Professional Pharmaceutical Representative Compensation
Unless you really understand and appreciate the mindset difference between that of the professional representative compared with that of the traditional pharmaceutical sales representative, this compensation discussion will not make sense to you. As GlaxoSmithKline recently discovered, a change in sales compensation structure, especially incentive compensation, away from traditional sales and prescription volume model will take an organizational and perhaps even industry realignment of pharmaceutical sales compensation philosophy. Most pharmaceutical companies, their commercial management teams, and many representatives are not ready for this.
In fact, I predict that sales organizations will be most resistant to this change as most pharmaceutical sales representatives and managers are too grounded in the traditional sales mentality. Many sales people are just going to see this as a take-away and will want nothing to do with the job. It will also be hard for managers to get their arms around how to manage sales (“drive sales”) and evaluate performance without sales quotas and other activity based numbers. They will complain about the inability to fairly and consistently assess performance if they don’t have hard numbers. They ignore the fact that today’s prescription data and sales volumes are not accurate and are filled with national, regional, district, and territory caveats. They also like to think that today’s sales goals and territory alignments are fairly distributed and accurately reflect potential. And when was the last time we correlated the number of territory activities to sales results?
In the end, none of this matters because incentive compensation is not a performance driver for professional representatives the way it is for traditional sales representatives. Incentive pay is not a scorecard like it is for traditional sales reps. In fact if the lack of incentive pay is the reason for a representative to quit, you really didn’t lose a professional representative, you lost a sales representative and this is fine because they wouldn’t be happy or satisfied trying to make it work. This is the hardest concept to get comfortable with if you have a traditional sales and sales incentive mentality.
Professional representatives want to be paid for their expertise, their stature in their medical community, and recognized for their personal performance excellence. They prove their expertise and the effectiveness of that expertise by the business health of their territory in terms of how their products are perceived, formulary and reimbursement status, their access to key decision makers, and the professional respect those decision makers have of them personally. They appreciate that actual sales of their product depends on a number of factors, some they can influence while for others it would be inappropriate to influence (e.g., encouraging the use of their product for patients who are not good candidates or where there is a better product available). Sales and prescriptions are merely surrogate markers for a lot of things going on, not just their performance.
So how do you compensate the professional representative? You pay them relatively high base salaries (compared to traditional sales representatives) consistent with their expertise and ability to create or maintain a healthy market environment for your products. How many people can you hire with that level of expertise and ability to keep a territory healthy? If you think you can find a lot of these people, you don’t have much for expectations and you are probably not looking beyond physician prescribing. Are the people you are talking about able to hold their own in a scientific discussion with the Medical Director of an insurance company or pharmacy benefits manager that is considering how your product should be used in their patient population? Can your representative cite the scientific literature to support their claims and recommendations for appropriate use? Is your professional representative so knowledgeable and good at their job that the insurance company Medical Director wants to hire them?
As for incentive pay, you might as well save it or better yet, invest it in your professional representative’s development. You’d be better off spending the $20,000 per year on training, development, or sending them to more scientific meetings not to stand in an exhibit but to go to sessions and interact with their professional and academic colleagues. If you still feel compelled to provide incentive pay, test them regularly on their expertise and give cash awards for testing performance.
You have to remember, professional representatives don’t do things because there is an additional pay opportunity associated with it. They inherently want to do it because they see it as their responsibility. Their job is a big part of who they are and they take pride in themselves and the work they do. They view their compensation as a reflection of the level of expertise they have and the value they bring to the company when they apply that expertise. They get more job satisfaction out of applying their expertise than any incentive pay could possibly achieve. In fact, they’d rather have a pay raise as recognition of their advanced expertise than an incentive to drive sales.
The industry’s strong sales mentality will make it difficult to embrace the professional representative concept and even more challenging to formulate sales compensation plans that are not tied to sales and prescription volume. You have to start someplace so perhaps this at least has got you thinking about it philosophically.