Ethical Performance
inside intelligence for responsible business
 

GSK

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GSK creates a new business model with innovative marketing and sales practices

More by GSK - Back to the Winter 2016 issue

case study

The pharmaceutical company ranks first in both trust and customer value, according to a survey of 4,000 US healthcare professionals. Tom Idle reports… 
 
It is hard to think of a more contentious business practice than the one historically used to sell pharmaceuticals. For the past 50 years, sales representatives have been compensated based on the total number of prescriptions written, without any specific regard as to patient need. Similarly, doctors have been paid to represent and speak on behalf of the same products and companies that the sector is keen for them to prescribe. 
 
It is a situation that has fuelled a widespread belief that the pharma industry cares more about profit than patient wellbeing. These traditional commercial practices have gone unchallenged—until now. 
 
Global healthcare company GSK has made a number of changes to the way it sells and markets its products around the world. Now, no GSK sales representatives are compensated based on individual sales targets. Instead, they are incentivised on their scientific knowledge of each product, their customer service feedback, and the wider success of the business. 
 
Also, nowhere in the world is an external doctor paid to speak about GSK pharmaceuticals or vaccines. And no doctor receives direct sponsorship from the company for medical education, with all GSK funding for education now determined by independent bodies instead. 
 
Where healthcare professionals are paid – say, for non-promotional activity – the company says it is committed to disclosing those payments on an individual or aggregate basis. It has already been doing so in several countries, including Australia, Japan, the UK and the US, in line with local regulation. 
 
“Our staff now have a deeper understanding that being a responsible business is not just about what we do, but how we do it,” says Katie Loovis, GSK’s director of corporate responsibility. “By replacing the industry’s old ways of working with totally new, modern commercial practices, we are able to better align the business with our purpose and the expectations of society.” 
 
It is working. In the US, a survey of almost 4,000 healthcare professionals ranked GSK first in both trust and customer value for the second time in a row – largely because a more simplified system has boosted engagement levels among US sales teams. In a 2015 employee survey, 81% said they were proud to work for GSK. 
 
The “old ways” Loovis mentions have persisted for so long because of a reluctance within the sector to modernise, says GSK’s CEO Andrew Witty. He recalls the early years of his career flying to all corners of the globe in a bid to grow the business from what was the 35th biggest drug company in the world when he joined the company in 1985, to one of the world’s biggest. “For 20 years, I spent my entire time trying to get a seat that was not behind the smoking row,” he says. 
 
“The world was loading millions of people a year into metal tubes to get them to inhale cigarette smoke. Now we’d say that was shocking, but then it was normal. It’s an example of how minds change, and industries have to change with the change of mind.” 
 
Changing marketing and sales practices is less about building trust and more about modernising, according to Witty. Is it really right that in the 21st century, the best way for doctors to get information about new drugs is to turn up to listen to somebody giving a speech in a hotel venue? ‘No,’ is GSK’s answer. Instead, it wants them to go online and have a direct interaction with a qualified physician who can give them the information they need within the framework of local regulations. 
 
The changes are also about giving the company a competitive edge as the only player of its type to have made such a move to wipe out legacy practices across the sector. As Witty attests, many people in the industry think GSK’s new approach is madness. “The world does not stop turning,” he says. “What happens is you start to have intelligent, mature conversations with your employees about what value really means to customers; what do your customers really need in a world where they are under pressure; how do you help a customer, a doctor make a better, more appropriate decision.” 
 
The new requirements will also apply to any company that collaborates with GSK, too, including co-marketers and licensers of GSK products. 
 
Beyond ethics, trust and responsibility, it is a move that is also reaping pure economic benefits. The company has now executed several successful product launches using the new commercial model, including the most successful HIV medicine launch ever (growth in excess of 50%). And sales of GSK’s new pharmaceutical products have dramatically accelerated, representing 25% of total pharmaceutical sales (up from 14% a year ago).  
 
The company’s Q3 numbers point to strong group sales of £7.5 billion, and growth across not only pharmaceuticals (£4.1 billion, +6%), but vaccines (£1.6 billion, +20%) and consumer healthcare (£1.9 billion, +5%) too.  
 
And the company is keen to maintain momentum in delivering commercial success while being able to demonstrate its values and purpose. During the recent UN General Assembly, GSK made pledges to improve access to immunisation for refugees, tackle antimicrobial resistance and prepare for global pandemics, for example. Topping Fortune magazine’s ‘Change the World’ list and the Access to Medicine Index (for the fifth consecutive time), and ranking within the top 5% of the Dow Jones Sustainability Index is further evidence of progress by the company. 
 
Identifying an opportunity to grab a first mover advantage is not always easy. Moving to shake up legacy practices, which have for so long served the pharma sector so well – and where the risk and opportunity are not that clearly defined – is harder still. The changes to payments and incentives are not about compliance; nothing that has been going on for decades has been illegal.
 
“The real test to pass is not a lawyer test, it’s a society question: is it right that the company who’s selling you the product is paying you to talk about the product that they’re selling you? Does that feel right? Does it create a perception?” asks Witty. “Our conclusion was that it did create a perception, and our conclusion was it was right to stop.”
 

IBE comment

GSK 
 
By Rozlyn Spinks, Head of Advisory Services
 
Being ethical pays. 
Pharmaceutical companies have long been subject to criticism over the legitimacy of sales practices. The transformation of the GSK marketing and sales model provides a sound demonstration that when a business strategy is clearly aligned to its purpose and values, it reaps rewards for employees, shareholders and society alike. 
 
An assessment of what the company values truly mean to both employees and customers has informed and allowed GSK to adapt from a historically contentious practice that created poor perceptions to one that is moulded in fairness and transparency. 
 
Points of note: 
• The innovative changes, supported by greater ethical efficacy in the business model, have led to increased trust amongst employees as well as in the marketplace, reflected in survey data. 
• The introduction of ethical measures has meant that sales representatives are now incentivised based on scientific knowledge and customer feedback rather than sales targets. 
• Sales of GSK’s new pharmaceutical products have dramatically accelerated during the past year (14%).
 

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