Does Your Incentive Compensation Plan Need a New Prescription?

In today’s regulatory environment, the pharmaceutical sales incentive plan is one area that receives deserved close scrutiny by compliance departments. The reason? A company’s incentive plan can be used as evidence of encouraging non-compliant behavior, especially around off-label promotion. Due to the risks this creates, it is crucial that companies demonstrably encourage a culture of compliance, implementing compliance-cautious strategies for compensating their sales force.

Achieving that goal has become more difficult for pharmaceutical companies. As pharmaceutical products have become more complex and targeted, it creates regulatory impacts that can affect the sales force. As the FDA narrows approvals to not just the disease state, but in some cases the line of therapy (or even specific genetic markers), there can be penalties or other repercussions for those who promote the product off-label, encouraging their customers to use it for unapproved diagnoses, unapproved patient groups, or in unapproved dosages. Doctors, on the other hand, can prescribe outside of the label, leveraging their medical expertise and clinical trials data that may be compelling to them to provide the best treatment to their patients.

The FDA’s thinking on this tension is evolving. Recently, Amarin won an injunction, and later reached a settlement with the FDA, based on the principle that their reps “may engage in truthful and non-misleading speech promoting the off-label use” of Amarin’s approved drug, Vascepa®.  This challenge, based on First Amendment free speech principles, may open the door to additional challenges or settlements with the FDA, when the marketing efforts can be proven to be truthful and non-misleading.

Regardless of that outcome, the challenge remains that through sales-based incentive compensation plans, there can be an appearance of encouraging sales reps to grow their sales and resort to non-compliant behaviors to make that happen. The impact of off-label promotion and other non-compliant behaviors can be far-reaching. Not only is there the likelihood of large fines or settlements, but it can also lead to the imposition of new restrictions on the company. Needless to say, such instances can become a huge public relations issue, damaging the brand’s reputation, leaving a bad impression with employees and customers alike, further impacting sales progress.

A New Approach to Sales Compensation
So what can pharmaceutical companies do to protect their organizations and encourage a culture of compliance with their sales representatives? More organizations are taking a closer look at the incentive compensation plan and identifying risks that it can present. Some are even moving away from the commonly used incentive compensation model in which sales reps are paid based on individual performance.

One commonly cited example of a large pharmaceutical company making this shift is GlaxoSmithKline. Rather than continuing the common practice of paying bonuses to reps based on the volume of prescriptions written out by doctors or individual sales data, the company shifted to paying bonuses based on factors such as the rep’s product knowledge, business acumen, and ability to understand the needs of patients and physicians. The goal is to help remove the pressures reps feel to persuade doctors to write prescriptions, thereby eliminating instances of off-label promotion. However, they have seen challenges with this approach in fairly measuring and rewarding performance.

But that isn’t the only way companies can work to mitigate risk in their compensation plans; there are numerous other methods to ensure a compliant approach to compensating sales reps. For example, the company can provide variable pay based on how the district or nation does as a whole, they can factor prescriptions based on patient-level data showing more detailed information (such as diagnosis, line of therapy, or even diagnostic information), or they can limit the subset to a “target list” or “clean universe,” all prescribers that are eligible for promotion.

5 Steps Toward Compliance
Despite the numerous challenges pharma companies face in compensating their sales reps and ensuring a safe and compliant approach, there are several steps they can take to build a culture of compliance for their sales teams:

  • Show the company takes compliance seriously: A no-tolerance policy against off-label promotion and other non-compliant behaviors, whereby sales reps are told they won’t receive any incentive pay (and may have other corrective action taken) if they exhibit non-compliant behavior, will help to keep the sales team focused on the right behaviors.
  • Provide comprehensive compliance training: Holding regular compliance training sessions – and making sure they’re updated to reflect the latest developments – will further instill compliant behaviors throughout the organization.
  • Leverage Sales Operations: The Sales Ops team can be instrumental in communicating and enforcing a culture of compliance and motivating the sales team. The use of agile targeting, new data sources, and innovative compensation models will ensure that reps have guidance on where they should be promoting, and that there are no rewards (perceived or real) to non-compliant behaviors.
  • Get buy-in from all stakeholders: While senior leadership understands the risks of non-compliance, the greater challenge lies in how messages cascade down to the sales team as a whole. Get the rest of the team onboard by setting clear expectations in sales training, communicating how the incentive compensation plan rewards compliant behaviors, and committing to continually enforcing those policies.
  • Present a positive perspective: Although compliance departments are often put in a position of identifying and mitigating risks, they can also create a positive culture of compliance. This can be done by showing the sales force a path to success, helping them identify prescribers where their message will have the most impact, providing them with approved materials that do not create risk, and giving them the support of a medical team that can appropriately engage with physicians when a question arises.

Putting Compliance Front and Center
Taking a close look at the current incentive compensation plan and any potential mixed signals it could send is the first step in mitigating risk and maintaining a compliant sales strategy. Exploring new ways to compensate reps based on performance – without having to resort to non-compliant practices – is also key to building a culture of compliance. Although any new approach can face initial resistance, focusing on the benefits of the plan and motivating sales reps to go to the right physicians with the right products will help them achieve compliance, mitigating risk while still creating opportunities for themselves to maximize their pay and connect patients to your company’s products.