Guest column : Ponzi schemes in Indian pharma sales a real problem

Last week, a PharmaAsia News story reported sales malpractices at Mumbai-based drug maker Novartis India.

The article, which told of how representatives for Novartis’ market-leading diabetes treatment Galvus had fudged distributor receipts and bought back stock using their cash incentives to meet sales targets, may have shocked some.

But when MedicinMan posted this article on social media sites such as LinkedIn and Facebook, it drew no surprise at all from pharmaceutical executives at all levels. A deputy general manager at a leading Indian pharma company wrote: “The observations placed here are not new and are known to top bosses of top pharma companies who have big brands, but the point is who will bell the cat first!!”

Most pharma sales professionals point to irrational sales targets, lack of communication between senior management and the field force, absence of accountability mechanisms and poor adoption of technology as the primary drivers of this malpractice. What often starts off as a matter of expediency during sales closing by less-than-scrupulous reps and field sales managers, quickly becomes regular practice given the fertile ground for such behaviour.

Some commentators said that therapy areas with large market potential and high competition seemed more prone to sales inflation by reps.

“Clean MNCs” no exception?

Artificially generating sales is the age-old bane of the pharma industry. Directly or indirectly bribing doctors to overprescribe is the most odious of the methods employed. Showing inflated primary sales at the stockist level is a much more insidious practice, but might prove to be equally problematic for pharma companies if initial reactions to the Novartis scam are any indication of its extent.

A Facebook commentator whose profile names a top multinational company (MNC) as a past employer had this to say: “Highly unfortunate and this is just the tip of the iceberg. This has been happening for years in all major companies both Indian and MNC across all therapy segments. In a pool team, anyone who resents or does not fall in line for this arrangement is singled out for “special treatment” by his/her pool mates and also by the higher ups (sic).”

Another manager at a top MNC says that front-line executives might spend roughly Rs 4000-5000 every month to pad invoices. The money is taken from sales incentives and continuous medial education, or CME, budgets. Other tactics include offering unsanctioned discounts and overextending credit lines to distributors to hoard stock.

Interestingly, most commentators agreed that MNCs were as caught up in this practice as Indian companies, if not more so.

“MNC expectations have sky- rocketed on top line sales specially with high-priced finished formulations directly imported into India where 100% repatriation of precious foreign exchange is given back to the parent company,” remarked a senior professional at a top 10 Indian pharma company. “Also import consignments are huge and the need to liquidate them puts pressure on CEOs of MNCs in India. This pressure percolates down to the bottom rungs and the result is what happens.”

An executive at a leading chemist chain said, “I can prove to you that stocks at stockist level of some so-called clean MNCs are almost 5 times the actual secondary sales and stockists hold this stock because they get something extra for this holding. This is encouraged by line managers and you will see during month-ends entire team spend (sic) at least two to three precious days at stockists.”

Ultimately, the company and its executives are losers in this Ponzi scheme and only the middle men stand to gain.

Cleaning Up the Mess

In retrospect, Novartis deserves praise for taking the bull by the horns and cleaning house. Whether other companies will follow suit is to be seen.

Says the MNC Manager, “Many top management executives are in competition among themselves. Hence every therapy SBU would like to prove that they are better in achieving their objectives.”

Cleaning up the rot can be a painful task. And at the end of the day, targets still have to be met.

Almost every commentator seemed to agree that the most important step needed to be taken was to set rational sales targets for the field force. For this, senior professionals need to open regular and meaningful channels of communication with the feet-on-the-street. Challenging targets should be supported with equally aggressive training and skills development.

Secondly, there should be better accountability and monitoring at the distributor level. The field force should consider appointing ethical distributors as their core function for which they must receive training and support.

Finally, perhaps it’s time that the current model of single-mindedly chasing scripts is replaced. After all, Pharma is in the business of selling better health and not simply pills. Deirdre Connelly, head of GSK North America, hinted at the need for change in a speech at a pharma compliance conference.

Connelly observed that the business model for selling “chocolate or cars” was not entirely appropriate for selling “life altering and life saving medicines.” She added that “sending in ever greater numbers of sales representatives to call on a single doctor” with a focus on “reach and frequency” and rewarding executives “on the volume of prescriptions they obtained in their sales territory”, was ill-suited to the dynamics of the healthcare market. Read the full speech here.

A better approach would be to base at least part of an employee’s compensation on competencies and on demonstrating the company’s values.

The need for change is clear. The only question is, “who will bell the cat?”

Anup Soans is Editor at MedicinMan. Connect with him on Facebook, LinkedIn and Twitter. Joshua Soans holds an integrated Masters in Humanities from IIT Madras and is the founder Executive Editor of MedicinMan.

Pics sourced from LinkedIn and MedicinMan.

You can also view Apothecurry’s Editorial Policy here

Advertisement