It has been one of the pharmaceutical industry’s most closely watched experiments: does ending kickback payments to doctors undermine drug sales? GlaxoSmithKline, the British drugmaker, believes it has proved that raising the ethical bar on marketing practices doesn’t necessarily reduce competitiveness.
GSK Chief Executive Andrew Witty said better-than-expected 2016 first quarter results coincided with a period where the entire group had operated under a new policy that bans payments to doctors who speak on behalf of GSK. “It convinces us that the moves we’ve made are both good for our business and also good for improving the reputation of the industry,” Witty told reporters.
GSK, which was fined nearly $500 million in 2014 for bribing doctors in China, is the first drug company to implement such a broad clampdown on payments to prescribers and competitors are watching closely to assess the commercial fallout.
The former head of the Chinese division of GlaxoSmithKline was charged with corruption in connection with the bribery scandal in which GSK paid off doctors and government officials. In the prior six years Mark Reilly and some of his associates allegedly spent an approximate sum of $480 million on hospitals and its employees, in order to increase the sales of GSK pharmaceuticals in China. Shortly after the allegations against the pharmaceutical company were made public their sales in the Chinese market fell 61%.
GlaxoSmithKline announced it would stop paying doctors for promoting its drugs and scrap prescription targets for its marketing staff – a first for an industry battling scandals over its sales practices, and a challenge for its peers to follow suit. Britain’s biggest drugmaker also said it would stop payments to healthcare professionals for attending medical conferences as it tries to persuade critics it is addressing conflicts of interest that could put commercial interests ahead of the best outcome for patients.
The Chinese authorities were not only investigating GlaxoSmithKline; big international pharmaceutical companies like Novartis International AG, AstraZeneca PLC, Sanofi S.A., Bayer AG und Eli Lilly and Company have also been subjected to greater scrutiny.
In China, GSK’s business is still struggling, with sales down 28 percent in the first quarter, due to disposals of some products and lower prices, but Witty said he expected GSK to return to growth in China in the second half of 2016.
In the United States, the industry’s biggest market by far, many companies have run into conflicts over improper sales tactics and GSK reached a record $3-billion settlement a few years ago with the U.S. government over charges that it provided misleading information on certain drugs.
AstraZeneca said in 2011 it was scrapping payments for doctors to attend international congresses but others, until now, have not followed suit and GSK’s actions go further.
The shift is pragmatic to a certain extent, since many decisions about which drugs to use are now taken centrally by big insurers and governments, based on cost-effectiveness measurements, rather than by individual doctors.