Business

GSK decides not to pay any more!

GSK stops funding

GSK stops funding

The most disruptive news in the pharmaceutical industry is out. GSK has decided to stop paying doctors to promote its products. The reasons are many and the implications are far deeper. Here are some reasons why.

The first concern is GSK stating that it will stop paying doctors to promote its products. It has been a long known but vehemently denied fact in the pharmaceutical industry that the companies have been coaxing doctors to prescribe their products. Incentives, gifts, giveaways, call them whatever you want. They all are based on the simple principle of obligation that comes with accepting a gift. This psychological appraoch in the initial decades of pharmaceutical marketing (80s and 90s) did well to generate the desired revenues. But now pharmaceutical companies realize that they have been taming a giant. As competition grew and as physicians became all the more occupied with growing practices, continuous learning and increasing patient vigilance regarding their loyalties to pharma companies, the tables turned. Now the physicians wanted something extra to take such a difficult decision. The pharma giants readily complied. But the ball had started to roll and as it turned out, the grey areas in prescription patterns began to emerge.

On the outset, the move may seem like a corporate social responsibility attempt to protect patient rights and remove influence on the prescription patterns of the physician. Closer look reveals that as the healthcare costs of USA and other similar healthcare institutions boom, the inspection lens has swerved in the direction of the pharmaceutical companies. Glaxo had to settle charges amounting to $3 billion for mislabelling and misrepresentingtheir products in the USA.  A similar series of investigations surround the company in China where officials are looking into bribery accusations on the company to access the country amounting to half a billion US dollars. Liang Hong revealed some of the most explosive facts that run the favor industry in pharmaceuticals, up till and including use of travel agencies, bribing doctors and even sex bribery to GSK executives.

Sir Andrew the current CEO of GSK is battling serious accusations, a dip of more than 60% sales in China and rising concerns about the marketing practices of the pharmaceutical world. But GSK is not the only one. Johnson and Johnson paid a similar $2.2 billion fine recently on the same incentive practices on doctors. Other companies which are under scrutiny include Sanofi, Novartis, Eli Lilly and Bayer. GSK is not the first one to engage in such controversy, only the first one to publicly acknowledge it.

Many factors have led to the cumulation of events as we see today. The Sunshine Act of 2010 in the US can be considered as one of the reasons the scales tipped in this direction. Similar patient advocacy projects such as the PEW project also influenced this change, which claims that an estimated $20 to $50 billion per annum goes into direct marketing to the medical professionals.

What are the implications for local pharma market? Plenty. GSK remains the leader in the Pakistani pharma sector, and the decision it takes will lead to a new discussion of the influence of marketing strategies in Pakistan. Pakistan does not have the legal systems such as the Sunshine Act which can ensure foolproof disclosure of amounts spent on incentivising and direct marketing. The decision will influence the doctors and their prescription patterns in the same manner as it will affect globally. The true impact of the decision and announcement will be visible after some time. Meanwhile, serious rehaul of the marketing and sales appraoches in pharma industries mean that for sometime, pharma branding will remain a rough road to travel.

December 19, 2013

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