Coronavirus Pandemic Effects On Incentive Compensation

The rapid spread of COVID 19 has resulted in pharma companies facing significant ramifications on their business, requiring a change in assumptions, thinking, and decisions going forward. One such critical area of effect from the pandemic is on incentive compensation (IC). Pharma company investment in the sales force is significant in both personnel and economic terms. Mandates on social distancing, travel disruptions, shelter-in-place state orders, closures of physician offices and hospitals to sales reps, and company concerns for the health of their field force have significant effects on the personnel dimension of implementing of IC plans. Pharma companies also rely on sales reps for the effective delivery of critical scientific/medical/clinical information to healthcare professionals (HCPs). Thus, having the right incentives strategies in place is important to help drive sales rep-physician engagement and relationship building while also motivating the sales force to achieve performance goals. Spending on direct sales forces accounts for close to 50% of all sales and marketing costs. Therefore, effectively managing IC in light of effects from COVID 19 has significant personnel and economic implications that a pharma company must weigh and balance. This paper focuses on the effects of COVID-19 on IC for pharma companies in the short-term, medium-term, and long-term while also providing prescriptive actions for sales executives to consider in each time frame scenario.

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