It’s hard to look like an innovator when your company has paid a $3 billion fine in the U.S. and is accused of paying another half billion in bribes to China. But GlaxoSmithKline CEO Andrew Witty is building on a long-term strategy with his move Tuesday to stop paying staffers for hitting sales targets and doctors for promoting its drugs.
The move reflects Witty’s ongoing battle to modernize the British drug maker, lower discovery costs, and create what he calls “values-based decision-making” that gets beyond hawking the latest blockbuster.
It hasn’t been easy. In his six years as CEO, Witty has waded through government investigations, a financial crisis, shifting health-care systems, and the arrival of disruptive new competitors. In July 2012 he announced the record $3 billion settlement for a range of practices that predated his leadership: from promoting the antidepressant Paxil for children and Wellbutrin for sexual dysfunction and weight loss to failing to report safety concerns for its diabetes drug Avandia. That settlement is what caught the eye of Chinese officials, who this July announced their own investigation of GSK practices in China, which allegedly include funding fake conferences and hiring prostitutes.
And yet during this ongoing drama, Witty has been knighted and named 2013 Top CEO by Best Practice Institute. The reason: he’s taking meaningful steps to challenge an industry business model where success means getting people to consume as many of your drugs as possible. Three years ago, Witty and North America pharmaceuticals chief Deirdre Connelly began compensating GSK’s U.S. salesforce on patient outcomes instead of prescription volume. Connelly says her sales force is now much more aligned with their customers who are under pressure themselves to show proof of high-quality efficient healthcare. At the same time, GSK has been an innovator in increasing public access to clinical trial data and emerging markets-access to critical medicines.
Of course, such moves may seem meaningless amid a massive criminal probe in a lucrative market like China. While the bribery investigation has widened to other foreign drug companies, and no charges have been laid, the high-profile case has marred GSK’s reputation. Witty essentially acknowledged that in announcing the shift in compensation on Tuesday, talking about the need to “actively challenge our business model at every level” and meet “the wider expectations of society.” But Witty’s efforts to reshape corporate culture are more about positioning the GSK to win the trust of customers than pleasing the regulators. With clouds lingering on the ethics front, that’s a tougher task to complete.
