Week 5 study materials and assignments

PHARMACEUTICAL MARKETING QUESTIONS (175 words per question)

What are the differences between direct and limited reimbursement plans? Which do you think would work best in this case? Justify your response.

In a direct reimbursement plan, sales personnel would be reimbursed for every penny of expenses incurred in connection with promoting the product to physicians who are prospective customers (George & Jones, 2008). By contrast, in a limited reimbursement plan, sales personnel have a choice between limiting their promotional expense to what will be reimbursed by the company or spending money out of their own pockets to secure sales from prospective physician-customers (George & Jones, 2008).

In this particular situation, it is clear that a direct reimbursement plan would be preferable to a limited reimbursement plan, or at least preferable to such a strictly limited reimbursement plan. That is because the standard in the pharmaceutical industry is for sales personnel to incur much more significant expenses than those possible under the current MedTech plan without requiring sales personnel to dip into their own pockets to compete on anything approaching a level playing field. Moreover, the fact that sales personnel are dependent on their sales for 100% of their compensation places them in a Catch-22 that could conceivably increase stress and breed resentment toward the company (Robbins & Judge, 2009).

Assume you are Harold. What specific changes do you think should be made to the compensation program? Why?

Harold should consider a new compensation program that provides a base salary with graduated incentives for sales. More specifically, the new compensation scheme could still require a minimum number of sales to qualify for the base salary. In principle, the base salary would reduce discontentment among sales staff in connection with the complete dependence of their compensation on their sales success and reduce the perception that MedTech cares only about sales and not about its employees (Robbins & Judge, 2009).