With a trailing yield of 4.7%, GlaxoSmithKline (GSK) offers the second-biggest payout among the traditional pharmaceutical companies (pharma names that develop new drugs with the intent to collect all the revenue they produce). GlaxoSmithKline, however, has decided to make a major departure from the sales-process model that got the $123 billion company to where it is today.
That change? GSK will stop paying doctors to prescribe its drugs. The company is also going to stop paying its salespeople purely based on meeting sales targets and driving prescription growth. Instead, the new compensation model rewards product knowledge, quality of service, and of course, some sort of sale s performance … though the details remain a tad fuzzy.
It’s a risky move to be sure; nobody really knows if physicians will continue to favor Glaxo’s drugs when there’s no financial incentive to do so. But what the company has lost in marketing muscle it seems to have more than made up for in credibility. That may support dividends better than any pay-per-prescription plan could.