Constructing effective incentive compensation plans can be difficult in any therapeutic area, but oncology presents even more of a challenge given its extremely complicated market, frequent changes, small patient populations, low sales volume and products that are used across multiple indications. These complications make it a struggle to generate a complete picture of sales team performance. As a result, companies must assess the performance of their teams—and incentivize them accordingly—based on partial information. It’s akin to looking through a clouded window.
That’s a key finding from ZS’s 2016 Incentive Practices Research study, which surveyed 47 companies with the goal of providing a benchmark of sales compensation practices for pharmaceutical and biopharmaceutical companies. The biggest sales compensation challenge among oncology players, cited by 41% of respondents, is the availability and accuracy of market data from specialty prescribers and specialty distributors.
According to 32% of the oncology sales leaders we surveyed, sales crediting also is a major issue because it can be difficult to separate oncology sales data by indication and customer segment. Sales data from some sources can be split cleanly by indication, and others only at the national level—and still others only provide partial data. (Companies also clearly note that these are problems that directly affect the sales force. Employee satisfaction and retention, along with compensation fairness, were in the top five challenges that respondents listed.)
The common theme running through these findings is that companies often don’t have the information that they would like to design an effective compensation program. As one respondent put it, “We don’t have access to the level of detail (by tumor indication) needed from satellite accounts … [and] specialty distributors.” Another respondent was more blunt: “Reps don’t believe in projected numbers.”
These issues are particularly acute in situations where a company’s portfolio is concentrated among a small number of products so that any one product has a greater impact on the overall performance of a company. Additionally, product launches are tricky in that incomplete or inaccurate data makes planning difficult. Twenty-seven percent of respondents listed assessing the potential of a given market as a key challenge.
Seeing the Way Forward
While no solution is perfect—and a one-size-fits-all approach for all oncology companies hasn’t materialized—one of the most effective ways to get around these issues is to roll up metrics to a larger geographic area and then reward reps in that team based on the performance of the entire area. That allows companies to smooth out any gaps and flaws in sales data. Notably, this approach is less than ideal since the objective is to link compensation as directly as possible to the performance of individual reps. However, the peculiarities of the oncology market can make this extremely difficult.
Oftentimes, companies assess performance at the district level, though some also group sales territories into tiers or clusters with similar potential. And some companies look at sales performance across multiple groupings—such as both the overall territory and individual district—to round out their information and adjust sales compensation accordingly.
A second approach is to supplement the company’s own sales data and sales compensation system with external information. For example, according to our survey, 77% of companies rely on overall market data from third-party sources to set objectives for the sales team. Others incorporate field input, market research or additional third-party data sets. Roughly one-third of companies that rely on market data use a proxy to determine the potential of an overall market, such as incidence rates or episode data for a given indication. And 55% of respondents’ companies apply business rules and make manual adjustments to the data to improve accuracy. “It requires more creativity to get an accurate picture and make the IC plan transparent and understandable to the sales force,” one respondent said.
Still other oncology companies use MBOs as part of their sales compensation plans, though these are less common, used by fewer than 25% of companies for oncology teams, according to our research. The most common reasons for using an MBO are corporate compliance requirements and the data challenges discussed here. As a result, most MBOs tend to focus on non-sales metrics, such as performing sales calls or other specific activities on accounts, developing new partnerships with providers or monitoring key accounts. These aren’t perfect indicators of future sales, but in large enough sample sizes, they should provide directional performance indications.
Contests are a common approach to incentivize the sales force, and according to our research, sales reps typically participate in two contests per year. Most companies still use cash as a prize, and the average award is $3,000. Typically, contests are intended to boost sales growth (86%), new patient starts (75%) and growth in market share (50%). Ideally, they target a specific objective and don’t overlap with the company’s existing sales compensation plan.
Finally, companies can build in flexibility for managers to weigh in on sales compensation metrics based on their knowledge of local markets. For example, in setting quotas or other objectives, managers can proactively make refinements before the period starts. In addition, managers can reactively adjust sales credit at the end of a period—assigning or splitting it across territories.
In both cases, companies should create clear business rules to govern the adjustments, provide transparency to the field force, and establish limits for how much leeway managers can have. None of these solutions is perfect, especially on its own. But in combination, the solutions can help oncology sales organizations work around the problem of incomplete and inaccurate data, gain some clarity and transparency, and design sales compensation plans that offer meaningful incentives to the sales force.