Big Pharma Incentive Model Flawed, According to New Research from Hay Group

Big Pharma’s dependence on traditional executive compensation plans threatens to work in opposition to the very “medicine” of innovation that could restore the sector’s once vaunted health. The analysis of 2010 proxy data from 50 big and small publicly traded U.S. pharmaceutical companies suggests that the compensation committees of Big Pharma organizations remain fairly change averse. Instead of seeing this moment in time as an inflection point that requires both risk taking and role modeling, the executive compensation programs at the likes of Eli Lilly, J&J and Merck seem to remain oriented towards rewarding compliance and near-term financial outcomes. Revenue remains the most common measure of both short and long-term incentive programs at large pharma companies. 80 percent of metrics used to determine incentives are financial while only 12 percent relate to drug development and commercialization. “For at least a decade the pharmaceutical industry – both sales and R&D – has operated with...