Glaxo's challenge: Create an 'ecosystem' of community, and serve investors

Selling medicine - versus, say, televisions or toasters - for profit has inherent conflicts, and those challenges played out in several places Tuesday with drugmaker GlaxoSmithKline.

In the morning at the Navy Yard, company officials handed out $40,000 to each of nine Philadelphia-area nonprofit organizations.

In the afternoon, President Obama visited the National Institutes of Health in Bethesda, Md., where scientists are working on the first Ebola vaccine to be tested on humans, an effort involving tax dollars and hundreds of GSK employees in this region. If the GSK/NIH vaccine eventually helps stem the epidemic raging in West Africa, investors will expect as big a profit as possible while patients the world over will want it for free or as cheaply as possible.

Meanwhile, North American pharmaceuticals chief Deirdre Connelly met with financial analysts Tuesday and is likely to address U.S. employees Wednesday on how $1.57 billion in cost cuts will be implemented.

Joe Touey, a senior vice president, handles IT for the North American pharmaceuticals division and helped hand out the GSK Impact Awards Tuesday.

"How do we continue to create an ecosystem here in the community which has the right level of background for people to work in a high-tech environment at the intersection of health, community, and technology - that's the connection we try to make with our awards," Touey said.

GSK leaders recognize the quarter-to-quarter financial pressures, he said, but long-term investments in community and the workers of the future will eventually pay off.

The modern Navy Yard building is one example, Touey said, with no assigned seats or cubicles that would be empty when employees are at GSK facilities in Upper Merion or Upper Providence, North Carolina or London, or on vacation.

"You can't hide," he said of the workspaces. "We measure utilization of space. If you book a conference room for three hours and only use it for 30 minutes, we'll come back to you and talk about it."

CEO Andrew Witty and Connelly broke the decades-old mold of commission-based compensation for sales reps, and some of their superiors, that contributed to illegal promotion of drugs for unapproved uses. In 2012, GSK agreed to pay a record fine of $3 billion and admit to criminal and civil charges.

Sales reps were unhappy, but GSK is implementing the new model worldwide. Witty has said that the best performers are still the best performers, and that the old system doesn't mesh with the changing reality of U.S. health care.

Individual doctors don't as often choose one company's medicine for a patient. Large organizations - doctor groups, insurers, and pharmacy benefit managers, who work for employer-based health plans - more often have that control and push down prices paid to drug companies. Patients shoulder more costs, so they shop more.

That especially applies to primary-care medicines. GSK's top-selling drug, Advair, and newer asthma medicines are part of that ecosystem. Witty can ignore message-board comments from angry reps, but he tried again in October to explain to financial analysts, who don't get paid a dime for community-partnership advice.

"In the medium to long run, these products will find their place and be adopted well," Witty said in arguing that GSK products did as well as competitors' sold on the commission model. "But it's not the 1990s anymore, and we have to have the right model to do that. And it's one of the reasons, much as I know, not everybody on this call agrees with us, it's one of the reasons why we think our selling model is absolutely the right way to go."

Witty is banking on his models eventually bringing sustained profits from drug, vaccine, and consumer product sales in the 100-plus countries where GSK operates.

Does Touey think he, Witty, and Connelly will survive long enough for this long-term view to be sufficiently profitable?

"I do," Touey said. "Am I clairvoyant? No, but I'm confident that the strategy will work. It is a value play, and it takes time."

After School Activities Partnerships: Develops high quality after-school activities and resources to empower youth and strengthen communities.

The Center for Grieving Children: Supports the needs of grieving children and families.

Community Design Collaborative of Philadelphia: Strengthens neighborhoods through design.

Gearing Up - A Nonprofit Corporation: Provides women in transition from abuse, addiction, and/or incarceration with the skills, equipment, and guidance to ride a bicycle for exercise, transportation, and personal growth.

Graduate! Philadelphia: Helps adults complete their college degrees.

Pennsylvania Horticultural Society: Creates a sense of community through horticulture.

Philadelphia Youth Network Inc.: Changes systems and improves educational and economic outcomes for youth.

University City District: Makes major investments in public space development, public maintenance, and public safety.

YouthBuild Philly: Helps young people rebuild their lives (earning their diplomas, learning vital job skills, and providing community services).

SOURCE: GlaxoSmithKlineEndText

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