Rethinking Sales Compensation

The New Logic for Biotech and Pharma Commercial Leaders

Breakthroughs in precision and regenerative medicine, rare and ultra-rare disease treatments and new oncology pathways have set the stage for a decisive reimagining of biotech and pharma commercial models. Yet as commercial operations rebound from pandemic-era contractions, the central challenge remains unchanged: crafting sales compensation architectures that sustain high performance, adapt to an increasingly complex landscape and protect organizational integrity. With investment in commercial organizations surging and the competitive battle for market share intensifying, the need for innovative, data-driven compensation strategies has never been greater.

The New Reality: Investment, Specialization and Complexity

Recent industry data reveals a robust uptick in commercial investment across biotech and pharma. A recent industry benchmark found that 75% of organizations are increasing commercial spend, notably in launch-centric roles for specialty indications. This resurgence signals a return to pre-pandemic norms, with specialty areas (oncology, inflammatory, rare and ultra-rare diseases) now comprising the majority of industry focus.

Yet with opportunity comes complexity. The market is facing headwinds such as Medicare Part D changes, price caps and ongoing regulatory scrutiny. Leaders must navigate these uncertainties while capitalizing on renewed momentum in R&D and commercial expansion. Alexander Group’s framework  stresses the need to tune commercial strategy to growth phase, whether that’s navigating a fast-moving launch or optimizing a mature portfolio.

Talent Market Dislocation and the Compensation Equation

The fight for talent is acute. Compensation environments are becoming more demanding, with base salaries and headcount rising and 67% of firms expanding targeted incentives. However, the percentage of sellers attaining quota is projected to decrease by 14% and employee turnover is expected to rise. This is a clear signal that recruitment and retention are more challenging than ever. Quota attainment rates have declined and voluntary turnover is trending higher, especially among top sellers in high-growth geographies.

Alongside this, AI-enabled commercial enablement and training tools are gaining traction—20% of organizations are already implementing AI solutions to enhance commercial effectiveness. While AI promises to transform routine tasks, human interaction remains irreplaceable in sales. As a result, compensation plans that motivate and retain high-performing teams are essential.

Compliance as a Core Design Principle

Pharma sales comp is shaped, first and foremost, by compliance and legal boundaries. Regulatory teams are now cornerstone contributors to plan development, ensuring outputs align with regulatory guidance.  Commission-driven plans can drive results, especially at launch. But they must be tightly governed and backed by clear documentation—particularly when their credibility is in question. In contrast, stack ranking has lost its luster due to its well-documented impact on morale and its limited effectiveness in tightly regulated, team-based selling.

Instead, goal-based bonuses and differentiated incentives are recommended to reinforce achievement and drive sustained performance. Mature organizations break their incentives down by product phase (launch, scale, mature, optimize), role specialization and market segment.

Managing Compensation Across the Drug Lifecycle

A hallmark of successful commercial organizations is the ability to evolve incentive compensation as therapeutics progress through their lifecycle. Rewards are typically higher during launch phases, reflecting increased market risk and the imperative to capture share. As products mature, volatility decreases and compensation structures shift toward quota-based bonuses and more stable incentives.

Leaders must avoid the trap of applying a one-size-fits-all compensation program across diverse portfolios. Instead, tenured organizations adjust plans to align with market dynamics—ensuring that incentives remain relevant and effective at every stage, from launch to patent cliff and beyond.

Best Practices for Launch Environments

Launching new drugs or indications requires robust commercial capabilities and agile compensation strategies. In near-perpetual launch environments, organizations must measure and compensate sellers in uncertain contexts. To succeed, leaders should adopt design principles that improve morale and accelerate revenue growth.

Key questions for leaders include:

• Which formula types are most effective for new launches—commission, goal-based or team measures?
• How frequently should compensation plans evolve post-launch?
• What weighting should be assigned to team measures, especially when territory-level prediction is difficult?

Best practice dictates that plans change rapidly during launch, often within six months, transitioning from unit-based or commission pay to goal-based structures as market data becomes available.

Defining and Rewarding Top Performers

High performance in commercial organizations can be defined in multiple ways: growth, new product objectives, prescriber development, portfolio balance or consistent quarterly achievement. Leaders must establish clear criteria and align incentives to drive desired behaviors, recognizing that market regulations and demand uncertainties are not barriers to a performance-based culture.

Geographic differences also play a role, with markets like Texas, Florida and Arizona experiencing outsized growth due to demographic shifts. Quota setting should account for these dynamics, ensuring fairness and opportunity across regions.

Data Quality and Performance Measurement

Data availability and quality remain persistent challenges, particularly in tracking sales performance across complex purchasing sites and territories. Leaders should quantify the impact of data gaps and, where necessary, implement team-based measures to gurantee accurate and equitable compensation.

For organizations with robust data, individual measures can be maintained; for those facing significant gaps, team metrics may be more appropriate. The key is to tailor approaches to the specific context, leveraging analytics to inform decisions and drive continuous improvement.

Transitioning Compensation Models Without Losing Top Talent

As organizations shift from commission to goal-based plans during product launches, protecting top performers is essential. The focus should remain on earnings potential, not mechanics, to ensure that high-volume sellers continue to see opportunity and reward. Supplemental incentives—such as end-of-year trips or special bonuses—are important, but their impact is often limited compared to clear, attainable financial rewards.

The Path Forward: Strategic Sales Compensation

For commercial leaders in biotech and pharma, the imperative is clear: design sales compensation programs that are flexible, compliant and aligned with organizational goals. This process requires ongoing benchmarking, data-driven decision-making and a willingness to evolve plans as market conditions change.

Takeaways for Commercial Leaders

• Align compensation and organization structure with product lifecycle and regional market realities—reject the uniform model.
• Use analytics and segmentation to target high-potential accounts, inform quota decisions and tailor checkpoints.
• Plan for rapid and transparent transitions from commission to goal or hybrid metrics post-launch, protecting culture and top talent.
• Integrate compliance and regulatory expertise from the outset—not as an afterthought.
• Prioritize ongoing training, not just for reps but for first-line managers, who have a proven multiplier effect on field performance.
• Embrace digital and AI tools as force multipliers, not replacements—the best compensation plans motivate, not automate.

By embracing best practices in compensation design, leveraging technology and analytics and fostering a culture of performance, life sciences organizations can attract and retain top talent, drive commercial success and navigate the complexities of a dynamic industry.