What are the differences between direct and limited reimbursement plans? Which do you think would work best in this case? Justify your response.

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In a direct reimbursement plan, sales personnel would be reimbursed for every penny of expenses incurred in connection with promoting the product to physicians who are prospective customers (George & Jones, 2008). By contrast, in a limited reimbursement plan, sales personnel have a choice between limiting their promotional expense to what will be reimbursed by the company or spending money out of their own pockets to secure sales from prospective physician-customers (George & Jones, 2008).

In this particular situation, it is clear that a direct reimbursement plan would be preferable to a limited reimbursement plan, or at least preferable to such a strictly limited reimbursement plan. That is because the standard in the pharmaceutical industry is for sales personnel to incur much more significant expenses than those possible under the current MedTech plan without requiring sales personnel to dip into their own pockets to compete on anything approaching a level playing field. Moreover, the fact that sales personnel are dependent on their sales for 100% of their compensation places them in a Catch-22 that could conceivably increase stress and breed resentment toward the company (Robbins & Judge, 2009).

Assume you are Harold. What specific changes do you think should be made to the compensation program? Why?

Harold should consider a new compensation program that provides a base salary with graduated incentives for sales. More specifically, the new compensation scheme could still require a minimum number of sales to qualify for the base salary. In principle, the base salary would reduce discontentment among sales staff in connection with the complete dependence of their compensation on their sales success and reduce the perception that MedTech cares only about sales and not about its employees (Robbins & Judge, 2009).

However, the most important change that Harold should make is in connection with the reimbursement of sales personnel for their expenses incurred in promoting the product to prospective customers. In that regard, MedTech is actually in a fairly unique position because (based on the available information in the case) there are no contraindications associated with the product. Ordinarily, there are significant ethical issues associated with marketing pharmaceuticals to physicians (Halbert & Ingulli, 2008). Specifically, many medical products and pharmaceuticals can be used inappropriately (typically, in so-called “off-label” applications) and heavy marketing and incentivizing their use by physicians indiscriminately can increase the potential risks to patients (Halbert & Ingulli, 2008). Harold should at least establish an expense-reimbursement system that allows direct reimbursement for approved marketing expenses so that sales personnel can compete better for prospective business without having to incur un-reimbursed expenses to do so.


George, J.M. And Jones, G.R. (2008). Understanding and Managing Organizational

Behavior. New Jersey: Prentice Hall.

Halbert, T., and Ingulli, E. (2008). Law & Ethics in the Business Environment.

Cincinnati, OH: West Legal Studies.

Robbins, S.P. And Judge, T.A. (2009). Organizational Behavior.. New Jersey: Prentice