The current conflict with the Sales Force (21 Reps) started in June 2001 opposing the implementation of the Pyramid Project (a Regional initiative, which among other alternatives established the outsourcing of the promotion of some non-Strategic brands) and claiming changes in the Incentive program. A second phase has been triggered by the restructuring made in January, following local decisions endorsed by Regional and Global to adapt the size of the Company to the new market environment.
As evaluated and discussed in Business Plan 2001 the project called Pyramid was created aligned to the Regional Strategy with the objective of generating additional growth and value creation in the Region, with optimized resources allocation to some Regional and Local Brands.
In May 2001, Aventis Pharma Uruguay implemented the "Pyramid project", as defined at regional level. This implied that Aventis contracted an independent company, Sumilco S.A., in order to promote the products that were not regarded as strategic for the company (and most of which were not actually being promoted by the reps of Aventis).
When it was decided to terminate 14 people in January 2002 (11 Reps) applying the restructuring plan, the remaining 10 sales representatives initiated a strike claiming for the reincorporation of the former 11 Reps and the cancellation of the Pyramid Project, plus better salary conditions. At the same time the Union sent letters to physicians and medical institutions declaring boycott to Aventis products. The reps of Aventis refused to receive public bid conditions and purchase orders, they left any meeting with clients where Aventis products were even mentioned. At first these measures affected only the products included in the Pyramid project, or whenever products included in the Pyramid project and other Aventis products were simultaneously involved. Later, those measures were extended to every Aventis product (which were specifically listed in the pamphlets that the Union spread all over the local medical institutions).
Upon the merger of RPR and HMR, all the reps consented to sign a new labor contract, which was executed with all legal guarantees and filed with the Ministry of Labor. As per those contracts, the reps agreed to receive a salary composed of a fixed amount plus a percentage to be determined according to the levels of sales reached for each product (incentives geared to focus the promotion and sales on the strategic brands).
The company paid the incentives on a monthly basis and at the end of each quarter the actual sales were accounted. If the balance was negative for the reps (because the forecasted sales had not been reached) a set off had to be applied on the following salary.
The local market is undergoing (and has been for the last years) a difficult situation, which has worsened over the last year. Sales were down and as a result of this, the incentives forecasted and actually paid to the reps turned out to be in excess. When they had to face this situation, the reps questioned the labor contract. At the beginning of the conflict, in June last year, the claim on incentives was one of the grounds they based the strike on. Later on, they virtually left the claims on this concept aside.
The sales of the pharmaceutical companies fell by an average 15% over the last year due to the collapse of the healthcare system. Most of the medical institutions ("Mutuals" and MOH) are going through serious (and in many cases, really critical) financial problems, which deeply affected their credit with pharmaceutical companies. The general economy in Uruguay has been in continuous recession for the fourth consecutive year now, worsened lately by the impact of Argentina’s crisis, the main Uruguay trade partner.
As there was not patent protection to pharmaceutical products until the end of 2001, the copies of the products of multinationals, which are sold at prices sometimes three times lower than the price of the original products, was another negative factor that affected the business of multinationals in particular.
In this context, as it was explained above, a restructuring of the Uruguayan subsidiary was resolved and took place as of January 14, 2002. Downsizing the company implied to terminate 14 people (11 reps and 3 administrative employees).
The reps' conflict got worse after that announcement. The reps who were still Aventis employees went on general and permanent strike. They were called to get back to work in several occasions. But they never showed up. Two months later, those remaining 9 reps were terminated.
All along the period that this conflict has lasted, there were meetings of Aventis representatives with the reps and with the Union. Both at the offices of the company, and at the Ministry of Labor, Aventis made serious proposals to the reps on strike seeking a solution to the conflict (including, extra payments for dismissals, extending health insurance for the dismissed employees and their families for a period of time, a commitment to keep the current employees for certain period of time, re-hiring two of the dismissed reps, etc.). None of the offers of the company was accepted. The reps kept asking to undo the outsourcing project, disregard the plan of payment based on incentives, and, after the dismissals took place, they denied acknowledging the fact that they had been dismissed and are no longer employees of Aventis. And besides, the Union and the former reps kept on and are still applying the boycott measures on Aventis products.
In March 2002, Aventis Pharma hired a new sales force (1 Sales Manager and 8 news Reps), composed by professionals, all with a large experience in multinational pharmaceutical companies. They have been receiving intensive product training, they are demonstrating self-motivation and accepting the challenge to make a turn around in Aventis and they went to the field on April first.
All this procedure has been followed and consulted with the Legal, Human Resources and Regional Management. The respective provisions are duly booked.