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The ethical battle for the future of pharma

Published on 25/07/16 at 02:11pm

A battle is raging for the soul of the pharma industry and the stakes are high. Those companies seeking to promote ethical best practice and corporate social responsibility shoulder a heavy burden, because the future of the industry depends on their success.

History offers plenty of examples of bad and best practice in pharma, but these increasingly dominate headlines in a way that will define the industry in the public’s mind. And, because pharma is such a socially important industry, reputational damage has the potential to fundamentally harm its ‘licence to operate’ at a time when governments and international institutions need to be looking to the industry to help deal with some of the biggest challenges of our age.

Those pharma businesses demonstrating their commitment to operating fairly and transparently are playing an important role in winning public trust, but they simultaneously force unfavourable comparisons with those in the industry that fall short.

For pharma to truly earn its license to operate, there will need to be a concerted effort to drive ethical behaviour across the industry, ensuring it becomes so widespread that examples of bad practice are viewed as isolated incidents that poorly reflect on the overall ethos of the industry.

The current picture

It requires no specialist knowledge or specific interest in big pharma for someone to be aware that the sector suffers a reputational problem.

A cursory glance at a newspaper over recent weeks and months might convince a casual observer that this is the case.

The collapse of the Pfizer-Allergan merger, a tax inversion deal which many believed made little sense beyond delivering returns to the shareholders, will no doubt have caught the eye. And, it might have suggested that pharma businesses are expending more energy on reducing their tax liability than the social good they undoubtedly deliver.

Other eye-catching news includes Martin Shkreli acquiring the rights to produce the HIV drug Daraprim, before raising its price by 55 times. Clearly, that’s almost a caricature of the worst element of pharma and, although driven by an investor, serves as a prominent example of ‘the industry’ prioritising profit over public health.

At a lower level, even the recent fine for Reckitt Benckiser, which sold identical products as specific Nurofen varieties – prompting debate about the line between marketing and deception – could have eroded the very public trust, which the industry needs to build.

Of course, some will say that bad practice is reported in the news precisely because it’s an example of behaviour that deviates from the norm – it’s newsworthy because it is an exceptional case and therefore unrepresentative of the pharma industry as a whole.

That’s true to an extent, but neglects to take into account that it can work the other way too. There are examples of pharma businesses demonstrating particular commitment to social responsibility that gain a deserved share of the headlines.

One excellent example is GlaxoSmithKline (GSK), which recently announced steps designed to widen access to medicines in the world’s poorest countries. This included graduating its approach to intellectual property protection to reflect a country’s economic maturity i.e. for the least developed countries GSK will not file patents for its medicines.

That’s an important counterweight to the Pfizer-Allergan and Martin Shkreli stories – a reader might draw the conclusion that extracting the maximum profits possible is less a priority for GSK than ensuring vitally important medication reaches people who need it in less economically developed parts of the world.

GSK has also overhauled its approach to selling medicines to healthcare professionals – firmly placing more emphasis on providing information and education.

This has included shifting the way sales people are rewarded and incentivised – with rewards no longer tied to individual sales targets, but rather their technical knowledge, along with the quality of the service they deliver to support improved patient care.

In a similar vein, GSK is working to demonstrate its commitment to transparency, as well as preemptively addressing any perception that it might be exerting undue influence, by ending the practice of paying healthcare professionals to speak on its behalf about its products or disease areas, to audiences who can prescribe or influence prescribing.

That’s a big shift for the industry, because it challenges mainstream practice – setting sales incentives and paying healthcare professionals to speak to their peers on behalf of the business – and suggests this isn’t the right way to represent the industry and ultimately best meet the needs of patients.

Future of pharma

The future of pharma operating as a healthy and sustainable industry, with an essential seat at the table in tackling global health issues, will require business leaders – supported by employees at all levels – to shape a corporate culture that earns its licence to operate in the eyes of the public.

There are enough examples of businesses demonstrating strong commitment to social responsibility to inspire others in the industry.

That’s not to say there should be a ‘me too’ approach to establishing best practice, which might come across as a hollow catch-up exercise. Instead, pharma should look at the values underpinning socially responsible behaviour and consider how these can be embedded from top to bottom in their organisation. It will also require Boards to take a stance against those, often powerful, shareholders driven only by the desire to make short term financial gains. It will mean winning over industry analysts by demonstrating that ethical behavior is not only ‘the right thing to do’, but that it will also deliver commercial success. It is not overstating the situation to argue that this is a battle for the very soul of the industry.

Winning and keeping public trust, is the battleground that will secure the industry’s future. And it is a battle worth fighting, as it will not only ensure the long term sustainability of the industry, but will also result in pharma taking its rightful seat at the table in solving some of the biggest health, social and economic challenges that are facing the global community in the 21st Century.

Stephen Vinall is a Partner at the business transformation consultancy Moorhouse. Moorhouse’s report on delivering value through acquisition in pharma can be downloaded here.


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