Reputation Enhancement

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Reputation Enhancement Ahn. The biopharmaceutical industry has blindly relied on the argument that high prices are needed because of increasing research and development costs. Focusing on innovation without discussing access is disingenuous. We risk alienating ourselves precisely when we have so much to contribute to the political and social debate. It is no coincidence that many polls rank the pharmaceutical industry as less trusted than the tobacco industry. We need to change the debate about biopharmaceutical innovation from a political football to a reasoned dialogue about two driving truths: one, as a society we possess an incessant drive for innovation leading to novel treatments based on emerging biological insights; and, two, we possess a deep desire for expanding access to medical treatments to all who need them. We need to separate the innovation issue from the access issue. By way of an example, as a society we don’t ask our legislature to control the price of food; but as a society we ensure that anyone whose income is below the poverty line receives access through food stamps or other welfare services. It is time to seize the initiative and to be part of the solution on biopharmaceuticals. History shows that high-risk innovation is best conducted in the private sector and that the government is not good at choosing winners and losers in any industry. The biopharmaceutical industry should be leading the debate on the hard choices needed to ensure access to medicines in the developed and developing world. Chamberlain. When Nexium feels like Nike and Claritin mimics Clairol, as one prominent newspaper has observed, it’s easy to misinterpret the industry’s mission and its motive. During the past five years, as the volume of medication messages directed at consumers has risen dramatically, a harsh and, some would say, partisan critique of the industry has emerged. Reducing the public animus and maintaining a patient focus are now two of the most important challenges facing the industry. A recent CBS News poll indicates the depth to which the industry’s reputation has sunk — only 15% of Americans have a positive impression of drug companies. This decline is stunning in its implications. The more popular or prolific a brand becomes, the more likely it is to encounter criticism and controversy. This unintended consequence of consumer marketing now weighs heavily on the whole industry. Industry insiders — those reading this publication and their constituencies — characterize the criticism as unfair, although not completely unfounded. Modifications to some promotional practices seem appropriate but won’t dampen the cynicism or reduce the industry’s vulnerability. Nor can these modifications presume to alter the nature of competition in a free-enterprise system. Industry can take several steps right now to reduce the animosity. It can share credit with its partners in universities and government. It can rely more on science and less on emotion in consumer advertisements. Brand managers must have their antenna tuned not solely to their target audience but to the wider world if they are to maintain brand equity and corporate goodwill. Companies also can assess and act on clinical risks earlier. This could go a long way to reducing the impact of negative news. And industry should never mistake significant medical findings for a marketing threat. Instead, companies should mobilize around competitive advantages that truly exist and above all else create an enduring, positive agenda that emphasizes the patient. Critics are doing an excellent job of influencing public opinion. By taking two relatively small steps the industry can help humanize itself and reclaim considerable ground. S. Levy. Between rising healthcare costs across the board, a somewhat disingenuous political discussion about importation of drugs from Canada, and scandals, such as the suicidal threat in kids on Paxil, improved public relations would be useful in 2005. In 2005, the pharmaceutical industry will have to place a continued spin on its self-image through the expanded inclusion of celebrity and patient spokespeople testimonials highlighting the many benefits associated with the continued research available through pharma’s current drug-to-market model. In Europe, where healthcare is a state function, pharma companies do not have the same reputation as “profit-driven companies with little regard for average people who bear the weight of high drug prices.” European pharma companies are viewed more as scientific pioneers without which healthcare would be less effective. W. Levy. Companies must explain to shareholders and the public more effectively that local economic conditions will dictate the pricing of products, that the high cost of drug development must be borne by the small fraction of drugs that reach the market, and that the cost of prescription drugs represents a very small component of total healthcare costs. The public should be focused on lowering the cost of healthcare, not only drugs, and the greatest concern should be directed toward the largest contributors to that total cost. Kermani. Every government is concerned about the rising costs of healthcare and in meeting the demand. The uncertain economic situation combined with a growing elderly population and falling birth rates places a great strain on funding public healthcare. The Organization for Economic Cooperation and Development (OECD) has estimated that in the 1970s the average healthcare expenditure share of gross domestic product (GDP) was around 5%; it is now closer to 9%. Governments will therefore look for means to slow expenditure, and it is likely that they will further target the pharmaceutical industry. The pharmaceutical industry is going to have to respond and show that, far from being a problem, greater expenditure on pharmaceuticals is an important part of the delivery of high-quality healthcare. When used effectively and appropriately, drugs are cost-effective healthcare solutions since they can remove the need for expensive, lengthy stays in the hospital. Furthermore, some of the new drugs actually aim to modify the course of the disease, thus improving the quality of life for patients. The rising cost of drugs needs to be placed in the context of healthcare in general; downward pressure on prices will not miraculously make healthcare affordable. The Centers for Medicare and Medicaid Services (CMS) found that pharmaceuticals accounted for only 9.4% of the total $1.3 trillion spent on U.S. healthcare in 2000. Although there will be continued pressure on pharmaceutical companies to justify their prices in line with social objectives, other nonpharmaceutical elements involved in healthcare expenditure need to be tackled. From a more global perspective, as a society we need to make further progress in developing drugs for diseases that primarily affect developing countries. There is often negative coverage of the pharmaceutical industry in the media when it comes to this issue, but there are a lot of people in the industry who do wish to see their companies play a more proactive and benevolent role and we are beginning to see the results of their efforts. Recently, for example, AstraZeneca opened a dedicated research facility in Bangalore, India, focusing on tuberculosis and Novartis opened its Institute for Tropical Diseases in Singapore. Although the industry must make more effort, it would be unfair for the media not to recognize these as steps forward. Simply providing free or affordable drugs is not the answer to tackling these diseases; time and money must be invested in developing collaborations with international, governmental, and local agencies so that a long-term benefit can be achieved. Similarly, the industry must also work with healthcare agencies in industrialized countries to ensure equal healthcare for all. Stern. Pharmaceutical companies are under constant attack. During the elections of 2004, healthcare was a major focus of both candidates. Drug pricing and importation from Canada remain significant challenges for our industry. As pharmaceutical manufacturers, we need to show our customers the value that we bring to healthcare. We have not done a good enough job to differentiate our brands from generics or to show the benefits of using branded pharmaceuticals to consumers, patients, and healthcare providers. The industry continues to bring new drugs to the market that save lives (and are quite expensive to develop). In addition to the drugs, we are developing valuable programs to help patients adhere to medication regimens. I believe that 2005 will be a critical year for the industry to show the value that we add to society. Love. There will continue to be intense healthcare system cost pressures in Europe, Japan, and the United States. The industry will need to engage its critics, payers, healthcare professionals, and consumers more effectively by explaining its real value proposition — treating diseases cost-effectively. Nash-Wong. Among the greatest challenges is obtaining product differentiation, which can be next to impossible when therapeutic classes are flooded with me-too drugs, extended-release formulations, and generic options. Those companies that are successful at differentiating their products from the pack often suffer a backlash from managed-care groups that tighten formulary access and add prior authorization restrictions. To further exacerbate the situation, pharma faces a massive, uphill public-relations battle. With drug prices rising faster than inflation and the Medicare drug benefit focusing attention on the senior citizens who can’t afford to pay for their prescriptions, importation has and will continue to be a hot topic in the year ahead. Therefore, for manufacturers to succeed in a hostile environment, the key is to have a strong value proposition for all stakeholders: prescribers, payers, and patients. Tillett. The No. 1 issue facing the biotech industry is how to separate itself from big pharma in the eyes of the public-equity markets. While big pharma companies are our partners in healthcare, smaller biotechnology companies need to find a way to separate the issues of big pharma from the value that biotech companies are creating with innovative new products. If we have a repeat of 1993, we will all have serious problems. The challenge is to present a message of innovation that will be rewarded regardless of government policy effects on the shorter-term problems facing big pharma. Turett. The growing skepticism among the public and press of all major institutions creates a more complicated environment for communications firms representing multinational corporations. Add to that the critical environment in which the pharmaceutical industry now finds itself, and there is what an optimistic PR person can only call a wonderful challenge. That being said, brands, companies, and representatives who conduct themselves with integrity and transparency still will be able to market their products effectively. Boily. The industry has seen an escalation in lawsuits by state attorneys general, federal prosecutors, and whistle-blowers. Pharmaceutical companies are facing a growing chorus demanding that they revamp their sales and marketing practices. Major initiatives have taken place because of the implementation of the PhRMA Code on Interactions with Healthcare Professionals and the 2003 Office of the Inspector General Compliance Program for Pharmaceutical Manufacturers. All agree that scrutiny will increase in 2006 when the new Medicare drug plan takes full effect. It has never been more obvious that it is crucial for the pharmaceutical industry to establish a credible, powerful voice in the public debate. The pharmaceutical industry needs to communicate to the public that it is on the same side. A key way to establish this credibility is for the pharma industry to show its commitment and lead the way in providing fair and balanced patient and healthcare provider education. What’s Your Opinion? 2005 — A look ahead What are the most significant business challenges you believe the industry will face in 2005? Reputation management Our reputation is hanging by a thread. And because reputation has significant impact on a company’s revenue, physician/ advocacy relationships, and government regulations, reputation management will become a priority for many companies in 2005. We need only look at the pain Merck is experiencing, as groups focus their intense scrutiny on Vioxx. With legal costs estimated between $4 billion and $18 billion, how long will it be before consumers and analysts begin to trust Merck products again? For years, it seemed that our industry could do no wrong. After all, we develop innovative medicines that enable people to live longer and more productive lives. We can list antiretrovirals for treating HIV and imatinib mesylate for treating leukemia as examples of our contributions to society. But our industry can no longer rest on its laurels. In the last five to six years, the industry’s reputation began its spiral trend downward. It’s only recently that we began to focus our attention to the problem. And now that we know reputation management will be one of the challenges companies face in 2005, the question becomes, “will executives dedicate their resources and corporate strategy to address the issue?” Reputation management should be integrated in customer service, brand marketing, corporate-strategic planning, sales, and yes, even R&D. Everything a company does should link back to its reputation. Time will tell before we know how many pharmaceutical companies leaders will embark on a reputation-management strategy. Marita Gomez Partner HealthInfo Direct Pharmaceutical and biotechnology companies need to better communicate the benefits of their products, not just in terms of efficacy but as part of an overall economic value proposition. For instance, the industry has to find a way to put a dollar value on how new therapies can reduce the need for hospitalization. Dr. Beh Swan Gin Singapore Economic Development Board For manufacturers to succeed in a hostile environment, the key is to have a strong value proposition for all stakeholders: prescribers, payers, and patients. Kristine Nash-Wong HealthMedia Inc.

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