drug-prices1
Pricing and pharma’s reputation, how deep does it go?

29th September, 2016


Category: Pricing & Market Access

Pharma and its appearance have always been an issue of contention. This is particularly the case when references are made to specialized drugs that are used to treat correspondingly specialized conditions at seemingly exorbitant prices. The key focus of this article is not to look at the justification of the industry’s pricing, but to look at how deep the reputational harm really does go. Are the few instances of “Corporate Greed” as dubbed by the Wall Street Journal enough to deter the general public from purchasing alternative medication at more traditional price levels? Or is this merely an example of the media running a story to provoke an emotional response, targeting the few products which sell at a premium and neglecting to mention the plethora of benevolence that is produced by the industry?

It is not difficult to firstly find an example of a drug sold at a premium, and then write a story which capitalizes on human emotion. This demonizes the company for its economic approach to the release of its product. For example, this can be seen when looking at Gilead’s $1,000 dollar per pill Hepatitis C cures. While this made for a mild storm, its impact on the pharmaceutical industry was miniscule in comparison to the media frenzy created when Martin Shkreli unapologetically raised the price on an off-patent drug indicated for AIDS patients by 5,000%. These instances have in effect painted the entire pharmaceutical industry with the same brush, labelling it as greed stricken and evil.

This in fact is not the case when examining the industry as a whole, as opposed to merely looking at the top end of the drug chain.

GlaxoSmithKline is a prime example of this; having recently been making a public and well announced reformation in order to provide cheap drugs to millions of people in the developing world. Andrew Witty head of GlaxoSmithKline has pledged that the company will continue to slash prices on all medicines in the world’s poorest countries, give back profits to be spent on hospitals and clinics as well as share knowledge about potential drugs that are currently protected by patents.

The reputation of the industry suffered a deep and damaging blow with Martin Shkreli’s price increase, however, the impact this has on the bigger picture of the pharmaceutical industry is limited to the level of media attention it receives. In previous years the world’s largest pharmaceutical companies have been quietly:

  1. Cutting prices on drugs in the 50 least developed countries not to exceed 25% of the levels in the UK and US *The Wall Street Journal
  2. Contributing chemicals and processes that are covered by intellectual property rights that are pertinent to discovering drugs for neglected diseases into a “patent pool”, so they can be explored by other researchers
  3. Reinvesting profits in the least developed countries in hospitals, clinics and staff

In general, these are all pertinent points which have a dim light shining upon them. The masses do not generally witness the impact that pharma has on the lives of patients, the benefits that pharma supported education offers physicians and the global impact of the pharma industry on the economy. Despite all the good created by the industry it still receives a generally poor reception.

So why is this the case?

The industry’s poor reputation emanates mainly from trepidations over pricing and transparency. A multi-year global study (years 2013-2014) was conducted to explore this area. 34% of respondents claimed that big pharma had a “good to excellent” reputation in comparison with 42% of respondents making the same claim in the previous year.

The study also interviewed patient groups to have them rank pharmaceutical companies based on six key indicators that influence corporate reputation: patient centeredness, patient information, patient safety, useful products, transparency, and integrity.

Overall, when examining the results across the board the industry’s reputation suffered the most in the following areas:

  1. Managing bad news about drugs (29% decrease)
  2. Having ethical marketing practices (23% decrease)
  3. Having a good relationship with the media (19% decrease)

Other factors mentioned for pharma’s reputational damage included; failure to aid patients in developing countries gain access to medicines; a preoccupation with medicines that offer short term health benefits and a lack of resolution to discover new medicines for neglected patient groups.

Where does pharma go from here?

Stakeholders, particularly those who receive support from the industry, should respect pharmaceutical companies as corporate citizens. Concurrently, these companies must understand that they are in an advantageous position where they can leverage their global impact and acknowledge the problems of both acute and chronic diseases. All stakeholders are set to benefit if pharmaceutical companies play a more prominent role in addressing chronic diseases and partner with outspoken bodies to promote disease prevention.

Pharmaceutical giants need to deal with pricing accusations directly as opposed to avoiding and circling around the controversy. Regardless of the outcome of global healthcare reform, political and economic pressure, pricing and affordability will always remain the forefront of the industry’s reputational challenge. Simply being told to reduce prices is not an equitable or justifiable resolution for this problem and not one that will happen on a global scale in the near future.

However, increased transparency around pricing could be the key to decreasing reputational fallouts created by extraordinary pricing. Pharmaceutical companies should be encouraged from a reputational rather than an economic standpoint to make a push to educate policy makers as well as the public on the costs of medicines as well as health economics by substantiating how their products decrease the economy’s overall health care costs. Increasing this level of education will not only satisfy the market’s reverence for price cuts but will ease their desire for it. It creates an aura of understanding and hence ultimately levels out the rocky road of perception that the pharmaceutical industry has inevitably succumbed too.

Insights