ONE GREAT PROBLEM
By Harry Sweeney
Social theorist Niklas Luhmann suggests trust is an evolutionary mechanism created in human beings to cope with high levels of uncertainty and complexity in contempory life by reducing the mental effort necessary to make choices concerning risks.
To explain the role of trust in human transactions, economist Paul Zak and his collaborator, Stephen Knack, studied public trust levels in more than 40 countries, creating the Zak and Knack economic model.
Their startling conclusion? "Differences in trust cause differences in living standards."
Furthermore, the record shows that as trust erodes, the political response is more legislation or regulation—exactly what the drug industry is facing today.
In earlier times, makers of gold coins put their marks (i.e. brands) on the coins, so that unscrupulous shaving of gold from the coins would damage the mark and reveal thieves had been at work.
Conversely, if the mark was clear, the value of the coin could be trusted. As modern economies moved to mass production, "brands" became ubiquitous as symbols of the credibility and trustworthiness of the manufacturer, and of the strength, speed, safety, and/or other attributes of the products being offered.
The importance of trust to the pharmaceutical industry was captured recently by Billy Tauzin, president of PhRMA, who responded to a question about the drug industry's tarnished reputation by saying: "There is one great problem that challenges the ability of America's research-based pharmaceutical companies to continue doing what they do better than any other entity on the globe: research and develop new cures and treatments. In a word, it is trust."
From a net positive rating of 60 percent in the 1997 Harris Interactive 20-industry reputation poll, the pharmaceutical industry rapidly declined to a rock-bottom negative 4 percent in 2004. The pollsters concluded it was almost "surely a direct result of the constant drumbeat of unfavorable publicity about their prices. Industry rating rebounded to 25 percent in 2005, as success of the Medicare Part D prescription drug legislation helped to ameliorate the public's anger.
However, as the volume of negative publicity related to drug pricing abated somewhat, the drumbeat continued with a barrage of bad publicity related to alleged drug safety and disclosure issues.
The magnitude of the trust problem is suggested by the results of a 2007 Harris Interactive survey of opinions about the institutions identified as most responsible for drug safety.
While FDA and drug companies are believed by American consumers to be largely responsible for drug safety—60 percent and 53 percent respectively—only 45 percent of people surveyed trust FDA, and for the industry, the numbers were worse (27 percent).
I believe these perceptions are wrong. But in the court of public opinion, "Perception is reality." And, as we all know, what happens in the judicial courts frequently mirrors what happens in those of public opinion.
Earlier this year, a report from PriceWaterhouseCoopers concluded that consumers do not understand the economics of the industry, nor do they understand (or seemingly, care about) the risks and costs involved in drug development—they want lower prices.
Moreover, they believe the anti-industry rhetoric that "the industry has put profits before patients."