Take Me to Your Leader - Pharmaceutical Executive

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Take Me to Your Leader
Turnover in the top 10 has new CEOs racing to reinvent the way their companies do business. But who has the courage to lead the industry itself back to greatness?


Pharmaceutical Executive


It's a peculiar paradox: Pharma spends more than any other industry seeking influence on Capitol Hill, but it remains, in the words of Terry Hisey, US managing principal of life sciences for Deloitte Consulting, "a public punching bag." In turn, it views much of the mainstream media with disdain. It's true that, say, the New York Times sometimes inflates scant evidence into scandals. Yet there's a level of industry misbehavior, especially in the marketing of drugs, that merits such scrutiny. As drug-industry newshound Ed Silverman says, "Virtually every company has had serious safety and ethical issues that the public is aware of. Yet they have also had to pay billions of dollars in fines and lawsuit settlements—and that's mostly kept in the shadows."

Dr. Sid Wolfe, the outspoken director of Public Citizen's health research group, says, "It grieves me that they do so much good—but they do so much bad too. The level of fraud and corruption is so high that CEOs need to start cleaning it up." Not surprisingly, Wolfe supports holding executives personally responsible—with high fines and even jail time for crimes that seriously harm patients. If the recent OxyContin settlement is any indication, he may get his wish.

Leaders do not end up in bunkers or behind bars. "The industry has learned that CEOs need to be more proactive to answer challenges and charges," says PhRMA head Billy Tauzin, citing Richard Clark's passionate public defense of Merck's integrity amid the Vioxx hysteria. Tauzin notes that when he agreed to take the reins of the lobbying group, he made it a condition that what he calls the "'No Comment' era" was over. "Still," he says, "we have a long way to go."

Drug safety, pricing, and patents will grow only more controversial and convoluted. Leaders will find it increasingly difficult to present the industry's case. Although judgments about whether a drug should be withdrawn from the market are rarely clear-cut, drug firms' denials and silence play to the public as indifference. As Jeff Moe says, "Imagine if J.P. Garnier had stepped up as soon as the news broke about the Avandia heart-attack risk study and said, 'We welcome people coming to our Web site, analyzing the data, and offering a new interpretation. We will look into it.'

"Doctors and patients are growing wary of new drugs," Moe adds. "If that trend continues, it could be the death knell for industry innovation."

As for the prickly pricing issue, there is little doubt that a new era of price-for-value is upon us. Yet the industry's bunker mentality has blocked it from either confronting or collaborating with increasingly powerful external stakeholders, such as the health-insurance industry.

"Pharma unfairly bears the brunt of the 'healthcare crisis' rage," says Michael Russo. "The other players have deflected public anger to focus on the price of drugs, even though that composes only 14 percent of healthcare costs. Still, if you turn your chronic meds into brands, people grow resentful about $20 monthly co-pays. They'll shell out for cable, but pharma needs to communicate why they should shell out for health."

CEOs who wish to recalibrate the debate will have to embrace greater transparency around how prices are set. "Pharma needs to be much more proactive in communicating both the benefits of their drugs and the investment demanded to develop them," says Stefan Thomke, a Harvard Business School professor. For all their fury at Big, Bad Pharma, consumers have little grasp of its unique economics. "Because R&D is invisible, people tend to think that it's free or that the government pays for it," Thomke says. "They can't conceive of a drug company investing billions of dollars in research, much of which shows no immediate profit."


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