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Home , Pharmaceutical industry

EXECUTIVE SUMMARY

Recapturing the vision* Restoring trust in the pharmaceutical by translating expectations into actions

PricewaterhouseCoopers’ Health Research Institute “There is one great problem that about practices that carry significant Consumers and stakeholders seriously challenges the ability reputation risk: research and do not understand the of America’s research-based development, and , development decision process, and pharmaceutical companies to continue product pricing, finance and ethics. do not understand the risks and doing what they do better than any The survey results strongly supported costs involved in researching new other entity on the globe: research and our hypothesis: we found significant and bringing them to market. develop new and treatments. strategic, reputational and operational Most consumers and stakeholders In a word, it is trust.” That statement, gaps between the pharmaceutical underestimated by more than made recently by Billy Tauzin, president industry’s perspectives and priorities 50 percent the average financial and CEO of Pharmaceutical Research and those of the industry’s stakeholders. investment required to research and Manufacturers of America, Based on our findings we believe that, and develop a new drug. This captures the core of one of the greatest with support and positive publicity misperception may result, to some challenges to the pharmaceutical from industry , individual degree, from a recent industry trend: an industry in America and throughout the companies can restore and strengthen inverse relationship between increasing world: that of restoring its damaged the foundations of their damaged (R&D) reputation. reputations by better understanding spending and a decreasing number of and addressing those gaps and their new drugs brought to market. Unaware While the industry’s reputation associated issues. of the higher price pharmaceutical has been damaged, however, it companies must now pay to develop a has not been destroyed. Although In short, our research indicates that new product, many stakeholders perceive healthcare remains one of the least- companies can narrow strategic, that increased industry spending focuses represented industries in the Financial reputational, and operational gaps (and on marketing—particularly on highly Times/PricewaterhouseCoopers thereby enhance their reputations) by visible direct-to-consumer advertising annual reputation rankings, a few demonstrating a successful balance of products for non-life-threatening pharmaceutical companies maintain of their primary mission to improve conditions. a position among the world’s most human health and their fiduciary reputable companies.1 Recapturing obligation to manage shareholders’ There appears, furthermore, to be a the Vision is PricewaterhouseCoopers’ assets wisely. discrepancy between the definition view of how pharmaceutical of held by stakeholders companies can identify, address, and Key survey findings and the definition held by the alleviate the core issues that affect pharmaceutical industry. Consumers their reputations and how they can Consumers and stakeholders believe think of innovation in terms of products take steps to regain any lost respect. that pharmaceuticals constitute a much developed to address unmet medical higher percentage of total healthcare needs rather than lifestyle needs or We base our point of view upon costs than current information from incremental improvement on existing the hypothesis that pharmaceutical the Centers for Medicare & Medicaid treatments. Those consumers, industry stakeholders* and consumers Services (CMS) indicates, which however, also do not understand the have lost trust in the industry because distorts the value–for–money argument complexity involved in the discovery, they believe that financial success and used by the industry. Those surveyed formulation and development of subsequent pressures have blurred the said that drugs consume too high novel . industry’s greater purpose of improving a percentage of health spending, human health. We believe this is just and they significantly overestimated Stakeholder groups and consumers one of several reputation-related the value of that percentage. The continue to have concerns about the issues on which key stakeholders and disconnect may in part result from the nature and extent of pharmaceutical pharmaceutical companies perceive fact that pharmaceuticals consume sales and marketing practices. More the industry differently. While reputation a higher share of consumers’ out- than 94 percent of stakeholders said knows no national borders, we focused of-pocket spending than does any pharmaceutical companies spend too on the U.S. market, where—primarily other component of health spending; much on advertising; they also feel that because of the rise in consumerism— many other health services receive industry advertising lacks transparency we see reputation-related issues as far better coverage from with respect to drug risks and benefits. most pervasive and as posing the plans. As healthcare grows more Most stakeholders expressed concern greatest threat to the industry. consumer-driven in the near term, this about the amount spent on sales disproportionate cost-sharing could and marketing, about the influence To test our hypothesis, we surveyed continue to feed the public’s distorted marketing has on prescribing habits pharmaceutical industry executives, view of how much drugs contribute to and about the impact of off-label drug consumers, and stakeholders* overall health spending. promotion. While stakeholders accept

* Industry stakeholders, as referred to throughout this paper, are defined as the groups represented in our survey: doctors in groups, researchers in academia, former makers, executives, managed care executives, and employer executives. the need for pharmaceutical companies Recommendations for performance incentives that to market products, those stakeholders consideration reward preventive treatment plan believe that marketing focuses too compliance—thereby ultimately much on sales and not enough on Our recommendations for saving on hospital costs for payers treatment and outcomes. pharmaceutical companies to • Differentiate the corporate consider fall into two categories. They with communications that Pharmaceutical executives and are summarized here and further feature improved, cutting-edge stakeholders hold strikingly different discussed later in this report: activities views on a number of issues affecting • Ensure that company and reputation. These gaps in perception— 1. Restore trust in the company’s incentives promote compliance particularly the following—may explain choices and processes regarding with sales and marketing policies much of the well-documented erosion of and clinical and controls the industry’s reputation in recent years. development. •  with state pharmaceutical • Communicate to stakeholders licensing agencies, • When deciding whether to use the differences between chemical enforcement agencies and a given pharmaceutical product, and biological innovation and wholesalers to strengthen consumers place more value educate stakeholders about the controls over the integrity of the on a pharmaceutical company’s difficulties and nuances of fostering pharmaceutical supply chain reputation than pharmaceutical breakthrough medical products executives believe • Address consumer misconceptions • In contrast to the views of about the costs and risks of Conclusion pharmaceutical executives, pharmaceutical product development the majority of consumers and • Understand the most effective It continues to be difficult to stakeholders view pharmaceutical channels for the accurate and understand why an industry whose companies as too aggressive in their complete reporting of mission is to save lives and improve promotion of drugs for unapproved outcomes by collaborating closely the health of our should uses, and many said that companies with healthcare workers and patient be held in such low public esteem. lack adequate processes to monitor groups, and establish links so that Whether consumers and stakeholder unapproved drug use once a product information can be provided for group perceptions are accurate or are has been released to market relevant stakeholders based on misconceptions is to some • Though pharmaceutical executives extent irrelevant. The realities are that report that they make health needs 2. Refocus sales and marketing perceptions drive people’s behavior and their top priority when deciding activities on improving the efficacy, that in recent years the pharmaceutical which drugs to research, consumers safety and compliance of patient industry has, for a myriad of reasons, and stakeholders do not recognize treatment. lost the trust of its key stakeholders— those executives as doing so • Ensure that marketing practices regulators, payers, , and and promotional activities focus . As such, the industry can and Increased transparency by the on improving the treatment of should act to restore trust as the central industry could improve its image with , as well as—in light of the tenet of all of its relationships. all stakeholders. Most stakeholders trend toward consumerism—the and consumers know very little cost-benefit ratio of treatments and At the core of these actions there about the pharmaceutical industry’s communications around safety profiles must be an enhanced focus on significant financial pressures and • Partner with healthcare professional transparency and the provision of unique business model. Companies associations such as medical or complete and accurate information can enhance stakeholder trust if they advisory societies and physician for consumers and stakeholders. The deliberately sharpen the public’s groups to pursue mutually right level of transparency will address vision of these matters—including beneficial activities that improve the concerns identified in the survey the public’s view of the development patient outcomes by improving by those who cited a lack of accurate process, drug risk and benefit the prescribing habits of educated information as the principal driver of information and drug cost and value healthcare professionals mistrust and reputational decline. In data. More concentrated efforts to • Work with health plans and addition, public commitment to and communicate the industry’s role benefit managers private actions toward the creation of a in improving human health and to (PBMs) to develop incentive patient-based promote programs already in place arrangements that contribute model—supported by a sustainable that help indigent patients also could to clinical preventive treatment program to promote compliance with improve the industry’s image. goals—that is, cost-sharing and laws and regulations—could help restore in the public’s eyes the balance between Foster a culture of compliance Attila Karacsony the legitimate need of pharmaceutical and patient-focused behavior. By Director, Global Pharmaceutical companies to promote their products ensuring that the company demonstrates Industry Marketing and the greater good of patient health. In dedication to ethical, patient-focused [email protected] our view, companies can take concrete behavior and by implementing +[1] (973) 236-5640 action to effect the needed changes. fundamental changes in the processes and tools that are relevant not only Jeffrey Rosenbaum Restore trust in discovery and to the efficient and effective conduct Senior Manager, Global Pharmaceutical development. Companies should of business operations but also to Industry Group change the way they define innovation reputation , pharmaceutical [email protected] and communicate it to the public. companies may guard against exposure +[44] 20 7213 4194 They should correct commonly held to excessive and unnecessary business [email protected] misconceptions related to the costs and financial risk—and thereby protect and risks inherent in the development stakeholder value. About PricewaterhouseCoopers process. They should also take steps PricewaterhouseCoopers is the to ensure that they are using the most Educate the public. Communication global leader in providing , effective channels for accurate and on the benefits of the industry for the tax and advisory services for the complete clinical trial reporting to all day-to-day lives of patients—as well pharmaceutical, , and relevant stakeholders. as communication on the risks and life sciences industries. The firm’s costs inherent in the development of Pharmaceutical and Life Sciences Explain the broader benefits of the new drugs for future consumption—is Advisory Services Group works with medicines the industry delivers. needed if patients are to understand clients to address a broad range of Improved communication of the the role of the industry in their strategic, financial, and operational broader socioeconomic benefits personal health cycle. An improved issues. Clients benefit from the firm’s of modern drugs will enhance understanding of the role of the industry global network and extensive portfolio stakeholders’ esteem for the industry in enhancing personal lifestyle and of performance improvement and and help educate the public on the longevity will reestablish the trust and compliance capabilities specifically impact of modern drugs on healthcare the bonds that have historically existed designed to support key operating in general. Improved understanding between the patient and drug company. needs in research and development, may make price justification easier in , sales, and marketing a market in which government pricing For more information and to obtain a and in corporate functions such as policies impede industry economics. copy of the full report, contact: finance, information , and human resources. For more Redirect marketing and sales activities Anthony L. Farino information, visit www.pwc.com/ toward more effective, safer, and Partner, U.S. Pharmaceutical and Life pharma, www.pwc.com/hri. more compliant patient treatment. Sciences Advisory Services Leader Sales and marketing efforts should [email protected] PricewaterhouseCoopers (www. espouse a greater bipartite focus on +[1] (312) 298-2631 pwc.com) provides industry-focused the treatment of diseases and the assurance, tax, and advisory services cost-benefit ratio of those treatments. Peter J. Claude for public and private clients. More Toward that end, companies should Partner, US Pharmaceutical and Life than 120,000 people in 139 countries consider nontraditional venues to Sciences Advisory connect their thinking, experience, educate physicians and thereby [email protected] and solutions to build public trust and improve prescribing habits and, +[1] (973) 236-4289 enhance value for clients and their in turn, patient outcomes. Third- stakeholders. party financial arrangements should Brian Riewerts incentivize compliance all along the Partner, US Pharmaceutical and Life supply chain. Improved, cutting-edge Sciences Advisory pharmacovigilance and drug safety [email protected] activities, as well as a companywide +[1] (410) 783-8920 culture of compliance, should become hallmarks of the corporate brand. Simon Friend Companies should reinforce stringent Partner, Global Pharmaceutical business ethics as a basis of good Industry Leader corporate behavior and penalize those [email protected] who run afoul of expected good practice. +[44] (20) 7213 4875

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