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Report shows public think pharma 'puts profits before patients'

By Anna Lewcock, 11-Jan-2007

Related topics: Regulatory & Safety

A new report out this week suggests the pharma industry is losing the trust of its key stakeholders. The report, compiled by PricewaterhouseCoopers (PwC), concludes that the growing decline in the pharmaceutical industry's reputation poses a serious threat to the long-term success of the sector unless steps are taken to address the problem sooner rather than later.

"It is difficult to comprehend how an industry that has saved so many lives should be held in such low public esteem," said Peter Claude, partner in the PwC pharmaceutical and life sciences advisory services group.

"Yet in the current climate of distrust, the public is questioning the industry's motives and practices from sales and marketing to pricing to drug development."

The report highlights the fact that no other industry's reputation suffered as badly as that of the pharmaceutical industry during the years 1997 - 2003. While 79 per cent of survey respondents believed the industry was serving its customers well in 1997, this had plummeted to 44 per cent by 2003. Despite a slight rebound in the intervening years, only the reputation of the oil services industry fell further than pharma from 1997 through to 2005.

The report authors suggest that the distrust stems from a belief by consumers and stakeholders that the industry has deviated from its original vision of improving public health to focus on increasing company profits.

The greatest concerns raised were regarding the alignment of drug development pipelines with unmet medical needs, the transparency of the clinical trial process and the focus and approach of sales and marketing activities.

However, the researchers also revealed a wide gulf in understanding of the industry and its mechanisms by consumers and stakeholders which is likely to have contributed to this negative view of pharmaceutical companies.

For example, 97 per cent of consumers surveyed estimated that prescription drugs contribute to 15 per cent or more of total US healthcare costs, when in reality it accounts for less than 10 per cent.

Concerns

The PwC report revealed that consumers don't believe that pharmaceutical companies focus enough on important unmet medical needs. Only 55 per cent of consumers were of the opinion that companies really consider true medical need when making drug development decisions. This compared with 71 per cent of industry stakeholders, and 91 per cent of pharmaceutical executives.

The assumption is that drug development follows the money, cashing in on markets by developing so-called 'me-too' drugs, drugs to treat diseases for which the disease pathways are well known.

However, there was also a vast under-appreciation of the cost of drug development on the part of consumers; the average cost of developing a marketed pharmaceutical product has been estimated at around $802m (€618.5m), but recent research has noted that the cost can vary greatly, from $500m up to $2bn.

65 per cent of consumers underestimated the average R&D cost per product and 21 per cent simply had no idea. Less than 10 per cent of those surveyed estimated costs in the correct bracket.

Another major concern highlighted by the report was the issue of how pharma's focus on profit-making could influence drug safety and reporting of clinical trial results.

62 per cent of industry stakeholders surveyed believed that drug companies often manipulate or suppress negative clinical trial results to maximise sales - 20 per cent of pharmaceutical executives agreed.

Authors of the report suggest that these suspicions may stem from a lack of understanding of how clinical trials fit into drug development and commercialisation processes. 92 per cent of the stakeholders surveyed said that drug companies need to do more to ensure clinical trial results are reported accurately and completely, and 96 per cent believe there is a need to increase transparency in reporting the results.

Another issue which does not impress the public is the perceived battle between pharmaceutical companies and generics manufacturers. 73 per cent of stakeholders believed that drug companies expend too much money and effort trying to prevent generic drugs competing with their branded products.

The perception that companies are using up resources that could be put to good use developing potentially life-saving drugs to fight off threats from generics manufacturers will cause the reputations of pharmaceutical companies to suffer further. Consumers were of the opinion that pharmaceutical companies should work with the generic drug manufacturers to ensure generics are available when a branded product's patent expires.

Reputation Matters

PwC found that pharmaceutical executives tend to underestimate how much value consumers place on a pharmaceutical company's reputation when deciding which pharmaceutical product to use. 78 per cent of consumers surveyed said they would consider the drug company's reputation when choosing a product, whereas only one in three pharmaceutical executives thought reputation would play a role in their decision-making.

94 per cent of stakeholders also agreed that drug companies spend too much money on promoting their drugs, including direct-to-consumer advertising, physician education and other sales initiatives. Almost three-quarters of pharmaceutical executives agreed.

The report would seem to be a wake-up call to pharmaceutical companies to adapt their activities to address issues of reputation and public trust.

"Whether consumers and stakeholder group perceptions are accurate or are based on misconceptions is to some extent irrelevant," the report states.

"The realities are that perceptions drive people's behaviour and that in recent years the pharmaceutical industry has, for a myriad or reasons, lost the trust of its key stakeholders…As such the industry can and should act to restore trust as the central tenet of all its relationships."

And if drug companies find dragging themselves away from the balance sheet a bitter pill to swallow, then they can take comfort in the fact that a 5 per cent positive change in corporate reputation can apparently translate into a 3 - 5 per cent positive change in market value.