Why pharma needs Chief Values Officers

To counteract the industry’s negative image with the public, Lea Katsanis suggests pharma companies should employ an executive dedicated to ensuring marketing and pricing activities have ethics embedded at the core.

There has been an onslaught of negative media about the excessive price increases taken by pharmaceutical companies, with both Turing and Valeant at the forefront of this controversy recently. The American Medical Association (AMA) just voted to ban direct-to-consumer (DTC) advertising in the US as one contributing factor to high prices. Many others around the world have called for government policy intervention on both pricing and advertising.

However, while increased regulation may answer some problems, it may, to some extent, let pharmaceutical company executives off the hook with respect to their own attitudes towards drug prices and marketing activities in general. In fact, it may be argued that the industry should become an active participant in the solution to this problem. It should not blame others, such as payers, for their situation, as did PhRMA in the US a few weeks ago.

Is current spending on pricing and marketing inappropriate?

Drug pricing is one of the primary contributors to the continued decline of the industry’s reputation.

In a 2014 study of 26 countries, GlobeScan reported that lack of access to life-saving drugs because of high prices is a major contributor to the industry’s poor reputation worldwide, not just in North America. What’s more, a 2014 GlobalData study reported that many pharma marketing budgets significantly exceed those for R&D. This leads the public to believe that the price they pay for their medication is not actually going to research, but directly to drug marketing.

Finally, it is well known that public funds contribute significantly to new drug development activities, and this knowledge exacerbates the perception that prices and marketing budgets are excessive.

An image problem or a values problem?

One of the three industry executives willing to speak to the media in the wake of the Turing controversy – global head of research and development at Teva, Michael Hayden – was quoted in Reuters (29th September) as saying, “We need to change the way we’re viewed by the public. We’re doing good. We’re really indispensable to the healthcare system. Turing and others don’t really help that perspective . . . We have an image problem.”

While the industry’s poor image is real, it is not the problem in and of itself, but rather a symptom of something larger, as it appears that its values are fundamentally different from those of the general public. The public values affordable pricing and transparency in pharma company marketing practices. The industry’s lack of understanding about this difference in values, combined with the consequences of its behaviour due to its pricing strategies over an extended period, detracts from the many positive contributions that the industry has made to the wellbeing of the public.

Although changes in government pricing policy may be necessary, these take time. Image management consultants are not the answer either — the values problem is structural and cannot be managed by massaging messages to the public. So what can be done at company level in the meantime to solve this problem?

A Chief Values Officer – yet another C-suite job?

Although it may be argued that there are already too many corporate-suite occupants earning what some consider excessively high compensation, one new position for the industry to consider might be that of a Chief Values Officer (CVO) for marketing and pricing activities.

This individual must have specific training (a PhD in ethics or bioethics) and hands-on experience in designing ethics programmes for industry. The appointment of a CVO would seem one way to begin to introduce the idea of fairness to all parties (including the company) as a guiding principle.

This notion does not preclude ‘good business’ practices — in fact, if done properly, it may enhance a firm’s reputation and financial performance by aligning its values with that of its external stakeholders. It may be argued that the CVO could be the most important C-suite position the firm creates.

What about Chief Compliance Officers and Chief Patient Officers – is this duplication of effort?

In most pharmaceutical companies, Chief Compliance Officers (CCOs) are charged with ensuring that product labelling, clinical trials, and other activities meet the government’s legal requirements, and have little time to deal with the training needed to implement effective corporate culture/values programmes and systemic organisational change.

The primary concern of Chief Patient Officers is to ensure the success of outcomes research, and they do not necessarily address the issues that face patients today with respect to high drug prices or excessive marketing expenditure. CCOs may not have a positive impact on employee behaviour, as it has been reported that many industry executives reject any criticism about their pricing strategies and marketing expenditure, provided they are legal.

When questioned about large court settlements levied on their firms for inappropriate pricing and marketing, some executives respond that they consider such actions the cost of doing business. This thinking will require an attitudinal shift, and the CVO would be the right person for that job.

How will CVOs perform their duties?

The CVO would develop a set of enduring core values, providing guidance for all employees with respect to the treatment of patients and health care professionals. These values should be measurable so that their implementation can be monitored.

Values training for all employees is essential, as some ethicists suggest that the influence of peers and top management is even more important than personal belief systems — in other words, all employees must be on the same page for these values to become part of the company’s operating system.

The CEO and board of directors must also receive training and lead by example. This training must be carried out on an ongoing basis — it cannot be a one-time event. While value sets will differ by company, the development of fair and transparent company policies would be part of the CVO’s mandate.

The CVO would work with key stakeholder groups to develop these values. These would include, but not be limited to, federal and local government agencies, professional health care societies, and patient groups. The CVO would establish a guidance committee formed of individuals from these groups, in order to understand the view from outside the firm. Internally, he/she would work those groups responsible for pricing and marketing policies to integrate feedback from these stakeholders into current company strategies.

Is this a panacea for the industry?

The creation of a CVO is neither a panacea nor a cure-all for the current state of affairs. However, it may be one way to shift the internal dialogue in a company that permits acceptance of excessive price increases or excessively high prices for drugs toward considering fairer drug pricing strategies in addition to appropriate marketing strategies.

When the values of the industry move closer to those of the public as a result of a changed mindset, the industry’s image may begin to shift from negative to positive and allow key stakeholders to focus on the positive contributions the industry makes to the public’s health.

About the author:

Dr Lea Prevel Katsanis is a Professor in the Department of Marketing at Concordia University in Montreal, Canada. Prior to joining Concordia, she held various positions in market research, product management, strategic planning, and licensing and acquisition for three major US and European multinational firms. She is the author of the newly released Global Issues in Pharmaceutical Marketing (Routledge 2016), a book that covers topics from industry reputation to physician communication and branding. Her numerous research articles in academic journals focus primarily on pharmaceutical marketing and she is a recognised marketing expert in the areas of trademark, copyright and patents, with a particular interest in the pharmaceutical sector.

Read more on ethical considerations:

Ethics and the public good: the race to find a treatment for Ebola