Healthy Skepticism Library item: 13118

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Publication type: news

Taylor L.
Pharma “shooting itself in the foot” over reputation
Pharma Times 2008 Mar 10
http://www.pharmatimes.com/WorldNews/article.aspx?id=13026&src=EWorldNews

Full text:

The public image of pharmaceutical companies is not as bad as some people within the industry believe, and in fact the industry may well be “shooting itself in the foot” by perpetuating the belief that it is generally poorly regarded, even though new research shows this is not the case, according to the Association of the British Pharmaceutical Industry’s corporate affairs director, David Lewis.

In a recent survey, 49% of UK Members of Parliament of all parties described their feelings towards the industry as “mainly favourable,” while the views of 18% were “very” favourable, said Mr Lewis, speaking last week at the Thames Valley University’s second annual conference on pharmaceutical responsibility and reputation. Only 16% of the MPs described their opinions of the industry as “mainly unfavourable” – fewer than the 17% who said they held none of these views.

Moreover, of 2,000 UK adults who were asked the same question, 51% said they were favourably disposed toward the sector and just 14% were unfavourable. 26% of the adults polled also said their positive views of the industry were based on use of medicines, either by themselves or someone else, and they admired drugmakers for their R&D and discovery of new medicines and for saving lives. However, there was also widespread dislike of the industry’s perceived “excessive” profits, pricing policies and activities in Africa and the Third World, said Mr Lewis.

While the industry has long had to live with negative coverage in the broadcast and print media, the Internet has made the scrutiny of perceived bad corporate behaviour much greater and available to “anyone with an opinion and a laptop,” Alex Bollen, research director at survey research organisation Ipsos MORI, told the conference, which was sponsored by PharmaTimes.

Reputation is a key business asset, and one which is very easy to lose but very hard to recover, said Ms Bollen. It affects a business’s bottom line and, ultimately can lead to its destruction; this was most vividly demonstrated by the collapse of Arthur Andersen, one of the world’s leading accounting firms, after it was found guilty in 2002 of obstructing investigations into fraud at its client Enron, the energy giant which subsequently became the biggest bankruptcy in US corporate history.

Ms Bollen described how a company’s “bank of goodwill” can persuade its stakeholders to be willing to hear its side of the story in time of crisis, and stressed that it is vital for employees to have buy-in and become “ambassadors” for the company. Your stakeholders are customers, employees, investors, legislators, journalists, non-governmental organisations – “in fact, anyone who can bugger up your business,” she told the meeting.

Roger Stubbs, deputy managing director and head of business research at Ipsos MORI, said that recent research by the company has revealed a “sea change” in the factors which business journalists take into account when judging pharmaceutical companies. Quality and range of products, which has always had priority status, is now even more important, but the second and fourth most important factors – R&D spending and investment and financial performance – are declining, while the third factor, the company’s trade record, is now assuming much greater importance.

If a crisis occurs, people expect to hear from the chief executive officer, who is the voice of the company and responsible for 47% of its reputation, said Jennifer Garratt, managing director of Burson-Marsteller’s healthcare practice. However, she also pointed out that only two pharmaceutical company CEOs – Procter & Gamble’s AG Lafley and Novartis’ Daniel Vassella – are included in the Burson-Marsteller/Economist Intelligence Unit’s list of the world’s 25 most-admired business leaders.

Loss of reputation is the second biggest threat to any company, after business interruption, and it takes an average of three and a half years for the crisis to fade and reputation to be restored. However, only 22% of companies have any kind of plan in place to deal with crisis issues, Ms Garratt told the conference.