Public trust eroding

Public trust eroding

Source: Med Ad News Staff //MARCH 2007

Significant differences between the public’s view of pharmaceutical companies and the industry’s self-perception have caused the pharmaceutical industry to lose the trust of patients, physicians, and others. The differences in perception are contributing to the decline in the industry’s reputation and causing messages about the industry’s value to society to fail, according to analysts with PricewaterhouseCoopers.

In a nationwide survey of consumers and pharmaceutical industry stakeholders, including physicians, health insurers, researchers, and policymakers, PricewaterhouseCoopers found the public believes that the industry has put profits before patients, abandoning its original vision of improving human health. As a result, the public disregards the benefits that pharmaceutical companies bring to health care. According to PricewaterhouseCoopers analysts, unless the industry takes decisive steps to understand and narrow the gap between its actions and public perception, its damaged reputation will continue to pose a threat to the long-term success of the industry.

"How an industry that has saved so many lives can be held in such low public esteem is difficult to comprehend," says Peter Claude, partner, pharmaceutical and life-sciences advisory-services group, PricewaterhouseCoopers (pwc.com/pharma). "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. Pharmaceutical companies need to demonstrate a better balance of their primary health-care mission with their fiduciary obligation to shareholders through patient-focused behavior."

According to Mr. Claude, research has shown that a 5% positive change in corporate reputation translates into a 3% to 5% positive change in market capitalization.

Key findings of PricewaterhouseCoopers’ survey reveal striking differences in the public’s versus industry’s perceptions about pharmaceutical companies. About 74% of consumers underestimate the average financial investment required to research and develop a new drug by more than 50%.

Consumers are split between believing that pharmaceutical companies consider important unmet medical needs when deciding to develop a new drug instead of choosing to develop me-too and lifestyle drugs with the greatest sales potential. This compares with 71% of industry stakeholders and 91% of pharmaceutical executives who say health needs are a top priority for pharmaceutical companies.

About 94% of consumers and 81% of all those surveyed said drug companies are too aggressive in promoting unapproved uses of their product. Fewer than half of pharmaceutical company executives agreed.

About 62% of those surveyed agreed that drug companies often manipulate or suppress negative clinical trial results to maximize sales. Four out of five pharmaceutical executives disagreed.

More than seven in 10 of those surveyed agreed that drug companies spend too much money and effort attempting to prevent generic drugs from competing with their branded products. Consumers strongly agreed that drug companies should be working with generic drug manufacturers to make generics available upon expiration of their branded drug’s patent.

The PricewaterhouseCoopers survey found consumers and others believe that pharmaceuticals comprise a much higher percentage of total health-care costs than they do in reality. Two-thirds of consumers surveyed by PricewaterhouseCoopers estimated that prescription drugs account for between 40% and 79% of U.S. health-care costs. In fact, just 10% of health-care spending goes to drugs, according to the Centers for Medicare and Medicaid Services.

According to PricewaterhouseCoopers analysts, this disconnect may stem from the fact that pharmaceuticals can consume a higher share of consumers’ out-of-pocket spending than other components of health spending. "The rise of consumer-directed health care will only feed the public’s distorted view of how much drugs contribute to overall health spending," says Brian Riewerts, partner of the pharmaceutical and life-sciences advisory-services group for PricewaterhouseCoopers. "As consumers share more of the cost of care and make their own decisions about health services and products, they will be far more sensitive to drug pricing — yet they clearly do not appreciate the cost and financial risks of drug research and development. Worse, pharmaceutical companies are not educating the public because they do not have adequate tools or transparency to accurately track and report the cost of innovation."

About 86% of consumers underestimated the cost of bringing a new drug to market. Independent studies place the cost of developing a single marketed pharmaceutical product in excess of $800 million. Part of the public’s misconception may stem from the fact that consumers neither understand who funds drug discovery nor appreciate the cost of failure that factors into each success in the drug-discovery process.

PricewaterhouseCoopers found that consumers place more value on a pharmaceutical company’s reputation when deciding whether to use a given pharmaceutical product than pharmaceutical executives believed. About 78% of consumers said when given a choice, they will consider a drug company’s reputation when choosing which product to take. Only one out of three pharmaceutical executives thought reputation was a factor.

One of the chief ways patients become familiar with a company is through direct-to-consumer advertising, which poses a double-edged sword for the industry. In an era of growing consumer power, direct-to-consumer advertising can provide valuable information to a large audience of consumers. Only 10% of consumers and others surveyed think that direct-to-consumer advertising provides complete and useful information, compared with 40% of industry executives. Almost 94% of stakeholders agreed that drug companies spend too much money on drug promotion overall, including direct-to-consumer advertising as well as physician education and overall sales-force initiatives. Surprisingly, almost three-quarters of industry executives agreed.

PricewaterhouseCoopers survey of consumers and pharmaceutical industry stakeholders

• 74% of consumers underestimate the average financial investment required to research and develop a new drug by more than 50%.

• 55% of consumers believe that pharmaceutical companies consider important unmet medical needs when deciding to develop a new drug.

• 45% of consumers believe that pharmaceutical companies choose to develop me-too and lifestyle drugs with the greatest sales potential.

• 71% of industry stakeholders and 91% of pharmaceutical executives believe that health needs are a top priority for pharmaceutical companies.

• 94% of consumers, 81% of industry stakeholders, and 47% of pharmaceutical company executives believe that drug companies are too aggressive in promoting unapproved uses of their products.

• 62% of stakeholders believe that drug companies often manipulate or suppress negative clinical-trial results to maximize sales.

• 73% of stakeholders believe that drug companies spend too much money and effort attempting to prevent generic drugs from competing with their branded products.

• 86% of consumers underestimated the cost of bringing a new drug to market.

• 78% of consumers, when given a choice, will consider a drug company’s reputation when choosing which product to take.

• 10% of stakeholders and consumers and 40% of industry executives think that direct-to-consumer advertising provides complete and useful information.

• 94% of stakeholders believe that drug companies spend too much money on drug promotion overall.

Source: PricewaterhouseCoopers Pharmaceutical and Life Sciences Industry Group (pwc.com/pharma)