SUMMARY: Via Business Insider “CEOs have for decades chanted the mantra of shareholder supremacy and placed cost-cutting and short-term profits above all else. That mindset, however, just might be changing.” It might be changing in other industries but within pharma, the mindset is still “short term balance sheet”.
Something is taking shape within the CPG market. The days of double digit growth might be over so NOW is the time to invest in the brand for a strategy position. Obviously pharma can and can’t do that. Pharma companies only have a short time to maximize the return on their drugs before patent protection allows generic competitors. To this end pharma continually spins the tale that drug development is really expensive. That is not necessarily true.
According to JAMA: although prices are often justified by the high cost of drug development, there is no evidence of an association between research and development costs and prices[/inlinetweet]; rather, prescription drugs are priced in the United States primarily on the basis of what the market will bear”. And I guess most pharma executives believe the market can bear a lot more.
If you follow the trade news like I do, you’ll become aware that drug failures are reported as to their effect on the company’s stock price not on the potential impact on patients. Too many pharma CEO’s are compensated on how their company performs rather than how they are helping people and thus the rub.
At the heart of any discussion, a simple question needs to be asked: “are pharma companies here to serve the public or to make money?”. My belief is that they can do both. However, the excuse of R&D costs doesn’t align with reality when they use tax cuts to reward shareholders instead of investing in the future.
What about the rank & file? Their voices are confined to a calendar of all-day meetings and politics. How can they be the voice of the patient when senior management is focused on the balance sheet?
I believe that a forward thinking, patient centered CEO can take control of a pharma company and have success. There will be some upstream swimming but it can be done. We HAVE to believe that.