Good Policy: The Victim of 'Good Works'?

Public policy activities should be a distinct, mission critical function for Big Pharma - our business  depends increasingly on government as a key customer. However, as companies confront the necessity to plump up the bottom line as patents expire, staffing of non-line functions has taken a big hit, with policy advocacy work emerging as a principal target. But there is a larger long-term trend at work that promises to do serious damage to the industry’s chances in preserving its basic “license to operate.” This is the decision taken by many of the leading companies today to merge  the corporate social responsibility (CSR) function with public policy/government relations advocacy, effectively  subordinating the latter tasks as part of a “reputation management” mandate focused on philanthropy and good works. 

The trend is especially troublesome in the industry’s relationships with multilateral organizations, where responsibility has been  transferred from policy/government relations experts to company philanthropic foundation or CSR managers. No longer is the relationship managed by  policy experts capable of promoting and protecting policy environments conducive to medicines innovation. Rather, those CSR managers are focused simply on extracting a one-off reputation gain through high-profile (and costly) initiatives that often detract from long held policy principles endorsed by the industry as a whole.

As a result, a coordinated, industry-wide approach to  economic and social policy engagement across the UN system, in individual member states and among key NGO influentials is being weakened, at high risk to the intellectual property protection, market-based pricing, balanced and non-discriminatory  regulatory standards and other business friendly objectives that help build opportunities for drug makers.  The risk is particularly high in emerging country markets, which tend to follow closely the work of multilateral organizations like the WHO and WIPO and where much of the industry’s future growth prospects is concentrated.

Quite simply, Philanthropy-minded CSR managers feed the insatiable appetites of government officials, UN bureaucrats and NGOs with “voluntary initiatives” that put multinational corporations in check, using mandatory regulation, through a range of human rights and sustainability instruments.

According to James Roberts and Andrew Markely of the Heritage Foundation[1]: “This new CSR push is an attempt to redefine the very purpose of business by asserting so-called triple-bottom-line obligation of companies to deliver (1) economic, (2) social and (3) environmental “returns” or to justify a theoretical “license to operate” granted to them by society”.

Although future business-school analyses of the decline of innovative biopharmaceutical companies may conclude that R&D failures were the cause, I agree with Roberts and Markely that ill-advised initiatives supported and delivered by the industry’s own foundation and corporate responsibility managers helped to accelerate  the spiral.

Industry actually began this self-inflicted wounding decades ago.  In 1984, Rael Jean and Erich Issac, in “The Coercive Utopians,” warned companies against making contributions to pressure groups in the hope of buying peace – or to encourage them to focus on competitors.  This they called “funding the rope” for ultimate corporate hangings.

The goal of CSR is to engender favorable perceptions among stakeholders. This is often regarded as a “soft” public relations goal. To the extent  that CSR initiatives develop good relationships, that is a worthy objective.

Those relationships cannot lay fallow, however, and a handshake is empty unless all parties benefit. Industry – and the patients it serves – does not benefit unless its public policy work is successful. Intelligence-gathering, position development, advocacy, obtaining buy-in on positions and lobbying are  critical to securing the enabling environments for realizing “hard” corporate performance indicators.  Consider this:  In 1900, aspirin was the only widely-available medicine. Before 1940, four additional scientifically-developed medicines were added, by 1960 there were a total of 392 new molecular entities (NME) and by the end of 2011, FDA had approved 1,135 NMEs for marketing in the US. Much of the success here was due to the seamless relationship between industry policy advocates,  scientists and the clinician community in extending high levels of public funding for basic research combined with strong regulatory incentives for the commercial development of the fruits of that research.  The question that needs to be asked is whether this productive  trend is sustainable if power and resources are directed to a company’s “good Samaritans” while the policy advocates - that first line of defense for the business model - are starved?

Reference
[1] “Backgrounder #2685”,  dated May 4, 2012

About the author
Susan Crowley is a former Merck executive who now advises companies on global issues.scrowley@multilateralconsulting.com