The Regulatory Engagement Conundrum

Responsible lobbying—appropriate corporate engagement with legislative and regulatory processes—is becoming a high-priority social impact and governance topic for biopharma. This complex and sensitive challenge needs a tailored response from each company, but there are important general questions to ask, and good ideas to consider.

What’s the problem? Near-term responses to COVID-19, together with our long-term commitments to the UN Sustainable Development Goals (SDGs), are driving new regulations that will deeply affect biopharma. This is true in the US, where discussion skews legalistic and political, and in the EU, which has become a global leader in sustainability regulation.An active dialog between biopharma companies, regulators, and legislators is needed—how else can we craft well-designed policy? But isn’t public policy engagement by industry—lobbying in all its variations—perceived negatively, especially for biopharma?

Sandor Schoichet

Key institutional investors are waking up to this conundrum, increasing scrutiny of lobbying activities and corporate oversight.There’s quite a range of perspectives: the Future-Fit Foundation “encourages investors to take a systems-lens approach, enacting change through…the political sphere as well as…asset allocation,” while the Corporate Lobbying Alignment Project (CLAP) from Preventable Surprises aims to “make corporate political capture a central component of investors’ approach to environmental, social, and governance (ESG) stewardship.”

The Biopharma Sustainability Roundtable, an executive network I founded and co-lead, organized a discussion on Responsible Lobbying to explore this challenge. Three of the highest-priority ESG topics identified by biopharma corporates and investors connect with the question of responsible lobbying: equitable access to medicines with fair pricing, business integrity and compliance, and effective corporate governance.

Nate Byer, managing director at Purple Strategies, a corporate communications firm working with global biopharma clients, shared surprising poll results on public expectations and opportunities related to biopharma lobbying. For our Roundtable, Purple surveyed 501 “Informed Public” respondents in the US from Aug. 28 to Sept. 2. It seems there’s a generational divide in attitudes towards biopharma. Younger respondents (age 25-44, 41% of survey, vs. 48% over 45) were more familiar with the industry, more positive about corporate motivations, and more open to industry participation in the regulatory process. At the same time, 65% of respondents across age groups and genders said biopharma has a social duty to provide data and insights to elected officials and regulators. The divide is over viewing biopharma as an innovative technology sector, vs. older perceptions focused on drug pricing and insurance. This insight suggests biopharma can drive positive social perceptions by focusing on the next generation of social and political influencers.

An investor’s perspective came from Jvan Gaffuri, director, ESG benchmarking, for S&P Global, the financial data and analytics firm that recently acquired RobecoSAM’s ESG ratings business. Their research corroborates the idea that effective policy engagement can impact biopharma value drivers, potentially reducing long-term risk and encouraging revenue growth. They note that healthcare, including biopharma, has the highest annual spend on policy influence as a percent of revenues across business sectors, but lacks meaningful disclosure frameworks.

Biopharma has a key role to play in defining policies and regulation for pandemic recovery, and for tackling some SDGs. Best practices for engagement noted by S&P Global echo the suggestions from Purple: highlighting supported social causes and outcomes, being transparent about policy-related funding and activities, and leadership to address issues before they get on a government agenda. They also warn that excessive lobbying can create reputational risk, especially if not aligned with public statements or in defense of structural inefficiencies.

Building a policy engagement strategy that reflects future international requirements, while still driving company objectives, requires a team: business planning, risk management, communications, investor relations, and sustainability professionals need to collaborate. Do you have governance processes in place to ensure lobbying and policy engagements are aligned with your long-term value creation strategy? Are you disclosing the scope and purpose of external engagements to analysts and investors?

We are living through a once-in-a-generation opportunity to shape public dialog on the role of biopharma in our healthcare infrastructure. We all need to find a way to lean into this opportunity for social impact.

Sandor Schoichet, Director, Meridian Management Consultants, and Co-Founder of the Biopharma Sustainability Roundtable. He can be reached at sschoichet@meridianmc.com.