Posted by: Arlene Weintraub on July 23
During a spring management meeting at Pfizer, one executive floated a seductive idea: With millions of Americans struggling to make ends meet, maybe Pfizer should give away drugs to people who have lost their jobs. The 160-year-old company, which has long offered financial assistance to low-income patients, has never handed out freebies in response to a recession. But Pfizer CEO Jeffrey Kindler seized on the idea as a way both to support customers and to burnish Pfizer’s reputation. “Five weeks after it was suggested, we just did it,” he says.
Pfizer’s free-drug program, called Maintain, is the latest effort by the pharmaceutical industry to repair its damaged public image and position itself as a standard bearer for social responsibility. For years, drug companies have been blasted for charging outlandish prices, holding generic drugs off the market, and paying doctors to help market their products. Such behavior seems especially troubling amid the ongoing economic woes—and it doesn’t help that the industry’s largest players continue to post outsize profits. Pfizer earned $8 billion on $48 billion in sales last year. Kindler believes there is no better time for drug companies to make the case that their No. 1 priority is curing diseases. “What has broken down is the perception of our values,” he says. “We were seen as greedy, arrogant, not transparent.”
Kindler has taken a number of other steps to address these criticisms. In addition to launching Maintain on July 1, Pfizer started tracking payments it makes to doctors for speaking, consulting, or participating in clinical trials. It will begin disclosing the payments on its Web site in early 2010. Several other drug companies will make similar disclosures, including Eli Lilly, Merck, and GlaxoSmithKline. Merck has also expanded its patient assistance program during the economic downturn. Individuals may now qualify to receive free drugs if their household income is less than $43,320. The previous income limit was half that amount.
Rebuilding reputation is a particular challenge for drugmakers. That’s because people believe these businesses have a duty to help sick people get better. Popular opinion isn’t swayed by the fact that each new drug costs up to $1 billion to develop, or that pharmaceutical companies shoulder tremendous costs when experimental drugs fail in clinical trials. “Drug companies are caught between the reality of what it takes to get a drug to market and the public’s expectations of what their rights are when they’re sick,” says Davia Temin, CEO of New York consultancy Temin & Co. (featured in our video, above).
While it’s hard to quantify the benefits of repairing a reputation, experts say being a good corporate citizen pays off. Twenty-two years ago, Merck started giving away a drug to treat river blindness, a devastating infectious disease endemic to certain countries in Africa and Latin America. The company has donated 2.5 billion tablets at a total cost of $3.75 billion over that time. Merck manages the program with the World Health Organization and other groups, and the effort is widely cited as a model of successful public-private partnerships. On July 21, WHO announced for the first time that it sees evidence the disease will be eliminated in Africa with Merck’s drug.
Pfizer won’t divulge the cost of its Maintain program, which will supply qualified patients with drugs at no charge for a full year, or until they become insured again. But even without advertising, the program has struck a chord: Call volume to Pfizer’s patient assistance hotline is up 46%.
* Related blog post: Pfizer CEO Braces for Changes
How are industries and companies positioning themselves for recovery? What should troubled businesses be doing to survive? BusinessWeek writers explore what is becoming known as The Reset Economy. We’ll look at smart strategies for growth and industries undergoing transformation, from autos to entertainment.
Top executives answer questions from readers. Submit your questions and we'll ask them in a video interview. Check back regularly to watch.