10 Headaches for the Drugs Industry

GlaxoSmithKline has pleaded guilty and agreed to pay $1 billion in criminal fines and $2 billion in civil fines following a nine-year federal investigation into its activities. The Pharmaceuticals Industry is facing dilemmas which threaten its existence in its current form. Here are ten dilemmas which are keeping executives in Big Pharma organizations awake at night

Onece upon a time, the search for scientific knowledge was associated with contributions to human well-being and enlightened progress. One of the great economists who held that view was Joseph Schumpeter, who also visualised great knowledge-creating laboratories. Such medical laboratories came to pass. Many millions of lives have been saved through their products. Even the humble aspirin was made safely and widely available by such technological processes, as were increasingly sophisticated vaccines and drugs. But today, the firms operating the research laboratories have acquired an increasingly poor image for criminally corrupt business practices.

Their leaders, if they have not resorted to effective drugs, may well spend sleepness nights worrying over the emerging dilemmas

[1] The demise of the ‘funnel’ model of discovery of new drugs. This was the standard business model for finding the next generation of mega-drugs. The model has struggled to retain credibility as fewer financial winners emerged out of the funnel.

[2] Fines for criminal wrongdoings. The global pharmaceutical industry has racked up fines of more than $11bn in the past three years for criminal wrongdoing, including withholding safety data and promoting drugs for use beyond their licensed conditions. In all, 26 companies, including eight of the 10 top players in the global industry, have been found to be acting dishonestly.

[3] The scale of the wrongdoing, revealed for the first time, has undermined public and professional trust in the industry and is holding back clinical progress, according to two papers published in this week’s New England Journal of Medicine [September 2012]

[4] Prosectution of business leaders. Leading lawyers have warned that the multibillion-dollar fines are not enough to change the industry’s behaviour so that criminal prosecutions of executives may be considered more seriously in the near future.

[5] Corporate social responsibilities. The drug companies would like to concentrate on profitable areas and leave research into socially important areas such as alzheimers disease to governmental and other not-for-profit agencies.

[6] Big Pharma’s image problem, fuelled by such high-profile scandals, may have made doctors so suspicious of the industry’s claims that it is warping their clinical judgement

[7] Cynicism of pro-bono efforts. Pressures continue for low-cost drugs delivered to the poorer countries in the world with increasing opportunities for reducing the security of intellectual property such as patents. Industry’s pro-bono efforts are viewed cynically.

[8] Conspiracy theories abound in popular culture. These feed into TV and movie dramas in which leaders of drug companies are part of secret and illegal alliances.

[9] Drug compaies perceived as thoroughly corrupt. Drug companies may be the next industry sector to become increasingly regarded as institutionally corrupt, and its leaders will take their place alongside financial executives, politicians, journalists and the police, in future legal investigations.

[10] More government intervention rather than self-regulation of industry practices will become increasing easy to introduce.

Conspiracy Theory or Leaders We Deserve?

There has been an enormous level of interest in the working of Pharmaceutical Companies as part of a gigantic conspiracy theory. I took a look at the blogs which appeared most prominent via a Google search. The conspiracy theory implies that the big companies are broadly colluding with powerful elites including prominent figures in Governments, the Federal Drug Agency, and in some variants of the theory with other more shadowy groups who meet in clandestine fashion.

One way in which conspiracy theories persist is that they are very difficult to test applying the canons of empirical analysis. That, incidentally, is one interpretation of what a theory is, an abstraction helping to explain the world in which we live.

An alternative abstraction is to consider the wrongdoings in drug companies as episodes to which there is a pattern which does not require the presence of a wider global conspiracy or an ultimate (evil) architect. I like the label of Leaders We Deserve as a start to approaching the means whereby organizations develop their cultures and behaviours.

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