Reinhard Angelmar The Salmon and Rameau Fellow in Healthcare Management Professor of Marketing...

Reinhard AngelmarThe Salmon and Rameau Fellow in Healthcare Management

Professor of MarketingINSEAD, Fontainebleau, France

The International Pharmaceutical Regulatory and Compliance Congress June 6-7, 2007

Sheraton Brussels Hotel and Towers, Brussels, Belgium

INDUSTRY IMAGE AND TRUST FROM A EUROPEAN PERSPECTIVE

2

INTERNET ASSOCIATIONS

0

200000

400000

600000

800000

1000000

1200000

1400000

1600000

1800000

and "unethical" and "evil"

"Pharmaceutical companies" "Tobacco companies"

"Oil companies" Mystery benchmark

Google Search, May 8, 2007

3

Strong Industry Brand equity

INDUSTRY BRAND EQUITY

• Seek, pay for, and adhere to medical treatment

• Political support for industry

• Prescribe medicines


• Industry-friendly policies

• Favor medical treatment and pay fair prices for medicines


• Supportive of industry

• Positive coverage of industry


High industry awareness

Strong, favorable,

unique associations

Benefits of a Strong Industry Brand Equity

Consumers (voters)

Physicians/ HC

profess.

Policy makers

Payers

Media

NGOs

4

COUNTRY HEALTH EXPENDITURE(% of GDP)

5

HEALTH EXPENDITURE FINANCING: 2004

6

CHANGE IN SHARE OF PUBLIC SPENDING ON HEALTH: 1990 – 2004(ranked by 1990 public share)

7

Age-related change in public expenditure: EU15 - 2004-2050 (% of GDP)

Source: The impact of aging on public expenditure. Projections for the EU25 Member States,Report of the DG ECFIN, 2006

8

Source: Eurobarometer, Feb 2007

Fieldwork: Nov-Dec 2006

Source: Eurobarometer, European Social Reality, February 07

ISSUES OF CONCERN FOR EUROPEANS: EU25

9

DRUG SPENDING AS PERCENT OF TOTAL HEALTH SPENDING, 2004

38.5

29.6

27.6

27.4

24.8

23.1

22.8

22.0

21.1

20.9

18.9

18.9

17.7

17.7

17.4

16.3

14.8

14.1

13.0

13.0

12.8

12.4

12.3

12.3

11.5

11.3

10.4

9.5

9.4

8.5

0

5

10

15

20

25

30

35

40

45

Slo

vak

Rep

ub

lic

(3)

Po

lan

d

Hu

ng

ary

Ko

rea

Tu

rkey

(1)

Po

rtu

gal

Sp

ain

Cze

ch R

epu

bli

c (2

)

Ital

y

Mex

ico

Fra

nce

Jap

an (

3)

Can

ada

OE

CD

Gre

ece

Fin

lan

d

Icel

and

(2)

Ger

man

y

Au

stri

a

Un

ited

Kin

gd

om

(4)

Au

stra

lia

Irel

and

Sw

eden

Un

ited

Sta

tes

Net

her

lan

ds

(2)

Bel

giu

m (

3)

Sw

itze

rlan

d

No

rway

Den

mar

k

Lu

xem

bo

urg

(1): 2000; (2): 2002); (3): 2003; (4) OFT estimate. Source: OECD Health Data 2006

10

ANNUAL GROWTH IN EXPENDITURES (1998-2003): Total Health and Pharmaceuticals

11

MAIN HEALTHCARE EXPENDITURE COMPONENTSCountries ranked by total share of in-patient care of current expenditure on health

12

SELECTED STAKEHOLDERS

Pharma-cies

Physicians

Other service

providers(comple-mentors)

THIRD-PARTY

PAYERS: Public / Private

Em-ployers

Consumers (Patients) /

Employees / Taxpayers

PHARMA COS

Mktg Authorization Agency (e.g.,

EMEA)

Product / Service Flow

Financial / Payment Flow

Price approval

authorities(e.g.,

Ministry)

HEALTH TECHNOLOGY ASSESSMENT

CENTERS

13

THE POWER GAME

• Change in relative power– Traditionally strong stakeholders become less

powerful– Traditionally disempowered stakeholders become

more powerful

• Pharmaceutical industry’s relative power declines

• Zero-sum game perception heightens conflict between health care sector players

• Conflict is resolved in favor of players that– are more powerful– have stronger brand equity

14

COMPONENTS OF INDUSTRY BRAND EQUITY

R&D / Innovation

Safety of

Medicines Pricing

Sales &

Marketing

Valueof

medicines

ENGAGEMENT WITH STAKEHOLDERS

TRANSPARENCY

TRUST

• Patient outcomes

• Healthcare cost impact

• Aggressive-ness

• Ethics

• Price level of medicines

• Access to medicines

• Industry profitability

In

• Development

• Regulatory

• Post-launch

• Choice of disease areas

• R&D costs (vs marketing costs)

• Industry’s role in innovation

OVERALL ATTITUDE TOWARD INDUSTRY (FAVORABILITY)


TRANSPARENCY

TRUST



• Aggressive-ness

• Ethics




In

• Development

• Regulatory

• Post-launch






TRANSPARENCY

TRUST



• Aggressive-ness

• Ethics




In

• Development

• Regulatory

• Post-launch






TRANSPARENCY

TRUST



• Aggressive-ness

• Ethics




In

• Development

• Regulatory

• Post-launch






TRANSPARENCY

TRUST



• Aggressive-ness

• Ethics




In

• Development

• Regulatory

• Post-launch






TRANSPARENCY

TRUST



• Aggressive-ness

• Ethics




In

• Development

• Regulatory

• Post-launch






TRANSPARENCY

TRUST



• Aggressive-ness

• Ethics




In

• Development

• Regulatory

• Post-launch






TRANSPARENCY

TRUST



• Aggressive-ness

• Ethics




In

• Development

• Regulatory

• Post-launch






TRANSPARENCY

TRUST



• Aggressive-ness

• Ethics




In

• Development

• Regulatory

• Post-launch






TRANSPARENCY

TRUST



• Aggressive-ness

• Ethics




In

• Development

• Regulatory

• Post-launch






TRANSPARENCY

TRUST



• Aggressive-ness

• Ethics




In

• Development

• Regulatory

• Post-launch






TRANSPARENCY

TRUST



• Aggressive-ness

• Ethics




In

• Development

• Regulatory

• Post-launch






TRANSPARENCY

TRUST



• Aggressive-ness

• Ethics




In

• Development

• Regulatory

• Post-launch






TRANSPARENCY

TRUST



• Aggressive-ness

• Ethics




In

• Development

• Regulatory

• Post-launch






TRANSPARENCY

TRUST



• Aggressive-ness

• Ethics




In

• Development

• Regulatory

• Post-launch






TRANSPARENCY

TRUST



• Aggressive-ness

• Ethics




In

• Development

• Regulatory

• Post-launch






TRANSPARENCY

TRUST



• Aggressive-ness

• Ethics




In

• Development

• Regulatory

• Post-launch






TRANSPARENCY

TRUST



• Aggressive-ness

• Ethics




In

• Development

• Regulatory

• Post-launch





15

DETERMINANTS OF TRUSTHIGH CAPABILITY - COMPETENT

LOW CAPABILITY - INCOMPETENT

ALTRUISTIC MOTIVESSELFISH MOTIVES

16

SURVEY RESULTS

17

Perception gaps• between beliefs and reality

• between beliefs of different stakeholders

18

PERCEPTION GAPS: USConsumer estimates of cost to bring average drug

to market (percent of respondents)Percent agreement that drug companies make drug development decisions based on ‘unmet

need’

Percent agreement that drug companies have sufficient programs in place to monitor their products’ post-market

safety profile and public health risks

Percent agreement that drug companies need to improve transparaency in reporting clinical trial results

19

PERCEPTION GAPS: US (cont’d)Percent agreement that drug companies spend to much

on drug promotion

Percent agreement that DTC advertising provides complete and useful information to consumers

Percent agreement that drug companies can be too aggressive in promoting unapproved uses of their products

Consumer estimates of the amount of overall U.S. healthcare spending comprised by prescription drug costs

20

PERCEPTION GAP: Credit for the discovery of new medicines, EU survey

11

11

15

23

41

0 5 10 15 20 25 30 35 40 45

The PharmaceuticalIndustry

Doctors

Local or NationalGovernment

Hospitals andMedical Schools

Other MedicalProfessionals

11

11

15

23

41

0 5 10 15 20 25 30 35 40 45

The PharmaceuticalIndustry

Doctors

Local or NationalGovernment

Hospitals andMedical Schools

Other MedicalProfessionals

“If you had 10 units of credit for the discovery of new medicines, how many of those 20 units would you assign to each of the following:”

Source: Pfizer, 2004

21

PERCEPTION GAP: Pharmaceuticals in % of total HC costs

Average38

%

18

13

22

20

16

11

0 5 10 15 20 25

More Than 50%

50%

40%

30%

20%

10% or Less

18

13

22

20

16

11

0 5 10 15 20 25

More Than 50%

50%

40%

30%

20%

10% or Less

Percent of Health Care Cost

Survey average: 38%Source: Pfizer, 2004

OECD Average: 18%

22

OVERALL ATTITUDE TOWARD THE INDUSTRY

23

ATTITUDE TOWARD INDUSTRY: EU Elites1% 1%

3%

7%

18%

17%

24%

21%

4%

2%3%

1%

4%

6%

14%

14%

28%

19%

6%

4%4%

6%

27%

18% 20

%

20%

5%

1%2% 1%

3%

8%

16% 18

%

25%

23%

3% 2%

1 2 3 4 5 6 7 8 9 10

TOTAL (Mean = 6.35)

NGO (Mean = 6.45)

Media (Mean = 6.29)

Gov't (Mean = 6.33)

Extremely Unfavorable Extremely

Favorable

“How do you rate your overall feelings toward the pharmaceutical industry? Please use a scale from one to ten, where one means you feel “extremely unfavourable” and ten means you feel “extremely favourable” toward the industry.”

Source: APCO/EFPIA, 2005

EU Policymakers (n=147): EU Parliament, Commission, Council Permanent RepresentativesNGOs (n=80): international organizations, think tanks, trade and professional associaitons,

health NGOs, patient organizationsMedia (n=88): Pan-European and key national specialized and non-specialized media

24

How favourable or unfavourable is your overall opinion or impression of the Pharmaceutical Industry?

ATTITUDE TOWARD INDUSTRY: UK MPs

0

20

40

60

80

100

Favourable Unfavourable

Base: All MPs asked, Summer 1996 – Summer 2006

16%

General Election

67%

% Favourable/

UnfavourableGeneral Election General

Election

Source: MORI / ABPI, 2006

25

ATTITUDE TOWARD INDUSTRY: UK MPs

42%39%39%38%

36%36%

32%31%

29%27%

19%19%

11%

6%16%15%

9%13%

29%12%

22%38%

28%18%

20%36%

19%36%

32%39%

46%65%

44%46%

53%54%

67%68%Biotechnology

Favorable

PharmaceuticalsOil exploration and production

AgricultureEnergy

Unfavorable

Nuclear energyChemicals

Base: All MPs

GasSupermarkets

Nuclear Decommissioning and clean up

ConstructionPetrol

BankingAccountancy

Mobile phone operatorsDebit cards

PensionsWater services

Credit cards


26

For each of the following industries, please rate your overall opinion or impression of them, according to the scale shown - Pharmaceutical companies

DECEMBER (1) 2006OPINIONS OF CERTAIN INDUSTRIES

ATTITUDE TOWARD INDUSTRY: UK GPs

7%

35%33%

21%

6%

Very unfavourable(1)

Slightly unfavourable(2)

Neither favourablenor unfavourable (3)

Slightly favourable(4)

Very favourable (5)

Base: All respondents (200)

Mean Score = 3.2

Source: GfK / ABPI, December 2006

27

For each of the following industries, please rate your overall opinion or impression of them, according to the scale shown


ATTITUDE TOWARD INDUSTRY: UK GPs

3

3.6

1.4

2.7

2.6

3

3.1

2.9

2.8

3.2 Pharmaceutical companies

Banking

Chemicals

Food

Car

Oil & petrol

Rail

Tobacco

NHS

Local PCT/ SHA

Base: All respondents (200)

MEAN SCORE


28

ATTITUDE TOWARD INDUSTRY: UK General Public

How favourable or unfavourable is your overall opinion or impression of the pharmaceutical industry?

Base: General Public 1991-2006

0

10

20

30

40

50

60

1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006

Favourable Unfavourable%

Year

14%

51%


29

REASONS FOR POSITIVE orNEGATIVE ATTITUDES

30

-1.5

-1

-0.5

0

0.5

1

1.5

1.0 1.5 2.0 2.5 3.0

Mean Favourability

Mean Familiarity

Familiarity and Favourability – General public

Base: All respondents (1,997), Summer 2006

Banking

FoodPharmaceuticals

Chemicals

Oil & petrol

Car

Rail

Tobacco

31

INDUSTRY POSITIVES: EU Elites

Percent of Respondents

49%

38%

4%

4%

3%

3%

8%

1%

0% 10% 20% 30% 40% 50% 60%

THERAPEUTIC BENEFITS/CURESILLNESSES/SAVES LIVES

R&D/INNOVATION

QUALITY OF PRODUCTS

GENERALLY CONTRIBUTES TO SOCIETY

WEALTH CREATION AND EMPLOYMENT

PHILANTHROPY

OTHER

NOT SURE

On the question of the pharmaceutical industry, people often express both favourable and unfavourable impressions. On the positive side, what is the

main reason that people might regard the pharmaceutical industry favourably?


32

INDUSTRY POSITIVES: UK GPs

9%

6%

5%

6%

7%

7%

7%

7%

12%

12%

15%

27%

32% Produce/ develop new/ valuable/ good products

(Spend a lot/ good in) research and development

But still profit motivated

But dislike some of their marketing practices

Doing an important/ good job/ service

Sponsor/ help with education

Necessary industry

Are generally ethical/ adhere to a code of practice

Help/ support us/ our profession

Like/ respect/ knowledgeable representatives

Efficient/ well organised/ have good procedures (unspec)

Other

Don't know

“Why do you say that you have a slightly/very favourable opinion of the pharmaceuticals industry?”

Base: All who have a slightly or very favourable opinion of the pharmaceutical industry (82)



33

INDUSTRY NEGATIVES: EU Elites

48%

11%

10%

9%

7%

5%

5%

4%

3%

2%

17%

1%

0% 10% 20% 30% 40% 50% 60%

PRICES TOO HIGH/EMPHASIS ON PROFITS RATHER THANHEALTHCARE

MARKETING STRATEGIES/EXAGGERATES BENEFITS

ATTITUDE TOWARDS/LACK OF R&D FOR 3RD WORLD/POOR

UNETHICAL/IGNORES OR HIDE SIDE EFFECTS

ABUSE OF MONOPOLY POSITION/INTELLECTUAL PROPERTY

DENIES ACCESS TO 3RD WORLD/RESTRICTIONS ON IMPORTING

LACK OF TRANSPARENCY - GENERAL

LACK OF TRANSPARENCY - TRIAL RESULTS

ANIMAL TESTING

LACK OF HEALTHCARE KNOWLEDGE/DRUG SAFETY

OTHER

NOT SURE

On the negative side, what is the main reason that people might regard the pharmaceutical industry unfavourably?


34

INDUSTRY NEGATIVES: UK GPs

2%

4%

4%

4%

4%

8%

8%

8%

10%

13%

15%

33%

46% Profit motivated/ large profits/ profit

before patient Biased/ misleading/ not enough

information/ research Dislike

marketing/ advertising/ promotions Corruptive/ unethical/ underhand/ do

not trust them Pushing expensive/ unnecessary

drugs

Too many \ me too\ " drugs"

Representatives areslimey/ pushy/ untrustworthy

Expensive/ will not reduce prices

Dislike patent extension

Third world disease creation

Have/ set their own agenda

Other

Don't know

“Why do you say that you have a slightly/very unfavourable opinion of the pharmaceuticals industry?”

Base: All who have a slightly or very unfavourable opinion of the pharmaceutical industry (52)



35

InnovationPricing Transparent Communication

Philanthropy

Health OutcomesSafety

Engagement

Profitability


REPUTATION IMPACT and INDUSTRY PERFORMANCE: EU Elites

36

Stakeholder Divergences: EU Elites

InnovationPricing

TransparentCommunication

PhilanthropyHealth Outcomes

Safety

Engagement Profitability

InnovationPricing

Transparent Communication

Philanthropy

Health OutcomesSafety

Engagement

Profitability

NGOMediaGovernment

Innovation

Pricing

Transparent Communication

Philanthropy

Health Outcomes

Safety

Engagement

Profitability


37

TRUST IN INDUSTRY

38

TRUST IN INDUSTRY: US Adults

Source: HarrisInteractive. Online survey: 2,010 U.S. adults, October 4-10, 2006

2003 2004 2005 2006

% % % % Supermarkets 40 42 39 34 Banks 35 40 34 31 Hospitals 34 35 34 28 Computer software companies 22 25 22 23 Computer hardware companies 27 29 27 20 Airlines 20 22 17 16 Packaged food companies 23 23 21 14 Electric and gas utilities n/a n/a 14 14 Online retailers n/a n/a 16 11 Life insurance companies 11 15 10 11 Telephone companies 12 13 11 10 Car manufacturers 14 18 13 9 Pharmaceutical and drug companies 13 14 9 7 Health insurance companies 7 9 9 7 Managed care companies such as HMOs

4 5 5 4

Oil Companies 4 4 3 3 Tobacco companies 3 4 4 2 None of these 37 32 37 40

"Which of these industries do you think are generally honest and trustworthy – so that you normally believe a statement by a company in that industry?"

39

76%79%

76%73% 73%

76%

23%20% 22%

26% 27%24%

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

2002 2003 2004 2005 2006 2007

Trust No trust

TRUST IN INDUSTRY:France – General Public

Source: IFOP/Leem, 2007

« Faites-vous tout à fait confiance, plutôt confiance, plutôt pas confiance ou pas du tout confiance aux Entreprises du Médicament? »

40

TRUST IN INDUSTRY:Physicians in 5 countries

Agreement with « trustworthy »as a descriptor of the pharmaceutical industry

Source: Harris Interactive, 2004

41

NUMBER OF TRUSTED SALES REPS: GPs in Germany

Source: INSEAD Survey, 2007

42

TRUST IN INDUSTRY INFORMATION – CREDIBILITY AS A SOURCE OF INFORMATION ABOUT HEALTHCARE: EU

%

University medical centers 51

National association of doctors 40

New healthcare alliance/doctors, pharma companies, pharmacists, patient groups 35

Patient advocacy organizations 35

National association of pharmacists 31

National association of pharmaceutical

research and manufacturing companies 26

Government agency 21

Leading pharmaceutical company like

Merck, Pfizer or Novartis 14

%

University medical centers 51

National association of doctors 40

New healthcare alliance/doctors, pharma companies, pharmacists, patient groups 35

Patient advocacy organizations 35

National association of pharmacists 31

National association of pharmaceutical

research and manufacturing companies 26

Government agency 21

Leading pharmaceutical company like

Merck, Pfizer or Novartis 14

Source: Pfizer, 2004

43

TRUST IN INDUSTRY INFORMATION:UK GPs

4%

2%

5%

5%

6%

19%

21%

22%

34%

39%

47%

55%

63%

65%

68% Doctors

Colleagues

NICE

Prescribing advisors

Pharmacists

Medical media

Internet sources

PCT/ SHA

Pharmaceutical companies

Government organisations

NHS Direct

Nurses

Patient help groups

Consumer media

None of these

Which, if any, of the following sources, do you generally trust to provide helpful and reliable information about medicines? Base: All respondents (200)



44

CONCLUSIONS• Perception gaps

– Between beliefs and reality – Between industry beliefs and stakeholder beliefs

• Attitudes toward industry– The proportion of persons favorable / unfavorably toward the

industry varies between 4:1 to 2:1 approximately, depending on the surveyed population

– Compared to other industries, the pharmaceutical industry is well regarded in Europe

• Strongest positives associated with the industry: – R&D/innovation– Patient outcomes

• Strongest negatives associated with the industry:– Pricing– Transparency– Sales & marketing practices

• Significant number of persons do not trust the industry

TO CHANGE THE WORLD WE HAVE TO CHANGE OURSELVES

Reinhard Angelmar The Salmon and Rameau Fellow in Healthcare Management Professor of Marketing...

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