If someone owed you money and claimed they couldn’t pay a long overdue bill because their finances are a dreadful mess, would you consider sending them another product shipment or doing another deal with them? What if your product is a medicine that a large number of people rely on to stay in good health? You’re running a business and have to pay your own bills, of course, but to what extent do moral considerations alter your thinking? Where do you draw a line?
This is the dilemma that a growing number of drugmakers are facing as various debt-laden European countries grapple with worsening fiscal quagmires. The issue first arose early last year, when Greece instituted substantial price cuts on hundreds of medicines, prompting Novo Nordisk to halt shipments of insulin. The cuts, however, were like the proverbial straw on a camel’s back — Greece already owed Novo some $36 million and showed no sign of making good.
Not surprisingly, Novo’s move sparked an outcry. More than 50,000 Greeks are estimated to use the Novo Nordisk insulin that was yanked and a patient association called the decision an example of “brutal capitalist blackmail” and a “violation of corporate responsibility.”
GlaxoSmithKline chief executive officer Andrew Witty also lent some criticism. “That kind of action isn’t necessarily helpful to the debate that is going on at the moment,” he told Reuters. “We’ve got to find ways to stay at the table and be constructive. Walking away from the table isn’t, I think, necessarily the right step.”
Whether such views can prevail much longer is an uncertainty, at best. Roche recently halted shipments of medicines for treating cancer and other afflictions to state-owned hospitals in Greece that had not paid their bills. And the Swiss drugmaker made clear that the same action would be taken in other countries, such as in Spain, Italy and Portugal, where bills are going unpaid. In explaining his decision, Roche chief executive officer Severin Schwan complained that some state-owned hospitals had not paid for medicines in three to four years.
The problem, in fact, seems destined to get worse as the European debt crisis deepens. However, this will increasingly force the pharmaceutical industry to walk a decidedly fine line — drugmakers will be forced to balance their responsibility to shareholders with a need to maintain goodwill toward ailing patients. This will be a difficult challenge, although it could also shape up as a defining moment for an industry that has been much maligned for its previous stances toward pricing, safety disclosure and access to affordable medicines in poor countries.
For their part, Novo Nordisk executives have struggled to convince just about anyone who will listen that they truly are concerned with the ethics of such situations. Not so coincidentally, shortly after the flap in Greece last year, the drugmaker made a point of trumpeting a partnership that was newly formed with the University of Copenhagen and a consulting firm to create a pair of tools called Ethics Decision-Making and Ethics Dilemma, which are aimed at businesspeople, academics and students.
The Ethics Decision-Making tool uses questions and games to help viewers improve their understanding of ethics and how to respond to situations that fall into a gray area. One question about a hypothetical decision: “Would it be okay to see it on the front page of a newspaper?” What about on a blog? Having such discussions makes sense. Ethics Dilemma, meanwhile, uses a questionnaire to show how differing views of ethics can influence decisions and lead to different outcomes.
In talking up the tools, Novo Nordisk executive vice president Lise Kingo explained that the point was to help people navigate the ‘gray zones’ in which there is no precise right or wrong, but choices must still be made. Of course, this begged a question — did the Novo Nordisk team, particularly chief executive officer Lars Sorensen, test themselves? Other than this attempt at fostering ethics, the drugmaker kept a notably low profile about its interactions with Greece. In fact, there was no mention of the controversial episode on the Novo Nordisk web site. And a few weeks later, the spat was over and largely left the collective radar screen, because Greece raised its prices close to previous levels.
But the issue never really went away. And more than a year after tussling with Greece, Mr. Sorensen continued to take a hard line. He recently told The Wall Street Journal that he refused to be a “captive supplier” to debt-laden countries that mismanage their finances. “I think, actually, it ought to be the government who faces the patients and talks to the patients about why we cannot afford to buy the products that you have been used to getting, because we didn’t manage our finances well enough,” he said, adding that he went to “great lengths” to explain the decision inside and outside of the company.
Clearly, this is not an easy situation to be in. Businesses are run, after all, to make money and, even when altruism is in the air, things can fall apart if losses start to mount. At the end of the day, no one is helped, especially patients who have come to rely on various medications, if a drugmaker is forced to cut back so drastically that certain medicines are simply not available.
The U.S. recession and European debt crisis are also stark reminders that governments are responsible for their finances and elected officials cannot expect drugmakers — or any other company — to wait indefinitely for payments, at least not without some plan of action. In this regard, Mr. Sorensen has a point. Drugmakers are not charities, although there is very good reason for them to act responsibly and provide assistance to populations that desperately need, but cannot obtain, medications.
This takes us to a larger issue, though, and that is the willingness of the pharmaceutical industry to acknowledge its special role. Unlike tires, toaster ovens and iPods, medicines are different. Yes, medicines are commodities to be bought, sold and consumed like so many other products. But unlike other products, prescription medicines can mean the difference between life and death. And this places a greater responsibility on drugmakers to weigh their actions as they consider availability and pricing.
Unfortunately for Mr. Sorensen and other chief executives, the pharmaceutical industry does not have much goodwill to draw on. To be sure, drugmakers have patient assistance programs, donate to charities and work with non-profits to develop medicines for the poorest nations. But more than a decade of scandals involving nearly every large drug maker over side effects and pricing — coupled with eye-popping settlements over marketing, fraud and kickbacks — has created unrelenting cynicism.
In other words, there are many people who are not willing to cut Messers Sorensen and Schwann and their peers much, if any, slack because they may be stuck in a tight spot due to unpaid bills owed by debt-ridden governments. The contracts may be interpreted correctly. The amount of money owed may be accurate. And the right to walk away and not ship any more medicine may be legally legitimate. But drugmakers may find it difficult to generate much support if they play hardball too fast.
There is no easy salve for this dilemma. But if Mr. Sorensen and other executives really want the public at large — and not just the same old amen corner that shares an ideological bent or a financial connection of some sort — to understand their position, then the pharmaceutical industry will have to work harder at striking that delicate balance between commerce and citizenry. Recent efforts toward greater disclosure of clinical trial data and payments to physicians are steps in the right direction.
Meanwhile, any executive team that chooses to cut off a bunch of needy patients should not expect much sympathy. Most people understand that tough choices have to be made sometimes. But drugmakers will have to go the proverbial extra mile to explain themselves and, perhaps, undertake still other efforts to convince their constituents — and not just shareholders — that they can put some of their money where their mouths are and implement practices that benefit patients and society at large.
Ed Silverman is a prize-winning journalist who has covered the pharmaceutical industry for The Star-Ledger of New Jersey, one of the nation’s largest daily newspapers, for more than 12 years. Prior to joining The Star-Ledger, Ed spent six years at New York Newsday and previously worked at Investor’s Business Daily. Ed blogs about the drug industry at Pharmalot (www.pharmalot.com). He can be reached at firstname.lastname@example.org.