This issue of Contract Pharma sees a definitive listing of Top Companies in the industry, which is an important gauge of the results that firms are achieving across a variety of measures. So how do those companies at the top do it?

What are you interested in? Make sure you ask the right question
One thing is certain when appraising organizations for performance: The answer is highly dependent upon the question. Are you interested in which organization has the top revenue? Highest return on equity (ROE)? Or most favorable return on assets, perhaps a better measure of financial performance than return on sales?
Typically in pharma, simple comparisons are made where the ‘top’ companies’ revenues are compared with their R&D spend—itself used as a proxy for reinvestment in future profitability. But again, these cheap correlations are not as sophisticated as some of those methods listed above.

Not all companies are all things for all people. Firms need to determine what they stand for and remain true to it. The public consciousness is perceptive to organizations having elusive core values, or perhaps even worse, malleable core values. Recently, Forbes published a list of the pharma companies that people felt tended to feel the most positive about. The data used for the list was produced by the Reputation Institute and collected by online surveys. The survey questions measure the respondents’ subjective perception and admiration for each company on factors such as innovation, corporate citizenship, leadership and workplace favorability. Again, not one company took highest marks across all of these categories, but instead there were differential results, which put certain firms above others depending upon the measurement used.

So who comes out on top?
It really depends on some of the principles discussed above. For example, as corporate sustainability and citizenship become more and more important in the public’s consciousness, they will have outsized influence compared to their impact a couple decades ago. These are two factors of Corporate Social Responsibility (CSR), which is how sensitive an organization is to the environment in which it operates. Typically, corporate social responsibility begets corporate financial performance (CFP).

CSR –> CFP
Or, put another way, companies that do good, tend to do well. But to reiterate, this stems back to the notion of core values—a company can mimic good corporate social responsibility in the short-term, but those who are only doing it for financial gains tend to not fare well if the public discovers their moralistic sleight of hand. It used to be that companies would opine, “Who cares what the customers feel, as long as they buy our products.” Now, much more than ever before, and facilitated by word-of-mouth and social media, the customers’ perception is part of the interplay of the market ecosystem and companies that are thoughtful about social concerns will tend to draw a devoted customer, or supporter, base.

But is this relevant to pharma and biopharma companies?
It sure is. With direct-to-consumer advertising driving an incredible proportion of new prescription requests, pharma as an industry is not financially immune to social perception. It may seem like, in contrast to typical consumer markets where people can buy whatever they’d like, that pharmaceuticals aren’t something that the public ‘chooses.’ But this notion is largely incorrect. Not only do millions of patients daily request certain drug therapies from their physicians that they’ve heard about from friends or family, or seen advertised on television, but that behavior is a manifestation of an industry that is more free market competition now than it has ever been. And it’s a difficult industry to be objective with, because the products we make are altruistic, meaning they’re products designed by their very nature to help people.

So the connection between pharmaceutical products and social responsibility is a deep one. And because of the nature of the products produced by the industry, there is enormous public scrutiny on scandals such as price inflation, which undermines not only the companies who actively engage in it, but it paints the whole industry in a negative light because those individuals who are affected aren’t concerned with a nuanced discourse about which companies did or didn’t engage in price hacking. It becomes a dynamic of ‘the people’ versus ‘the pharma industry,’ where our industry becomes the faceless ‘them’; what social identity theory would term ‘the social outgroup,’ where once the reputation is lost, it becomes almost impossible to course-correct and restore it. As a result, all of the firms suffer a halo of negative perception.

We owe it to our patients and the public to be better and strive to always embody the title of ‘top pharma company’ by doing the right things, regardless of what a particular metric may say. Metrics aren’t a reliable proxy for a brain.

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Ben Locwin

Ben Locwin, PhD, MBA, MS writes the Clinically Speaking column for Contract Pharma and is an author of a wide variety of scientific articles for books and magazines, as well as an acclaimed speaker. He is an expert media contact for the American Association of Pharmaceutical Scientists (AAPS) and a committee member for the American Statistical Association (ASA). He also provides advisement to many organizations and boards for a range of business, healthcare, clinical, and patient concerns. He can be reached at ben.locwin@healthcarescienceadvisors.com.