Biopharma has hit a new low.
A recent Gallup poll found Americans view drugmakers more negatively than more than 20 other industries polled, including oil, banking and the federal government, with pharma's net favorability rating reaching an all-time low in the survey's 19-year history.
The results are just the most recent data point confirming a trend industry executives already know: the drug industry has become a symbol of capitalist excess rather than of scientific progress.
It's a reputation drug company CEOs are trying to reverse, at a time when the business world is proposing a new mandate for the public corporation.
Last month, a group of nearly 200 top CEOs, including leaders of drugmakers like Pfizer and Johnson & Johnson, backed away from the Milton Friedman credo that shareholder returns are a corporation's primary purpose. In a mission statement revamped for the current political climate, executives elevated other stakeholders to be on par with shareholders, which some experts saw as an implicit acknowledgment of capitalism's shortcomings.
For the drug industry, such questions are particularly acute after years of anger over unaffordable drug prices, addictive products and aggressive marketing tactics.
As the Gallup poll shows, the public sees the drug industry as falling short of its responsibility to society — a shortcoming severe and persistent enough to sap the public's trust.
"There's been a lot of harm, some self-inflicted and some not from an industry perspective, on our reputation and image within the public," Alnylam CEO John Maraganore said in an interview. "I think we've lost a lot of the public trust that, frankly, we never should have lost."
Recovering it will fall to industry execs like Maraganore. But with controversies perennially in the background, can drugmaker CEOs be taken seriously in their efforts to rehabilitate biopharma's image?
A new role for CEOs
Even as public trust wavers, CEOs face public pressure to play a more active role in society.
Alan Murray, a longtime chronicler of chief executives now at Fortune, recently noted a shift in how American CEOs approach their job over the past decade, citing actions such as Merck & Co.'s Ken Frazier leaving President Donald Trump's business council after Trump's equivocation on the violence in Charlottesville, Virginia, Bank of America's leader publicly opposing a North Carolina bill to limit transgender access to public bathrooms and Delta's CEO ending a discount program with the National Rifle Association following multiple mass shootings.
"I can confidently state that none of these actions would have happened a decade earlier," he wrote. "The standard chief executive response, when faced with a controversial social issue that didn't directly affect the bottom line, was to shut the heck up."
Alnylam's Maraganore agrees, adding that he sees speaking out on broader social issues as a growing part of the job of private sector leadership, having done so several times against the administration's immigration policies.
"You've got a mantle that frankly requires you to be able and willing to speak out," Maraganore said in an interview.
Yet, as social trust in the sector declines, drug industry CEOs risk their message getting undermined.
Michael Pirson, a business professor at Fordham University, sees CEOs' newfound willingness to take social and political stands as a response to consumer questions of what those companies value.
"If people don't know what you value, they impute cynically it's only financial," he said.
For an industry ranked as least regarded, pharma has a compelling social message to share in its development of new medicines. But that mission's importance magnifies every controversy.
"They are playing with something that is truly important to people, their health," Pirson said.
Distrust is intertwined with legitimacy, which can in turn weaken the effectiveness of a leader speaking out, said Kirsten Martin, a business professor at The George Washington University.
"When people don't trust you, you start to lack legitimacy until you don't have a leg to stand on to opine about what others should do or to be a normal corporate citizen," Martin said.
Ron Cohen, CEO of Acorda Therapeutics since 1995, said increased political polarization has made it impossible to please everyone as a leader.
"I do think that has caused more CEOs to consider, if we're going to irritate someone, then we may as well take a stand where we think it does the most good," said Cohen, who recently co-wrote an open letter raising concern over the U.S. government's treatment of Chinese scientists in the country.
And as drugmakers come under fire for pricing medicines high, companies need to voluntarily curb their worst practices, Cohen said.
That's out of self-preservation more than benevolence. With political rhetoric heating up, regulatory and legislative threats have intensified. Lawmakers in both the Senate and the House of Representatives are considering major drug pricing bills, while the Republican administration in the White House has shown itself willing to target an industry usually considered an ally.
"Extreme conditions are not healthy for any of us and anything we are trying to do," Cohen said. "It's really an effort to nudge things closer to the center, back from the edge."
Can the industry win back trust?
In recent interviews with BioPharma Dive, industry CEOs ticked off practices they said must stop or be reformed for drugmakers to regain credibility.
Maraganore cited annual drug price increases, direct-to-consumer advertising and generic obstruction as tactics that have sapped the public's trust.
Of course, Alnylam is a biotech newly on the commercial stage, does not do DTC advertising and faces no imminent generic threats. And while Alnylam has vowed to limit price increases to inflation, it also set an initial list price of $450,000 for the typical patient for its only commercialized rare disease drug.
Still, Maraganore has an influential voice, running a biotech worth more than $9 billion and as past chair of the industry's main trade group, the Biotechnology Innovation Organization.
"The hardest thing to explain to the public is why their drug prices should increase just because the clock turns from December 31st to January 1st," he said. "It just makes no sense."
When patent exclusivity lapses, Maraganore said the industry has to get better "about burying their dead" and allowing drugs to go generic when they should.
Commitments and acknowledgements can only go so far, however.
Take the six drug companies whose leaders signed onto the the Business Roundtable's new mission statement for the public corporation. Pfizer, Allergan, Johnson & Johnson, Bristol-Myers Squibb, Bayer and Mallinckrodt have all made headlines in recent months and years for price increases, controversial patent deals, the opioid crisis, and mega-mergers.
John Arnold, a billionaire philanthropist who's made reforming drug pricing a mission, mocked the letter on Twitter a few days later, calling attention to an advertising campaign recently launched by an industry-friendly group to counteract political pressure.
In first action since @BizRoundtable redefined stakeholders to include customers & communities, drug companies announced major price cuts to improve access & affordability.— John Arnold (@JohnArnoldFndtn) August 27, 2019
Haha, no. Reality is today they launched $2.5 mil campaign to rally lawmakers to kill all pricing reforms.
In conferences and interviews, drug company CEOs increasingly admit the industry must change. But until it does, don't expect Gallup's poll numbers to reverse.