Learning Abbott's Lesson on Drug Pricing

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  • 01/04/2007
It is not for nothing that the WSJ ran its piece on Abbott's strategery regarding the re-pricing upward of Norvir the week that Democrats are planning to push through price controls on prescription drugs. (See New Regimen Inside Abbott's Tactics To Protect AIDS Drug Older Pill's Price Hike Helps Sales of Flagship; A Probe in Illinois By JOHN CARREYROU)

But then again, the article does offer some valuable lessons from drug and biotech firms as does a seemingly unrelated article by Alan Murray today dealing with the demise of Home Depot's CEO Bob Nardelli for not understanding that today's corporate chieftain is now in charge of a group of stakeholders (that's why it's called a public company) and not just the bottom line. Indeed, it is the persistent failure of drug and biotech companies to fail to plan for the political and consumer impact of it's corporate decisions.

Abbott raised the price of Norvir when it became clear it was being used as a booster for a competitor product. But the company did a horrible job of clearing the path for what it knew would be a controversial move. In the end, the furor died down but not until Abbott took steps it should have integrated at the outset into an overall package to both explain and insure that both Norvir and it's new product, Kaletra, could be used a suite of products en route to delivering outstanding care. Abbott undertook damage control when it should be been planning for a reconfiguration and relaunch, working and talking to the groups affected and interested in its products.

The fact is what drug and biotech companies do interest people far beyond the immediate group of patients and clinicians that use them. They generate headlines for news organizations and politicians alike. Companies have yet to understand that public policy is just as important to the launch and reimbursement of a product as the science behind it. Similarly, CEOs in the industry seem to be the last of the bunch to understand that their role is not just making the numbers and steering firms through a transition in the science of drug discovery, tough as those tasks are.

Rather, as Alan Murray notes about Home Depot's Bob Nardelli can still be said for many CEOs in the pharma and biotech community:

What Mr. Nardelli missed, however, is that in the post-Enron world, CEOs have been forced to respond to a widening array of shareholder advocates, hedge funds, private-equity deal makers, legislators, regulators, attorneys general, nongovernmental organizations and countless others who want a say in how public companies manage their affairs. Today's CEO, in effect, has to play the role of a politician, answering to varied constituents. And it's in that role that Mr. Nardelli failed most spectacularly.' See Alan Murray's article: Executive's Fatal Flaw:
Failing to Understand New Demands on CEOs in today's WSJ.

The Abbott article is a cautionary tale of the cost of continuing to fail. As we enter a high dry political season for pharma-bio, leadership on a grander scale will be required. Above all, if CEOs fail to defend the mission and value of their enteprise, no one else well. Ultimately, the pharma CEO must create a constituency for his corporation. And simply paying lobbyists to keep the wolves away will not do.

Center for Medicine in the Public Interest is a nonprofit, non-partisan organization promoting innovative solutions that advance medical progress, reduce health disparities, extend life and make health care more affordable, preventive and patient-centered. CMPI also provides the public, policymakers and the media a reliable source of independent scientific analysis on issues ranging from personalized medicine, food and drug safety, health care reform and comparative effectiveness.

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