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INDUSTRY IMAGE AND TRUST
FROM A EUROPEAN PERSPECTIVE
Reinhard Angelmar
The Salmon and Rameau Fellow in Healthcare Management
Professor of Marketing
INSEAD, Fontainebleau, France
The International Pharmaceutical Regulatory and Compliance Congress
June 6-7, 2007
Sheraton Brussels Hotel and Towers, Brussels, Belgium
INTERNET ASSOCIATIONS
1800000
1600000
1400000
1200000
1000000
800000
600000
400000
200000
0
and "unethical"
and "evil"
"Pharmaceutical companies"
"Oil companies"
"Tobacco companies"
Mystery benchmark
Google Search, May 8, 2007
2
INDUSTRY BRAND EQUITY
Benefits of a Strong Industry Brand Equity
Strong
Industry
Brand equity
High industry
awareness
Strong,
favorable,
unique
associations
Consumers
(voters)
•
•
Seek, pay for, and adhere to medical
treatment
Political support for industry
Physicians/
HC profess.
•
•
Prescribe medicines
Political support for industry
Policy
makers
•
Industry-friendly policies
•
•
Favor medical treatment and pay fair
prices for medicines
Political support for industry
NGOs
•
Supportive of industry
Media
•
•
Positive coverage of industry
Political support for industry
Payers
3
COUNTRY HEALTH EXPENDITURE
(% of GDP)
4
HEALTH EXPENDITURE FINANCING: 2004
5
CHANGE IN SHARE OF PUBLIC SPENDING
ON HEALTH: 1990 – 2004
(ranked by 1990 public share)
6
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
7
ISSUES OF CONCERN FOR EUROPEANS: EU25
Fieldwork: Nov-Dec 2006
Source: Eurobarometer, Feb 2007
Source: Eurobarometer, European Social Reality, February 07
8
10
5
0
17.4
Greece
(1): 2000; (2): 2002); (3): 2003; (4) OFT estimate. Source: OECD Health Data 2006
9
11.5
11.3
10.4
Netherlands (2)
Belgium (3)
Switzerland
8.5
12.3
United States
Luxembourg
12.3
Sweden
9.4
12.4
Ireland
Denmark
12.8
Australia
9.5
13.0
United Kingdom (4)
Norway
13.0
14.1
Germany
Austria
14.8
Iceland (2)
16.3
17.7
OECD
Finland
17.7
Canada
18.9
20.9
Mexico
Japan (3)
21.1
Italy
18.9
22.0
Czech Republic (2)
France
22.8
23.1
24.8
Spain
Portugal
Turkey (1)
27.4
15
Korea
20
27.6
25
Hungary
29.6
30
Poland
38.5
40
Slovak Republic (3)
DRUG SPENDING AS PERCENT OF TOTAL
HEALTH SPENDING, 2004
45
35
ANNUAL GROWTH IN EXPENDITURES (1998-2003):
Total Health and Pharmaceuticals
10
MAIN HEALTHCARE EXPENDITURE
COMPONENTS
Countries ranked by total share of in-patient care of current expenditure on health
11
SELECTED STAKEHOLDERS
HEALTH
TECHNOLOGY
ASSESSMENT
CENTERS
Mktg
Authorization
Agency (e.g.,
EMEA)
Price
approval
authorities
(e.g.,
Ministry)
Physicians
Consumers
(Patients) /
PHARMA
COS
Pharmacies
Employees /
Taxpayers
Other
service
providers
(complementors)
Product / Service Flow
Financial / Payment Flow
12
THIRDPARTY
PAYERS:
Public /
Private
Employers
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
13
COMPONENTS OF INDUSTRY
BRAND EQUITY
R&D /
Innovation
• Choice of
disease areas
• R&D costs (vs
marketing
costs)
• Industry’s
role in
innovation
Safety
of
Medicines
In
• Development
• Regulatory
• Post-launch
Pricing
• Price level of
medicines
• Access to
medicines
• Industry
profitability
Sales
&
Marketing
• Aggressiveness
• Ethics
Value
of
medicines
• Patient
outcomes
• Healthcare
cost impact
ENGAGEMENT WITH STAKEHOLDERS
TRANSPARENCY
TRUST
OVERALL ATTITUDE TOWARD INDUSTRY (FAVORABILITY)
14
DETERMINANTS OF TRUST
HIGH CAPABILITY - COMPETENT
SELFISH MOTIVES
ALTRUISTIC MOTIVES
LOW CAPABILITY - INCOMPETENT
15
SURVEY RESULTS
16
Perception gaps
• between beliefs and reality
• between beliefs of different
stakeholders
17
PERCEPTION GAPS: US
Percent agreement that drug companies make drug
development decisions based on ‘unmet need’
Consumer estimates of cost to bring average drug
to market (percent of respondents)
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
18
PERCEPTION GAPS: US (cont’d)
Percent agreement that drug companies spend to much
on drug promotion
Percent agreement that drug companies can be too
aggressive in promoting unapproved uses of their products
Percent agreement that DTC advertising provides
complete and useful information to consumers
Consumer estimates of the amount of overall U.S.
healthcare spending comprised by prescription drug costs
19
PERCEPTION GAP:
Credit for the discovery of new
medicines, EU survey
“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:”
Other Medical
Professionals
41
Hospitals and
Medical Schools
23
Local or National
Government
15
Doctors
11
The Pharmaceutical
Industry
11
0
5
10
15
20
25
30
35
40
45
Source: Pfizer, 2004
20
PERCEPTION GAP:
Pharmaceuticals in % of total HC costs
Percent of
Health Care Cost
10% or Less
11
20%
16
Average
38
30%
20
40%
22
50%
13
More Than 50%
18
0
5
10
Survey average: 38%
15
20
OECD Average: 18%
Source: Pfizer, 2004
21
25 %
OVERALL ATTITUDE
TOWARD THE INDUSTRY
22
ATTITUDE TOWARD INDUSTRY: EU Elites
EU Policymakers (n=147): EU Parliament, Commission, Council Permanent Representatives
NGOs (n=80): international organizations, think tanks, trade and professional associaitons,
health NGOs, patient organizations
Media (n=88): Pan-European and key national specialized and non-specialized media
3
5
6
21%
19%
20%
23%
4
7
8
23
9
2%
4%
1%
2%
4%
6%
5%
3%
2
17%
18%
18%
1%
1%
1%
1
Extremely
Unfavorable
3%
4%
4%
3%
1%
3%
2%
Gov't (Mean = 6.33)
7%
6%
6%
8%
Media (Mean = 6.29)
14%
NGO (Mean = 6.45)
18%
14%
16%
TOTAL (Mean = 6.35)
20%
24%
27%
28%
25%
“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.”
10
Extremely
Favorable
Source: APCO/EFPIA, 2005
ATTITUDE TOWARD INDUSTRY: UK MPs
How favourable or unfavourable is your overall opinion or impression of the
Pharmaceutical Industry?
%
Favourable/
Unfavourable
100
Favourable
General
Election
General
Election
Unfavourable
General
Election
80
67%
60
40
20
16%
S9
6
W
96
S9
7
W
97
S9
8
W
98
S9
9
W
99
S0
0
W
00
S0
1
W
01
S0
2
W
02
S0
3
W
03
S0
4
W
04
S0
5
W
05
S0
6
0
Base: All MPs asked, Summer 1996 – Summer 2006
Source: MORI / ABPI, 2006
24
ATTITUDE TOWARD INDUSTRY: UK MPs
Favorable
68%
67%
Biotechnology
Pharmaceuticals
Oil exploration and production
Agriculture
Energy
Nuclear energy
Chemicals
Gas
Supermarkets
6%
16%
15%
9%
13%
54%
53%
46%
44%
42%
39%
39%
38%
36%
36%
32%
31%
29%
27%
Nuclear Decommissioning
and clean up
Construction
Petrol
Banking
Accountancy
Mobile phone operators
Debit cards
Pensions
Water services
Credit cards
Unfavorable
19%
19%
29%
12%
22%
38%
28%
18%
20%
36%
19%
36%
32%
39%
46%
11%
65%
Source: MORI / ABPI, 2006
Base: All MPs
25
OPINIONS OF CERTAIN INDUSTRIES
DECEMBER (1) 2006
ATTITUDE TOWARD INDUSTRY: UK GPs
For each of the following industries, please rate your overall opinion or
impression of them, according to the scale shown - Pharmaceutical companies
35%
Mean Score = 3.2
33%
21%
7%
6%
Very unfavourable
(1)
Slightly unfavourable Neither favourable
Slightly favourable
(2)
nor unfavourable (3)
(4)
Base: All respondents (200)
Very favourable (5)
Source: GfK / ABPI, December 2006
26
OPINIONS OF CERTAIN INDUSTRIES
DECEMBER (1) 2006
ATTITUDE TOWARD INDUSTRY: UK GPs
For each of the following industries, please rate your overall opinion or
impression of them, according to the scale shown
MEAN SCORE
Pharmaceutical companies
3.2
2.8
Banking
Chemicals
2.9
Food
3.1
Car
3
Oil & petrol
2.6
Rail
2.7
Tobacco
1.4
NHS
3.6
Local PCT/SHA
3
Base: All respondents (200)
27
Source: GfK / ABPI, December 2006
ATTITUDE TOWARD INDUSTRY:
UK General Public
How favourable or unfavourable is your overall opinion or impression of
the pharmaceutical industry?
%
Favourable
Unfavourable
60
51%
50
40
30
20
14%
10
0
1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006
Year
Base: General Public 1991-2006
28
Source: MORI / ABPI, 2006
REASONS FOR POSITIVE or
NEGATIVE ATTITUDES
29
Familiarity and Favourability –
General public
Mean Favourability
1.5
1
Food
Pharmaceuticals
0.5
Car
Chemicals
0
Bankin
g
Rail
Oil & petrol
-0.5
Tobacco
-1
-1.5
1.0
1.5
2.0
Mean Familiarity
Base: All respondents (1,997), Summer 2006 30
2.5
3.0
INDUSTRY POSITIVES: EU Elites
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?
Percent of Respondents
0%
10%
20%
30%
40%
THERAPEUTIC BENEFITS/CURES
ILLNESSES/SAVES LIVES
60%
49%
R&D/INNOVATION
38%
QUALITY OF PRODUCTS
4%
GENERALLY CONTRIBUTES TO SOCIETY
4%
WEALTH CREATION AND EMPLOYMENT
3%
PHILANTHROPY
3%
8%
OTHER
NOT SURE
50%
1%
31
Source: APCO/EFPIA, 2005
OPINIONS OF CERTAIN INDUSTRIES
DECEMBER (1) 2006
INDUSTRY POSITIVES: UK GPs
“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)
32%
Produce/develop new/valuable/good products
27%
(Spend a lot/good in) research and development
15%
But still profit motivated
But dislike some of their marketing practices
12%
Doing an important/good job/service
12%
Sponsor/help with education
7%
Necessary industry
7%
Are generally ethical/adhere to a code of practice
7%
Help/support us/our profession
7%
6%
Like/respect/knowledgeable representatives
5%
Efficient/well organised/have good procedures (unspec)
6%
Other
9%
Don't know
32
Source: GfK / ABPI, December 2006
INDUSTRY NEGATIVES: EU Elites
On the negative side, what is the main reason that people might regard the
pharmaceutical industry unfavourably?
0%
10%
20%
PRICES TOO HIGH/EMPHASIS ON PROFITS RATHER THAN
HEALTHCARE
9%
7%
ABUSE OF MONOPOLY POSITION/INTELLECTUAL PROPERTY
DENIES ACCESS TO 3RD WORLD/RESTRICTIONS ON IMPORTING
5%
LACK OF TRANSPARENCY - GENERAL
5%
4%
3%
2%
17%
OTHER
NOT SURE
33
60%
10%
UNETHICAL/IGNORES OR HIDE SIDE EFFECTS
LACK OF HEALTHCARE KNOWLEDGE/DRUG SAFETY
50%
11%
ATTITUDE TOWARDS/LACK OF R&D FOR 3RD WORLD/POOR
ANIMAL TESTING
40%
48%
MARKETING STRATEGIES/EXAGGERATES BENEFITS
LACK OF TRANSPARENCY - TRIAL RESULTS
30%
1%
Source: APCO/EFPIA, 2005
OPINIONS OF CERTAIN INDUSTRIES
DECEMBER (1) 2006
INDUSTRY NEGATIVES: UK GPs
“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)
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
46%
33%
15%
13%
10%
Too many \me too\" drugs"
8%
Representatives are
slimey/pushy/untrustworthy
8%
Expensive/will not reduce prices
8%
Dislike patent extension
4%
Third world disease creation
4%
Have/set their own agenda
4%
Other
4%
Don't know
2%
34
Source: GfK / ABPI, December 2006
REPUTATION IMPACT and
INDUSTRY PERFORMANCE: EU Elites
Pricing
Innovation
Transparent Communication
Philanthropy
Health Outcomes
Safety
Engagement
Profitability
35
Source: APCO/EFPIA, 2005
Stakeholder Divergences: EU Elites
NGO
Media
Government
Philanthropy
Innovation
Pricing
Innovation
Transparent
Innovation
Communication
Safety
Pricing
Transparent
Philanthropy
Communication
Transparent
Communication
Philanthropy
Safety Safety
Pricing
Health Outcomes
Health Outcomes
Health Outcomes
Engagement
Profitability
Engagement
Engagement
36
Profitability
Profitability
Source: APCO/EFPIA, 2005
TRUST IN INDUSTRY
37
TRUST IN INDUSTRY: US Adults
"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?"
Supermarkets
Banks
Hospitals
Computer software companies
Computer hardware companies
Airlines
Packaged food companies
Electric and gas utilities
Online retailers
Life insurance companies
Telephone companies
Car manufacturers
Pharmaceutical and drug companies
Health insurance companies
Managed care companies such as
HMOs
Oil Companies
Tobacco companies
None of these
2003
%
40
35
34
22
27
20
23
n/a
n/a
11
12
14
13
7
2004
%
42
40
35
25
29
22
23
n/a
n/a
15
13
18
14
9
2005
%
39
34
34
22
27
17
21
14
16
10
11
13
9
9
2006
%
34
31
28
23
20
16
14
14
11
11
10
9
7
7
4
5
5
4
4
3
37
4
4
32
3
4
37
3
2
40
Source: HarrisInteractive. Online survey: 2,010 U.S. adults, October 4-10, 2006
38
TRUST IN INDUSTRY:
France – General Public
« Faites-vous tout à fait confiance, plutôt confiance, plutôt pas confiance ou
pas du tout confiance aux Entreprises du Médicament? »
100%
Trust
90%
80%
76%
79%
No trust
76%
73%
73%
26%
27%
2005
2006
76%
70%
60%
50%
40%
30%
20%
23%
10%
20%
22%
24%
0%
2002
2003
2004
39
2007
Source: IFOP/Leem, 2007
TRUST IN INDUSTRY:
Physicians in 5 countries
Agreement with « trustworthy »
as a descriptor of the pharmaceutical industry
Source: Harris Interactive, 2004
40
NUMBER OF TRUSTED SALES REPS:
GPs in Germany
41
Source: INSEAD Survey, 2007
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
Government agency
26
21
Leading pharmaceutical company like
Merck, Pfizer or Novartis
14
Source: Pfizer, 2004
42
OPINIONS OF CERTAIN INDUSTRIES
DECEMBER (1) 2006
TRUST IN INDUSTRY INFORMATION:
UK GPs
Which, if any, of the following sources, do you generally trust to provide helpful and
reliable information about medicines? Base: All respondents (200)
68%
Doctors
65%
Colleagues
63%
NICE
55%
Prescribing advisors
47%
Pharmacists
39%
Medical media
34%
Internet sources
22%
PCT/SHA
21%
Pharmaceutical companies
19%
Government organisations
6%
NHS Direct
Nurses
5%
Patient help groups
5%
Consumer media
None of these
2%
4%
43
Source: GfK / ABPI, December 2006
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
44