Industry’s Trust and Reputation Eroded by Perception Gap

Feb. 21, 2007
Addressing misconceptions, fostering a culture of compliance and patient-focused behavior and refocusing sales and marketing activities can restore and strengthen the industry

The pharmaceutical industry has lost the trust of its key stakeholders due to significant differences between the public’s view of the industry and the industry’s self-perception, according to a report by PricewaterhouseCoopers (PwC). The report, “Recapturing the Vision: Restoring Trust in the Pharmaceutical Industry by Translating Expectations into Actions,” found strategic, reputational and operational gaps between the perspectives and the priorities of the parties involved.

However, based on its findings, PwC believes that with support and positive publicity from industry organizations, individual companies can restore and strengthen their damaged reputations by understanding and addressing those gaps.

"The goal of this survey is not to bury the (pharmaceutical) industry but to help them with ways to improve their long-term success," says Peter Claude, a partner in PricewaterhouseCoopers’ Pharmaceutical and Life Sciences Advisory Services Group.

Drawing on last year’s Harris Poll rankings of how well industries serve customers, PwC set out to discover why the industry had such a severe decline in rankings (from 60 percent net positive in 1997 to 25 percent in 2006). Trust was perceived as the driving force behind this decline. The hypothesis was that pharmaceutical industry stakeholders (defined as doctors in physician groups, researchers in academia, former health policy makers, hospital executives, managed care organization executives and employer executives) and consumers have lost trust in the industry because they believe that financial success and subsequent pressures have blurred the industry’s greater purpose of improving human health. The results supported this view.

“It’s difficult to understand how an industry that saves so many lives is held in such low public esteem,” says Claude. “However, in the current climate of mistrust, the public is questioning the industry’s motives.”

A big factor in these problems may be the public’s misconceptions. For example, the study found that consumers and stakeholders believe pharmaceuticals comprise a much higher percentage of total healthcare costs than they do in reality. Two-thirds of consumers surveyed by PwC estimated that prescription drugs account for between 40 percent and 79 percent of U.S. healthcare costs. The truth is that just 10 percent of healthcare spending goes to drugs, according to Centers for Medicare and Medicaid Services (CMS).

“The problem is pharmaceuticals many times consume a higher share of consumer’s out-of-pocket expenses than other components of health spending. People are only paying a $5 co-pay for a doctor visit. Other health services receive better coverage from insurance plans,” says Claude.

According to PwC, as healthcare grows more consumer-driven, this disproportionate cost-sharing could continue to feed the public’s distorted view of how much drugs contribute to overall health spending.

Another area of misunderstanding is the risks and costs involved in researching new drugs and bringing them to market. Most consumers and stakeholders underestimated by more than 50 percent the average financial investment required to research and develop a new drug. Independent studies place the cost of developing a single marketed pharmaceutical product in excess of $800 million. “There is a high risk and cost involved in developing new drugs,” says Claude. “If you start with 1,000 compounds, only five to 10 make it into development. Of these, maybe one – or if you’re lucky, two – make it to market.”

Consumers are split between believing that pharmaceutical companies consider important unmet medical needs when deciding to develop a new drug (55 percent) instead of choosing to develop “me too” and “lifestyle” drugs with the greatest sales potential (45 percent). In comparison, 71 percent of industry stakeholders and 91 percent of pharmaceutical executives said health needs are a top priority for pharmaceutical companies.

Stakeholders and consumers also have concerns about the nature and extent of pharmaceutical sales and marketing practices. More than 94 percent of stakeholders said pharmaceutical companies spend too much money on drug promotion, including direct-to-consumer advertising as well as physician education and overall sales force initiatives. Surprisingly, almost three-quarters of industry executives agreed. While stakeholders accept the need for pharmaceutical companies to market products, those stakeholders believe that marketing focuses too much on sales and not enough on patient treatment and outcomes.

“It seems physicians want more information electronically instead of the traditional sales rep in the office giving drug details scenario. Electronic alerts and detailed websites can offer more timely and technical information. In addition, training geared more toward medical education is being requested,” says Claude.

Pharmaceutical executives and stakeholders also hold different views on reputation issues. PwC found that consumers place more value on a pharmaceutical company’s reputation when deciding whether to use a given product than pharmaceutical executives believed. Seventy-eight percent said that when given a choice, they will consider a drug company’s reputation when choosing which product to take. Only one out of three pharmaceutical executives thought reputation was a factor.

One of the main ways a patient becomes familiar with a company is through direct-to-consumer advertising, an area increasing by pharmaceutical manufacturers. This poses a conundrum for the industry. Direct-to-consumer advertising can provide valuable information to many consumers at once. However, only 10 percent of stakeholders and consumers think that direct-to-consumer advertising provides complete and useful information, compared with 40 percent of industry executives.

“Pharmaceutical companies have found that demand is elastic. The more they advertise, the more they sell. Consumers though, don’t want to pay more for their drugs because of all the advertising of lifestyle drugs,” says Claude. “As consumer-driven healthcare becomes more prevalent, pharmaceutical manufacturers can use advertising as a valuable way to get out important information.”

Recommendations for companies to consider fall into two categories, according to the PwC report:

  • Restore trust in the company’s choices and processes regarding drug discovery and clinical development.

  • Refocus sales and marketing efforts on improving efficacy, safety and compliance of patient treatment.

At the center of these actions, PwC suggests that there must be an enhanced focus on transparency and the provision of complete and accurate information for consumers and stakeholders. “Pharmaceutical companies are talking, but consumers are not listening. Until the industry can improve this trust, nothing else matters,” says Claude.

The right level of transparency will address the concerns of those who cited a lack of accurate information as the principal driver of mistrust and reputational decline. In addition, the study suggests the creation of a patient-based drug marketing model (supported by a sustainable program to promote compliance with laws and regulations) could help restore the balance between the legitimate need of pharmaceutical companies to promote their products and the greater good of patient health.

To view the full report, visit

About the Author

Bill Swichtenberg | Senior Editor