What Is the Social Value of Pharmaceuticals?

What’s shared value’s place in big Pharma? Earlier this week I had the opportunity to discuss this question in a live online chat with Guardian Sustainable Business. The other panelists and I were prompted by the contentious suggestion posed by Guardian’s Sarah LaBrecque: “Instead of a reactive system that deals with the fallout of illness, different stakeholders are keen to promote the reverse, a dynamic system with more patient-doctor-treatment feedback loops. This system might be possible with the help of pharmaceutical companies, who are well placed to offer their business acumen to healthcare services, as well as connecting their products to patient wellbeing.”

Since my work partially focuses on corporate shared value initiatives across the health industry, I was excited to be included. I highly recommend you view the full debate, which you can find on the Guardian Sustainable Business website via their Pharma Futures blog. However, for the purposes of discussion in this Initiative’s community of practice, I’d like to focus on how we discuss Pharma’s role in shared value. Here were my thoughts in response to the Guardian’s questions:

How do you define “social value”?

To me in the broadest sense, social value corresponds to effecting positive change along the major societal challenges we all face globally today – environment, poverty, precarious health and hygiene conditions, inequalities etc. Particularly the emphasis on sustainability of value creation is key to the current evolution of how the private sector is rethinking their engagement, and how the public sector is rethinking how to engage with corporations to address public health challenges.

What are some concrete examples of ways the pharmaceutical industry can offer a more socially focused healthcare system which privileges patient wellbeing instead of simply the prescription of drugs?

There are many examples of pharmaceutical companies seeking to do this today – going beyond the provision of drugs to provide more comprehensive health solutions. Novo Nordisk is collaborating with government and civil society stakeholders in India, Indonesia and Bangladesh around diabetes prevention, diagnosis and treatment. And Novartis set up an innovative distribution and sales network across rural India to provide access to a portfolio of essential medicines to underserved populations (the Arogya Parivar initiative).

Sounds like switching the focus from sales to outcomes enables Pharma to look beyond products – developing services that can not only benefit patients, but also payers and providers.

Yes, this is a very important comment because if offers insights into how governments and public policy can create the incentives for corporations to engage. Incentives need to be structured based on social outcomes. The challenge for a pharmaceutical company in a world mostly ruled by the short-sighted vision of the "average" investor is to find a way to do this profitably, and to demonstrate a viable business case. Take diabetes, a preventable disease. How can an insulin manufacturer, for example, demonstrate the business value of prevention, which in the mid- to long-term could reduce or cannibalize insulin sales? A new model has to be invented here, and the issue of the time horizon for corporate investments in such public health interventions is therefore essential.

How can Pharma truly drive societal value when their senior leaders remain primarily focused and significantly rewarded based on share price growth?

One solution is to rethink Pharma's social engagement in terms of economic opportunities for the business (what we call shared value) and not in terms of added costs to the business (e.g., traditional philanthropy in the form of product donations or volunteer time). This defines a narrower, company-specific space where social interests and business interests converge, creating an opportunity for sustainable social innovation. Pharmaceuticals – by their very nature – are in that space, but they need to move beyond the boundaries of their traditional markets and work more in collaboration with other stakeholders to address the needs of the underserved.

Still, without profit, it is difficult to further innovate to address the unmet needs of the patient. The challenge is to harness the innovation power of corporations to address more social needs. This is and will always be a gradual process. For example, Novartis found a way to serve those rural Indians living on, say, $5 per day, in a financially sustainable way. It's within the "boundary” of market efficiency now. The next question then is: how do you serve those living on less than $5 per day? That's a challenge for the industry to crack. It may take a year – or a decade. What's important is that companies start to think about these opportunities as part of their mainstream commercial strategies, to get the ball rolling.

With the hundreds of pages FSG has written on this topic and its framework for implementation, of course we couldn’t presume to cover everything in this one discussion. For a more comprehensive overview of shared value creation in the Pharma and med tech spaces, read “Competing by Saving Lives,” an FSG report which expands upon the Novo Nordisk and Novartis examples as well as implementation stories from BD and Eli Lilly. 

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