A Breakthrough in the Parmaceutical World

We have become accustomed to cynicism whenever we read about such gestures. “What are they really up to? What are they hiding?” These are the questions I can hear people asking in their minds (or more vocally) as they take in the news that GSK’s CEO, Andrew Witty, has announced a 95% (!!!!!) reduction in prices for the poorest, for whom this dreaded disease is a leading killer.

Be cynical all you want. For my part, I am viewing this decision in the most positive light; as an effort to do the right thing and “behave in step with society”, as Witty puts it. Also, it raises some interesting question about the drug company model and how far it can go in a ‘social business’ direction. Our upcoming Social Business Conference, “All Shapes and Sizes”, considers how diverse the sector could be. Is GSK a social business? Could it be? Is the pharmaceutical sector ideally suited for the social business model?

Firstly, one should bear in mind that big pharma has been under considerable pressure for some time for its prices in the developing world. Whatever the commercial realities, it was becoming increasingly difficult to get around the argument that drug prices were simply unaffordable–and that as a result many of the world’s poor were dying. One could look at the GSK move as a pre-emptive strike against action that was brewing. There may have been an element of that.

But let’s also consider the people who work in pharma–how might they have been feeling about these accusations, in the growing knowledge that its pricing policy may have meant untold suffering in the developing world. We sometimes tend to think the worst of people, but I imagine that most went into the industry genuinely believing that they were helping to solve sickness and disease on a massive scale. Maybe they too wish to be proud of the firms they work for again, instead of fending off incessant allegations.

Look, Andrew Witty has two kids–don’t we think that even CEOs consider how they will (or how they do) respond to their children’s enquiries. “Daddy, what did you do when you ran that big pharmaceutical firm and people were dying in Africa?” I am a parent as well, and moral questions haunted me in my banking days. Who am I to assume Witty is any less humane? Or that his staff are?

And Witty has also served plenty of notice of intent. When he arrived in 2008, and in subsequent interviews in 2008 and 2009, he said he would take action in this regard. Thus his claims that the move was “not a gimmick or one off philanthropic gesture, but part of a concerted strategy to change our business model”, feels somewhat more credible to me than most.

Is GSK a social business? At this stage, probably not–perhaps a question for my colleagues Simon Evill (ClearlySo‘s Social Business Champion) and Tom Cropper to consider as we probe the limits of the emerging social business model (see our recent pieces on The Guardian and John Lewis). But even if GSK is not, the question is worth asking: how far could the model stretch? Is there a case for a social business or for social investment in this sector? Given the massive social benefits to successful drug research, are there not different models worth considering?

Frankly, from a purely financial perspective, I think a great number of questions are being asked about the conventional model. “Ten year waits” and “billion dollar gambles”–how can this be healthy? Is there not a case for a different model, with “win-wins” all around. For example, is the US-oriented lengthy drug trial process, driven in part by the litigious US business environment and the risk averse FDA, really the way all the world should approach drug development? Might social investors support drug research, with far below market rate capital, if they knew that the poor would be a prime beneficiary? Would not the combination of these substantially reduce the cost of drug trials from which all would benefit?

Frankly, if as a result, the pharmaceutical industry benefitted as well, I would be very relaxed. I see this social business and investment model as being able to generate solutions where all parties win. And if Witty is ahead of the game and shows us the way, and GSK shareholders gain as a result, I will not lose sleep over that either.