The pharmaceutical industry’s tarnished image was analyzed, even quantified, in January, when PricewaterhouseCoopers issued a survey report that characterized the industry’s loss of public trust as a serious, long-term threat.

“It was certainly shocking to us that the industry was held in such low esteem,” said PWC partner Peter Claude, one of the principal authors of the report, “and that the responses were so strong in their criticisms of the industry’s actions. But the survey results also illustrated a tremendous number of misconceptions and misunderstandings.”

The report, Recapturing the Vision: Restoring Trust in the Pharmaceutical Industry by Translating Expectations into Actions, commissioned by the industry, shows that a substantial portion of the public believes that pharma puts profits before patients. The report also shows that the public has a distorted sense of how much pharmaceuticals contribute to the total cost of health care.

“What is heartening,” Claude added, “is that the companies realize that they need to take ownership of this issue.” And there are many issues to own:

Nearly two out of three consumers (63 percent) estimated that prescription drugs account for between 40 percent and 79 percent of overall US health care costs. In reality, prescription drugs account for about 10 percent of the total cost.

Three out of four consumers (74 percent) estimated that the average R&D investment required to develop a new drug is less than $500 million. The actual cost, on average, is $802 million.

94 percent of consumers said that drug companies are too aggressive in promoting unapproved uses of their product.

41 percent of consumers, along with 57 percent of stakeholders, held the belief that drug companies don’t disclose their products’ negative side effects. Only 7 percent of industry executives surveyed shared this belief.

80 percent of consumers believed that pharma makes R&D decisions far too frequently on the basis of which drugs will sell the most; 45 percent assume that developing “me-too” and “lifestyle” drugs with the greatest sales potential is the greater consideration.

Pharma’s determination to get to the root of its public perception problems was in part driven by a recent Harris Interactive survey showing that between 1997 and 2005 only one other industry fell further in terms of reputation - Big Oil. A 2005 Rating Research study estimated that only one in four US consumers agreed with the premise that major drug companies engage in “ethical business practices.”

“We looked at the situation two years ago and saw a poll indicating that we were minus four in public perception,” said Billy Tauzin, president and CEO of the Pharmaceutical Research and Manufacturers of America (PhRMA). “And we looked back historically, when Merck was not only the number one pharmaceutical company, but the number one in natural respect and admiration of all the corporations in the US. The whole industry was seen as making miracle drugs and saving lives, something that needed to be supported and appreciated, and we said: How can we get back there? How can we restore that trust relationship? What broke it down?”

“The pharmaceutical companies may have been hoisted on their own petard,” PWC’s Claude explained. “By direct consumer advertising, they increased their visibility, which infl ated public awareness of drugs and their costs. But this also had an effect similar to that of advertising among lawyers. Whereas once the public saw the lawyer as a learned professional, and people wore their Sunday best to an appointment, we saw billboards saying, ‘1 800 sue your neighbor.’ With familiarity sometimes comes a loss of status.”

“We looked like used-car salesmen on television,” Tauzin added. “Prior to direct-to-consumer advertising, the industry was represented as part of the medical community, and the medical community - doctors and nurses - were revered. Here was something that had been so important in people’s lives, and we were turning it into a commodity.” The industry commissioned PWC to survey 500 consumers, as well as 150 stakeholders, including doctors, researchers, former health policy makers, hospital executives, managed-care organization executives, and pharmaceutical company executives. A comparison of the responses from the two groups reveals a chasm between how the industry sees itself and how others see it.

“When a group of people thinks about itself differently from what others think about them,” Claude went on, “they tend to develop some degree of tunnel vision. As a result, they can lose perspective. What is important to them takes precedence over their larger place in society as well as the impact of their actions on others.”

But the PWC research found problems even within the smaller circle of those with direct, professional involvement: 62 percent of stakeholders agreed with the proposition that drug companies often manipulate or suppress negative clinical trial results to maximize sales. 73 percent agreed that drug companies spend too much money and effort attempting to prevent generic drugs from competing with their branded products. Nearly three-quarters of industry executives expressed the belief that drug companies spend too much money on drug promotion overall: on sales force, physician education, conferences and events, and DTC advertising. (According to Advertising Age, large pharmaceutical companies spent only 5 percent of their revenue on advertising in 2005, compared with 14 percent on worldwide R&D.)

Peter Claude underscored the fact that, although the industry has insisted that its pricing is necessary to support R&D, only 14 percent of the public had an accurate idea of how much it costs to develop new drugs. “What that says is that the industry is talking, but the public isn’t listening,” he said.

And he suggests that that is the fundamental reason why it is so important to improve the reputation of the industry - so that people will start to pay more attention.

Also troubling was that 97 percent of the consumers surveyed thought that the share of health care costs related to prescription drugs was vastly higher than it was. “Our hypothesis is that this disconnect is because consumers bear more of that cost directly on a day-to-day basis,” Claude said. “This creates an issue with the payers over reimbursement. It also drives public reaction to pharmaceutical prices, assuming that it must be taking away from the hospitals. And no one is listening to the value proposition - that if you take your hypertension or cholesterol drugs you can defer 30,000 or 50,000 heart attacks and the accompanying quality of life effects.”

Claude also noted a more fundamental discrepancy between the industry and the public in the definition of progress. “The public tends to have a more simplistic view of innovation. They use words like cure, while the pharmaceutical companies have a broader definition. They know that having a statin that will not be metabolized in the liver but in the small intestine is real innovation. The public looks at it as just another statin, whereas the medical community will say, you know, I have this patient who has liver issues and high cholesterol, and now I can give him something to treat his condition. Or an injectable becomes a once-daily pill, which improves compliance and quality of life.

“It is a difficult topic to get across to the public that finding cures per se is not necessarily in the job description. Industry has been focused on the chemistry, whereas the biology of disease, which may ultimately suggest a cure, is still unknown. How do you make a tumor actually go away? How do you cure diabetes? This is still extremely difficult.”

“People tend to expect medicines that can treat all patients, but the reality is that the process of drug discovery is more evolutionary than revolutionary,” said Tauzin.

“Issues with certain drugs, issues with the price disparities between the US and Canada obviously have not helped public perception,” Peter Claude added, “which may skew some of these statistics toward the negative. People look at Canada and say you’re just trying to preserve your profits while charging us high prices, when the actual level of the burden as percentage of health care costs is not as high as they think. It is also true that Americans are bearing an inordinate percentage of the cost of research and development because the rest of the world has imposed price controls in different forms.”

But, according to Claude, the biggest eye-opener was the influence of reputation on the overall sustainability of the industry. Among the general public, almost 80 percent said that a company’s reputation was important to them when deciding whether or not to use a new drug. The industry’s general assumption had been that, for prescription pharmaceuticals, an individual company’s brand identity and image was not an important factor.

“The pharmaceutical industry is like no other,” Claude explained. “People look to it for help in deferring their own mortality. It has a role in our lives almost no other industry has.”

Claude suggested that part of the current misconception stems from the industry’s tremendous success, which led to pressure from the investing public and Wall Street to continue double-digit growth. But in recent years, pharma’s fall from grace had been so severe that executives began to worry about whiplash. “There once was a time when PhRMA had a great deal of influence in Washington,” Claude said. “It became difficult for them to gain access to power, because no one wanted to be associated with them.”

“As a former member of Congress, I can tell you, there was a hardening of attitude toward the industry,” Tauzin added. There were more and more pressures to pass legislation such as foreign drug importation and a great deal of political animosity growing. You could see it in state legislatures. You could see it in initiatives that were being offered, all of which were designed around the notion that the industry had lost its connection to patients and was now just another set of entities connected to Wall Street. That was a poisonous atmosphere in which bad policy decisions were being contempla”

Negative perceptions also threatened to deter consumers from participating in clinical trials, prevent doctors from deciding to prescribe certain products, and spur payers to decline reimbursement for them.

The most severe signs of damage from the industry’s loss of reputation were its growing vulnerability to government price controls and increased regulatory control over its products, which struck to the heart of its business model.

After January 2006, the industry was, for many, epitomized by an actor on television throwing a football through a target to promote an erectile dysfunction drug. Since that time, PhRMA’s new face has been talk show host Montel Williams, touring the nation on behalf of the Partnership for Prescription Assistance. That effort to provide help for those unable to afford the cost of their prescriptions was the brainchild of a special working group within the industry, embraced by Tauzin and PhRMA.

“Direct-to-consumer advertising established a direct relationship with patients,” Tauzin explained. “We established a new contact point, which, unfortunately, created a lot of the bad feeling about the industry. Without the PPA program as an ancillary to this direct relationship with patients, the only thing people heard was that we had these great new products ?and, by the way, they’re pretty expensive. We did not have that second message - that if you cannot afford this new product, we will help you gain access to it. It looked like we were simply pushing that expensive product, without having the heart or conscience enough to recognize that there were people who could not afford them.”

For Tauzin, the solution was obvious: “We had to focus on that contact point between the American people and the industry on television. We not only had to have the PPA, but we needed to make it much more conspicuous.”

Since PhRMA made that commitment, two buses - both called the Help Is Here Express - have crisscrossed the United States, often with Williams aboard, spreading the word through personal appearances and in television ads. PhRMA also established a telephone hotline and a sophisticated Web presence. “We’re spending into the tens of millions of dollars on television to invite patients to actually call that number, and they are responding,” said Tauzin. “We just hit a milestone: 3.5 million people have not only called in, but have been helped.”

PhRMA has taken other steps to reestablish and underscore its image as a respected member of the health care community. “We started projects in Fresno, California, and in Jackson, Mississippi,” Tauzin explained, “to see whether we could completely change the health care statistics in a particular community by focusing on prevention, health maintenance, and wellness. We are also working with pharmacists on new concepts that are coming out of those pilot projects. We are active in the implementation of insurance programs for seniors on Medicare Part D. Ninety percent of seniors now have insurance coverage for the prescription drug needs. Most important, we’ve had a 40 percent increase in the number of seniors who are compliant. They’re now getting the full benefit of the medicines the doctors are prescribing for them. Before, they were splitting medicines and not getting their prescriptions refilled. Now they are getting the full benefit of the medicines the doctors intend to provide for them - which is all part of our central theme, which is that medicines can not only save your life, but they can maintain you in a daily battle we all face with chronic diseases.” Still, changes in public perception inevitably lag behind changes in substance, and problems remain.

“There is no nutshell solution for the image problems in the pharmaceutical industry,” Peter Claude said. “Each of these companies must critically compare our findings against their own reputation profile, and then address the issues per our recommendations, or recommendations that are more tailored to that company.”

The “to do” list drawn up by PWC is extensive:

Eliminate or reduce aggressive DTC advertising. Only 10 percent of stakeholders and consumers said that DTC advertising provides “complete and useful” information for consumers. (Significantly, only 40 percent of pharmaceutical executives said that DTC provided that level of information.)

Reduce DTC advertising of so-called lifestyle drugs - medicines for non-life-threatening conditions. (The problem, of course, is that even though the public doesn’t like it, direct to consumer advertising drives sales, leaving companies that pull back vulnerable to competitors.) This is an area likely to require an industry-wide solution.

Provide for transparency - about side effects, clinical studies, risks versus benefits - as well as complete and accurate information for consumers and stakeholders.

Lack of accurate information was cited in the survey as the main source of mistrust.

Partner with physicians to improve outcomes by improving the way they prescribe.

Track costs, including the R&D cost of drugs that never make it to the marketplace, and make these actual costs clear to the public.

Communicate more clearly the benefits of new drugs. A broader understanding of the socioeconomic benefits of modern drugs reduces price resistance among the consuming public.

Curb the drive for short-term revenue growth embodied in the aggressive sales rep. Cut back on legacy tactics such as giving pens to the office receptionist, and meals, entertainment, and other gifts for doctors. (Six states have now passed laws requiring the reporting of the financial value of gifts received by a physician.)

Create a sales force with more scientifically trained, higher-paid reps making fewer, but more effective, calls. Such a sales force could help gather data and report it, while also sharing information on the latest clinical trials and possible uses of a new drug.

Work with patient and disease advocacy groups as well as health care professional associations to make sure that marketing focuses on disease treatment, cost-benefit ratios, and safety.

Promote compliance with marketing policies within the company, and differentiate brands with communications about pharmacovigilance activities.

Work with doctors and payers to reduce the number of unneeded prescriptions.

Work with insurers and pharmacy benefit managers to encourage compliance through lower copayments for preventive treatments.

Work with health plans and pharmacy benefit managers to develop incentive arrangements that move toward clinical preventive treatment goals - that is, costsharing and performance incentives that reward preventive treatment plan compliance. This ultimately saves hospital costs for payers.

Develop a strategy to clearly communicate the potentially serious side effects of every drug. Recently released new labeling guidelines and further regulatory guidance support these efforts.

Develop an effective, tested procedure for monitoring and dealing with counterfeit product transactions in order to increase credibility, promote a positive image, and make the company a champion of product safety.

Work with state pharmaceutical distribution licensing agencies, enforcement agencies, and wholesalers to strengthen controls over the integrity of the pharmaceutical supply chain.

“Transparency is key, and it works,” said Lori Queisser, vice president and chief compliance officer of Eli Lilly and Company.

“You have to align your actions with your vision to have a sustainable culture of ethical behavior.”

“We already came out with guidelines for direct consumer advertising,” Tauzin said. “Sales forces have been reconfigured, and we see companies reversing their position on certain products when they became uncomfortable with the safety profile. In all these instances, you can see the desire to become a patient-focused pharmaceutical company.”

Every physician knows that successful treatment of a problem begins with an accurate diagnosis, and, according to Peter Claude, Recapturing the Vision is just that. “Their reputation is a greater issue than they thought,” he said. “If they don’t take control of their destiny, then someone else is going to do it for them.”