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How pirates could fix big pharma’s image problem

Western drug companies badly need a shot in the arm of good PR, but are all but ignoring one of the greatest PR opportunities ever presented to them.

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Pharmaceutical companies spend more on advertising than they do on research and development, and yet most people have a negative view of the industry thanks to debacles like the Vioxx scandal.

The big margins in pharmaceuticals are in drugs rich people use, like Viagra. There’s not a great deal to be made on malaria tablets and anti-AIDS drugs, and patented malaria tablets and anti-AIDS drugs are often too expensive for most people in countries like Brazil, Argentina, Thailand, Egypt and China who desperately need them.

As a result, in countries including Brazil, Argentina, Thailand, Egypt and China, pill pirates are saving lives by offering illegal, albeit life-saving drugs at prices that make financial sense to the residents of those countries. Their governments are all ignoring Western patent laws, because letting their citizens die in the name of profit isn’t exactly a vote-winner.

In the book I talk about how competing with pirates using Joseph Stiglitz’s idea of a prize system could help the drug companies create better, cheaper meds for some of the world’s poorest people – an idea that a lot more people are getting behind. But also I’m willing to bet my deductible that by competing with pirates in the developing world, the drug companies could turn around their image problem all over the world.

If you’re a drug company making no money on an anti-leukemia drug in Thailand, because no one there can afford the Western price, what’s the harm in lowering your prices and competing with the pirates selling cheap knock-offs? The marginal cost of a pill is tiny, and you’re not making money in this market anyway. There is an element of risk involved with lowering your prices, sure, but if you’re a multi-national company of any kind, you should be able to master the art of market separation, at least at a basic level like this. And besides, think of the upside.

By saving lives in one country, you create a positive piece of PR you can use worldwide, something that you as a drug company spend billions trying to create, that is currently in very short supply.

Novartis are already starting to do this in Thailand, India, and in other developing countries, and are winning corporate social responsibility awards as a result. TV ads will only get the drug companies so far, but acting in a socially responsible way overseas is likely to win hearts and minds at home too. And as foreign markets develop, being the trusted brand is going to be a huge competitive advantage in the long term.

The pirates are out there anyway. Fighting pirates doesn’t work when we’re talking about music files, never mind saving human lives. Good corporate responsibility practices are much more potent than empty advertising messages, especially if you PR them the right way. Saving lives in the developing world won’t kill the drug companies, but it could revitalize their ailing reputations.

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