« Freakonomics Radio

336. The Most Vilified Industry in America Is Also the Most Charitable

2018-05-24 | 🔗
Pharmaceutical firms donate an enormous amount of their products (and some cash too). But it doesn't seem to be helping their reputation. We ask Pfizer's generosity chief why the company gives so much, who it really helps, and whether all this philanthropy is just corporate whitewashing.
This is an unofficial transcript meant for reference. Accuracy is not guaranteed.
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Farmer, manipulates the system to keep prices high to Elizabeth WAR in the democratic senator from Massachusetts, and a lot of that money that is spent lobbying Congress is to keep drug prices high from Donald Trump. The drug companies frankly are getting away to Bernie Sanders. I have been fighting the greed of the prescription drugs industry for decades and, as far as I can tell, the pharmaceutical industry always wins, and here's an interesting twist, the pharmaceutical industry,
also the most charitable industry in America, according to a survey by the chronicle of philanthropy, the top three american companies for charitable contributions are Pfizer, Juliet Sciences and Merk, also in the top ten Bristol, Myers Squib and Eli Lily. It's hard to imagine that being so charitable is what makes them unpopular probably makes more sense to think that their charity is meant to mitigate their unpopularity, although doesn't seem to be working so well. In our previous episode, we looked at some of the surprising consequences of corporate social responsibility or cs or programmes which, as the economist John List told us, are very popular? You have ninety percent of Chea two fifty companies with global fortune, two hundred fifty companies. Ninety percent of them are now publishing annually.
Yes, our reports see us our can take many forms and accompany volunteer rhythm environmentalism and, of course, charitable contributions, you know every dollar we earn. We give a nickel to charity list also told us that promoting CS are is a great sorting mechanism for company. it attracts more employees who are willing to work hard for less money exactly but list also found that CS are
can lead to what's called moral licensing. The idea that doing good can give you a licence to be bad for employees at CS our firms that can take the form of cheating and stealing. Another group of economists looked into the politics of C s arm. They found that a lot of firms use corporate philanthropy as a form of tax exempt lobbying, that is, firms increase their giving in congressional districts when representatives from those districts get seats on committees related to the firms business. So a little scepticism about the true intentions. of corporate social responsibility is probably in order. On the other hand, when it be nice to hear directly from someone who runs CS are one of these firms. Maybe someone at the most charitable firm in America
My name is Caroline Round and I wear two hats for Pfizer. One is vice president of corporate responsibility for the come. and the other is president of the Pfizer Foundation, which is a separate legal entity today on for economics, radio, He asked Rhone about her industries reputation. I will confess we don't. A lot of winded, our back about their mission, business and social mission is actually one of the same and we're reputation in mission. Intersect, I mean look, this is a complex issue. That's coming up right after this
from W and Y see studios. This is frequent, comics, radio, the podcast that explores the hidden side of everything. Here's your host Stephen Dogma Pfizer based in New York. City is a huge company. More than ninety thousand employees around the world. It sells its products in a hundred twenty five countries. a lot of over the counter brands. You are probably familiar with like advocates Chap: Stick: Sintram Diamond tap, preparation, age and robust, but fighters big money maker is prescription drugs you ve, probably heard of laboratory tightly can which is an anti fungal previn, our thirteen, which is normal, cockle vaccine Lira car, which is for pain, then, of course, We also contributed Viagra, which was for a very serious disease. The company was founded in
in forty nine by two german immigrants it considers corporate social responsibility or CS, are to be part of its dna and really the first ethics. Never can't contribution was unlocking the ability to mass produce penicillin, and it was a wonder drug Nobody had sort of sorted out the specifics of how you take it to mass production and Pfizer did that at the time of World war, two, they actually ram the plant twenty four hours a day and partnered with the United States government too, sure that we had enough penicillin that our troops could take it ashore. On D day. iser created its foundation in nineteen fifty three and their department of corporate responsibility in two thousand one. That's the same year. Rhone joined the company today, she's in charge of both CS are and the foundation Pfizer has. A wide range of helping
Shit, it's from medicine. Giveaways too, are indeed addressing diseases, common in low income populations to a project called global health fellows. So we call it Pfizer's p Court. If you well- and we were literally donate our colleagues to go work it now, governmental organisations to support the efforts on the ground and in the field. I've literally had people come to the company and tell me I It came to this company because I knew you had this programme and I've waited for me three years in to be able to participate. Caroline did you have a student in this peace corps type project I haven't, but I feel like I do, because you know I've been took a coma. I've been in Kenya. I've been to Lolly Bela in Ethiopia. I mean I have got to see the but all medicine that we produce all the way import
Rico may get to the most remote locations and its profound and restores your soul on a fundamental level. So let me ask you this: why is there a department of corporate responsibility that needs a vice president, like yourself Isn't everyone in a corporation responsible? Somehow I think seamen. That's a great point: we think corporate responsibility, very simply as the how of how we do business and its very grounded in the mission of the company. That said, in order us to achieve that mission of discovering endeavour. We need great medicines and vaccines. We have to ensure that we are doing our part to get those medicines and vaccines to the patients who need them view. Economist Milton Friedman famously argued that corporate social responsibility is a ass. He called it a fundamentally submit
save and that court there is one and only one responsibility of businesses to use its resources and engage in activities designed to increase its profits. So what are the inherent conflict between profit seeking and corporate social responsive while I am very familiar with the business of business is business, but we don't make lipstick. We medicines and vaccines, and so I do think seamen you'll see a vast difference and how industries approach this work, but for Pfizer. You know in order for as to discover and develop those medicines and vaccines they have to get to the people that need them. We have to have functioning healthcare systems and we ve got to be more creative and dress those needs and a very meaningful way. The mean we're living in.
Time: a vast income inequality around the world. We know that the poorest of the poor no longer live in the most remote villages. They don't live and low income. trees actually live in middle income countries, they live in urban centres and governments are failing to pay, I'd a very basic set of services and so on does that mean for a big multinational company? That's in the Bin, so health. We ve got to adjust and do our part to prove too. patients in those communities that we will help them get access to quality healthcare. Medicines and vaccines and that's what we do so give me an example of where you're having huge success with that, whether its life expectancy alleviation of suffering, prevention of death, it set out centre. So a perfect example of that is our work in
addressing Tacoma, it's the number one cause of preventable blindness, and what happens is that you get a repeated infection and over time, your eye lashes turn inward. It's quite painful and you go blind. An interesting way. People who came into Alice Island were checked for trachoma before they were right. You'll might see, remember seen pictures of the eyelids being turned. There is also this terrible story of unintended consequences. Were they use this tool to czech people for it. Without realising that it was a bacterial cause and that they are actually spreading it as much as they were alleviating exactly the disease that you know of poverty. It's a disease that affects the folks that are living at literally at the end of the road. Now visor disk bird that Cythera MAX are antibiotic, was effective. Entreaty in the active infection that causes this disease. Will we double down on our
first to eliminate at we have our eyes on the prize of actually eliminating this disease by the year, twenty twenty. So in order To do that, we had to conduct the largest global public health mapping project that has ever occurred, and when we did that, we discover these pockets of true coma, and we realized in order to achieve the global elimination goals with the World Health Organization, we were gonna have to increase the donation of Cythera MAX. We were also going to have to support a comprehensive public health strategy. And we are literally changing one community at a time the ability for young children and moms. To avoid this infection and to avoid blindness, it's one of the most powerful protein I've ever seen in the field, one that I think I'm most proud about, and I assume
you're giving all that medicine away, correct, yes, in fact seem an interesting way. Half of the production of Pfizer's commercial supply of Cythera MAX more than half is donated to support this programme. Let me backup for just a second, because the industry that you're in is an inherently interesting one. I don't about inherently controversial, but it is controversial, so you're sick is we know not so beloved by the general public which which is interesting because you make medicine, the term helps people, but it is acquaintance later state. I've seen the least popular business sector in America, you worse than the legal field, worse in oil and gas. So why do you think such a firm and the industry is not better regarded? He now tat, two great point, and I think one that I will confess we don't have a lot of winded our back. Those statistics are right and it's confounding to us what I wish the public
what understand is Pfizer literally deep and abiding commitment to patients. We put patients first and everything that we do, We believe if we can deliver for patients will deliver for shareholders and will deliver for society and, unfortunately, Stephen, where in a world where bad actors and headlines grab people and the complex store, you have drunk development, is hard to give you in a sound bite or in a tweet, and we do our best to tell that story of commitment to patients and commitment to science, but it is hard to break through so Pfizer is hugely six, full annual revenues in the neighbourhood of fifty four. Fifty five billion with profits are on twenty one or two billion, so good profit margin. It's smart, its strategic, firm.
But often that strategy is in what most people would think of his quite kosher. So let me give you a couple. Examples then ask you: how cs our fits into that so a couple years ago, Pfizer I was planning on an inversion merger with an irish firm, but that was spiked by the Treasury department. It was considered a method of avoiding taxes by merging with a foreign company. Pfizer's also paid the second largest settlement claim ever by a pharmaceutical company. More than two billion for violating the false claims act with infractions included. Kick x on several drug. So when we, the non Pharma community, learn about that as a company, and we also know how much pharmaceutical spend on on lobbying and so on. Why? didn't we be wise to be sceptical of something like corporate social responsibility, as practised by far Why? Wouldn't we be wise to see it as little
more than a form of pr or some kind of whitewashing in it. There is a fair amount of scepticism out there for big business over all four Pfizer. The reason I believe that people should take another look is that we have for clearly defined strategic priorities, and I think it has sat there. Path for us in terms of responsible business growth and the first is around our science, we are working Everest single day to get the necessary resources to innovate, to create the next generation of important medicines. Second, we are looking the allocation of the resources for the long term results for our shareholders. We would be remiss if we didn't do that. The third and fourth imperative are critically important: we're trying to create a culture, where we work as a team where we win the right way where we are compliant and
insistently delivering the business both that we want to in the right way and the fourth imperative is being responsible: corporate So every single person in this company knows that that's a part of their day, job part of your corporate responsibility initiative. Will there are many parts among the big ones that I've read about are what you called building healthcare caprice. they, which means improving health systems and low and middle income countries and improving access to health care for the most underserved communities. Also part of the portfolio is expanding access to medicine. Let me just be a total devils advocate, or maybe just a devil for a minute. How much is this about building health care in
structure in order to create a robust, long term delivery system for Pfizer products. I think, seem anyhow. If we don't have a functioning healthcare system, you're right, we can't deliver our problem and our vaccines, but I see that is net net, a benefit both for the company and for society. But, as I said, I think that's a bit different than what you might see an irregular commodity like lipstick or another type of fraud, where you could maybe argue more on this and, if saying well, that's just because they want to build up a market, it is in our best interests to have a functioning healthcare system, because patients aren't gonna be able to get the support. They need and we know that if patients are healthy and communities are held,
ain't there more likely to have. You cannot make success. Ok, so let's talk a little bit more about this massive chunk of value that Pfizer gives away as part of its corporate responsibility initiative in the most recent ear which you ve provide the numbers, it's about five billion dollars in total, giving out of with the revenues of about fifty two billion dollars. So Roughly ten percent of revenues are given away now food point: seven roughly billion dollars of that is product donations and then the the cash represents, if I'm calculating correctly about four tenths of one percent
I wanted to be sure, wish, I would say: well: okay, Father is giving away not very much money but giving away a lot of kind of nation in the form of medicine. Let's start with how the value is attached to that medicine, that's giving away what is the actual valuation process to attach a number to the So too, given away, as I would say, the following: that is complicated and I am not intimately engaged in the evaluation process. Look one of the reasons we give away a lot of product is our product is our most valuable asset right when we think about where we can make the biggest difference. What spies or have that's unique while we have the medicines vaccines that we ve discovered and developed, and people need them. That's why it any given point if you were to ask our partners what they're asking us for their starting with our medicines and our vaccines.
and in the U S. For more than thirty years, we ve had a programme in place now called Pfizer, Aurex pathways and that's designed to help people who are falling through the cracks get access to medicines. Here in the United States we offer more than seventy products to patients free or deeply discounted. Last year we helped to, and fifty thousand people get about. One point: seven million prescriptions. Some people say well, it's wonderful that you and firms like you give away a lot of your drugs to people in need. People in crisis people can afford it. People don't have access to it, but rather than that model of let's sell our products in some markets and make as much money as we can. We just what firms do and then give away some of it in other markets Why not have a pricing structure that as difficult as it may be to come up with? That makes it affordable for people to buy honesty?
end basis everywhere, rather than having communities need to rely on charitable donations. Well, it's a great. Quaint? And increasingly, we are moving in the direction of Crete. What were calling creative commercial strategies? So we have tiered pricing globally, which means that countries pay based on an ability to afford the medication, but we also for the poorest of the poor, which is where I focus our efforts. We are looking at strategies that are truly built on public private partnerships that provide our products at an affordable cost to organizations who are working to serve this, relation and a perfect example is our work with Gabby. The vaccine alliance, the Gates Foundation, really started this effort and deserves credit for it, but gaudy makes a whole host of accidents across companies available to seventy three of the poorest countries and we provide
our new Morocco vaccine, which is one of our most innovative products. Lesson three dollars a dose and countries can purchase through the guy, the alliance if they so choose to and believe it's a more sustainable approach and what would that three dollar dose cost in the? U S, I've actually dont know what it will cost in the. U s. We looked up the price of that New Muckle vaccine prayer
thirteen in the United States. The CDC pays Pfizer about a hundred thirty dollars per dose if you buy a privately cost, but a hundred eighty dollars, pricing and other economic maneuvers are at the root of the pharmaceutical industry's poor reputation for one the industry often practices what's called value based pricing. This means setting a price based on what an element would cost society if it weren't treated or if it was treated by a less effective medicine. That and exclusive patent rights explains how a three month course of Hepatitis C treatment made Juliet Sciences can cost more than ninety thousand dollars. There are plenty of other complaints. Senator Paul argues that american drug companies use there ah being billions to prevent the importation of cheaper drugs from abroad, we ask the american people think it's bs it. You can't buy drugs from Europe or from Canada, or
Mexico or other places. Hillary Clinton has complained about another issue: pharmaceuticals have gotten pretty smart. They pay companies that are working on competitive drugs, not to bring them to market, so they don't have competition is called pay for delay. So there s a lot of games going on President Trump, like many politicians before him, has been threatening serious priest reform for the drug industry. The other thing we have to do is create new bidding procedures for that again industry, because they getting away with murder farmer. Farm has a lot of lobbies, level, lobbyists a lot of power, and this a little bidding on drugs, Another reason the pharmaceutical industry is so unpopular these days. The opium crisis Pfizer is not one of the companies that make the opium aids most commonly abuse
and is not among the companies being charged with misrepresenting the drugs benefits and concealing the risks. But Pfizer is a big contributor to the drug industries lobbying arm, which fought hard in the ninety nine these to allow mass prescription of painkillers, which means that Pfizer is trying to be part of the solution, up after the break. Caroline Rhone says she's ready for him. I used to work with heroin attics, so I have a deep appreciation
for the pathway of addiction and the challenges that communities face. Given the pharmaceutical industry's deep unpopularity end their deep profitability, you can see why firms like Pfizer might be so interested in giving away so much of their medicine. That's what we are talking about with Caroline Rhone, who runs the Pfizer founded, as well as Pfizer's corporate social responsibility unit. I know that there's been some, you might call it latent criticism against the notion, giving away medicine, so one primary argument comes from doctors without borders. They basically said: there's no such thing as a free vaccine Tom you know free, is not always better, sometimes or strings attached. They ve argued that don't
since can undermine long term efforts to increase access to affordable vaccines and medicines it it might destroy the incentive for other firms to producer, distribute or that donations? You know they might come in when you need em, but then it might not be long lasting. You know. We all know that the world is full of good intentions that lead to outcomes that are less good than than we'd like, and I'm curious. How you'd respond to those objections. To this practice of giving away so much venison. What you know, it's actually a conversation, that's front and centre and the global development community, as you well know, just about the role of cash donations product Nations, how we get countries to be self sufficient than for doctors without borders, specifically
I am very familiar with their concerns and we had an open door. Conversation with famine deeply respect honestly their work, and some people do believe that donations are not the answer for how they want to deliver healthcare, and so we We have taken steps to address through these more creative commercial partnerships and a perfect example is our work with Gabby the vaccine alliance, but another perfect exam Ball is one that we announced last year, via the main oncology medicines in Africa. So we looked at the concept of should we donate these medicines and conclusion in conversations with stakeholders and governments was no, they want to create a partnership that would allow them to purchase the product, and so, in that case, were offering together with the american cancer society. In the Clinton Health Access initiative, we expect
in access to eleven essential cancer treatment medications that include chemotherapy he's an numb, mostly EAST Africa, Ethiopia, Kenya, Uganda, Rwanda in Tanzania on their refugees crisis so specifically, which was what some of the dialogue with doctors without borders, was about I did want to acknowledge that we did offer or to donate our New Mexico vaccine and we I've donated to a number of organizations who work and active refugee settings, but we also hearing that feedback against a new humanitarian terror, so that the organ actions that are conducting that work in refugee settings are allowed to come to Pfizer and purchase. Argue Morocco, vaccine for again the lowest global price, which is under three dollars a dose, but for a Pfizer. You really debated this, we didn't feel it was appropriate,
flee to make money in a refugee setting and we decided for the first year of this programme, to donate their proceeds back to the organisations who are working on the ground, I also asked ruin to address what Pfizer's doing about the opulent epidemic and how that fits into the firms. Corporate responsibility, angle, So you know we always start with our science, where accelerating our efforts to bring non addictive alternative medicines to patients and were doing that in partnership with regulatory authorities were also working at the community level through primary prevention and education. But I think We go back to where Confessor make the most distinctive difference. In this case, we, up and to make the locks as you may know that knowledge zone will reverse and opiate overdose, and we have to added to make that available both through donation.
and again back to the approach of meeting the needs of multiple stakeholders through deeply discounted pricing, so we ve two more than a million doses over four years with our partners to make those available They charge and then on the commercial side, Weave discounted that price significantly for first responders, so that no one has go without relaxing specifically what interesting for me in this context, Stephen as I used to work with. urban attics. When I was at Yale, and so I have a deep appreciation for the pathway of it- she and the challenges that communities face, and so we, really saying we're ready to be partners and trying to this on, because we ve got it
around. I mean it's a massive problem and we know that it destroys families, but we think we have a productive role to play in addressing it. Let me ask you bout some interesting research on corporate social responsible, That's been done by the economist John List and a few others sure. So, there's a lot of really interesting stuff in their work. They ve looked at whether corporate social responsibility is necessarily at odds with profit, maximizing and found it? In fact, no it really and help companies bottom line in a number of ways, including tax benefits. But there is another piece of the: the CS are research that is not so promising. Necessarily they found some evidence that corporate social responsibility might have a sort of perverse effect on worker behaviour, so they didn't experiment. They found that if a firm communicated its socially responsible
work to employees? Then they would see a greater incidence of cheating and lying in shirking among its employees. I'm just curious if you ve seen any evidence of moral licensing in your firm in your industry, where people feel that boy, I'm doing so much good for the world that it might have a little bit of a an outlet in a negative dimension. in some other way. Well, I might say I my exercise routine. I live more licensing when I go to the German, then are you my bagel, which I did this morning, but now the short answer is absolutely not, and you know I I. I can appreciate that deep level of scepticism that we ve talked about, but really I chose very key
fully. When I chose the company in their career that I wanted, and I did it because I think you find something really unique in the people that come to work. Adviser says the short answer is no, it's hard work every single day to try to get the innovation to the patients, and I have never seen any evidence of that in the work that that we ve done here. So it must be so far straining to go through life working for a firm. Were you really feel you're doing some version of God's work and yet the rest, the world things out, man as big, a nasty greedy, dishonest pharmaceutical people. I mean to get frustrated Now I really doubt- and you know why- because I know what I do every day and I stand on the commitment that I have so deeply and personally to the patients that we serve and the team that I support and so look
Does it make me sad on some level that you do people want to be skeptical and we don't have the wind at our back and people get our question are our motives sure I don't turn that into frustration. I really turn that into how to help more patients get what they need and when you deliver that medicine. That's a term acts in the field or I go meet with community members, and they welcome and they bless you and may pray for you and their language. That's really powerful, and it gets me through the days when we see tough headlines coming up next time on for economics, radio. They are an american tradition from old English for an open space or what is called the glade their incredibly abundant. That's about fourteen a half
million acres of turf there. Also incredibly, labour and resource intensive. Every square foot requires twenty, eight gallons of water. We love our lawns, but are they worth the trouble and the cost financial, environmental and otherwise how stupid is our obsession with lawns? That's next time for economics, radio for economic radio is produced by w and mice studios and W productions. This episode was produced by Gregory's asking our staff also includes Alison Hockenberry Merit Jacob Stephanie, Tam MAX Miller, Harry organs and Andy Mildenheim or the music you here throughout. The episode was composed by Luis scare. You can subscribe to for economics, radio and apple podcast teacher or every get your punkahs. You should also check out our archive
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Transcript generated on 2021-01-20.