Pharmaceutical Research and Manufacturers of America (PhRMA)
2008 Annual Meeting
First General Session
March 28, 2008
PhRMA Chairman’s Address

"A Foundation of Trust"
Merck CEO and President Richard T. Clark

Good morning. Thank you to all the members of the PhRMA Board of Directors for giving me the opportunity to serve as your chairman. This is a time of real challenge and change for this clark_web.jpgorganization and our industry, but I think we can be excited by the real opportunities we have as well.

When I looked around the PhRMA board room table this morning, I saw that new leaders have joined long-serving PhRMA board members ready to take on the tough issues facing our industry.

There is much to be proud of about the contributions of the pharmaceutical industry. The world's medicine chest is filled to an extent that was unthinkable just a few decades ago. Millions live longer and better as a result of the inspired and dedicated work of our scientists. Vaccines are creating one of the greatest public health success stories in human history. New medicines for cancer and HIV/AIDS provide hope and help to many who never had hope and help before. And we can expect this progress to continue because our laboratories are involved in cutting edge research based on new and exciting information on the fundamental mechanisms of disease and health.

Yet, as we come together today, we know that our industry faces challenges that are not for the faint of heart.

Rapidly growing health costs globally are creating even greater pressures on reimbursement and utilization. The pressure to control overall healthcare costs is real even though pharmaceutical costs are being targeted well beyond their actual contribution to rising healthcare costs.

In the U.S. and globally, we continue to cope with a high bar to gain licensure along with the increasing scrutiny of post-marketing surveillance.

Worldwide, we face a growing disregard for our intellectual property and increasing questions about the importance of IP to create incentives for innovation.

In the U.S., tort litigation is being used improperly to second guess the complex decisions made by scientists at the FDA and at our companies. And much of the media coverage of our industry is unfavorable, to say the least.

In order to prevail against these challenges, we first need to attend to a fundamental trust deficit. We can complain that it's not right and it's not fair. But that won't get us to where we need to go. The fact is that the lack of trust in our industry is a direct threat to innovation.

As companies and as an industry, we will not succeed if we don't start closing our trust deficit. And we won't accomplish this simply with more effective education efforts or better communications. While those are necessary, they are simply not sufficient in today's environment.

As an industry, we must rebuild the foundation of trust that we once had and the foundation of trust that we continue to deserve.

Stephen M.R. Covey – son of management guru Stephen Covey – has written a best-selling book," The Speed of Trust."

In it, Covey offers 13 behaviors for us to model in our individual, company and industry lives that can inspire trust. While I recommend them all, I want to today highlight just three and suggest some ideas on how we as an industry can model these behaviors.

One of the behaviors is "Listen first." Sometimes it's tough to listen to what is being said about us. However, listening is essential.

Some of what we are hearing is that people have come to question – and, in many cases, doubt – both the motives and the means by which we engage with key participants in the health care system.

Some question whether we are motivated more by profits than patients' welfare. Others question whether we have the long-term view of what the healthcare system requires if it is to remain economically viable.

Many question whether we are willing to be transparent in our dealings with the medical profession and society in general.

We're hearing these concerns not just from our harshest critics – those who don't believe in the for profit pharmaceutical enterprise – but also from some of those whom we consider friends, allies and customers.

I am convinced that we will only be successful if we listen to and engage with the concerns of our customers. At our November strategic planning meeting, we spent as much time listening as we did strategizing. We need to do more of that. We need to find ways to more actively engage our partners in the health care system – not only physicians, pharmacists and patients – but also governments, payers, health insurers, and PBMs.

And this leads directly to another of Covey's trust-building behaviors – "Confront reality."

When we can correct misperceptions, we need to do so. But when we hear about a legitimate concern, we need to act.

One of the greatest concerns we hear is about the cost of medicines. We can act on this concern through an agenda that is about "the right medicine for the right patient and used in the right way."

This is an agenda that includes support for more post-marketing research on appropriate use for our medicines. And support for the development of guidelines for treating and preventing disease so that clinicians will have better information on the appropriate use of medicines and other interventions, including changes in lifestyle.

This is an agenda that includes support for the appropriate health technology assessment, including analysis of the comparative effectiveness of medicines.

In many of these areas, PhRMA has adopted progressive, pro-patient, policies. We now have the opportunity to confront reality by acting on these policies in partnership with our customers.

Other groups have a different agenda, one that would misuse these initiatives to restrict patient access to care and that would reduce the incentives for innovation. Let me be clear: PhRMA must remain steadfast in its opposition to these misguided efforts. My point is simply that there is a right way and a wrong way to move forward, for example with health technology assessment. We must act affirmatively and effectively to support the right way.

Another reality that we must tackle is the continuing lack of access to medicines for many Americans. We've already done much as individual companies and as PhRMA to meet this need through our patient assistance programs, our Partnership for Prescription Assistance and our support for the enactment of a Medicare prescription drug benefit.

Now it is time to build on this record. Over the next few years in the U.S., we may have a chance to make major progress on extending the benefits and security of quality health care coverage to all Americans. This is something that both our companies and our customers support. PhRMA has the opportunity to join with them and lead on this important issue. We must seize this opportunity.

And we must also look beyond our borders. For too much of the world, global poverty coexists with a lack of access to basic health care, including medicines.

While some would seek to take the easy route of blaming our industry for inadequacies in health care systems, the causes of this situation – and the solutions – are far more complex. And our role is not always clear. Yet, the first step is to acknowledge that action on global access to health care, including needed medicines, is squarely part of our responsibilities as corporate leaders.

Our companies have acted to help address the issue of access to medicines. The programs and policies adopted by the companies in this room are wide-ranging and we are proud of them for good reason. To date, however, we have primarily acted individually. I'm pleased that, following our strategic planning meeting, we're committed to initiate a new joint effort to make our member companies full partners with others in addressing global health care challenges. We have so much to offer – expertise, science, medicines, money, and organization – and I am glad we will be working in partnership to help address these pressing challenges.

A third behavior that Covey recommends to restore trust is to "Create transparency." He writes that transparency is all about – quote – telling the truth in a way that people can verify.

Trust in our industry is low. We need to go the extra mile in order to allow our stakeholders to see what we do, so that the public can place greater trust in all that we seek to do on its behalf.

There are at least two areas that I hope we can work together and with our stakeholders to create more transparency and build more trust.

The first is our interaction with third party medical professional societies and patient advocacy groups. This past year, Eli Lilly led our industry in committing to and then acting to create more transparency for their activities in this area. Several other companies have made similar commitments.

We are also challenged to increase the transparency of our interactions with health care professionals.

Bolstered by our PhRMA code and our own companies' policies, we seek to support the role of prescribers in making independent medical judgments based on the best information and in the best interests of the individual patient. This is consistent and supportive of getting the right medicine to the right patient and having it used in the right way.

We can strengthen and make further improvement in our PhRMA code and I look forward to us announcing such improvements in the near future. A strong code that supports greater transparency of our interactions will serve to further build public confidence not only in our practices but also in the professional judgments of healthcare professionals.

These then are just three steps that we can take to build and rebuild trust – listening first, confronting reality, and creating more transparency. I strongly believe that taking these steps will help build a stronger foundation of trust.

And, as we build that foundation of trust, we can do so without compromising our core values. Among them:

• Belief in the power of markets to best determine the value of our medicines
• Support for strong intellectual property protection as a necessary prerequisite for innovation
• Trust in a rigorous, scientifically-based regulatory process to evaluate the safety and effectiveness of our medicines
• Confidence that we have a right – and responsibility – to provide balanced information to prescribers and patients about our medicines
• And commitment to access and serving the needs of society

We know that these values are not only in our best interest – they are in the best interest of the patients that we serve.

I look forward to working with each of you over the next year and beyond to build upon that foundation of trust and to move forward to once again become among the most admired industries in the world.

Thank you.