What Pharma Can Learn From Penn State


Over the past week the Penn State scandal has held the top spot among media stories, outranking the Euro Zone's possible collapse, the Republican primary race, the Occupy saga, and nearly everything else.  Despite some of its details, the Penn State scandal differs from sensational stories such as crimes and natural disasters because it contains important lessons for people not directly involved.   While the story holds social, ethical and, yes, economic significance outside the universities, pharma in particular can learn a lot from it.

Here are a few lessons that emerged so far.

1. Big money trumps principles, mission and practically everything else


Jonathan Zimmerman posed a key question last week, asking whether Coach Sandusky would have been allowed to keep consorting with young boys for years if he hadn't been part of a big-time college football program. "Not a chance," according to Zimmerman's own answer.

He rightly claims that football and basketball programs at large universities have become such "huge profit centers " they're simply "too big to fail."  At Penn State football generates more than $70 million a year, higher than the average for universities in both the Big Ten and the Southeastern Conference.

The problem occurs when a scandal erupts involving a big cash producer.  At those times, according to Zimmerman, "officials try to sweep it under the rug.  When they can't do that, they dismiss it as an aberration."

Pharma is no stranger to scandals.  Hardly a week goes by without some blowup concerning off-label marketing, distorted clinical trials, ghostwriting or bribing physicians.  Much of the time the pharma people at the root of those affairs are basically decent, responsible people, but the pressure to protect the golden goose proves irresistible. 

Industry lore even has a saying for it:  "The me-too's pay for the breakthroughs."  It means people have to feed the big-selling brands to fund research on new products that may improve care.  Usually that line is just a convenient rationalization, an effort by people in charge to use the noble ends of helping many patients to justify an improper means of keeping revenue flow intact.  As pharma companies are profit-making businesses, it's very easy to let the desire for uninterrupted revenue replace the core mission of developing better therapies. 

Here and in several other areas, the answer lies in improved corporate governance.  Although it may require a scandal that causes dissolution of a Big Pharma company, the outside directors must work closely with chief ethics officers and take a more active hand overseeing brand management.  Right now outsiders on the board, especially the "honor" appointments from universities and prestigious research institutes, merely seek to keep quiet and collect their director's fee.  Inside ethics officers are usually just an adjunct to the corporate counsel's office.  Job descriptions at both positions must change radically.

2. Organizational patterns protect revenue and override ethical standards

The Inquirer's Jeremy Roebuck spoke to psychologists and other experts who told him that "hierarchical organization(s)" focus on self-preservation, thereby creating a potential for "power to go wrong."

Sometimes the culture provides individuals with the rationalization that wrongdoing will remain secret and confined to a few insiders.  Former Oklahoma and Dallas Cowboys coach Barry Switzer told The Inquirer's Mike Jensen, relative to the molestation at Penn State, that "everyone on that [coaching] staff had to have known."  In most cases, however, secrets remain that way only for so long.  The advice of former New Orleans crime boss, Carlos Marcello, seems quite sound on this topic.  He once told his associates, "Three people can keep a secret if two of them are dead."

Yet the self-protection of organizational cultures creates pressure to keep sordid information inside the hallways.  Many organizations tell employees that responsible action just requires them to report matters one level up.

Pharma insiders who tried to remain within the chain of command have typically been frustrated in their attempts to handle wrongdoing that way.  At Pfizer a sales rep even went so far as writing her company's chief legal counsel to complain about managers requiring her and her colleagues to attend formal training sessions that demonstrated illegal promotion methods.  The lack of any remedial action eventually led her to file a whistleblower suit that was resolved in her favor.

3. Sports analogies accentuate the worst aspects of some organizations

One scholar of unethical conduct told Jensen that the very concept of "being on a team" dulls an individual's standards of ethical conduct.  It demands "giving up your individuality, doing what you're told, and believing your coach has your best interest at heart."

Pharmas and companies in other industries formally designate their mid-level operations as brand teams.  They use the term to describe ad hoc task forces, sales groups, and situations where researchers work with commercial managers on a developing compound.  Sports metaphors predominate and the result is that responsibility gets diffused. 

The fix here seems fairly simple and probably doesn't even demand a corporate crackup.  The next time wannabe jocks in the company start elaborating on extra base hits or speaking as if they're planning the D-Day landing -- military metaphors are another favorite distraction -- people should impugn their intelligence and advise them to return to the business at hand.

4. Organizations create their own "moral universe"

The Inquirer ran an article by the Pittsburgh Post-Gazette's Paula Reed Ward where she spoke with philosophers, theologians and ethicists.  They told her that organizational pressures and their requirements for loyalty often create a moral universe where "the relationship and the duties to the people inside that universe become the only things that matter."  Doing the right thing within those confines can demand ignoring illegal or blatantly unethical behavior.

In practical terms doing the right thing in many organizations sometimes demands a person who is willing to go rogue, to expose wrongdoing by violating organizational norms in favor of those from the larger society.  In other words, the moral man or woman must be a whistleblower.

5. Penn State learns from pharma, rather than vice versa

Instead of pharma "benchmarking" appropriate lessons from the Penn State affair, it should probably come as no surprise that at the end of last week, Penn State sought guidance from pharma.  Doubtlessly the university recognizes pharma as an industry that deals with scandal on a weekly basis.  For that reason the university trustees appointed one of their own, Ken Frazier, to lead an inquiry into all matters surrounding the football program's child abuse pattern.

Ken Frazier is the CEO at Merck who made his name within the company as their in-house counsel.  In that position he managed Merck's legal defense when the FDA's Dr. David Graham determined their pain relief medication,Vioxx, was responsible for almost 140,000 heart attacks and nearly 50,000 deaths.  At an early stage of the Vioxx scandal, several equity analysts predicted Merck's liability could approach $40 billion.  Frazier was able to contain the company's actual costs to approximately $5 billion plus outside legal expenses.  Despite a background that included no operating experience in pharma, at either the product/franchise or geographic levels, Frazier's ability to contain the scandal's financial consequences won him the top position.

So much for eschewing sports approaches.  Frazier's legal strategy on Vioxx, worthy of Vince Lombardi and a thousand other locker room savants, was to fight each case, never give an inch and wear down adversaries in the trenches.

6. One solution for pharma: go virtual

Former Inquirer writer Buzz Bissinger proposed a common sense solution for Penn State and the hundreds of other universities with major athletic programs. "The only way to get rid of this," he said last week, is to "license these programs out. The university takes a fee, they become minor league systems. Get them out of the academic setting. They do not belong."

Bissinger here reinforced what a segment of academics have urged for years.  In The Chronicle of Higher Education, Ohio State English professor, Frank Donoghue, wrote that severing the relationship between college education and sports will end "undercover payments from boosters to athletes...sex scandals...pampering athletes through grade-school level courses...[and] cover ups."

Perhaps pharma can do something similar by adopting a radical version of the Hollywood model, discussed here and here.  The approach has its shortcomings, not the least being that the industry's current managers wouldn't have a clue of how to do it.  But it would at least follow Bissinger's suggestion of separating the moneymaking function from most of the daily business operations and from research.  For that reason, it is at least worth considering.

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