Published in CommPRO.biz 2013.07.24

The Teeter-Totter

The Cystic Fibrosis Foundation finds itself running back and forth on a seesaw of its own making. It runs to the one end to care for those stricken by a horror story disease. But then it does a swivel and heads for the other end to collect its share of $307,000.00 some of those dealing with the coughing, wheezing and gasping desperately for breath pay every year to ease their suffering. The Foundation put up $75 million dollars to develop Kalydeco, the $307,000.00 a year drug sold by Vertex Pharmaceuticals. A drug based on NIH (National Institutes of Health) research funded by our taxes.

Vertex is quick to insist they have invested over five billion in R&D since going into business in 1989, with a “significant” amount on cystic fibrosis. It would be hard for them to be any less transparent than that. Given the formula the Pharma companies use to calculate their R&D costs, this doubletalk leads us to believe Vertex invested little or none of their own money directly into Kalydeco. Vertex priced it, “based on how well it worked in patients and the cost of developing it.” What? In other words, whatever the market will bear.

The Cystic Fibrosis Foundation’s share of the booty is secret. Best guess? Under 10% of the $307,000.00 Vertex collects each year from each and every suffering patient that needs this drug. And what are they doing with their share? Is it given to help folks pay for the drug? No, the Foundation is too busy looking for ways to invest in other new drugs. Did it ever occur to them to demand the right to look at Vertex’s books? To limit the cost to patients? Those seem like minimal demands for a $75 million dollar investment.

Oh no, no, that’s a “deal breaker.” What deal? They got no deal. Just hand Vertex most of the bucks they need to bring the drug to market for a paltry share of the revenue? Here’s a deal. Take their $75 million, add it to the NIH break-through and watch dozens of drug companies hungry for a winner jump for it. Anyone could craft a better deal than Vertex gave the Cystic Fibrosis Foundation.

Speaking of deals, America deserves a better deal on drugs. Canada has 10% of our population –less than the State of California– yet they pay a fraction of what we pay for drugs. Why? They negotiate lower prices; an option Congress denies us. Big Pharma pours a few million in the pockets of our representatives in the Congress for a deal allowing then to reap billions. Ethically, morally, there is no excuse for this insanity. No excuse for the Pharma sector to drive up the cost of health insurance, our taxes and out-of-pocket costs for drugs. There’s no excuse for the Congress to license the drug companies to rip off every American.  

Published in CommPRO.biz 2013.07.18

Chasing the Bucks

If we are to believe the most successful investor of our time, the most important goal for any company is long-term growth. Why then do the directors of company after company follow a short-term path? Why would anyone focus on quarterly results? How many Americans watch the stocks in their 401Ks or other market packages rise and fall quarter to quarter? Why? Unless you are almost ready to hang up your spurs and retire, why do quarterly numbers even interest you? It’s the long term results that will support you one day, that’s the Warren Buffett way.

The only people who benefit from the quarterly rat race are those who collect fees from every trade. Trades and fees that reduce your nest egg, how does that make sense? This madness extends to the outrageous compensation levels “C Suite” occupants score these days. This, in spite of evidence that sky-high pay does not focus executives on the long-term health of a company; it focuses them on their paycheck and ways to fatten it up. Management guru Jim Collins pointed out in a USA Today piece a decade ago that leaders do not create great companies for a paycheck; they create great companies because they can. True then, true today.

A recent New York Times article on “C Suite” compensation notes that three Oracle executive’s compensation ranks them among the top five CEO paychecks. Among the top 200 CEOs the software company founder Larry Ellison is number one. His two Co-Presidents Safra Catz and Mark Hurd both have earnings that would put them into the top five if they were CEOs. Hurd, ousted from Hewlett Packard where he carried on the slash and burn route to profitability that his predecessor Carly Fiorina established. She was canned when her ham-handed style dragged this once great company down. Hurd collected over twelve million dollars on his way out the door for his role in destroying HP. For his leadership at Oracle Ellison saw his pay jump by a quarter last year. However, his shareholders suffered an almost equal decline. How does that make sense?

“C Suiters” should be well compensated, compensated for long-term strategies like research and development and real growth. Oracle Co-President Safra Catz lists 85 acquisitions completed within five years as an accomplishment. That is a strategy often followed by those looking to improve their quarterly gains. While acquisitions make sense when they fit, often they do not and can lead -as they did under Carly Fiorina at HP- to chaos and corporate decline. 

Flashy, pricy, “C Suiters” do not make companies great. Anytime their pay scale runs more than forty times the wage of the lowest paid worker in the company it’s way high. Today we have “C Suiters” routinely collecting a hundred, even as much as a thousand times their lowest paid worker’s take home. That’s just outrageous. It makes no sense as a business plan and it is ethically disgusting.

Published in CommPRO.biz 2013.07.08

Ethical Marketing

 

Marketing genius Seth Godin brought us up sharp with an on-the-mark blog post. He pointed out that many marketers blithely peddle goods or services that they know – or should know – are anything but good for those they entice into using them. It’s easy to look askance at those who market tobacco and other well known threats to our well-being. Godin zeros in on fast food, actually food in general, and our obesity epidemic along with the array of woes it brings with it.

It’s too easy to point out that the occasional burger and fries, or pile of pancakes with maple syrup does not make one obese. Nor that some individuals find it a lot harder to control their weight than others. Neither of those points amounts to a whole lot when we all know that there’s no way to limit what a food maker offers unless we do it, unless we show them a better and more profitable option.

There is another face on this coin, health insurance. Or more accurately benefits, since this sector veered from the insurance model years ago. No one expects a life insurance company to offer a policy to those in their nineties; in fact most policies cut off well before the applicant turns eighty. Nor is it expected that a life policy will be issued to an individual with severe health issues. While we as a people are not going to deny health benefits to those who do not act to care for themselves, some boundaries need to be established by the underwriters, the government and the medical community; the doctors and healthcare facilities.

Godin makes the point that marketing is one of the few professions that does not have boundaries. Law, medicine, real estate, retailing, even food manufacturing all have boundaries. The only fence surrounding the marketing world is a truth in advertising rule. Of course many marketers have ethical boundaries. They won’t work for companies who do not adhere to high ethical standards. But even those individuals and agencies might not feel that a food manufacturer presents an ethical issue.

On the contrary such a company might present an opportunity, an opportunity to create a set of boundaries. Boundaries that never show oversized portions; that offer only healthy recipes and serving suggestions. Boundaries that limit the potential for harm from legitimate efforts to create revenue for the company. There is reason to believe that this is a solid marketing concept. Consumers are moving more and more to products that offer healthy options. So rather than selling more to a limited number of customers, create more customers.

Beyond marketing, medicine and government have work to do on the obesity front. And marketing needs recognize that food and obesity are but a single color on its palette. There’s hardly a company that does not present ethical issues when it comes to creating their sales messaging. We owe Godin thanks for reminding us of our responsibility to follow the ethical model whatever we peddle.