Traders and canny investors take a keen interest in spread – the difference between the buy and sell price on any given market. They know that whatever they buy must bridge this gap before they can make a penny. Spreads are wider on stocks that are infrequently traded and, if they get too wide, traders will not touch them.
Industries and companies face reputational spreads too: the gap between the good or ill they do and how they are perceived. There is no industry in the world today with a greater reputational spread than the pharmaceutical industry.
In the past century, global life expectancies have risen from 40 to 70 years. It is one of mankind’s greatest achievements and has been driven largely by advances in medical science funded by the pharmaceutical industry.
A whole host of illnesses and diseases, such as polio and measles, are now wiped out altogether or under control.
Let’s put aside for one moment the huge number of people working in the industry, the hundreds of millions of pounds paid to the Treasury each year, and the £2.8bn trade surplus delivered annually to the UK alone.
The industry spends some £45bn a year on R&D. To put that into context, the pharma industry spends 96 times as much on trying to find cures to illness and reliefs to human suffering as the world’s largest cancer charity Cancer Research UK. Yet in a recent PatientView global survey it sat just above tobacco and just below big oil for public trust. Why is this?
There are two obvious reasons.
First, the pharmaceutical industry is naturally risk averse. When miscalculations can lead to deaths, we are glad that they are. But to practice the same level of risk aversion when it comes to communicating is a handicap. All communication carries a level of risk. Communications can be misunderstood, words twisted and answers can lead to difficult questions. But failing to communicate means amazing stories left untold and criticisms left unchallenged.
Last year when Turing Pharmaceuticals, run by former hedge fund manager Martin Shkreli, bought the rights to an HIV drug and raised the price by 5,000 per cent, many pointed to it as an example of the way the industry behaves as a whole.
What little refuting the industry did failed to make it across the spread into positive territory.
They failed to tell the stories of how they are reducing the costs or giving away for free drugs in the poorest countries and the work they are doing to create cures for illnesses with little or no commercial value.
Second, there will always be those who question the ethics of profiting from illness. But there is no shame in the profit motive: it is what drives business and innovation and has ultimately saved, extended and improved the lives of billions of people across the globe.
Those that want to know what a world where no-one profits from medical innovation looks like need only look at what life was like before the late nineteenth century.
The pharmaceutical industry must become better at making this argument unashamedly. Just as they must make the case for why medical practitioners are sometimes paid to give frontline advice or feedback.
So the answer is to be risk averse with lives but not with communication, and to understand that the spread created by the industry itself means it may have to tell 10 positive stories before a single one makes it into profit territory.
But once it gets there it will not only be improving its reputation for today but reducing the spread for the next time a rogue rotten apple is used to assert that the whole consignment has gone off.