ANALYSIS: Explaining healthcare costs will help cure PhRMA's woes

PhRMA has been accused of being ineffective, but its recent shift to performing PR based on hard facts shows an awareness of the issues it must address.

PhRMA has been accused of being ineffective, but its recent shift to performing PR based on hard facts shows an awareness of the issues it must address.

The Pharmaceutical Research and Manufacturers of America (PhRMA) spends a lot of time playing defense. Discord over the costs of prescription drugs has led to heaps of bad press for the pharmaceutical industry and its lobby group. Adversaries that view brand-name drug makers as solely profit-focused have made it their mission to further that image, while the hill that industry proponents are climbing seems to get steeper with each day that goes by without a prescription-drug benefit being passed. While it's up for debate how much one has to do with the other, PhRMA has developed a reputation among some healthcare professionals - both for and against the big pharma companies - as being ineffective. One industry professional says, "PhRMA has been notorious about neglecting the public and even its own allies when it comes to telling its story. It has done a poor job reaching anyone outside the Beltway. It has spent time and money on multimillion-dollar ad campaigns, but that is not ringing home to professional or consumer audiences. Until PhRMA can explain the price of drugs, it isn't going to get anywhere." PhRMA's board consists of the CEOs of the top drug companies, so it is possible that such theories are reflective of being so closely associated with a controversial industry. But recent changes within PhRMA's communications department suggest that it knows there are issues that need addressing. Mark Merritt, former head of communications for PhRMA, recently quit after five months on the job to become president and CEO of Pharmaceutical Care Management Association (PCMA), a pharmacy-benefits manager (PBM) trade association. Michael Tuffin, John Murray, Dan McLagan, and Tom Bunnell - all "reasonably senior" members of PhRMA's communications team, according to senior director of public affairs Mark Grayson - also left, leaving five of its 14 communications slots open. A source close to the situation says, "The resignations are going to point to some of the internal problems PhRMA is having with trying to communicate with all its constituent members." However, Grayson says of his former colleagues' departures, "This is a difficult time for us, but Mark leaving will not change the strategies he put in place. He revamped things by making communications more aggressive." Grayson was the most senior remaining member of PhRMA's communications team when top dog Merritt left. Rather than replacing Merritt directly, the association expanded the responsibilities of its former head of policy, Richard Smith, adding communications oversight to his duties. The decision makes sense, says Grayson, because so many of PhRMA's communications efforts are "fact-based and policy-driven." PhRMA's 15-person policy staff and its communications team will all report to Smith, now SVP of policy and strategic communications. But the two units will remain separate. "These divisions are still going to be working on their own, but Rick overseeing both will help create better synergy between the two," Grayson explains. Additionally, search firm Korn/Ferry is currently working to find a VP of communications - a new position created to handle day-to-day media efforts. According to Grayson, PhRMA will also be replacing all members of the Merritt-led exodus once Smith has settled into his new role. "We're pleased with the direction we are headed in, but we need more staff to get our messages out," admits Grayson. Data-driven communications The Pink Sheet wrote of the reorganization, "By combining the policy and communications functions, PhRMA is signaling that it will emphasize data-driven communications efforts to counter criticism and underscore the value of medicines. For example, Smith oversaw the drafting of a report looking at managed-care spending on pharmaceuticals to underscore PhRMA's position that drug costs are not driving health-insurance premium increases." Issuing such fact-based reports has become necessary for PhRMA, as it is repeatedly forced to respond on behalf of an unpopular industry, regardless of whether the allegations against it are true. Earlier this month, for example, Rep. Michael Michaud (R-ME) introduced a bill by which the federal government would act as a PBM to negotiate lower prescription drug prices. The proposal, American Rx, would make non-participating drug companies ineligible to receive tax deductions for marketing. In a letter urging colleagues to cosponsor American Rx, Michaud claims that it "would not have an adverse impact on pharmaceutical research and development," because "each year, pharmaceutical companies spend three times more on advertising and marketing than on research and development." This is false, says Jack Angel, executive director of the Coalition for Healthcare Communications, who contends that such statements hurt PhRMA. "But either way, it generates headlines. That type of PR blurs the view of the industry," he says. One thing that everyone seems to agree on, regardless of their position on how drug companies spend money, is the need for a drug benefit under Medicare. PhRMA supports a benefit, but opposes price controls, feeling they would detract from the funds drug companies have for researching and developing new medications. Angel thinks PhRMA should direct its efforts toward a Medicare benefit now, because it will pay off in the long run. "If I were working for PhRMA, I would be spending every waking minute on trying to get Congress to pass a prescription-drug benefit," he says. "If that happens, it will take a lot of the heat off the industry, and in turn, off PhRMA." Merritt, who has traded one beast for another, has his work cut out for him in his new post. Last month, the four largest PBMs - AdvancePCS, Medco Health, Express Scripts, and Caremark Rx - were sued for allegedly making patients pay more for prescription drugs through higher copayments and deductibles. In its coverage of the suit, The Wall Street Journal asserted that PBMs "are generally secretive about the rebates and other monies they earn from drug makers for favoring some brand-name prescription drugs over others." It added, "allegations echo claims made by plaintiffs' attorneys in other cases against the PBMs in recent years, and come at a time when regulators are increasing efforts to figure out how the PBM industry actually works." In an attempt to address many of these issues, Merritt plans on enacting an aggressive communications plan at PCMA, reminiscent of the one he tried to put in place at PhRMA. Even though he is head of the whole organization, he says he will be "very involved in communications." LaVarne Burton, who became EVP and COO of PCMA when Merritt was hired as president, says, "The change in leadership reflects the growth of our organization as our issues become more visible." New job, old challenges Before joining PhRMA last October, Merritt was head of public affairs for the American Association of Health Plans for several years. He compares the issues facing PBMs today to the ones the managed-care industry contended with in the late 1990s. "Like HMOs once were, PBMs are at a crossroads where they have a real chance to tell America what they do and how they can help." Aware of the challenges he'll face in his new post, Merritt concedes, "Like most segments of healthcare, PBMs play a very complex role. The end product is simple, but it is difficult to get people to understand how you get there." Grayson makes a similar observation in discussing PhRMA's PR plan under its new leadership. "So many people just don't understand the cost structures within healthcare. We need to be more aggressive and think about more appropriate avenues for getting those messages out to the reporters, third parties, think tanks, and the public."

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