Frazier's call earns him praise, rare for a pharma CEO
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Merck CEO Ken Frazier's decision to withdraw from President Trump's manufacturing council over his response to the Charlottesville protests has prompted a level of social-media cheerleading rarely received by drugmakers.
It's not often that pharmaceutical companies — or any of their counterparts in the healthcare industry — are held up as examples of morality or leadership to the general public or greater business community.
“When people like Ken Frazier or [Allergan's] Brent Saunders or [Acorda Therapeutics'] Ron Cohen step outside of their companies and express a unique point of view that connects with society's interests, society responds,” said Gil Bashe, managing director of global health at Finn Partners. “They listen intently because it's been so unusual to have a pharma executive have a defined individual point of view.”
The ongoing debate about the high prices of prescription drugs has put drugmakers in the crosshairs of lawmakers, Trump, and other players in the competitive healthcare market (like pharmacy benefit managers and health insurers). But this time the Twitter back-and-forth evolved into a defense of Frazier and his work at Merck from some unlikely supporters.
“Ken Frazier put aside the bottom line to speed vaccine work,” Ronald Klain, former Ebola czar in the Obama Administration, wrote on Twitter.
“Ken was someone who I could talk to about what was right for the country,” wrote Andy Slavitt, former head of CMS, also on Twitter.
Frazier, the only black CEO of a Fortune 500 pharmaceutical company, was the first executive to resign from the manufacturing council over Trump's belated critical response to the violent protests over the weekend and the first CEO in general to call out his lackluster response. Calling it a “matter of personal conscience,” Frazier said in a statement on Twitter that “America's leaders must honor our fundamental values by clearly rejecting expressions of hatred, bigotry, and group supremacy.” The post received 48,000 likes and 19,000 retweets within 36 hours.
Trump tweeted that Frazier will now “have more time to lower ripoff drug prices.” He later tweeted at Merck that “pharma is a leader in higher and higher drug prices” and that companies should bring back jobs to the U.S. and lower drug prices.
Since Monday morning, at least three more executives on the council have quit, including the CEOs of Under Armour, Intel, and the Alliance for American Manufacturing. Their decisions to leave the council, however, may have been a long time coming.
“In the case of Mr. Frazier at Merck, he was likely ambivalent about Trump all along,” said Gene Grabowski, a crisis communications expert and partner at Kglobal. “When a catalyst like this occurs, this gives them a reason.”
The only other pharma chief on the council is Johnson & Johnson's Alex Gorsky, who announced on Tuesday his intention to remain on the council. Dr. Toby Cosgrove, CEO of the Cleveland Clinic, confirmed he plans to stay as well. In an email, a spokesperson for the hospital system said that “Dr. Cosgrove believes that it is important to have direct access to the highest level of government to be able to provide input.”
Even so, CEOs are now more likely to be on the hook when it comes to responding and addressing social issues than they have in the past. A survey conducted by Interpublic Group's KRC Research and Weber Shandwick and fielded this spring found that 56% of millennials believe that CEOs have more responsibility now than before to publicly speak up on social issues. About one-third of baby boomers and Generation Xers say the same thing, according to the survey of roughly 1,000 adults.
The decision to step down from the council “speaks very highly of Merck, of the board, and of Frazier himself, because the government is a major client,” said Laura Schoen, chair of Latin America and president of the global healthcare practice at Weber Shandwick. “He is famously credible and respectful.”
Merck, like the majority of drugmakers, has raised the prices of its drugs as part of its business model, and since the election Trump has called for lower drug prices. This year, however, Merck became one of the first pharmaceutical companies to disclose list-price increases for its drugs. The prices of its therapies rose, on average, 9.6% in 2016. Several drugmakers have promised to limit price hikes to less than 10% each year.
Beyond the potential impact on pricing, what makes Frazier's statement unique is that it was a rare moment of humanity and personal perspective from a leader in an industry that speaks most often to investors and each other.
“It's an industry that has historically talked through its trade association and through the fundamentals of its business, like earnings,” Bashe said. “It's not an industry that talks about ideas and disruptive change.”
Still, Frazier's decision isn't likely to have a lasting impact on the debate over drug prices. “It's tangential to the ongoing narrative about the price of drugs,” Grabowski said. “There was a narrative going on before and it will go on after.”