William George, Sr. Fellow at Harvard Business School and Former Medtronic CEO, weighs in on the latest action coming from Twitter and their business strategies.
This article was originally posted to CNBC.com on 01/25/16
William George, Sr. Fellow at Harvard Business School and Former Medtronic CEO, weighs in on the latest action coming from Twitter and their business strategies.
This article was originally posted to CNBC.com on 01/25/16
At the World Economic Forum in Davos, Switzerland, a lot of people were palpitating about the decline in stock prices since the start of 2016, the precipitous drop in oil prices, the slowdown in China, war in the Middle East – even the prospects of Donald Trump or Ted Cruz in the White House. The stock market tends to overreact to perturbations like these, just as it did to Greek concerns in 2014 and 2015.
For the two dozen CEOs I talked to at Davos, it is "full speed ahead." Not that they aren't concerned about these geopolitical factors. Rather, they have already anticipated this kind of volatility and designed their corporate strategies to adapt rapidly to changing global conditions.
No doubt the slowdown in the global economy is a significant factor, but it certainly does not impact everyone equally. Rather, in Warren Buffett's infamous words, "When the tide goes out, you find out who is swimming naked." In my view, times like these separate the well-run companies from the short-term players that are caught unprepared.
Let's look at contrasts in several industries between companies with the best leaders who have long-term strategies and those who choose to react to short-term events. Here are some of the winners where investors might place long-term bets:
Unilever vs. Procter & Gamble: Since becoming CEO in early 2009, Unilever's Paul Polman has built a diversified strategy to pursue the world's markets with vigor. He's rapidly adapting to changing conditions using the banner of "sustainability," which he sees as Unilever's growth engine in spite of troubled markets. Meanwhile, archrival P&G struggles without a clear strategy. It seems focused mostly on paring back by selling off brands as new CEO David Taylor takes over. In 2015, P&G's stock dropped 15 percent, while Unilever's was up 4 percent.
PepsiCo vs. Coca-Cola: PepsiCo's Indra Nooyi put her strategy in place even earlier than Polman. Soon after being named CEO in late 2006, she declared PepsiCo's strategy of "Performance with Purpose" to focus on healthy foods and beverages. By 2020, PepsiCo plans to reach $30 billion in nutritional product sales, up from $10 billion in 2010. Pepsi's archrival, Coca-Cola, led by CEO Muhtar Kent, elected to double down on sugar-based Coke. Initially, Coke appeared to be winning, but in the last four years, PepsiCo has steadily pulled ahead. Meanwhile, Kent has painted Coke into a strategic corner, appealing to a declining demographic as millennials eschew sugar-based drinks.
Exxon vs. British Petroleum: What will happen to oil companies as oil prices drop from over $100 to under $30 a barrel? Having served on Exxon's board for a decade, I saw first-hand how veteran CEO Rex Tillerson prepares the company for major downturns. Exxon keeps its balance sheet flexible, which gives it the capacity to take advantage of financial stress. Meanwhile, BP's balance sheet never recovered from the Deepwater Horizon incident in the Gulf of Mexico, and it lacks the cash to take advantage of current investment opportunities.
Delta vs. United Airlines: On the opposite side of the oil price decline, Delta is benefiting from lower fuel costs. It is using savings to invest in the higher-revenue business traveler and to reward its high-frequency travelers. CEO Richard Anderson has figured out the basics of appealing simultaneously to both the value-conscious traveler and the business market while achieving superior operational efficiency and high load factors. Meanwhile, United continues to struggle with both service and efficiency. Since 2012, it has ranked near the bottom in delays, cancellations, and mishandled bags. With newly appointed CEO Oscar Munoz recovering from a heart transplant, United may not be in a position to make necessary changes.
Starbucks vs. McDonalds: The growth that Starbucks has enjoyed since founder Howard Schultz returned as CEO in 2009 is nothing short of phenomenal. Meanwhile at McDonalds, new CEO Steve Easterbrook has made much needed changes and the stock market has hailed his initiatives. Nevertheless, it will be very difficult for McDonalds to return to sustained growth as it is trapped with a declining demographic. McDonald's has yet to shake its reputation of serving unhealthy, highly modified foods, which is limiting its appeal to health-conscious consumers.
Target vs. Wal-Mart: Target's new CEO Brian Cornell has moved rapidly to appeal to the younger generation. Cornell has focused on mothers, babies, families and wellness with an omni-channel strategy that is paying off in rising same-store sales. Wal-Mart is trapped with an old demographic and has yet to attract large numbers of millennials. It has too much space as many consumers shift to online purchases. If anyone can turn around giant Wal-Mart, it is new CEO Doug McMillon, a highly progressive leader who is making all the right moves and deserves a long runway to complete the turnaround.
Medtronic vs. Pfizer: Under CEO Omar Ishrak, Medtronic is on a roll. It has successfully integrated its $50 billion merger with Covidien, and its innovation pipeline is paying off in higher growth. Recently, Medtronic announced an additional $1.5 billion in high tech acquisitions. Recently, Pfizer purchased Allergan for $160 billion – more than five times Allergan's revenues. Unlike Medtronic, Pfizer is financially strained and its pipeline is paltry. Allergan won't help much in that regard as it too has a limited pipeline. Expect Pfizer CEO Ian Reed to reach the limits of financial engineering soon after he realizes the cost savings from consolidation of Allergan.
While I don't expect these sharp comparisons necessarily to manifest themselves in the near-term stock performance, they will become evident over the next 3-5 years. In a challenging market, investors will be well advised to be highly selective in their investments and focus on the quality of leadership. It is in difficult times that leadership makes the largest difference and becomes evident. The winners above have leaders who have proven their capacity to take advantage of the current challenges and come out on top.
Commentary by Bill George, a senior fellow at Harvard Business School and the former Chairman and CEO of Medtronic and previously served on the board of Novartis. He is author of the book "Discover Your True North" (Wiley: August 17). Follow him on Twitter @Bill_George.
Disclosure: Bill George holds stock in Exxon and Medtronic, but none of the other companies listed above.
For more insight from CNBC contributors, follow @CNBCopinion onTwitter.
This article was originally posted to CNBC.com on 1/25/16
Bill George is professor of management practice at Harvard Business School, where he has taught leadership since 2004. Mr. George is the former chairman and chief executive officer of Medtronic. He is the author of the new book, Discover Your True North, an updated version of his bestseller True North. In this interview, we discuss how to become an authentic leader.
In This episode, You’ll Learn:
Resources Mentioned In This Episode:
Enjoy This Episode?
You’ll also love the Radio Free Leader starter kit. It’s a collection of the BEST episodes of the show in an easy to digest format to help you lead smarter with thinkers like Daniel Pink, Adam Grant, Dan Ariely, Nilofer Merchant, and more.
This interview was originally published to davidburkus.com on 1/19/15
AMERICA’S PHILANTHROPISTS AREN’T WAITING ANY LONGER FOR POLITICIANS OR BUSINESSES TO SOLVE THE WORLD’S MOST PRESSING PROBLEMS.
To those optimistic, persistent souls who have a vested interest in seeing positive social change in the U.S., here’s a sobering message: if you are looking for meaningful government support, don’t hold your breath.
Political gridlock and mounting federal debt have effectively rendered the U.S. government impotent, robbing it of its historic ability to spur social change. Americans give Congress a miserable 11% approval rating, and when the government does take action, it seems to bungle the job. President Obama’s Affordable Care Act promised to transform health care. After debacles in the rollout of the law, many Americans are accepting penalties versus buying insurance due to the increases in health insurance premiums. Meanwhile, rapid escalation of drug prices continues unabated.
Can business step into the void and champion meaningful change?
Many companies are making important contributions, but CEOs have less leeway than ever to make bold investments in their communities. Due to growing pressures from short-term shareholders and increasing regulations, companies have been severely constrained in making targeted, long-term investments that drive social change.
America’s philanthropists aren’t waiting any longer for politicians or businesses to solve the world’s most pressing problems. They are committing massive amounts of their own money to solve the most difficult challenges in health, education, job creation, and the environment.
In doing so, they are elevating the importance of philanthropy in American society and across the world. By targeting their funds to achieve tangible results, philanthropists are demonstrating they are indeed “the passing gear of society.”
Following a long line of benefactors like Andrew Carnegie, John D. Rockefeller, and Henry Ford, Microsoft founder Bill Gates ignited the current philanthropic revolution. In 2000, he and his wife Melinda announced they were creating a foundation worth $44 billion—half his net worth. Inspired by Gates’ passion and effectiveness, his friend Warren Buffett announced in 2006 he would contribute $30 billion of Berkshire Hathaway stock and have it managed by the Gates Foundation. Since 2000, the Gates Foundation has given away $39 billion to eradicate diseases in developing countries, enable people to emerge from poverty, and improve K-12 education.
Bill and Melinda Gates are anything but “checkbook philanthropists.” They are devoting the bulk of their time traveling the world searching for opportunities to make a difference with their funds. Their focus on overcoming disease, improving education, and lobbying for climate change initiatives is having a powerful impact. They have also built an organization of 1,200 talented people who manage their grants.
In 2011, Gates and Buffett decided to recruit other philanthropists by launching “The Giving Pledge.” By the end of 2015, they had persuaded 141 wealthy couples and individuals to give away at least 50% of their fortunes—a clear indication of the growing power of philanthropy.
Their efforts have borne fruit in the case of Facebook founder Mark Zuckerberg and his wife, Dr. Priscilla Chan. After giving $100 million to Newark, New Jersey schools,$120 million to Bay Area schools, and 18 million Facebook shares (now worth $1.9 billion) to the Silicon Valley Community Foundation, they made the audacious announcement that they would give away 99% of their Facebook stock during their lifetime, an amount currently valued at $45 billion. They decided to make these contributions through a limited liability company (LLC) to have greater flexibility to make grants, lobby for causes, and invest in promising innovative ideas. If Facebook continues its remarkable growth, the ultimate value of the Zuckerbergs’ giving could easily exceed $100 billion.
The Chan-Zuckerberg Initiative makes clear the dedication of Millennials to drive social change. Millennials have a deep passion for making a difference in the world and are focused on making a difference throughout their lives, rather than waiting until their death. At 31, Zuckerberg’s commitment comes at a much younger age than even Gates and Buffett. As he wrote in his inspiring letter to his newborn daughter, “We must make long term investments over 25, 50, or even 100 years.”
In Zuckerberg’s case, it didn’t take long for the cynics to pounce. Because their investment vehicle is an LLC rather than 501(c)(3) foundation, writers like Jesse Eisinger inThe New York Times accused Zuckerberg of a public relations coup, saying, “we are turning into a society of oligarchs.” Eisinger apparently fears the power of the wealthy to influence social change, as Rockefeller, Ford, and Carnegie did in the early 20th century.
Eisinger even had the audacity to assert that he could do a better job of distributing this money than Zuckerberg. Without a touch of humility, he wrote, “I think I might do a good job allocating $45 billion. Maybe even better than Zuckerberg.” Eisinger ignores one simple fact: it’s not his money.
Critics like Eisinger are missing a critical point. Rather than hoarding their money or creating family dynasties as many of their predecessors did, a growing number of wealthy Americans are pledging their fortunes to benefit society.
The critics argue the allocation of these funds is the proper role for government. As Eisinger wrote, “Society can’t rely on the beneficence and enlightenment of the super-wealthy. We need to take a portion uniformly—some kind of tax on wealth.”
This perspective is misguided. The technological and organizational genius of leaders like Gates and Zuckerberg can bring tremendous contributions to the improvement of social welfare. The critics’ apparent alternative—to redesign the U.S. tax system by instituting additional levies on income, capital gains, and estates—would inevitably backfire. They ignore the reality that excessively high tax rates would shut down the incentives that have made America the world’s most entrepreneurial nation—and also the most generous. Because European countries do not permit deductions for philanthropic gifts, philanthropy in those countries pales in comparison to charitable giving in America.
The magnitude of giving by these philanthropists marks a turning point in American society. Rather than criticizing leaders who are stepping up to help solve the most pressing problems of global society – devoting not just their money but their time as well – we should be venerating them. As a result of their remarkable generosity, philanthropy in 2016 is poised to stand alongside government and business as one of the most powerful forces influencing social change.
Bill George is Senior Fellow at Harvard Business School, author of Discover Your True North, and former Chairman and CEO of Medtronic
This article was originally posted to Fortune Magazine on 1/17/2016
On the third Monday in January, the United States holds a federal holiday to commemorate Martin Luther King, Jr.’s birthday and, more important, to honor his immense contributions to this country’s civil rights movement.
Bill George, a senior fellow at Harvard Business School and an expert on leadership, took time ahead of the holiday to reflect on Dr. King’s lasting legacy and to discuss his case “Martin Luther King, Jr.: A Young Minister Confronts the Challenges of Montgomery.”
What compelled you to write this case?
Bill George: I went to college in the early 1960s in Atlanta, where Dr. King lived and had grown up. This was during the height of the civil rights movement he was leading, his “I Have a Dream” speech, and the marches on Washington and in Alabama. King’s legacy of staying true to your beliefs, pursuing your purpose, and exhibiting courage under pressure are profound lessons for leaders in all walks of life.
How do you teach it?
BG: The most powerful moment in the case – and perhaps in Dr. King’s life – occurs in 1958 in Montgomery, Alabama. He was a young preacher with his first parish, and he was chosen at a town meeting one night to lead the protests against racial discrimination. It was a role he neither sought nor was prepared for, since his whole education to that point (including obtaining his doctorate from Boston University) had focused on a scholarly approach to religion aimed at becoming senior minister at his father’s large church in Atlanta. But he could not ignore this new calling.
Traumatized by his predicament, King gets down on his knees and prays for guidance. This is King’s crucible, something that presages all that lies ahead. It represents the turning point in his life. As we all know by now, he decides to accept the call to lead the fledgling civil rights movement. From this point forward, events lead inexorably not only to Memphis and his tragic assassination, but also enormous progress toward racial equality in the United States.
While perhaps not as dramatic as King’s, all of us experience crucibles. It is important that we understand their meaning for our lives, and how they shape our future direction. The key to coping with your crucible is to reframe it in terms of a learning experience and an opportunity for personal growth that will prepare you to deal with the challenges that lie ahead.
Looking back at Dr. King’s legacy, what are some of the most applicable lessons for leaders today?
BG: The most important lesson that all leaders can draw from Dr. King is to recognize how you can make a difference in the world through your leadership, and then to step up to the challenge when opportunities present themselves. When you do so, undoubtedly you will encounter roadblocks and opposition. That’s when it becomes imperative to have the courage and resilience to persevere in order to fulfill your mission. In a very real sense, the character you demonstrate in achieving your purpose is the legacy you leave to those leaders coming along behind you.
“IN A VERY REAL SENSE, THE CHARACTER YOU DEMONSTRATE IN ACHIEVING YOUR PURPOSE IS THE LEGACY YOU LEAVE TO THOSE LEADERS COMING ALONG BEHIND YOU.”
Education laid the foundation for many of Dr. King’s great ideas. How important was that in terms of his leadership and his development of innovative approaches to difficult problems?
BG: Unlike many other civil rights leaders of his era, Dr. King was a scholar who not only pursued depth in his religious studies, but became a student of Gandhi and his approaches to non-violent civil disobedience. Gandhi’s philosophies form the heart of King’s non-violent marches on behalf of racial equality. In its time this was a highly innovative approach to challenging racial discrimination in the American South.
Coretta Scott King is an important figure in this case. Can you talk about her role in Dr. King’s success?
BG: Coretta Scott King was an incredibly strong woman who was at Dr. King’s side throughout his challenging civil rights protests. She knew the dangers he faced and feared for his loss as a husband and father. Yet she was supportive and faithful throughout his ordeals until the very end. After his death, she did her best to further his mission, which was truly their mission, and to carry on his legacy.
One of the issues that I intentionally chose to leave out of the case is King’s relationships with other women – something that FBI Director J. Edgar Hoover kept files and photos of and for which King has been criticized. While King’s lack of fidelity to Coretta does not diminish him and his legacy, it was clearly one of his greatest weaknesses. On the other hand, I think this illustrates that all leaders are imperfect. We should not excuse their failings, but those shortcomings should not cause us to lose sight of their accomplishments and the greater good that they do.
This article was originally posted to HBS.org on 1/15/16
On today’s show, we learn how to discover your True North with Bill George, one of America’s most seasoned business leaders.
Bill is a senior fellow at Harvard Business School and the former Chairman and CEO of Medtronic, the world’s leading medical technology company.
Reading glasses work well when you’re reading a book, but don’t try to drive across town wearing them. To do that, you need glasses that can change focus. The same is true with leadership. You need a different kind of focus to manage yourself, others, and the greater systems around you.
Attune: The Role of Focus in Authentic Leadership is a 40-minute streaming conversation between Daniel Goleman and Bill George about the three kinds of focus that are essential for enhancing your ability to give feedback, motivate people, and respond to changing situations in your environment.
Their discussion draws on examples from their own careers and those of business and world leaders, and highlights the benefits of developing each type of focus.
Why inner focus? Self-awareness allows leaders to manage their inner world.
Why other focus? Developing empathy helps leaders build effective relationships and interactions.
Why outer focus? Awareness of larger systems helps leaders choose effective strategies.
Topics covered include:
Learn the three types of empathy
Find your leadership blind spots
Giving and receiving feedback
Handling the heat in crucible moments
Understand the dangers of groupthink
In the classic Hans Christian Andersen story, everyone tells the Emperor what he wants to hear – that his new clothes are beautiful. No one wants to anger the Emperor, so they won’t tell him he’s wearing nothing. It isn’t until a child names the truth that the Emperor learns he’s been fooled by the weavers who were supposed to make him a special set of clothes.
What happened to the Emperor isn’t just the stuff of fairy tales, it’s the real-life experience of many high-level leaders who surround themselves with people who won’t report negative information for fear of repercussions. As leaders rise through the ranks, the less honest feedback they receive. High-level executives can become isolated and not understand the reality of their situation. Such leaders may not walk down the street naked, but lack of information can lead to poor decisions and missed opportunities.
My colleague Bill George and I talked about this question in our conversation for Attune: The Role of Focus in Authentic Leadership. Bill shared a first-hand experience with the dangers of groupthink.
“Early in my life, I worked in the U.S. Department of Defense as a civilian in the era of Robert McNamara and the Vietnam War. Some of the most brilliant people I’ve met in my life were at the high levels of the Pentagon. But, toward the end, they were walking off the cliff together. They suffered from groupthink. McNamara was so powerful, his team simply reinforced what he was saying. They didn’t take different perspectives. Any good leader needs to have a reliable team who will ask tough questions.”
One way a leader can avoid groupthink is by honing your triple focus: yourself, others, and your larger situation.
First, a leader needs to develop self-awareness. It’s important to know your strengths and limitations.
How can you develop that self-awareness? One way to understand ourselves better is to seek honest feedback from trusted peers, friends, and family members. The key is to find people who can hold up an honest mirror and then to be open to what you see in the mirror, warts and all. Often, that means looking for a coach or support group outside of your organization. Such a resources can help you see where your biases limit your ability to take in information that contradicts your opinions.
The good news is that once you’re aware of your limitations, you can work to move beyond them. Tara Bennett-Goleman explains the neuroscience behind developing new habits in her book Mind Whispering: A New Map to Freedom from Self-Defeating Emotional Habits. She describes five key steps to habit change, including familiarizing yourself with the self-defeating habit, being mindful, remembering alternatives, choosing something better, and practicing the new habit often.
Focus on Others
Along with knowing yourself, you need to really understand the people around you. I call it other focus. Effective leadership depends on being able to tune into people, talk to them in a way they understand, motivate them, influence them, and listen to them.
Sometimes, the best way for a leader to focus on others in a group, to truly hear what they have to say, is to silence yourself. That’s one of the points made by Cass R. Sunstein and Reid Hastie in their December 2014 Harvard Business Reviewarticle, “Making Dumb Groups Smarter.” They said,
“Leaders often promote self-censorship by expressing their own views early, thus discouraging disagreement. Leaders and high-status members can do groups a big service by indicating a willingness and a desire to hear uniquely held information. They can also refuse to take a firm position at the outset and in that way make space for more information to emerge. Many studies have found that members of low-status groups have less influence within deliberating groups (and may self-silence). Leaders who model an open mind and ask for candid opinions can reduce this problem.”
In our conversation for Attune, Bill shared an example of a time when his lack of focus on others stifled his team from saying what was on their minds.
“After a meeting, one of my co-workers asked, ‘Do you think everyone agreed with that decision in the meeting?’ I said, ‘Yeah, they all said yes, we even voted.’
His response was an eye-opener. ‘Well, there were three people backing their managers that were so angry, they could hardly speak to you because you blew over them, and forced them to say yes.’
After some thought I knew he was right. I had to go back, tail between my legs, and say, ‘I’m really sorry. I guess I didn’t hear what you were really saying.’ That allowed me to be open to honest conversation. I learned I need to seek out honest feedback and surround myself with people who have diverse viewpoints.”
The Big Picture
Beyond being aware of yourself and listening closely to the people around you, you need to be able to see the big picture. As Bill realized, one way to do that is to surround yourself with very diverse people, people whose expertise, experience, and worldview complements your own.
Of course, such diversity only is useful if you pay attention to what those different voices say. In a conversation about systems thinking with my colleague Peter Senge, we talked about the importance of developing a culture of mutual respect and appreciation so knowledge can transfer. Competitive coworkers can squash an idea before it even gets off the ground. In a more respectful atmosphere, you and other team members may say, ‘Wow! That's really interesting. How do you do that?’
Think about your own situation.
It’s Your Choice
Leaders without skillful self-awareness, other focus, and attention to their larger situation leave themselves open to being like the Emperor striding down the street naked. With well-tuned triple focus, you can be sure that you and your organization avoid the pitfalls of groupthink.
Can the outrageous actions of one individual taint an entire industry?
By demonstrating total disregard for the patients that drug companies serve, pharmaceutical bad boy Martin Shkreli, former CEO of Turing Pharmaceuticals, is trying his hardest to destroy the reputation of the industry. Shkreli became America's most detested businessman when he jacked up prices on an AIDS drug 5,500 percent, from $13.50 a pill to $750. Meanwhile, a generic version of the drug is available for $1.00.
Shkreli proudly defended the price-gouging, unapologetically claiming his obligation was to serve investors. His extreme indifference to the patients whose lives are upended by his massive price hikes allowed the media to cast him as a "greed is good" Wall Street villain. His cavalier attitude may turn the full force of public opinion against the pharmaceutical industry, which is otherwise doing great work in treating and curing life-threatening diseases like cancer. Shkreli's timing is ironic since it comes just as a new generation of breakthrough drugs is working its way through the arduous pharmaceutical trial process.
Shkreli got his 15 minutes in the spotlight last Thursday, but perhaps not the way he wanted. His photo in his gray hoodie was on the front page of every newspaper as he was led away by FBI agents. He was arrested for creating a quasi-Ponzi scheme by using money fromRetrophin, a prior pharmaceutical company he started, to pay off losses in his hedge funds.
Meanwhile, Valeant, a legitimate company with a different business model, drew scrutiny for its own pricing by increasing prices 200 percent to 500 percent. As Cleveland Clinic CEO Toby Cosgrove said on CNBC last month, "We worked hard to reduce costs across the system by $10 million, and all our efforts got offset by price increases from Valeant totaling $11 million."
Two years ago Gilead caused an uproar when it announced its new Hepatitis C drug, Solvaldi, would cost $84,000 for a 12-week treatment, which put it out of reach of many patients. To its credit, Gilead spent billions to develop two breakthrough drugs, Solvaldi and a second Hepatitis C drug, Harvoni; together, they generated $14 billion in revenues in the first nine months of 2015.
The latest round of drug-price increases have stirred up a public furor. As a result, the U.S. Senate Committee on Aging held hearings on these enormous increases on Dec. 9, during which senators from both partiesdenounced the unconscionable price increases on decades-old drugs.
The pharmaceutical industry's rationale that it needs high prices to afford the research has been turned on its head by Valeant's business model of spending less than 3 percent on research & development (R&D) and paying less than 3 percent in taxes. Under CEO Mike Pearson's leadership, Valeant attracted many investors and increased its stock-market value to more than $90 billion by last August. Since then, serious operating problems and questions about its business practices have contributed to a 60 percent share- price decline.
Pearson, a former management consultant, says 3 percent is sufficient because Valeant R&D is much more efficient than the big pharmaceutical companies. As a longtime medical technology executive, I find this assertion preposterous, because no pharmaceutical company can create breakthrough drugs for just 3 percent of revenues. The most productive pharmaceutical companies such as Merck, Eli Lilly, and Roche, spend 17 percent to 24 percent on R&D. They have deep internal expertise and take on scientific risk, rather than just acquiring small drugs and marketing them.
As egregious as these price increases may be, they are just the tip of the iceberg. A much deeper problem threatens the financial viability of the Affordable Care Act (ACA), known as Obamacare. When President Obama's former chief of staff Rahm Emanuel was putting together ACA back in 2009, he negotiated deals with leading pharmaceutical companies. For their support of ACA and $70 billion in payments to the federal government, the pharmaceutical industry obtained legal guarantees that the government could not negotiate drug prices. Now the chickens are coming home to roost for the government and private health plans as pharma makers regularly increase prices 6 percent to 10 percent — and many go far higher.
The pharmaceutical industry faces twin threats, just as the new generation of promising life-saving drugs is in final development. First, the entire industry is at risk of being vilified for not caring about patients. Second, the industry's research-driven business model is under pressure from short-term investors arguing to abandon research in favor of simply acquiring drugs from start-ups. The pitfalls of price gouging are now being exposed, as are the consequences of simply buying drugs from others.
It's time for the leaders of the pharmaceutical industry to speak out forcefully against these practices, and reaffirm their primary commitment to patients and research. That's what Merck CEO Ken Frazier did at a recent Fortune conference, declaring, "Turing is not the market. This is a hedge-fund guy masquerading as a pharma exec." Frazier is following the mission established by founder George Merck, who declared, "Medicine is for the people. It is not for the profits."
All pharmaceutical companies should adopt that motto before the U.S. government, in response to public outrage, contravenes ACA to set strict price controls. Time is running short, and public patience is wearing thin.
This article was originally published on CNBC on 12/21/15.
From a young age I have understood the importance of giving. My father and mother instilled in me the practice of giving tithes, and I have stuck with that practice my entire life. Both of my parents were very involved in giving back – from local charities and organizations to the United Way and Rotary Club.
I believe that we must make a resolution to give back, however. It cannot be something that taught early but never executed. We must also be willing to donate our time in addition to our money.
Finally, it is critical that we prioritize the causes that we are truly passionate about. Otherwise, we may spread ourselves too thin between the innumerable amount of valiant causes that exist in the world.
Bottom line: Find the places you actually care about giving back to; then, commit yourself to contributing time, money and effort.
This was originally posted to Delta Sky Magazine.