From The Editor | August 23, 2019

Business Roundtable Reaffirms Capitalism – And The Supply Chain

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By Louis Garguilo, Chief Editor, Outsourced Pharma

Dollar puzzle

 

With the hoped-for media splash accomplished, 181 CEOs, including from Abbott, Allergan, Bayer, BMS, Johnson & Johnson, Mallinckrodt Pharmaceuticals, and Pfizer, published an updated “Statement on the Purpose of a Corporation” (reprinted in full below).

They’ve committed to lead their companies for the benefit of all stakeholders: “customers, employees, suppliers, communities and shareholders.”

The third of those five areas reads:

  • Dealing fairly and ethically with our suppliers. We are dedicated to serving as good partners to the other companies, large and small, that help us meet our missions.

What would that look like in practice in our drug development and manufacturing outsourcing world? Perhaps all Outsourced Pharma readers should contemplate – individually and more formally among colleagues.

How would this new “commitment to the supply chain" from a BMS or Pfizer (or any sponsor) play out at any particular CDMO?

I reached out to a few CDMOs for their impressions.

Perfect Public Relations

“I don’t think it’s a big shift. I think it’s an important restatement of what has been largely true for companies across the country,” said former governor of Michigan and previous Roundtable president, John Engler, during a CNBC interview, regarding his former organization’s new commitment.

Many would agree. My immediate thought when reading the principles (printed in full with each executive signature in The Wall Street Journal):

“Brilliant public relations.”

With this soft salvo, the narrative has been neatly reversed to promote individual companies as the very entities that facilitate the sought-after “economy that serves all Americans.”

We’ve acquired a widely disseminated reconfirmation of all the good capitalism (already) brings, using the same language that gets bantered around in critiques of free markets and enterprise. 

These signatory CEOs now have a new-society look-and-feel credo, on which to go forth, as Engler said in his CNBC interview, “and give positive speeches.” To talk about the great good of our great businesses in the U.S., since, as Engler also said, “We don’t seem to adequately or perhaps accurately teach economics in this country anymore.”

Johnson & Johnson Chairman and CEO Alex Gorsky – and current chair of the Business Roundtable Corporate Governance Committee – said:

“This new statement better reflects the way corporations can and should operate today. It affirms the essential role corporations can play in improving our society when CEOs are truly committed to meeting the needs of all stakeholders.”

Nicely sincere and sanguine, and so much aligned with the memes of our times.

One-Fifth Of The Constituency

Again, the third of the five CEO commitments is:

  • Dealing fairly and ethically with our suppliers. We are dedicated to serving as good partners to the other companies, large and small, that help us meet our missions.

Let that sink in.

First, we all hope it’s a reaffirmation … and not something new.

Either way, how should this “commitment to the supply chain" from a Pfizer or Biogen (or any sponsor) feel to a CDMO or any supply-chain partner?

Here’s David Enloe, President and CEO, Ajinomoto Bio-Pharma Services:

“Regarding dealing fairly and ethically with suppliers, and serving as good partners to suppliers large and small, I believe this has been happening the past several years in the biopharma market, and for a couple of reasons. 

“First, treating CDMOs as a trusted partner, and not “yet another supplier,” results in our being able to provide real value to clients’ supply chains. We aren’t ‘just making stuff for them.’ Clients realize there are places along their value chains where we are the subject matter experts – not them. Allowing us to serve that role is smart business.

“The second reason this has been happening in our space, honestly speaking, is more simply a coefficient of supply and demand. We have far more of a say in who we are going to work with when demand is so robust. Our commitments to ever-increasing regulatory requirements, as well as to our people, have created a paradigm shift where actually, the ‘customer isn’t always right.’ If we don’t agree with the way a quality issue or a patient safety issue is being handled, we have to speak up for ourselves.”

Enloe then nails the narrative with this:

“Frankly speaking, we didn’t need 181 CEOs to tell us it’s smart business for biopharmaceutical sponsors to deal fairly and ethically with their CDMOs. We knew that already.”

The question, though, is how many drug sponsors know it. Perhaps the Roundtable communiqué improves the odds they do.

Fabrice Cornille, Executive Director, Global Business & Strategic Development, Flamma SpA, who reports directly to CEO Gian Paolo Negrisoli, provided this feedback:

“We are family-owned and family-run since 1950. Focusing on building long-term relationships is part of our DNA. We hope this Roundtable statement means pharmaceutical customers see CDMOs as an extension of their CMC activities, and not just a simple subcontractor. When customers are fully aligned, outstanding results occur, business grows, and trust is a consequence.

“We can obtain a sustainable model that allows us to properly reward our employees and our suppliers, and invest in the customer and other groups. Reliability in all aspects is key to any business and for any partner, large or small. This aspect is perhaps different from current practice and attitude.”

Steve Klosk, President & CEO, Cambrex, shared these thoughts:

“We recently concluded an extensive study that charted the last 40 years of the outsourcing industry, from a short-term focus for capacity and difficult-to-handle technologies of just a single step, to the evolution of full-scale drug substance and drug product supply, and hence the introduction of GMP to the CDMOs. 

“The exodus to the East driven by cost targets was then tracked, followed by the return to Western suppliers and strategic relationships and what that demands. Part of the study involved asking industry experts what to expect of CDMOs in the next 5 years.  The results were characterized in 4 main themes – technology, customer focus, data and new markets.

“With regard to technology, it is clear CDMOs must invest ahead of the curve for the next wave of molecules coming down the pipeline. Pharmaceutical companies can help support this process by offering their CDMOs transparency in the forecasting process, as well as being open to co-investment strategies.”

So it was encouraging to read the uncommon headlines on our leading CEOs, to skim the reactive social-media chatter, and see serious capitalists fighting for the only economic system that rewards all constituents and society so generously.

And it was nice to have those CEOs particularly mention the importance of the supply chain.

 


 

Statement on the Purpose of a Corporation

Americans deserve an economy that allows each person to succeed through hard work and creativity and to lead a life of meaning and dignity. We believe the free-market system is the best means of generating good jobs, a strong and sustainable economy, innovation, a healthy environment and economic opportunity for all.

Businesses play a vital role in the economy by creating jobs, fostering innovation and providing essential goods and services. Businesses make and sell consumer products; manufacture equipment and vehicles; support the national defense; grow and produce food; provide health care; generate and deliver energy; and offer financial, communications and other services that underpin economic growth.

While each of our individual companies serves its own corporate purpose, we share a fundamental commitment to all of our stakeholders. We commit to:

  • Delivering value to our customers. We will further the tradition of American companies leading the way in meeting or exceeding customer expectations.
  • Investing in our employees. This starts with compensating them fairly and providing important benefits. It also includes supporting them through training and education that help develop new skills for a rapidly changing world. We foster diversity and inclusion, dignity and respect.
  • Dealing fairly and ethically with our suppliers. We are dedicated to serving as good partners to the other companies, large and small, that help us meet our missions.
  • Supporting the communities in which we work. We respect the people in our communities and protect the environment by embracing sustainable practices across our businesses.
  • Generating long-term value for shareholders, who provide the capital that allows companies to invest, grow and innovate. We are committed to transparency and effective engagement with shareholders.

Each of our stakeholders is essential. We commit to deliver value to all of them, for the future success of our companies, our communities and our country.

https://www.businessroundtable.org/business-roundtable-redefines-the-purpose-of-a-corporation-to-promote-an-economy-that-serves-all-americans