Temperatures are finally dropping here in New York at The Week That Was HQ, but we’re still seeing highs and lows all over the map.
• From the “science is awesome” files: doctors in Europe used a gene therapy to save a child suffering from junctional epidermolysis bullosa, a genetic disease that destroyed most of his skin.
• Hospitals are feeling the squeeze, as major health systems around the country are reporting significant declines in operating margins. In FY 2016, Partners HealthCare in New England lost $108 million while MD Anderson—the largest cancer center in the US—lost $266 million. Leaders are pinpointing increased expenses, as well as constraints by government and payers as the source of their economic woes.
• Speaking at an FTC Workshop this week, Commissioner Scott Gottlieb touted new guidance for a single Drug Master File (DMF) for shared system REMS submissions, which he hopes will “end the shenanigans” of branded manufacturers using REMS to delay generic manufacturers’ access to drugs for bioequivalence or bioavailability studies. Gottlieb used the FTC event to reinforce his support for expediting generic competition.
We’re just getting started, so hold on tight to your Starbucks holiday cup (1997 – 2017 designs below) and read on for more of last week’s thermometer breakers.
► CLOTHES THAT MAKE A STATEMENT: FASHION CHAIN ZARA UNDER FIRE FROM HIDDEN MESSAGES
“I made this item you’re going to buy, but I didn’t get paid for it.”
This phrase is popping up on garments sold by popular retailer Zara. In July 2016, the Bravo Tekstil factory in Istanbul—which produced clothing under European labels like Zara, Mango, and Next—unexpectedly shut its doors after its owner disappeared with 155 workers’ pay. After waiting for over a year for compensation, 140 of those employees started a Change.org petition demanding three months unpaid back pay and severance; which amounts to 0.01% of Zara’s annual sales. When the petition appeared, so did the workers’ notes, suggesting that they started attaching the messages to merchandise inside Istanbul-based Zara retail stores. Zara has not released an official statement; Zara’s parent company Inditex stated that they fulfilled their financial obligation to the Bravo factory but have set up a “hardship fund” to cover unpaid wages, notice indemnity, unused vacation, and severance payments.
► OUR TAKE
This situation is a classic example of finger-pointing: between Inditex, Zara, the factory and the factory owner, no one has taken responsibility, leaving the workers to fend for themselves. While Inditex was financially responsible for the factory worker’s payments, Zara is the one with the brand name. When stories like this hit, a reactive approach rarely works. Zara sitting on its hands will only serve to diminish its reputation among consumers and make the brand target for activism. In this highly populist environment, companies need to be proactive, protect their workers, and show they are being good corporate citizens. And blaming third parties is no excuse. Your brand will be judged by the company you keep. Your issues plan should include scenarios related to challenges with suppliers, vendors, and other business partners so that your company can take quick action to reassure customers, protect employees, and preserve its own reputation in times of turmoil.
► HEALTHCARE LINKS DEMOCRATS' WINS IN STATE-BASED ELECTIONS
Last week, Democrats had their most successful non-presidential Election Day since 2006. A key issue in many of these races? Healthcare.
• Maine made headlines as it rejected the position of Republican Governor Paul LePage by voting to expand Medicaid. Experts estimate that about 70,000 Mainers could gain health coverage through the expansion.
• Voters in Ohio rejected a ballot initiate that would cap state-run health program spending on prescription drugs.
• Based on exit polls, healthcare was the No. 1 issue for the majority of Virginia voters, 78% of whom cast a vote for Democratic candidate Ralph Northam.
► OUR TAKE
Pundits on both sides are analyzing these election results and what they may mean for 2018. While it’s too early to tell if Dem victories are directly related to the GOP’s unsuccessful efforts to repeal and replace the Affordable Care Act, they do suggest that voters aren’t ready to limit insurance coverage or access to medicines (despite public outcries about costs). What does this pro-access, anti-cost environment mean for biopharmaceutical companies? Likely more of the same: scrutiny on drug pricing and the Orphan Drug tax credit, and possibly renewed discussions around drug importation. In other words, the national debate on healthcare—and increasing efforts to curb spending at the state level—will continue to be a hot-button issue in the coming year.
Until next week,
- the Reputation & Risk Management Practice
