GlaxoSmithKline getting high on giving

GSK is pumping £3.5m of its profits back into African healthcare. Could it be the start of a trend?

by Dave Waller
Last Updated: 04 Jun 2013
The pharma giant has announced that 20% of last year’s profit from least developed countries will be reinvested in healthcare in those areas – to pay for the recruitment, training and retention of healthcare workers.

It’s part of CEO Andrew Witty’s plan to re-position GSK, the world’s second-largest pharma company, as an outfit with a philanthropic core – especially in Africa.  'I want people outside this company to be as proud of what we do as those inside it are,’ Witty told MT as he worked on his grand plan back in March 2010.

It’s a big deal for Big Pharma, as the old model is certainly showing signs of ill-health: take the challenge of patent expiry, which cost GSK $4.5bn from 2007-2010 in the US alone. And it has some hefty damage to repair in the developing world: in a doomed effort to protect prices in the west, GSK was one of 39 multinational drug firms that began legal action against the South African government to prevent it importing cheap drugs on the 'grey market'. The industry wound up tarred as heartless, profiteering and immoral.

You have to give Witty respect for his foresight. Since the South Africa debacle, the Glaxo boss has taken several other steps towards a healthier treatment of Africa, cutting the price of key drugs like Aids treatment Combivir by up to 75% in these markets. And Glaxo has been working with Pfizer on an Aids joint venture, Viiv Healthcare, pooling their knowledge instead of squabbling over who owns what.

This long-term cash commitment shows it’s prepared to put its money where its pill-hole is: It’s not a huge chunk of cash by industry standards, as Witty himself admits – but it will go a long way in Africa, and the pot is growing (up from £2.8m last year). Having begun work with smaller NGOs in each of the 37 LDCs where it operates, GSK now plans to direct the cash through three major players: Save the Children, Amref and Care International UK. The theory is this will lead to a ‘more efficient and more industrialised way of doing things,’ Witty told the Guardian.

Yet even this plan isn’t without a heavy dose of self-service: Africa is a growing market that is getting richer and in greater need of drugs, as are China and India. GSK needs to be well-regarded there. But there’s a price issue: educated professionals there will have money to pay for their rising healthcare expectations, but not at the kind of prices Big Pharma currently likes to charge. So the industry will have to find new ways to cater to the pockets of these new customers.

‘What you're seeing now is an almost entirely new generation of CEOs who aren't wedded to the past, and they are all pushing hard on strategy,’ Witty told MT. ‘Over the next five years, we'll see the characteristics of the old model break up and the emergence of something new.' That something new seems to involve an enticing blend of profit-making and philanthropy. Maybe this is the shot in the arm the ailing sector needs…

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