Allergan CEO Tries A New Approach: Ethics

Big Pharma has been in the news a lot lately. But for all the wrong reasons. Brent Saunders, CEO of Allergan, is looking to change all that. And the market likes it…

Allergan New Approach: Ethics

After the recent news of Mylan’s 500 percent price hike of the EpiPen, not to mention the ensuing fallout and negative attention placed on Big Pharma, Allergan plc (AGN) CEO Brent Saunders is looking to change the public’s perception. And so far it’s working. On Tuesday, Allergan pledged to put limits on the size (and frequency) of drug price hikes.

In a bold move customers are applauding, Saunders announced in a blog post that the company would only raise prices once per year, and those rate hikes will only be single digit percentages. This comes after Mylan came under fire from the public and the senate for continuously raising rates on the life saving EpiPen by as much as 15 percent, and as often as every other quarter from 2013-2016.

Allergan will also not raise rates on drugs which are about to lose patent protection – a standard practice by the drug industry to squeeze out extra profits before being undercut by generic drugs.

Saunders says he's out to prove that it's possible to grow the business and develop new drugs, without gouging consumers.

“We are drawing a line in the sand and saying we can be one of the fastest-growing companies in our industry, we can invest in R&D and innovation, and we can have a social contract where we act responsibly and make our drugs accessible to people and patients,” he was quoted as saying in a recent interview.

Now, while Saunders is being applauded for throwing down a pricing challenge to the rest of the pharma industry, he’s also protecting his company and his shareholders. After Mylan’s EpiPen disaster, Big Pharma has come under the scrutiny of not just the public and Congress, but both presidential candidates. Hillary Clinton, currently leading in polls, has proposed steps to promote competition for generic drugs, importation of drugs, and potential penalties for companies who price gouge. By self-policing his company, Saunders is giving Allergan a head start, and creating a healthy buffer between Allergan and future legislation and penalties.

Wonder how ethics can give a big impact in the corporate world? Watch this video from Corporate Secretary about Pfizer's ethical corporate culture!

Shareholders seem to agree. As of close of bell Tuesday, Allergan’s shares rose 1.34%.

Allergan is creating a new path for pharma. A path which will be ethical – and profitable. Look for Allergan shares to continue to rise.

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