Could ‘Trust’ Be The Ultimate Competitive Advantage?

In the high-stakes world of the pharmaceutical industry, where healthcare, innovation and competition coalesce, companies will always be seeking an edge. But what if the most powerful competitive advantage isn’t a new drug or a cutting-edge technology, but something far more fundamental?

What’s Your “Moat”? A Lesson from Warren Buffett

Legendary investor Warren Buffett emphasizes the importance of a durable “moat” – an enduring competitive advantage that protects a company’s ability to produce profits. He famously stated, “The key to investing is determining the competitive advantage of any given company and, above all, the durability of that advantage. The companies that have wide, sustainable “moats” around them are the ones that deliver exceptional rewards to investors.”

In the pharmaceutical world, traditional moats include patents, robust pipelines, regulatory prowess, and manufacturing excellence. These are undeniably vital. But perhaps there’s a deeper, more powerful, yet much more subtle moat. One that underpins and amplifies all the others, acting almost as a ‘force multiplier’. Perhaps that moat is trust.

A Rising Tide Lifts All Ships

In business, trust acts as a rising tide, lifting all ships (i.e. individual departments / functions and Affiliates / Clusters), synthesising and amplifying the collective potential of the entire organization.

When trust permeates a company’s DNA, everything operates more effortlessly:

• Efficiency Soars: Decisions are made faster, processes are streamlined, and friction is swept away.
• Costs Reduce: The need for constant oversight and second-guessing, often fueled by skepticism, diminishes, freeing up resources.
• Relationships Flourish: Trust fosters genuine collaboration amongst employees and with regulators, payers, healthcare providers and other external stakeholders.

Yet the concept of trust is not something theoretical or intangible. A high-trust environment can yield concrete benefits across the pharma value chain:

• Clinical Trial Participation: Trust in pharmaceutical companies and research institutions is a significant factor influencing individuals’ willingness to participate in clinical trials. A systematic review of clinical trial results found that one of the barriers to clinical trial enrolment was due to patients not trusting the research team.
• Improved Commercial Outcomes: Payers value reliability in the efficacy and quality of products, continuity of supply, and fairness in pricing. Trust, therefore, can lead to more favourable formulary decisions and reimbursement negotiations.
• Increased Patient Uptake: Healthcare providers rely on accurate data, scientific exchange and medical information (as well as ethical marketing and promotion activities) when making prescribing decisions. Trust, then, is essential to helping get the right products to the right patients.
• A More Engaged Workforce: Internal trust fosters a culture of innovation and a shared commitment to ethical conduct, empowering employees and enabling growth. A study by the Human Capital Institute found that organizations with high levels of trust benefit from a staggering 50% lower employee turnover than those with low levels of trust.

Trust: Your Strategic Reserve for Navigating Crises

Trust isn’t merely a facilitator of opportunities; it’s also a vital strategic reserve that can be drawn upon to navigate crises effectively. When stakeholders, including regulators and enforcement agencies, have faith in your organization’s fundamental integrity, they’re more likely to be more understanding and potentially extend the benefit of the doubt during challenging times.

Moreover, a crisis can, paradoxically, strengthen trust when handled with transparency and accountability. This demonstrates resilience and a commitment to doing what’s right. The recent example of Kiromic BioPharma illustrates this point.

Kiromic BioPharma: A Case Study in Trust-Based Crisis Management

When faced with whistleblower allegations regarding undisclosed FDA clinical holds during a capital raise, Kiromic BioPharma acted decisively and transparently:

1. Immediate Independent Investigation: A special committee of independent directors, supported by external counsel, was formed quickly.
2. Proactive Disclosure: The company voluntarily self-reported the issues to the SEC, demonstrating accountability.
3. Comprehensive Remediation: Kiromic appointed an interim CEO with strong compliance credentials, established a disclosure committee, and added independent board members, signaling a commitment to systemic change.

The outcome? While the CEO and CFO faced SEC charges, Kiromic itself avoided fines, penalties and sanctions by demonstrating a commitment to remediation and accountability. By demonstrating ethical conduct, Kiromic not only navigated a critical period but also rebuilt, and potentially even strengthened, trust with regulators and investors.

Compliance & Ethics Leaders: From Gatekeepers to Trust Architects

Traditionally, Compliance & Ethics (C&E) teams have often been perceived as the organization’s internal gatekeepers. It’s time to transform that narrative. C&E professionals are uniquely positioned to become the architects of organizational trust, helping to build significant value through integrity.

This expanded role could entail:

• Cultivating a Culture of Trust: Moving beyond mere rule enforcement to fostering an environment where ethical behavior is the norm, actively recognized, and rewarded.
• Actively Championing and Showcasing Trust: Serving as advisors to the business, demonstrating how ethical conduct strengthens relationships with regulators, payers, providers, and patients and ultimately drives financial success.
• “Trust, But Verify”: Maintaining robust systems and controls that measure and reinforce trust without stifling innovation or agility. This might involve using advanced analytics to be smarter about sampling a smaller, but higher risk sub-population of transactions and interactions to monitor. Remember, being trusting doesn’t mean being naive, nor does it forgive lax standards!

Trust: The Foundation for a Sustainable Future in Pharma and Biotech

Trust offers companies that are willing to proactively and intentionally build it the promise of a deep and durable competitive advantage. Trust is not merely a “nice-to-have” but the very foundation upon which sustainable success is built. And the business case is clear: A study by Willis Towers Watson found that high-trust organizations outperform low-trust organizations in total return to shareholders by 286%.

C&E leaders have a critical role to play, and the journey from compliance gatekeepers to trust architects is a critical step. This means fostering a culture where ethical conduct is ingrained, educating and encouraging leadership teams and employees, and implementing thoughtful systems that reinforce trust through verification.

In so doing, they can grasp the opportunity to shape not just a more compliant organization, but a more resilient, respected, and successful one.