STATE OF THE U.S. BIOPHARMACEUTICAL INDUSTRY 2013:EXECUTIVE SUMMARY

APCO Worldwide and its research consultancy, APCO Insight®, developed the Return on Reputation (ROR) Indicator to better understand and address key stakeholders’ expectations in order to protect, enhance and track reputation over time, as well as to quantify the impact on the industry and its individual companies. At the core of the research is a proprietary model that isolates the key drivers that define the reputation of biopharmaceutical companies. The model was developed through comprehensive primary research among the industry’s key stakeholders: health care opinion leaders, health care providers (HCPs), policy leaders and payers.

The ROR study is a comprehensive evaluation of the biopharmaceutical industry’s reputation, measuring:

Safety & Efficacy

• product quality• product transparency• product safety• pharmacovigilance• research transparency• manufacturing• counterfeit

Public Health Leadership

• chronic disease management• disease awareness• prevention• drug adherence• comparative effectiveness researchResponsible Business Operations

• responsible marketing• environmental responsibility• governance• executive engagement

Government Relations

• government cooperation• advocacy

Innovation

• sustainable innovation• bold advancements

Economic Impact

• financial strength• employee investment• job creation

Social Responsibility

• philanthropy• patient assistance• reliability

Pricing

• affordability• pricing transparency

• ImpactScores:The issues that are most important in shaping the industry’s reputation

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• OutcomesAnalysis:How reputation can impact the industry’s operating environment

The 2013 ROR study was conducted between November 22, 2013, and January 2, 2014, using mixed-mode (telephone and online) data collection. Interviews lasted about 20 minutes among health care opinion leaders (n=750), HCPs (n=300), policy leaders (n=100) and payers (n=50).

“APCO’s Return on Reputation Indicator provides companies

with direction to support business strategies at the

highest level all the way down to the tactics. To me, the

most interesting information is learning what matters most to key stakeholders and then applying this knowledge to create strategic, targeted

reputation programs. Through this process, APCO helped

us enhance our organization’s reputation on multiple levels.”

Phyllis Piano former vice president,

corporate communications and philanthropy at a major

biotechnology company senior counselor,

APCO International Advisory Council

“The ROR Indicator shows that the reputation of

biopharmaceutical companies has a measurable impact in improving the business environment, including

increasing sales and market capitalization. The study

provides a clear roadmap for how the industry can effectively

enhance its most valuable asset. Addressing public health

concerns is one of several opportunities, the research shows, that can both help

improve reputation and drive positive business outcomes.”

Bryan Dumont president

APCO Insight

• ReputationModel:Expectations stakeholders have for the biopharmaceutical industry

• PerformanceScores: How the industry is seen in meeting those expectations

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The foundation of APCO’s ROR Indicator is a robust model that measures the extent to which stakeholders believe the industry – and its individual companies – is meeting its unique and specific expectations. The model is based on more than 10 years of extensive qualitative and quantitative research in the sector that identifies the drivers that define the “reputation DNA” of the biopharmaceutical industry.

The model is comprised of 54 stakeholder-defined attributes. Correlations between these attributes are organized into 28 reputation drivers (first-order factors). Additionally, relationships between the reputation drivers reveal eight broader dimensions of reputation (listed alphabetically): Economic Impact, Government Relations, Innovation, Pricing, Public Health Leadership,

Responsible Business Operations, Safety and Efficacy, and Social Responsibility.

The model retains its ability for year-to-year comparison by reflecting changing priorities and evaluations of the biopharmaceutical industry according to key stakeholder groups.

Reputation Model

Safety & Efficacy

• product quality• product transparency• product safety• pharmacovigilance• research transparency• manufacturing• counterfeit

Public Health Leadership

• chronic disease management• disease awareness• prevention• drug adherence• comparative effectiveness researchResponsible Business Operations

• responsible marketing• environmental responsibility• governance• executive engagement

Government Relations

• government cooperation• advocacy

Innovation

• sustainable innovation• bold advancements

Economic Impact

• financial strength• employee investment• job creation

Social Responsibility

• philanthropy• patient assistance• reliability

Pricing

• affordability• pricing transparency

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The ROR Reputation Index score is a reliable measure of the industry’s overall reputation that takes into account both the performance scores and the impact scores of the factors.

The U.S. biopharmaceutical industry’s Reputation Index score remains stable from 2012, with no statistically significant changes among key stakeholder groups; however, a declining trend may be emerging among Policy Leaders as a gradual, directional decline is noticeable.

Reputation Index Score

56.7 56.4

61.3 60.5

55.6

54.7

62.4

59.3

57.2

59.3

63.9

62.3

59.6

57.6 58.6

55.3

73.3

2010 2011 2012 2013

Rep

utat

ion

Inde

x

Blue arrows indicate significance from year to year

0

100PAYERS

HCPs

OPINIONLEADERS

POLICYLEADERS

TOTAL

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The Reputation Matrix maps each of the 28 reputation drivers by their relative impact and performance across audiences. The matrix provides a roadmap for prioritizing key industry initiatives and communication efforts, as well as a quantitative view on the extent to which these efforts actually move the needle on reputation.

The industry’s core assets continue to be defined by the functional attributes of its products (ProductSafety,ManufacturingandProductTransparency). However, a demand to address ResearchTransparencyremains a vulnerability across all audiences.

Stable, strong performance on Innovation drivers, coupled with high impact over time, continues to reinforce the essential nature of these expectations in defining the industry’s value.

PublicHealthLeadership remains a strength for the industry, though its impact on overall reputation is offset by other expectations. In particular, addressing ChronicDiseaseManagementand DiseaseAwareness can boost the industry’s reputation.

Concerns about ResponsibleMarketingpersist – especially marketing to physicians – and elevate the importance of ResponsibleBusinessOperations.

Though stable alignment year after year, GovernmentRelations remains a vulnerability for the industry. Advocacy (use of political influence) continues to weigh down the industry’s reputation – more so than GovernmentCooperation, which intensified in impact though ratings remain neutral.

A broad notion about the industry’s role in access and availability of medicines, SocialResponsibility, emerges as a critical weakness among PolicyLeadersandPayers. Generally, stable placement suggests the industry’s commitment has not been clarified.

Reputation Matrix

governance[3.9%, 5.42]

ALL AUDIENCES | REPUTATION INDEX = 60.5

Core AssetsKey Vulnerabilities

Relative Performance

Rela

tive

Impa

ct

philanthropy[3.8%, 5.83]

patientassistance

[3.7%, 5.77]

comparativeeffectiveness

research[3.5%, 5.98]

reliability[3.2%, 5.95]

pharmacovigilance[3.3%, 6.23]

producttransparency[3.7%, 6.40]

employeeinvestment[3.7%, 6.67]

diseaseawareness[3.7%, 6.23]

sustainable innovation[4.1%, 6.52]

product safety[4.2%, 6.63]

government cooperation[4.2%, 6.24]

boldadvancements[4.3%, 6.27]

manufacturing[3.8%, 6.72]

product quality[3.1%, 6.90]prevention

[2.9%, 6.52]

jobcreation[2.8%, 6.50]

drug adherence[2.3%, 6.98]

counterfeit[1.5%, 6.69]

financial strength[0.7%, 6.94]

chronic diseasemanagement

[4.3%, 6.17]

responsiblemarketing

[4.6%, 5.99]

research transparency[4.4%, 5.90]

environmental responsibility[4.3%, 6.04]

advocacy[4.7%, 5.33]

affordability[3.9%, 4.49]

pricingtransparency

[3.8%, 4.65] executiveengagement

[3.6%, 5.21]

Reputation Index = 59.3

OpinionLeaders: Diffused alignment signals uncertain view of the industry

o Performanceratingshavedroppedsignificantlyfor most reputation drivers.

o Increasedemphasisonpartnershiprelatedtopublichealth. Importance of Advocacy remains unchanged – now coupled with a directional increase in salience of Government Cooperation – intensifies Government Relations expectations.

o Criticaltodemonstrateroleinsolvinghealthchallenges. Innovation and Public Health Leadership expectations lead – with undistinguished performance on critical Chronic Disease Management and Bold Advancements – which reinforces the need to demonstrate its value beyond product delivery.

Reputation Index = 62.3

HealthCareProviders: Strong alignment reveals Advocacy as clear vulnerability

o Performanceratingsgenerallyremainedstable, with significant declines on Product Safety, Product Transparency, Sustainable Innovation and Government Cooperation; however, tracking shows few signs of growth among HCPs.

o ImpactofSafetyandEfficacydriversincreased. Though several Safety and Efficacy drivers have increased in importance, many – Product Safety in particular – are experiencing deterioration in performance ratings. Still, this is a core strength compared to other drivers.

o Focusonthefuture. Innovation remains high impact – with an eye towards sustainability. At the same time, salience of Comparative Effectiveness Research surged, though impact of Public Health Leadership remains generally stable with impact at midline.

Reputation Index = 55.3

PolicyLeaders: Weak alignment presents clear opportunities to strengthen image

o Performanceremainsstableyear-to-year – though half the scores are at all-time directional lows. Noteworthy consistency on Public Health Leadership and Responsible Business Operations (except drop on Responsible Marketing).

o HeightenedexpectationsforSocialResponsibility. While performance remains stable on Executive Engagement, impact has directionally declined, pushing up Social Responsibility expectations (Patient Assistance, Philanthropy and Reliability).

o FluctuationofPricingexpectations is evidence of the ability to change industry-wide conversation. Though raw impact scores remain stable, the relative impact is greater this year (similar to 2011) coupled with directional decline on performance scores.

Reputation Index = 73.3

Payers:High impact drivers converge near midline – opportunity to define

o Innovationcoretovalueproposition. Sustainable Innovation leads as a high impact strength. At the same time, Chronic Disease Management, Disease Awareness and Comparative Effectiveness Research also dominate Payer expectations – sending a message they desire the industry to address health challenges with an eye towards the long-term.

o HeightenedexpectationsforExecutiveEngagement. It is the second leading reputation driver, yet performance lags. Though, related Responsible Marketing is considered an asset.

o Post-marketsurveillanceamust. While all Safety and Efficacy drivers are strengths for Payers, Pharmacovigilance is the only driver within the category that exerts meaningful impact.

Key Stakeholder Insights

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Measuring the Return on Reputation

Whatimpactdoesreputationhaveondrivingfavorablepolicy outcomesonspecificpolicyandregulatoryproposals?

A 10-point increase in the Biopharmaceutical Industry Reputation Index corresponds to an average 6percentagepointincrease in the proportion of policy-makers who are aligned with the industry’s position on specific policy proposals (anywhere from a 1.4 percentage point increase to a 13.8 percentage point increase, depending on the policy proposal).

Whatimpactdoesreputationhaveondrivingsupport or opposition?

A 10-point increase in the Biopharmaceutical Industry Reputation Index will lead to approximately 7.2millionadditional“industry advocates” who actively speak out in support of the industry.

WhatimpactdoesreputationhaveonleadingAmericanstogivetheindustrythebenefit of the doubt whencrisesemerge?

A 5-point increase in the Biopharmaceutical Industry Reputation Index will lead to approximately 5.6millionadditional“defenders” (people who will give the industry the benefit of the doubt on litigation facing the industry).

Based on a sophisticated statistical analysis, the ROR Indicator reveals that reputation can drive favorable policy outcomes, increase community activism and support the benefit of the doubt when crises emerge. Moreover, at the individual company level, consumer behavior, prescribing habits and financial value can be predicted.

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APCO Worldwide and its research consultancy, APCO Insight, developed the ROR Indicator, a robust measurement tool that takes an integrated approach to reputation management. The ROR Indicator study for the biopharmaceutical industry offers a holistic view of reputation across key stakeholders.

The complete findings for the biopharmaceutical industry, as well as an interactive display of the data, can be viewed at www.rorindicator.com.

Detailed, company-specific findings from the latest tracking phase of this groundbreaking research model are now available to member companies. In the most recent study, more than 20 of the

top biopharmaceutical companies operating in the United States were evaluated and, for many companies, tracking data is also available. Members receive a complete report of company-specific

findings, including an in-depth view of the company’s reputation ratings relative to the industry; a quantitative assessment of the key reputation strengths and opportunities for protecting and

enhancing reputation among each audience; and the impact of reputation on key business outcomes.

To find out more about the ROR Indicator study, please contact: Chrystine Zacherau, health care research director, APCO Worldwide,

at +1.202.778.1029 or czacherau@apcoworldwide.com.