As the mother of a young child with a life-threatening nut and sesame allergy, it’s hard to remain objective and impartial when it comes to a company increasing the price of EpiPen, the life-saving allergy injector, by more than 400 percent since 2007.
However, the latest example of a company facing a public backlash, political pressure and social media storm due to its business practices illustrates the importance of having the necessary resources in place to mitigate the effects of a reputational risk crisis if and when it occurs.
As we’ve noted before in an earlier blog post, reputational risk is among the most challenging categories of risk to manage. A survey from ACE Group found that 81 percent of companies view reputation as their most significant asset—and most of them admit that they struggle to protect it.
The survey suggests that organizations need a clear framework for managing reputational risk that reduces the potential for crises, taking a multi-disciplinary approach that involves the CEO, PR specialists and other business leaders.
Mylan, the company at the center of the EpiPen controversy, has moved quickly to respond to the angry mob and to stem the drop in its share price which has so far lost investors $3 billion.
Yesterday, Mylan’s CEO Heather Bresch went on CNBC to announce the company was increasing financial assistance to patients to offset out-of-pocket costs of the EpiPen.
However, as The New York Times reports, Mylan did not say it would lower the list price — which has risen to about $600 for a pack of two EpiPens, from about $100 when Mylan acquired the product in 2007.
By the way, actress Sarah Jessica Parker also announced she is ending her relationship with Mylan after the pricing debacle broke.
Wherever you stand in this debate, the reality is the pharmaceutical industry is for-profit, as noted by Ms Bresch, and in the absence of a competitor or a generic, EpiPen is the latest example of a company trying to maximize profit.
Reputational risk is not covered by a standard business insurance policy, but companies can purchase coverage via a stand-alone policy which typically would pay fees for professional crisis management and communications services; media spending and production costs; some legal fees; other crisis response and campaign costs including research, events, social media and directly associated costs.
Newer reputation insurance products have also been developed that would cover a company’s financial losses due to reputational and brand damages.
In the mean time, in a climate of increased public, regulatory and investor scrutiny, the Mylan case is a good example of why companies need to be more proactive than ever to respond to challenges before they do serious damage to their brand and reputation.