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Has Trump's power over pharma come to an end after Charlottesville?

Published on 31/08/17 at 10:21am

In a shock move that was to have deeply resonant consequences, MSD Chairman and Chief Executive Officer Kenneth Frazier announced his resignation from Donald Trump’s American Manufacturing Council. The decision was made in the wake of the violent clashes in Charlottesville, Virginia, and more importantly, the President’s dubious failure to adequately condemn them.

The violence broke out at the ‘Unite the right’ rally on Saturday 12 August, as white supremacist and neo-Nazi groups clashed with anti-fascist counter-protestors. A state of emergency was called, and the conflict culminated as a right-wing protestor rammed his car into a crowd of counter-protestors, leading to the death of 32-year-old Heather Heyer and leaving nineteen others injured.

In his statements on the events afterward, President Trump drew heavy fire from Republicans and Democrats alike for failing to directly condemn the white supremacist groups involved in the violence – something which has landed him in hot water in the past – instead saying that “many sides” were to blame.

On this basis, Frazier released a statement on his decision:

“I am resigning from the President’s American Manufacturing Council. Our country’s strength stems from its diversity and the contributions made by men and women of different faiths, races, sexual orientations and political beliefs. America’s leaders must honour our fundamental values by clearly rejecting expressions of hatred, bigotry and group supremacy, which run counter to the American ideal that all people are created equal. As CEO of MSD and as a matter of personal conscience, I feel a responsibility to take a stand against intolerance and extremism.”

In typical fashion, not even an hour had passed before Trump made an attempt to point-score and distract from his own scandal with a personal attack on Frazier via Twitter: “Now that Ken Frazier of Merck Pharma has resigned from President’s Manufacturing Council, he will have more time to LOWER RIPOFF DRUG PRICES!”

Frazier’s decision was not unprecedented, as leaders in other industries have also felt need to distance themselves from the president. Tesla CEO Elon Musk and Walt Disney CEO Robert Iger took a stance to withdraw from the president’s Strategic and Policy Forum in June following Trump’s decision to pull the US from the Paris climate accord.

Spurred by Frazier’s bold move, a further two executive members of the council then also announced their resignation a day later: Kevin Plank, CEO of sportswear firm Under Armour, and Brin Krzanich, CEO of Intel. The latter explained his own exit in a statement: “I resigned to call attention to the serious harm our divided political climate is causing to critical issues, including the serious need to address the decline of American manufacturing. Politics and political agendas have side-lined the important mission of rebuilding America’s manufacturing base.”

He continued: “My request – my plea – to everyone involved in our political system is this: set scoring political points aside and focus on what is best for the nation as a whole. The current environment must change, or else our nation will become a shadow of what it once was and what it still can and should be.”

John Maraganore, CEO of Alnylam Pharmaceuticals, added his voice to the show of support for MSD’s CEO by tweeting that he was “proud to stand with leaders like Ken Frazier.”

Bowing to serious public pressure, President Trump clarified his statements two days later on the Monday, specifically calling out the extremist groups involved: “Racism is evil, and those who cause violence in its name are criminals and thugs, including KKK, neo-Nazis, white supremacists, and other hate groups are repugnant to everything we hold dear as Americans. Those who spread violence in the name of bigotry strike at the very core of America.”

Though delivered reluctantly, the statement seemed to somewhat defuse the situation. However, just one day later, Trump bizarrely backtracked, reverting to his previous statement and again equating the counter-protestors with the extreme-right groups they were protesting against. This is when things began to snowball, as three more CEOs announced their resignations in light of the President’s behaviour.

At the centre of a storm of controversy and with support from industry and the public quickly waning, Trump attempted to end the debacle by dismantling the manufacturing council and its sister incarnation, the Strategy and Policy Forum, with a tweet: “Rather than putting pressure on the businesspeople of the Manufacturing Council & Strategy & Policy Forum, I am ending both. Thank you all!”

Less than 15 minutes later, the only other pharma representative on the already defunct board, J&J’s CEO, Alex Gorsky, announced his resignation, despite the previous statement that he wouldn’t in order to “represent the values of Our Credo as crucial public policy is discussed and developed”.

In a statement outlining his decision, Gorsky said: “Johnson & Johnson has a responsibility to remain engaged as important policy decisions are made. That hasn't changed. The President’s most recent statements equating those who are motivated by race-based hate with those who stand up against hatred is unacceptable and has changed our decision to participate in the White House Manufacturing Advisory Council. We will continue to support, advocate and champion policies and programmes that make this country and the world healthier, stronger and more united.”

The whirlwind set of events, which spanned only a few days, left much in their wake to be examined. While the implications on Trump, his affiliations, his public and professional support, and where the US goes from here are perhaps too numerous to count, the saga illuminated a change in relationship for the pharmaceutical industry.

While in the past Trump had the power to sink shares with a single tweet, as evidenced in reactions to his infamous “getting away with murder” assault on the industry, his tirades here accomplished very little; Wall Street was mostly unfazed by the fallout of Frazier’s exit. Not only were MSD’s stock prices not even dented by the President’s attempts to associate the company with price hiking, they actually rose by just under 1%.

Financial reactions this time round suggest that pharma, and possibly wider industry, no longer fears the president’s influence and criticisms, rendering his outbursts increasingly inert. Furthermore, recent research also suggests that, in a time when the industry is vilified for its extortionate pricing practices, Frazier’s actions actually generated good publicity for pharma, placing the CEO as one of the good guys in the ethical battle raging across the US. How long this will last, and how Trump’s ‘America first’ manufacturing policy will continue from here now that the committee designed to promote it has imploded, remains to be seen.

Matt Fellows

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