Recently I was invited to a panel discussion on the Social Pillar of ESG in the Health Care Industry. It was a hugely interesting event.
This for one good reasons:
The Health Care Industry is per se a rather unique industry in a number of ways: seldom do interests in the public good (public health), profit, and R&D/innovation encounter each other in such an intense way – for better or for worse.
But let me go through a small number of my learnings:
S – A two-pronged meaning
The S in ‘ESG’ stands traditionally for the term ‘social’. Which obviously raises the question when talking about the Health Care sector: what does ‘social’ actually mean?
Again, traditionally, one would talk about labour conditions in head quarters, in the supply chain, and – if it is a very pro-active company – about living wages, and local community impacts around manufacturing and office sites.
And there is nothing wrong with this.
Just – it’s not quite a complete picture in the context given. In Health Care the ‘other S’ is the social impact of the Health Care industry as such. In other words: on patients, on the health, economies and health care systems of the countries these companies are active in. And as it goes: this is not an easy-to-solve equation. For one, there is the inherent economic need for a company to at the very least be marginally profitable. On the other, there is the regulatory frame – which hugely varies from market to market – within which they operate. And lastly, there is the relationship & reputation component.
Much of the 2nd meaning of the ‘S’ relates importantly to the purpose of a company, and how – dare I use the word – ‘idealistic’ it is. Is the company in business to genuinely change lives, for example by improving lives of people with rare deceases my promoting preventive life style choices? Or are these aspects in essence a ‘means to an end’ to grow the bottom line benefits?
The ‘purpose’ view is in as far important also, because it may well related to how ‘patient’ a company is in the face of complexity and difficulty. For example manifested in: its willingness to discuss and engage with governments that have distinctly their own view on what is needed in their country as opposed to copying a Global North system; or indeed entering markets that the typical Health Care investor would consider ‘difficult’ (i.e. markets outside Europe, North America …)
There is an S in Diversity
It is a bit of a running joke by now: Medicines-in-the-makes are typically tested on healthy young males, 25 to 35 years old, 70 to 80 kilos in weight. Unless, they are explicitly targetting an already a different constituency of, still normally male, end users.
Somewhat similarly, the vast majority of clinical trials are run Global North countries. And hence assuming such infrastructure, availability of e.g. cooling facilities, or distance to patient home / travel time to hospital etc.
The issue with this is, unsurprisingly, that the results are meds that work best, sometimes at all, only in context that offer that type of infrastructure. Which again is the minority of geographies globally.
While such setting makes of course the clinical trial work well, and along commonly ‘used to’ lines, it marginalises a) up and coming markets which probably enough patients who could afford the med, b) ignores significant number of patients that would need the medication or treatment but do not live in a context where the infrastructure needs can, or any time soon will be met, and c) creates an ever more sophisticated but also more expensive to run health care system in the Global North (as many of can attest to, based on our health insurance’s price year-on-year price increases).
Hence, the S in diversity in the context of the health care industry is closely linked to innovation, market entry, business model resilience. And yet it is an aspect gravely under estimated.
And that is before we even get to the S here: personalised medicine and treatments. Which I won’t go into, at this moment.
S and the business case for prevention
The typical prevention story goes something like this: A company A offers screening (i.e. preventive health checks) to its employees. As a consequence B number of early stage cases of C are found and can be cured, saving the company D amount of dollars in short-term staff adjustments as well as the subsequent re-hiring costs of replacement employees.
This business case works – in fact, I have been part of implementing one: A the local subsidiary in an Asian country of a large multi-national company; B was the statistical mean relative to the staff base: 1 out of 10 in females, 1 out of 100 in males; C was breast cancer. As for D I sadly never got to know the number, but I do know the programme paid its ways, and then some.
However, this is a business case that is clearly very biased: it puts the company’s desire front and centre; it takes place in a first world developed country in Asia; the company itself is a non-Asian large technology multi-national. And the disease is a very well known killer, equally well known for how well curable it can be if diagnosed early.
Once we veer away from the Global North corporate realm, the discourse around prevention is a different one. It closely links to a jurisdiction potential and actual economic competitiveness. And it links to public spending and infrastructure build up / existence / absence.
Competitiveness is affect by how common the disease or condition is among a given population, and how much of an individuals energy would go into ‘surviving’ or ‘living with’ the disease as opposed to funnelling such energy into economic activities (aka ‘work’).
Typically, or at least not uncommonly, there exist a vicious cycle: nations challenged with a flailing or developing economy stop investing into their health care system, or cannot afford to do so in first place. Therefore, patients usually get treated, if at all, at very late illness stages. This again absorbs proportionally a lot of resources, which the patient cannot afford. So either (s)he dies, or the government covers the cost as it is an emergency. This again prevents resources (time, energy … of the individual; cash of the government) to be invested otherwise, notably schooling, enforcing anti-bribary legalisation etc.
Of course this is a very coarse description of reality, but one – if one desires to push this argument to an extreme – none the less accurate.
Prevention, whether within a company or in a country needs some simple, logistically easy, and financially affordable way to scale it out. In absence of such possibility – for whatever the reason may be – makes implementation hard, patchy, little effective, …. and expensive.
S in ESG: And what’s the governments; role to ‘get it done’?
Health Care systems are the subject of health care politics. And, as the name says, health care politics is politics. Warts and all. This can mean a verity of things:
That the health of citizens is used as a bargaining chip in the public eye of global media. That it is traded off against educational spend (not often the case) or military spend (more commonly the case). That decisions cannot be taken without ample considerations of intended and unintended biases built into the system (e.g. ethnicities, geographies, wealth …) And of course: availability vs. actual results (efficacy) across the entirety of a population.
Health care politics also would mean to take unpopular decisions: not every treatment is available to everyone. And yes, that may mean: a death sentence for some individuals, in favour of deploying resources for many, many more individuals that can be cured with the same amount of resources (time, money, hospital beds, ….).
Health Care politics is though also linked to political capital: for example, that of a strong local economy vs the availability of external highly developed knowledge and skillet; that of rural communities vs city communities and their respective voting powers. And last, but not least, that of the international business community forever looking to expand investment opportunities and the protection of local markets from (too much?) global influence and overseas competition.
Health care politics is politics. Even if the good at stake is the most precious one we have individually and collectively: good health.
S and the GDP
The troublesome issue with the GPD is, that it is rather quite well able to measure bad health (through health care spending) – and indeed benefits from it – as opposed to good health. It is not the only case where the GDP is far away from being an ethical, and indeed conducive to ‘welfare’ measure, as David Pilling manifests accurately in his book.
I will therefore close with a rather cynic note: if it is that we do not invest more in prevention, and into distributive approaches related to health care (including, but not limited to: treatments, medication etc) the GDP, or more accurately: what goes into the GDP as it is calculated, is at least partially to blame. It sets entirely wrong incentives.
It will not be until we recognise this, and change how we calculate it – for example deduct health care spending for treatments from GDP while adding to it through money not spent through prevention.
Measuring the right thing is evidently important – but also identifying whether that measurement is measuring ‘negative outcome’ (i.e. bad health through spending on fixing it) or ‘positive outcomes’ (as would be the money NOT spend on a long-running cancer treatment thanks to early detection).
Unless we truly measure what is conducive to what we’re really after – good health for as many people as possible with the least possible resources invested – were not measuring the correct thing. And the GDP of all, is not the right measurement system for most components related to public health, the health care system, or indeed ‘the welfare’ of a society.
