Meera Toraskar
COMM 409
Ethical Dilemmas in the Spotlight Investigation of the Roman Catholic Church Scandal of 2002, and its Relevance to Current Journalism
Summary
In the film Spotlight, the journalists investigate allegations of sexual assault against a Catholic priest and eventually against eighty-seven priests in the Boston area. Spotlight is the investigative journalism team at the Boston Globe, functioning as both watchdog and beat journalists. The team comprises of Sasha Pfeiffer, Mike Rezendes, Matty Carroll, and their editor Walter ‘Robby’ Robinson. I admired the dedication of the Spotlight journalists, especially the lengths to which they went to uncover information. The film touches on ethical dilemmas the journalists faced such as dealing with sources, conflicts of interest and the role of journalism.
These ethical issues make the Catholic Church scandal relevant to today’s journalism. After the Spotlight story broke out, news organizations across the world started investigating the matter. Also, the scandal shows that journalists need to start asking other institutions the ‘tough’ questions. Even now, new allegations are emerging in The Anderson Report, created by Jeff Anderson & Associates in March 2019. This report revealed sexual abuse allegations against four-hundred priests in Illinois. Journalists can learn from this incident and apply it to the #MeToo movement and recent college campus sexual assault cases. The Church scandal teaches its audiences that the wrongdoing of institutions, even institutions as powerful as the Catholic Church, can be exposed. This paper hypothesizes that the editorial responsibility of journalists is shown through the watchdog role of journalism, dealing with sources, and conflicts of interest.
Ethical Dilemmas
Watchdog Role of Journalism
The theme of watchdog-role journalism is an essential theme in this movie. As an editor, Marty Baron’s concern was for the journalists to uncover the wrongdoing of the Church and its structural fallacies. At an editor’s meeting Baron brings up the watchdog role of journalism, “We need to focus on the institution, not the individual priests. Practice and policy. Show me the Church manipulated the system so that these guys wouldn’t have to face charges. Show me this was systemic, that it came from the top down. We’re going after the system.” Other stakeholders, such as editors and news organizations, are involved in deciding the role of journalism. Not only does the self-assessment of a journalist’s role matter, but so does the other stakeholders’ evaluation of this role.
“Ends-based thinking directs a choice in favor of the course of action that brings the most good to the most people.” (Foreman, 2016, p. 81). Baron is using ends-based thinking to justify the investigation. Baron believes that future children will be saved from abuse more so than the people harmed from the investigation into the Church. The idea Baron had for Spotlight was for the journalists to assume its watchdog role, which involves reporting when “powerful institutions are working effectively, as well as when they are not.” (Foreman, 2016, p. 25).
Rezendes finds the fourteen documents the church sealed. These documents include letters from the mother of victims, and an auxiliary bishop of Boston addressed to Cardinal Law in the 1980s. Cardinal Law was the Archbishop of Boston at the time. After the sealed documents are released, Rezendes reads aloud the letters to his colleagues. Rezendes emotionally reacts to Robby’s decision not to publish yet. Rezendes is focusing on Cardinal Law, but Robby says they need to focus on the whole system – the ninety priests. Rezendes believes the role of journalism should be to publish information, but before the competition gets the story. Rezendes says, “We gotta show people that nobody can get away with this. Not a priest, or a Cardinal, or a freaking Pope!” Rezendes is upset the article is not being published yet, believing that Cardinal Law is the scope of this investigation.
Dealing with Sources
The Society of Professional Journalists (SPJ) code of ethics states that journalists should “use heightened sensitivity when dealing with juveniles, victims of sex crimes and sources or subjects who are inexperienced or unable to give consent.” Sources provide journalists valued information and context for stories. Spotlight followed this SPJ guideline in interactions with survivors. Sasha Pfeiffer interviews one of the victims, Joe Crowley, now an adult. Pfeiffer underscores the importance of language and exact wording for the story: “Joe, I think the language is going to be important here. We can’t sanitize this. Just saying ‘molest’ isn’t enough. People need to know what actually happened.” While Pfeiffer shows Joe compassion, the details of the assault are imperative for the reliability of the paper.
According to Mark Feldman, a journalism professor, seasoned journalists should regard a source with skepticism. “What is essential in these situations is a heavy dose of skepticism; journalists need to check out the information while being conscious of the source’s motive.” (Foreman, 2016, p. 226). The journalist’s skepticism towards Phil Saviano is apparent when they meet him. Phil Saviano is a representative of the Survivors Network of those Abused by Priests (SNAP). Matty Carroll tells Phil that the newspaper did run stories of him. Phil responded “Yeah, but to be completely frank, it wasn’t enough. You guys gotta understand, this is big. This is not just Boston. It’s the whole country. It’s the whole world. And it goes right up to the Vatican.” Michael Rezendes responds, “[Y]ou got any proof of that, Phil?”
Conflict of Interest
Foreman defines conflict of interest as “a journalist’s self-interest or loyalty to another person or organization” that the journalists allow to influence their duty to the audience (Foreman, 2016, p. 377). Journalists deal with influences and loyalties from all aspects of their life. Matty Carroll lives in a neighborhood near a priest treatment center. He approaches Robby, his editor, asking if he can inform his neighbors of the priest treatment center in his area. Robby tells him not to inform yet. Carroll is experiencing a conflict of interest between his social and professional loyalties. As a journalist, Carroll must refrain from informing his neighbors because those actions would be considered intervention. Intervention is “a decision by a journalist to become involved in a news situation that he or she is covering.” (Foreman, 2016, p. 379). Foreman believes that the journalist is an observer, not a participant. The rationale against intervention is that “intervention changes the nature of the event, and the intervention could persuade the audience of bias on the journalist’s part.” (Foreman, 2016, p. 379).
As people who may have religious, social, and familial loyalties journalists must not let these loyalties influence their work. “This first allegiance to the readers, viewers, and listeners is the basis for journalistic independence.” (Foreman, 2016, p. 25). Pfeiffer and Rezendes discuss the frustration in reporting on the Church scandal. Pfeiffer and Rezendes are experiencing a conflict of interest, where professional loyalties are competing with religious loyalties. Pfeiffer and Rezendes discuss how covering the story have affected their faith in the Church. Pfeiffer’s grandmother is a religious Catholic, and Pfeiffer tells Rezendes she has stopped going to Church with her grandmother because of her anger for the victims. Rezendes says “I used to like going to Church as a child. The weird thing is I think I figured that maybe one day I would actually go back. I was really holding on to that. I read those letters, and something just cracked.” Pfeiffer remarks, “It’s a shitty feeling.” Rezendes agrees. To compensate for the conflicts of interest, journalists must detach from these influences and ultimately remain impartial.
Literature Review
According to Michael Blanding, 22 percent of news articles with male victims “used ‘language that minimized the abuse or implied consent’ versus 4 percent of those with female victims.” (Blanding, 2017, p. 38). Nonetheless, journalists face challenges when reporting on sexual assault. “[R]eporters unconsciously slip into the language of consensual sex, saying someone ‘had sex with’ or even ‘fondled’ a victim, rather than using words like ‘raped’ or ‘molested.’” (Blanding, 2017, p. 38). In the film, Pfeiffer stressed the importance of using exact wording to describe the assault. Pfeiffer’s attempt to accurately portray the details of the assault was necessary, so the allegations were not downplayed.
Carl M. Cannon suggests the journalists’ skepticism as one reason why the investigation of the Roman Catholic Church did not catch attention until 2002. When the Spotlight team met with Phil Saviano, they were highly skeptical of him.
“First, the original problem with this story was simple skepticism that anything so horrible could be condoned by the hierarchy of a Church that has done so much good in the world…It seemed, back then, almost impossible to believe – not just to faithful Catholics, but to secular journalists as well. When I explained the dimensions of this problem to fellow Washington reporters – reporters who would believe anything about a politician – I would often get dubious looks.” (Cannon, 2002, p. 23).
This skepticism for journalism is a prerequisite, but it seems to have stunted journalists at the beginning of the investigation in the 1980s.
The reporting on the Church scandal is risk reporting. In the Columbia Journalism Review, David Ropeik writes risk involves “two elements: a hazard and exposure to the hazard. Either component creates the potential for risk and is, therefore, a story by itself, but an actual risk to people only exists if there are some hazard and exposure to it.” (Ropeik, 2011, p. 2). Anna Solin analyzes risk reporting through interviews with the UK press.
“Moral responsibilities (such as avoiding exaggeration) are rarely referred to in the interview talk and seem to be relatively distant from day-to-day writing newsrooms. The immediate local concern is the journalist’s accountability to the editor: at the end of the day, the journalists has to have produced stories acceptable in ‘news terms.’ We may interpret this as two normative orders clashing, with the one influencing daily writing in the form of editorial gatekeeping and control and the other having a more diffuse presence, involving less direct sanctions.” (Solin, 2015, p. 399).
Solin mentions the relationship journalists have with abstract codes of ethics. The interviewees do not talk about penalizations for inaccurate reporting but instead focus on the inability to create strong stories as job failure. This perception of journalists makes codes of ethics seem inapplicable to journalists.
In practice, journalists attempt to attain ideals, but this may not be realistic. According to Mellado and Dalen, there is a gap, known as the role conception-performance gap, between a journalists’ role ideals and actual practice (Mellado, Dalen, 2014, p. 861). Mellado and Dalen found “a significant gap between journalistic role conceptions and role performance. This gap is particularly large for the watchdog and civic-oriented roles, which are the two roles more closely related to the professional ideal of the press as an autonomous fourth estate.” (Mellado, Dalen, 2014, p. 872).
Furthermore, beat journalists had a more significant gap in the watchdog role compared to other roles. Mellado and Dalen explain why this gap is more prominent for beat journalists. Beat journalists cover the “de facto powers (politics, economy, beats)” and are dedicated to being analytical. “Nevertheless, they might feel more pressure from the political and economic power, as well as from their own news organization, leading to self-censorship and, therefore, a bigger gap.” (Mellado, Dalen, 2014, p. 870).
Throughout Spotlight, the journalists question their role in deciding the best approach for reporting. Rezendes argument with Robby shows the responsibility Rezendes feels towards doing the story and the victims justice. Robby holds on publishing the story, and Rezendes perceives this as a role conception-performance gap. Rezendes believes the Boston Globe should release the story with the fourteen documents before another news organization gains access to these documents.
The public opinion on the media coverage of the church scandal affected views on media reliability and confidence in the Church. Mancini and Shields found unintended media consumption effect on Catholic and non-Catholic audiences.
“[P]rior exposure to media reports of the scandal served to increase public confidence in the Church among Catholics. Additionally, Catholics and non-Catholics who perceived the coverage as biased were significantly more confident that the Church could effectively respond to sex crime allegations in the future… In particular, among the very devout Catholics, media effects mattered less in shaping views about the Church.” (Mancini, Shields, 2014, p. 229).
These results imply that avoidance of bias in media coverage of the scandal was imperative. In this light, the skepticism displayed by the Spotlight reporters was necessary.
In his interviews with Catholic priests on their attitudes towards the media coverage of the scandal, Michael Kane reveals perceptions of both accuracy and bias. Kane found that priests believed that the media portrayed all “current and past bishops” as ignoring victims until 2002 (Kane, 2008, p. 586-587). “Many of these respondents believed this was a fairly accurate portrayal and that the media was correct in its deception of a conspiratorial code of silence among bishops.” (Kane, 2008, p. 586-587).
On the other hand, the priests believed the media coverage was unnecessarily sensationalized and biased. These quotes show the attitudes of priests, who are a part of the audience. This perceived bias creates distrust of the media. In the future, priests may be discouraged to talk to the press assuming perceived biases. “Overwhelmingly, priests respondents believed that the media’s motivation was not only to garner attention to the revelations of sexual molestation but to cast suspicion on all priests and to portray a serious situation in the most damaging manner possible.” (Kane, 2008, p. 588).
Elizabeth Mehren was a correspondent for the Los Angeles Times at the time of the scandal. Mehren writes about her experience covering the ever-expanding scandal. “After all this time, the shock from reading those records has not worn off, not one bit… The sadness never leaves this story. These are, after all, real people.” (Mehren, 2003, p. 54). As a mother of a teenage boy, Mehren empathizes with the survivors. Through compassion, a journalist can convey the emotional and physical damage these survivors have suffered. The film shows Pfeiffer’s and Rezendes’ respectful interactions with survivors. By empathizing with the survivors Pfeiffer and Rezendes were able to do the story justice. According to Mehren, “truth and justice” have always been needed in journalism. “In some ways, the clerical abuse scandal has become a journalism textbook. Consider the elements: power, corruption, intrigue, tragedy, sex, betrayal, money – and an institution that dates back 2,000 years.” (Mehren, 2003, p. 54-55).
Walter Robinson, the editor of Spotlight, describes the difficulty in reporting on the Church scandal. “How do you get at a story that no one within the Church would discuss? How do you breach an institution that has neither the obligation nor the inclination to make its records public nor discuss how it operates?” (Robinson, 2003, p. 56). He also cites lessons learned from the case that apply to all news organizations:
“If the Church’s most embarrassing secrets can be exposed, there surely must be ways to retrieve information from other institution… [T]here is a powerful incentive for other news organizations to do the same when the public interest is at stake in civil lawsuits. It’s about the institutions that mean so much to the life of the community... Especially in our coverage of our most respected institutions we, as journalists, should not check our skepticism at the door. The institutions might chafe at the tough questions. But our readers expect us to ask them.” (Robinson, 2003, p. 58-59).
Walter Robinsons’ comments show the importance of watchdog journalism and skepticism. Not only are these elements crucial to journalism, but also the public interest.
Wilkens and Brennen claim that conflict of interests in journalism can occur in the “exploitation of a professional position for private advantage; allowing financial, collegial, social, or familial loyalties, both past, and present, to interfere with professional loyalties; placing self-interest above one’s duties to others.” (Wilkens, Brennen, 2004, p. 303). Pfeiffer, Rezendes, and Carrol all experienced conflicts of interests among their familial, social and religious loyalties.
Wilkens and Brennan comment on the New York Times new code of ethics published in 2003. The new code was released a year after the Spotlight investigation of the Boston Globe into the Roman Catholic Church sex scandal. “The focus of the document is conflict of interest…The [New York] Times’ code interprets conflicts of interest broadly, linking conflict of interest to the perception of the newspaper’s impartiality, neutrality, and the integrity of its news reports.” (Wilkens, Brennen, 2004, p. 304). One could theorize that after the experiences of Spotlight journalists in covering the church scandal, other news organizations chose to heavily focus on conflict of interest in their codes of ethics. Wilkens and Brennan believe the New York Times chose to focus on conflict of interest to “protects its reputation as the nation’s, and perhaps the world’s, preeminent news organization.” (Wilkens, Brennen, 2004, p. 305).
Benjamin Mullin writes on the changes at the Boston Globe. The Spotlight team joined the Globe’s metro investigative team and also moved to a new building. Mullin remarks on the growth of investigative journalism at the Globe, despite the decline industry-wide (Mullin, 2016, p. 2). Jenn Abelson, an employee of the Globe for fourteen years, thinks nothing has changed about the fundamentals of journalism. “Journalism has changed, but at the end of the day, reporting is still pounding the pavement and getting people who aren’t supposed to talk to you to talk to you,” Abelson said. “So, I think the basics of how we go about our jobs hasn’t changed, and our goals and ambitions have grown.” (Mullin, 2016, p. 6). Even with changes in technology and ethics codes, journalism is still the same. Journalists cultivate quality sources they can return time and again and find hidden information relevant to the public interest.
Discussion
Editorial responsibility is not just in the hands of the journalist, but also in the hands of the news organizations, editors and the audience. Covering a nuanced subject matter such as sexual assault can be challenging for some journalists. Precise wording that does not diminish the allegations is essential in such news articles. Although, sometimes media coverage can have unintended effects. Audiences who perceived media coverage as biased did not lose confidence in the Church. Religious Catholics cared less about the media’s information on the scandal. Most Catholic priests believed the media accurately portrayed the cover-up by the Church. However, the priests thought the media coverage perceived all priests as pedophiles and felt the media were biased to this extent. Audiences’ perceptions in media coverage affect how they interpret media reputation and the validity of published information.
Journalists experience frustration in the gap between role-conception and practice. The glaring differences between journalism ideals and actual practice are commonplace for watchdog-role and beat journalists. After all, journalists are people, who are susceptible to diverse influences. The fact that the New York Times changed its code of ethics to focus on conflicts of interest signifies the potential damage conflict of interests can have on a news organization’s reputation. At the same time, from the perspective of the journalist codes of ethics that are too abstract are inapplicable. News organizations must word codes of ethics carefully, placing low ethical expectations of journalists will not bode well.
Editorial responsibility is especially important in the coverage of sexual assault. There is no better case of poor editorial responsibility covering sexual assault than A Rape on Campus by Sabrina Erdely which was published by Rolling Stone. “Among its findings, the report determined that Erdely relied almost entirely on Jackie’s version of the story, failing to corroborate it with witnesses or confirm the identity of her attacker, much less interview him.” (Blanding, 2017, p. 36). While journalists can be compassionate towards survivors, there is still a burden of proof that needs to be satisfied. Editorial responsibility is even more critical than it was before because of online journalism. Audiences can verify if the information published is correct through the use of search engines and online fact checkers. Changes in perceptions of media coverage, journalism codes of ethics, and technology bring more enormous challenges for future journalists in uncovering wrongdoing in powerful institutions.
Conclusion
This paper theorized that editorial responsibility in journalism is exhibited through codes of ethics, dealing with sources, balancing competing values and the self-assessment of a journalist’s role. After analysis and discussion, a revised thesis would be editorial responsibility is exhibited through applicable codes of ethics, decisions made in dealing with sources and conflicts of interest, and the evaluation of the role of journalism from the journalist and other relevant stakeholders.
According to Carl M. Cannon, journalists had been investigating random reports of sexual allegations against priests since the 1980s. There are numerous reasons why the Church scandal did not catch on until 2002, which serve as lessons for the journalism industry. Journalists should not undervalue the importance of watchdog journalism and skepticism in uncovering wrongdoing in powerful institutions. A simple question like, “how do you know that?” can be fundamental in covering a story. Legal documents and evidence support a moving, verified story that audiences can trust. Using quality sources and precise research to back up claims is imperative. Reporting on sexual assault must be accurate, without implications of bias. News organizations should always be ready to ask for help from sources, such as survivors, and stakeholders. Asking readers for help is not a sign of weakness but shows a willingness to learn. Lastly, journalists need to prepare for the shock, sadness, and frustration in reporting on stories like the Catholic Church scandal, which of all lessons learned, may be the hardest to achieve.
References
The Anderson Report: Child Sexual Abuse in the Archdiocese and Dioceses in Illinois. Retrieved from https://andersonadvocates.com/Sexual_Abuse_Reports
Foreman, Gene. The Ethical Journalist: Making Responsible Decisions in the Digital Age (p. 25, 81, 226, 270, 377, 379). Wiley. Kindle Edition.
SPJ Code of Ethics - Society of Professional Journalists. Retrieved from https://www.spj.org/ethicscode.asp
Blanding, M. (2017). Covering sexual assault: Reporting on rape and sexual assault challenges journalists to build trust with sources and avoid injecting bias into the story. Nieman Reports, 71(1), 34
Cannon, C. M. (2002). THE PRIEST SCANDAL. (cover story). American Journalism Review, 24(4), 18. Retrieved from http://search.ebscohost.com.ezaccess.libraries.psu.edu/login.aspx?direct=true&db=ufh&AN=6674907&site=ehost-live&scope=site
Mullin, B. (2016, November 26). At The Boston Globe, Spotlight is changing, but it hasn't dimmed. Retrieved from https://www.poynter.org/reporting-editing/2016/at-the-boston-globe-spotlight-is-changing-but-it-hasnt-dimmed/
Mehren, E. (2003). Reporting stories with children as victims of priests. Nieman Reports, 57(1), 53.
Robinson, W. V. (2003). Shining the globe's spotlight on the catholic church. Nieman Reports, 57(1), 55.
Mellado, C., & Van Dalen, A. (2014). Between rhetoric and practice: Explaining the gap between role conception and performance in journalism. Journalism Studies, 15(6), 859-878. doi:10.1080/1461670X.2013.838046
Ropiek, D. Risk Reporting 101. Retrieved from https://archives.cjr.org/the_observatory/risk_reporting_101.php
Mancini, C., & Shields, R. T. (2014). Notes on a (sex crime) scandal: The impact of media coverage of sexual abuse in the catholic Church on public opinion. Journal of Criminal Justice, 42(2), 221-232. doi: 10.1016/j.jcrimjus.2013.06.006
Solin, A. (2015). Construing professional norms in journalism: Responsibility and risk reporting. Journal of Applied Linguistics and Professional Practice, 9(3), 387-404. doi:10.1558/japl.v9i3.20844
Kane, M. N. (2008). Investigating attitudes of catholic priests toward the media and the US conference of catholic bishops response to the sexual abuse scandals of 2002. Mental Health, Religion & Culture, 11(6), 579-595. doi:10.1080/13674670701746933
Wilkins, L., & Brennen, B. (2004). Conflicted interests, contested terrain: Journalism ethics codes then and now. Journalism Studies, 5(3), 297-309. doi:10.1080/1461670042000246061
GSK: Adapting Competitive Strategy to the Changing Indian Pharmaceutical Industry
In this report, I am going to analyze the issues that GlaxoSmithKline (GSK) is currently facing in the dynamic Indian pharmaceutical market. To attain a unique leader position in the market, GSK has to make certain strategic changes. As a product of this analysis, this report is going to develop different strategic alternatives that are available to the firm to solve its difficulties in India. Furthermore, I will be making a recommendation as to what strategic changes GSK should follow in order to successfully retain its competitive advantages and foothold in the Indian pharmaceutical market.
Background of GSK
In order to understand the strategic circumstances of GSK and comprehend the potential results of each of the alternatives at hand, we first need to know the basics about the business.
GSK emerged from a merger in January 2001 of Glaxowellcome plc and Smithkline plc, of which both companies were founded in the early 1800s. GSK has developed three primary lines of business: pharmaceuticals, vaccines and consumer healthcare. The pharmaceuticals business creates medicine for treatment of respiratory, cardiovascular, and chronic diseases like diabetes. Within the pharmaceuticals division there is a division devoted only to making medicine for HIV treatment. GSK has a majority interest in ViiV Healthcare, which is a HIV specialist company that manages GSK’s HIV line of business. Pfizer is also a shareholder in the company (GSK Pharmaceuticals, 2014).
Furthermore, the vaccine business creates different vaccines for infants, adults and for travel purposes. The consumer healthcare business creates products to promote wellness, oral health, skin health and nutrition. This also includes over-the-counter (OTC) medicine, such as for pain relief, which can be purchased by consumers without the supervision of a doctor. Nutritional supplements, such as Horlicks for children, are very popular in India (GSK Consumer Healthcare Brands Portfolio, 2014).
GSK currently earns 23 billion pounds ($35.67 billion USD) in sales, with the US market accounting for the largest proportion of sales at 32% (see Appendix 1). Followed by 28% from the European market, 27% from Emerging Markets, 7% from Japan and 6% from other markets. GSK has a strong foothold in the worldwide pharmaceuticals market, in fact GSK’s pharmaceuticals earns the most proportions of sales among GSK’s three primary lines of businesses, which is 67.3% of sales (GSK Annual Report, 2014).
GSK is a publicly traded company with the board comprised of one chairman, three executive directors and twelve independent non-executive directors (see Appendix 2). The board is further divided into several committees, such as the audit and risk committee and remuneration committee. The CEO and corporate executive are independent from the Board in terms of organizational structure (GSK Annual Report, 2014). The company follows more of a flexible M-form geographic structure, as separate geographic divisions operate and localize to each country.
GSK’s current strategy focuses “on diversifying its product line, creating products that survive the R&D cycle financially and deliver value to their patients, and reducing operating costs for efficient practices” (GSK, 2014). In this way, GSK can be said to be following value-added management by reducing operating costs and increasing shareholder value.
Core Competencies of GSK
Starting from 2001 GSK’s core competency has been R&D, by focusing on an efficient R&D process to increase productivity and rates of return. R&D timelines are tailored differently to whether a new product is a medicine, vaccine or a consumer healthcare product. Recent R&D achievements include six significant new product approvals in 2013, and delivery of phase III data in the R&D cycle for six potential new medicines and vaccines for 2014-2015. GSK is continuously innovating R&D processes with 80% of R&D spending targeting new medicine (GSK Pharmaceuticals, 2014).
Since 2009, GSK has further strengthened its commercialization and distribution activities in its operating model. For example, to make products affordable in underdeveloped countries it has limited prices to 25% of the prices set in developed countries, and have been able to lower prices through high volume contracts. In addition, transfer pricing is used between global divisions to efficiently spread resources and reduce costs throughout the firm.
The rural transportation infrastructure was weak when GSK entered India, causing GSK to innovate away from its traditional distribution methods. Rural villages in India account for 70% of the population, yet become inaccessible with underdeveloped roads and a poor telecommunication infrastructure. The planned goal was for GSK’s distribution network to access 20,000 villages by 2014, and currently it has reached 16,000 villages. GSK expects to reach 15% of the rural villages by the end of 2015 (Increasing Access in India GSK, 2014).
Competitor Analysis
Considering that there are so many new entrants in the Indian pharmaceutical market, four competitors have been chosen by rank in terms of global sales and growth (see Appendix 4).
Novartis
Net sales in 2014 were $58 billion USD, with the pharmaceuticals division accounting for 55% of net sales (Novartis Annual Report, 2014). After a number of transactions in 2014, Novartis has reduced in size to three divisions, which are: Pharmaceuticals, Alcon for Eye Care, and Sandoz for generic medicine. Recently in March, Novartis acquired GSK’s oncology division for $16 billion USD, and in exchange GSK acquired Novartis’ vaccines division (except for the division developing influenza vaccines) for $5.25 billion USD. Additionally, Novartis and GSK created a Consumer Healthcare joint venture in which GSK will hold a majority equity interest of 63.5%. GSK claims this aim of this transaction was to create a more balanced pharmaceuticals industry (GSK Novartis Transaction Press Release, 2015).
Roche
Roche’s net sales in 2014 were $ 49.15 billion USD (47.5 billion Swiss Francs). Three main lines of business are pharmaceuticals, diagnostics, and research products. Pharmaceuticals division comprises of medicine used to indicate presence of cancer or other infectious diseases, and medicine used in hospital procedures and the treatment of cancer. Roche does not produce over-the-counter prescription medicine with which individuals can self-medicate. The diagnostics division creates products for testing purposes, while research products divisions sell research instruments to researchers such as microscopes and genome sequencing machines (Roche Annual Report, 2014).
Pfizer
Net sales year-end 2014 were $46.6 billion USD, and products are categorized into three segments (see Appendix 5). These three segments are: Global Innovative Pharmaceutical segment (GIP), Global Vaccines, Oncology and Consumer Healthcare segment (VOC), and the Global Established Pharmaceutical segment (GEP). The GIP segment develops medicine and therapy for chronic diseases in inflammation, cardiovascular/metabolic, neuroscience and pain, rare diseases and women’s/men’s health. The VOC segment does vaccines and OTC medicine, and each of the three businesses in VOC operates as a separate, global businesses. The GEP segment includes the brands that have lost market exclusivity, as in they have lost exclusive marketing rights granted by the FDA upon approval of a drug and can run concurrently with a patent or not. Mature patent-protected products that will lose exclusivity in major markets and generic medicine are also included in this segment (Pfizer Financial Report, 2014).
Indian Pharmaceutical Market
Market Attractiveness
According to a 2014 McKinsey & Company Pharmaceutical report, with the average Indian consumer experiencing rising incomes and GDP growth from 2005-2009 from 7.3 to 7.9%, the Indian pharmaceutical market is expected to grow to USD $55 billion by 2020 (Bhadoria, Bhajanka, Mitra, 2014). Enhanced medical infrastructure, increasing incidence and treatment of chronic diseases, and more health insurance coverage has also contributed to this estimate. In fact, determining the attractiveness of the Indian pharmaceutical market is no longer paramount, rather it is more important for global pharmaceutical companies such as GSK to determine a competitive strategy that will give them a unique leadership position in the Indian pharmaceutical market (Bhadoria, Bhajanka, Mitra, 2014).
Analysis of Indian Pharmaceutical Market
By applying the Porter Diamond Model (see Appendix 6) to the Indian pharmaceutical market, an overall view of what actors and drivers affect performance can be seen. Distinctive characteristics of the Indian pharmaceutical market include branded generic pharmaceutical companies as leaders with 70-80% of the retail market share, local companies having first mover advantages due to early entrance into the market and investment, prices are low due to intense rivalry in the industry (Bhadoria, Bhajanka, Mitra, 2014).
Factor conditions of India include a large, educated, young English-speaking workforce, and vast natural resources. India’s population continues to grow at 1.3% each year, with 41% of the population being of working age; 25-54 years of age (CIA World Factbook, 2015). An additional advantage to GSK hiring India’s educated young workforce is that is salaries will be lower compared to those employees hired in the US or UK. In fact, the exchange rate between the Indian rupee to the US dollar is 1 USD to 63 rupees. Many multinational companies, such as JP Morgan, have taken advantage of India’s young and educated workforce to make their IT, business outsourcing and software services efficient. India’s largest natural resources include coal, iron ore, rare metals and arable land.
Demand conditions for medicine and treatment are considerable in India, due to four factors, which are population factors, increasing affordability, accessibility and acceptability (Bhadoria, Bhajanka, Mitra, 2014). Population factors such as increasing incidence of chronic disease, such as diabetes will further increase the demand for GSK’s medical products. The incidence of chronic disease is expected to grow by 25-40% by 2020, which will increase the number of patients available in India by 20%. Furthermore, by 2020 650 million people will be covered by RSBY national health insurance for hospitalization related diseases (Bhadoria, Bhajanka, Mitra, 2014). This insurance will cover 70% of people in India who are considered to be in poverty. Accessibility to medical infrastructure and increased government spending on healthcare also drive demand conditions (see Appendix 7).
Related industries such as chemical and industrial companies, and supporting industries such as recruitment companies and domestic workers are prevalent in India.
The Role of Government
India’s ruling government has been in a continual contest between the Indian National Congress Party and the Bharatiya Janata Party (BJP). Both parties are nationalist and welfare promoting in nature, and both support the movement of low cost public healthcare (Sharma, 2014). The Congress party was formed in the 1880s, before India’s Independence (BBC India Profile, 2014). Its mission is in the “advancement of the people of India and the country of Socialist state based on a Parliamentary Democracy in which there is equality of opportunities for political, economic and social rights” (Indian National Congress, 2014). While the BJP was formed almost three decades after Independence in 1980, it has a similar founding philosophy of nationalism and humanism.
Since the 1950s, the Congress party was India’s ruling government until 1996 when the BJP won its first general election. The BJP is currently the ruling government of India. The only concern for GSK is the BJP’s lackadaisical approach towards financial sector reforms in terms of transparency (Sharma, 2014) and an ineffective patent protection system. On the other hand, the BJP government is helping to cultivate factor conditions by gradually implementing massive open online courses to educate the young workforce. In addition, it is promoting an organizational culture in factories where industry owners and laborers act like family to achieve goals (Sharma, 2014). This is in a way shaping the structuring and culture found in Indian factories, some of which are the supporting industries that GSK uses.
GSK: Competitive Strategy - Solutions
Alternative 1: Strengthen Internal Capabilities & Culture
To become a leader in the pharmaceutical market, GSK will need to strengthen its marketing capabilities. Specifically for the Indian market, GSK marketing strategies will need to sustain and develop large brands, work in direct collaboration with doctors, and differentiate marketing messages to different types of doctors and therapy. In fact, large brands contribute 50% towards the brand portfolio as seen in the McKinsey analysis (Bhadoria, Bhajanka, Mitra, 2014). Furthermore, by working with doctors GSK can help increase patient awareness on diseases and reduce fear of medical procedures, especially in rural areas. Marketing efforts will have to understand what different specialists and patients are accustomed to – for instance products that appeal to a general practitioner will be different from products that appeal to a physiotherapist.
Moreover, GSK will need to reconsider moving away from the traditional sales model. For example, instead of only comparing current performance to previous performance, sales models will need to purposefully direct actions towards the future as the Indian pharmaceutical market is continually changing. Although, one drawback in this action is that India lacks talented and experienced sales managers available within each state (Bhadoria, Bhajanka, Mitra, 2014). To compensate for this GSK will need to invest in its current sales managers to train and further develop these employees. It would also complement training and development if GSK instilled values of creative thinking and risk taking in sales managers, as this mindset would eventually help the company to increase sales performance. The company will also need to actively change its recruitment process to hire qualified sales managers that are able to adapt to the dynamic market.
Alternative 2: Pursue New Opportunities
To become a leader in the pharmaceutical market, GSK will have to actively pursue new opportunities with certain risk involved. In any case, if these new opportunities pan out then GSK will enjoy first mover advantages. According to a 2014 McKinsey growth scenario analysis, new opportunities for pharmaceutical companies to pursue in India include patented medicine, government contracts, consumer healthcare products, and biologics. The patented products division has the potential to grow to $1.7 - $3.2 billion USD by 2020 (Bhadoria, Bhajanka, Mitra, 2014). To do this GSK will need to find the right price that will be suitable in the Indian market – although it already implements this optimal pricing in emerging markets as mentioned before. Doctors and patients would also need to be highly involved to maintain patient numbers and receive commitment form doctors.
One significant concern for GSK is the Indian government’s long-standing low priority on patent laws for prescription medicine. Patent laws in India do no offer enough protection to pharmaceutical companies, and in recent research it was found that within one year of launching a product, 50% of these new medicines were being imitated – 85% within three years (Graham, 2014). Global pharmaceutical companies are thus reluctant to launch new products to the Indian market. The Indian government is slightly reluctant to make reforms due to the fact that the generic medicine industry is one that benefits India and other countries like the US (Graham, 2014).
The Indian public healthcare system is ripe for pharmaceutical companies to sell services and products to state and central government, especially with the BJP government and Prime Minister Modi being more open to FDI and entering into partnerships with private companies. This opportunity is currently estimated at USD $1billion, and will grow from $4.5 billion to $6 billion USD in 2020 (Bhadoria, Bhajanka, Mitra, 2014). Although the opportunity to provide products and services to the public healthcare system is immense, it would be more important GSK could either pursue purchases from state government or central government hospitals, although it would be advisable to receive purchases from central government hospitals, as these hospitals are more accessible in terms of infrastructure.
The Indian consumer healthcare segment for pharmaceuticals is approximately USD $3 billion and above, and is estimated to grow by 14-16% and become USD $14-18 billion by 2020 (Bhadoria, Bhajanka, Mitra, 2014). This segment includes medicine that is changing from prescription to OTC medicine, and exclusively OTC medicine. To pursue the consumer healthcare segment GSK will need to rely on research to determine what types of products consumers need, and strengthen its distribution channels.
The biologics opportunity involves the development of complex medicine, such as insulin, used in treatment of diabetes, oncology and autoimmune diseases. This opportunity is currently valued at USD $300 million with the highest amount of growth at 30%, and is estimated to grow to USD $3 billion by 2020 (Bhadoria, Bhajanka, Mitra, 2014). If GSK were to further develop and pursue the biologics opportunity the company could enjoy some first mover advantages, as the market in India is largely untapped. There are further areas of therapy that need medicines to be developed in India.
Alternative 3: Collaboration with Pharmaceutical Companies & Stakeholders
The third alternative is for GSK to collaborate with pharmaceutical competitors and other stakeholders in India. Three types of alliances are available for GSK to invest in. The first being partnerships with other pharmaceutical companies that will allow GSK to change the market – promotion of products and launch events can alter needs of pharmaceutical market. For instance, GSK could hold launch events of the joint venture it is launching with Novartis in India. GSK already collaborates with Novartis and Pfizer in terms of joint ventures and acquisitions, as previously mentioned in this report. Partnerships with competitors would be more economically feasible and quicker to implement, but may not ensure a long-lasting future in the Indian market. Second, partnerships with other stakeholders such as medical equipment providers, diagnosis providers or hospitals can increase access and distribution to medium-sized urban cities. These alliances could also increase disease awareness in patients and allow for GSK and other stakeholders to share common resources, such as the supply chain to create synergies (Bhadoria, Bhajanka, Mitra, 2014).
Third, public-private partnerships are increasing in incidence with the current BJP government being more open to private companies, especially since the launch of government health insurance coverage (Bhadoria, Bhajanka, Mitra, 2014). For example, GSK could provide services for state heath insurance and help public government hospitals to create more efficient treatment procedures. This opportunity is vastly different from the privatization of public entities, as the current BJP government has not mentioned this at all in its agenda (Sharma, 2014). Public-private partnerships would not be straightforward to implement, but would ensure a long-term future for GSK in the Indian market.
Conclusion
The Indian pharmaceutical market is evolving with new entrants and changing consumer needs, thus GSK needs understand the changing dynamics in its external environment and adapt its strategy accordingly.
To create an inclusive strategy for GSK to follow, GSK needs to strengthen its internal capabilities in terms of marketing and sales, pursue the public healthcare, consumer healthcare and biologics opportunities, and gradually start forming partnerships with government and non-competitor stakeholders. Firstly, any company in any industry needs to continually review their internal capabilities as a preventive way to ensure against the impact of unforeseen shocks in their environment. In further upgrading its sales and marketing capabilities GSK would be able face the changing needs of the market, especially since large brands with brand extensions account for most of a brand portfolio.
By pursuing new opportunities GSK would be taking some risk, but by striving for opportunities that seem to have less risk involved GSK can take a balanced approach to pursuing new ventures. It would not be wise for GSK to look into patents as it is subject to the ruling government, and if the company wants to prevent imitation then pursuing patent protection would not be advisable. Reform on patent protection laws in India will be gradual and immediate effects will not be felt, especially since this has been a law term difficulty for global companies in India. I have chosen the public healthcare and consumer healthcare segment because these are both large segments with high growth that GSK use increase revenue and market share in the Indian market. Furthermore, I have also chosen the biologics opportunity for GSK to invest in because the market in India only covers medicine for basic diseases like diabetes. Many pharmaceutical companies have ignored the biologics segment in the Indian pharmaceutical market due to an inability to gain high volume contracts to offer lower prices. On the other hand, this segment has the highest potential for growth of all three opportunities and would be a risk worth taking for first mover advantages to GSK.
I also advise GSK to gradually start forming public-private partnerships with the government. Currently, GSK already partakes in alliance with competitors like Novartis and Pfizer and it should continue to do so. Specifically for the Indian pharmaceutical market, partnerships with non-competitor stakeholders like medical equipment providers; diagnosis providers and hospitals are almost non-existent (Bhadoria, Bhajanka, Mitra, 2014). This may be due to a number of reasons such as the fragmented nature of these stakeholders, inaccessibility or being uninformed of the benefits that could arise from such partnerships.
Again, these recommendations are still contingent on government decisions for healthcare. For the best outcome of the Indian pharmaceutical industry, the government will have to take certain measures. These measures include increasing healthcare investment to 3% of the GDP, strengthening medical infrastructure in medium-sized cities and rural villages of population 100,000 and less. Furthermore, using different fiscal policies towards healthcare costs would be advisable Drug prices in India are already quite low, and further government intervention to control costs may eliminate the chance of the market becoming USD 20 billion in 2020 (Bhadoria, Bhajanka, Mitra, 2014).
For example, the government could implement repayment programs for intensify health insurance coverage for individuals who cannot afford expensive treatment. In addition, increasing the number of physicians, especially in rural areas is needed perhaps by allowing private investment in medical education. In conclusion, if GSK implements these recommendations while carefully monitoring government policies and action it can attain a leadership position in the Indian pharmaceutical market and retain its competitive advantage.
Appendices
Appendix 1: GSK Pharmaceutical Sales by Region
Appendix 2: Organizational Structure of GSK
Appendix 3: GSK Consolidated Income Statement
Appendix 4: Top 20 Global Pharmaceutical Companies
Appendix 5: Pfizer Consolidated Income Statement 2014
Appendix 6: Porter Diamond Model
Appendix 7: Indian Government Spending on Healthcare
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