Philip Morris International (PMI) has taken over asthma inhaler producer Vectura in a move worth GBP1.1 billion. Finalised in mid-September, Vectura has received significant backlash for ignoring its broader social responsibilities towards people with lung conditions. This highlights the need for the business community to move towards a more ethical form of capitalism.

Health groups argue that Vectura’s shareholders have prioritised short-term financial gain over both public health and the long-term prospects of the company. Vectura could be excluded from research trials due to the conflict of interest among specialist clinicians. It could also deter talent and investment, hampering product development and future profitability. It was already barred from both the ‘Formulation and Delivery’ conference in September and the ‘Drug Delivery to the Lungs’ conference to be held in December, due to its association with Big Tobacco.

Moreover, a letter to Vectura’s board members signed by 26 health organisations and experts revealed concerns that PMI could “profit from treating the very illnesses that its products cause.” Signatories of the letter included the President of the Royal College of Physicians, the CEO of the American Lung Association, and the Chair of the European Lung Foundation.

PMI – Moving beyond nicotine

PMI’s diversification is no surprise. GlobalData forecasts that the UK tobacco sector will continue to decline from GBP12.3 billion in 2020 to GBP11.5 billion by 2025, a negative CAGR of 1.4%.

PMI already established its ‘Beyond Nicotine’ goal of generating over 50% of its total net revenues from smoke-free products by 2025. This is in response to government challenges to the smoking industry, rising health consciousness among consumers, and more socially responsible investors.

Conscious capitalism

Although Vectura’s shareholders simply chose the highest bid on the table, the potential consequences indicate a need for the business community to move towards a more conscious form of capitalism. Conscious capitalism considers the interests of broader stakeholders than just the shareholders, i.e. the environment and the wider population. Benefits of conscious capitalism for a business include increased trust and customer loyalty, more dedicated and productive employees, and becoming a more attractive investment.

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Of course, the question then arises of how best to measure how ethical a business is. PMI has acquired pharma companies like Vectura, Fertin Pharma and OtiTopic as part of its Beyond Nicotine framework to become a majority smoke-free company by 2025.

However, not only is its acquisition of Vectura damaging professional medical partnerships, but some campaigners argue that as part of its move beyond nicotine, PMI should stop promoting and selling tobacco products altogether. Though safer than cigarettes, PMI’s smoke-free products, such as its heated tobacco range, are still addictive and not risk-free.

The COP26 connection

A similar concept which has gained traction ahead of COP26 is degrowth, which describes replacing GDP with social and environmental wellbeing as the main indicator of prosperity.

This stems from the belief that sustainable development is oxymoronic due to the depletion of finite resources that comes with economic growth. Advocates also argue that happiness does not increase with economic growth past a certain point due to longer working hours, pollution, road congestion, and worse psychological health.

With investors and consumers increasingly concerned with broad environmental, social, and governance (ESG) issues, Vectura is likely to face further repercussions from its affiliation with Big Tobacco. The business community may be forced to gravitate towards conscious capitalism after all.