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ESG In Focus

May 31, 2023

What Healthcare Companies Need to Know about Diversity, Equity and Inclusion

Healthcare’s unique relationship with patients and society creates a naturally high bar for its social license to operate. How companies treat people—their own employees, patients and society—suggests whether those companies are trustworthy, credible and accountable. Diversity, equity and inclusion (DEI) is an important framework for understanding corporate sustainability and the creation of social good. Understanding how DEI is woven into the fabric of healthcare’s most pressing material issues will help companies unlock value through ESG.

DEI encompasses how a company manages aspects of its business that may be experienced differently depending on one’s gender, ethnicity or other facets of identity. A key concept in ESG is the perspective of “double materiality,” which refers to taking a company’s inward and outward facing impacts into account when assessing sustainability. Inwardly, companies affect the physical, mental and emotional wellbeing, safety and growth of employees through the culture they foster and the types of programs and policies they have in place. These factors in turn affect attrition, retention, innovation, creativity, productivity, and ultimately the company’s profit margin and bottom line. Outwardly, companies impact patients, communities and society through provision of life improving treatments, interaction with healthcare professionals, centers and systems, and contributions to societal health and scientific advancement. These outward effects influence image, reputation, partnerships and the company’s sales, impacting revenue and topline growth over time.

What aspects of DEI should companies focus on internally, and which of those are most critical to firms in the healthcare space? Diversity is a good place to begin, as it is observable and can be tracked and measured over time to gauge improvement. Despite improvement in some areas, the healthcare sector overall still lacks diversity. A recent industry report on the state of diversity in healthcare hub Massachusetts found fewer than 1 in 6 biopharma employees in the state is Black, Latino or Native American, despite those groups accounting for nearly a third of the population.[1] A 2022 industry report found that while women make up roughly half of biotech employees in the US, four fifths of biotech CEOs are men.[2]

A significant challenge to improving diversity is lack of data. The Massachusetts study found that fewer than a quarter of companies surveyed actively track diversity metrics.[3] Before a company can assess its performance on diversity, it must capture and track data on employee gender, ethnicity/race and other components of diversity such as veteran status or disability. Diversity is important to capture not only in aggregate, but by level—the ability to observe differential patterns in hiring, retention, performance and promotion across diverse groups at different levels is critical to pinpointing areas for improvement.

Improving diversity is where equity and inclusion come into play. A company that focuses only on improving its diversity scores will fail to garner long-lasting improvements—it will hire more diverse candidates only to see attrition erode its brief diversity gains. This is because in order for companies not only to attract, but to retain diverse talent, they must create an inclusive culture and provide equitable access to tools and resources to help diverse employees thrive. Frequent touchpoints through engagement surveys covering DEI topics (and taking action to address the findings), implementing employee resource and affinity groups and mentoring programs, providing learning and development opportunities around implicit bias and cultural sensitivity, and establishing formal policies around discrimination and harassment are steps companies can take to make lasting improvements in diversity, equity and inclusion.

Socially responsible companies must consider DEI not just from the perspective of their employees, but also of their boards. Boards are the company’s public face, and shareholders, institutional investors, banks, stock markets and regulators increasingly expect companies’ boards to be diverse. Goldman Sachs’ CEO David Solomon made headlines in 2020 stating the bank would no longer take companies public without at least one diverse board member.[4] In 2021, the Securities and Exchange Commission (SEC) approved Nasdaq’s proposed listing rules which would phase in board diversity requirements for companies listed on the exchange.[5] A large proportion of blue chip investors and increasing numbers of smaller asset managers and quantitative investors publish requirements for board diversity in their proxy voting guidelines, further pushing companies to diversify boards. Today’s healthcare companies should be considering and creating space for diversity from a board’s inception.

Diversity, equity and inclusion are not just important within a company—socially responsible companies must manage DEI impacts on their patients, the communities where they work, and on society as a whole. In order to appreciate the outward aspects of DEI, it is important to understand its intersection with other material issues—drug access, affordability, patient safety and quality management.

Clinical trial diversity, a key consideration for quality and safety management, is rapidly becoming one of the most visible material issues faced by healthcare companies. A report issued in 2022 by the National Academies of Sciences, Engineering and Medicine (NASEM) cited the “urgent” need to improve diversity in clinical trials to match the demographics of the disease, citing little improvement in clinical trials diversity over the past 30 years.[6] According to the FDA, white patients accounted for 3 in 4 molecular and biologics clinical trial participants in 2020, despite making up just over 60% of the US population. FDA regulations proposed in 2023, if finalized, would require companies to submit diversity action plans with clinical trial documentation in order to improve diversity in clinical trials.[7] Healthcare companies at all stages should be working to ensure the rosters of their clinical trials match the underlying disease demographics as closely as possible. Establishing a clinical trial diversity policy and formalizing a process for considering diversity in clinical trial development, considering the location of trials and historical success of clinical trial locations in enrolling diverse participants, taking into account cultural sensitivities and language barriers in developing plans for outreach, recruitment and compensation, and engaging with community groups are some of the methods companies may consider to improve diverse representation in clinical trials.

Product accessibility and affordability also intersects DEI and is a leading material issue for many innovative healthcare companies. Because diverse groups are often the least able to pay for new treatments and products, DEI considerations should be central to a company’s approach to pricing and accessibility. Companies may consider expanded access programs for clinical trials, tiered pricing, strategic partnerships and collaboration with firms in emerging markets, and product donations to help disadvantaged communities access innovative products. Demonstrating a commitment to product accessibility and affordability can help biotech and pharma companies make their case when negotiating price with healthcare systems and providers.

Diversity, equity and inclusion is much broader than simply tracking diversity statistics—it applies both internally to a company’s culture, policies and programs, and externally, to how it interacts with diverse patient populations and communities. Reporting on and improving employee diversity is important—but a focus on diversity alone is insufficient. Healthcare companies should prioritize DEI as a core consideration in how they approach recruiting, engagement, promotion and retention, board composition, employee learning, development and training, clinical trials development, pricing and access programs. Mission-driven companies will find DEI naturally compliments their vision and expands their capacity to create positive change.

Molly Podolefsky, Ph.D. (she/her/hers)







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