Just a couple of days ago, Reuters reported that Pfizer “…is winning attention from some of the savviest hedge funds thanks to high-tech drugs and vaccines that it got when it paid $68 billion for Wyeth.” OK, I get it that it’s all about THE PIPELINE and buying Wyeth put quite a few new potential (nest) eggs in Pfizer’s basket. But here’s the rub: That portfolio of eggs is now going to be nurtured by the Pfizer organization, not Wyeth. Hmmm, this is the same organization that paid a whopping $1.3 B for Esperion Therapeutics in 2004 and then walked away with a $426 MM tax benefit in 2008. And this is same company which invested $800 MM in a clinical program for Torcetrapib (the cholesterol agent which might not have been the best pick of the litter, but was the fastest track to market) only to see it blow up in Phase 3 in a spectacular manner due to safety issues. And, yes, these same decision-makers brought Exubera to market, the $2.8 B debacle in the insulin/diabetes market, a product apparently plagued with manufacturing, device and price issues, just to mention a few. And today we hear that Pfizer-Medivation’s dimebon for Alzheimer’s failed to differentiate from placebo in a Phase 3 trial. Another spectacular melt-down for Pfizer.
Now, it is possible that some strange anomaly occurred in this trial and it will be interesting to see Pfizer’s next moves to investigate the formulation, patient recruitment, etc. But barring any mystical solution to explain the failed Phase 3 results, one really needs to ask what was going on in their due diligence prior to entering the deal with Medivation. Many investors surely trusted Pfizer’s experts to examine the Russian Phase 2 trials and data, as well as the animal studies that formed the basis of the Phase 3 program. Was their due diligence flawed? Or was the pressure to fill THE PIPELINE so great that various and sundry decision-makers felt compelled to “deliver a Phase 3 product”. Given Pfizer’s checkered history with shareholders over the last several years, the pressure to “do something” was surely enormous, and Pfizer’s classical style is to buy their way into a pipeline (so long Warner Lambert, Pharmacia, Wyeth and others).
Hedge funds beware…sometimes a post-mortem assessment on management decision-making (and corporate culture) can uncover some underlying flaws that belie the apparent “undervalued” assets. For my money, I’m not too comfortable with desperate management making decisions about an R&D portfolio. And if you look to track records, Esperion, Exubera, Torcetrapib and now Medivation represent a pretty scary set of examples. Pfizer appears to be running too fast to catch up and ask what their vision and strategy are. What is needed is a ‘pause’…not a leap into generics to pile on another acquisition (Ratiopharm).

The first step in making positive change is to create the mindset that one can achieve great things or surmount great challenges. I know we have seen enough evidence of this in recent months as the new U.S. administration seeks to assume a global leadership role, as well as fix the U.S. economic, energy, education and health care challenges. An Opinion article in the Wall Street Journal this week, “It’s Time to Fight the ‘PharmaScolds’”, made me wonder… Where is the Leadership to Fix Pharma?

In this article, Shaywitz and Stossel succinctly point out the classic challenges of drug discovery and development well-known to industry insiders: “Human biology is maddeningly complex, laboratory models are necessarily simplistic, and scientific understanding remains painfully limited. Discerning which ideas have value and capturing this value is extraordinarily challenging and has a depressingly high failure rate. The complexity of product development as well as the scientific sophistication, regulatory oversight, and manufacturing consistency required to pull this off are astounding. That any new useful medical products emerge at all is nearly miraculous.”

They then proceed to bemoan “…the disproportionate influence of a coterie of prominent critics we have previously dubbed “pharmascolds,” who routinely vilify the medical products industry and portray academics working with it as traitors and sellouts.”

But the comment that got me thinking and reaching for my keyboard was the following: “For the sake of the many patients whose diseases require innovative treatments — and for the medical philanthropists determined to make it happen — it’s time for the leaders of the medical products industry to take pride in their purpose and start fighting back.”

So, where are those leaders? And by the way, who are those leaders? I don’t think they are the CEOs of pharma companies whose words are mistrusted by most, from the lay public to the highly educated and experienced scientists at the lab benches of their own companies. (Sorry for this harsh judgment….but it has been a tough decade for pharma and few have gone unscathed!) And the industry organizations who represent pharma, including PhRMA and BIO, as well as many regional organizations, don’t seem to have been much more effective at addressing this very specific need to change perception. They are too busy lobbying for industry interests using traditional and well-meaning tactics to advance business interests.

So, who will lead the industry to a better day? We have so much to fix, from Discovery to Development to Distribution, but where are we looking for leadership? To suppliers or out-sourcing organizations whose incentive is to sell more into pharma? To management consultants who become attached like barnacles to ships floating gingerly in shallow waters, hoping not to sink or run aground? To the employees who have learned to stay out of trouble, rather than innovate…and who could blame them, these days? Or to the investment bankers who are richly rewarded for merging us into another cycle of gap-filling consolidation?

If you have read to the end of this commentary hoping for the answer, I am sorry to disappoint you. I simply do not have the answer and at this moment, I don’t think there is an answer. But I am ever hopeful that out of the self-examination of our health care system in the health care reform effort, leaders will emerge who “get it” and can fix some of the broken fundamentals that can lead to transformational change.

Where do you think leadership might emerge? Will industry scientists step up and lead in a bigger way, not just as product champions but as industry champions? Or are we waiting for patients to just love us? It could be a long wait. A few major breakthroughs in some serious diseases would certainly help, but these are unlikely to save the day in the short term. Perhaps education will provide the answer over time… glorification of the scientist and the R&D process in the mind of every child would go a long way to creating a new future for pharma and the nearly 7 billion patients waiting for those new products. Hollywood, where are you?

What do you think?

Many have argued that health care reform in the US is a significant threat to pharma, largely due to the expectation that health care reform will certainly equate to some form of price control by the government that will dramatically reduce reimbursement for pharma products.  For many years, the public has railed over the price of pharma products in the US, comparing pricing here to that in many other countries where price controls exist and blaming the pharmaceutical industry for gouging the US consumer.  Needless to say, this has tainted the industry’s image in spite of the dramatic advances that the industry has made in saving lives, reducing the need for surgical intervention and improving quality of life in so many diseases.  Personally, I have spent many hours explaining the global pricing disparities to family and non-pharma friends who generally believe that pharma should just stop selling their products in countries that control pricing, so that we can level the playing field and moderate prices in the US!  Aaaah, if only it were so simple!

Now we have some very interesting data reported today from the Business Roundtable that quantifies this lack of a level playing field. →Read more: Is Health Care Reform Bad for Pharma?

Fixing Pharma.   For years, perhaps for decades, the doom and gloom about pharma’s decline has always lurked just around the corner…price controls, me-too products, and unsustainable healthcare costs always threatened.   For those of us who have been in the trenches seeking the holy grail… a robust pipeline, that is… there has always been another change initiative to keep us busy.  The skeptics amongst us have a name for it…Flavor of the Month.

But this time things seems a bit different, more intense, with daily news portending fundamental change.  Why now?  →Read more: Flavor of the Month or Tranformational Opportunity?