How are Pharma CEO's Like the Ostrich?

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The ostrich has become a staple of many pharmaceutical science presentations of late, symbolizing an industry that is reluctant to change. Perhaps it could symbolize some of the more shortsighted pharma CEO's at this point in the 21st century. With all due respect, as CEOs face a tough balancing act today, I have a few questions for this elite group:

  • Why do your actions, post-merger, so often diverge so very far from your stated goals and promises?
  • Why do you so often seem to sacrifice the best and most committed to positive change, in your downsizing efforts?
  • Why don't you appear to take any interest, on a personal level, in the brilliant and hardworking people who discover, develop and make your drugs? Or the consumers who take them, who must deal with huge variability and, more increasingly, questionable quality? (If household paint manufacturing were as full of variability as drug quality, I heard someone quip recently, we couldn't even have color sample sheets....each time one painted one's walls, the results would be a "surprise.") Contrast J&J's CEO and his purse-lipped, monosyllabic and defensive responses to recent product quality issues with those of Toyota's managers in the recent past.
  • Do you care about how the industry handles R&D and manufacturing? Does it matter to you whether both of these remain in the 20th or the 19th centuries?
  • What is your vision, for your company and the industry? Beyond exploiting huge BRIC market opportunities, and the savings of outsourcing and offshoring? Oh yes, and acquiring your way to innovation. By the way, the number of pharma and bio acquisitions are increasing, but the value of those transactions is apparently shrinking....according to data from the University of Grenoble, pharma and biotech mergers were up by nearly 3% last year, but their value was down by over 40%....what does that say?   

Prompting this note was sad news that Pfizer will be closing its facility in Sandwich, U.K, a small-molecule facility and key incubator for PAT and Right First Time efforts (not to mention the birthplace of a major blockbuster. You know the one). And so it joins Wyeth Pearl River, Pfizer Ann Arbor, Pfizer Groton and others that had led the industry in innovation and change.

We all know that not every R&D and manufacturing site can remain open, but couldn't some creativity be used to retain the most potentially valuable assets and human capital? The problem with recent pharma mergers (and I don't only mean Wy-Pfi) is their wastefulness....in the Wy-Pfi transaction, resources that had been newly acquired were often scrapped to generate cash....innovative platforms acquired were trashed because they weren't invented at the acquiring company, and some of the industry's most exemplary change agents lost their jobs.

In addition to their impact on local economies, there's also a certain pettiness to some of these transactions, as evidenced by the nickling and diming over Sandwich researchers' severance,  reported by the Wall Street Journal. These severance packages pale in comparison with the golden packages and stock options offered top management.  Is the act of developing a blockbuster drug, earning billions in revenue, that much less valuable than the job of managing diverse businesses, as a CEO must?  Yes, the managers deal with more risk and must be paid more....but THAT much more?

Must a generation of pharma managers be removed, to change the status quo? So says one industry observer, whose name I respectfully leave out, and who had this to say on Wy-Pfi. Perhaps other pharma CEOs embarking on acquisitions could take note:

"Pfizer told the market it was buying a company for its expertise and pipeline in certain key, complementary areas, then ran the takeover to deliberately maximize the destruction of exactly those resources...the bigger the pharma company the further its head is in the sand, ie the less it likes change, the less it accepts people with innovative views and aspirations and the less it is prepared to do anything which may be viewed with anything other than complete acceptance by regulators [editor's note----that is, when it complies with regulations] . Science and risk go out the window, certainty and mediocrity become watchwords of the day, and the bigger the company the more likely they are to stagnate."

Another reader writes in, "Pfizer's new CEO must show productivity for this year, and the easiest way to do this is to close sites."  Sandwich is large, and its closure will have a devastating impact on the local economy, others note. "On the ledger, this year will be a special item: layoffs that justify below-par results.  Next year, the fact that 5,000+ salaries have been eliminated will result in a positive number.  But one year later, the dust will settle and the net impact will be...zero. A year later?  Everyone will say "tsk, tsk" and the CEO will move on to receive his golden handshake." Where is the long-term savings, or benefit, to the consumer, the worker, the local economies supported by industry?  Anyone?   

But what do you think? If you can't leave a comment on this platform please email me at ashanley@putman.net.

AMS

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