Saturday, August 06, 2011

Weekend Reading: The Self-Destructing Pharma Industry Edition

Like most people working in drug discovery and development, I've watched the waves of mergers between pharma companies with sadness. The mergers never seem to do much good for the companies- hundreds of people are laid off, but even worse, the productivity of the resulting company never seems to live up to the promises made by senior management at the time of the merger.

No company demonstrates this sad recent history more that Pfizer. When I was leaving graduate school, a job offer from Pfizer was greeted with enthusiasm. Now, people are reticent to take a job there, because the industry scuttlebutt is that morale is at rock bottom, and no one trusts that his or her job is safe.

As I've written before, I think we all need to adjust to a world without job security, but I can attest that it is possible to have high morale in the absence of such security- most biotech jobs are quite insecure, but I love the energy and team atmosphere in biotech.

Last week, Derek Lowe at In the Pipeline had a post that led me to a recent write-up in Fortune about the most recent shake up at Pfizer. It is depressing, but fascinating, reading. I think everyone should care about this, not just those of us whose industry has suffered from the upheavals at Pfizer. If the pharmaceutical industry self-destructs in a wave of short-sighted, finance-driven mergers, who will develop the new drugs that will treat the many conditions still in need of treatment?

Despite what you may have heard, government and academic scientists do not make new drugs. They excel at identifying new drug targets (the proteins that the drugs modulate), and recently they have started to do some very good work in lead discovery (identifying a small molecule that has the right properties to be the starting place for the development of a drug). Some have even started to push towards clinical candidate identification (a clinical candidate is a small molecule that has been thoroughly tested for activity at the target, checked for undesirable off target effects in vitro and in various animal models, and also shows good properties with respect to metabolism, absorption, etc.). But I am not aware of any academic or government site that is doing large scale development- the work of taking a clinical candidate and figuring out the formulation that can go into humans, doing the preclinical testing required by the FDA, and more. Maybe they will start to do so. Maybe small and medium-size biotech will adapt to fill the void. Maybe the resulting system will work even better than the one that has been destroyed by the recent rounds of mergers. But I have to think there was probably a less painful way to get there.

10 comments:

  1. Fascinating post. I have no experience with mergers, but I can't imagine them being productive.

    New drug development is a big problem, but the old system definitely had some problems. The necessary focus on expensive drugs - maintenance medicines rather than cures. The cost of new drugs is becoming quite prohibitive. As someone living in a country with health care it becomes a problem that the government as a whole is more interested in solving. Hopefully the old system falling apart will lead to some long overdue changes.

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  2. I don't know why (like it's not my area at all and they aren't all people who know each other) but I have quite a few friends in the sales side of pharma, all for different companies, and none are very happy right now.

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  3. @Today Wendy- the cost vs benefit ratio a whole 'nother set of problems! Part of the problem is that a lot of the new drugs are biologics (i.e., proteins), which have significant manufacturing costs- unlike small molecules, which are usually pretty cheap to manufacture. But for sure, the pricing system is messed up. There was a recent NY Times editorial that covers some of this: http://www.nytimes.com/2011/08/07/opinion/sunday/ezekiel-emanuel-cancer-patients.html?_r=2

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  4. The topic of Rx drugs has been on my mind recently as my dad plans for retirement. I'm starting to see just why many seniors are freaked out by Medicare part D. In the typical analysis of how is an average retiree to pay for all of this, Pharma is always portrayed as the Evil Empire. So I appreciate your more reasoned analysis from a unique perspective.

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  5. Fascinating. I know a bit about the government side of things, but not much about the industry side. Thanks for insight and the reading!

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  6. the milliner8:20 AM

    "a wave of short-sighted, finance-driven mergers"

    If you change the word 'merger' to 'restructures', I think this phenomenon is impacting a lot of companies in a lot of industries (including ours) right now. And I think the end result, for the most part, is the same: loss of innovation and cutting new paths, which I think will ultimately will result in loss of revenue, their primary goal in finance-driven changes. I understand the need to tighten belts in hard economic times. But I have to think there is a more innovative solution that takes short and long term goals into account. And I realise this is easier for me to say as one of the peons instead of the CEO.

    And I couldn't agree more with this:

    "Maybe the resulting system will work even better than the one that has been destroyed by the recent rounds of mergers. But I have to think there was probably a less painful way to get there."

    This particular question "who will develop the new drugs that will treat the many conditions still in need of treatment?" is of great interest to us, in that DH takes tens of drugs in a day to be able to live with a transplant. Though I don't know much about drug development, I'm sure we rely heavily on what happens in the US. We hope that new technologies and drugs will help extend the limited life of a transplanted organ. But certainly a slow-down in development is not encouraging.

    Regarding @Today Wendy's comment on cost, We are lucky here (Canada) though, that the issue of cost is manageable for us as the patient. After hitting a ceiling of about $900 out of pocket (i.e. the amount insurance doesn't cover), the province kicks in and pays until the end of the year. (And those that aren't able to get insurance are insured by the province). This ceiling happens for us around June. Which was good news for us when DH was potentially to continue medicating at home for viral meningitis. The cost would have been $1000 / day. Eek. But it would have been paid for. Going to check out that NYT article.

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  7. It's pretty sad. I have a friend who's worked at Pfizer for a short while now, and he's constantly wondering what will happen next. He's had a couple of near misses but somehow landed on his feet with a job in the company, but he's had to move his young family around the country quite a bit in a short amount of time. I'd be willing to be the constant uncertainty makes doing his job as well as he can quite difficult.

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  8. According to this paper: http://www.nber.org/confer/2011/SI2011/LE/Matsa_Miller.pdf, they would do well to put more women on their boards of directors. Or at least more Norwegian women.

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  9. Anonymous6:31 AM

    Everyone, read up on the Sunshine Act, it was passed within the healthcare reform act by our glorious congress. That will explain much about the pharmaceutical industry imploding. It is good in the sense of requiring ethical drug development, but the industry will be shaken for the next few years while learning to adapt to this new legislation.

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  10. Anonymous- the pharma industry implosion predates the health care act by many years.

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