Pfizer's Deep Trouble - Will Pharmaceutical Industry be Able to Change?

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Pharma

Pfizer's new CEO, Jeffrey Kindler, implicitly acknowledged last week, that Pfizer has hit the wall. "Despite the nearly $15 billion it made last year, despite the fact that it still has the best-selling drug in the world, Lipitor, which generates around $13 billion in annual revenue - its reliable business model had begun to break down", is the assessment of Joe Nocera in an article in the New York Times' business section.

"Jeffrey B. Kindler, announced that Pfizer was going to do some serious retrenching. For starters, it would lay off 7,800 people. Along with a previously announced reduction of 2,200 sales representatives, that meant Pfizer was going to cut 10,000 jobs, about 10 percent of its work force", continues the article.

Vera Hassner Sharav of the Alliance for Human Research Protection has a comment about this:

"Oddly, the New York Times seems to buy industry's efforts to gain even longer patent extensions beyond its current 20 year market exclusivity. What the Times doesn't begin to address is that many of the blockbuster drugs have no proven, demonstrable therapeutic value, but rather a perceived benefit that when the adverse events are added up, the perceived benefit disappears.

By checking the initial FDA-approved label and subsequent changes in the labels of blockbuster drugs provides insight about how risky it is to consume a newly approved drug.

Take Pfizer's blockbuster antidepressant, Zoloft--whose sales in 2005 reached $3.5 billion. In scientific controlled trials, its benefit (82% of its benefit) was matched by placebo--which carries no risks and no cost.

Pfizer's Zoloft label history shows an incremental acknowledgment of previously undisclosed serious risks of harm. The labels do not reflect any commensurate findings of added benefits for those who are exposed to those increased risks of serious harm.

By the time the latest Zoloft label included a black box warning about suicidality in children and adolescents -- its patent protection had almost run out. Even today, the Zoloft label does not yet reflect the evidence that the drug poses a greater than twofold increased risk of suicidality for adults -- as the FDA's latest reported finding (December 2006) show."

This gradually emerging profile of deadly side effects is by no means unique to Pfizer's Zoloft. Other companies and indeed a number of drugs are suffering similar problems. Merck's Cox-2 inhibitor Vioxx was approved in 1999 but after some years, as thousands of deaths among patients could no longer be covered up, the company decided to remove the drug from the market. In 2001, Bayer withdrew its cholesterol-lowering Baycol after it had been linked to more than 50 deaths, later estimated to have been more than a hundred - an ominous sign for Pfizer's blockbuster Lipitor.

When 13 billion dollars out of your total yearly income of 15 billion are from the sales of one fatally flawed drug like Lipitor, you know you are in trouble, despite the size of your company. Despite its apparent success, Lipitor has an appalling side effect profile, and the philosophy behind it - the drug interferes with the liver's natural ability to produce cholesterol - renders the drug both damaging and ineffective.

A flawed business model

Commentators quoted in the New York Times article fault Pfizer's concentration on what are called blockbuster drugs, those that generate more than a billion dollars in yearly revenues:

The era of the blockbuster - and the blockbuster business model - may well be coming to an end. If you get away from Wall Street, it's not hard to find people who view things that way. "I don't think the model makes sense anymore," said the Harvard economist David Cutler.

"The blockbuster model does not work as a business anymore," said Roger Longman, a managing partner at Windhover Information, a health care consulting company.

But that is a very superficial way of looking at things. Pharmaceutical companies generally rely on patentable drugs which they can sell at high prices without having to fear competition as long as the patent holds good. That means, their research - by necessity - has to go further and further away from using natural molecules, those the human body has been exposed to and has learned to live with for millennia.

Instead of searching for better ways to deliver nutrients that help our bodies cope with stress and illness, the pharmaceutical world must look for synthetics, which are patentable but which, more often than not, end up disturbing homeostasis, in an effort to suppress this or that symptom. The real causes of illness are almost never addressed.

While pharmaceutical producers have to make ends meet, there is no reason that our health should be the playground for an investment industry that is yielding insane profits to shareholders. But as long as pharmaceutical companies profit from disease, rather than from health, we will have disease as a major outcome. This puts incredible stresses on national health systems, which not only must pay for the overpriced drugs but end up having to provide hospitals and care for an increasingly sick population.

Pfizer's recent restructuring move only shows the tip of the iceberg. What is at stake is not only the pharmaceutical business model. The real question is: can we allow companies to profit from ill health rather than from good health, and can society continue to foot the bill for the outcome in terms of public health.

Something has to give - sooner or later. Whether Pfizer follows the pharmaceutical blockbuster model is not the question. We need deep reforms to bring the pharmaceutical industry out of the doldrums. And those reforms must bring better health outcomes than patentable synthetic molecules are able to deliver.

You can find the New York Times article here, but below is, for archive purposes, a copy.

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THE NEW YORK TIMES
January 27, 2007
Talking Business

The Dangers of Swinging for the Fences
By JOE NOCERA

There was once a pharmaceutical company that could do no wrong. It had the best-selling drug in the world. It saturated the airwaves with its ads, and swarmed doctors' offices with its army of good-looking sales representatives. It had mastered the art of turning drugs into blockbusters. It made many billions in profits. Wall Street analysts loved it. That company, for those among you with short memories, was Pfizer. And that era when it was the king of the hill wasn't some distant age - it was just maybe three or four years ago. Oh, how the mighty have fallen!

This week, during a meeting with analysts and investors, the company's new chief executive, Jeffrey B. Kindler, announced that Pfizer was going to do some serious retrenching. For starters, it would lay off 7,800 people. Along with a previously announced reduction of 2,200 sales representatives, that meant Pfizer was going to cut 10,000 jobs, about 10 percent of its work force.

He also announced that Pfizer would close some of its manufacturing and research facilities and reconfigure its research capabilities. But most important, Mr. Kindler did something his predecessor, Hank McKinnell, who was shown the door last summer well ahead of his scheduled retirement (and handed an obscene exit package), had never been able to do.

Implicitly at least, Mr. Kindler acknowledged that Pfizer had hit the wall. Despite the nearly $15 billion it made last year it; despite the fact that it still has the best-selling drug in the world, Lipitor, which generates around $13 billion in annual revenue - its reliable business model had begun to break down. Mr. Kindler's essential message to the investment community was that Pfizer was going to try to do the single hardest thing any big company can try, and that is to change.

We in the newspaper business tend to obsess about the wrenching transformation taking place in the media industry. It is easy enough to see. We look at other industries, like the domestic auto business, and we can see that its way of doing business isn't working anymore either.

It is a little harder to see that with Big Pharma, which is still rolling in profits. But the pharmaceutical business is, indeed, changing. "I think of the environment as a huge screw that is slowly turning," said Steve Scala, the health care analyst with Cowen & Company. "You can't see it turning if you are in the middle of it, but if you walk away for a while and then come back, you notice how much it's turned." For Pfizer, the very tactics that made it so successful for so long are precisely the ones that have now caused the company to stumble.

Mr. Kindler has noticed that the screw is turning. Whether he can actually do anything about it, retrenchment or not, is another question entirely. THE modern Pfizer was built on blockbusters, which is what the industry calls medicines that generate $1 billion or more in annual revenue. That isn't exactly a news flash: There was Viagra, which it brought to market in the late 1990s and turned into a $1.6 billion drug, and its high-blood-pressure medication Norvasc ($4.8 billion in sales last year). And Lipitor, which, despite competing with a handful of other cholesterol-lowering drugs, is by far the dominant drug in its class.

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