What Is Really Killing Pharma

Posted by Anthony Nicholls on Apr 4, 2011 9:00:45 AM

Sometimes it’s frustrating being in the business of servicing an industry so manifestly important and so manifestly stupid. I started OpenEye to help those I had come to know in pharma do a better job, enjoy their work more, and further the science of drug discovery. And I think we’ve done okay: shape has become a routine way of finding new or better molecules; 3D is no longer seen as difficult. What I had not expected was how the very people I was trying to help would constantly be undercut and sabotaged by their management.

I’ve written before about the eviscerating effects of the Bayh-Dole Act on the spirit and, ultimately, the effectiveness of science in this country—and, by a curious domino effect, in Britain and other major science nations (with the possible exception of Germany, as far as I can tell). Today I’m going to suggest that another act of government laid the foundations for my issues and problems with management in big pharma. That act was the decision by the FDA in 1997 to loosen its restrictions on Direct To Consumer (DTC) advertising. In large part, this came about because of intense lobbying pressure by the drug industry to have the FDA overturn its 1983 moratorium on broadcast DTC. This decision led to dramatic increases in TV advertising and changed forever how the industry was both viewed and run.

I have come to believe (and I admit that this is only a theory) that as more and more of pharma’s budget was funneled into advertising and direct marketing to both the general public and to doctors themselves, the path to the top in pharma ceased to be via the lab bench and instead was by way of Madison Avenue. So where do I get this idea? Let’s look at a few examples. When I first started visiting AstraZeneca (then just Zeneca) in the mid-1990s, it was run by Sir Tom McKillop. McKillop, a PhD in chemistry, had formerly been technical director at ICI, the company that de-merged to produce Zeneca. Stories abound about him stopping by to discuss chemistry with researchers (including tautomerism with our good friend Peter Kenny!). But who succeeded Sir Tom? David Brennan. And where did he come from in the organization? Sales. GSK’s Andrew Witty rose up the ranks from that company’s sales and marketing department. Jeff Kindler of Pfizer is a lawyer who had replaced another business man, and who has recently been replaced himself by an accountant. Before 1994, Merck’s CEO was Roy Vagelos, a scientist with 100 publications and a member of the National Academy of Sciences. After a variety of business types, Merck’s most recently elected CEO is Kenneth Frazier, a lawyer.

You would think (or at least hope) that pharma would learn its lesson from other industries. Remember John Sculley? He ran Pepsi until he was brought in by Steve Jobs to run Apple in 1983. In ten years of running the company Sculley increased sales from $800M to $8B. Great, except that he fired Steve Jobs and nearly destroyed the company. Like today’s pharma CEOs, he knew a lot about selling but not much about what he was selling.

One consequence of this shift from science to business in the pharma industry has been less and less appreciation for the realities—as opposed to the hype and hope—of drug discovery. This is reflected both in the quixotic choices made by pharma as to what to pursue and in the stunningly bad management of the core talent in drug discovery.

Ironically, a lot of the talk of what is wrong with pharma comes from pharma CEOs themselves. And when they talk, they just can’t avoid using the “i” word: innovation. From a short missive by Witty that uses it six times, consider the first sentence: “The past fifty years have seen the pharmaceutical industry deliver a constant flow of innovation.” [1] Well, yes; but because pharma has been pumped up by sales and Wall Street valuations, “constant” has not been enough. Management has assumed drug discovery can be commoditized, industrialized and ramped up as “revenues” from DTC increased. This assumption has proved spectacularly wrong. The rate of new chemical entities did not keep up with the hype and the hope, precisely because the realities of drug discovery did not—and do not—seem to enter into the equation for management. In another rant, I’ll go on more about scientific absurdities (like making millions of bad compounds, screening millions of bad compounds, betting the boat on kinases, etc.); here I’m just going to concentrate on the mistakes made by management as they attempt to make a process out of an art.

When you get right down to it, management is really just about dealing with people. The role of a CEO can be boiled down to just four things: managing the company’s vision, hiring the right people, providing resources for those people, and removing the obstacles that prevent them from getting work done. Today’s big pharma CEOs are great at the “vision” thing—but that’s the easy part. And most drug companies already have—or at least had—very talented people, because making a drug that betters the health of millions is a calling of great moral and ethical standing. So all a good CEO really has to do is support those people and clear the path for them to work effectively.

But what has actually happened? First, a lot of senior scientific talent has moved on—some through retirement, others preferring to work at smaller companies with less of the “world-class management” big pharma can provide. But what has shocked and distressed me is the number of people in their fifties who have been let go. These are the people who actually have a working knowledge of the fifty years of pharma Witty mentioned, people who have done their “10,000 hours” [2] refining unique and irreplaceable skill sets, people who can pass these skills on to others. If you accept that making drugs is more art than process, then these are the last people you let go.

But even this travesty pales next to my next point: the danger of management fads. Because your modern big pharma CEO knows next to nothing about science, I have to assume they think they are adding value by imposing management schemes they do know about. Let’s consider one such disaster of a fad: lean thinking and six sigma. Originally developed at Motorola by Bill Smith but based on earlier concepts from Genichi Taguchi and others, the concept is simple enough: apply statistical modeling to an industrial process so that one can gradually improve that process. Actually, this principle is not dissimilar to my decrial of the lack of statistics in molecular modeling—if you don’t know where you are you never know if you have improved. The problem, though, is the process being modeled here—drug discovery—doesn’t lend itself to this method. As any senior medicinal chemist or molecular modeler would be happy to explain to management, an embarrassingly large fraction of drug discovery involves serendipity—while you’re looking for one thing, you find another. And serendipity is, of course, the complete antithesis of a Taguchi robust process [3] where variance, i.e. a standard deviation, can be well defined- we work in the domain of the unexpected, the domain of the “Black Swan” [4]. Now that the method has been applied and failed, it seems ridiculous to have ever thought it might have succeeded. But not only was it applied with great vigor, it often came to be seen as a much more secure employment path than the vagaries of drug discovery. Not a little talent was wasted on these meaningless exercises and not a few careers lost to management bullshit.

Another good one: empowering IT departments to make scientists use the same infrastructure as the guy at the front desk. Rather than see that scientists often have different computing needs than other parts of the business, IT demands obeisance to the corporate norm. In doing so, they hinder the kind of innovation (e.g., Linux, GPU solutions) that used to regularly occur because scientists are quite computer literate, thank you. Instead, IT departments make it impossible for competent people to manage their own resources. They create obstacles instead of removing them. Machine was made for Man, not Man for the Machine.

More fads? How about metrics and cross-charges? In this Through-the-Looking-Glass world, scientists have to account for everything they do, with the cost of each and every action weighed and accounted for. Work done by other groups is counted as “services” that have to be expensed. In other words, upper pharma management—convinced, perhaps, that scientists don’t know the real-world cost of operations—are ruining the one indisputable advantage of a big company: the fact that you can just walk down the corridor and get the another person’s expertise to help solve a problem. They are building walls that turn a large company into a thousand little independent entities with all the problems of communication and lack of shared vision that implies. That’s the newest, most amazingly dumb-headed, most disastrous strategy. Now tell me, does this empower your researchers? Does this “remove obstacles”?

And then, of course, there are the constant reorganizations at every big pharma, splitting up groups that could share expertise into to project-centered groups (so they could have “skin in the game”—oh please), or thinking that having your chemists in China and designers in the West is a good idea (look how well that worked for the software industry—and yes, outsourcing will be the subject of yet another future rant), or thinking that academic drug research will save them.... The madness really never, ever, stops.

I want to end with one of my favorite management insanities- the push within big pharma to remake themselves in the image of biotechs—the reasoning being that biotechs “get things done” and are more productive. Leaving aside the fact that over its history, biotech as a whole has mostly lost money (with only two years of profit in the last twenty-five), I wonder if it occurs to upper management that the principal difference between big pharma and biotech is simply much less upper management. If they are truly serious about making pharma like biotech, then upper management should simply resign. I’m confident that one step would do wonders for innovation.

Here’s a positive suggestion: instead of using biotech as a model, I would suggest that pharma CEOs look to Hollywood for inspiration. The film industry long ago recognized that what is important is talent. No one can predict what will be a blockbuster (drug or movie), but Hollywood has at least recognized that movie-making is a talent-based industry. Perhaps today’s pharma chiefs need to see themselves as latter-day studio heads—I’m sure they’d love that!—and come to the same conclusions. Define the vision, get and keep the right people, stop making it harder for talented people to do their jobs, give them the time and resources to be creative. Then maybe, just maybe, they would start curing pharma.

References:

  1. GSK's Andrew Witty features in The Economist's The World in 2011
  2. Ericsson Anders K; Charness, Neil; Feltovich, Paul; Hoffman, Robert R. (2006). Cambridge handbook on expertise and expert performance. Cambridge, UK: Cambridge University Press. ISBN 0521600812.
  3. http://en.wikipedia.org/wiki/Taguchi_methods
  4. Taleb, Nassim Nicholas (2007), The Black Swan: The Impact of the Highly Improbable, Random House, ISBN 978-1-4000-6351-2

Preserved Comments

When I entered the industry in the mid-1980s, there was a clearly established tradition of valuing employees. Respecting science was a part of that, but only a part. Once people were hired, they were expected to stay.

As a young scientist, I had to make some difficult calls (like failing a million dollar batch). There were plenty of ethically-challenging areas (e.g., is there genuine informed consent in testing soldier-volunteers?) and a certain amount of corruption (why are we buying this material from this company? because our vice-president is sleeping with their vice-president), but in general there was respect for the science over the personality.

But even from the beginning, the tradition was in decay, and politics started to reign supreme. Leaving one place hoping to find a better situation, instead I found myself under pressure to approve a process that could have left retrovirus in the product. Over the years, things got worse and worse, as the majors stopped doing science and started buying in products from small companies, many of which had no ethical culture at all.

I loved pharmaceutics and worked my heart out for the industry. But nowadays--I say this with deep sadness--there are no ethical pharmaceutical companies left. I had a hell of a run, and even started a company to commercialize a class of drug substances on which I hold a patent from my academic days. The real failure is of leadership at the top, and it runs through all of American society. The people in leadership positions are doing it for the money.

You can't be focused on the money and be a leader. You have to do pharmaceutics because you love it, because you want to make people whole. Then you can pour your whole heart into your work, and inspire others to do likewise.

And you know what? If the leaders are acting unselfishly, the organization will make better decisions, make fewer blunders, recover quicker, and... make more money. - JS

Another blog post which partially restores my confidence that there may be a bastion of hope in getting researchers, the actual creators and producers, the credit that they deserve.

I'm frequently baffled (and internally enraged) at times at how people who know nothing about the science that is the foundation for their company manage to sit at the top. I can't even count the number of times I have been on my way to or home from my lab, thinking in my head, "I want upper management (of any type, even government) to pony up and participate in a live and open debate where they must show their creativity to propose solutions to open-ended problems with no predefined solutions," which in my opinion should be developed by having experience all the way from a fundamental level in their industry. At my fantasy debate, any answer similar to "I have assembled a team to investigate this" results in automatic expulsion.

What frightens me more is when that same manager passes off his "knowledge" to another generation of people hopeful to bank on the talents developed by others.

Companies that have moral and great scientific and industrial goals at their outset, and are eventually taken over by non-technical management and greedy guys in suits - if someone hasn't already, it sounds like a pattern having dynamics that can be characterized mathematically.

Clint Eastwood's character deals with a similar frustration in the movie Heartbreak Ridge, where he is a veteran recon platoon leader who knows what it really takes, and the battalion leader who presides over him came from logistics and supply, knowing little to nothing about warfare tactics. Eastwood's character takes no shame in embarrassing his superior when appropriate.

Article describing loss of ethics in drug discovery and pharma:
J. Drews, "Strategic trends in the drug industry",
Drug Disc. Today, 8:9 p.411-420 (2003) - JBBrown

Ant - Very insight full analysis and discussion. The Hollywood Studio model that you suggest can be likend to the way companies like Berkshire Hathaway (Buffet rule fame), GE etc. are structured where top mgt focus is largely on corporate wide functions like finance, legal etc. but differing business units/product lines are at full liberty to operate as per their unique success requirements. So, why not Pharma? On some of the other macro level points that you allude to (ie the way corporations work in general in US), Paul Volker,in the aftermath of the financial meltdown, had suggested that US return its focus to actually making products rather than attempt to become the global financial powerhouse. This involves a whole range of public-corp-govt interface matters beyond the scope of you discussion; still, they impact focus/operation of corporations IMHO. - Sunil

I greatly enjoyed this most excellent rant although I think that there are other factors which may be even more important than Pharma's uninspiring and underwhelming management. The Pharma of today is forced to go after less validated targets in a tough regulatory environment. Late stage toxicity is still highly unpredictable and you often need to dose a large number of patients just to observe it. - Pete

Anthony, Great post! I couldn't agree more with your rant. You laid out all the reasons why my initial dreams of working for the Big Pharma had been squashed - right after I saw the truth during my first interview there... No, thank you - I'd rather stay where I am, working for a small company governed by a tiny management team, without wasting valuable time on writing "weekly reports", and without the bloody hegemony of an "IT Department". At least I can get things done here, which is worth far more than fat bonuses. - SmallCompanyFan

Anthony: A thought provoking article. As someone who has been CEO and/or a member of the board of a number of small companies, some thoughts:

There is one task the CEO can never delegate, even if he/she wants to; the setting of culture. From whether or not it's OK to be late to meetings to whether or not it's OK to fudge scientific results, the organization will adapt to value what the top person values, and ignore what he/she ignores. Cultural influences only flow one direction -- downhill. So, your comments on the degredation of the ethical culture in pharma, if true, can and should be laid at the feet of top management.

With regard to DTC advertising and expenditures on marketing/sales: There is a stern qualification which you or anyone must meet before they have standing to criticize any CEO for doing what will cause the stock to go up faster, sooner: You must, on a regular basis, call whoever is responsible for investing your money, and tell them you don't care about whether the stock price goes down, you want your money invested on the basis of (fill in the blank). My point of course is that CEOs who underperform their industry get replaced by CEOs who don't. The replacement is done by the board, who in turn serves at the pleasure of the equity analysts and investors who invest YOUR money. CEOs are doing exactly what WE (including everyone who directly or indirectly owns even one share of stock) insist that they do. Getting them to do something different can happen only as a result of legislation, which effects a societal decision that maximizing profits isn't what's best for all of us.

And finally to what's killing the industry. The problem underlying all of this is simply that drug discovery is discovery, and not design. That, along with the fact that new drugs must improve on old ones to get approved, ensures that the probability of finding a viable new drug withing a given number of R&D dollars will inexorably fall. As has been often said, the low hanging fruit is gone, reaching ever higher simply costs more. This will remain true until drug discovery gives way to drug design.

What does this imply about running a drug company? Well, as the well-validated targets get crowded and/or filled with good drugs, we inevitably turn to less well validated ones, which fail more often. If we somehow imposed a constant risk-tolerance on advancing to the next step in the drug pipeline, the pipeline would still be drying up, but we'd be spending a lot less money in the process. Instead, the drugs we move to the next steps are not those that pass some independent standard of risk/reward, but just *the best ones we have at the moment*. Choosing among them is a classic case of making bet-your-company decisions without nearly enough objective data, which is guaranteed to maximize the influence of what we commonly call politics. It's not that anyone doesn't like science - it's just that there's not enough of it to be had when the decisions must be made. - Best, JHD

What is a well validated target? Could it be a target which eventually finds an effective drug against it? Or a cost-effective one? Otherwise, a bit confusing it may be looking at the data. I am not sure the axiom "the well validated were the ones that worked out" is real if we compare the levels of "validation" (a vague concept I would say especially in some indications without reliable or clapped-out models) among targets. May take longer but both short and long term returns must be considered if want to be a healthy corporation. I reckon an average SME has two or three chances along their life to make it. Best to be equipped with two or three bullets to reach different ranges and thus keep the expectation alive. In any case, validation of new targets may be one of the innovation routes. A dozen of very similar multi-VEGF receptor inhibitors do not seem very reimbursely elating, I would have thought.

True. Decisions have to be made at one point in time having analysed and/or interpreted the available data. And there is never enough. But I am one of those that think that, if really negative, which is different from problematic (how many compounds were first despised and then developed and thus enabled the existence of many big pharma nowadays) next steps must follow data´s forthright guidance. Unless there is a scientific or commercial psychic in the room. A turd may always be a turd no matter how you dress it. Needless to say, it is health what we are talking about. - Smallweed

Thanks, JHD, for some thoughtful comments.

I do appreciate the role a CEO can have, often inadvertently, in setting the culture of a company. I think, though, that this is a part of the vision thing. I, at least, try to act like how I'd like to see my company act. You are right that this, then, does not speak well to the leadership of large pharma at the moment- they are lousy role models.

On the matter of what CEOs ought to be doing, however, you seem to have the impression that I am proposing the tired argument that businesses ought not to be looking after their, or their shareholders, best interests. I lay the blame for the change in the mid-90s to DTC not on pharma (although they lobbied for it) but the FDA that allowed itself to be foolishly cowed. I'm reminded of that great scene from Scorsese's "Aviator", when Howard Hughes is being grilled by the senate subcommittee on his undue influence on the air-force program directors. Hughes just throws it back in their face that of course he is going to continue to do this- until they make it illegal why shouldn't he? No, my argument is that given this unfortunate change in the landscape, what did management do? Did they wisely invest in the science necessary to actually make drug discovery better? The hell they did. They instead throttled the golden goose with red tape. Furthermore, although there is an argument that public companies face this inexorable pressure of their next quarterly report, the duty of a CEO is actually to protect and enhance the long-term value of company shares. This is an implicit pact with the employees and an explicit pact with society, for example, long-term capital gains are significantly lower than the general tax rate. John Sculley is considered a failure at Apple because he enhanced the short-term value, but devastated its long-term value.

I like your comment on design vs discovery, i.e. that when you can't design you inevitable run into diminishing returns. I'm not convinced it is necessarily true. We do design much more than in the earlier days of drug discovery, yet are having more problems not less, even in new target areas. But it's an interesting thought.

Finally, I agree that the need to ramp up production has led to poorer, less well informed decisions- but I don't think it just because there is less science, I think it is as much because there are less people willing and able to listen to what the science is telling us. At least in management. - Ant

Anthony, You nicely spotted some of the issues in these last 20 years in managing Pharma organisations. May be some statements were a bit too strong but there is always some truth in them.

In addition to your underlying proposals for changes, here my propsals. Some being a bit revolutionary, some I would say creative (normal I am a researcher ...).

The proposals are around the three major themes below.
Actually these should apply to any kind of organization, not just pharma.

1- Democraty,
2- Avoïd mercenaries,
3- Transparency and pragmatism.

1- Democracy.
My proposal is to elect CEOs and executive management and not nominate them by an obscur committee of friends or cronies. Each candidate has to present his vision, strategy, ultimate goal, the path toward it, as well as the values of the organization and finally his commitments. A panel representative of all organization partners including employees (at 50% of the panel), Shareholders (20% of the panel), Top management (20%) and external partners (10%) will review the candidate proposals and elect the one that seems best to drive the company towards success. This will avoïd some manifeste mismatches observed in the recent past. And this will give the elected person a serious credibility and at the same time all employees, shareholders and other partners will be part of the decision thus sharing responsabilities, risks and benefits....

Notice the strong representation of employees in this committee.... This will force the top manager to respect those who are actually producing the value of the company and thus justifying his salary & bonuses. They are bound in a team !

2- Avoïd mercenaries
What you describe is just simply the mistake with mercenaries.
Only people having an experience of at least 5 to 10 years should be allowed to apply to any executive management position. This forces HR to plan management successions. Sic! Big task usually not done at all.
Too many top managers joining the company not to make it a success but just for their own little interests (power and more importantly $$$$ with lots of zeros).
Many of these guys just destroy what was good by changing the paradigm the organization, the way of working, the values and so on, and once they notice it goes in the wrong direction they quit, with usually quite a nice bonus.
Others, the ones that believe in the company, usually within that company for years, have to play the firemen if not fired or forced to quit due to the negligence of the mercernary.

3- Transparency and pragmatism.
Each top manager should be paid a basis salary of no more than 500 k$ !!!! All the rest linked to goal achievements. But....
The extra salary (in the form of bonuses) will be allocated not yearly but upon the prove of actual achievements i.e. measured and quantified achievements. The assessment of achievements will be done by the same panel of people having elect this top manager. By electing them, they are also responsible of making things happening. Thus they have to judge the goal achievements. And only if this committee agrees on the achievements the bonus will be paid. Some bonuses will be paid yearly, some other after 5 years, some others after 10 and some after 15 ! Why ? Just an example for explanation : if one goal were Improving R&D productivity, you can evaluate this in pharma honestly only after 10 years as it takes at least this time to put a product on the market starting from early research. Thus the bonus might be allocated after the top manager has left the company ;-).
This has some implications: top managers might stay longer and ensure things go in the right direction in order to get the bonus, they will be more involved and committed to success, they will be accountable of the following managers as these have to continue towards the right directions to success. They will be bound the successors thus ensuring continuity. There will be less disrupting management that you clearly noticed as one of the killing factors. - Claude

Hi Claude, Thanks! Your comments are an interesting proposal for society in general. I'm not as ambitious- I'd just like pharma to start having leaders that know what they are doing. Perhaps selfish of me in that their foolishness hurts my bottom line, but I also think their failure has stemmed an important part of the tide in the improvement of human health, no small thing. - Anthony

Alright, overall there are things I agree with. However, I wouldn´t necessarily turn to Hollywood if searching for talent. And I would not make a fuss about the scientific and business/commercial labels or stigmas. I have come across quixotic, bombastic, cleverclogs, stuffy and intellectual thugs in both arenas, science (PhDs included) and business, sales. Big and SMEs. Not to mention an important player you glossed over, venture capitalists, riches. To me it comes down to sheer common sense, alertness and controlled flexibility. And you can find these in various types of professionals if no sycophants. Sheer gambling this game is. Agree, strait jacket management makes drugs a burden, ballast too heavy for the journey. - Smallweed

I wanted to elaborate on a couple of points you made, that really highlight the problem with applying lean, six sigma, kaizen, etc. to pharma/biotech discovery. Those tools make great sense for manufacturing where the goal is repeatability, not innovation. They make no sense where the goal is innovation, which is a by product of diversity. In fact, when you're trying to innovate, you want to increase the variance of a process, not decrease it. Much of my career has been in management consulting focused on R&D process development, which comes into play when you cull best practices from a heterogenous set of processes. Statistical approaches make little sense on development programs since you're dealing with small sample sizes, even in large companies.

The evolution in the executive suite over the past fifteen years has been from scientists to sales and marketing executives to lawyers. This really is due to the shift in preeminence of product and brand management, followed by a need to emphasize legal risk management as companies were punished for illegal promotional activites. Big Pharma has really lost most discovery and development expertise, instead they survive using their huge capital resources to acquire small and mid-sized companies that have promising compounds in development.

Serependitionsly, just yesterday I happened to read an article in a local law journal (hey, it was discarded at a table in a cafe, I'll read anything) about brands and trademarks. It pointed out something that had not really crystallized in my mind; that originally, the concept was to guarantee to the consumer that the article was a product of a specific process used by a specific manufacturer, presumably with higher quality than the competition; for instance, Eli Whitney/Samuel Colt, et al and the interchangable precision manufactured subunits production techniques (early six sigma). With time, and legal decisions, that changed into a guarantee that, although the seller may not have used a specific process, or even manufactured the item itself, the quality of the item was up to a specific standard. With time, and legal decisions, we have reached the current state where a brand is simply a means for a consumer to somehow identify himself with something which in some way will elevate his status or self-regard, etc. The article describes it in scholarly tones as a "magical object". - Anonymous

In addition to what the author has stated, i.e. mismanagement, the big pharma industry did not understand the implication of Wax-Hatchman in the late 80's. I have worked in the generic pharma business all my life and the survival of this industry actually depends on the the discoveries of innovative pharma's through their scientific talent. The big pharma business basically disintegrated in front of my eyes since mid ninties due to: a) quick generic launches from poorly written regulations and regulation enforcement by FDA, b) poorly written patents by big pharma guys, and c) worst of all low quality scientific talent pool with sharp eyes towards profits made the generics run towards the money goalpost, in the process destroying the big pharma business model and community of scientists.

I have seen mismangement, cheating in generics too! Only now FDA (OGD) is kind of realizing the folly after the horse is out of the barn to tighten the review process of ANDA's and hopefully will induce some scientific talent in OGD (Office of Generic Drugs) instead of bureaucrats running the show.

 -Paper200

I came into this expecting another somewhat crusty rant about the world not fitting the ideal, but your analysis sold me. (Meaning it parallels mine to a good degree).

My quibbles would be that the explosion of layers of middle management which exacerbates the problems with top management; and that the problems you describe are not at all restricted to pharma. I've seen similar dysfunction in companies as far removed as North Carolina furniture manufacturers, who have tried to "modernize" by hiring MBAs instead of promoting guys who used to make furniture. Sales people sell themselves into top positions; people with no skills for actually doing things think they can contribute by "managing" those who actually do what the company sells; then both of these together install a glass ceiling over those who do the productive work, above which they cannot rise unless they too move into management.

As if management were some sort of pure skill which can be isolated, taught, and practiced without regard for the substrate being managed. As an Ivy League grad student with an attitude once asked me, "When did Business become a subject for doctoral studies, up there with Arts and Sciences? Can you imagine a student at the Sorbonne five hundred years ago writing a dissertation on overseas tax shelters?"

After a career of watching organizations rise and fall, I've come to the conclusion (hardly unique to myself) that they mostly fit into a set pattern; first a group of talented and dedicated individuals assemble who share a vision and are committed to and capable of doing whatever needs to be done to move forward. At some point, however, it has to make the transition to an organization where a lot of inherent "knowledge" or "information" is built into the organization's structure, somehow, rather than residing in individuals who are, in the end, transitory. The long term quality/success of the organization is correlated with how well it makes that transition. Most don't do very well.

In closing, I recommend to anyone who has not done so to read the section of "The Hitchiker's Guide to the Galaxy" where they come upon a planet colonized by the ship containing all the middle managers, salesmen, etc. of their home planet, sent on ahead to use their specialized skills to prepare things for the planned arrival of the other two ships, that of the home planet's thinkers and that of its doers; both of which have mysteriously failed to leave home. It's a fantasy, but cathartic. - Anonymous

Your post couldn't have come at a better time - thanks for the inspiration! Oh, and six sigma was pushed on me too, but after 2 weeks I became a six sigma dropout - its not really compatible with running chemical processes IMHO. - Anonymous

This a great, insightful article, and unfortunately one which has implications beyond pharma.

A friend told me that a few years ago, when she went to the bank to get a simple service done the teller asked her "Would you like to get a mortgage?". My friend answered "You can see all of my financial data on the computer right there. You can see that I am a college student and have over $100,000 in student loans. Do you really think it's a good idea for me to buy a house?" The teller replied that they were required, by management, to offer the "product" of a mortgage after a "customer" had used the other "products" of the bank a certain number of times. In some industries, this is a sensible practice - it's cheaper (marketing wise) to persuade current customers to buy more than to acquire new customers. However, we know what happened when banks took this approach.

On a different note, I find some of your rhetoric offensive. For example -

"I want to end with one of my favourite management insanities..."

stigmatizes the mentally ill. For a more detailed explanation, read

http://disabledfeminists.com/2... - Anoymous A

Re: Another good one: empowering IT departments to make scientists use the same infrastructure as the guy at the front desk. Rather than see that scientists often have different computing needs than other parts of the business, IT demands obeisance to the corporate norm ... They create obstacles instead of removing them. Machine was made for Man, not Man for the Machine.

I wrote in some depth about that phenomenon ... in effect, de facto IT control of R&D ... at this link:

Conflation of IT with information science in the pharmaceutical industry
http://www.ischool.drexel.edu/... - MIMD

There is a strong disincentive in pharma against true innovation, ie cures.

If diseases et al get cured, the revenue streams dry up. Isn't this just obvious? The money is in treatments, ie keeping the ill just on the edge of well, but never truly well enough to stop using treatments.

So from management's perspective lack of real innovation is not just not a problem worth solving, it's a problem they should rationally perpetuate.

The rest is of the explanations are just distraction. Realize the fundamental disincentive, and come up with an alternative business model. Programmers did it with Linux, so can chemists. - Anonymous

I remember a friend of mine in the late 80s saying something similar about IBM. They used to have tech guys in management and at that point (1988-1990 or so) the top management was mostly salesmen. - Anonymous

I just retired after 28 years in the industry and have seen the decimation of a number of research-based companies either from mergers or just plain attrition within the R&D group. The analysis of the new CEOs coming from the marketing side is correct. Lilly is the only company today that has a CEO (Lechleiter) who came through R&D and has a science degree. I do want to make one comment on the DTC advertising. I don't think it's a nefarious a contributor as you make it out and if anything it has helped for the following reason. With DTC, advertising is cheaper relative to maintaining a large sales force that calls on individual physicians (I'm not saying that it's the right way to do things but only looking at it from the cost side). Many academic medical centers have adopted policies prohibiting direct interaction with drug company representatives and continuing education programs are moving away from company sponsorships as well.

One further contributor is the move away from blockbuster drugs and the fact that for some medical conditions current therapies are pretty darn good and have relatively few side effects. A new drug for cardiovascular conditions will have to really have marked efficacy and safety superiorities. I think we are moving into more niche products (individualized oncology treatments for example) that will require different business models. -Orange 14

You raise some good points. It's no doubt overly simplistic to assume DTC was entirely to blame, but I do think it set the stage for a very different relationship between pharmaceutical companies and the general public that hastened the steady erosion of the scientific leadership of the former. As to where all the blockbuster drugs have gone, I'm not convinced it is because they have all been discovered and we are just eking out the last morsels. Have faith! The rains will come again... - Ant

As I read your article, I couldn't help but think how it played out at Merck as they transitioned from Roy Vagelos to Raymond Gilmartin. The company went from exactly the environment you describe as essential to high productivity to a company in total disarray. This change was related to the fact that the MBA consultants from BCG, brought in to re-design the company, had little knowledge of drug development but were constantly searching for "management paradigms" that fit their mind set. One example, these people told me that they believed aircraft manufacturing had the best project managers. Therefore, they wanted to hire people from Boeing to run the project management group at Merck. I sat in stunned disbelief when this was presented to me. They also wanted to merge the QA groups from manufacturing with clinical because, after all, wasn't QA expertise transferrable? And these people were graduates of some of the best business schools, Harvard and Wharton. Gilmartin himself was named CEO by the BOD because he had run BD and I assume they thought that if you can run a company that makes disposable plastic syringes you are qualified to run a company that makes the products going into the syringes!

I knew that it was time to get out when I went to a kick off meeting for a new compound that hadn't even entered safety assessment and the meeting was run by someone from the finance department (Gilmartin's brainchild) who told us that our mission was not to cure a disease but to develop a 3 billion dollar product. - Anonymous

Merck stockholders should bemoan that these same managers were restricting discovery scientists' access to critical drug discovery computer information tools like CAS SciFinder for years. Empty pipeline? No surprise there. - Anonymous

Thanks for this contribution- I didn't know the story at Merck as well as at some other companies, but your final comment is really heartbreaking. Of all the major pharma Merck used to the one I felt most believed in science, most believed in the worthiness of the profession and had the strongest sense of shared values. For Merck to have lost so much of that (and for me the closing of the Merck-Frosst site was nothing less than corporate vandalism) is tragic. - Ant

and linked from another blog. It reminded me, in part, of a slightly similar circumstance. Late last year, Cathie Black, an accomplished business person in the publishing industry and friend to NYC mayor Mike Bloomberg, was appointed Chancellor of NYC Schools. She resigned on Thursday after numerous instances of doing the one thing you shouldn't do as head of a school district, directly piss off the parents at public meetings. What were Ms. Black's qualifications to run a school district? Absolutely, none, but heck she ran Hearst Magazines so why not?

Uninformed CEOs who came up as lawyers, accountants, and sales people are par for the course in just about every industry. So is the use of Six Sigma, which is the newest name for Total Quality Management which was once called something else I believe. We instituted a form of it at a company I worked for in the 90s in the hopes of streamlining new product development. We principally made RF amplifiers for cable tv systems. Design and manufacturing of RF transmission products is particularly challenging, more so for broadband. Anyway, we tracked both derivative and platform product development. After we had the system in place for some time, a year or more, at the weekly corporate product development meeting the company's Director of Sales had a suggestion - Since derivatives were produced more quickly and generally on schedule, why don't we limit product design to them and not do platform development. Everyone else thought he was joking, but he actually wasn't. The guy had worked in cable tv product sales for over 30 years, was directly working with customers who had interest in our under-development new platforms, understood some things about cost reduction and manufacturability, and still wondered why we did anything but derivatives on existing design.

I'll remember that meeting for the rest of my life. -Makarov

Nice job, Ant.

Comment on six sigma: Some activities in research benefit from serendipity (synthesizing the wrong compound, but it happens to be more active or active for another program); other activities are undermined by poor process control (high throughput screening, analytical chemistry support of formulation development or drug product stability measures, etc.). It sort of fits with your Hollywood analogy. Yes, you want your star actors to try different readings so the director can pick out the best takes (and maybe the botched take might end up being the best one). But, you don’t want your sound or lighting person to have his equipment fail during a shoot so you end up missing the best take or you have to reshoot the scene. - D Yamashita

"Define the vision, get and keep the right people, stop making it harder for talented people to do their jobs, give them the time and resources to be creative. Then maybe, just maybe, they would start curing pharma."

Absolutely right, I was present in big pharma when the management consultants
came in and gutted the research department. An inordinate number of people who
loved the science and lab were let go.

Some business people fight dirty, arm yourself with information.
See this free pdf from an insider with 20yrs of management consulting,
a good read for tricks to watch for.

Reference link... -China Bonding

Nobel prize winner and drug inventor Sir James Black would probably agree with many of the assessments above. I particularly like his recollection that:

"Max Perutz, director of one of the most successful postwar science institutions, Cambridge University's Molecular Biology Laboratory, had compelling ideas on how best to nurture research, says Sir James: "No politics, no committees, no reports, no referees, no interviews - just highly motivated people picked by a few men of good judgment."

and his observation that:

"There is no shortage of scientific talent, he says. "But [I am] much less optimistic about the managerial vision [of the pharmaceutical industry] to catalyse these talents to deliver the results we all want." -MMD

Congratulations to the author for this lucid and honest account of what went wrong in Pharma, which accords perfectly with my own experiences, and those of other scientists I know. -Nick K.

You didn't describe the role of a CEO, at least not one of a large public company. You describe the President or COO. A CEO is more about external interactions and capital allocation decisions than internal operations. Sales and marketing operations are hugely important to the success of a firm, and once products are present, every bit as much so as R&D. You may have a 'theory' about advertising spend vs. R&D spend -- well, look it up. These large pharma companies are public after all and R&D ratios to revenues as well as SG&A are pretty easy to get a hold of in public filings. - Anonymous

"Sales and marketing operations are hugely important to the success of a firm, and once products are present, every bit as much so as R&D." Ah yes: "once products are present". -Dearieme

It's true I am only the CEO of a small company. But I've spoken to CEOs from companies of various sizes and my list of CEO functions is actually borrowed from Jim Alampi who, in addition to having run a billion dollar (public) chemical company, now runs a successful consulting company - for CEOs (http://www.alampi.com/). But perhaps you've had experience of running a large public company- if you have and you did not think setting the vision or getting the right team in place or making sure they could succeed was important, I wonder how that went? But your point about the sales figures vs research is a v. good one and I will do more research for a future blog on this. - Ant

Several companies track R&D spending by big pharma and a recent analysis by BMI illustrates recent trends nicely:

"The leading multinational drugmakers will place downward pressure on their research and development (R&D) budgets over the short term. Cost-cutting and the implementation of operational efficiencies will continue and will be offset partially by commitments to pipeline candidates, especially expensive late-stage clinical trials. This approach may seem counterintuitive, as more research now would boost sales in the medium and long term. The problem is that drugmakers are encountering numerous headwinds against their abilities to generate sales. In the face of the patent cliff, healthcare cost-containment by governments in developed states and higher regulatory barriers, Big Pharma must control R&D spending in order to maintain profit margins and sustain shareholder value".

In layman's terms: "Big pharmas know that cutting R&D spending may compromise future growth but they do it anyway because sales are flagging and they are not willing to alienate investors by cutting short term returns".

See: http://www.pharmaceuticalsinsi... - BiopharmDeals

Anthony Nicholls has stated with perfect clarity what is killing big pharma. One can look at Pfizer over the past decade to see that each point made by Nichols is spot on. Pfizer has killed both scientific innovation and the loyalty of its scientists by trying to grow "Beyond number 1" (whatever that is) by many hostile take overs to rob successful moderate sized companies of their top products. Then, the scientific expertise in each of these companies has been destroyed by laying off the most experienced of the bunch. Constant re-organizations implemented by the worst and most incompetent pharma managers in the business, totally distracted scientists who were left. Those at Pfizer who cannot do science, were not let go, but were "promoted" into management to run the mess and increase the chaos. Management's bonus each year was based on achieving false goals and cutting budgets. Management from the UK were brought to the US to further destroy innovation. They are poor scientists and arrogant. They have further killed the company. While still paying a fluctuating dividend, the stock price has not increased in over ten years. Investors should through the bumbs out. - Experienceincolor2

An excellent analysis and one I hear echoed in many labs I visit. I really believe that the only people who can manage a research based organisation are those that have done it themselves. Recognising the individuals who are most successful and putting them in positions where they can have influence seems an obvious thing to do. Instead most big Pharma companies seemed to be more concerned with following the latest management fad their competitors have adopted.

Perhaps the large Pharma companies will evolve into development house, where process driven work is the norm. The discovery research will be undertaken elsewhere, if so I know where I'd rather be. - DRC 007

Management in biomedicine by those without domain expertise is, by definition, mismanagement.

This is a first principle. There is nothing to debate.- MMD

This might tickle your fancy ...

Hollywood Economics: How Extreme Uncertainty Shapes the Film Industry (Routledge Studies in Contemporary Political Economy) [Paperback]
Arthur De Vany (Author)

I've not read it but it sounds like it might have some interesting analogies with pharma. - John Delaney

Have it already! It's fun, and impressively complex. - Ant

If pharma CEOs become studio heads then will scientists be film stars? And where will that lead:
http://www.theonion.com/articl...

James

I look forward to the day when scientists in pharma are indeed treated like the stars they are!! Thanks for pointing out the Onion got there ahead of me ;-) - Ant

I hope other industries, racing to adapt many of the same 'Lean Six Sigma' processes that have contributed to the sad state of affairs in Pharma, listen and learn!!! - Nancy R.

I spent 22 years in the labs and towards the end of that span, I also thought six-sigma would never be applicable to Discovery, and was dubious of Development. But I kept an open mind since 6-sigma seems then (in the 1990's) to have improved our manufacturing of raw active and finished drugs.

So, I would look more carefully at the reality of the past 10-15 years of its success in other industries, instead of just dissing it. Unfortunately, that is what I heard from my peers in the labs in the 1980's and since then, it appears we still have blinders on. - James R.

To be clear, I wasn't dissing lean six sigma- if anything I am a fan of the application of statistical processes to anything and everything. Rather, it is knowing when to stop- when to realize something is now actually interfering with the creative process that underlies your industry. From the stories I have been told of its application to major pharma there were some definite wins when applied to routine processes- hurrah! My claim is that the lack of appreciation for the scientific process in upper management led to inappropriate application that hindered development. - Ant

So your conclusion is that if an R&D guy was at the helm of all the companies that you mentioned the companies would be doing a stellar job currently? Also, if all the top scientific talent in big pharma left due to business guys being at the top...where did they go? The answer is small biotechs. Small venture backed biotechs. Care to share your thoughts on how successful these R&D CEO run biotechs have been? I am all ears. - Anonymous

Well, I don't think scientist CEOs could have done a lot worse, do you? At least a lot of the ridiculous management fads might have been averted.

As for the scientists who left pharma, those with the years of experience so valuable for drug discovery, some retired, some went into academia and some did exactly what you say. An excellent example is Josh Boger who left Merck to found Vertex and ran it very successfully until 2009, market cap ~$10B. Then there's Arthur Levinson who went straight from academia in 1995 into Genentech and ran it until its $47B merger with Roche. Biotech has done poorly on the whole, but put a good scientist in charge and I think you have a better chance of maintaining the culture you need to, well, do science. - Ant

I liked the perspective - could make a good commentary for a journal. Somehow scientific publishing seems to be weathering the storm of the decline in pharmaceutical research productivity. Could it be the one place were publishing scientific failures actually occurs to some extent. Increased failure rate of projects increases the number of papers submitted by pharmas - would be keen to see if there is an inverse correlation between pharma productivity and publication productivity. Maybe all the scientists are writing papers while they wait for the next megamergers or some management type decides their fate.

Perhaps the successful companies will be those that self select scientific talent and/or those that squeeze every ounce of patent life and therapeutic utility out of the molecules they make, or in license. -CollabChem

Topic: Ant's Rants