Monday, January 21, 2013

Is Pharma Too Big to Succeed?

You've heard of investment banks being "Too Big To Fail" as an excuse for government intervention. After reading the book "Devalued and Distrusted" by John LaMattina, former Pfizer president of R&D, I've come up with a new twist on corporate bigness and failure: Pharma is Too Big to Succeed; well, succeed alone.

LaMattina does says that “industry consolidation of the last 15 years has resulted in less competition, less investment in R&D, and a gradual decrease in the approval of new medicines…such a trend should be alarming,” according to LaMattina.

LaMattina cites M&A’s disruptive consequences, such as cost-cutting, site closures, shifting of people and projects, etc. However, a few pages on, LaMattina points out that big pharmaceutical companies cannot meet a glaring unmet medical need for new antibiotics because the “commercial return on a new antibiotic would pale in comparison to a new treatment in areas like cancer or Alzheimer’s Disease. This is attributed to the fact that an antibiotic is generally used acutely,” says LaMattina, “not chronically, and so profits are diminished by short-term use. . . This narrow use. . . [makes] it unattractive for a big [my emphasis] company.” La Mattina suggests that fulfilling such unmet medical needs is “ideally suited to the expertise of biotech companies.”

These musings and others in the book seem to undermine LaMattina’s goal, which is to correct the public’s perception of the drug industry – a perception that has been distorted by the media such as The Dr. Oz Show where he made a fateful guest appearance. Much to LaMattina’s chagrin, the show was titled “The Four Secrets that Drug Companies Don’t Want You to Know.” His book is in many ways an attempt to rebuff the premise of that one show by addressing the “four secrets,” which are:

  1. Drug companies underestimate dangerous side effects
  2. Drug companies control much of the information your doctor gets
  3. You’re often prescribed drugs that you don’t need
  4. Drugs target symptoms, not the cause

I’m not going to get into all of LaMattina’s thoughts on these issues. You’ll have to read the book yourself. Unfortunately, as I mentioned in a previous post, the paperback version costs $29.95, which means most of the American public will never buy it. Even if they did buy it, I doubt they would read it because it is pretty technical and seems to be written more for physicians than for the lay public.

Back to the “secrets.” I’d like to focus on LaMattina’s rebuff of “secret” #4 and how it relates to the topic of this post; that is, Pharma is Too Big to Succeed.

IMHO, LaMattina, fails to convince me that Big Pharma focuses on the causes of diseases rather than the symptoms. When he waxes on about the benefits of “targeted therapies,” for example, he says we are “not far from the time when a cancer diagnosis” will be one “of a chronic disease, one that might not necessarily be cured but rather treated with a variety of medications that will keep one’s cancer in check. . . what a wonderful situation for patients,” says LaMattina. Obviously, postponing death – a major “symptom” of cancer – is wonderful for many patients. It’s also wonderful for Big Pharma, which currently has about 1000 “novel anticancer agents” in clinical development.

LaMattina suggests he may be “na├»ve” when he assumes expensive targeted cancer drugs when used in combinations can be delivered at a “reasonable cost.” It’s only this hope that he cites to counter the point he makes earlier that paying for all these new cancer treatments “will become unsustainable.” Treatments are not so “wonderful” when they are not sustainable, IMHO.

LaMittina also points out that Big Pharma spends only about 15% of its R&D budget on “R”; i.e., basic research. Research is much better left to NIH, academia and other government funded labs. LaMittina gives the public sector credit for this basic research and points out that “a successful academic-industry partnership is crucial in discovering new medicines.” In those cases where NIH is “diverting” hundreds of millions of dollars to do “drug discovery,” LaMittina suggests this is “clearly better done by industry,” which is responsible for 90% of new drugs approved for marketing by the FDA.

So, it’s clear that Big Pharma cannot succeed on its own and should not lay claim to all advances in “curing” diseases such as cancer.

Despite the economic realities of Big Pharma companies mentioned above, LaMattina on one hand says that “Big Pharma can gain a lot of good will, something it desperately needs, by fully committing to rare diseases…” On the other hand, LaMattina suggests that Big Pharma needs to be happy with a “niche blockbuster” model whereby instead of having a “few $10 billion-selling drugs,” it has “many billion dollar products.”

As I pointed out in a previous blog post, it is possible to have billion dollar “orphan drugs” targeted at rare diseases IF the price is right. One such drug is Pfizer's Xalkori (crizotinib), a newly approved for a rare form of lung cancer, for which Pfizer plans to charge $115,200 a year per patient. LaMattina cites Xalkori many times in his book as a wonder drug, but does not mention the price Pfizer wants to charge for it. At that price Pfizer only needs 9000 patients to reach a billion dollars in sales! (see “New Big Pharma Economies of Scale: Less Patients Needed to Reach Blockbuster Sales”).


  1. Anonymous1:43 PM

    Pfizer plans to charge $115,200 a year per patient. LaMattina cites Xalkori many times in his book as a wonder drug, but does not mention the price Pfizer wants to charge for it. At that price Pfizer only needs 9 patients to reach a billion dollars in sales!

    million, not billion John

  2. Or perhaps you mean 9 thousand patients to reach a billion. I agree that the price is rather high. On the other hand many patients taking lipitor will have no benefit from it (or at least many would have to take it for many years to have any benefit). Price per patient year may not be a good way to compare drugs.

    I have not read the book and somehow don't think I am going to. Keep up the good work.


    1. Stephen, Thanks for the correction! Yes, 9,000. There is another measure of cost -- I forget what it is right now.


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