What Is Really Killing Pharma

By | April 4, 2011

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. http://www.gsk.com/media/downloads/economist-world-in-2011-gsk-witty.pdf
  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

Anthony Nicholls

CEO & Founder of OpenEye Scientific Software, Inc.

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