Pharmaceuticals: A slow business in a fast age

Abbott doesn’t want to be Abbott any more, and Pfizer is trying very hard not to be Pfizer. You might regard these developments, particularly the latter, as a kind of bellwether in the drugs sector.

Who you calling ‘ungainly,’ sucker?

What does it mean that Pfizer—which is either the number one or two drugmaker, depending on ranking criteria—is paring back to its core, and anxiously ditching peripheral units such nutrition and animal health (said to be worth a combined $30 billion?)

Or, to raise what is perhaps a more ominous question: Why is Abbott, the eighth-largest drugmaker, cutting itself in half, and allowing the vivisectionists who ordered the procedure to retain the half that has nothing to do with pharmaceuticals?

These recent occurrences depict the uncertain footing of Big Pharma, that enormously successful old 20th century enterprise, as it slowly comes to terms with the discovery that the young 21st century is already one-eighth concluded.

“Slowly” being the operative term. Mention the word to your kid, or any kid (you’ll need to text them), and they are bound to respond: LMAO! SLOWLY DON’T CUT IT, H8R! LOL!!!

The young world now moves at the speed of thought. And yet, we old pharma-folk are compelled to wobble cautiously—not just by our industry’s traditions and culture, but by antiquated outside forces: the nation’s slow-to-evolve laws and regulations, and your company’s timorous policies toward stakeholders. We are compelled to be deliberative, to be process-driven, to measure progress in decades, not days. To be, forevermore, a weird curiosity from the past, the trained bear perched on the unicycle at the sparsely attended circus.

Indeed, investors have lost interest in the Big Pharma story, and sector analysts describe their job as tantamount to watching paint dry. Ask Wall Street what it thinks of the drugbiz, and this is what you will hear: “Nothing ever moves the needle.”

There was a time, very recently, when it seemed as if the fast people might be able to teach the slow people how to be fast people. Didn’t work. The principals behind Google, the dominant IT group, jumped into the healthcare sector with great enthusiasm, thinking there was much they could contribute to the Life Sciences. And then they quickly jumped back out again, shaking their heads in disbelief at what they witnessed. Officially, the decision to back away from healthcare was based on “too much exposure to litigation,” which is no doubt true. But you can easily imagine the culture clash that occurred when Google met Big Pharma.

“What are you talking about, ‘late Phase III?’ Why would you need three phases for anything? In fact, why would you need one phase? And what the hell is a phase, anyway?”

The twains just don’t meet. The differences between the fast guys (ie, the IT sector, or “them”) and the slow guys (ie, Pharma, or “you and me and Clive there in the next cubicle”) seem insurmountable.

We develop a product, spend an eternity bringing it to market—and rely on legislation and patent attorneys in order to allow us to maintain making exactly the same product in precisely the same version, for the next 14 years.

The fast guys, on the other hand, simply throw their products out, label them “beta version,” and then begin a lifetime-long process of offering continual improvements and refinements, known as upgrades. They never, never, never stop tweaking their stuff.

What about us, the slow guys? We innovate, to one degree or another, right up to the point where we get the green light from regulators. Then we set loose the field force… and prepare to start the generation-long process all over again in exactly the same fashion, back to square one and around again.

Fact: All slow businesses die, regardless of how well entrenched, or how highly regarded, they once were.

Three words prove the point: passenger railroad transportation. Every undergraduate business student grows sick of hearing case studies about the old Pennsylvania Central, whose executives continued to manage by the grand old methods of the insular, time-honored Railroad Industry—which the marketplace reviled. Customers, investors and regulators each wanted faster, cheaper, point-to-point transportation, and had no interest in hearing about the problems and limitations one faced operating switching yards on an aging rail network.

The railroad industry went from heroes to zero in 25 years. Pharma doesn’t have that long

However (as your B-school prof probably liked to babble), that became the sole focus of the Penn Central brain trust. We are unique, they told themselves. The travelling public needs us. You can’t compare what we do to what any other group does. We’re the railroad industry, for crying out loud. The world depends on us!

That internal monologue began right after World War II, and ended in federal bankruptcy court in 1970. That was only 25 years of reading consultant reports, fiddling with management structures, occasionally cutting a whistle-stop or two, and constantly changing the decor, while the business model ground to a complete halt.

The railways were lucky to exist in an age when companies were given such a generous amount of time to fail. Our companies certainly don’t have 25 years to figure out what the healthcare market currently expects from its therapy developers and providers.

We should consider that we’d be fortunate to have four or five years left to finally come to terms with the question of what Big Pharma needs to be now.

That should be more than enough time, if we begin by accepting the main point: that it’s not about pharmaceuticals any more. We’re in the business of helping people. Start by understanding how that’s different from peddling pills, and we might just begin to figure out a path forward.