Category: Pharmaceuticals

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Let Them Eat Tort

(here’s the From the Editor column from my magazine this month)

Sometimes, writing this column requires compulsive news-trawling, and my paranoid-detective method of reading people’s quotes. It can be a painstaking process, involving market and biographical research, trend analysis, and interpretations of government health statistics. And sometimes there’s a Vioxx trial, in which case this column pretty much just writes itself.

Recently, Merck won a federal Vioxx suit in New Orleans. The plaintiff, Robert Smith, took Vioxx for four months and suffered a heart attack. Or we could say that Mr. Smith was obese, had high blood pressure and atherosclerosis, took Vioxx for four months, and suffered a heart attack after shoveling snow for nearly an hour. After the verdict, Merck’s lead lawyer on the trial, Philip Beck, commented, “Unfortunately, Mr. Smith would have suffered a heart attack whether he was taking Vioxx or not.” After a few hours of deliberation, the jury agreed with Mr. Beck.

But that’s not the part of this trial that so lends itself to my mean-spirited but occasionally entertaining tirades. No, that honor is reserved for Mr. Smith’s lawyer, Christopher Seeger, who is the plaintiffs’ co-lead counsel for federal Vioxx suits. According to the Reuters report for the trial verdict, Mr. Seeger didn’t exactly put his heart into this one:

“This was a defense pick. . . . It was an impossible case to win going in,” said Chris Seeger, . . . referring to the process of selecting which lawsuits go to trial.

He said Merck could have settled the suit for far less than the $10 million to $15 million it cost them to take it to court, but the company’s “scorched earth strategy” leaves no room for such calculations.

Got that? Provided his definition of ‘impossible’ is the same as mine, it would seem that Mr. Seeger, who co-represents 39 law firms across the country in federal Vioxx suits, pursued a case that he knew he had no chance of winning. From that second quoted paragraph, I infer that he pushed this ‘impossible case to win’ because he wanted to get paid off by Merck to make Mr. Smith go away. A shakedown like this would embarrass the mafia, but it seems that Mr. Seeger and the 39 law firms figure that enough of these $10–$15 million price tags for victories (could it really have cost Merck that much?) will lead Merck to start settling, which will bring them contingency fees without the risk of going to trial. Merck, on the other hand, seems to have the mindset that forcing the Contingency Corps to walk away with empty pockets will cause the ‘impossible cases’ to go away on their own. And that might be the biggest tort reform of all.

While I think there is a benefit that comes from trial lawyers’ discovery processes, I have to wonder about the ethics of a person who told Robert Smith, “You may be entitled to compensation from Merck!” Scorched earth, indeed.

Gil Roth
Editor

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Made it!

Maybe (?) it’s dweebish to take pride in being able to help put on a good pharmaceutical outsourcing conference, but it’s an awfully good feeling when an event works out as well this one has.

The first day of the event is the more stressful one: We had 130 companies at the one-day tabletop exhibition and more than 300 attendees in the house for the conference sessions (between sessions, we had events in the exhibit hall, so the attendees could learn about the exhibitors and do business). It’s basically a four-person operation, with some day-of-show help from some of our office staff.

The buildup is pretty harrowing for us, knowing that more than 500 people are on site because of the strength of the brand 0f our magazine. But the big day was a rousing success. The exhibitors were ecstatic with the quality of the leads they were getting from the attendees, while the attendees loved the presentations we put together (I take a little more pride in that part, since this was the first year I was largely responsible for organizing the presenters and topics).

Anyway, I know this is coming off as a rah-rah horn-self-tooting, but I feel awfully good about how well it all turned out. Exhibitors were seeking us out at the cocktail reception after the show, to tell us they wanted to sign up for next year’s event now. It takes months of preparation that still leaves plenty of last-minute stress, and it’s a great feeling when everyone else is happy with the results.

Now, on to Paris, for a conference about 9 bazillion times bigger than this one.

(I’ll try to post some Unrequired Reading this afternoon, when I’m home.)

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Unrequited reading

Sorry to be writing less frequently, dear readers. I’m in the midst of a work-crunch of monumental proportions. Gotta finish a giant issue of the magazine by next Wednesday, then help put on our annual conference & exhibition Thursday and Friday, then get on a plane Saturday for a chemical ingredient conference. On the doubleplusgood side, said ingredient conference is in Paris, and my wife’s coming along for the trip.

On the down side, the book I just started, Witold Rybczynski’s City Life, is boring me silly, so I may have to drop it. I enjoy WR’s architecture articles on Slate, but the first 50 pages of this book have been pretty dull and pedantic, especially the second chapter’s extended take on how population size does not say much about the importance of a city. Again and again.

Fortunately, Amazon is about to deliver my copy of Shakespeare Wars, the new book from Ron Rosenbaum. Unfortunately, I don’t want to carry a 640-page hardcover with me overseas. So why don’t you suggest a book for me to read, already?

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Outta touch

Sorry it’s been a quiet week, dear readers. I’ve been busy at work, but I’ve also found myself falling into one of my wheels-within-wheels paranoiac phases. It’s centered on trying to get at an understanding of the power-relations at play in the current Gulf War.

Anyway, I gotta write an article on the benefits of RFID in the pharma supply chain, so I’m gonna get to that.

I leave you with the Rev. Sun Myung Moon / sushi axis.

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Drug Deal

I know this story about the generic release of Plavix requires some knowledge of how the pharmaceutical industry works, but it’s a really funny tale of corporate manuevering. The CEO of the generic company (Apotex) gives an interview with the Times in which he goofs on Bristol-Myers Squibb and Sanofi-Aventis as a couple of pikers:

Mr. Sherman, in a telephone interview, all but ridiculed his two big rivals, saying they had naïvely agreed to conditions that allowed his company to bring [generic Plavix] to market even though the deal was rejected by regulators.

“I think they acted foolishly in a number of ways,” said Mr. Sherman, a Toronto billionaire who amassed his fortune in the generic drug business.

Mr. Sherman said that he had never expected the American government to approve the deal, but that he had conducted the negotiations in a way to let him push the Apotex drug onto the market.

The twist is that BMS & SA were trying to use a loophole agreement with Apotex to keep generic Plavix off the market till 2011. Instead, the deal got shot down, but its side-provisions give Apotex 5 business days to push its drug into the distribution chain before they can lodge a complaint. So Sherman’s company is trying to get as much as $1 billion in product out before any injunction can stop it.

I know it’s another business article, but you oughtta give it a read, just for Sherman’s incredulous take on the agreement.

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And they said I’d never amount to anything

I’m interviewing a pair of companies this morning for an article in my September issue. Their combined 2005 revenues were $126 billion.

One’s a major drug company, the other a major healthcare distributor. Margins are a funny thing: the drug company had around $52 billion in sales, with a cost-of-goods of $8.5 billion, while the distributor had $74 billion in sales, with a cost-of-goods of $70 billion. On the other hand, the drug company’s selling, general, and administrative costs were $17 billion while the distributor’s SGA costs were $2.8 billion.

Reminds me of those differences in R&D costs from a few posts back.

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Today’s post is brought to you by the letters R and D

BusinessWeek has an essay about the lack of innovation at the major telephone companies (yet another installment in the “I care about this stuff; no reason for you to” series). Mind-blowing quote:

One way in which these companies are very different from the old phone monopoly is that while the original AT&T had a world-class research operation, its successors don’t. One of the signal facts of the communications revolution is that virtually all the new technologies that made it possible were developed outside the phone world. Last year, Verizon’s revenue came in at nearly $80 billion. AT&T (without BellSouth or Cingular) had revenue of $44 billion. And yet while Intel Corp. spent $5.1 billion last year on research and development, AT&T spent just $130 million. The word “research” doesn’t even appear in Verizon’s annual report.

Now, in the pharma industry, there’s a lot of talk about “rethinking R&D,” as major companies learned that simply pumping more dollars into the process doesn’t necessarily yield results. When I compiled this year’s Top Pharma Companies report, I noticed that plenty of big guns have reduced their R&D budgets — not drastically, but it was certainly a change from past double-digit increases. And these annual R&D figures were at least $1 billion for the top 17 companies on the list.

Obviously, the drug industry is keyed by development of new products; patent terms dictate that every product has a brief lifespan. When the R&D pipeline falls short, companies turn to in-licensing new drugs. In my many Yankees = Pfizer comments, this equates to buying free agents when the farm system isn’t producing good players.

Turns out that this is the main model for the telcos.

There is something to be said for “buying it elsewhere.” If the big telcos built everything themselves, there would be no Cisco and no Motorola. But years of buying it elsewhere has yielded a culture distrustful of technology — and of progress: It’s impossible to imagine Microsoft developing a big new product and having the lead engineer shift from foot to foot in the corner pretending to be just another customer. It has meant, as with AT&T’s Lightspeed, that telcos are likely to offer services that only match, but not surpass, those available from others. And increasingly their approach has put the telcos on the wrong side of technological innovation, leaving them in the position of protecting their investments in their networks from the encroachments of new ideas.

Anyway, I’m fascinated by the ways major industries function, and this essay provides some neat insights into what it’s like to be an $80 billion player with razr-thin (ha-ha) profit margins. So give it a read.

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The Hit Factory

Since I’ve been writing about the drug industry (our magazine bowed in October 1999) I’ve been hearing that we’re heading toward The Era of Personalized Medicine. This means that, as we develop more knowledge of the genome, proteome, and metabolome (you think I’m making this stuff up?), drugs will be tailored to generate greater efficacy or fewer side effects in smaller population groups.

The drug that gets touted as the advance guard in this wave is Herceptin, which can be very effective in treating breast cancer, but only in tumors that over-express the HER2 protein. Around 20% of breast cancer cases fall into this category; Herceptin isn’t effective against other tumors.

Some pharmacoeconomists contend that personalized medicine will lead to The End of the Blockbusters, as smaller patient groups translate to a cap on your “customer” base. On the other side of the spectrum is a “mass appeal” drug like Lipitor, the cholesterol treatment that sells more than twice the dollar amount of any other drug in the world and is now being tested for benefits in treating Alzheimer’s disease.

I bring this up not because I just finished that Top Companies report, but because of N’Sync.

This morning, I read a funny article adapted from the book The Long Tail by Chris Anderson (not this guy). It examines how the entertainment industry faces The Death of the Blockbuster, citing diminishing CD and movie sales figures and TV and radio ratings as indicators that the niche is where it’s at.

It’s altogether possible that NSync’s first-week record [2.4 million CDs sold] may never be broken. The band could go down in history [. . .] for marking the peak of the hit bubble — the last bit of manufactured pop to use the 20th century’s fine-tuned marketing machine to its fullest before the gears were stripped and the wheels fell off.

Music itself hasn’t gone out of favor — just the opposite. There has never been a better time to be an artist or a fan, and there has never been more music made or listened to. But the traditional model of marketing and selling music no longer works. The big players in the distribution system — major record labels, retail giants — depend on huge, platinum hits. These days, though, there are not nearly enough of those to support the industry in the style to which it has become accustomed. We are witnessing the end of an era.

His long-term economic arguments and his moralizing (near the end) are bizarrely off-kilter. For one thing, News Corp. owns MySpace. The site may offer massive “niche” opportunities, but it’s going to make cash hand over first for Murdoch & Co., both little (user fees) and big (as a promotional tool for its properties).

For another, in this era where every entertainment option is allegedly losing its hit-making power, Anderson manages to avoid any mention of the Harry Potter books and The Da Vinci Code. Both of these are such impossibly massive hits — despite the fact that more individual titles get published now than ever — that they blow a sizeable hole in the concept that we’re all moving to the margins.

It’s my contention that, while there a whole lot of factors at play in the decline of hits in the last five years, I think the biggest is that almost every blockbuster movie is crap, contemporary pop and dance music is so dull that radio stations needed to be bribed into playing it, and the current generation of TV executives were raised on the awful television of the late 1970s and 1980s.

Hits might not be as big as they once were, but they’re even more important to the entertainment industry now, given the high price of failure. I’m not saying it’s right, as it tends to lead to “safe” committee-designed projects, but in the pharmaceutical business, as in Hollywood, the big hits help defray the costs of a bazillion failures.

(The Agitator has some reflections on Anderson’s book.)