Can Mid-Size Disruptors Save the Drug Industry From a Cubicle Farm in Jersey?

If you don’t think this is a dispiriting time to be in Big Pharma, you obviously haven’t spent time with anyone who works there, laboring in the trenches.  I have – in fact, I’ve spent the last several days at a professional workshop with a number of colleagues from a range of companies – and I’m struck and deeply saddened by the level of resignation so many have voiced.

It was especially heart-wrenching to hear a colleague at a well-regarded and recently-acquired biotech firm discuss her upcoming relocation to a Big Pharma cubicle farm in New Jersey, which she described as consisting of four identical buildings with multiple identical floors.  (As I pictured her trudging off to work, the final scene of The Shield came immediately to mind.)  The kicker: she considered herself lucky to have been retained following the acquisition. 

This colleague also discussed how difficult it had suddenly become to do even the most basic things; close relationships that had been developed over years with patients, physicians, and scientists were compromised as all activities suddenly had to be routed through workstreams and vetted by multiple committees.  To add insult to injury, these changes were all implemented under the banner of – you guessed it – fostering innovation.  I can only imagine the inspirational posters that HR undoubtedly put together to accompany this initiative (I’d have suggested starting here).

It’s remarkable, but hardly surprising, to learn about the degree of process (see this previous discussion) that seems to dominate these large companies – something I remember only too well from my own experience, and which I had hoped improved during the intervening years.  Evidently: not so much. 

Turns out, there continues to be all sorts of meetings, and meetings about meetings, and meetings to plan for meetings about meetings.  A good example of where this leads is a job opportunity I was approached about at a Big Pharma several years ago, a role that no one seemed to be able to describe clearly, but apparently involved oversight of a newly-created group designed to optimize and facilitate the interaction of two other groups; in big organizations, this is business as usual.

One quantitative manifestation of excess process (or the lack of it) is the ratio of market cap to employees, a parameter I’ve tracked for a while, and which I recently saw thoughtfully discussed in the context of tech companies by Rebecca Rosen in The Atlantic.  For Big Pharmas like Merck and Pfizer, this ratio is around $1-1.5M, while for select mid-caps such as Celgene and Gilead (disclosure: my wife works at Gilead), the ratio is between $7M and $8M.  Rosen pegs Facebook’s “value per employee” at an astonishing $25M, with Google and Amazon also rather impressive at the $6-8M range.  More traditional companies like GM, Ford, and IBM come in at less than $1M.

I suspect a lot of this is basically about scaling: to grow from mid-cap to large-cap, you may need just the sort of connectivity functions for which I had been unsuccessfully recruited. 

It certainly makes intuitive sense that in biopharma, smaller and leaner can also be better – as well as more satisfying.  Not surprisingly, the most hopeful person I ran into at my recent workshop was a colleague from a mid-sized biopharma.  She described a culture characterized by remarkably little process, by a true 80/20 mindset, and by ultra-rapid decision-making.  She felt her company could execute while larger competitors were still deliberating, and she enthusiastically described watching ideas turn rapidly into practice.

I’ve more than a casual interest in seeing how things shake out here.  While I can think of so many reasons why smaller should be better – rapid decision-making, more engaged and involved employees, less discussing/more doing, etc.  – I also recognize there’s one huge reason why bigger may ultimately win: the sheer cost of drug development (see this articulate and much-discussed Forbes piece by Matt Herper).  As clinical development becomes ever more expensive, it effectively prices almost everyone else out of the market – especially if you aspire to advance a diversified portfolio of clinical projects, rather than bet the ranch on a single “product shot.” 

I hope that Big Pharmas learn how to “think small” and create cultures that genuinely support innovation rather than rotely invoke it while effectively dissipating all remaining traces.  I confess I have great difficulty envisioning this actually occurring, although, to be fair, I’ve also seen isolated encouraging examples – persistent pockets of innovation that reflect the intrinsic passion and creative drive that many Big Pharma employees I know harbor and valiantly struggle to express.    

Thus, the interesting questions are whether select mid-size companies can:

  (a) continue to leverage their lean profile and deliver ongoing strong performance;

  (b) remain independent (as a wag on Twitter put it, describing Big Pharma, “when you can buy the boat, you can’t really miss it”); and

  (c) grow to the point of displacing Big Pharma without effectively becoming Big Pharma.

Two key factors are likely to influence the eventual outcome:

  (1) the rapidity with which personalized medicine truly arrives (in practice vs hype); we urgently need the ability to readily identify which patients are most (and least) likely to benefit from a new therapeutic, an advance that will enable considerably more efficient clinical development;

  (2) an improved regulatory environment – we need to aggressively pursue opportunities to significantly reduce the existing, massive upfront clinical trial requirements, perhaps by implementing a progressive approval process (see here, e.g.) that utilizes a range of emerging technologies to closely monitor the performance of such conditionally-approved products under real-world conditions.

There are important opportunities to disrupt the established Big Pharma model; but without profound changes in the scientific and regulatory environment, things will remain very tough for the agile disruptors – relatively good news for established giants, presumably less good news for patients and for progress.

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About the Author

 

David
Shaywitz
  • Dr. Shaywitz trained in internal medicine and endocrinology at MGH, and conducted his post-doctoral research in the Melton lab at Harvard. He gained experience in early clinical drug development in the Department of Experimental Medicine at Merck, then joined the Boston Consulting Group’s Healthcare and Corporate Development practices, where he focused on strategy and organizational design. He is currently Director of Strategic and Commercial Planning at Theravance, a publicly-held drug development company in South San Francisco. He recently wrote Tech Tonics: Can Passionate Entreprenuers Heal Healthcare With Technology? 

  • Email: davidshaywitz.aei@gmail.com

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