Saturday, May 8, 2010

Pharmaceuticals – Under Siege?

Lately, I’ve been blogging about the general malaise that life sciences, and in particular, Big Pharma, are finding themselves in. Last week, I even compared poor Mike Huckman to a canary in a mine. (Apologies there, it seemed like a good idea at the time.)

The recent full court press by the Federal government against Goldman Sachs, first a civil suit, then a criminal investigation, got me wondering what the Beltway Gang was up to with their another one of their favorite bête noirs, Big Pharma. Seems that the Federal Drug Administration (FDA) has decided to breathe new life into its Office of Criminal Investigations. A recent article by Alicia Mundy in the Wall Street Journal ( ) outlines the FDA’s plans to re-energize itself and the focus of its prosecutions.

Are we seeing yet more evidence of an industry under siege? There’s definitely a more activist administration in Washington, D.C. these days. And Big Pharma has all the characteristics of a great target. Unpopular with the public, aging business model in need of an overhaul, and recipients of large amounts of public largess (i.e., Medicare). Makes me think of the financial services industry. I wonder if we’re going to see Big Pharma’s chairpersons appearing before Congress en masse anytime soon?

But, maybe we won’t see everyone trooping down to the Capitol anytime soon. Here’s why. First, Congress is enjoying themselves too much with the financial services industry. (Big Pharma should consider themselves fortunate in not having a poster child for egregious behavior like Bernie Madoff.) Next, Big Pharma hasn’t provided a lightning rod for public outrage yet. Sure, they’ve had the occasional Vioxx but they haven’t tried to melt down the economy or anything comparable yet.

In ancient China, there was a form of execution cum torture known as the death by a thousand cuts. I won’t go into the details (there are other blogs for that) but you get the idea. This is what Big Pharma is experiencing now. Every day seems to bring another cut/issue. Nothing big by itself but cumulatively they have an effect. Resources are drawn away from things like research and development. Innovation is throttled because of a risk adverse culture developing. Management attention is distracted from running the day to day business let alone forward looking strategic planning.

Once upon a time, Big Pharma was one of the glamour industries. Overtime, they became one of the last men standing. Now, Big Pharma is on the cusp of being another also ran. Globalization and commoditization are bringing down another industry.

I’ll continue to pursue this line for awhile. Unfortunately, I don’t see any significant changes anytime soon.

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Contributed by Guy de Lastin

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