| Wednesday, February 23, 2005 |
| Pfizer's Funk |
Disclaimer: I used to work for Pfizer and have very dear friends who still do. They are committed scientists who do outstanding research into life changing products. I can also state with some impunity, that Pfizer was perhaps the best employer I ever worked for in terms of benefits, percs, and overall support.
But - in biting the hand that fed me, I can honestly say that I was uncomfortable with their marketing and sales practices from Day 1. So much so, that I made a conscious decision to leave the pharmaceutical industry altogether after four years, and return to graduate school so that I could go into an area of the healthcare industry where I could apply my scientific background and management skills and still sleep at night. I should point out however, that the $$ and stock options I was able to save in my short tenure with Pfizer, along with some significant scholarship monies, allowed me to go to grad school full time and not have to take out any loans.
Not a whole lot has changed since I left - other than Pfizer's profits continue to grow at unbelievable (and as this article points out - unsustainable) rates.
Pfizer now spends twice as much on sales and administrative expenses -- $16.9 billion last year -- as it does on research and development. And it employs 15,000 scientists and support staff in seven major labs around world. As long as those labs are churning out a steady stream of blockbuster drugs for Pfizer's gargantuan sales force to promote, this mass-market approach is extremely profitable. The steady stream of blockbuster drugs has slowed to a trickle however, and now there is the threat of pulling Celebrex off the market along with the other COX2 inhibitors. There are also charges that Pfizer may have known Celebrex presented a threat, which, if true, will make them a target for billion dollar lawsuits along with Merck.
While it's true that there are plenty of niche drugs and top level research going on at Pfizer (some of the stuff my friends are doing is just mindblowing research) - marketable, ready to sell drugs are also much farther away than the usually well spaced launch of consistent money maker blockbusters that Pfizer had in the 1990's. Some of this is due to the increased cost and scrutiny involved in clinical trials, as well as FDA bureaucracy. Both of which have caused the cost of bringing a drug to market, where it only enjoys 10 years of patent protection in which to recoup the cost and make a profit to rise dramatically. So....
There's only one problem: The blockbuster model doesn't really work anymore. Pharmaceutical companies, Pfizer being the leader, have sent so many sales reps into the field that they're tripping over one another.
Each of Pfizer's sales reps costs close to $170,000 per year including car, computer, and benefits, estimates Credit Suisse First Boston (CSR ) analyst Catherine J. Arnold. That figure doesn't change a lot if the company's sales are soaring or falling. So a big-selling drug can generate fantastic margins as sales ramp up. Pfizer generated an astonishing $45 billion in gross profits last year. That works out to $1.2 million per sales rep. Celebrex, with 90% gross margins, according to analysts, contributed some $3 billion of that.
...If Celebrex gets yanked from the market, profits per sales rep immediately drop to $1.1 million -- a 7% decline in productivity. If several drugs fall dramatically, which will inevitably happen as patents run out, and if others fail to take off quickly, that massive sales force quickly becomes a massive millstone. As the article points out, Pfizer needs to be more bottom up in it's management style, and perhaps diversify into other areas of healthcare like medical device manufacturing if they are going to subsidize the company's investments into the current R&D development pipeline and wait for the "next big thing" to get approved by the FDA.
I still think there are serious and obvious changes that need to be made in the way prescription drugs are marketed and sold in this country. Pfizer is the fourth largest advertiser there is. I have to believe that much of that money could be spent in better ways, and I know most of the physicians I work with would welcome the idea of not coming in to work in the morning to find more drug reps than patients waiting for them in their offices.
Perhaps instead of focusing their efforts on SELLING drugs, they should refocus their efforts on investing in the excellent research they've always done to create safe, effective, medications at reasonable prices. What's wrong with that model?? The FDA may regulate drug safety in this country, but when healthcare corporations begin to act like Enron or Worldcom, a lot more is at risk than stockholders profits and employee retirement plans. I believe the pharmaceutical industry should be held to a different standard than other industries. Their actions have the potential to directly affect lives - not just goods and services. |
posted by Broadsheet @ 9:35 AM   |
|
| 1 Editorial Opinions: |
-
Can we blame George Bush for this?
|
| |
| << Home |
| |
|
|
Can we blame George Bush for this?