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Derek Lowe The 2002 Model

Dbl%20new%20portrait%20B%26W.png After 10 years of blogging. . .

Derek Lowe, an Arkansan by birth, got his BA from Hendrix College and his PhD in organic chemistry from Duke before spending time in Germany on a Humboldt Fellowship on his post-doc. He's worked for several major pharmaceutical companies since 1989 on drug discovery projects against schizophrenia, Alzheimer's, diabetes, osteoporosis and other diseases. To contact Derek email him directly: Twitter: Dereklowe

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June 17, 2009

The View From Pfizer's Corner Offices

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Posted by Derek

There's a good article from Lee Howard up at The Day (the New London/Groton newspaper) on the changes going on at Pfizer. It's the story according to management, though, which is worth having for its compare-and-contrast uses:

Despite the looming uncertainty, according to company spokesmen, the new research structure has added energy and urgency to the drug-discovery process in Groton. . .

. . .The changes in Groton - seen most plainly in displays of logos the new business units are in the process of choosing - have added drug-development staff and even legal experts to the R&D mix, along with biologists and chemists who typically have worked in close proximity. In the middle of it all sits the chief scientific officer of each business unit, as well as other managers.

The idea is to develop a more realistic idea of a drug's likelihood to succeed at an early stage and then bring it to market quicker if it seems to be working.

I hope that the process of choosing new logos doesn't take too long. You could get a reasonable read on the success of any attempt to remake Pfizer's culture by counting the number of meetings the logo process has required so far.

But I can't make fun of the goals that the company is setting - they're perfectly sensible. The only problem is that they're just what everyone else is trying to do, too, and if it were easy, everyone would be finished doing them by now. The problem with trying to get an earlier decision of a drug's chances for success are that many of the serious problems don't show up (in fact, can't show up) until larger clinical trials. And I don't think that anyone's got a good way around that one yet. Some therapeutic areas are better suited than others, to be sure.

Would the new structures that Pfizer's putting in place have prevented the torcetrapib disaster? I doubt it - that one took everyone by surprise. Would they have prevented the Exubera disaster? Now, that one's food for thought, because it seemed to be much more self-inflicted. If the company can avoid doing that sort of thing again, then they've accomplished something.

And for all the nasty things I say about Pfizer here, I hope that they do accomplish things. After all, they're the biggest drug company in the world, and they seem determined to stay that way. If an organization that huge ends up spinning its wheels (or sitting around designing new business cards), it can't be good for anyone.

Comments (37) + TrackBacks (0) | Category: Drug Development | Drug Industry History


1. HelicalZz on June 17, 2009 8:39 AM writes...

It isn't just the logo meetings that drag, but what some of the terms mean. The comment 'likelihood to succeed at an early stage' is of course a bit of an oxymoron. As pointed out, drugs don't succeed at an early stage.

Where it gets cultural though is what defines success. Is it a drug with the potential of at least $1B in annual sales? Is a drug with the potential of only $250M in annual sales OK? What if the latter drug will probably require only 2 phase III trials of 500 subjects, vs. the likely 4 trials of 5000 subjects for the one with $1B in sales potential? What if either or each of these potential drugs will have a cheap effective generic that it will need to compete with at some point in its product cycle (assuming it gets to approval)?

Has Pfizer defined what it means by success and communicated that effectively down the line is what really matters and keeps time from being spent on projects / programs that don't have a chance of being moved forward anyway. The questions above aren't ones that the line scientists tend to ask, nor should they be. But the questions do need to be addressed early and effectively communicated to these individuals for a company to achieve any degree of productivity.


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2. NH_chem on June 17, 2009 8:46 AM writes...

Seems to me that Big Pharma is focused on drug candidates that can generate big dollars (i.e. at least $1B as stated in comment #1). Personally, making any money is a plus. Why they tend to throw out lesser drugs that generate smaller sales is beyond me.

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3. Hap on June 17, 2009 9:31 AM writes...

If clinical trials cost $400M to $1B+, it will take a while for a drug with a smaller sales volume to make back its development money, if it ever does. If $250M clears $200M after cost of goods, then you can probably pay your development costs back in five or six years - but that means you have at most four years to actually make money to pay for other drug development (unless you are developing a drug which can't easily be made as a generic). Going for big drugs limits your choices for development (and assumes you know which drugs could actually be big sellers); in addition, sometimes companies try to make big sellers of drugs that shouldn't be, but the motives for focusing on drugs with large sales markets makes sense, and is probably part of why blockbusteritis has infected pharma companies.

In addition, pharma investors are expecting not just to make people healthy but to make money, and if they could make more money elsewhere with comparable risk, then they won't invest in pharma, and there won't be money to develop new drugs. Investors are probably too focused on the short-term (that aphorism about the seed corn comes to mind), but they are (and should) expect to make money someday. In the short-term, competition is probably from other more rapidly maturing investments, while in the long term, people are expecting to beat inflation and unrisky investments - but they are expecting to make more money from their investment than whatever comparison is appropriate for the focal term. Making a little bit of money for a lot of investment is unlikely to make investors happy.

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4. rtw on June 17, 2009 10:15 AM writes...

"After all, they're the biggest drug company in the world, and they seem determined to stay that way."

Ya - But this didn't help General Motors much either.

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5. anon on June 17, 2009 10:50 AM writes...

"If clinical trials cost $400M to $1B+, it will take a while for a drug with a smaller sales volume to make back its development money, if it ever does."

The FDA needs to take a bloody nose for excessive CYA and slow approvals.

Re: the cost of clinical trials-- if we outsourced more trials to China and India, instead of pretending we can get acceptable chemistry done there, the world would be a much better place.

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6. Muruga on June 17, 2009 11:14 AM writes...

The single factor which looms uncertainty at Pfizer is the patent expiry of lipitor in 2011. Pfizer should have learnt lessons by now from the huge failures of torcetrapib and exubera. These factors should create a sense of urgency and maturity at Pfizer to develop a healthy pipeline. Hope, Pfizer will succeed.
As we all know, the merger with Wyeth is largely meant to plug the gaps in the pipeline of Pfizer and add the biologics portfolio to its kitty.
After all, drug discovery is a risky business and no one is sure of the clinical outcome. One can only hope that the compound will have a fair chance of succeeding in the clinic (and subsequently reaching the market) by adequate optimisation of ADME-Tox profile early on.

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7. Cloud on June 17, 2009 11:19 AM writes...

@anon- so you won't trust companies in India and China to do chemistry, but you'll trust them to run clinical trials? I'm sorry, that makes no sense to me. It seems to me that the key in both cases (and, in fact, in any outsourcing agreement, regardless of the country in which the work is being done) is effective oversight, and if you can't do that in the early phases or R&D, you probably aren't going to be able to do that in the later phases.

Or are you arguing that the outsourcing company will pay more attention to oversight in the late phases, because of the higher costs associated with risks in those phases?

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8. PorkPieHat on June 17, 2009 11:40 AM writes...

Forgive a conspiratorial perspective here, but if you were an oversized company, say, in the pharmaceutical industry, and you had a grand design to get completely out of Drug Discovery and be a Development company only, how might you do it? You could eliminate Research overnight, but that would be too draconian. Maybe you initiate a stepwise breaking down into therapeutic area components and then 'liberate' each component as an independent biotech. Do you wonder...?

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9. partial agonist on June 17, 2009 11:48 AM writes...

on the logo design:

When I worked for a major pharma company, one of the first huge red flags I noticed was a company meeting to roll out their "mission statement".

What was very troubling was that the powers-that-be indicated that this one paragraph statement was the result of lots of hard work and lengthy discussions over the past year, and so its rollout was cause to celebrate!

Of course it was the obvious collection of jargon like "applying cutting edge technologies to address unmet medical needs... blah... blah... blah.. blah... blah...."

The scientists were rolling their eyes and maybe some of them wisely started updating their resume. Mergers, downsizing, etc. were soon to come.

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10. Chemjobber on June 17, 2009 11:51 AM writes...

@PorkPieHat: That's widely believed to be the plan, considering the new "Business Unit" structure of PFE.

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11. SRC on June 17, 2009 12:11 PM writes...

When I worked for a major pharma company, one of the first huge red flags I noticed was a company meeting to roll out their "mission statement".

But when they start replacing nameplates on doors with new ones that say the same thing, you know the end is nigh.

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12. Anne on June 17, 2009 1:24 PM writes...

Outsourcing clinical trials sounds like trouble to me. The point of it is to either do them more cheaply or get higher success rates, right?

Doing them more cheaply can be done by finding a company and a country that don't worry so much about details like informed consent, and where people are desperate enough to sell their health for a few dollars, or even just for the health care that comes with the trial. (I suppose I'm assuming this isn't how it works in the US now.)

Getting higher success rates, well, one benefit of outsourcing is that the company developing the drug doesn't need to look too closely at the data or the statistics. They just choose a company that has a track record of reporting success from their clinical trials and take the results at face value.

Maybe sufficient regulation could prevent this kind of ethical disaster. But enforcing such regulation across international (and linguistic) boundaries seems even more challenging than enforcing it within the US, where there have already been difficulties.

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13. durham on June 17, 2009 1:27 PM writes...

The costs for clinical development for an individual compound rarely approach the $400M-$1B range cited earlier. These numbers probably come from the widely quoted Tufts survey, which factors in the costs of failed programs.

Pharma never knows which drugs will be big sellers. For example, Zofran was initially expected to be a niche drug, but it was still developed by GSK. It grew into a billion dollar drug. Same for Advair, which was never predicted to cross the $1B threshold.

Pharma is much more interested in niche therapeutics opportunities now. First, they need to diversify. Second, the need to replace the revenues of an expiring blockbuster can drive down the share price of the company and skew its long term strategy (see Pfizer).

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14. Hap on June 17, 2009 1:51 PM writes...

I think the Tufts survey came up with an average of $800M - the main bone of contention (I thought) was not the inclusion of the research costs of other drugs but the factoring of opportunity costs (if I invest in one drug, and it fails, I've lost the money I would have made in the bank, or with bonds, or with investments in something else) into the development costs of a drug. Even excluding opportunity cost (which is still important to investors, and hence to companies), I thought the costs were closer to the $400M figure. While there are tax incentives to overstate losses, the Exubera and torcetrapib fiascoes argue that the cost of a drug's development looks a lot more like $1B than, say, $200M. The FDA's increasing risk aversion (in part precipitated by previous problems) is likely to increase those costs further, not decrease them.

In addition, the barrier to FDA approval of a drug is not likely to be lower in a drug with a smaller target audience, while people may be harder to find and effects harder to substantiate with trials, so the development costs for drugs with smaller markets might not be lower than for those with larger markets.

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15. Hap on June 17, 2009 2:04 PM writes...

12: There was a Bloomberg article in 2002(?) that described some of the trial companies here, and they seemed to be sketchy with their choices of trial participants and their informed consent, so some of the issues are probably present now with trials.

Another problem with outsourcing clinical trials to places cheap enough to make sense (other than the ethical one of putting people at risk for a drug from which they are unlikely to ever benefit) is that the people in whom you test the drug likely eat differently, have different genetic backgrounds, environmental exposures, etc., than the audience to whom you hope to sell the drug. While you could find obvious problems, you are likely to miss problems specific to its target audience, which would seem to be asking for trouble. SSOD made a comment about Phase 1 trials in Britain that they don't tell you how drugs behave in the population as a whole but only for the population of unemployed 100 kg rugby players - that would seem to be a problem writ large in outsourced clinical trials.

Trials seem to be the most expensive part of drug development, so the temptation to outsource is really high. Of course, reputations are kind of expensive, as well.

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16. Cellbio on June 17, 2009 3:31 PM writes...

Clinical trials are often reaching across the globe now in order to find patients. Factors such as the number of active trials and approved drugs make competition for available patients tough and enrollment slow, compounding the need for larger markets to recoup costs in the shrinking number of years remaining on patent.

THis experienced has revealed that the site to site variation is high, may be genetics, diet, as mentioned, but also, placebo rates in some settings have been much higher, above 50%. Perhaps a consequence of doing studies in populations with less prior medical care, or less skeptical of the medical profession? Anyway, the outsource model in clinical trials is well tested by most large companies, and not seen, as much as I know from insight into a couple of organizations, as providing great value by delivering rapid execution or enabling rapid approval.

@Porkpiehat, inside one large organization, I pleaded for relief from the stiffling internal environment by asking to be spun out. I think this model has merit. Timeline manufacturing, process manage the hell out of regulatory timelines, adapt mission statements, get your personalysis done, manage performance with detailed SMART goals, do whatever is seen as valuable in large corporations, but leave us alone in research!

Final comment, I am now convinced that all the fail-fast approach brings is a room full of naturally skeptical people pointing out less than ideal properties to CYA managers who will kill everything.

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17. HelicalZz on June 17, 2009 3:41 PM writes...


It has been a while since I looked in detail at the old now but still oft quoted Tufts study, but the $800M value included both time value and failure into its 'average' cost.

So the cost includes the consideration that say only 1 out of X projects make it to approval, and the costs of all X projects are included in the development cost of the one.

Also it calculates the cost as measured 'at time of approval'. While I wouldn't label that as opportunity cost, the concept is really the same. In a nutshell, $50M spent 7 years ago would be equivalent to well over $50M in todays dollars. The amount would be (was) based more on an industry wide return on invested capital type calculation.


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18. Hap on June 17, 2009 5:14 PM writes...

OK. The only catch might be if trials are the most expensive part - if a lot of drugs don't make it to trials, or only make it to Phase I or II, their contributions to the cost of a drug won't be as much (though there are more of them, so depending on failure rate the contributions of other failed drugs might be high) - so some of the quoted cost might go away, but depending on the failure rate, a disproportionate amount might be spent on the drugs that get to trials and so be a legitimate primary cost.

It seems hard to base what drug development costs on the direct costs of a drug (though it's better than counting simply material costs) - if people knew what would work, and could have found what did without all the failures and side alleys, they would have done it. If you can't a drug without accounting for the things you developed that didn't work, then it seems like the development cost should count for those failures.

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19. PorkPieHat on June 17, 2009 7:03 PM writes...

Cellbio -- Agreed on your point about fail-fast approaches. While I believe it has value on the face of it, it has a tendency to make people forget that the real goal is to succeed (and succeed fast if you can), not to fail fast or slowly!

How do people get work done when they fear for their jobs due to mergers every 2-3 years? Is that not the vicious circle that Pfizer is in? Each merger produces necessary down-sizing, each down-sizing producing inevitable jargon of how it will improve the company, and each such communication leaves a jaded and cynical workforce in those who remain. As if that wasn't bad enough, those who can do so leave proactively, and with some exceptions, are usually some of the better folks. How do working relationships built on trust between scientists develop under these conditions? I gotta tip my hat to those who succeed and prosper under that kind of environment.

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20. Pfizerite on June 17, 2009 8:15 PM writes...

Until Pfizer and Big Pharma breaks the model of paying bonuses for meeting goals usually CANs, phase 1, 2 and 3 starts for senior management you will the same situation regardless of how you arrange the deck chairs on the Titanic because what you measure and reward will be what you get as a business. Fast fail will not work unless there is a bonus paid for failing fast and then you run into the problem of failing projects that would have succeeded. The solution is to align the long term interests of the employee with the company by paying a bonus when the project CANs a compound with a bigger bonus when the compound achieves phase 1 2 and 3 starts and ultimate approval so that a biologist or chemist would get a bonus for projects he no longer works on and I would argue a bonus even if he is no longer with the company. Similarly, the project team would need to be able to control who is joining the team, what skills they bring, and how much of a bonus they would get to avoid people parachuting onto successful teams at a late stage.

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21. CMCguy on June 18, 2009 12:22 AM writes...

The concept of (re)organizing into smaller units (100-150 Scientists) has appeal in creating more conducive culture for R&D as does getting a mix that included down stream functions to "guide" the efforts (perhaps avoiding some of those ugly molecules per Derek's definitions). It would require better leadership at all levels that has only rarely been seen in past few decades.

But I am skeptical that Pfizer which has merged itself to mega mindset can do this effectively because all the associate "baggage" of the Biggest Pharma. From my perspective R&D is typically much less bloated than most other parts of Pharma can be so unless can streamline those other pieces any successes from the small groups, unless achieve a much higher percentage than norm, will not be enough to hold up the rest(GM analogy may be considered as going to be reinvented via bankruptcy so could get "rid" of unprofitable assets). [Of course some do view internal R&D as only non-revenue generating sink so why not just in-license late stage projects].

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22. That Guy Again? on June 18, 2009 1:17 AM writes...

I think that Fast-Fail is code for "we wish you people were as capital efficient as venture-backed start ups". As op have noted, killing projects is easy. What Big Pharma management is really looking to do with R&D is not kill projects but rather find a way to improve the perceived capital efficiency of their R&D operations. Right now, BP management don't know how to do this -- so they turn to in-licensing to fill their pipelnes, and borrow VC-created business models to form entrepreneurial Centers of Excellence in their internal R&D orgs. Interestingly, one model that I have NOT yet seen discussed/utilized is the idea that internal "CEDD" R&D "Goes Long" (i.e. takes real long-term risks) while corporate BD continues to "Go Big" (late stage in-licensing used to fill the late stage gaps left when internal R&D misses on a product slot). Or maybe there's a BP that is actually delivering on this concept, and I just haven't noticed it yet...

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23. soon to be pfizered on June 18, 2009 7:46 AM writes...

In the beginning was the plan.
And then came the assumptions.
And the assumptions were without form.
And the plan was completely without substance.
And a darkness fell upon the faces of the Employees.
And they spoke amongst themselves, saying "It is a load of crap and it stinks."
And the Employees went to their Supervisors, saying "It is a bucket of dung and no one can bear the odor."
And the Supervisors went to their Managers, saying "It is a container of excrement and its smell is so strong that none can abide it."
And the Managers went to their Divisional Directors, saying "It is a vessel of fertilizer and none can abide its strength."
And the Directors went to their Executive Directors, saying "It aids plant growth and it is very strong."
And the Executive Directors went to the President, saying "Our plan promotes growth and it is very powerful."
And the President went to the Board of Directors, saying "This new plan will actively promote the growth of this organization."
And the Board of Directors looked upon the plan and saw that it was good and the plan became policy.

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24. Anon on June 18, 2009 8:46 AM writes...

double down on Pfizerite (#20 above).
"The problem with trying to get an earlier decision of a drug's chances for success are that many of the serious problems don't show up (in fact, can't show up) until larger clinical trials."

As long as preclinical teams are rewarded for transition to humans, they will resist efforts at "early kill." And if phase 1 teams are rewarded for phase 2 starts, they will resist incorporating efficacy biomarkers. Similarly phase 2 trials are optimized for success in narrow populations. The snowball rolls to the bottom of the hill, and breaks up in a phase 3 failure.

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25. HelicalZz on June 18, 2009 8:48 AM writes...

Along the lines of comments on the cost of drug development. Interested parties can read this 2004 paper, in which Henry Grabowski (Duke), Joseph Dimasi (Tufts), and Ronald Hansen (Rochester) defend the Tufts analysis and comment on other published efforts.

Those interested in pharmacoeconomics should have Henry Grabowski on their SciFinder alerts list (LOL)

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26. CMCguy on June 18, 2009 9:50 AM writes...

ZZ although agree may be issues regarding how certain factors Tufts uses are calculated at least they do attempt to account and outline assumptions for many expenses involved in drug development that other analyzes totally ignore (Public Citizen in particular). If you have come across a good model/estimation please share because nothing I have seen has good balance and truly solid rationale behind assumptions IMO. Frankly I am not sure even companies could come up with a "correct" value because of the complexities and intertwining to resources involved so can not "take what was spent" and divide by the number of approved drug. I believe the trend reflected is correct that costs of drug development continue to escalate so not sure anything should be considered low risk.

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27. Impartial Observer on June 19, 2009 12:56 AM writes...

soon to be pfizered, you have a career waiting for you somewhere. How lucrative it would be, I don't know...

What really baffles me about Pfizer is how could the board think that research morale and productivity would improve by handing the reins to a lawyer from Boston Chicken?

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28. eugene on June 19, 2009 5:24 AM writes...


"How do people get work done when they fear for their jobs due to mergers every 2-3 years?"

I assume postdocs and grad school after classes were out of the way would prepare them for such a model. You can get a lot done in two years. It still sucks to be always looking for a job and I imagine some would get fed up with it after they were in industry for a while. But multiple post-docs are a good preparation. With less money of course.

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29. discover on June 19, 2009 12:39 PM writes...

It's interesting that you reference surprise at the torcetrapib failure given your recent comments about ugly molecules. To my mind torcetrapib was an ugly molecule: 600 MW, three trifluoromethyl groups and two carbamates. Even though I've always thought that rule of 5 was substantially overhyped, the chemical features of torcetrapib, looking a bit like a grease bomb, should have raised at least some concerns early on.

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30. Pfizerite on June 19, 2009 10:02 PM writes...

Impartial Observer, Soon to be Pfizerized does have a career ... VP of Research at big Pharma

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31. sure on June 20, 2009 1:52 PM writes...

Nothing more than a ploy to keep shareholders from bailing all together.

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32. thegoodoldays on June 20, 2009 1:58 PM writes...

If Pfizer, if anyone for that matter, could fill their pipelines, they would, it would be happening. There are thousands of jokers (scientists) walking around thinking they all know how it should be done, based upon a few lucky hits. The entire drug discovery business will soon be but a mere fraction of what it once was, never to come back.

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33. awwwwww on June 20, 2009 2:01 PM writes...

I'd fill my blog with negative Pfizer articles too if I was turned down by them and ended up at some circus in Cambridge

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34. milkshake on June 20, 2009 4:51 PM writes...

I had the displeasure working for Pfizer and I can tell you that even a travelling circus in Moldova is a better company to be with. But you can have a different opinion - so why don't you stay for little longer and you can see for yourself, how your compounds and project and your motivation (and finally your job too) going all to dogs.

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35. Pfizerite on June 21, 2009 1:23 AM writes...

The reality is that senior management at Pfizer and probably the other big pharma companies as well listens to McKinsey and young MBAs who have never even worked in a lab let alone been part of a successful drug development team. Most of the people on this site have been part of the drug development process and their frank and anonymous opinions should count for something since the reality is that research productivity whether it be from biotechs, big pharma or Universities has sucked despite more money being poured into research. The question is why, if researchers have better tools in the form of high thruput screening, structure based drug design, molecular modeling and computational chemistry, molecular biology and other techniques is research productivity so poor. Some people, myself included, believe that clueless senior management is part of the problem and that the reward/punishment system of big pharma is sadly out of whack. What society as a whole needs to remember is that without some form of big pharma there will be very few new drugs especially in light of the fact that big pharma either by in licensing or collaborations will support the majority of new compounds under development.

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36. Hap on June 22, 2009 12:36 PM writes...

I don't think society is making those decisions though - the people running the companies (the boards of directors and the high-level executives) have had different incentives than either the stockholders, their customers, or their employees for some time. Society wants drugs cheap - but the reorgs aren't giving it to them (nor are they giving them anything in the way of new drugs, either). The companies aren't giving shareholders much in the way of returns, either - but the shareholders have little power to affect the operation of the companies and either the incentives or identities of those who run them. The changes aren't (yet) engineered by governments looking to get votes and cheaper health care, but by people looking to take the money (what's left of it) and run to the next job they get from their friends on the board. While scientists may not know how to run a company (and may have only a situationally-dependent grasp of logic), they are at least likely to have a stake in the survival and success of their companies, which would put them at least one point ahead of their bosses+6 or 7.

When your board pays off its friends with its shareholders' money, the jobs of its employees, and the reputation of their company, it's hard to expect the business to do well. Particularly when the only meaningful choice of shareholders (who are supposed to have a say in the company) is whether to sell or not.

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37. Chemjobber on June 22, 2009 12:42 PM writes...

how your compounds and project and your motivation (and finally your job too) going all to dogs.

The first going to dogs isn't such a bad thing! The rest, wellllll....

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