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PHARMA: Time to get Shakespearean at big Pharma? by The Industry Veteran

The Industry Veteran has been busy this summer, but luckily for those missing his unique view of the pharma world, he’s ba-ack. And in his purview this time is the whole issue of why Big Pharma is filling its top jobs with lawyers.

DICK: The first thing we do, let’s kill all the lawyers.

CADE: Is not this a lamentable thing, that the skin of an innocent lamb should be made parchment, that parchment, being scribbled o’er, should undo a man? Some say the bee stings: but I say, ’tis the bee’s wax; for I did but seal once to a thing, and I was never mine own man since.

Shakespeare, King Henry VI, part II: IV, ii

Late last week (July 26) Merck announced the promotion of corporate counsel Kenneth Frazier to succeed Peter Loescher as president, global human health, effectively making him the company’s chief operating officer.  Given Pfizer’s earlier decision to make their corporate counsel, Jeffrey Kindler, the CEO there, Frazier’s promotion means two Big Pharma companies within the past year have elevated lawyers to key, strategic positions.  The moves in both cases indicate the unwillingness of the respective companies to cleanly break from the unsavory and dysfunctional practices of their recent past.

By naming Kindler to the top spot, Pfizer’s board clearly desired a relatively inexperienced manager without settled attitudes toward the pharmaceutical industry.  As CEO it seemed apparent that he would move slowly and rely upon practiced hands within the company for guidance.  Kindler immediately acknowledged this when he promoted his rival for the CEO spot, CFO David Shedlarz, and publicly referred to him as his "right hand."  Such thinking among board members appears mystifying because if any pharmaceutical company requires fundamental changes to the economic model by which it conducts business, it is Pfizer.  Since the 1990s Pfizer led the industry in implementing the blockbuster, mega-company approach.  Under William Steere, an agile and precise thinker, the company grew and prospered with the strategy.  In the hands of his successor, the arrogant head of finance, Hank McKinnell, Pfizer’s capitalization declined by more than 30% while the rest of the industry ignorantly followed his long walk down a short pier.

Kindler’s claim to fame as corporate counsel consisted of his use of outside contractors to pursue foreign Viagra counterfeiters and harass them into ceasing their operations.  While serving as Pfizer’s legal counsel Kindler hired the former number-three man at the FBI to direct corporate security and together they retained companies such as the Blackwater Group, one of the largest US contractor in Iraq.  Blackwater, which maintains close ties with right wing religious groups in the US, performs the usual range of corporate security and sleuthing services.  It is also a mercenary army for hire that makes abundant use of stealth surveillance technology.

One example of Kindler’s failure to break with the blockbuster/mega-company approach appears in his dealings with third-party payers. 

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PHARMA/PHYSICIANS/HOSPITALS/QUALITY: Busy busy busy

My correspondents have sent me lots of articles today. All worth a read—

When Is a Pain Doctor a Drug Pusher? Basically never as far as I can tell but in the DEA’s view any time the DEA feels that its livelihood is threatened. What a disgusting scumbag organization (and I include the US and State DA’s in their ecosystem), and I’m beyond disgusted that as a taxpayer I’m paying for this insanity. The DEA needs to abolished and anyone who’s

Report Rates Hospitals on Their Heart Treatment. The “report” is from CMS using Medicare data and it names names. I spent the last two days with lots of hospitals. They don’t think this type of hospital ranking matters yet, and they’re right. But it will matter increasingly as patients figure this out (more from me on this next week).

 

3 drug makers busted and fined for drug reimbursement scam in cancer drugs. Not exactly a surprise:

The plaintiffs argued that the drug makers had sold medications to doctors at steep discounts to the “average wholesale price” that Medicare and pension funds paid, while secretly encouraging them to claim full reimbursement from insurers.

There is nothing rational about allowing doctors to profit from selling drugs. But then again there’s nothing rational in our payment system as a whole. This is, though, one abuse that should be ended quickly.

Finally from the WSJ, yet again showing that it’s a socialist rag, How many doctors does it treat to see a patient? (Behind sub wall I’m afraid), but let me give you the first few lines:

In the mid-1990s I worked weekend shifts as a “moonlighting” doctor in a suburban Chicago hospital. When I would show up on Friday evenings, the other doctors would always say: “Peter, remember, no roundtrips on weekends.” Translated, that meant no patients admitted over the weekend should go home before Monday afternoon at the earliest. I soon understood the genesis of the “no roundtrip” rule. At the crack of dawn on Monday mornings, before their regular office hours, the doctors would go from room to room, providing consultations and filling out billing cards.

The villain is of course fee-for-service medicine. The author wants it eliminated and he’s right. But note the interesting screw-up in the current incentives. The doctors wanted to see their patients on the Monday so they could bill FFS and make more money. But the hospital was getting a fixed DRG payment for most of those patients. It was in their interests to get them out of the hospital as soon as possible, as every moment they stayed they were making less money because they were filling a bed that could be filled with a new admission. Both of them are crazy incentives for the overall health care systems, but more than a decade later we still do not have hospitals and doctors on the same set of incentives—even irrational ones!

PHARMA/POLICY: Crackpots at Hoover

The NY Times gives an op-ed to a crackpot called Henry Miller who used to be a minor official at FDA and is now with the other loonies at Hoover. It’s called Crackpot Legislation in which he goes after those states allowing smoked medical marijuana as medicine. In this op-ed he apparently with a straight face can say this:

When presented with a cannabinoid development program that comports with modern scientific principles, both the F.D.A. and the D.E.A. have demonstrated their willingness to allow it to proceed.

This is complete and utter bullshit. The FDA has with the rest of the US government (including the crackheads at NIDA) in preventing the use of marijuana in clinical trials and medical testing for decades, despite the IOM study. Here’s a statement from a DEA judge (!) on the topic in March.

"NIDA’s system for evaluating requests for marijuana for research has resulted in some researchers who hold DEA registrations and requisite approval from the Dept. of Health and Human Services being unable to conduct their research because NIDA has refused to provide them with marijuana"

Two tiny smoked marijuana studies (including the Abrams one he cites) have been finally allowed after decades of pressure from academics, and now Sativex is being allowed into clinical trials because a) it has a pharmaceutical company behind it which is going to make money off it, and b) because the Brits and Canadians have already allowed it on the market. That action, after thirty years of preventing research into the medical usefulness of marijuana for purely political reasons, does not suggest anything like what Miller calls “willingness.”

Miller thinks that the FDA should be allowed to regulate marijuana. But of course the US government already does regulate marijuana. It’s been a schedule 1 drug, banned since 1937 by Congress incidentally against the then wishes of the AMA with no debate. So what is the FDA’s likely vote on the matter now? To continue the ban of course. Which is why medical marijuana proponents are opposing the amendment to allow the FDA to regulate them, as it’s a back door way of outlawing the progress made at the state level.

The NY Times should be asking itself why it’s allowing such a bunch of half-truths to be published when somewhere between 60 and 80% of Americans are in favor of legalizing medical marijuana, and it’s abundantly clear to anyone that the reasons for the continued ban is the politically and economically-inspired persecution of people who want to use marijuana—whether for medicine or pleasure.

And if Miller really thinks that the current drug-policy powers that be will allow Sativex to get past the FDA and be openly sold in the US, then he really is a crackpot.

PHARMA: What the Zubillaga affair may suggest, by The Industry Veteran

We haven’t spent much time over here talking about the “buckets of cash” scandal that’s been keeping the pharma-focused bloggers very busy, and even less comment on the apparently expensive and rather bizarre purchase of MedImmune. Both concerning AstraZeneca. But The Industry Veteran has been wondering around on the grassy knoll and has come up with a very interesting explanation that links the two:

I spent a good part of the past two weeks in the unaccustomed position of defending AstraZeneca. Equity analysts and others in the pharmaceutical industry seemed astonished by the high price the company paid (a 52 P/E ratio) to acquire MedImmune. Their basic criticism amounts to a complaint that AZ acquired neither an auspicious, late-stage pipeline or a significant cash flow. Both observations are correct but AZ gained other benefits for this steep price. What AZ bought was a place for themselves in two businesses when they acquired MedImmune. Companies typically have to overpay when they want to get into a new game. Ten years ago Abbott paid 40 times earnings when they bought MediSense to get into the blood glucose monitoring business. More recently Novartis paid through the nose to belly up to the vaccine business bar. A few weeks ago Schering-Plough overpaid to buy Organon but Fred Hassan gained stronger positions for himself in the women’s health and the dermatology businesses. Given the current trough in Pharma’s new product development, it’s simply a fact of life that anyone seeking to consummate a merger or acquisition must be prepared to overpay. Fifteen billion dollars for MedImmune is certainly no more outrageous than paying a 42-year old pitcher $15 million for half a season.AZ placed a toe in the water of the vaccine business, something that does not resemble Pharma’s traditional goldmine because a high proportion of vaccine customers are public agencies. Nevertheless, the vaccine business is poised to grow, and if it receives a boost from a pandemic flu epidemic, it will grow enormously. It will also grow substantially if someone makes good on the effort to develop an oncology vaccine or immunizations for the many viral infections that threaten the length and quality of life.In buying MedImmune AZ also acquired capabilities for entering the biologicals business. At this point the multi-billion dollar products of companies such as Amgen and Genentech do not face the precipitous revenue losses that occur when Pharma companies lose patent protection on their products. This is because most regulatory agencies have not developed guidelines for determining acceptable thresholds to approve generic versions of biological products. Congressional waterboys for the biotechs, such as Sen. Ted Kennedy, want makers of generic biologicals to conduct the same sort of clinical trials for their products as the original developers of the branded biologicals. Faced with such high development costs, the generic model of low cost equivalents becomes unsustainable. Nevertheless, despite the disingenuous concerns of Sen. Kennedy and others, Congressmen wise to Pharma such as Henry Waxman and Bernie Sanders will eventually succeed in creating some form of "bio similar" legislation. The country can only tolerate so many stories about people who died because they were unable to make even the co-payments on biological medications costing between $40,000 and $200,000 per year. At that point there will be a major demand for an entire industry of generic biologicals.During the two weeks I was defending AstraZeneca’s purchase, CEO David Brennan and John Patterson, the VP for Clinical Development, did their best to undermine my claims about their wise purchase.

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