OXYGEN
07/05/2005, 08h24
NEW YORK - Merck's surprise ouster of its longtime Chairman and Chief Executive Raymond Gilmartin almost a full year before the executive was scheduled to retire may reveal as much about Merck's current woes as it does about the funk in which the entire pharmaceutical industry now finds itself mired.
Merck , the third-largest American drugmaker, named an insider, Richard Clark, its current head of manufacturing, as the company's new chief executive. Merck said the chairman's position would remain vacant for at least a year.
Clark has no experience in drug marketing or research, which are the two areas that are generally considered the most crucial to drugmakers. He is neither a physician nor a scientist and lacks experience in sales. Instead, Clark's experience and expertise is in manufacturing, drug benefit management and controlling costs.
Without the internal research productivity, cost cutting is going to become more crucial, as some of the biggest drug companies, like Pfizer (nyse: PFE - news - people ), GlaxoSmithKline (nyse: GSK - news - people ) and Novartis (nyse: NVS - news - people ), also begin to face a market where the prices of their products are likely to fall.
For one thing, consumers are increasingly footing more of the bills for their drug choices, whether it's through higher co-pays or stricter formularies that require them to pay out-of-pocket for expensive branded primary care drugs like cholesterol-lowering statins or high blood pressure pills.
In addition, drug-pricing authorities abroad continue to extract lower prices for new medicines from the major pharmaceutical companies. Companies appear to have little power to stop this practice so long as our own trade authorities sit on the sidelines.
In this kind of a world, having a serious cost-cutter in the executive suite begins to make more sense, especially one who understands the arcane nuances of drug manufacturing--an area long ignored--and harbors some significant savings from much needed technological and management upgrades. Merck's own stock price has fallen more than 60% from its peak in 2000, and the company has introduced only a handful of new drugs in the past five years. If it cannot make new drug candidates, it needs to cut its costs and buy some.
(...)
Finally, in recent years, manufacturing violations have cost the industries millions in delays, injunctions and fines, and companies were forced to confront their creaky factories.
But there is also a big reason why companies had been able to ignore cost-saving improvements in their manufacturing facilities, and why they can no longer do so. In a market where drug prices are more tightly controlled and margins slim, companies can no longer afford to ignore simple efficiencies to be gained from improving things as rudimentary as punching out pills.
This is where the industry is likely to focus more of its attention, and in selecting Clark, Merck is signaling that is where more of the focus will be inside its own management ranks. This is what happens when a wickedly profitable industry becomes a so-so business. Companies can find lots of ways to remain profitable and it need not be from dumping outrageous sums into new research. It can squeeze costs to the bone and, eventually, get into other lines of business such as lifestyle medicines or cosmetic pharmaceuticals.
(...)
This is one way to view Clark's ascendancy as Merck chief. The company is not preparing for a future filled with its own breakthrough research but, instead, for life as a regulated utility. It is a future where profits are increasingly set by price controls and cutting costs has become the best way to squeeze out extra income.
NDLR : C'est un nouveau signe que Big pharma s'attend a des années très difficiles. Le contrôle des coûts sera très important pour survivre dans le nouvel environnement pharmaceutique
extrait de http://www.forbes.com/newsletter/2005/05/06/cz_sg_0506soapbox_inl.html
Merck , the third-largest American drugmaker, named an insider, Richard Clark, its current head of manufacturing, as the company's new chief executive. Merck said the chairman's position would remain vacant for at least a year.
Clark has no experience in drug marketing or research, which are the two areas that are generally considered the most crucial to drugmakers. He is neither a physician nor a scientist and lacks experience in sales. Instead, Clark's experience and expertise is in manufacturing, drug benefit management and controlling costs.
Without the internal research productivity, cost cutting is going to become more crucial, as some of the biggest drug companies, like Pfizer (nyse: PFE - news - people ), GlaxoSmithKline (nyse: GSK - news - people ) and Novartis (nyse: NVS - news - people ), also begin to face a market where the prices of their products are likely to fall.
For one thing, consumers are increasingly footing more of the bills for their drug choices, whether it's through higher co-pays or stricter formularies that require them to pay out-of-pocket for expensive branded primary care drugs like cholesterol-lowering statins or high blood pressure pills.
In addition, drug-pricing authorities abroad continue to extract lower prices for new medicines from the major pharmaceutical companies. Companies appear to have little power to stop this practice so long as our own trade authorities sit on the sidelines.
In this kind of a world, having a serious cost-cutter in the executive suite begins to make more sense, especially one who understands the arcane nuances of drug manufacturing--an area long ignored--and harbors some significant savings from much needed technological and management upgrades. Merck's own stock price has fallen more than 60% from its peak in 2000, and the company has introduced only a handful of new drugs in the past five years. If it cannot make new drug candidates, it needs to cut its costs and buy some.
(...)
Finally, in recent years, manufacturing violations have cost the industries millions in delays, injunctions and fines, and companies were forced to confront their creaky factories.
But there is also a big reason why companies had been able to ignore cost-saving improvements in their manufacturing facilities, and why they can no longer do so. In a market where drug prices are more tightly controlled and margins slim, companies can no longer afford to ignore simple efficiencies to be gained from improving things as rudimentary as punching out pills.
This is where the industry is likely to focus more of its attention, and in selecting Clark, Merck is signaling that is where more of the focus will be inside its own management ranks. This is what happens when a wickedly profitable industry becomes a so-so business. Companies can find lots of ways to remain profitable and it need not be from dumping outrageous sums into new research. It can squeeze costs to the bone and, eventually, get into other lines of business such as lifestyle medicines or cosmetic pharmaceuticals.
(...)
This is one way to view Clark's ascendancy as Merck chief. The company is not preparing for a future filled with its own breakthrough research but, instead, for life as a regulated utility. It is a future where profits are increasingly set by price controls and cutting costs has become the best way to squeeze out extra income.
NDLR : C'est un nouveau signe que Big pharma s'attend a des années très difficiles. Le contrôle des coûts sera très important pour survivre dans le nouvel environnement pharmaceutique
extrait de http://www.forbes.com/newsletter/2005/05/06/cz_sg_0506soapbox_inl.html