John Castellani: Industry's Level Bet on a Dizzying Future

Will reinforced evidence and messaging continue to deliver results in a changing healthcare marketplace? Can PhRMA's own business model synch with industry's? Pharm Exec takes a closer look at PhRMA's new leadership
Mar 01, 2011



For Big Pharma, the track where "business meets policy" is a gutted one—or, as some would say, muddy as the road to Moscow in springtime. Not only is its reputation facing pushback from unfamiliar quarters—from criminal corruption vigilantes at the Department of Justice to the new GOP House leadership and grassroots Tea Party populists—but for the first time there are basic cost metrics to apply against the industry's own domestic policy commitments. These commitments now stand at approximately $90 billion and counting, just to help fund the cost of Obamacare alone. No one knows what the real number will be.

The industry has also had to confront breaches in its historic omertà-like code of silence, as evidenced by last month's harsh public verdict of Pfizer's former chief state government lobbyist on support for health reform—"one of the worst self-inflicted wounds in the history of lobbying."

Suffice it to say today's task of managing the industry relationship with the external world requires more than money alone; resources are not the issue. Someone has to finesse a finer point, working the "social thermostat" in daily testing the balance between the convictions that can lead to the deep freeze of confrontation or the thaw that accompanies a tactical compromise.

To fill that role, the Pharmaceutical Research and Manufacturers of America (PhRMA) has tapped a new leader: John Castellani, who last September replaced the ace-yet-polarizing politico, Billy Tauzin. Castellani's skill in managing sensitive CEO egos to build a series of successful multi-sectoral coalitions as head of the US Business Roundtable helped him win the position at PhRMA, where he leads a staff of some 160 people administering an annual budget of approximately $200 million.

PhRMA—and Castellani—in effect serve as industry's global spokesmen, as PhRMA's resources far exceed those of its main counterpart trade associations outside the US. The European Federation of Pharmaceutical Industries and Associations (EFPIA), which itself is embracing new leadership under the former Swedish association president Richard Bergstrom, and the International Federation of Pharmaceutical Manufacturers and Associations (IFPMA) each have less than one-tenth of what PhRMA spends every year. "The cooperation from John Castellani and the entire PhRMA team on cross-border issues of interest to both our countries has been extraordinary," Russell Williams, head of Canada's association Rx&D, told Pharm Exec. "Ours is a global industry and we need to develop a more global approach to engagement in all areas. Partnerships are essential to demonstrating the value of our industry and our medicines and vaccines."

Pharm Exec sat down with Castellani on Feb. 4 to explore where he sees the industry going and to discuss his vision for the organization over the next three years. Excerpts from the conversation reveal him as refreshingly direct in outlining what's at stake if the US fails to maintain basic support for medicines innovation.

Is there a prospect for this diverse, creative, and high-performance segment of American industry to become just another low-margin public utility? Yes. And with the cumulative weight of bad regulation it can happen literally overnight. Does the slow global devolution of the US automobile industry provide lessons to Big Pharma? Indeed it does. Decline is guaranteed for any industry that loses sight of the basic principle of good economics, which is maintaining value for the customer. This is why PhRMA members are working so hard to adjust the business model to changes in that customer base, and how PhRMA has to prioritize to ensure that external conditions are there to help ease the transition. In Castellani's words: "To the extent this industry gets identified as being built around the premise of government payouts for an imitative, aging commodity—the pill equivalent of cash for clunkers—we're all dead."