The new year started early for pharma—and with a bang. Hard on the Democratic win in the midterm elections came the industry
leader's week from hell.
On November 30, Pfizer CEO Jeffrey Kindler enticed Wall Street to the company's sleek research labs for a pipeline preview-cum-sales
pitch. A distinguished lineup of suits and lab coats talked up Pfizer's top-30 R&D programs, doing their best to persuade
skeptical analysts that their "robust and diversified product pipeline" will control the bleeding when the company's $12.9
billion cash cow, Lipitor, goes off patent in 2011.
The all-day affair served as a calculated display of the fact that Pfizer was under new management. Former CEO Hank McKinnell
had been widely viewed as pharma's Ahab, obsessively pursuing blockbusters and mega-mergers as his company's stock value tanked.
Kindler, in the top job a mere four months, wanted Wall Street to see change.
Only two days earlier, he had made a stunning leadership debut, announcing that Pfizer would cut its storied 11,000-strong
sales force by 20 percent. That single stroke demonstrated that Kindler could make not only the tough decisions but the right
ones—and drew praise for restoring sanity to the mindless escalation of the "arms race."
As Kindler took the mike to introduce Pfizer's crown-jewel—torcetrapib, the breakthrough anti-cholesterol drug that promised
to outsell Lipitor—he surely savored the moment. What a coup for a new CEO: to follow up a dramatic cost-cutting move with
a flashy display of R&D. All confidence, he revealed that the company would be speeding up torcetrapib's ETA at the FDA to
2007. "This drug," Kindler said, "is one of the important developments in medicine in our generation."
And then, two days later, it wasn't.
The press played the abrupt reversal for all it was worth: "Pfizer's Bitter Pill" (BusinessWeek), "A Catastrophe for Pfizer" (Forbes), "When Big Pharma Gets Too Big" (Fortune). Although no one rushed to pen Pfizer's or Kindler's obituary—and some lauded the company for pulling torcetrapib the day
it got word that the drug appeared to cause heart attacks—there was an unmistakable sense industrywide that something momentous
had taken place. The writing was on the wall: The Blockbuster Model, R.I.P.
"Big pharma has been put on notice," says Arjun Bedi, a managing partner at Accenture who has watched the industry for 28
years. "It has only a small window of opportunity to make the changes necessary to get to a new model." Bedi sees 2007 as
do-or-die, a year of serious soul-searching. "The companies will not only be doing battle with one another. Each one will
be struggling with itself and its own capacity to change."
Call it pharma's perfect storm. "Growth is shifting from mature markets to emerging ones," says Murray Aitken, a senior vice
president at IMS Health. "New product adoption is not keeping pace with the loss of patent protection. Specialty and niche
products are playing a larger role. And regulators, payers, and consumers are more carefully weighing the risk–benefit factors
Each of these developments is, like a force of nature, largely beyond industry control. And combined, they are far greater
than the sum of their parts. In weather like this, companies must figure out how to do much more with much less. "Either you
have to downsize or you have to build the pipeline," says Andy Bender, the president of Polaris Management Partners. "Most
have to do both."