Being Bob: Q&A with Robert Essner - Pharmaceutical Executive


Being Bob: Q&A with Robert Essner

Pharmaceutical Executive

Tell me about Prevnar. Pediatric vaccines like this are potentially world-changing drugs.

Prevnar [a vaccine for multiple strains of bacteria that cause childhood pneumococcal infections] was still very much a project when we acquired American Cyanamid in the mid-1990's. At that point, vaccines were out of favor in the pharmaceutical industry. Prices were low, and I think a lot of companies thought of them mostly as service items, items that they supplied but weren't really an important part of their business mix.

Prevnar was being developed by the Lederle vaccine group, who were talented people, but their concept of a vaccine was very much that vaccines are not quite commodity items. At one point, we woke up and said, wait a second: Prevnar is really a very sophisticated, very valuable biotech product, and we started to think about it in those terms. We invested in it in terms of its development, its commercialization. We priced it in a way that looked more like a biotech product—still not very expensive, but certainly more expensive than any vaccine in history when we launched it. And our vaccine people were very nervous that we were setting a price that would not be accepted, but we still thought Prev-nar represented a tremendous value as a biotech product.

The initial estimate for the total peak revenues for Prev-nar was $300 million or $400 million. At that level it would have been a small, interesting product. But we reconceptualized it, priced it, developed it, advocated it. Promoting is not such a big part of vaccines, but we took it very seriously, and made it into a multi-billion dollar product. I think the recent renewed interest in vaccines is, in many cases, a direct by-product of Wyeth showing the world that vaccines can be important, commercially valuable products.

How does a company like Wyeth make this drug accessible in parts of the world where it's really needed?

We have committed ourselves, working with the Global Alliance for Vaccines and Immunization, with the World Bank, with the Gates Foundation, to getting Prevnar to every kid in the world who can benefit from it. The current formulation, the seven-valent formulation, is developed based on the strains that are prevalent in the United States and Western Europe. But the 13-valent formulation, which is coming in the next couple of years, will be valuable everywhere. We're actually starting to do demonstration projects in parts of Asia, to make Prevnar available to kids who couldn't otherwise afford it.

Currently two-thirds of the drug industry's profitability comes from the US, and it certainly looks like profitability in the US is going to get squeezed. What happens then?

Well, from a Wyeth perspective, this year for the first time, more than half our revenue will come from outside the United States. A lot of companies sell drugs for much lower prices outside the US, and that is true for some of our major products like Prevnar and Enbrel. But we have prices that are within a global band, and sometimes more expensive outside the United States. So I think we will be relatively insulated from that problem, in that our business is growing faster in Europe and in Asia than it's growing in the United States. We've worked hard to see that Wyeth is relatively resistant to that issue.

And for the industry as a whole? They're just going to have to be more like you?

The big issue obviously is not demand, it's pricing. With both Enbrel and Prevnar we felt we had a certain value we were offering, and that we could command a certain price, and that price was justified. There are many cases where we waited months, years before those products became available in a given market, in order to make sure that we could establish a consistent global price band. But it takes a lot of discipline and a little bit of courage to carry that off, as well as a real belief in the value of what you're selling.

Speaking of selling, what do you think the sales model ought to be for pharma?

I think there have been problems with the sales model. We got into a position where our customers were building up defenses against our sales reps. If a doctor's office is having to build a moat to prevent pharmaceutical reps from coming in, something is wrong with that. Several years ago, we stopped sending multiple reps to the same doctor's office, and tried to listen a lot more to what our customers were saying. Trying to force an enormous number of reps onto a relatively finite number of busy customers is a defunct idea, and deserves to be defunct.


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