6. WALKING AWAY
Pfizer Yanks Exubera From Un-Exuberant Market
The phenomenon of loss aversion is the tendency to prefer avoiding losses over achieving gains. It comes into play when people
who have invested in a cause cannot admit that it was a mistake. The dying poker player who gave "life advice" in Kenny Rogers'
hit song, "The Gambler," understood this when he said, "You got to know when to hold 'em, know when to fold 'em, know when
to walk away, and know when to run." Pharmaceutical companies must know when to "fold 'em," considering not only a product's
safety and efficacy, but also its ability to add value in the eyes of payers.
Pfizer's dramatic withdrawal of support for Exubera, the first inhaled insulin on the market, was one of the headline events
of 2007. Pfizer took a $2.8 billion charge associated with the write-off. It had paid $1.3 billion to buy Sanofi-Aventis'
share of Exubera, and then saw sales of just $31 million from launch to the time of the withdrawal. Yes, that's millions.
Pharmas have a history of pulling products in development because of less-than-optimal trial results, or because of unexpected
safety issues. But pulling a safe, effective new drug simply because it's not selling is almost unprecedented. In fact, when
products get off to a slow start, companies tend to increase promotion.
Based on IMS's Launch Excellence study, we know that only a minority of launches are able to improve their launch trajectory
after six months on the market. In the US, the number is less than one in 10. If pharmaceutical companies act on this observation,
we would expect them to invest heavily in the first six months of a product's life. However, should the launch show a poor
trajectory, the most logical step would be to pull back on the investment.
IMS analyzed 569 launches in the US, from 1997 to 2005, to understand how well the product did at launch, as well as the extent
to which companies promoted them. Interestingly, those launches that saw a strong increase in promotional investment from
six months to two years after launch were also most likely to show a decline in performance. This clearly suggests that companies
do often throw good money after bad.
The quest to develop an insulin that diabetics can inhale, sniff, or even ingest has been long and difficult. The fact that
Exubera came to market at all is a considerable technological achievement. What Pfizer could not overcome was the reaction
of the audience that has become the dominant decision maker in many countries, including the US—the payer. In the eyes of
payers, Exubera was a premium-priced product that provided no improvement to treatment outcome or overall cost benefit, as
there was no evidence of compliance improvement.
For the industry, this was a hard (and for Pfizer, painful) lesson on the consequences of failing to address the decision
makers who matter most. Health economics studies can demonstrate the benefit of innovative products to payers. But health
economics cannot step in at the last moment to save a product. If the fundamental product concept is not payer-friendly at
the beginning of Phase III, it's not likely to become so with the application of health economics studies late in the day.