We’re well aware that arguments by analogy are often fallacious but it’s been difficult for this blogger to watch the CEOs of the American automakers plead for a government loan and not see important analogies between what led them to the witness table in front of the Senate Banking committee and current issues in the pharmaceutical business.Three basic points:
1) Thanks to their own inefficiency, shortsightedness and inability to deal with a labor and infrastructure problem largely of their own making, Detroit carmakers built themselves to supply a market, gas guzzling cars, that is disappearing. It’s difficult to believe that the same management and union groups which got them into this mess are going to be able to do the radical restructuring that will get them out of it.
2) A nimbler set of competitors ran straight through the hole in the Detroit defenses to create markets for small fuel-efficient cars, particularly hybrids, that should have been Detroit’s by right but which they by and large ignored or relegated to fig-leafing SUVs into merely moderate gas hogs.
3) Granted GM, Ford and Chrysler can make it through the next year (GM’s got roughly $60 billion more in debts than in assets; it’s burned through $9.7 billion in cash in the first three quarters of 2008 and, with about $16 billion cash remaining, will be flat bust before 2009 is over) the big hope is technology – in particular, the electric car (GM’s Volt).
Big Pharma has likewise shackled itself to a market – primary care -- that most of us know in our gut, and IMS can demonstrate with data, is shrinking. Primary-care medicines still make lots of money; SUVs don’t. But given the number of new primary-care drugs that have fallen out of the clinic on their own, fallen afoul of regulators, or been yanked off the market or sharply restricted in their use (e.g., Galvus, Zelnorm, Avandia, Pristiq), and the number of drugs that are losing patent protection by 2012, it’s not got long to thrive. If you call this thriving.
Big Pharma’s versions of Detroit’s nimbler competitors: companies who set themselves up to go after specialist markets – Gilead, Genzyme, Celgene, Amgen, Genentech and Biogen Idec (indeed, Gilead and Celgene started out with molecules Big Pharma could’ve had). First mistake: Big Pharma’s blindness to the value of niche markets (blind because they weren’t structured to take profitable advantage of them, self-mandated to find drugs that could support primary-care commercial and development organizations rather than new medical needs). Second mistake: unwillingness to adopt a new technology – protein therapeutics, a nice parallel to Detroit’s blindness to hybrid engines.
As for electric engine technology: think biomarkers. As with batteries, the technological hurdles to an effective companion diagnostic are gigantic; so are the regulatory and business challenges. So far, we haven’t known enough to really make effective therapy-directing diagnostics. But just as electric cars could transform the worldwide car market (and with it, the worldwide political landscape…without a war), markers could allow drugmakers (or whoever controls the biomarker) an almost incontrovertible argument against recalcitrant payors who, by and large, now determine the success of a drug’s launch.
You still hear arguments that Pharmas shouldn’t pursue biomarkers because they’ll limit markets. You hear even more arguments about the need to continue to focus on primary care. What if we come up with another Januvia, they say? We say: if you come up with another Januvia, great. It ain’t all that tough to hire a sales force, if and when you need it.
It all sounds a little bit like that other notion we’re hearing about, even as the car makers beg Congress for a bailout: now that gas prices have tumbled back nearly to where they’d been before things went crazy, maybe the car companies can get by on the old strategy – still appealing to some apparently unquenchable American desire to drive cars too big for their own good?
Not the right lesson. For the car companies or Big Pharma.
