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Online Extra: "It's a Perfect Storm" for Drugmakers

Q: You've also been aggressively in-licensing [buying rights to products being developed by external players] since the merger. Do you plan to continue?

A: We in-licensed about 30 products in the first two to three years after the merger because I thought the cupboard was kind of empty and we had to restock. Wellbutrin XL [the follow-on drug to Wellbutrin] turned out to be a very good deal. I would like to continue to do that, frankly. The problem is, there isn't much out there. Over the last four years, two things have happened: We're seeing earlier and earlier compounds, which are very high-risk, and they have become more expensive.

The danger in in-licensing is that it dies in your arms. Because the whole drug industry has a thin pipeline, whenever the few biotech companies that need a partner have an asset, the whole industry is around the table. But frankly, [a slower pace on deals] has been more [due to] a lack of assets than pricing issues because we would have paid whatever it was worth. But there just haven't been that many molecules.

Q: What has happened with the suit brought by New York Attorney General Eliot Spitzer [charging that GSK withheld negative information about its antidepressant pill, Paxil]?

A: What happened is we were accused of things [but], when you scratch the surface of the press release, Mr. Spitzer's substance was fairly modest. Our bad luck, in a way, was we did four studies in depression for children to prepare for a filing because we generally thought it would work. The first was positive, and the others were not. But when the first one came out positive, we said, "Great, let's publish it."

Of course, the journals were delighted, as they always want to publish positive stuff -- it's news. Then the second one comes in negative. That doesn't surprise you -- Prozac was approved on seven pivotal studies, four of which were positive and three negative. But when the third one came in negative, then there was no doubt, and that's when we communicated. We didn't file it with the FDA as it was obvious it wasn't going to get approval. We pulled the data on all the trials, [which also indicated] a signal of suicidality -- it's very weak, like [that of] placebo. There has never been a kid attempting suicide while on those trials.

Q: And now you're publishing all your clinical results since the 2000 merger on the Web?

A: We didn't wait for Mr. Spitzer. We think the accusation had no merits, but the fact is, people could accuse us because we were less than completely transparent. Now, we're going to publish every clinical trial there on all our marketed drugs and be completely transparent. I will give credit to Mr. Spitzer for having accelerated something that was going to happen anyway. [Apart from agreeing to release all clinical results, GSK's settlement with the New York Attorney General also includes a $2.5 million payment to the state.]

Q: What about marketing practices?

A: We're reviewing every single process at the company. The environment of the business has changed after Enron. I believe that there was a lack of trust [on the part of] the public for big business, and that lack of trust has been amplified by a few bad apples in the cart. And because of that, there has been a tremendous loss of trust in all big business -- not just pharma -- and that has implications to me as a CEO.

I can't count on people just to trust us as a company to do the right thing, even though they should. You only have to go inside GSK and ask people -- go to the CEDDS, the people who deal with HIV issues in Africa. But it's irrelevant, because the public doesn't see all this. We have reformed our marketing practices to point of political correctness.

We can't buy baseball seats for a doctor anymore. Five to ten years ago, it was a different world. People say, "Well, you had bad marketing practices [then]." Maybe we did, judged on today's criteria. It's tougher for sales reps today because they can't just buy access to physicians -- doctors are too busy, and there are too many sales reps.

But the industry is cleaning itself up, and we're leading the way. We were the first to stop having dinners for physicians in the U.S., and we're very aggressive about this. But all the major companies are spending less on promotion and more in research -- the whole industry is wising up after considerable scar tissue.

Q: Are you planning to do more clinical trials in lower-cost countries?

A: There's no doubt that the cost of doing clinical trials in Europe and the U.S. is absolutely prohibitive, and we can save substantially -- I mean hundreds of millions of dollars of pure savings -- by switching some of those trials to other, lower-cost countries. Of course, we have to go to places where they can do trials [with the] highest-quality standards to meet FDA requirements. So we will divert more trials to certain countries that have the infrastructure, such as Poland and India. Now, we do about 10% of our trials in these lower-cost countries, and our goal is 30% by the end of 2005.

We do about 60,000 patients in total trials each year -- so the saving per person if you switch, say, 20,000 of those patients to India is in excess of $10,000 per patient. So that's a savings of $200 million right there.

Q: Speaking of India, tell me more about your partnership with Ranbaxy, an Indian generic firm.

A: The generic companies know the best times are behind them in India [since India will be forced to respect patent rights come 2005]. They have had a free meal for many years. Now, for a variety of reasons, the future will be much more challenging. So smarter players realize they have to reinvest some of those gains into discovering drugs.

Indian companies have some of the core capabilities to do it -- they have the chemists and biologists -- but what they don't have very often is adequate targets, so they're missing pieces in early discovery. We're providing them exclusive targets that we have discovered, and they're applying the weight of their chemistry and biology to those targets. If they find something, then we share.

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