Sermo Bags a Big Pharma Fish

10/14/07

One of the most exciting things about launching Xconomy in such a vibrant tech community as Kendall Square has been the chance to watch our startup neighbors grow, up close and in real time. So when Sermo founder and CEO Daniel Palestrant invited me last week for a second visit to the company, which just over a year ago launched an eponymous online community for physicians and last month closed a $26.7 million Series C financing round, I was glad to make the block-and-a-half trip.

Palestrant and the rest of the team were gearing up for tomorrow morning’s long-anticipated (at least by me; other people probably have hobbies and a better sense of time) announcement that the company has closed its first deal granting a pharmaceutical firm access to Sermo and, by extension, the 30,000-plus physicians who are now its members. And it’s a big fish that Palestrant et al. have bagged: Pfizer, which is, depending on how you like to count, the biggest or second-biggest drug company in the world. Thanks to that fact, I think, things were even more frenetic in the quintessentially startupian basement office than they were when I visited back in July. (My apologies to the Sermo staff, who had already pulled up chairs for a long-overdue meeting when Palestrant, Sermo director of communications Greg Shenk, and I got done talking.)

Pfizer is not the first organization to pay for access to Sermo, where physicians, who get in for free, communicate with one another via posts, comments, and polls to, among other things, discuss treatments and trends and consult with one another on difficult cases. (Sermo already has deals with several investment firms and the American Medical Association, as well as an evaluation agreement with the FDA that does not involve any money changing hands.) But to me the Pfizer deal is the most interesting one to date, because I’m hard-pressed to imagine any relationship as fraught as the one that exists right now between doctors and the drug industry.

For his part, Palestrant says that Pharma involvement in Sermo is something that some community members began asking for about nine months ago, much to his surprise. “I always thought that industry was a real third rail for physicians,” he says. Certainly the sentiment on this is mixed among Sermo members; one idea seems to be it would be better to have drug companies involved in the community and clearly identified, rather than lurking behind anonymous usernames (as is possible, given that Sermo is open to any U.S. physician, and plenty of physicians work for drug companies).

And it’s no secret that Pharma is struggling with how to present itself to doctors and consumers. Sales reps—you know, the pathologically cheerful ex-cheerleader types who roam the halls of hospitals and doctors’ offices proffering free pens—have been a particular source of scorn for (in the view of many) wasting physicians’ time and contributing to drug-price bloat. Pfizer itself announced last November that it would lay off a fifth of its U.S. sales force. So it makes sense that the company would be keen to experiment with new ways to get its message to doctors, and that a ready-made community like Sermo would be an attractive place to start. (Just how attractive, in dollar terms, is unclear. Palestrant, who hasn’t revealed financial terms of any of Sermo’s client arrangements to date, would only say that that the 15-month, non-exclusive deal is “a significant partnership.”)

So what does Pfizer actually get for its undisclosed fee? Not equity in Sermo, Palestrant wants to make clear. Palestrant talks easily and eloquently about big ideas—in this case, the common ground between doctors and Pharma of information and expertise—but I’m the sort of person who needs to acquaint myself with a few of the trees before thinking about the forest. In previous conversations I’ve been able to coax some particulars out of him, but this time he didn’t pony up much about just how Pfizer and the Sermo community will interact. My sense is this doesn’t reflect any particular caginess on Palestrant’s part, but rather that it indicates just how experimental the relationship is at this stage.

Indeed, the agreement begins with a three- to six-month exploratory period in which, as I understand it, Pfizer will mostly just hang out within Sermo and try to strike up conversations with members about what they want and don’t want from the arrangement. There will be some ground rules, Palestrant says: of Pfizer employees, only those who are doctors can log in, they can only do so from their work computers, and they will be identified within Sermo as Pfizer employees, even if they had pre-existing accounts. And over the next few months an advisory board including both Pfizer representatives and Sermo members will develop a set of guidelines for pharmaceutical-industry participation in Sermo. What’s more, Pfizer will join in some of Sermo’s discussions with the FDA to try to define ways that the agency, industry, and healthcare providers can improve their communications.

(One concrete benefit of the partnership for Pfizer will be the right to post a certain number of “hotspots” within Sermo. The hotspots technology, which Sermo will launch next month, allows clients to introduce outside information into Sermo in a variety of well-marked forms, including guidelines, polls, and drug backgrounders.)

So, to recap, tomorrow morning a bunch of drug-industry representatives—members of a group that’s probably tied with insurance bureaucrats for second-most appearances on doctors’ lounge dart boards (surely lawyers top the list)—are going to slap on their virtual Pfizer badges and step inside a close-knit, incredibly self-protective community of doctors. I would love to be a fly on that wall but, though Sermo has previously granted journalists limited-time observer accounts, the company decided against it this time. Still, I’m thinking this is an experiment that potentially affects all of us, in that it’s an opportunity, in some small way, for better or worse, to change the complicated relationship between money and medical knowledge.

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  • Andrew

    interesting. is this a sellout to Big Pharma, or not?

    Sermo is a great idea, and the money has to come from somewhere. I guess $27 million in funding forces their hand toward the Big Pharma deals…

    I wonder if docs would pay for a site that was Pharma free?

  • Pingback: Health Blog : Pfizer Follows Docs Online With Sermo

  • lawrence f kron

    though worrisome,not the least bit surprising to anyone who has witnessed the corruption of medical practice resulting from our love affair with the self fulling propoganda and money of the pharma industry.