Bigger Isn’t Better: It’s Time for Big Pharma to Break Up Into Little Pharma
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Big Pharma continues to set up R&D teams that are too big. It’s time for Big Pharma to get serious about breaking up into Little Pharma.
It’s hard to say whether Big Pharma is ready to go down this road. In a recent op-ed for The Economist, GlaxoSmithKline (NYSE: GSK) CEO Andrew Witty did acknowledge that an industry culture change is in order. The imaginative R&D environment he describes sounds more like the one you see sometimes at small biotech companies.
“In the past the problem of R&D in big pharmaceutical companies has been ‘fixed’ by spending more and by using scale to ‘industrialise’ the research process. These are no longer solutions.” Witty wrote. He added: “We need to recapture the ability to empower creative talent in the discovery phase of R&D by creating an environment in the labs that reflects the fact that discovering a drug is as much an art as it is a process.”
Witty doesn’t go so far as to say smaller is better, but the environment he describes sounds small, and reminded me of some comments former Merck CEO Ray Gilmartin made to me a few years ago when he was visiting his company’s Seattle branch. I asked Gilmartin whether Merck would continue to grow its Rosetta Inpharmatics operation in Seattle. At the time, Merck had about 300 people doing leading-edge work that was supposed to help it separate the wheat from the chaff in its drug development pipeline.
No, Gilmartin said, 300 people was pretty much as big as Rosetta would ever get. With fewer people, he said, it would be too small to make an impact. But if it got much bigger, then the staff would end up spending so much time in meetings, trying to figure out who’s doing what, that productivity would go down.
Gilmartin, regardless of whatever mistakes he made during his tenure, had a point. Very few of the high-impact drugs of today are coming from the biggest R&D budgets in Big Pharma. If you look at the eight blockbuster drugs in the works that I listed in this space a couple weeks ago, six were developed by small companies. Even if you add Bristol-Myers Squibb’s new FDA-approved melanoma drug to the list, that really shouldn’t count as a Big Pharma contribution, because all the critical early development work came from a small company, Medarex, that was bought by Bristol.
Do you think Big Pharma should get smaller to create new drugs? What is the ideal amount of money and manpower needed for pharma R&D? What kind of culture does it really take to pull of this act of art and science? I’d love to hear your thoughts in the comment section below.