On October12, Merck KGAA (Darmstadt) published a very interesting study that appears to address lagging performance in innovation in the industry by including personal characteristics in hiring decisions. The company scrutinizes its new hires for curiosity.
Merck examined with its Curiosity Study 2016 the extent to which staff are able to make the most of their curiosity at work, and if they are encouraged to do so.
“73% of respondents do not feel comfortable asking more questions at work. Nearly 45% workers surveyed in Germany believe that they are discouraged by their employer from challenging the status quo. 35 % of German employees cited self-directed work as the most important factor. ”
Pharmaceutical innovation has been suffering from problematic performance for years. And the core problems are largely organizational and cultural.
Bruce Booth in his article “Culture as a culprit of the Pharma R&D crisis?” (Forbes, 2012), highlights factors such as “tyranny of the committee”, “stagnation through risk avoidance”, and “negative impact of organizational entropy”. The article stirred a debate in the industry about cultural factors that affect human behavior within the system, namely willingness of individuals to present new ideas that may or may not succeed. Instead, natural human preference is “playing it safe” and stick with projects that have approved budgets to avoid layoffs during acquisitions and mergers.
In 2012, Derek Lowe in his article Eroom’s Law (In the Pipeline, 2012) commented on long-term trend in cost of developing a new drug:
Now, the companies (and CEOS) involved in this generally talk about how they’re going to turn things around, how cutting their own research will put things on a better footing, how doing external deals will more than make up for it, and so on. But it’s getting increasingly hard to believe that.
Richard Wobbe, in discussion below the article, posted a link to his article Project Management and Drug Discovery Productivity (page 8, figure 3) in which he presents the same problem in a differently designed graph (1960-1998), showing the same problem from a different angle. Combined graph showing R&D spending and number of approved drugs/year:
The Big Pharma culture has been homogenised, purified, sterilised, whipped, stirred, filtered, etc. and lost its ability to ferment the good stuff required to innovate. This isn’t covered in most reviews of the productivity challenge facing our industry, because it’s nearly impossible to quantify, but it’s well known and a huge issue”. ‘ From Vision to Decision Pharma 2020’
Sayle in his article Creating a Culture of Trust & Breakthrough Innovation in Pharma (EyeForPharma, 2015) dissected several analytical works such as PWC’s Report ‘From Vision to Decision Pharma 2020’ and ‘The Corporate Reputation of Pharma – The Patient Perspective’ and discussed the role of culture in pharmaceutical innovation. Sayle highlights the role of trust:
“So what can the industry’s senior figures do to rebuild public trust and build healthy, high-performing companies to successfully meet pharma’s fundamental challenges of the future?”
I wholeheartedly agree: public trust is essential for the industry to thrive. Without trust, no business is possible. Loss of public trust has the power to force major industry reform, such as the changes implemented in nuclear industry following the Three Mile Island accident. In extreme circumstances, as seen after the Chernobyl disaster in Soviet Union in 1986, failure to reform can trigger a regime change. For dynamic version of the presentation see Arete-Zoe company website or SlidePlayer.In pharma, nothing goes away unless it’s well and truly superseded – some of the oldest drugs such as ibuprofen and aspirin, metformin, cholesterol-lowering drugs, and anti-hypertensives still sell worldwide, many are on the WHO list of essential medicines, and their cost is generally very low. In fact, many essential drugs do go away as a result of business decisions: to create room for drugs that are newer and where it is possible to charge premium price.
Recently a new trend emerged to offer half-a-century old drugs for a premium price: Innovators vs. exploiters (Forbes, 2016) comment on Mylan’s EpiPen, Citron’s last word on Valeant’s business model, or the price hike of daraprim by Turing Pharmaceuticals, just to name a few.
So why is drug development becoming so expensive, then?
Series of mergers and mega-mergers in the industry significantly affects the drug development pipeline, and the culture within which people, including scientists, operate. Recent research published by HRB (August 2016) shows that mergers do indeed stall innovation:
“Acquirers often target firms that have a relatively similar patent portfolio. That means there’s less competition for discovering and developing new therapies. If a non-merging rival is also researching similar therapies, that outside firm also now has one less competitor. It experiences a similar reduction in competition as the acquiring firm.”
With all due respect, this practice closely resembles behavior of sand tiger shark embryos in the womb: they cannibalize each other.
As pointed out by FiercePharma, McKinsey & Co. analysts in their 2014 report emphasized the “shareholder value” effects of megamergers.
The value of curiosity
The role of organizational culture in pharmaceutical innovation is hard to overestimate. No man is an island: People function within an organization, not independently of it, thoroughly immersed in its culture, having to respect its reporting structure, encouraged (and more often than not discouraged) to undergo training that is relevant to their (current) job, with endorsed (or not) excursions into other areas of interest. Promotion issues and career ladder, mobility within the enterprise, and choices presented to internal talent all affect whether or not people communicate their preferences, develop the talents they have, and pursue their dreams.