Since we don’t do much health services posting around here I sometimes forget how terrific the blog Health Care Renewal is. It’s always interesting. Sometimes it brushes against things we are concerned about here and last week there was a post with some good links about GlaxoSmithKline, a Big Pharma company active in influenza antivirals (Relenza) and pandemic vaccines. The companies of Big Pharma represent some of the most profitable on earth, making so much money that normal rates of profit, like what you might get from defense contracting, are considered failure. They justify their obscene profits with the argument that they must invest heavily in research and development if we are to get the benefits of the magic wonder drugs that will cure cancer, heart disease and make our lives better (but if you have an erection lasting longer than four hours, call your doctor immediately). In truth these big companies don’t usually do their own research and development. They license the products of small biotech companies and market them. That’s what happened with Relenza, the flu antiviral zanimivir, that GSK bought the rights for. But when profits dip to semi-obscene levels companies like GSK need to tighten their belts to keep the shareholders and Wall Street happy. When they do, it’s instructive to see them do it in the least valued part of their operations — research and development:
Now the company is cutting their own head count in research, to what sounds like a pretty serious degree. There have been substantial cuts at their sites in Italy and the UK, and the Research Triangle and Pennsylvania sites are getting it even harder, from what I’m hearing. Some chemistry areas are losing more than half their people. (Derek Lowe, In the Pipeline blog)
Reports are that some GSK sites are axing 40% of their research personnel. If the high price of drugs is because of deep and risky investment in research, why would this be the first place for deep and hard cuts? The obvious answer is that these companies are not in the business of making drugs. Drugs are just a dollar’s way of making another dollar for GSK. It doesn’t need a healthy science effort because it is cheaper to outsource research to small biotech companies. That way you can scarf up the winners, vastly decreasing your risk. Is this good business? Depends on your point of view. It’s bad for the public but pretty good for shareholders and Wall Street, if that’s what it’s about:
The pharmaceutical industry is indeed in sad shape. Why this is so is no mystery.
Mismanagement in such a complex industry by people often seemingly more interested in short term profit and their own personal gain, and in kissing the ass of Wall Street instead of long term goals of actually discovering, developing and marketing innovative new drugs and advancing the frontiers of science, is apparently a feature of the landscape.
While there are many rationalizations about why we have such a situation, and while some of the rationalizations contain many reality-based truths, you’d be nuts to believe such an arrangement could actually produce good results. (HC Renewal)
Nuts if you believe good results means good drugs at reasonable prices. But GSK doesn’t believe that. That’s how it keeps its sanity. And how competent scientists lose their jobs.