[Ip-health] Jean-Pierre Garnier of GlaxoSmithKline defends the pharmaceutical industry as he overhauls his own drugs firm

[robert weissman]

http://www.economist.com/business/displaystory.cfm?story_id=3D9583361

The nimble sumo

Aug 2nd 2007
 From The Economist print edition

Jean-Pierre Garnier of GlaxoSmithKline defends the pharmaceutical
industry as he overhauls his own drugs firm


THIS would seem to be a terrible time to be the boss of a big
pharmaceutical company. Customers and regulators are fretting about
safety after the high-profile recall of Merck's Vioxx, a painkiller that
turned out to be dangerous for some patients. The number of new drugs
gaining approval has plunged in recent years, casting doubt on the
industry's research model. Poor countries are making noisy demands for
free drugs and are threatening to override patents through =93compulsory
licensing=94. All this has battered the shares of the drugs giants and
forced out the chief executives of three of the biggest in the past two
years. And yet here is Jean-Pierre Garnier, the boss of GlaxoSmithKline
(GSK), beaming confidently as he defends his industry. =93My generation of
chief executives is the first that =91gets it=92,=94 he declares.

What explains the ebullience displayed by J.P., as he is universally
known? One reason is his successful defence of Avandia, a blockbuster
diabetes drug that had threatened to go the way of Vioxx. A safety
scandal blew up in May when a leading cardiologist published a
statistical study suggesting that Avandia might increase the risk of
cardiovascular problems. Sales, which topped $3.3 billion last year,
plunged by a fifth in the quarter ending in June. In the wake of the
Vioxx scandal many drug companies have been eager to avoid messy
confrontations over safety. But not Mr Garnier. He came out swinging,
accusing critics of politicising the regulation of drugs and rebutting
the study's claims with his firm's own data. This week an expert panel
convened by America's Food and Drug Administration (FDA) voted
overwhelmingly to keep Avandia on the market, albeit with stronger
warnings about potential side-effects. As one analyst put it, GSK
=93dodged the FDA bullet=94.

Another reason Mr Garnier is smiling is that GSK has the strongest drugs
pipeline of any big firm. It has 33 drugs in the late stage of clinical
trials, with perhaps two dozen due to be launched between now and the
end of 2009. That is much better than at rival firms, and far better
than the pitiful prospects Mr Garnier inherited when he took over as
boss of SmithKline Beecham in 2000, just before the merger with Glaxo
Wellcome. The industry's poor research output has led some critics to
argue that the huge mergers of the past decade have produced giant firms
that are too big and bloated to innovate. Mr Garnier disagrees. =93R&D
productivity is not linked to size,=94 he insists. He invokes the image of
a successful sumo wrestler and says giants can be nimble if they are
clever. Indeed, size can be an advantage in marketing, or when
organising massive clinical trials, he observes.

But he accepts that size is a problem early in the drug-development
process. =93Drug finders=94 and innovators may well get tripped up by
bureaucracy and tangled in red tape; good ideas are lost. Even worse,
bad ideas may not be weeded out in time: Pfizer, for example, spent $1
billion to get Torcetrapib, a cholesterol drug, to late-stage testing
only to discover dangerous side-effects that forced it to abandon the
potential blockbuster.

So Mr Garnier has tried hard to decentralise. He did away with GSK's
top-down approach to research, replacing it with a number of autonomous
research clusters known as =93centres of excellence in drug discovery=94.
The idea is that these smaller groups will take many more =93shots on
goal=94 than bureaucratic research monoliths like Pfizer. Crucially, he
wants them to fail more quickly too, thus sparing the firm the huge
expense of a late-stage withdrawal. Surprisingly for an industry
veteran, Mr Garnier has also taken on the tradition of secrecy by
experimenting with =93open innovation=94 models. Managers are now rewarded
for successful inventions whether they were developed in-house or
acquired from outside. He reckons this eliminates the =93not invented
here=94 syndrome common at big drugs firms.
Self-confidence or arrogance?

A driving force behind Mr Garnier's success is a brash self-confidence
that even one of his lieutenants considers =93arrogant=94. The
American-educated Frenchman, who lives with his family in Philadelphia,
has ended up in hot water a few times as a result. In 2003 he was
branded a =93fat cat=94 by the press for trying to push through a =A322m
($36m) pay-and-benefits package. In a move rarely seen at a British
firm, shareholders voted against the resolution. Mr Garnier now seems to
have a healthy respect for shareholders, even initiating a recent
share-buyback to appease their concerns about a weak share price. His
instinctive cockiness also got him into trouble with developing
countries. Soon after taking over as boss of GSK he found himself
ensnared in a controversy over access to cheap HIV drugs, a row
portrayed in the media as drugs giants cruelly ignoring the plight of
dying Africans. Mr Garnier's first instinct was to fight. But although
he was confident of his firm's legal position, he was losing the media
war. So he chose to cut his losses and made a dramatic U-turn. =93For the
very poor countries of this world,=94 he explains, =93we decided to sell ou=
r
drugs completely not-for-profit.=94

GSK's attitudes toward the poor are now regarded as a model for others.
The firm encourages generics-makers to produce its formulations, so
costs can fall further. It offers tiered pricing, linking the price of
drugs to a country's ability to pay and offering subsidies for the
poorest. Even the World Health Organisation, a United Nations agency not
known for cosiness with the pharmaceutical industry, applauded GSK's
decision in June to donate 50m doses of its new flu vaccine to be held
in an emergency stockpile. This transformation, of both GSK and of its
boss, suggests there is hope yet for the pharmaceutical industry.
=93Society puts up with Big Pharma only because we come up with innovative
drugs,=94 says Mr Garnier. The world desperately needs a self-confident
drugs industry willing to take risks to discover new therapies, but will
no longer tolerate its arrogance and neglect of the poor.