West Coast Editor
SAN FRANCISCO - Issuing a call to industry conscience while making the promise of richer times ahead, former chairman and CEO of Merck & Co. Inc., Roy Vagelos, opened the Allicense 2005 meeting with a free-ranging keynote speech that also touched upon archaic marketing methods, which "can't be a part of the future," he said.
"Marketing and sales have been pretty much the same for the last 50 years," Vagelos told a crowded room at the Westin St. Francis Hotel. "We're better at it, but we still have the paradigm where the sales representative spends two hours at the doctor's office to see the doctor for five or eight minutes."
Vagelos, chairman of Theravance Inc., of South San Francisco, and Tarrytown, N.Y.-based Regeneron Pharmaceuticals Inc., stepped down from his position at Merck, of Whitehouse Station, N.J., in 1994.
Before leaving, he "decided we would just decrease the sales force 10 percent each year to force innovation," but Vagelos' successor "came in and doubled" the size of the team. Others in the industry did the same, creating "armies" of sales people - who still can't get in to see the doctor in a timely way, he said.
"In an age of high ability to transfer information technologically," the facts about new drugs are slow to reach physicians, Vagelos said. "We're going to have to completely turn the industry around. I can't tell you how to do it, but it has to happen."
Among his accomplishments with Merck was the free, philanthropic distribution of billions of doses of the company's drug ivermectin to fight river blindness, a scourge in sub-Saharan Africa. Ivermectin is an antihelminthic agent, best known as a remedy for canine heartworm. But it also destroys Onchocerca microfilaria, the river blindness parasite.
Other firms must similarly step up to the plate, Vagelos said, recalling the early days of the HIV pandemic when U.S. companies failed to do the right thing.
With reverse transcriptase inhibitors, protease inhibitors and combo therapies, drug makers "were doing a good job in the developed world where people could afford [them]," but "when it came to South Africa, the industry largely stonewalled," refusing to drop prices or offer royalty-free licenses, he said, calling it "an incredible situation."
Finally, embarrassed by "an Indian generic company that was putting drugs into Africa at very low prices and obviously making money, because they were a commercial outfit," and facing "anger that was building in America and other countries," the U.S. drug industry capitulated, Vagelos recalled.
"One after another, the large companies established wonderful programs in different parts of Africa and Latin America," he said. "The problem was that the image had been blasted by what they had done earlier. The reversal, and all the PR they tried to steam up to focus on the good things they were doing, was too late. It was a bad show."
Vagelos predicted a much better show ahead, at least in terms of new drugs and profits.
"Although we've gone through a plateau, I believe that we're going to see another emergence of a big growth phase in the introduction of new products," thanks to the genomics and proteomics efforts and the advent of targeted drugs, Vagelos said.
"Because of the movement of intellectual capital to the smaller companies and the start-ups, a lot of the excitement will happen [in those firms]," he said, and more so than ever before. "When I went into the industry in 1975, I was a rare bird - a professor who was successful, who was willing to do applied research to try to discover drugs," he said. "It was very unusual and unpopular. Today, the average professor is thinking about applying his or her research to finding a drug, a vaccine and commercializing."
The attitude is "stimulated and promoted" by academe, he said. Therefore, biotechnology wins, helped along by the fact that big pharma is "no longer a growth industry," Vagelos said.
"You need something of the order of 10 percent of real growth in revenues annually," he said. "Because of the size [of pharmaceutical firms] - some by internal developments, some by mergers - the companies have become extraordinarily big, the biggest being Pfizer with revenues of $53 billion. To get a 10 percent increase in real growth annually and revenues of $53 billon, when you have things coming off patent on a regular basis, is just impossible. Nobody's got that kind of pipeline."
Merck's revenues are about $23 billion per year, Vagelos noted, but "Zocor, the largest product, [is] coming off patent next year, and two years after that Fosamax [alendronate sodium, for osteoporosis]." Zocor (simvastatin) controls cholesterol levels.
Big pharma "will be looking to small companies" to fill pipelines, he said. "That's why this meeting is taking place." Sponsored by San Francisco-based Recombinant Capital, the Allicense event chalked up about 365 registrants and continues through today.