The Billion-Dollar Battle: Merck v Glaxo.
By Matthew Lynn.
Heinemann; 235pp; £16.99.
Review by Peter Chambers.
Management in the pharmaceutical industry is a fertile subject for a book. Its leading companies have won fame and notoriety in about equal proportions of late: startling growth and profitability plus innovative research and development on the one hand; controversy about marketing methods and product side-effects on the other.
Matthew Lynn conveys the pressures, risks and rewards of an industry in which, as he sees it, a series of almost chance discoveries can put a company at the head of the pharmaceutical world league. He reports, for example, that in the 1950s a senior executive of Hoffman-La Roche was won over to the pacifying properties of its new drug Valium after trying it out on his mother-in-law. The author also shows how a company can slide back down the tree just as quickly, as a result of public (or government) reaction to unforeseen side- effects.
But Lynn has chosen to cast one company - Merck - in a heroic role, and two others - Glaxo and Roche as villains. The resulting caricatures make entertaining reading but give a distorted picture of the businesses and the industry.
Most of the primary facts about the three companies' development are recorded, and racily enough. Roche rose to world pharmaceutical leadership in the 1960s mainly on the strength of one drug, Valium; and was toppled from that position when doctors and patients fell out of love with the product. Merck is currently the world's biggest drug company. According to a Fortune magazine poll, it is also the most admired company in the US. Glaxo's recent exponential growth and profits record is all the more astonishing since the company ignored many of the industry's usual rules for success. Until last year it, too, depended heavily on one product, the anti-ulcer drug Zantac. But the company broke new ground in its approach to marketing in the US. And from the start it priced its major new product significantly higher than the well established rival.
Lynn's baldly stated thesis is that Glaxo is 'fated to replay the tragedy of Hoffman-La Roche'. Yet Roche, it should be noted, has hardly disappeared from the scene. It is still a very large and very successful multinational pharmaceutical company, with - nowadays - a broad range of products to its name. Glaxo is moving urgently in the same direction, with half-a-dozen important new products in different therapeutic fields. The author's criticism, however, seems based on less tangible factors: Glaxo is condemned for supposedly allowing marketing to dominate research, and for being excessively profit motivated.
There is, to be sure, a special dilemma faced by managers in pharmaceuticals. Shareholders (and employees) require you to maximise profits. But, to a greater extent than elsewhere, users expect you to be altruistic. Doctors and patients always want to see drug companies applying higher ethical standards than other businesses, not only in the manufacture of products but also in their marketing.
Lynn mentions with approval Merck's awards for excellence as an employer of blacks and women; its schemes for supplying drugs free to the Third World, and at reduced prices to the poor back home in the US. At the same time, he observes, 'the drugs Merck works with are right at the frontier of the biological and chemical sciences.. then there is the cleanliness, the informality and the egalitarianism of the work place...' All admirable, indeed. But most - if not all - of this description applies just as well to Roche, Glaxo and the other major drug houses. And the aspects he deplores - emphasis on marketing and profits, and a certain single-mindedness at senior levels - are characteristic of any successful business.
The author's villains might equally well have been heroes. Glaxo, like Merck, has collected a raft of 'best company' awards. This year it came third (and first among the drug houses) in an Economist poll to find the companies most admired by UK businessmen and financial analysts. Lynn condemns Glaxo for not doing enough 'proper' research, yet its current spending compares to that of the industry leader, Merck. He describes Zantac (generic name ranitidine, incidentally, not raditidine) as a 'me too' drug, 'a copy of an existing cure'. This too is incorrect: the original cure was cimetidine, a different chemical entity which has a number of side effects. These are mostly minor, but one of them - admittedly rare and reversible - is to cause men to grow breasts. Zantac doesn't do this, which, to many patients and doctors, will justify its premium price.
Roche's innovation of testing a new product on people likewise attracts the author's censure: 'the tactic was to involve physicians in the development and launch of the drug'. Although this may have been one effect, there were also sound technical reasons for the policy. It reduces the chance of research findings being influenced by local factors. It is now regarded as good practice throughout the industry.
When it comes to good works, and relations with communities, there is hardly a big drug company that does not have a high and positive profile, in the developed world at least. Perhaps more to the point, Glaxo - like Merck - can be seen doing its bit for the Third World, by keeping open a loss-making production plant in Bangladesh.
Lynn has written a good yarn, with strong heroes and villains. The reality is rather more complex.
Peter Chambers is editor of Mims Magazine, the journal of prescribing and therapeutics for GPs.