Biopharmaceutical companies are under a great deal of financial pressure these days, and many are tinkering with long established business models. There can be no doubt that the industry is in flux as a result of pricing pressures from insurance companies, changing patent regulations and expirations, healthcare reform, and an increased focus on proving significant clinical benefits. Sadly, this is all taking place at a time when the largest biopharma companies have developed a black eye as a result of a seemingly endless series of ethical transgressions, including off-label drug promotions, hidden clinical trial outcomes, bribes and kickbacks for writing prescriptions, manufacturing breakdowns, and lawsuits tied to numerous medicines pulled off the market.
Have things really changed since the good old days in the industry? One notion that I heard voiced recently by industry consultant Bernard Munos is that some of pharma’s recent missteps (specifically, a decline in innovation) result in part from the fact that scientists are no longer leading these organizations. According to Munos, the old model was to turn scientists loose to follow their wide-ranging passions and interests, and innovative discoveries would come rolling out. This model was replaced about the mid 1990s by one where a culture of process was introduced by new leaders that focused company scientists in directions where innovation was desired, but where the science at the time was not necessarily up to the challenge.
One must be careful in interpreting how the term “leadership” is used; some use it to denote the person holding the CEO position, whereas others use it to mean any job where a person actually influences a company’s approach and decision-making. In addition, added complexity results when one attempts to compare traditional Big Pharma companies with biotechs, which I think are more likely than their much larger brethren to be run by PhD or MD scientists. David Shaywitz weighed in on this subject and suggested that company size may be a more important determinant of success in this industry than a CEO’s background, although he has identified a number of caveats as well. One of these is that luck can be mistaken for competency, at least in the short term, no matter what the CEO’s background is.
Neither of the thought pieces cited above included any significant data as to the backgrounds of past and present Big Pharma CEOs. This got me wondering if having a scientist leading a Big Pharma company really correlated with success in years past? Has the percentage of scientists who headed up these companies decreased in recent years, and if so, is this associated with pharma’s recent struggles? I set about answering these questions by looking up the biographies of the titans who ran this industry during a period when it was the envy of Wall Street, as well as more recent years when it has labored to find its footing. Let me share with you what my efforts revealed.
I decided to look back over a period of 30 years, since that should cover periods of huge profitability (80s and 90s) as well as more recent challenging times when these companies were merely highly profitable. CEO tenures vary widely, so I simply focused on identifying the CEOs that were heading these companies at the start of each decade. It wasn’t easy digging out their names and especially their academic degrees (if Google only covered the pre-Internet era in the same detail as more recent years!) It took time, but I was able to collect some background information on a reasonable sample size of these men (and they were all male) and assembled it into the table below. It shows who the CEOs were as well as their highest degree(s) achieved and the institutions that awarded them. Science and medicine degrees are highlighted in bold.
|Merck||John Horan, JD, Columbia||John Horan, JD, Columbia||Ray Gilmartin, MBA, Harvard||Richard Clark, MBA, American U.|
|Roche||Irwin Lerner, MBA Rutgers||Irwin Lerner, MBA, Rutgers||Franz Humer, MBA, Innsbruck Dr. of Law, Insead||Severin Schwan, Dr. of Law, Innsbruck|
|GlaxoSmithKline||Austin Bide, BS, Chemistry, London University||Charles Sanders, MD, Southwestern Medical College||JP Garnier, PhD, pharmacology, Louis Pasteur University. MBA Stanford||Andrew Witty, BA, economics|
|Novartis||pre-merger Ciba-Geigy Sandoz||pre-merger Ciba-Geigy Sandoz||Daniel Vasella, MD, University of Bern||Joe Jimenez, MBA, University of California-Berkeley|
|Bristol-Myers Squibb||Richard Gelb, MBA, Harvard||Richard Gelb, MBA, Harvard||James Cornelius, MBA, Michigan State University||Lamberto Andreotti, masters in engineering, MIT|
|AstraZeneca||Ulf Widengren, Astra||Hakan Mogren, Astra, ScD in applied biochemistry, Royal Institute of Technology, Stockholm. PhD in technology, Royal Institute||Tom McKillop, PhD in chemistry, Glasgow University||David Brennan, BA in business administration, Gettysburg College|
|Amgen (not Big Pharma, a control)||George Rathmann, PhD in chemistry, Princeton||Gordon Binder, MBA, Harvard||Kevin Sharer, MBA, Pittsburgh||Kevin Sharer, MBA, Pittsburgh|
|Pfizer||Ed Pratt, Jr., MBA, Wharton||William Steere, Jr. BS in biology, Stanford||Henry McKinnell, MBA, PhD business administration, Stanford||Ian Read, BS in chemical engineering, Imperial College London|
|Eli Lilly||Richard Wood, MBA, Wharton||Richard Wood, MBA, Wharton||Sidney Taurel, MBA, Columbia||John Lechleiter, PhD, organic chemistry, Harvard|
|Johnson & Johnson||James Burke, MBA, Harvard||Ralph Larsen, BA in business administration, Hofstra||Ralph Larsen, BA in business administration, Hofstra||William Weldon, BA in biology, Quinnipiac University|
|Sanofi||Jean-Francois Dehecq, engineering graduate of Ecole Nationale des Arts et Metiers||Jean-Francois Dehecq, engineering graduate of Ecole Nationale des Arts et Metiers||Jean-Francois Dehecq, engineering graduate of Ecole Nationale des Arts et Metiers||Chris Viehbacher, commerce graduate of Queens U (Ontario, Canada), and a CPA.|
|Abbott Laboratories||Robert Schollhorn, BS in chemistry, Philadelphia College of Textiles and Science||Duane Burnham, BS in accounting, University of Minnesota||Miles White, MBA, Stanford||Miles White, MBA, Stanford|
|Novo Nordisk||Knud Hallas-Moller, doctorate in pharmacy, University of Copenhagen||Mads Ovlisen, lawyer and MBA, Stanford||Lars Rebien Sorensen, MSc in forestry, Royal Veterinary and Agricultural University, Denmark||Lars Rebien Sorensen, MSc in forestry, Royal Veterinary and Agricultural University, Denmark|
My overall impression: I see no evidence of a trend towards the replacement of CEO scientists with MBAs and lawyers over the past 30 years. There were plenty of law and business degrees held by CEOs in the 80s, 90s, and 2000s. One issue I was not able to fully resolve was the exact subject of the engineering and technology degrees held by a number of these CEOs. These are clearly science degrees, but one might view the relevance (in the context described above) of a degree in chemical or bioengineering as distinctly different from one in mechanical or civil engineering. Non-scientists have always held a majority of the top leadership jobs in pharma in years past, just as they do now.
Perhaps the pharma companies that were acquired during this timeframe were more innovative and were headed by scientists, thereby leading to their acquisitions? This idea didn’t hold water either. I looked up other 1990 CEOs and found lawyers [American Home Products’s John Stafford, JD, George Washington U.; Schering Plough’s Robert Luciano, JD, U. Michigan], another business degree [American Cyanamid’s George Sella, MBA, Harvard], as well as pharmacists [Warner Lambert’s Joseph Williams, BS Pharmacy, U. Nebraska); Syntex’s Paul Frieman, BS Pharmacy, Fordham] and a chemist [Upjohn’s John Zabriskie, PhD Organic Chemistry, U. Rochester]. A mixed group once again.
Considering that this industry is focused on treating human diseases, at first glance it appears striking that there are so few leaders with biology or medical degrees (although, not surprisingly, there are a number of chemists). Looking into the history of a number of these companies shows why business degrees were highly favored years ago. While we think of these organizations today as primarily focused on pharmaceuticals, many of them are (or in most cases, were) conglomerates in years past, with wide ranging business interests. These include selling a variety of over-the-counter health products, diagnostics, animal health products, as well as cosmetics, raw chemicals, and consumer foodstuffs.
American Cyanamid’s Lederle division (which was absorbed into American Home Products, then Wyeth, then Pfizer) developed both tetracycline and methotrexate, useful drugs that are still prescribed today. As a conglomerate, however, American Cyanamid also sold Formica countertops, Old Spice aftershave, Breck shampoo, and Pine Sol cleaner, along with numerous agricultural products and industrial dyes and chemicals. Cosmetics manufacturer Elizabeth Arden used to be a part of Eli Lilly, American Home Products (now part of Pfizer) sold Chef Boyardee canned pasta products for over 50 years, and GlaxoSmithKline sells fruit and energy drinks. Thus, it’s not surprising that former leaders of these types of companies were more business focused than pharma focused: medicines made up only a part of their product portfolio. The majority of these companies have divested themselves of these side businesses in recent years, or the pharmaceutical component has been sold off (e.g. Abbott’s spin out of Abbvie).
Acquisitions also make it hard to evaluate innovation. In the last 15 years Pfizer has gobbled up Warner-Lambert, Pharmacia, King Pharmaceuticals, and Wyeth, and these companies in turn had already acquired Upjohn, Sugen, Parke-Davis, Agouron, and Searle among others. If you’re having trouble innovating, you can certainly buy innovative drugs across a widely varied pharmaceutical landscape. This process is still in progress today, a recent example being Amgen’s acquisition of Onyx Pharmaceuticals.
In summary, it seems pretty clear that the idea that scientists led Big Pharma companies during their most profitable (and possibly innovative) period is false. Most Big Pharma CEOs today are not scientists, but that was true in 1980, 1990, 2000, and 2010 as well. However, in a business that spends one of the highest percentages of all industries on R&D (up to 20 percent of revenues), CEOs must work closely with their research heads and Chief Science Officers if they truly want to be running innovative companies. An excellent example here is the relationship between Regeneron CEO Leonard Schleifer (MD-PhD) and his CSO George Yancopolous, as detailed in a Forbes story on the company’s remarkable recent run of success.
Biopharmaceutical companies are not struggling today because scientists are no longer running them. They are in serious trouble because they have failed to adapt well to a changing scientific, business, and healthcare environment. As Charles Darwin has been paraphrased as saying, “it is not the most intellectual of the species that survives; it is not the strongest that survives; but the species that survives is the one that is able best to adapt and adjust to the changing environment in which it finds itself.”
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