McKindler? New Pfizer CEO Echoes McKinnell’s Views On Payers, Scale

Pfizer's success will depend on its ability to negotiate the paradox of increasing demand for pharmaceuticals coupled with growing attempts to restrain costs, CEO Jeffrey Kindler said.

"One's view on this industry depends on how you believe this paradox will ultimately be resolved," Kindler said at the Bank of America Annual Investment Conference in San Francisco Sept. 20.

"On the one hand, demand for products by individuals...is exploding around the world and will continue to increase as the population ages and as we discover and develop new and exciting ways to prevent and treat disease."

"But on the other hand, many of those people live in countries that have created healthcare systems whose first priority is to restrain that demand and contain healthcare costs," he said. "Aspects of the U.S. healthcare system are increasingly taking similar approaches."

"The great opportunity for Pfizer is to capture as much of that growing demand as possible, while at the same time doing everything we can to anticipate, organize for, and wherever possible continue to shape the way society pays for healthcare."

The speech marked Kindler's first public presentation since assuming the top position at Pfizer. While Kindler has vowed "fundamental and sustained change" under his leadership, the most striking aspect of his comments were their similarity to statements made by previous CEO Hank McKinnell (¹ (Also see "Pfizer Set For “Fundamental And Sustained” Change Under New CEO Kindler" - Pink Sheet, 7 Aug, 2006.), p. 3).

One area where Kindler's statements resonated with those of McKinnell was his focus on the importance of demonstrating value to payers. A 2005 R&D restructuring under McKinnell aimed to make the company more responsive to payers and allow Pfizer to "manage the way value is really produced," according to the former chief exec (² (Also see "Welcome To Medicare: Pfizer Sees Part D As Key To Rebirth" - Pink Sheet, 9 Jan, 2006.), p. 3).

Kindler said that dealing with the paradox of both increased demand and constraints on utilization "means meeting the demands of our customers by providing clear and compelling proof of the value of our medicines."

"From our perspective that value is pretty clear: would you rather spend a few dollars a week on Lipitor or suffer the costs and consequences of a heart attack or stroke?"

Lipitor "is very consistent with the overall theme that I'm trying to communicate today," Kindler said. "This is a valuable product, and doctors and patients, and frankly even payers that put this product high on their formularies, recognize that value."

Kindler pointed to the large quantity of outcomes data available for the statin as the reason "value will win out. I'm very comfortable that Lipitor is going to continue to hold its own and do quite nicely in the face of challenges that we face in the marketplace today."

McKinnell also championed the availability of outcomes data as one of Lipitor's main assets, and the reason the product would continue to be successful despite the availability of generics of Merck's Zocor (³ (Also see "After Early Blow, Pfizer Prepares For Round Two Of Lipitor/Generic Zocor Fight" - Pink Sheet, 19 Jun, 2006.), p. 7).

However, Pfizer recently acknowledged that Lipitor will likely fall short of the company's $13 bil. global sales forecast for 2006.

"Clearly we must do a better job than we have of building both value and proof of value into everything we do. This includes the evidence we develop to support our medicines and the ancillary products and service that we provide around them," Kindler said.

As an example of providing additional services, Kindler pointed to Pfizer's Medicaid disease management program in Florida. The program was a centerpiece of McKinnell's attempts to prove the cost-effectiveness of Pfizer's products, although it had only mixed success (⁴ (Also see "Pfizer Optimistic On Florida Medicaid Deal Despite Legislative Setback" - Pink Sheet, 2 Aug, 2004.), p. 10).

During the presentation, Kindler maintained that enhanced efforts to use partnerships and collaborations to demonstrate value is one example of a change in direction under his leadership.

"We will be more successful at demonstrating the value of our products if we collaborate with others. We have so much more to offer as partners than as adversaries and too often in the past we've been adversaries."

"We need to listen to our customers better, understand their needs, collaborate with them, and establish the value of our offerings at every stage of the development and marketing of our medicines."

He described the education and support programs for two of Pfizer's new products, the inhaled insulin Exubera and Chantix for smoking cessation, as examples of "new partnerships [creating] new markets where innovative products and services can flourish."

"These are a couple of current examples of how we're expanding the value that we offer to patients, physicians and payers. We've gotten a lot of positive feedback about them and I think they're an indicator of where we need to go in the future."

In the weeks leading up to his departure, McKinnell also highlighted the Chantix and Exubera support programs as new vehicles through which Pfizer would engage stakeholders (⁵ (Also see "Pfizer’s Chantix Launch Priority Is Managing Expectations, McKinnell Says" - Pink Sheet, 26 Jun, 2006.), p. 11).

Kindler also echoed McKinnell in advocating for involving payers earlier as crucial to creating value.

"Rather than come to payers with a finished drug and a development program that they had nothing to do with and saying, 'here's our drug, how much are you willing to pay for it,' I think we're going to involve them collaboratively earlier in the development cycle to identify what it is they're going to want to see...to prove the value of our medicines and what prices we're asking to pay for them."

Success in the current environment will be based on both "demonstrating and creating superior value," Kindler said. "Pfizer's strengths - unrivaled scale, depth of experience, and financial flexibility - ensure that we will execute that strategy successfully."

Kindler's biggest break with the past thus far is a new senior management organizational structure, announced just two weeks after he took over as CEO (⁶ (Also see "“One Pfizer” Restructuring Initiative Divides R&D And Sales Operations" - Pink Sheet, 21 Aug, 2006.), p. 3).

"The changes in our management team and organization structure are part of a much larger undertaking which will make our company more nimble and entrepreneurial and therefore more likely to win in this changing marketplace," Kindler said.

"Changes in our operating environment demand changes in how we do business." Under the restructuring, Pfizer is "making decisions much more quickly, taking risks, [and] trying a variety of innovative approaches to drug discovery, development, manufacturing and marketing," he said.

Despite Kindler's emphasis on change, Pfizer described his reorganization as in line with the therapeutic areas approach. The new seven-person "leadership team" is also similar to the nine-person team that headed Pfizer under McKinnell prior to a 2005 reorganization (⁷ (Also see "Pfizer Streamlines Upper Management; Katen Positioned As Heir Apparent" - Pink Sheet, 28 Feb, 2005.), p. 20).

McKinnell had described aligning by therapeutic area as "a way to manage a very large, complex organization in ways that hit both the benefits of small and entrepreneurial, along with the real cost and efficiency benefits of large scale and industrial."

Kindler used similar language during his Bank of America conference speech, emphasizing the need to leverage Pfizer's size while reaping the benefits of smaller organizations.

"We're adopting the spirit of a small company, the entrepreneurial agile culture that characterizes a small enterprise, while taking full advantage of the unique opportunities that our scale and reach provide for us."

This combination is particularly crucial in R&D, Kindler said, asserting that discovery requires the agility and entrepreneurial spirit of small firms while clinical development is most effectively done by a large organization.

"Once you have a compound for which you have proof of concept and you're getting ready to enter into large scale clinical trials in preparation for registration, you're basically at that point in a gigantic, almost industrialized, process...that is definitely advantaged by scale and experience. I really don't think there's anybody who does that as well as we do," he said.

Building "value propositions into clinical trials and getting ready for the demands of evidence-based medicine," as well as the move to personalized medicine, will "make scale even more important."

However, on the discovery side, Kindler pointed to alliances with smaller companies and academic institutions as a way to enhance opportunities.

"Where the scientists are at the early stages of coming up with ideas and thinking through new targets and new mechanisms of action, that's a place where if you're not careful, scale can get in the way."

- Elizabeth Walker