Tuesday, November 30, 2010

Merck CEO-Designate Frazier and the Importance of Washington to Pharma

The announcement that Merck's global pharmaceutical head Ken Frazier will ascend to the CEO slot in January is hardly a shocker: he was viewed as the front-runner in a one-man race to succeed Richard Clark next year.

But this stable, planned succession is still an important marker about the climate for Big Pharma. Much will be made of Frazier background as chief counsel at Merck (he will join Jeff Kindler at Pfizer as the Lawyer-in-Chief CEO model), but we wanted to highlight Frazier's hands-on role in shaping Merck's public policy efforts throughout his career.

While Clark personally represented Merck in some of the critical events involving the health care reform debate, Frazier was very much on board with the plan -- and gave a thoughtful and compelling explanation for why Merck decided to take the risk of engaging in the reform debate during a keynote address during Elsevier Business Intelligence's FDA/CMS Summit for Biopharma Executives in December 2008.

We reprinted the full address in The RPM Report, here. But we thought Frazier's analysis of the risk of inaction was particularly compelling, and may be newly relevant as he takes over the top spot at Merck heading into the uncertain waters of a newly Republican Congress in 2011. So we've excerpted that section below.

Oh, and by the way, today is the last day to qualify for the "early bird" discount for this year's FDA/CMS Summit. In all modesty, we can't promise you will see tomorrow's CEOs today if you come to the Summit, but, as Frazier's address shows, you just might. What we can promise is that what happens in Washington continues to matter to the Big Pharma business, so you won't want to miss out on the chance to deepen your understanding of the rapidly changing public policy climate. (Click here for more on the Summit.)

Here is what Frazier said two years ago about the risk of inaction, if Merck chose not to support reform:

We understand clearly that we are entering this debate at a time when the pharmaceutical industry’s standing is low and we face challenges from many directions.

For years now, politicians, the media, and industry critics have disparaged our prices, our allegedly excessive profits, and our purportedly wasteful marketing expenditures. Most unfortunately, we have also seen critics challenge the integrity of the scientific research that is at the core of our value to patients and society.

These challenges have led to legislative proposals, here and around the world that could have serious negative impacts on our industry and on our ability to continue to innovate in the interests of patient health. In my new role overseeing the marketing of Merck medicines and vaccines around the world, I’ve seen first-hand the negative impact that some of these ideas have had.

Certainly, major health care reform action in the United States could provide a vehicle for the consideration of several harmful proposals, such as drug importation, price negotiation in Medicare Part D, and changes to the patent protection that is a necessary prerequisite to pharmaceutical innovation.

We’re also seeing these proposals at a time when Merck and other companies are facing unprecedented business challenges. The rapid and appropriate uptake of generic medicines, challenges to our patents, and setbacks in our pipelines are translating into layoffs as well as difficult research investment choices.

This is arguably the worst time for punitive government actions of the type some are proposing.

While the risks of action to us are clear, so are the risks of inaction. First and foremost, people without health insurance coverage have poorer health and, of course, reduced access to our medicines and vaccines. Those without coverage live with a day-to-day fear that most of us in this room can only imagine. It is a fear that... they are only one illness or one accident away from financial ruin or permanent disability.

If that were not enough in itself, as an industry we need to understand that until the nation reforms our health care system, including providing affordable access to quality care, the issues of access to medicines and the price of medicines will remain flashpoints in political and economic discourse. Further, more time without action will only embolden those who advocate anti-competitive approaches such as universal government delivered health care.

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