The Men Who Run The Global Phamaceutical Industry
February 26, 2010
24/7 Wall St.
By Douglas A. McIntyre and Michael B. Sauter
There are twelve major pharmaceutical firms that dominate this industry worldwide. Their combined market value is over $1 trillion with total annual sales of over $500 billion. The firms have developed and marketed most of the global blockbuster drugs. Most of the significant actions take by the FDA and other drug and medical device regulatory bodies involve the medications, devices, and vaccines developed by these firms.
These twelve companies are also involved in most of the large product liability actions and class action suits regarding prescription drugs. The largest pharmaceutical firms spend tens of million of dollars in legal fees and lobbying expenses every year to protect the intellectual property they have created and to defend themselves when side effects from their products injure customers.
The twelve CEOs on this list are the global drugs lords. They operate in a heavily regulated industry and have close and often fractious relationships with the governments whose agencies work with them. 24/7 Wall St. has looked at each company, its blockbuster drugs, and its most valuable board members. These members are often not the most well-known people on the boards. They are, however, individuals from the medical community, former regulators, academicians involved in the medical research world, and fixers who serve on large numbers of boards and whose contacts in the world of government and industry are invaluable.
The drug industry is under seige by generics and rising costs of R&D. Many of the largest firms in the sector, the companies on this list, have been though substantial restructurings and have fired tens of thousand of people, cutting R&D budgets in the process. This generation of CEOs and board members will shape the rapidly changing industry more than any other group in decades.
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Top Lobbyist for Pharmaceutical Industry Resigns
February 12th, 2010
Reuters
Pharmaceutical Research and Manufacturers of America (PhRMA) President and CEO Billy Tauzin said late Thursday he was resigning effective June 30 after five years as head of one of the most powerful lobby groups in Washington.
The group, which represents Pfizer, Merck and other top drugmakers, has been one of the biggest backers of Democrats’ legislation to expand access to health insurance, among other reforms.
“The bottom line is: this is not good for the (healthcare) bill,” said lobbying expert James Thurber, head of the Center for Congressional and Presidential studies at American University. “PhRMA played a key role and without Billy Tauzin, who is trusted by both parties, there … it doesn’t help the cause for getting the reform through.”
PhRMA pledged to pay $80 billion over 10 years in price cuts and other concessions as part of a deal with the Obama administration and top Senate Democrats last June. The cost was seen as a small price for the $315 billion drug industry to pay in exchange for potentially 30 million more insured customers.
In a statement, Tauzin said he had committed to serve PhRMA for more than five years and would meet his obligation this June.
Still, his departure adds uncertainty to the future of Democratic legislation currently stalled in Congress and PhRMA’s deal. Despite the industry’s backing, Democrats are struggling to find a path forward to pass a final measure after losing their supermajority in the Senate last month.
‘STRATEGIC BLUNDER’
Tauzin, who served 26 years in the U.S. House of Representatives first as a Democrat before switching to the Republican party, was the major force behind PhRMA’s deal. His group reported spending $26,150,520 in 2009 for lobbying, according to the nonpartisan Center for Responsive Politics.
“His members think he gave away the farm for nothing. So he was really tossed because of a falling out with the board over miscalculating how to negotiate,” a source familiar with the situation said.
Another industry source, however, said Tauzin’s move was not linked to reform but rather a personality clash between the former Louisiana lawmaker and incoming PhRMA chairman, Pfizer CEO Jeffrey Kindler — a Democrat who replaces current PhRMA chairman and AstraZeneca CEO David Brennan on March 18.
However, both PhRMA and Pfizer said the two men looked forward to working with each other.
“Billy has great relations with our board members,” said PhRMA Senior Vice President Ken Johnson.
Brennan added the group was grateful for Tauzin’s “strong leadership and many accomplishments … including his efforts to bring about healthcare reform.”
Still, Republican strategist Scott Reed cited flaws with Tauzin’s approach, saying he “got seduced by Obama world, and it turned out to be a strategic blunder for his industry.”
It is unclear what changes, if any, PhRMA would make in pressing the case for health reform as Democrats try to ramp up support, or what impact the change could have on the industry. PhRMA’s steep pockets all but guarantee its continuing role in shaping health reform negotiations going forward.
As for Tauzin, his tenure is probably best marked by his vocal support for the industry after surviving cancer. He denied his departure was due to any illness. His plans include writing a book, traveling and consulting, a PhRMA source said.
“As the first-ever cancer patient to lead PhRMA as its CEO, I now believe it is time I move on,” Tauzin wrote. “My health is excellent and I look forward to exciting new challenges ahead.”
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WH Blames Outdated Computers for Ineffective Government
January 15, 2010 by joel
Filed under Government
January 15, 2010
The Hill
By Ian Swanson
A big reason why the government is inefficient and ineffective is because Washington has outdated technology, with federal workers having better computers at home than in the office.
This startling admission came Thursday from Peter Orszag, who manages the federal bureaucracy for President Barack Obama.
The public is getting a bad return on its tax dollars because government workers are operating with outdated technologies, Orszag said in a statement that kicked off a summit between Obama and dozens of corporate CEOs.
“Twenty years ago, people who came to work in the federal government had better technology at work than at home,” said Orszag, director of the Office of Management and Budget. “Now that’s no longer the case.
“The American people deserve better service from their government, and better return for their tax dollars.”
The White House release that included Orszag’s comments said one “specific source” of ineffective and inefficient government is the huge technology gap between the public and private sectors that results in billions of dollars in waste, slow and inadequate customer service and a lack of transparency about how dollars are spent.
Obama is meeting with CEOs to solicit their views on how to improve the federal government with new information technology.
“Improving the technology our government uses isn’t about having the fanciest bells and whistles on our websites — it’s about how we use the American people’s hard-earned tax dollars to make government work better for them,” Obama said in a statement.
Obama had proposed the meeting in April. CEOs from Craigslist, Facebook, Microsoft, Adobe Technology and Monster.com are among those taking part.
“It’s time to bring government into the 21st century,” Orszag said. “Information technology has the power to transform how government works and revolutionize the ease, convenience and effectiveness by which it serves the American people.”
Those attending the summit are to break into smaller groups to discuss streamlining government operations, improving customer service and maximizing return on IT investments.
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AIG CEO Takes $10.5 Million Dollar Compensation Package
November 25, 2009 by JP
Filed under Government
November 25, 2009
CNN Money
By Ben Rooney
After balking at government imposed pay restrictions, American International Group’s chief executive Robert Benmosche has officially agreed to a non-compete contract that could total $10.5 million, the company announced Tuesday.
Benmosche, who was named CEO in August, had expressed frustration with the constraints placed on AIG by the government after the global insurance company was bailed out last year.
He reportedly threatened to quit his post in board meetings earlier this month, before issuing a statement saying he is “totally committed” to staying on as CEO.
AIG spokesman Mark Herr said Benmosche agreed to a “non-compete” contract and that he is “committed to staying” at AIG.
Benmosche is one of several high-level executives at seven private companies under the purview of the Obama administration’s “pay czar” Kenneth Feinberg.
In October, Feinberg unveiled a series of drastic pay cuts for 136 top executives at seven of the nation’s biggest bailed-out companies, including AIG (AIG, Fortune 500), Citigroup (C, Fortune 500), and Bank of America (BAC, Fortune 500).
AIG received a $182 billion lifeline from the government last year as the credit crisis forced the company to the brink of collapse. In exchange, the government took an 80% ownership stake in the company.
Despite ongoing criticism of the company’s compensation practices, Benmosche successfully negotiated the largest award of any CEO under the government’s new curbs on executive pay.
In a press release, AIG said it will implement Benmosche’s previously announced compensation agreement, which includes a $3 million base salary and $4 million in AIG common stock.
$1 Billion Profit for Ford in Third Quarter
November 2, 2009
Bussiness Week
By David Welch
It’s now fair to declare Ford Motor (F) an unqualified turnaround story.
The company reported a $997 million third-quarter profit on Nov. 2, adding profits to gains in market share and improvements in quality since CEO Alan Mulally took over in September 2006. The nearly $1 billion profit is a $1.2 billion turnaround from the third quarter of last year. The company also generated $1 billion in cash and paid down $2 billion in debt.
“Ford is making tremendous progress,” Mulally said on a conference call. “Our transformation is working.”
Strong earnings are a big victory for Ford and Mulally. The company has been far stronger than rivals General Motors and Chrysler (FIA.MI), gaining market share this year. But looking healthier than GM and Chrysler, both of which were in bankruptcy earlier this year, was hardly a great feat.
Ford still has a big debt load, something that GM and Chrysler were able to greatly reduce in bankruptcy. The company dropped long-term debt to $23 billion. But adding short-term debt and obligations to the UAW’s retiree health-care trust, Ford’s debt is estimated at $38 billion. It’s a disadvantage, but Barclays Capital analyst Brian Johnson says Ford should have enough cash to meet its needs.
U.S. Market Share Up to 15.2%
Ford made the earnings leap on the back of about $4.6 billion in cost reductions so far this year. But the company is making progress with consumers, too. Ford’s U.S. market share is up one percentage point to 15.2%, and Ford added $100 million to automotive revenue. The company said that productivity gains, lower retiree costs, and a drop in costs in its plants all added to the bottom line.
There is some real meat in Ford’s improvement. The company added $1.9 billion in pretax profit by getting better pricing. Some of that may be because the incentives it had to offer were lower during the government’s cash-for-clunkers program. But CFO Lewis Booth said Ford has been more disciplined at its plants, building fewer cars, so the company doesn’t need deep discounts to foist excess production on the market. Its new models are also selling at fatter sticker prices, Booth said.
Ford made $357 million in pretax profit in North America, after losing $2.6 billion at home in the third quarter of last year.
Despite the strong quarter, Ford has still lost $1.3 billion so far this year.
Ford did report a $2.3 billion profit in the second quarter, but that was thanks to a one-time special items that added $2.8 billion in black ink. Ford still had an operating loss of $424 million in the second quarter.
If you strip out Volvo’s $135 million loss—Ford is moving closer to selling the unit to China’s Geely Automotive—the numbers look even better.
Still Relying on Finance Profits
Ford’s results are a big boost for the company. But a lot of work still needs to be done. Of the company’s $1.1 billion pretax profit, $677 million came from the finance company. Relying heavily on finance profits has long been a crutch of U.S. automakers since profits on their cars were hard to come by.
Just being in the black in today’s recession is a big achievement, of course. Mulally said he expects Ford to be firmly profitable and to show positive cash flow in 2011, but he didn’t give guidance for 2010 because of uncertainty over the economy. “We’re not sure about the strength of the recovery,” Mulally said.
Ford is also flush with cash. The company has $23.8 billion in cash, up $2 billion from the second quarter. Part of that was achieved by issuing $565 million in new stock in the quarter.
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