The Lawyer Is In at Pfizer

Jeffrey Kindler's ascent reflects the new challenges drugmakers face

by Arlene Weintraub

In the race to replace Henry A. McKinnell Jr., the embattled CEO of drug giant Pfizer, Jeffrey B. Kindler was the dark horse. Named as McKinnell's successor on July 28, he had no pharmaceutical experience prior to joining Pfizer (PFE) four years ago as general counsel. But for months, the drug industry has been racked with legal, regulatory, and public-relations challenges, with Pfizer right in the thick of it. Against that backdrop, the 51-year-old Kindler—an accomplished lawyer and veteran of McDonalds Corp. (MCD) and General Electric (GE)—brings much to the table.

Kindler's sudden ascent at Pfizer may be the clearest signal yet that pharma boards aim to change how these sprawling, complicated corporate goliaths are managed. For years, directors have enlisted doctors, scientists, and marketing wizards as CEOs. They were expected to focus on the twin tasks of producing new drugs and persuading patients to ask their doctors about them. Kindler will still be responsible for these matters, but he will also have to craft strategies that have little to do with science or sales pitches.

More and more, Pfizer's business will hinge on managing patent disputes, lawsuits arising from adverse drug side effects, and mounting oversight by federal regulators. And the same will be true for all large drugmakers. "These companies will be picking leaders who are thoughtful, careful, and focused on challenges they need to handle today," says Jeffrey L. Moe, senior director of the Duke University Health Sector Management program. As a lawyer, Moe adds, Kindler "is trained to be concerned about risk. I think he's emblematic of a much larger trend."

RETHINKING RELATIONSHIPS.

Pfizer declined to make Kindler available for interviews, but board member Stanley O. Ikenberry says the company needed a leader who could deal with all sorts of issues. First on the list will be fixing Pfizer's broken drug operations: Its top line has flattened, and its mission to develop ground-breaking drugs has run into trouble. Skeptics might question handing this turnaround to a guy who's only operational experience was running McDonald's tiny Boston Market unit. Nonetheless, says Ikenberry: "We had a general feeling that the external environment for pharmaceutical companies is changing rapidly. Their relationship to patients and physicians needs to be rethought. Jeff is a very strategic thinker."

McKinnell's departure may have been sped up by the dysfunctional succession process Pfizer's board created. The three contenders were Kindler and two other vice-chairmen, Karen L. Katen, who ran the prescription drug business, and David L. Shedlarz, who was chief financial officer for a decade. Each of the three had committed loyalists, according to Kai Lindholst, a recruiter for Egon Zehnder International, who knows many Pfizer executives. "That's not very productive," Lindholst says. "It takes energy away from the real business." Says board member Ikenberry: "There was a feeling that now was the time to move forward and put this planning phase behind us."

The swirl of legal and governmental issues likely swayed the board toward Kindler, and these problems will draw plenty of attention. They include patent battles involving flagship brands such as cholesterol drug Lipitor and painkiller Celebrex, along with claims that Pfizer's sales force improperly promoted some drugs for uses that are not approved by the U.S. Food & Drug Administration. Most recently, a lawyer in New York filed lawsuits on behalf of 19 patients who say the company failed to warn them properly that Lipitor can cause dangerous side effects (see BusinessWeek.com, 8/03/06, "Statins Could Cause Legal Headaches").

Legal woes are endemic in the industry. The day Kindler was appointed, the Justice Dept.