Four New Pharmaceutical Chief Executives Speak Out

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Schwan: Our philosophy is that people need enough freedom to make decisions in a decentralized manner. One thing we have done in the last 18 months is to further decentralize our management model in pharma by creating five "disease biology areas." DBAs set priorities and make portfolio decisions for their specific diseases. An interesting thing happened when we implemented this new structure: We saw them streamlining certain projects. Previously the portfolio decisions were made high up in the organization, so everyone was fighting for their own portfolios—they wanted to get as many of their projects financed as possible. Now these decisions are made a level down in the organization. That means decisions are made by people who are closer to the projects, so they are willing to invest more in what they believe in, and remove money from those less likely to succeed.

Is it better for a drug company to diversify into other endeavors, such as devices or consumer health, or is staying focused on prescription drugs the way to go?

Cornelius: We see companies moving towards the diversification model. We're diversified now and moving the other way. We sold medical imaging, we sold ConvaTec [wound care]. Assuming there will be capital markets next year, we'll try to take a piece of our nutritional business, Mead Johnson, public in the first quarter. Our guess is it's worth $8 billion. This strategy is built on a strong belief that there are still very serious unmet medical needs out there and that the Bristol-Myers scientific group can bring us enough products and subsequent revenue to have [drug research] as our main strategy.

Lechleiter: There was a time when many of us couldn't shed our non-core assets fast enough. Lilly built up in medical devices in the late 1970s, but ultimately split off that business, Guidant. Now we're pretty much a pure-play drug company with the exception of our animal health business, Elanco. I think some diversification is necessary and prudent. Now, we look at Elanco and ask: How can we build it up? Being in biotech is a form of diversification, too. But our diversification strategy is going to be very thoughtful. We don't intend to build a devices business or anything like it again.

How will the economic crisis affect the pharmaceutical industry?

Cornelius: We're somewhat immune from the cycles that will play out for the remainder of this year, early next year. We have money in the bank, cash flow is strong, earnings are improving. The only disappointment has been the darn stock price. I watch the stock and I think we're worth much, much more. It brings tears to my eyes.

Kindler: Nobody is immune. One can expect to see some impact across the industry. As we sit here today, it's probably a little bit early to give any kind of prognostications. The market is still settling out. I do think in any economy, unfortunately, people continue to need medicines and treatments. They will value those that provide good medical benefits. I don't see that changing.

The public has a poor image of drug companies. What can be done to improve that trust?

Lechleiter: Winning back the confidence of people across the spectrum is going to require us to show we can be trusted. The scientific insights we have now are equivalent to being on the road with the lights on rather than trying to feel our way in the dark. We need to show we can translate the revolution in biology to products. And we need to make a lot more moves to restore transparency. Starting in 2009, we're going to make public our payments to physicians. Frankly, we can all do better.

Kindler: What you have seen from many companies is a willingness to make changes in response to some of the criticism the industry has. We've made commitments about posting our clinical trials, we have supported some legislation that Senator {Charles] Grassley [R-Iowa] has proposed regarding disclosure of certain payments [to doctors]. This is not about words, it's about actions. I like to tell people our business is asking people to put our products in their body. The people we ask to do that are entitled to demand that they [can] trust us. Every day we need to earn that trust.