Pfizer, J&J and the right path for innovation

We have seen this before.  Pfizer’s bid to buy Wyeth for more than $68 billion is another example of a giant pharmaceutical company seeking to get bigger as a solution to looming generic competition and an unproductive R&D pipeline.  The strategy has not been successful for Pfizer in the past.  The company has undertaken a number of mega-mergers over the last 10 years, including Warner-Lambert for $120 billion in 2000 and Pharmacia for $58 billion in 2003.

Bigger Giant, Same Clothes

These deals bought Pfizer the blockbuster drugs Lipitor, Celebrex and Bextra, but the impact on innovation has been striking.  During this same period, Pfizer invested $60 billion in R&D, but launched only one new product with revenues exceeding $1 billion.

While most major pharmaceutical companies are struggling with these issues, some are exploring a very different path to innovation in response.  Johnson & Johnson, for example, recently created the Office of Strategy and Growth to develop major businesses that enter new markets and leverage the drug, device and consumer product diversity and strengths of the company.  The direction of this strategy has become clear over the last few months, and it shows J&J moving quickly and aggressively into information-based, patient-centric medicine and wellness management.  In October of 2008, J&J launched a Wellness and Prevention Platform with the acquisition of HealthMedia, a leading behavioral medicine company that offers web-based, automated coaching for wellness, disease management and health interventions. (Note the impact technologies like this can have on patient outcomes in our Connecting with Connected Health post).   This was followed in December with the acquistion of the Human Performance Institute, a science-based health, productivity and performance training company.  J&J spoke of both acquisitions as being central to its growing focus on the health and wellness management needs of large employers, health plans and governments.  The company clearly sees a multi-billion dollar opportunity in providing solutions for these entities that are on the front lines of dealing with ever-increasing health care costs.

J&J is also positioned to link the new wellness and prevention platform to its portfolio of medical devices and pharmaceutical products, creating treatment systems that could redefine standards of care and outcomes…and have the potential for billions more in new and differentiated products.  Think about its LifeScan blood glucose meters linked to HealthMedia virtual diabetes education coaches on a diabetic consumer’s mobile phone, for example.  Or patients implanted with its Cypher heart stent receiving drug adherence monitoring and automated coaching for their anti-clotting therapy and recommended diet and exercise regimen, leading to an integrated system of device, drug and behavioral medicine.  This approach, focusing on new paths to innovation and growth and not just more of the same, can make even giants dance.

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