Prologue
A couple of decades ago, there was a joke floating around in the pharmaceutical industry that in a few years there would be only two pharmaceutical companies in the world! They would be on either side of the Atlantic Ocean, one in the USA, and another in Switzerland! Depending upon which one was stronger, it would buy out the other one, leading to only one pharmaceutical manufacturer in the whole world!!

There is more than a grain of truth in this joke! Just look around you for the past 10-15 years and you will see many buyouts and consolidations among the big players in the pharmaceutical industry.

Big Pharma: Definition
In this article, I have arbitrarily chosen to use the top 15 worldwide pharmaceutical companies whose sales range from $50 billion to $10 billion. These are, in descending order—Pfizer, Bristol-Myers Squibb, GlaxoSmithKline, Sanofi-Aventis, Novartis, Hoffmann-La Roche, Merck & Co., AstraZeneca, Abbott Laboratories, Johnson & Johnson, Wyeth, Eli Lilly and Company, Bayer, Amgen, and Boehringer Ingelheim. The number of employees range from 115,000 to 14,000.

The Quality Syndrome
The American public may have been brainwashed for years that pharmaceuticals manufactured outside the United States are inferior in quality and dangerous. If their inflow is not properly controlled, the answer  to this could be 'yes'. But tarry a moment! The Food and Drug Administration (FDA) in America has the precedence of inspecting plants around the world where major pharmaceutical companies manufacture their active ingredients or finished products. A good case is that of Puerto Rico and Singapore! I have seen many plants in international settings, and I have been very impressed that every sincere attempt is made to follow Current Good Manufacturing Practices as practiced in the USA. Many of the high echelon managers at these companies have even been trained in the USA.

Just take the case of Sony and Toyota, two reputable international organizations which originated in Japan, with a penchant for quality products. Can you imagine where they would be in world markets today if they hid behind the facade of Japanese quality which could be done by Japanese only in Japan? They taught their concepts of quality control to people around the world. Ironically enough, the man who taught them these concepts for many years was an American, Dr. William Edwards Deming. The Japanese themselves have admitted that the quality of products manufactured under their company names are identical in quality, regardless where they were manufactured in the world! They have their reputation to protect.

On a personal note, my Honda Accord was completely assembled in the USA with a majority of parts made here. The quality is exceptional compared with previous American made cars I have owned my entire life! As a matter of fact when Japanese demand for Honda Accords outstripped supply a few years ago, thousands of cars were shipped from USA to Japan.

Big Pharma may have also created a false halo around their products during the past couple of decades, trying to inadvertently stifle competition from American manufacturers of generic products when patents have expired. It is well-known that the FDA is responsible for inspection of plants which manufacture generic products, and it would be a mockery to say they have double standards. In a surprising twist, many brand name pharmaceutical manufacturers have their own generic product manufacturing arms, just to stay competitive!

Some signs of positive changes are already under way. A major pharmaceutical company is already making large investments in China, setting up Research & Development facilities as well as a manufacturing plant. As Thomas L. Friedman says in his book, The World Is Flat, the global competitive playing field is being leveled and the world is being flattened. Outsourcing and offshoring are becoming the norm. Globalization is here to stay!

A Word About The FDA
I would like to pause a moment here and pay tribute to the FDA. There have been very few scandals within the FDA. In all my years working with them, I have been deeply impressed by their professionalism, knowledge and ethics. These FDA inspectors are uniformly polite and will not even accept a cup of coffee or a cheap cafeteria lunch from you, which could be construed as a subtle bribe! Nay, they will not even fraternize with you in your company's dining areas. They are a dedicated group with a calling. Perhaps their compensation could be about half of what they could make in large pharmaceutical companies. Nevertheless, after serving at least 20 years at FDA, they do make a leap to the pharmaceutical industry, for financial reasons and otherwise. Based on the frequency and depth of plant inspections, I would venture to say that FDA is understaffed and underfunded under all administrations, a sad situation!

Since the early 1980's, they have extended their cooperation by their willingness to attend an annual FDA Conference, sponsored by the International Society for Pharmaceutical Engineering (ISPE), attended by personnel from various pharmaceutical companies. I am proud to say that I was part of a small core group that initiated the first conference.

The Innovation Fallacy
There is no monopoly on brains! Large pharmaceutical companies have always argued that if their profits are diminished, they will have to cut back on Research & Development expenditures and innovation will be stifled. Just throwing money at improperly managed research does not stimulate innovation nor does it guarantee a pipeline of new products. This is a bitter pill to swallow but big pharmaceutical companies will reluctantly admit that it is true! Why would a large pharmaceutical company invest heavily in Research & Development facilities in China, unless they wanted to tap Chinese brains?

Innovation and creativity are deeply rooted in many human beings and I simply do not believe this stance propagated by big pharmaceutical companies.

The Corporate Culture
The pharmaceutical industry attracts some of the most highly-educated, intelligent and dedicated people. Many take it as a vocation or calling or mission—to alleviate human suffering. There is a saying in the pharmaceutical industry that if you let a faulty product go by, you could kill your own mother (for example, if it was a critical pill for diabetes or heart condition)!

Let's clear our understanding of what corporate culture means. It is almost an intangible, something very hard to fit into a rigid definition. It is like asking someone to put into words how it feels to be in love. Many have referred to it as a state of mind, an unseen and unheard collective consciousness that is infused in an organization and its employees. It comprises of attitudes, experiences, beliefs and values of an organization. It is simply the way things get done around here.

Hill and Jones, in their 2001 book, Strategic Management, define corporate culture or organizational culture as "the specific collection of values and norms that are shared by people and groups in an organization and that control the way they interact with each other and with stakeholders outside the organization."

The corporate culture in pharmaceuticals is basically very conservative. It has also been referred to as The Process Culture by Deal and Kennedy, in Corporate Cultures (1982). What does that mean?

The Process Culture generally occurs in organizations where there is little or no feedback. People become bogged down with how things are done not with what is to be achieved. This is often associated with bureaucracies. While it is easy to criticize these cultures for being overly cautious because human life may be involved, or bogged down in governmental agency red tape, they do produce consistent results, which is ideally suited to a heavily regulated industry like pharmaceuticals.

Here is a low-risk, slow-feedback situation. The financial stakes may be low because of the stability of the company or industry. No one play can easily demolish any person or the company. When there is no sufficient feedback, except in the event of a disaster, it makes the employees concentrate on how they do something, not what they do. In other words, there is striving for technical perfection!

In this culture, it is very easy to develop  CYA (Cover Your Ass) syndrome. It is my memo to cover your memo! (I have been guilty of it myself!). Copies of memos and reports fly to the world around us! Eventually everything goes into the circular files, lost forever, except in case of indictments to prove one's innocence.

The true strength of the process culture is that it prevents chaos in the cosmos, and puts order into work that needs to be accurate and predictable, not unlike the pharmaceutical industry.

The WECSA Principle
The WECSA Principle is also known as Sutaria's Law of Commonsense.

If you really want to improve any operations, cut costs, and improve profits, you need to go in there with an open mind. But first, what in the world is WECSA? I can certainly assure you it's not witchcraft!

W:  Ask the million-dollar forgotten question, if that operation is needed; Why?
E:  Think seriously of eliminating an operation, if it is not critical; Eliminate.
C:  Try to combine one or more operations; Combine.
S:  There is usually a better way of doing an operation...find it; Simplify.
A:  Perform the above four steps first, then justify automation; Automate.

Try it! This methodology works! I've tried it successfully for many years and saved quite a few million dollars.

My point here is that if the pharmaceutical industry wants to stay competitive and thrive in the USA, it needs to imbue the principles of small but continuous improvements, as the Japanese would say, kaizen.

Studies have shown that there is an overcapacity in the world of pharmaceutical manufacturing and packaging. Most industries have production geared to running six or seven days a week, twenty-four hours a day. It is not unusual to have 10% to 20% utilization in many of the pharmaceutical production facilities in the USA. This is not the most effective utilization of our capital assets.

Areas of Opportunities in the USA
Development of orphan drugs, medications for ailments of the aging population, novel drug delivery systems, biotechnology products, and generics, can become the focus for new and emerging companies. In addition, highly skilled technical people displaced from large pharmaceutical companies can easily make contributions to the small new companies.

Epilogue: Over the Horizon

• The American pharmaceutical industry, especially the big players, have valuable lessons to learn from the American automobile industry. The classic example is the gain of Toyota over General Motors. Only the lean and mean will survive. Generic pharmaceutical manufacturers with their low overheads can have a good shot at prospering.
• Shortage of young trained pharmacists is expected to loom. Big Pharma may have to compete with chain pharmacies such as Walgreens and CVS to fill their slots for Research & Development positions.
• Excessive advertising of prescription pharmaceuticals to consumers has led to confusion among patients and a sharp drop in patient-doctor trust and relationships. Patients are constantly pressuring doctors for prescriptions based on their half-baked knowledge gained from advertisements. A cut back in advertising should be seriously considered.
• If Big Pharma does not stop giving away excessive number of free physician samples, and wining and dining doctors, which can be construed as a subtle bribe, I predict legislation will take over, based on the hue and cry from the American public. I think it has gone too far!
• Americans, especially seniors (the Grey Panthers like me!), are very upset over healthcare benefits, including prescription medications. Medicare and Medicaid go just so far, even the Medicare D plan with its shameful donut hole! They strongly feel, truly or falsely, that Big Pharma are taking them for a ride with price gouging, and they will refuse to take it lying down. Note that AARP (American Association of Retired People) with millions of members, has a lot of clout! While you are sleeping, they will turn out in large numbers to vote, in their favor!
• My predictions are that the costs of pharmaceuticals for people with low or no coverage in all age groups will need to be highly subsidized either by the pharmaceutical companies or by Uncle Sam! If we can only get war expenditures out of the way! It will be nothing short of revolutionary after the next elections. These incredible pressures on all sides on Big Pharma will naturally lead to tumbling of prices in the favor of patients and consumers. Consolidations and buyouts will show a steep rise.
• The human system of checks and balances in the USA at times seems to be excessive, and I would dare say additional computerization and artificial intelligence can produce quantum leaps in reducing costs, without jeopardizing safety and security for the pharmaceutical industry.
• The FDA has to be able to regulate and rein in manufacturers of natural health products and vitamins. How can unsubstantiated claims be made to the American public?
• FDA "User Fees" are very controversial. I think the rich brand-name pharmaceutical companies can afford to pay it. The smaller companies and generic manufacturers may be getting penalized. It is tantamount to "giving a bribe to cut in front of the line." At least, that is the perception of the public. How can the agency (FDA) maintain its independence, when it appears to cozy up this way to Big Pharma? The agency needs to be appropriately funded by the government (as mentioned earlier in this report), for the sake of public safety, and the drugs for approval have to patiently get in the queue, regardless of the parent company's size.
• Another point which has been troubling me for almost three decades is that the pharmaceutical industry, in spite of its strengths and lobbying efforts, has done an extremely poor job of communicating their value to the general public. A well-planned, informative documentary for the public about pharmaceuticals, to be shown on regular broadcast channels, can auger well. I mean an honest-to-goodness documentation showing 'real people' working in the industry, not 'polished actors!' Research & Development, Manufacturing, Marketing, and Finance can be woven into it.
• Many new pharmaceutical plants have glass-enclosed visitors' corridors to observe operations without distractions and outside contaminations. Too bad these tours are given only occasionally to doctors and pharmacists. Throw these educational tours open to the general public, encompassing all age groups. The Food, Beverage, and Brewing industries do it and derive great benefit from it. Why not pharmaceuticals?
• Worldwide, after the basic needs of food, shelter and clothing are satisfied, people need pharmaceuticals. Perhaps it can be rightly said for the pharmaceutical industry that to whom much is given, much is expected. At the risk of sounding preachy, I must add that there is a social responsibility attached to it for the sake of humanity. This industry has a very vital role to play, even considering its own interests. In many cases, precedence and good examples have been set.