In a recent note, I cited evidence for the lack of innovation in Big Pharma, at least from the perspective of stock market investors (see: Some Evidence that Big Pharma Has Lost Its Innovation Mojo). I did not go into issues of causality for this observation other than to cite the bloated cost structures of these companies. A recent article discusses the lack of an entrepreneurial spirit in many U.S. companies and suggests that the problem is that they suffer from excessive management (see: The End of Management). In other words, they employ too many managers with oversight over resources and new product development. The subtitle of this article is: Corporate bureaucracy is becoming obsolete. Why managers should act like venture capitalists. This says it all. Here is a key excerpt from this article:
In recent years, however, most of the greatest management stories have been not triumphs of the corporation, but triumphs over the corporation. General Electric's Jack Welch may have been the last of the great corporate builders. But even Mr. Welch was famous for waging war on bureaucracy. Other management icons of recent decades earned their reputations by attacking entrenched corporate cultures, bypassing corporate hierarchies, undermining corporate structures, and otherwise using the tactics of revolution in a desperate effort to make the elephants dance. The best corporate managers have become, in a sense, enemies of the corporation. The reasons for this are clear enough. Corporations are bureaucracies and managers are bureaucrats. Their fundamental tendency is toward self-perpetuation. They are, almost by definition, resistant to change. They were designed and tasked, not with reinforcing market forces, but with supplanting and even resisting the market.
The era of the block-buster drug with huge profits for Big Pharma seems to be long gone (see: Pharma industry prepares for end of 'blockbuster medicines'). Along the lines of the article cited above, I think that many of the managers in Big Pharma are bureaucrats who are primarily interested in self-perpetuation. Absent the potential for blockbuster drugs, they have little interest in the arduous and risky task of shepherding new drugs with smaller prospects for profit through the clinical trial and regulatory process. They would rather sell foot power with a smaller, but steady, profit and then purchase the smaller companies that are innovative enough to develop the new drugs. However, I fear that the innovative spirit of these smaller companies will be smothered when their fate is in the hands of the managers in these larger companies after purchase.
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