Pfizer CEO Jeff Kindler Discusses Leading in Uncertain Times
Jeff Kindler, chairman and CEO of Pfizer, the world’s largest research-based pharmaceutical company, called the current business environment the harshest he has known. “Trust is broken. We live in a time where there is more cynicism and lack of trust of institution than I’ve ever seen,” he told an SOM audience on April 2. “We have unprecedented transparency and speed of information. We live in the YouTube world, and we see the consequences of that every day in both the corporate and political sectors. We’re all in the fishbowl.”
Kindler, whose talk was part of the Millstein Center for Corporate Governance and Performance Lunch Forum and was cosponsored by the SOM Leaders Forum, has been closely watched by Wall Street since 2006 when he was the unexpected choice to be Pfizer’s CEO. He had no experience in the industry before becoming the company’s general counsel in 2002. But the board believed in his vision for change, which includes leading Pfizer beyond the end of the Lipitor patent. The cholesterol-lowering drug will come off patent as early as 2010 and much of the $12 billion to $13 billion in annual sales, which represented 25% of total revenue in 2007, are expected to disappear.
Kindler jokingly explained how he came to Pfizer after working at McDonald’s, where he served as executive president and general counsel, before becoming president of the company’s partner brands. “I figured after five years raising the country’s cholesterol levels it was time to do some penance.” Before these roles Kindler was a vice president at General Electric; a partner at the Washington, D.C., legal firm Williams and Connolly; and a law clerk for U.S. Supreme Court Justice William J. Brennan, Jr.
Over the next five years, Kindler said, the pharmaceutical industry will see patents expire on drugs that account for as much as 40-50% of revenues. “I’m not aware of any industry that has quite faced this kind of problem before,” he said. And despite creating important new medicines, the industry is not popular with the public. “In the case of health, you don’t choose to get sick; you don’t want to get sick,” he continued. “People resent the fact that other people are making money on their poor health. That’s a fundamental essential issue in our business. The problem is there is no way we are going to have medical innovation without the free market.”
Kindler experienced the risks of the pharmaceutical industry soon after becoming CEO, when results from clinical trials meant development of one promising drug ended abruptly after 17 years and roughly $1 billion invested. In response to the challenges, Kindler said, “You have to stay steady and calm, keep your eye on the long-term not the crisis du jour.”
That long-term view has Kindler optimistic. “For all of its challenges and political unpopularity and tremendous risks, when all is said and done, we need this industry.” But he also said the business needs to change. “The industry is going through an inflection. It will be transformed. It will be reinvented. We will come out of this on the other side with a new business model,” Kindler said. “Compared to the internet, this doesn’t strike me as an industry that can be reinvented by a couple of entrepreneurs in a garage. The resources and the scale of expertise that are required are very significant,” he added. “Somebody will reinvent the business. There is no reason why Pfizer can’t be that somebody.”
After mergers in 2000 and 2002 expanded the company dramatically, Pfizer has been consolidating. That has meant the loss of thousands of jobs and the closing of dozens of manufacturing facilities. Kindler said there is still an enormous bureaucracy that comes along with the leverage of such a large company. To counter that, he is working to foster innovation by empowering employees. One effort to encourage the sort of creativity required for drug discovery has involved small, focused teams with their own facilities and culture led by world-class researchers who have decision-making power for the avenues their teams explore. Kindler pointed to the oncology team in LaJolla, California, where the team leader starts the day surfing, something not typical for those at the corporate offices in Manhattan.
In uncertain times and an uncertain industry, Kindler sees the fundamental challenge as restoring trust with all of the company’s stakeholders. Rather than resist the fishbowl created by the fast and free flow of information, “We need to embrace transparency,” Kindler said. “Being open is key to establishing trust.”
Watch or listen to Jeff Kindler discuss the unpredictable and evolving nature of the pharmaceutical industry.