T BOSSES
`
`9 1:-
`L
`
`‘Wfiatgfg Yang“ team Warm“?
`he Hottest New Digital Cameras
`
`MAY 8, 2006 WWW.FORBES.COM
`
`
`
`
`
`How Big Pharma
`Got Addicted
`To Marketing
`
`.3
`
`HIGH
`94-55130
`" SHEFIIHIHHHIHH
`
`Page 1 of 18
`
`Acrux V. Kaken
`
`IPR2017-00190
`
`Kaken Exhibit 2029
`
`

`

`Forb 5
`
`MAY 8, 2005 | VOLUME 177 NUMBER 10
`
`94 Pushing Pills: How Big Pharma
`Got Addicted to Marketing
`'
`i
`.~ 13:; drug industry abandoned science for salesmanship?
`-: Ltirtgreth and Matthew Her‘per
`
`-
`
`131 Best Bosses: Who Earns Their Keep
`‘
`'1
`whine, whine. Sure, lots ot‘chiet‘ executives are vastly
`‘
`i. paid. But lots produce nice returns for shareholders. We tell
`which is which. ByScort DeCttrlo
`
`13,4 Unprecious Metal
`The aluminum. industr}r is enjoying a global commodities boom.
`At Alcoa the brass is getting considerably more enjoyment than the
`shareholders. By Michael Mittens
`it‘s; 6001:! to Be King
`-_ The; Bossesghave-‘done well for their shareholders over a span of
`i "d __
`seé'réti: Think like an owner. By Deborah Orr
`ban :‘Whatts‘ Your Team Worth?
`
`
`
`132 Arr Currents
`. tennis Reilley shaped up Pt‘axair. the industrial gas giant, and guv
`~t1areholders a nice ride. too. By Susan Kim-tens
`
`wit 1:;t- tinned-e
`
`flu Us. fin-clOzgrgziarr andLesley Kump
`
`_ 66 The Hottest New Digital Cameras
`Ellm'f \\ lltll\ rim" l|"\lt‘._\
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`Page 2 of 18
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`

`

`MAY 8. 2006
`
`18 Index
`
`22$idelines
`
`2683de
`
`33 FactdeonlnentISteve
`on the need for more transparency andlms
`resn-ictionincampojgnfinancing.
`38 OIherCommenis
`
`41 OnentEvem: | Panllottnson
`It'stime for the Westtorediinkpolitical parties.
`
`43 Digital Rules [ Ridt Karlgaard on the
`great divide between opportunity seekers and
`problem solvers.
`
`44 Informer | Hogwildontaxshelter;
`union benefits.
`
`
`
`
`
`46 OnMyMind IWalterOlson
`Mykingdomforacasino
`
`ummnwlnashbado
`
`160Thouglrls
`
`OUTFRONT
`
`51 London Calling Small companies skip
`the U.S., go public overseas. By Erika Brown
`
`5‘ Trust Me Everyone into the pool! Wall
`Street tries an old gambit to lure investors.
`By David Whelan and Matthew Rand
`
`Money Can Buy?
`131
`
`58 The Parts Paradox Why are America's
`struggling auto suppliers booming overseas—
`while foreign suppliers are flocking stateside?
`By Jonathan Fahey
`
`Plus: Dolls with baggage.
`
`HEALTH
`
`accounting
`55 Free Ride A
`move lets executives both fatten their
`
`compensation and boost their companies’
`bottom lines By Elizabeth MacDonald
`
`30 The DNA Bar Code An innovative
`method for coding cell samples prevents
`identity mix-ups while saving labs space
`and money. By Mary Ellen Egan'
`
`75 GATEFOLD
`
`MAVERICKS
`
`
`
`ENTREPRENEURS
`
`35 Gate Crashers A couple of French
`entrepreneurs find an edge in the rarefied
`world of cognac, By Daniel Fisher
`
`COMPANIES. PEOPLE. IDEAS
`
`106 We'll Do It Our Way Private equity
`rivals are getting together on the biggest
`deals. Not Warburg Pincus.
`By Plyllis Barman
`
`‘0' Wrap Star Bubble Wrap, the beloved
`protector of packages. gets a makeover.
`By Monte Burke
`
`110 Wanted Investors claim lack Sweesy
`bilked them of $140 million in fake oil deals.
`
`Now if only they could find him.
`By Dirk Smillr'e
`
`1 25 Insights I Track Your II) Thieves
`By Peter Huber
`
`10 FOIIES MAY8,2006
`
`Page 3 of 18
`
`INTERNATIONAL
`
`114 The Mogul of anbai Multesh
`Ambani is creating India's first truly
`integrated. private-sector oil compmy.
`By Christopher Helman with Naazneen
`Kannali
`
`MARKETING
`
`122 TheirSpace.com Social networking
`sites connect tens ofmillions of
`- a '-
`~39
`Naturally, marketerswantin. ByAllison u“
`
`MONEY 8: INVESTING
`
`89 DesertRose 'Ihefirstwomanto -1
`alargeSaudiinvestmentbanksaysthe
`ldngdomatlastwillbeagood place for
`Western money. ByDavidA.Andelmm
`
`146 Makers & Breakers l Pulte Home
`Universal Technical Institute; WebEx
`Communications.
`
`14!! Portfolio Strategy I Feel the Force.
`By Kenneth L. Fisher
`
`
`
`150 Capital Markets | MaybeNotSo
`Boring 13meinan
`
`FORBES LIFE
`
`_
`
`
`
`
`
`153 Houdini in the Desert The 3
`
`collection of magic in the world lies hi
`inside a nondescript Las Vegas war-aha .. _.
`By Finn-OMIones
`
`Plus: The Forbes Insider: The man
`who angles for extraordinary salmon
`Indulgences: A fabulous fiddle.
`
`
`“or
`9“,"
`~ «or.»
`
`'
`
`
`
`‘4
`
`The Hottest
`Digital Cam
`
`

`

`
`On the Business of Life
`
`
`
`
`enryFordisFordlandiaIinBrazil] wasanattempttocreateasystematicrubbertree
`
`phanMfiemMMfiradxadeJadbmflwworMbnatamlmbbncapiM.
`
`Imgk—scawredudldmbbermflourkhedBmflwbfighhflidnaghtflflflmmmsiond
`
`scatteredtreerepeatedlywipedouttheorderlyrowsoftheFordplantation.Heniyfinallyabandonedthe
`
`
`
`
`
`
`
`
`
`
`efliirtaflerWorld WarlLNantmbeatbackfliiseflbflmbdngpmducfiveefiiciencywhereflimhadbeen
`—MALCOLM FORBES (1987)
`
`littleBthnflandiasunfivesbmsortqftributetohisMgination.
`
`
`
`My imagination makes me human and
`makes meafool; itgivesme all the world
`and exiles mefrom it.
`
`—URSULA LE GUIN
`
`Fornmately somewhere between chance
`and mystery lies imagination. the only
`thing that protects ourfreedom, despite the
`fact that people keep trying to reduce or
`kill it ofaltogether:
`
`
`—-LUIS BUNUEL
`
`Man is an imagining being.
`“GASTON BACHELARD
`
`Imagination, the supreme delight ofthe
`immortal and the immature, should be
`
`limited. In order to enjoy If e, we should
`not enjoy it too much.
`—VLAD!MIR NABOKOV
`
`
`The imagination is mans power over
`nature.
`
`—WALLACE STEVENS
`
`Imagination is like a lofty building reared
`to meet the sky—fancy is a balloon that
`soars at the winds will.
`—GELETI‘ BURGESS
`
`
`
`Imagination is a very precise thing—it is
`notfantasy; the man who invented the
`wheel while he was observing another man
`walking—that is imagination!
`—]ACQUES LIPCHITZ
`
`
`Skill without imagination is craftsmanship
`and gives us many useful objects such as
`wickerworlc picnic baskets. Imagination
`without skill gives as modern art.
`—TOM SfOPPARD
`
`160 FORIES MAY8.2006
`
`Page 4 of 18
`
`
`.
`
`—EDGAR ALLAN P059
`
`
`
`
`
`
`
`
`So you see, imagination needs moodling—
`
`long, inej‘icient, happy idling, dawdling
`Imagination: a warehouse offacts with
`
`poet and liar in joint ownership.
`and puttering.
`
`—BRENDA UELAND
`—AM.BROSE BIERCE
`
`
`
`"film-W171-NunbettomallSSNwtssslnkwbwndfimekmmmhugmwithmmaisslnlnAorfiarIdOmbetbyFuheslnnfiflfifflIM
`
`
`MMW10011.Periodicalspostagepaidmmmmwmmmmmmmflnmflmmmmmb
`
`14962MMMBSWDNMT1L2.GST#125769513.RIPOSTMASTER:Sendaddressdsanges to RimesSuhsaiber Service. no Box 5471. Hanan, IA 9593-0911. Follies
`
`'Sewice'lsavallahle Mmrommwmmwwmmmmnmmmmmmmmmmmmmm.
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`H51m71.mumLlstvtenHmapoifimofumflagkWhWfimflmmMMmimmmdmemmWOMW
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`
`It is the spirit of the age to believe that
`anyfact, no matter how suspect, is
`superior to any imaginative exercise,
`no matter how true.
`
`—GORE VIDAL
`
`
`
`
`That which we know is but little; that
`
`which we have a presentiment of is
`immense; it is in this direction that the
`
`poet outruns the teamed man.
`—-]OSEPH ROUX
`
`
`
`
`
`
`It will befound, infact, that the
`ingenious are alwaysfanciful, and
`the truly imaginative never less than
`analytic.
`
`
`Think left and think right and think low '
`and think high. Oh, the thinks you can
`think up Jonly you try!
`—THEODOR G
`
`
`
`

`

`
`
`
`
`
`How the drug industry
`abandoned science
`for salesmanship.
`
`:IIL}! =:1I1|"|‘:'IH_:‘a'.‘."|‘
`
`
`
`
`OVARTIS EMPLOYS SOME OF THE BEST MED-
`” -‘
`ical researchers in the world. and they have cre-
`ated such lifesavers as Gleevec, which treats a
`' deadly form of leukemia. But what is the
`fourth-biggest seller in the Novartis medicine
`cabinet? N0 lifesaver. It’s Lamisil, a pill for—
`horrorsI—toenail fungus. The main effect of
`‘
`the fungus is that it turns the toenail yellow; it can hurt, but no
`one has died of this inconvenience. But a few people may have
`died takin Larnisil. Federal regulators have linked the drug
`to 16 cases of liver failure, including 11 deaths. Novartis
`says most of the patients had preexisting illnesses or were
`also on other drugs.
`Yet 10 million Americans have taken Lamisil, which
`costs $850 for a three-month treatment. They have
`been lured by a grotesque cartoon creature called Dig-
`ger the Dermatophyte, a squat, yellow fellow with a
`dumb—guy New York accent In TV ads he lifts a toenail
`as if it were the hood of a car, then creeps beneath it to
`V declare, l‘I’rn not leavin’!”
`-
`TNS Media Intelligence calculates that Novartis has spent $236
`
`_
`
`
`
`I
`
`
`
`94 senses MAY8.2006
`
`
`
`Page 5 of 18
`
`

`

`
`
`L M LAZAR FDR FORBES
`
`Page 6 of 18
`
`MAY8,2006
`
`FORBES
`
`95
`
`

`

`,‘y
`
`
`
`million on Lamisil ads in three years (Novartis says it has spent
`only $100 million). The first run, which featured Digger being
`crushed by a giant Lamisil tablet, so overstated the drug’s benefit
`that regulators objected and the company had to pull the spots;
`the drug fully cures the problem in only 38% of patients. But the
`ad blitz undeniably was effective: Lamisil sales jumped 19% to
`$1.2 billion worldwide in 2004 and held steady last year.
`
`AMISILJS RISE POINTS UP WHAT IS WRONG WITH THE
`
`something that can really hurt people.”
`The industry’s malaise is certainly visible on Wall 5 .
`
`ten largest drugmakers have lost $130 billion in combm
`
`ket value in two years, a 12% decline at a time when the .
`
`Index is up 12%. They have endured scandal after scan
`‘
`drug safety and dubious sales practices. A total of 17
`
`been recalled in the past decade. Wyeth's withdrawal of . ‘
`
`Redux in 1997 led to $22 billion in damages and co
`(FORBES, Apr. 10).
`drug industry today: the triumph of salesmanship over
`
`Vioxx could yet eclipse that. Merck’s new‘gener' -
`painkiller—touted to consumers at a cost of $550 million
`science. The industry spends a fortune to create and sell
`
`a raft of me-too remedies aimed at quelling sometimes
`five years—was recalled in September 2004 when a study
`
`trivial maladies, even as research pipelines run
`patents on
`that patients on it for 18 months had double the risk of .
`--
`‘
`
`attacks. In the ensuing legal onslaught 10,000 suits have 7
`7
`old drugs expire and critical areas of medicine go underserved.
`Sometimes the marketing improves health; Americans would
`filed, seeking billions in damages and accusing the m
`
`misleading doctors and the feds. Last month Merck lost a
`probably be better off if more of them were hounded into taking
`
`million verdict to one heart attack survivor, its second - a:
`pills to lower cholesterol and blood pressure. Sometimes the
`result is the reverse, as when side effects from an overhyped and
`five cases tried. There are more potential lawsuits lurking
`'_
`
`these came from.
`overprescribed medicine are fatal.
`
`The drug industry, of course, rejects the criticisms.
`'
`“The dominance of marketing over research has done real
`
`says its Lamisil spending “absolutely” “in no way” has taken.
`damage to company pipelines,” says Iurgen Drews, former
`resources from research into more serious diseases and I
`
`research chief for Roche. A decade ago he predicted a research
`spends far more on its cancer drugs. “Absolutely. mar-
`slump; it has arrived. A total of 87 major drugs with $31 billion in
`
`combined annual sales have lost patent protection since 2002, but
`doesn’t trump science—this is a science-driven industry,”
`new drugs aren’t arriving fast enough to replace them. Only 20
`Scott Lassman. a lawyer for Phrma, the industry trade
`
`I
`says makers have taken steps to curb any excesses and give.
`were cleared by the Food 8: Drug Administration last year, down
`
`“more sober tone.” Pfizer research chief Martin Mackay says,
`_._
`from 53 a decade ago.
`
`Drugmakers, says Maryland psychiatrist lack E. Rosenblatt,
`are thought of as monsters, but I don’t know of a single.
`where we have been driven to take risks on a compound I —°< =
`editor of Currents in Afieanie fitness, “don't seem to realize that
`
`of a marketing push. I would not let it happen.”
`this is not toothpaste or shampoo, that they are dealing with
`
`
`
`
`Since drug advertising
`Ill
`:H
`
`
`
`Lamisil
`
`-
`
`.
`
`:Lim‘yh
`
`Levitra
`
`Source: TNS Media Intelligence (ad budget); company statements; Food a Drug Administration.
`
`
`
`95
`
`FORBES MAY8,2006
`
`Page 7 of 18
`
`

`

`
`
`Drug firmslraire tripled the ranks
`, '3 That’s one seller
`i‘ salespeople '50
`.CIJI-"i
`
`9
`I a r
`o r ‘
`o
`3
`o
`-
`- g
`'
`
`
`ol-Myers Squibb Chief Executive Peter Dolan: “The
`
`111' set for me is between how the industry is por—
`
`how people in it actually feel about what they do.’’
`
`Pharma’s focus on marketing is undeniable, and it
`
`y on it. The top ten drug firms invest $42 billion a
`
`:
`, 14% of sales—yet they plow more than twice
`
`into marketing and administration. In a decade drug
`
`I almost tripled the ranks of salespeople calling on
`
`to 100,000, according to Verispan. That’s one seller
`
`does; in 1996 it was one for 18. Often they encourage
`
`i d off-label uses or sponsor “continuing medical edu—
`
`ions to stoke more prescriptions and broaden a
`
`-'-i I t base.
`
`
`VEN THE RESEARCH LAB 15 MORE MARKETING-
`
`consumer advertising of drugs, which had been highly restricted
`for decades before rules were eased in the 1990s. Ad spending in
`the U.S. has soared eightfold in nine years to $4.8 billion, says
`Nielsen Monitor-Plus. TV spots ply supposed low-risk, quick
`fixes to millions of people: Try Zoloft to get happy; gobble a
`state-of-the-art pain pill when aspirin would work fine. Drugs
`designed for narrow sets of patients end up in the hands of a far
`broader audience.
`“It creates demand where there’s not even disease there,"
`
`complains internist Robert Centor of the University of Alabama.
`Drug giants “do it in a devious way,” he says. “I wish they didn’t
`spend all that money on marketing.”
`Merck’5 marketing of the painkiller Vioxx was, in retrospect,
`all too successful, contributing to the multibillion-dollar liability
`now looming over the company. Vioxx, part of a new class of
`drugs known as COX—2 inhibitors, had been intended for only the
`small slice of patients who can’t stomach aspirin. But it ended up
`in the hands of 20 million people, driven by ad spending of $550
`million in five years, says ad tracker TNS. Some spots had 1970s
`Olympic figure skater Dorothy Hamill twirling on the ice.
`Vloxx’s chief rival, Celebrex from Pfizer, also reached a far
`
`broader market because of splashy ads. About 60% of patients on
`the drugs had low ulcer risk and might have fared just as well on
`older generics, say researchers at the University of Chicago and
`
`.driven than ever. More than $9 billion a year in
`
`aesearch spending goes to clinical trials of drugs that
`
`are already approved or may soon be—often to snare
`
`ans. That is up 90% in four years, says Goldman
`
`of these ad—driven trials are skewed to pit the spon-
`
`. m 1
`product against a weaker dose of a rival pill. Yet
`
`have failed to begin two—thirds of the 1,200 post-
`
`trials required by the FDA.
`
`'
`- geared trials provide fodder for an explosion in
`
`
`
`
`1997. several campaigns have raised eyebrows and ire.
`
`mus. 1Ncwartis disputes this value. 2 MS Health. 3First nine months on market,
`
`Nexium
`
`Creator
`
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`2 iii-Sta
`
`Page 8 of 18
`
`
`
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`

`

`that targeted only 25% of breast cancer patients, Levi. ‘
`recalls. Now the drug, Herceptin, is near $1 billion in .
`sales. “If you are developing novel drugs, you don’t
`forces of tens of thousands.”
`
`
`
`Stanford. Pfizer says most gastrointestinal complications occur in
`patients who are not at high risk.
`“People would come in asking for—demanding [a COX-2
`inhibitor] —and sometimes threaten to find a new doctor if I did-
`n’t prescribe it,” says physician John Abramson, a clinical instrucw
`tor at Harvard Medical School who has consulted for plaintiff
`lawyers. “Vioxx wasn’t a bad drug for everyone, it was a bad drug
`for certain patients," says Chris D. Robbins
`of Arxcel, which consults to pharmacy
`benefit managers. “Unfortunately, people
`saw the ads and started demanding the
`drugs from their doctors.”
`TV ads for prescription drugs were rare
`until Aug. 12, 1997, when the FDA lifted
`restrictions to let spots run without lengthy
`disclaimers of nasty side effects. Three days
`later Schering-Plough began a prime-time
`campaign for its antihistamine Claritin,
`featuring smiling folks frolicking in hay
`fields to the tune of Irving Berlin's “Blue
`Skies.” Schering upped the ante in 1998
`with one of the first celebrity pitches, by TV
`personality Joan Lunden. Claritin sales
`climbed 50% in 1997 and 30% more in
`
`H10 lth‘ than; rulmpw war-s below
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`Zoloft 17%
`
`other; illCllell'tf] l.lli'3\t!1,
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`
`
`
`1998, hitting $2.3 billion. Schering’s stock-
`market value approached $90 billion by
`mid-1999. Clarifin lost patent protection in
`2002. No problem: Schering was ready
`with Clarinex, a look-alike successor that
`still brings in $646 million in annual sales,
`even though its predecessor is sold over-
`the-counter at one—tenth of the price. The
`shift didn’t help enough: Schering had a
`mediocre pipeline, and today its market
`cap is down by two-thirds to $27 billion.
`
`THER COMPANIES FOLLOWED
`
`Noxium 2.9”“
`
`I
`
`'
`Some drug firms stopped researching in critical areas -
`
`they focused on pop pills. Eli Lilly 8: Co. had dominated
`antibiotic field for decades, and new remedies are badly n-
`
`kill drugaresistant superbugs. Yet in.
`s y" ‘-
`19905 the company sold off three -
`
`T
`ing antibiotics and antifungals,
`
`which went on to win approval.
`exited antibiotic research entirely in
`
`believing the chances of success
`higher with antivirals. The next year
`
`and partner Icos spent $243
`u
`launching their me-too pill for erectile
`
`function, Cialis. Barry Eisenstein,
`
`headed Lilly’s antibiotic program
`
`1992 to 1996, says drugs for chronic --
`tions, like Prozac, are seen as “a much a
`
`ter and easier business proposition.”
`says that any contention that it didn't
`
`sue antibiotics to chase mass- I
`
`7 V,
`
`..
`
`'
`
`'
`
`blockbusters is simply not valid
`
`HE “EASIEST PROFITS”
`
`.
`
`
`
`pi
`
`Ibuprofen 29%
`Ollie!» lllt llninmi
`l win-luv],
`Nl' Ilm
`
`Lipitor 55%
`-ll=r-r.
`Hlf. ltnimq .1th m
`Primal-ind
`
`Amhien 62%
`I‘
`l
`. w- wlmw I-‘I- .‘-
`5|.le !. .r.
`
`
`from me-too drugs, says
`
`Santa, medical director at
`gon Health 8r Science U
`
`sity. Genuine discovery is a risky b _
`EE
`ness, “more like drilling for oil.”
`
`prospecting for real cures, some co 9
`nies repackage old drugs with the :-
`
`mal tweaks needed to get a new p
`Then they stage exhaustive trials - ' n '
`
`unearthing some slender advantage
`
`can be cited in advertising.
`‘
`One throwback, the Lunesta sl _7
`
`pill from Sepracor that came out early
`
`year, is based on a remedy first a - ' '
`
`in Europe two decades ago. It is var? r.
`ilar to Ambien, which is made by
`‘
`
`I
`Aventis and racks up US. sales of $1.
`lion annually (on an ad budget of $
`
`million). Lunesta garnered $330 H l‘
`in sales in its first nine months on the market thanks '10 TV I,
`
`featuring a diaphanous cartoon butterfly flitting in and ' “-
`
`moonlit bedrooms. Tagline: “Leave the rest to Lunesta.”
`' '
`
`spent $215 million last year advertising Lunesta, says TNS-
`To differentiate Lunesta from Ambien, Sepracor k"
`drugversus a placebo in 1,600 patients for six months. 50
`
`Ambien’s maker hadn’t bothered to do. The trials let
`claim in print ads that Lunesta "is the first and only '
`approved for long-term use.”
`’ .uj
`Prescriptions for sleeping pills are up 48% in five
`
`with ads for antidepressants,
`heartburn drugs, painkillers
`and impotence pills. Pfizer
`found its erectile dysfunction pitchman in
`Senator Bob Dole, then age 75. Wall Street
`cheered the changes. “We had the whole
`financial community focused on block—
`blasters and maximizing the revenues and
`aggressive marketing,” says Daniel Vasella, chief executive of
`Novartis, which TNS Media Intelligence says has spent $235 mil-
`lion in three years advertising Zelnorm. (Novartis disputes the
`amount.) The drug, which treats irritable bowel syndrome, costs
`$200 a month.
`
`In the rush to find big sellers, many companies fell into a
`herd mentality and focused on the same few common ailments,
`says Genentech Chief Arthur Levinson. "Everyone was doing
`the same thing, so the chances of success got smaller and
`smaller.“ Big Pharma “said we were nuts" to test a cancer drug
`
`I senses MAYB,2006
`
`
`
`Page 9 of 18
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`HAMI'SH‘
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`
`
`ltf“. :1‘ilL‘
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`lit-‘1'
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`L
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`tit"
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`million prescriptions annually, driven by the huge ad spending
`for Ambien and Lunesta. Sales are up 140% in the same period to
`$2.76 billion. Yet the newer drugs “are no better than older ones
`costing about one-tenth as much.” says Iohn Abramson of Har-
`vard. “Has insomnia become an epidemic in the past five years?
`Or are the makers skilifiilly leading Americans [to] an expensive
`drug?” he asks. Sepracor points to an Institute ofMedicine report
`highlighting insomnia as a serious problem.
`
`STRAZENECA, FACED WITH PATENT EXPIRATION ON
`
`its blockbuster for acid reflux, Prilosec—touted as
`"the purple p' ”—tweaked it a bit to create “the new
`purple pill,” Nexium. AstraZeneca studied
`doses
`of Nexium in five trials totaling 12,000 patients. All this to show
`the drughelped the esophagus heal in an extra one in 20 patients,
`compared with Prilosec or competitor Prevacid.
`The payoff: Nexium now is touted as “the healing purple pill,"
`hawked in ubiquitous TV spots. In one, a sterling-haired man in
`black cites the “exciting news” from one of the studies and con—
`cludes. “Better is better." Nexiurn is the third-best—selling drug in
`the world, according to IMS Health, with $5.7 billion in sales and
`an ad budget of $226 million last year. Never mind that some of
`the trials were stacked: In three of the big trials AstraZeneca
`pitted high doses of Nexium versus half the dose of Prilosec; it
`never bothered to test whether twice the Prilosec dose would be
`
`equally effective. AstraZeneca says there are “clear differences”
`between the two purple pills and notes that one equal-dose study
`showed a statistical advantage for Nexium in esophageal healing.
`In another instance AstraZeneca staged trials that fizzled but
`
`
`
`used them for a new ad claim anyway. Before it won approval in
`August 2003, AstraZeneca studied its Lipitor look-alike, Crestor,
`for cholesterol reduction, in 24,000 patients. hoping to prove
`superiority. But the only dose of Crestor that clearly beat Iipitor
`turned out to cause kidney problems and never won FDA
`approval. Nonetheless after Crestor’s debut AstraZeneca used
`ads featuring a voiceover by the stentorian actor Patrick Stewart
`of Star Trek: The Next Generation, in Seussian rhyme: “When
`Crestor performed in a head—to—head test, its lowering effect was
`clearly the best.”
`That ciaim brought a rebuke from the FDA in March 2005.
`The company halted the ads, but it now is testing Crestor in
`30,000 more patients. AstraZeneca notes that Crestor is the only
`statin shown to clear plaque out of the arteries.
`The drug industry has begun to restrain its own advertis-
`ing. Last June Bristol-Myers Squibb took a first step, announc-
`ing that it would wait a year after drugs hit the market to begin
`running ads, leaving time for doctors to learn about a' medi-
`
`100 son-es MAY8,2006
`
`Page 11 of 18
`
`The ten largest drugmakers have
`lost
`in combined
`_marketjraluejnj:wo_vears._
`
`Hi
`lit] ‘.|i- 'I"tl|l
`will}
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`lint.“ ilIC-ifr-iir-ti
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`it
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`‘.‘
`
`
`
`
`cine and for side effects to crop up. Companies are now
`mitting ads to the FDA before they run and are more cl
`stating big risks.
`‘
`But myriad drugmakers have plenty of ways to game the -
`tem. In the market for new schizophrenia treatments Lilly ‘
`Johnson 8: Johnson and others have run 21 head-to-head
`7
`,
`and 90% of the time the conclusions favor the sponsor's -
`
`according to research in the -
`
`can Ioumai (if Psychiatry. Nine
`ies compared Lilly’s Zyprexa to
`
`son 8: Johnson’s Risperdal. All
`’
`.
`Lilly-paid trials favored Zyp
`
`three of four 18:] studies fave
`RisperdalLillystandsbyitshigh
`
`entific standards and says the
`highlight the need for more independent studies. Another 1
`in Ardtives ofIntemaI Medicine, tallied 56 studies ofpainkillers: e '
`
`once was the sponsor's drug deemed inferior.
`J
`"The comparative studies are a joke. They are comical. A. ‘1"
`of the scientific literature these days is worthless," SW5 P '
`
`trist Jack E. Rosenblatt. “The whole process has been con“
`says British bone researcher Aubrey Blumsohn. “it is 38 '
`
`worse as the financial stakes are rising."
`LUMSOHN CONTENDS PROCTER 8t GAMBLE FOR
`.
`
`refused to supply raw data for a 2003 study he led "
`
`paring its drug Actonel to Merck’s competing ‘
`
`Fosamax, even after he became suspicious that
`ter’s analysis was skewed in favor of Actonel. “It was a procm
`
`intimidation,” says Blumsohn, who was suspended from
`at the University of Sheffield after he complained to the i
`
`press. (He recently left after agreeing to an undisclosed -
`ment.) Procter 8r Gamble says it “always” provided Bi
`‘
`
`
`,
`
`I
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`

`

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`Page 12 of 18
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`
`
`with “unfiltered access to all of the data that was relevant“ “This
`
`issue is about a relationship fraught with misunderstanding, and
`we regret that," a spokesman says. Procter is now providing Dr.
`Blumsohn with additional data.
`
`Despite the profusion of dubious trials, drugmakers often
`don’t conduct crucial studies to ensure new drugs are truly safe as
`they move out to a mass market. This year Trasylol, a Bayer drug
`used to prevent bleeding during heart surgery, has emerged as yet
`another problem medication. In December Bayer promised
`annual sales of the drug, then at $280 million, would surge to
`$600 million.
`
`But a study of 4,000 surgery patients found that the drug, at
`$1,400 per dose, posed more than twice as much risk of kidney
`failure as cheaper generic alternatives, as well as more heart
`attacks and strokes. Replacing Trasylol with generics would
`prevent 10,000 cases of kidney failure each year, says clinical
`researcher Dennis Mangano, who led the study at the non—
`profit Ischernia Research 8: Education Foundation in San
`Bruno, Calif.
`
`
`.
`..
`Bayer says its own studies of 6,500 patients haven‘t
`'
`link between the drug and kidney failure. heart attack or '
`
`and that it is working with the FDA to evaluate the
`
`report and another study linking the drug to serious .
`
`events. “Bayer’s highest priority and concern is patient ;
`
`7
`says a spokeswoman.
`
`
`ANGANO, WHO ALSO DID THE FIRST
`
`raise concerns about the cardiovascular
`
`Pfizer’s Bextra {pulled from the market in
`
`2005), spent $35 million of his foun .J
`
`endowment to painstakingly gather the Trasylol data over
`
`years. Few independent researchers have the money to . s.
`
`such definitive safety studies. His foundation used to do . '
`
`trials for the industry, but drug companies don’t call much
`
`more, he says. "There is no incentive for companies to find .
`
`lems with safety once a drug is approved. It is just downside:
`
`he says. The result is worrisome: “We find out a drug is ;
`
`when the bodies accumulate.”
`
`
`
`
`
`
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`“.
`
`FORBES MAY8.2006
`102
`
`
`
`
`Page 13 of 18
`
`

`

`The new business collection by
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`Page 15 of 18
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`TERRY KEENAN
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`:/
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`/
`
`I‘
`
`1
`
`“’1‘le
`a
`
`(jashin‘
`ll
`
`

`

`in the water lately? That’s the
`.i‘ sound of leveraged—buyout
`I;
`-‘
`
`
`
`finnscircling some prettybig
`‘
`l
`fish—like GMAC and the
`Dutch media—research giant VNU. These billion-dollar buying
`opportunities have drawn the likes of Cerberus. Texas Pacific,
`Thomas H. Lee Partners, Bain 8t Co., Carlyle, Blackstone and
`Kohlberg Kravis Roberts, bidding together in packs. Such club
`deals, as they’re known, are a common phenomenon in the feverish
`leveraged buyout industry, which took in $152 billion last year from
`pension funds and other investors. Banding together spreads risk
`and sometimes helps put a ceiling on the bidding procms For their
`part. the LED engineers (who have taken tocallingtheirbusmess
`“private equity”) have to do something to justify annual manage-
`ment fees of 1.5% to 2%, transaction fees equal to at least 1% ofa
`deal’s value and a carried interest that gives them 20% of any profits
`after certain benchmarks are met.
`
`the table with other bidders. It joined with other 1.30 611115 in the
`purchaselastyearofNeimanMarcusandtheyearbeforein the pur-
`chase ofan EDS unit and ofTelcordia Technologies, which develops
`communications software. But that’s it.
`
`Despite enormous pressures to play in this game, Warbul’g i5
`holding back. According to a former employee, it has $20 billion
`under management today—half of it uninvested Warbng disputes
`t]1isandsaysthatnumberis$13billion,withactivestakesin120
`companies across 30 countries. It does deals of all sizes (some With
`initial antes ofas Iittle as $700,000) and has been doing this kind of
`investment banking since 1966. It claims a net return to investors
`overthefirst 30 yearsofits Bfeof23% ayear. Warburg’s $5 billion
`fund. which was raked in 1993, returned only 15% annually. Yet
`80% of its limited partners signed on again to participate in an _
`$8 billion fund that closed last August.
`How will Warburg put that money to work? Very likely in the
`usual way. That means being an active owner—investing its 0W11 -
`
`7
`
`1'1.
`
`Whyisn’t Warbulg Pincus LLC, one ofthe oldest and most pow-
`erful private equity shops, jumping in with both feet? It recently
`snifl‘ed both VNU and data processor Computer Sciences Corp. and
`decidedtowalkaumyfi'omboth. Yes, ithas ocmsionallysatdown at
`
`106 FORBES
`
`MAY 8. 2006
`
`
`
`Page 17 of 18
`
`

`

`w to 1% ofthe total purse, alongside that ofits partners for
`stake, putting its own associates on the board, possibly
`
`_ management at some point and holding on for up to a
`
`years before cashing out Not the usual leverage-and-flip
`
`"a
`see in a lot of LED activity these days.
`
`-
`;starl£dbuyinginlndia, for exampleinthemid-199OS,
`
`regulations liberalizing foreign ownership kicked in. That
`
`a time when other private equity groups were making risky
`
`high technoiogy in China. Warburg picked up pieces of
`
`ommunication, India's largest consumer Web portal;
`
`Ambuja Cement; and Sintex hrdustries, maker of plastic
`
`'Ibday, it has $1.1 billion invested in india
`
`,
`_
`finnsnrckit outinhealth careearlymthenewmillennium,
`
`.-
`were bailing out or looking the other way. In the US.
`
`1 held positions in medical device companies such as
`
`ore, an artificial lumbar- and cervical-disc maker, and
`
`r Medical Group, which makes small—joint implants and hip
`
`ants. More recently Warburg slapped together two busi—
`
`to create CCS, a chronic-care mail-order supply outfit.
`
`. Resources, an oil exploration company Warburg seeded
`
`3, has picked up critical pieces from down—and-out giants—
`
`ofa LDuisiana pipeline company from Enron and natural gas
`
`':~ a nation services and processing assets from Dynegy. Lately it
`
`.‘ f. y tinto Canada’s burgeoning tar sands exploration.
`
`--
`--‘ continuityinapproachoontrastsstarklywiththediurnwithin
`
`J
`u - any’s recent past. Lionel I. Pincus, 85, and John L. Vogel-
`
`71, have been together since 1967, a year after Pincus bought
`
`stake in EM. Warburg 8: Co (The original firm was founded
`
`Warburg in 1939.) Over the years Pincus has pocketed more
`
`‘i -$1 billion from carried interests. Vogelstein $300 million, But
`
`banm, a onetime executive ofa Warburg portfolio company, spent
`more than a year befriending Joseph Patrina, Wall Street Systems’
`founder, leaming all the inside dope. Once Warburg nailed a con-
`interest in the company in January, says this source, Patrina
`found himself without a job. So did a lot of lower~leve1 staffers.
`Mandelbaum, says this source, promised there would be no layofi
`for a year but required all employees to sign a noncompete clause.
`Aftertheyallcomplied, the souncesays, the firingsstarted.
`Who are the new guys in the corner office? Not so new, afier
`all. Charl