Amgen CEO on Marketplace

Kai Ryssdal interviews Amgen CEO Kevin Sharer on Monday’s edition of NPR’s Marketplace. Below are some excerpts from the interview. The full transcript is available here.

Ryssdal: Do you consider Amgen to be part of what is commonly referred to as “Big Pharma”?

Sharer: We have characteristics financially that look like “Big Pharma.” I’m the chairman of the Pharmaceutical Trade Association. So we obviously —

Ryssdal: So that would sort of be a yes, right?

Sharer: No, it’s not a yes. So people ask that question often. But no, we have a technology base that’s biotechnology. We’ve got a culture that’s biotechnology. And I have a lot of respect for the “Big Pharma” companies. And they’re our partners and competitors. But no, we’re a biotechnology company.

Ryssdal: What happened? How’d you get here? [Regarding the tough year for Amgen]

Sharer: I think we got here through a long series of events. But the challenge is that one of our medicines, our biggest medicine, so called ESAs. We’ve got two of them — Epogen and Aranesp, red blood cell medicines. Have had their labels revised and — by the FDA — and the Medicare, CMS, has changed payment policy. And it’s caused our sales to go down in those areas. So we’ve had to restructure the company. It’s something in our 27-year history we’ve never had to do. We can handle it but it’s sure not pleasant.

Ryssdal: Well let’s break some of those words down. First of all restructure. You’ve had to lay off a bunch of people.

Sharer: We haven’t laid off anybody yet. But we’ve made an announcement that we’re going to lay off through a voluntary program, through attrition and then an involuntary program between 12 and 14 percent of the workforce. Or about 22 to 2600 people. That’s a lot of people.

Ryssdal: Why did the FDA do this? [put a black box warning on Epogen]

Sharer: The FDA got some data over the years that said that our medicines when used above the indicated dose and in some uses was not safe. That is it had negative effect on patient survival. And they wanted doctors to understand that doctors should use the medicine specifically at the doses and in the areas that it was approved for. And the data around those doses and those uses says the medicine is safe. And it’s not unusual that medicines if you use them in areas in which they haven’t been tested or you use them at levels that haven’t been tested can have side effects that aren’t good.

Ryssdal: And yet doctors using your medicines in ways that are beyond the FDA guidance have negative financial repercussions for this company.

Sharer: That’s theoretically true. But our mission is to serve patients. And we want to make sure that our medicines are used in the right way to help patients. And you know we’re an experimental business in the sense that we’re science based. You learn things about medicines with experience. And as you learn where the medicines are best used you have to adapt to that. Biology’s very complicated.

Ryssdal: So how do you do a business plan when you’re in this kind of business? I mean you have to invest huge amounts of money in R&D. You have to have very smart people and pay them a lot of money to spend a lot of hours in the lab doing very difficult things.

Sharer: We’ve got pretty good visibility in what the medicines in the market right now will do for the next two to five years. We’ve got a fair shot at predicting what the very late stage products will do as they approach approval. We have less and less information about the early stage products. So the two to five year vista is fairly clear. Beyond five years is quite unclear. And so what you have to do is have lots of medicines under development. Make sure the biology’s good. Make sure your intellectual property protection is there. And that you’re running experiments based on sound science. And you’ve got the discipline to stop programs when it’s pretty clear they’re not going to work. And so there’s a certain sort of oil business like aspect to this. You get all the right information but you can you know drill dry holes once in a while and you’ve got to have a lot of wells to make sure you hit oil once in a while.

Ryssdal: And when you do hit oil in the oil fields as in biotechnology sometimes you hit a gusher and you get a blockbuster like Aranesp or Epogen.

Sharer: Yes.

Ryssdal: The other thing that’s happened to you that’s sort of made this a curious year for you is the decision by the government to reduce its reimbursement rate for doctors in Medicare. Explain that to us. Why it happened and what that’s going to mean for you.

Sharer: That is a bad decision. It’s not based on science. It’s not good for patients. And we are deeply disappointed in the government’s decision. And we are doing everything we can to change that decision. There’s no science behind this. This was an arbitrary decision by Medicare to reduce payment below the labeled range. In other words, the one arm of the government, Medicare, has made a financial decision that is different than what the label says. And that’s deeply troubling. And I think it’s going to cause patients to have many more transfusions.

In fact, just last night the Senate passed a resolution unanimously asking the government to reconsider this decision.

Ryssdal: And yet again what happens is that because doctors will be receiving lower reimbursement possibly if this decision becomes final, less of your product gets sold. And so you take a hit.

Sharer: Yes. That’s a fact. That’s not our fundamental motivation. I know it’s easy to think that a business only cares about dollars and cents. And obviously we have to care about it. We care about patients. And this is going to hurt patients.

Ryssdal: Surely you appreciate though that when somebody running a multibillion dollar company as this one or any other pharmaceutical company out there or biotechnology company, says repeatedly it’s in the patient’s best interests, it sounds a little facile in terms of business opportunity.

Sharer: Yeah, I think that what you have to do is you’ve got to do your own work to decide, “Do others believe that?” In our case the Oncology Doctors Association has said the same thing. Many other independent people have said the same thing. We’re one voice among many, many, many. And I think that that’s how you ought to test when business people say it’s in the patient’s interest, obviously it’s got financial consequence for us. But we can handle whatever financially happens. And I’m deeply concerned about patients. I’ve had family members who’ve taken this medicine under difficult circumstances. Many people here know people who’ve taken the medicine and had cancer. This is serious stuff.

Ryssdal: This is kind of off topic but who comes up with these drug names? Do you guys have a little room somewhere where it’s computer generated?

Sharer: I can guarantee you that it’s not us. Some agency of I think the government has some naming conventions. And this is not our marketing guy’s best thinking let me tell you.

Ryssdal: You are as many other industries are in this country, but perhaps more than a lot, at the mercy of the federal government. As has been demonstrated in the past year. Whether it’s by regulation or who pays for the medicines. Does that drive you crazy?

Sharer: No. I mean virtually every company in American to one degree or another is heavily influenced by federal government decisions. Whether it’s regulatory, reimbursement, legislative, intellectual property. That’s just the nature of our economy. And sometimes the government’s tough to deal with. But basically I think the process is fair. Good decisions ultimately are made. And we can deal with it. It’s okay. And if you’re in healthcare it’s inescapable.

Ryssdal: Let me reframe the question [about how to fix the healthcare system] then. Do you think the government’s capable of fixing the healthcare problem in this country?

Sharer: I think the country is capable of fixing the healthcare challenge in the country. And the problem is there’s no simple path forward. It’s not have the government take over healthcare. I don’t think our country wants that. And it’s not as simple as without any government intervention the system fixes itself. I think the government’s proper role is to set the rules and to be a smart participant. I think we can get there that way. I don’t think it’s a good idea to have government completely take over healthcare.

Ryssdal: Amgen found itself on the front page of the New York Times a number of months ago over reimbursements to doctors for some of its medicines that those doctors prescribed. Why’d you get yourself into that situation?

Sharer: The system in the United States is that for medicines prescribed by doctors and given in their office, doctors are able to make money on those medicines. That’s a law. That’s part of the system. We didn’t create that system. That is the system. We have a competing product with a J&J product. And since those two products came on the market, the unit price of that product’s gone down 40 percent. And so the society has benefited. And it’s a commercially competitive situation. We’re a relatively small part in these medicines of doctors’ overall reimbursement. And if the laws were to change that said no doctors can make any money on any medicines, you know we’d do it that way too.

Ryssdal: But surely you understand people who picked up the New York Times that day or who read any of a bunch of other stories about doctors and pharmaceutical companies and biotechnology companies having financial relations, they look at it and they say, “Oh, this whole system’s just corrupt.”

Sharer: There’s a point of view that some have. I understand that point of view. That doctors should not make money on things they do. In other words the U.S. healthcare system has as a financial underpinning the idea that the more doctors do the more they get paid. That is if you’re a heart surgeon, the more heart surgeries you do, the more money you’re going to make. If you’re somebody who’s doing tests, the more tests you do, the more money you’re going to make. If you’re prescribing drugs in your office, the more drugs you prescribe, the more money you’re going to make. That is the system we have in the United States. It’s not unique to pharmaceuticals.

We can have a big debate about whether that’s the best system or not. And I’m not trying to defend it. I think that it’s imperfect that’s for sure. And having doctors have a direct economic interest in the number of procedures they do or operations or medicines they prescribe is something that we’ve got to watch. But that is the system we have.

Ryssdal: I’m not hearing you say that Amgen doesn’t want any part of that anymore.

Sharer: Well, we can’t unilaterally say that we can’t participate in the system and hope to succeed as a company. I mean we’ve also got to be a player in the system in a logical, legal and fair way. And we certainly don’t do things to incent doctors or encourage doctors to use medicines that are bad for patients or in the wrong way.

And I think one of the things about the New York Times article that was really unfortunate is it left the impression in the minds of patients that their doctors are going to do things to do them that are not good for them simply for financial reasons. I don’t think doctors do that. I think doctors are, by and large, honest people who are small independent business people. They’ve got to think about making payroll too. And they’ve got to work within the system that we have. And so it’s a more complicated situation than just doctors make money on things they do.