The Massive Grapple Ahead for Pharma
"Stalemate" by Steve Ferris
The massive grapple in healthcare is balancing ‘value alignment’ across a system of markets. And then positioning the basis of competition on the production of outcomes, not the consumption of inputs, as the foundation to market innovation. The roadmap starts with an agenda to invent the automobile, not protect the horseless carriage.
Endpoints News first reported that major drugmakers are planning to meet with President Donald Trump this coming week as part of the industry’s effort to work with the new administration in a way that is non-confrontational and pro-business.
The meeting agenda and attendee list is still fuzzy, but it would be led by pharma CEOs that include Pfizer’s Albert Bourla, Merck’s Rob Davis and Gilead’s Dan O’Day, as well as the industry’s lobbying group PhRMA, says Endpoints.
It’s also unclear who would join the meeting from the Trump side. HHS Secretary Robert F. Kennedy, Jr. was confirmed by the Senate this week, and pharma companies have been seeking reassurances about how he would approach policy on vaccines and other issues important to the industry. [Presumably, the discussion guide prepared by the public affairs teams will include a bullet point around preserving DTC advertising; Kennedy said “on my first day in office I will issue an executive order banning pharmaceutical advertising on television.”]
The pharma CEOs are in Washington this week for PhRMA’s board meeting. They are also hosting a public summit on Feb. 18 meant to showcase their policy agenda for the year and the industry’s “Commitment to a Healthier America.” Separately, Eli Lilly is hosting an event in Washington on Feb. 26 about plans to expand US manufacturing and create “thousands of high-wage American jobs.” Bringing back manufacturing jobs to the US has been a significant priority of the administration.
It’s not hard to guess at other bullet points on the discussion guide with Trump, such as PBM reform and changes to IRA drug negotiations, because these topics have been at the heart of the discursive war the pharmaceutical industry has been fighting (and gradually losing) with the world for decades.
This is the “Classic Story” in Pharma. The Classic Story in pharma is a sea of sameness. It is template driven. It revolves around basic narrative plots, storylines and dialogue between the same actors, recycled again and again in the drug market, regardless of the brand telling them.
These stories may be populated by different settings, characters, and conflicts, but the dominant themes are The Big Miss (i.e., completely misreading the demand environment for a dug); Promotional Tonnage (i.e., the product push + disease awareness model); The Quest (i.e., double down on the push model); Death by a Thousand Reorgs (i.e., “restructuring” for better “efficiency” when the push model stops working); and ultimately Panic At The Disco (i.e., the patent cliff and, now, having to navigate the Trump Non-Linearity).
Promotional push of technical potential, alone and requiring ever-increasing media spend just to get traction, has stopped making sense creatively, tactically and operationally. (Diabetes and weight loss drug advertising alone was more than $1B on the strength of GLP-1 brand spending. A billion here, a billion there, and pretty soon you’re talking about real money.)
As strategy, drug promotion is the sound of one hand clapping: without economic innovation and infrastructure investment (there are smarter ways to spend $1 billion) on par with technical innovation and marketing investment, the storyline of value from a drug pipeline is fuzzy logic: market forecasts are one thing; market reality is something else entirely.
When it comes to pharmaceutical brand, business and industry leadership reading the room accurately: The elephant in the room is the room itself, an approach to business and product marketing unchanged since the “modern pharmaceutical industry” began around 1849, when Pfizer was founded in Brooklyn.
After 175 years, it’s time to start creating and selling “value” differently.
‘Value Alignment’ is a Three-Body Problem
Bourla, who is the incoming chairman of PhRMA, has emerged as a leader for the industry’s relationship with Trump, writes Endpoints. He worked closely with the first Trump administration during the Covid-19 pandemic and has met several times with Kennedy, including a trip to Trump’s Florida residence at Mar-a-Lago with Eli Lilly CEO David Ricks.
“I focus more not on the things that we clearly disagree, like the vaccines, but on the things that we can agree, and we can do things together,” Bourla said on the company’s fourth-quarter earnings call this month. Bourla said they have met “a few times” to discuss issues.
Probably the biggest issue in a $5 trillion system of markets is thinking about strategy and innovation with a non-fragmentary worldview, a different center-of-gravity from which to create and compete. From Whatever Happened to Eisai’s “Dementia Ecosystem”? published on Fresh Paint:
Because the nature of the network economy seeds disequilibrium, fragmentation, uncertainty and churn, new anchors of meaning and value are in short supply. The stereotypical “patient” is already a rather thin character. He or she is like a balloon: possessing an inflated identity stretched to its limit.
The same search-for-identity holds true for ‘drug companies’ — Are you in the business of producing drugs, or are you in the business of orchestrating the production of health, of which your drug is a keystone?
There’s more upside in crafting the latter.
Nestlé is the world's biggest packaged foods group. It has products ranging from KitKat snacks and Nescafe coffee to Maggi noodles and Purina pet foods. It, too, is in the grips of The Big Fear with RFK Jr., who has promised to “fix the food system” in the United States.
"The US is very, very important to us, and we are monitoring the situation," new CEO Laurent Freixe said last week when asked if anyone at Nestlé had spoken recently with Kennedy.
"Packaged foods are very, very important for mankind," he added (Lots of people, it seems, are on a mission to save humanity.). "They have brought safe foods to many. They preserve the quality of the food. They allow us to fight food waste." In related news last week: Nestle Posts Weakest Sales Growth in More Than Two Decades as Shoppers Retreat
Meanwhile, Big Pharma cousin/competitor/collaborator and Big Food channel/collaborator Big PBM is similarly stuck in strategic drift, trying to squeeze more life out of a collapsing market idea.
CVS Health cleared a low earnings bar last week — shareholders were happy, the results sent shares up; they had slumped more than 40% last year as the company missed earnings targets for the first three quarters of 2024 and later pulled its forecast. Like Big Pharma, CVS is trying to address “the industrywide challenges that have impacted our Health Benefits segment," CEO David Joyner said in a statement. (By “industrywide” you mean…..?)
Walgreen’s (not a PBM per se, but heavily dependent on them for reimbursement), is for the most part a basket case. It’s trying to unload VillageMD, must pay more than $987 million as part of an arbitration award won by a virtual care company, is closing stores all over the country, and, no surprise, admits that locking things up to prevent shoplifting backfired badly.
The drug market + the food market + the PBM market are all in the same boat, navigating the same collective holy-shit moment as the rest of the world. But each is thinking and operating as an independent sphere, separate and distinct from the other, which is out there in the ether somewhere. Markets fare better when they link capacity building.
A better discussion guide for drug market leaders this week wouldn’t be centered on defending the fuzzy value of DTC advertising and protecting drug pricing. It would be about PhRMA + PMCA + NACDS in the same meeting, aligning to collaborate at a system level, with vision and ambition to enable new industry ecosystems, an innovation agenda to produce a portfolio of big business solutions that’s a better product-market fit with Make America Healthy Again.
What's missing right now are the market and economic (and policy) relationships and mechanisms necessary to mount a multi-sector effort at growth, while ensuring universal access to innovations born from their interaction.
So story-telling, and positioning unique strategy stories, is the foundation to shaping shared objectives around which roadmaps are constructed around a singular, unifying vision.
Big market innovation is about ‘lateral strength’ as management innovation. it’s about making a crab-like move sideways. (You could make the case that Nestlé should be part of Lilly's big event on February 26, as a new market set, keystone partners collaborating to craft a more original strategy story, something roughly positioned around 'producing cardiometabolic health' as a framework for growth and alignment around MAHA.)
A Cookbook for Chaos
You could also make the case that the American Hospital Association should have a seat at the table next week.
The 2025 OPEN MINDS Performance Management Institute is event held annually for the nation’s provider organizations and health plans (i.e., Big Pharma customers) offering a deep dive into strategies for revenue diversification, managing AI and digital infrastructure, risk management, and improved delivery of whole-person care.
It wrapped last week. Monica E. Oss leads Open Minds, and ‘The Chaos Cookbook’ was her summary of the event. It captures the vibe of a whole new era, a rupture in the historical timeline that is hitting everyone, hard:
“The backdrop to every discussion was the issue of uncertainty — how to manage performance (and growth and sustainability) in the face of the many unknowns in the current market.
The uncertainty is being driven by a combination of actions of the new administration, the growing impact of technology and artificial intelligence (AI) on business models, and increasing competition and financial stress among provider organizations. These times of business chaos — defined as “the unknown, the uncertain, and the uncontrolled… [and] the absence of clear processes, procedures, or set understandings” — require a modified approach to strategy and to management.
The most apt adage for the situation is from management consultant Peter Drucker — environment drives strategy, strategy drives structure, and systems need to support the new structure. In a market environment with frequent unexpected changes, executive teams need to prepare for frequent changes in strategy — and changes in service lines, contracts, and organizational structure.”
As a general rule, you can’t “fix” an embedded economic system, whether that economic system orbits around CVS Health, Moderna, UnitedHealthcare or the U.S. Congress. This has nothing to do with desire and ambition so much as it does feedback loops sustaining structural stalemate.
And we’re not going to crack the mad riddle of healthcare by mounting long attacks on each other (say Big Pharma vs. Big PBM), or by chasing operational “efficiency” in the hope it conjures shareholder value. That delivers what we have now: strategic atrophy, systemic performance declines, a celebration of short-term wins, a stunningly bad ROI from a $5 trillion investment made every year in trying to preserve the horseless carriage.
"Everyone is looking for signals on what Trump might do on a host of health issues. On the early Executive Orders, Trump doesn't show his cards," said Larry Levitt, executive vice president for health policy at KFF.
The Big Takeaway for everyone trying to read the mind of Donald Trump should be this: The equivalent of ‘Johnny Rotten’ is now the most powerful person in the world. Strategic fit to his 'Flood-the-Zone' strategy is going to take a different framework.
That process starts by sweeping the old concepts out of the saddle. That comfortable mental furniture used as the centerpiece of product management — principles of branding, positioning, message and even “strategy” itself — are coming apart at the seams, unable to accommodate the seismic instability happening the world over. Existential crises abound and confound. These crises are ‘flooding the zone’ with velocity and ferocity unseen in modern times.
And while avoiding ambiguity and shying away from complexity is understandable, pretending it doesn’t exist is foolish at best and fantasy at worst. Professional survival now depends on breaking the Standard Model of thought and inaction. It all starts with a brick through the window of convention and cliché.
You have to be comfortable leading big system change.
Which is what Sex Pistols frontman John Lydon and Donald Trump understand so well.
/ jgs
John G. Singer is Executive Director of Blue Spoon, the global leader in positioning strategy and innovation at a system level. Blue Spoon specializes in constructing new industry ecosystems.