September 26 2006
By John Simons, Fortune writer
An interview with Dr. Peter Rost, drug company executive turned whistleblower.
Drug companies have come under scrutiny recently for recruiting former cheerleaders to fill sales jobs and lavishing doctors with "seminars" at exotic resorts. Earlier this month Stanford University became the third major medical school - after Penn and Yale - to ban doctors from accepting gifts from pharma firms. Now one of the industry's own inside men, Dr. Peter Rost, has published a tell-all titled "The Whistleblower: Confessions of a Healthcare Hitman." Rost gave Fortune's John Simons his take on what's broken in Big Pharma and how to fix it.
Does the swag that drug reps give doctors make a difference?
There is never a gift in life that doesn't make you feel that you have to reciprocate. That means there is a stronger push for the doctor to prescribe a rep's drug, not because of scientific proof, but because he is friendly with the sales rep.
As a vice president at Pharmacia, you discovered the company was encouraging the illegal sale of the human growth hormone Genotropin. How did you deal with that?
Genotropin is legitimately used by pediatricians to help children. They take daily injections for many years, at an annual cost of about $20,000. But half our sales force was focused on adults, most of whom were getting prescriptions for off-label anti-aging treatments. We were losing money. I took away incentives for selling to adults, did away with rebates to anti-aging centers, and in 2003, Genotropin sales rose 46 percent.
Is there some new paradigm for marketing medicines?
Price competition actually works in this market, if you do it in the right way. When I was overseas and in charge of the Nordic region for Wyeth, one of the tools I used was actually dropping prices significantly. We competed against AstraZeneca's Prilosec, one of the biggest drugs in the world. Our drug was under the brand name Prevacid.
When I went over there, AstraZeneca (Charts) had 95 percent market share; we had 5 percent. We were 10 percent cheaper, 10 percent more effective. Nobody cared. Eventually I dumped the sales force. I dumped the sales material. I dumped the advertising. I put the money into cutting prices. I dropped prices 30 percent to 40 percent. In 18 months my market share in volume had increased from 5 percent to close to 50 percent.
Before blowing the whistle on and suing two of your former employers - Wyeth (Charts) and Pfizer (Charts) (which purchased Pharmacia in 2002) - you were well compensated for a complicit role in the shenanigans you highlight in your book. Is it a "sour grapes" tale?
I had always waited for the chance to have an impact. And I kept my mouth shut. My ambition was to run a drug company someday - and run it my way. This book is my last chance to change an industry filled with good people and good intentions.
From the October 2, 2006 issue