The Antidote: Inside the World of New Pharma

by Barry Werth

  “It doesn’t mean that financial goals don’t play a role. The first part of George Merck’s famous slogan from the 1950s was to never forget that medicine and the drug business are for the patient. The second part of that slogan said that if you remember the first part, profits will follow. What the founder meant was that we focus on serious disease, and significant unmet medical need, with the principal objective of transforming patients’ lives. It’s a fundamental part of our corporate identity, it’s a fundamental part of our corporate brand.”

  Vertex prides itself on having zero tolerance for legal and ethical lapses. Ken’s twin brother, Jack, dean of the University of North Carolina Law School and a renowned anti–death penalty champion, tells a story that Ken says illustrates how companies should handle violators. An old political grandee at the school advised Jack on his first day on the job that he should grab the first person he saw and throw him down the stairs: after that, there would be no more trouble. Ken wanted the company’s newest hires—in what had become a disreputable business of bribing doctors with cash and favors, practices both government and industry were now cracking down on—to understand just how their actions would reflect on Vertex.

  “Now, how would we lose that?” he asked. “The same way that most big pharmaceutical companies have lost the trust of consumers, of patients, of regulators, and of society. By mistaking a commitment to the patient with a PR slogan. By losing sight of the fact that a brand, to have real value, describes reality. It’s who your company is, it’s who you are. And that’s determined by what you do, not by what you say.

  “How does that relate to compliance? Because whatever you think of the particular rules in our industry governing your behavior, they are in fact all intended to benefit patients—your grandmother, your grandfather, your children, your brother, your sister—and most of those rules do benefit patients. When we ignore them, or we twist them out of shape, we’re acting in a manner that’s inconsistent with an intention to benefit patients, and with every act we’re then destroying a piece of that corporate identity.

  “So I’d like to put out a few fundamental principles—they’re pretty simple,” Ken concluded. “The first one: talk is cheap. If acting for the patient on a day-to-day basis isn’t painful at times, then you’re probably not doing it. Second principle: five smart people in a room together can talk themselves into anything. Stay focused on the patient—your mother, your father, your grandparents, your children, or people like that—and don’t become one of those five smart people, justifying anything. And last, to paraphrase my dear departed grandmother, ‘Tell the truth. Don’t stretch the truth. And don’t get ahead of the truth.’ Those things pay off long term actually in your personal life, they pay off long term in your business life, and in the new pharmaceutical future that we want to be preeminent in.

  “Thank you.”

  In the giant brain of the executive team, if Ken was the superego, Smith was the ego. Joining the same month, in the midst of the maelstrom, they helped maneuver Vertex beyond its fractious early days, Ken by being chief negotiator and conscience, Smith by strutting. After Smith first started, and some complex financial issue arose, Boger and Sato would say to him, “You’ll figure it out, Ian. You’re an athlete.” Smith did figure it out. He had played Wall Street’s appetite for magic like a virtuoso, and with the launch of telaprevir his job entered a new phase.

  Smith revved up the field force using an onstage question-and-answer session with a popular regional manager from Philadelphia. Still athletic, he wore a blue shirt and no tie, his black trousers riding low on his slender hips. He was nursing a cold. Like Ken, he was concerned that the field force didn’t fully understand the company’s mission, and so he delivered a staccato, personalized financial tutorial on Vertex.

  “Instead of having a revenue line, we used Wall Street to fund the company,” Smith explained. “This is where it keeps coming back to you guys. Wall Street’s done. I’m done. So you’re going to be bringing in the cash flow for us now.

  “The business strategy for us was money and medicines. It is as simple as that. You keep your company wide. You reduce your R&D risks. You have more projects going on and you cross your fingers and you hope.

  “And when you open that envelope, you start to see stunning results. You start to see the Vertex swoosh. You start to see fifteen percent relative improvement in breathing in children. It’s absolutely astonishing, and it might happen a couple more times this year. That’s the uniqueness about Vertex. It keeps giving itself a chance. This company has something that a lot of companies don’t have. We create hope in a lot of different diseases.”

  By becoming an operating company, Vertex was shedding its brash demeanor as a late-stage development company. The center of gravity for bringing in revenue to feed Mueller’s R&D beast shifted from Smith to Wysenski, from stock sales to profits, and the new face of the company was sitting in front of him. Emmens was right: everything changes the day you go profitable. Smith advised them to concentrate on doing what needed to be done, but not to ignore Vertex’s tribal sensibility and history. He urged them to join the fear and fun.

  “As you go into the field, you’re working for a company that really does pride itself on doing things different. Now there are certain regulatory confines; I understand that. So don’t do things too differently. But think about how to get this done. Be creative. Enjoy the ride. Take a look around. This is a unique company.

  “You’ve got to live with that hope in this business. You’ve got to take the risk. It’s too easy to say no when you get there. We’re not going to say no. The culture of this company is to keep swinging. And the way that we keep swinging is you guys drive cash flow. Because I’m not raising any more money.

  “My challenge is in the next three years, go beat the Wall Street money. This really is possible. Think about that. Twenty years of putting money into this business, you can pay it back in three. It might just be.”

  Smith gulped some water, gazing out over his audience. He turned away, ambling toward a small table behind him, at the rear of the stage. “A favorite line of mine,” he said, chortling, “is ‘You call this a knoife? This is a knoife.’ ” On the twin jumbo screens flanking the stage flashed the familiar film image of the big-brimmed Australian reptile hunter Crocodile Dundee facing down a street punk. “Every story needs a hero and villain,” he said. “We’ve got Incivek versus Victrelis.” Someone murmured “victory-less,” the new in-house rag on Merck’s drug. Smith reached the table. “I’m gonna go to my prop here, and I have cleared this with Ken Boger, our general counsel. This is my knife.”

  From under a black velvet sheath Smith lifted a machete. It measured more than half the length of his arm. He waved it, grinning, and went on: “I’m just gonna hold this while I talk about Incivek. There’s no threat here, but Incivek, we believe based on our data, beats Victrelis in every possible way. The cure rates are significantly higher, seventy-nine percent versus sixty-three percent. Response-guided therapy. We treat a broader patient population. And what I personally think is the biggest difference between the two drugs right now, and hopefully this will come through in the label, is simplicity.

  “To drive this company, we need to do well in this market. Wall Street consensus this year is fifteen thousand patients. Fifteen thousand divided by about one hundred reps is one hundred fifty. You individually need to think about how you get one hundred fifty patient starts this year. Each rep. I hope you do that, I really do, because what that will do is give the company a great story to tell Wall Street, it will drive value, it will drive cash flow, and we will build the company.

  “Now, I’m being a little pushy, so I’ll put the knife down. But you can win this market. We do have a sharp weapon in our hands, and it needs to be used in the right way. This is a drug that should truly differentiate itself from Victrelis. I really believe we have the chance to build the company. The mark may be the stock price. We’re building a big company. We�
��re already the fortieth-largest company on the NASDAQ 100. I have hopes that in a couple of years we’re on the S&P 100. We’re chasing Gilead in terms of its market cap. We really have an opportunity.”

  By the next night the reps were primed. Vertex threw them a party at the top of the Prudential Tower, the ungainly Johnson-era skyscraper looming over the Back Bay. The venue has one of Boston’s best views, in no small part because it’s the only place in the city from which you can’t see the “Pru.” There were several craps and roulette tables where the reps noisily gambled for tokens while chugging the evening’s featured drink, the Vertex Swoosh.

  Emmens had recovered from his diverticulitis, and though he didn’t drink, he kept up a lively, rotating conversation away from the center of the room, near the elevators. He liked to stay off on the side, away from the attention, with more opportunities to learn things. As a sales lead in his early days in the industry he’d once had to fish a coed group of trainees from a hot tub, but this group was battle tested, as he was, and except for their being inordinately exuberant at the gaming tables, he was relieved to see the reps acting like adults.

  Victrelis received FDA approval on May 14. Even with the stock buyback, Merck shares had languished since Frazier took over as CEO at the start of the year. The drug was the company’s main chance to show Wall Street that it could exceed expectations, which jumped in light of what industry observers agreed was a hugely generous PI—no black box safety warning, no onerous Risk Evaluation and Mitigation Strategy (REMS). Anemia was listed alongside other side effects like fatigue and nausea, not singled out. Merck got permission to include null responders. Vertex’s label surely would be no worse, but it also couldn’t be much better.

  Merck priced its drug on a sliding scale, based on how long a patient, after a four-week lead-in period with peg-riba, needed to remain on Victrelis. The company planned to grab as much market share as soon as possible and so it priced aggressively. At about $1,100 a week wholesale, the overall charge for treatment-naïve patients would be around $31,000, and for previously treated patients around $35,000. If someone needed a full forty-four-week regimen, the cost could be as high as $48,000.

  Three days later, while Vertex awaited approval for Incivek, Merck announced a strategy that most reporters and analysts thought gave it a critical edge. It doubled its marketing muscle, partnering with Roche, its arch-competitor in hepatitis C, to copromote Victrelis. Selling competing versions of peg-riba, the two companies together controlled the market, visiting frequently every one of the five thousand doctors across the country who treat 90 percent of patients. Though Victrelis hadn’t been tested with Roche’s Pegasys, which commanded about 85 percent of peg-riba sales, Roche salesman now would call on their customers and promote “triple combination therapy” by mentioning Victrelis.

  Cumbo was flooded with anxious calls from his reps. “I had to talk a few of them off the ledge,” he said. Wysenski, initially shaken, went to work trying to learn more about the terms of the deal. She was encouraged to learn that there was no exclusivity; the Roche reps could also mention Incivek. Emmens acknowleged that Vertex had been thrown a curve but professed no worries, reasoning that the Roche reps, accustomed to bashing Schering’s Pegintron, would feel little compulsion to boost a rival’s product and that the battered Schering reps, who made up most of the Merck sales force in hepatitis C, would feel rightly that they’d been sold out. Bundling sales of Victrelis with Pegintron had been their sole marketing advantage over Pegasys. Now it was gone.

  Not since Merck’s Vioxx and Pfizer’s Celebrex were launched head-to-head a decade ago had a pharmaceutical battle intensified so swiftly. The size of the opportunity in hepatitis C—some analysts were predicting a $10 billion market within a few years and a $20 billion market by the end of the decade—kept hiking the stakes. Cumbo was counting on his people to be more motivated and stronger psychologically than their counterparts and so it was of little consequence how many more reps Merck tried to throw at him. In a sales war, the goal was domination. Winning wasn’t enough. “You break their spirit,” he says. “That’s what you’ve got to do with the reps. Representatives—the way I see it, and I was a rep for a long time—it’s a very emotional-type thing. You have ups, you have downs, and when you’re down it’s sometimes really hard to pull out of it. Merck had got some really good, talented, passionate people. Those are the ones you’ve got to break.”

  The following Monday at the start of business the FDA notified Vertex by fax that it had approved Incivek. The label had no serious issues. The blockade was down. Within an hour, a twenty-four-hour nurse hotline was activated, and the sales and patient support operations went live. Outside Chicago white-suited line workers started final packaging around the clock, determined to have the drug on loading docks within twenty-four hours, to reach the first pharmacies by Wednesday.

  After a brief flurry of champagne toasts across the various departments, Emmens, Mueller, Smith, Wysenski, Pace, and Partridge converged on the square windowless room outside Smith’s first-floor office in JB-II for an eleven o’clock conference call with analysts. The table was littered with scripts, whiteboard markers, Dunkin’ Donuts cups, Diet Cokes, and BlackBerrys. Kauffman, traveling, was on his cell phone in an airport, available to answer questions.

  “Two things to hit on,” Partridge coached. “The DDIs in the med guides; throughout the label—with food . . . with food.”

  “Stay away from all comments on Victrelis,” Smith advised. “We’re very happy with our label. That’s it. Any questions on consensus projections, I’d best take them.”

  The most urgent question, of course, was price. After Emmens and Mueller laid out the particulars of how Vertex had discovered and studied Incivek and elaborated on the breakthroughs the drug represented to patients and physicians, Wysenski announced its decision on how and what to charge for its first product.

  “We believe that patients who need Incivek should be able to get it regardless of their ability to pay,” she began. Vertex had assembled a commercial program not unlike “need-blind” admissions, which as practiced by wealthy colleges and universities amounts to: we’re going to charge premium prices but we say to you that if you qualify and we accept you we’ll make sure you can be here, even if it means we pay your way. Once you received a prescription for Incivek, Wysenski said, you could go to a website and find a menu of copay assistance and free-medicine programs. Dressed crisply in black slacks, a paisley blouse, a lime-green rain jacket, and a chain necklace, she elaborated:

  “Our copay assistance program is designed to cover up to 20 percent of the total cost of Incivek for the full course of treatment for people who are covered under commercial providers. The copay program has no income restrictions. For people who are uninsured or who are rendered uninsured, and also have an adjusted gross household income of less than $100,000, we plan to provide Incivek for free.

  “Now to Incivek pricing.” Wysenski paused; Emmens and Smith performed silent drumrolls. “We’ve set the price of Incivek at $49,200 for the entire twelve-week course of therapy.

  “I’d like to comment on the factors that we considered in our pricing decision. Broadly speaking our mission is to discover, develop, and launch medicines that cure or significantly advance the treatment of serious and life-threatening diseases. This is both expensive and risky, and we are committed to spending the money needed to enable us to tackle more tough diseases—this includes hiring and retaining the best scientists and medical team possible. More specifically, we took into account the fact that unlike HIV or hepatitis B, hepatitis C can be cured with a single course of treatment. We also considered the costs of other medicines and procedures used today to treat and care for people with hepatitis C and how well those treatments work.”

  By decoupling price from access to drug, Vertex presumed to diffuse any controversy while reassuring doctors that Incivek was a premium product. As the colleges and universities long ago discovered, with certain p
roducts, like education and medicine, consumers accept and trust that high costs confer higher quality and greater value, and so Vertex had no reason, other than access to strapped government dispensaries, to compete with Merck on pricing.

  The analysts, following up, requested numerous clarifications. They had based their valuations for the most part on a lower price. Even if they had gotten the cost of Incivek wrong they wanted to be sure they could defend their previous projections about how VRTX could be expected to do in the months ahead, even if it meant rejiggering the prescription rates they used in forecasting income. The stock price started the morning pointing downward, but throughout the conference call it recovered, rising more than 1 percent. As the discussion wound down, Wysenski and Pace fist-bumped, then, as the participants started collecting their materials, Partridge took a call from an investor, Adam Koppel.

  If there was one fund manager most closely, and emotionally, tied to the company, it was Koppel. As a managing director of the Boston-based Brookside Capital, a Bain Capital–owned hedge fund, he currently held about five million shares. Koppel had made his career on Vertex, first buying VRTX after meeting Boger in 2004, then moving in and out of the stock over the years. In 2006, when the share price dropped into the high teens, he bet big, making it Brookside’s largest holding by far. Its peak position was about $280 million.

  Koppel came to investing from medical research and consulting. After finishing an MD-PhD in neuroscience at the University of Pennsylvania in the 1990s, he took an additional year to earn an MBA before going to work for McKinsey, advising biotechs. What he looked for in companies was the “DNA” to replicate success, and he believed Vertex was the first biotech since Genentech to have it. Koppel got to know Boger, Smith, Alam, and Graves during the heady, triumphalist period of Incivek’s clinical program, and he loved the company’s swagger and way of thinking. Loyal to the old guard, he at first gave Wysenski a rough time, attacking her commercial strategy as thin. He thought the jury on Emmens was still out.