Biotechnology firm Amgen Inc. (AMGN) detected the value of its shares fall from a excessive of $77 to round $55 as of October 2, 2007. The decline in Amgen inventory adopted information of faded gross revenue forecasts for its best-selling drug, Aranesp. With declining revenues from drug gross revenue, Amgen is being compelled to trim expenditures. The firm introduced it was shedding between 12 - 14% of its manpower and deliberate to chop capital expenditures by $1.9 billion. See the associated information story is the assets field.
Surprisingly, Amgen plans no discount in employees in its Global Health Economics and Outcomes Research (HEOR) unit. This unit contains a hodgepodge of execs with Ph.D.s in economic science, apothecarys, medical medical doctors, and various analysts with cognition manipulation backgrounds. Their mission is to research pre-clinical trial design and post-clinical trial cognition to extract some inductive relationship between an Amgen drug and a optimistic profit to scientific trial sufferers. Normally, the competent medical medical doctors supervising a scientific trial at discipline areas can observe whether or not a drug is having any optimistic profit for sufferers. These medical doctors are entirely able to assessing the efficaciousness of a drug being evaluated inside the scientific trial.
The HEOR unit is acknowledged as to motion to confirm applied mathematicsly what the medical doctors declare they observe inside the discipline and to attempt to discover extra, uncaused advantages from the drug in order that Amgen can apply for a patent on the uncaused consequence. Due to the massive variety of scientific trials that don't reveal efficaciousness of projected medicative dru, the first work of Amgen's HEOR unit appears to be salvaging any manageable worth or use for an Amgen drug rejected by the medical group.
There is a superiority line between manipulating cognition as an instance a deeply hidden profit for sufferers versus looking a profit the place none exists. Relying on varied applied mathematics strategies, Amgen's HEOR employees proposes inductive relationships and desperately seeks cognition to verify them. Only individuals with a sure mentality may be excited by the every day prospect of sifting by rubbish in hopes of discovering a diamond.
From what the HEOR employees advised me, on and on the info manipulation goes attempting to show the medicative dru rejected by the medical professionals in scientific trials liquidate truth present some obscure, typically trivial, profit to sufferers. The Health Economics and Outcomes Research employees wish to imagine it's smarter than the medical doctors inside the discipline, as a result of the HEOR employees declare they'll discover medical advantages that medical doctors treating sufferers unsuccessful to watch. In my opinion, the Amgen HEOR employees analysis fashions and their applied mathematics outcomes are sometimes tenuous, at greatest, and ludicrous, at worst. I educate Health Care Economics at each the undergrad and graduate degree. Having seen how my undergrad college students critique well being care coverage initiatives and the pharmaceutical trade, I've little question they'd simply tear aside the assumptions, analyses, and conclusions of the Amgen HEOR research and experiences. Investors should marvel why Amgen spends an estimated $25 million in salaries for its HEOR professionals if their output is vulnerable to rebuke by undergrad college students with no pharmaceutical coaching.
Another signal of the poor superiority of Amgen's Health Economics unit is its lack of publications. Amgen unquestionably takes pleasure when its employees can get analysis outcomes written in peer-reviewed journals. Professional journal publications by Amgen employees support the corporate's advertising campaigns, add to the status of the corporate, and assist allow them to recruit main scientists. On October 2, 2007, I searched the Nexis "All Full-Text Medical Journals" database utilizing the key phrase "AMGEN" in the identical sentence as "Health Economics" or "Outcomes Research." A complete of zero clauses had been discovered. I then continual this identical search utilizing the "All Medline Review Article References," which accommodates journal publications pre-1975 to the current. A grand complete of 1 clause appeared entitled "Psychological outcomes associated with anemia-related fatigue in cancer patients," which pertains to Amgen's now declining gross revenue drug Aranesp. Desperate to search out some proof of tangible written analysis by Amgen's HEOR unit, I then searched the database referred to as "Healthcare Archive News," which accommodates promotion bulletins and press releases about even minor scientific and medical analysis determinations. The database contained zero clauses about any Amgen HEOR medical determinations all the same did listing a number of press releases regarding the appointments of David Beier and Joshua Ofman to guide Amgen's HEOR group.
In the fall of 2005, I accustomed be invited to attend Amgen's headquarters in Thousand Oaks, California, and delivered a chat on the most recent therapies for osteoporosis. The effect of my speak was that Novartis's bisphosphonate drug, Zometa (identified generically as Zoledronic Acid) diagrammatical the most effective and strongest manageable therapy to stop bone fractures in post-menopausal ladies affected by osteoporosis. Zometa is a drug used by oncologists to strengthen the bone construction brought on by Ca leach from sufferers subjected to sure types of chemotherapy. In my speak to check the efficaciousness of Zometa to different bisphosphonates, I indicated that the oral bisphosphonates (drugs), evocative of Fosamax and Actonel, had been like hand weapons, whereas Zometa (given intravenously) was like a howitzer. I notable that in November 2005, the FDA only permitted Zometa as a therapy for the implications of chemotherapy; notwithstandin, my contacts inside Novartis recommended me the corporate would quickly launch a scientific trial to increase exploitation this drug for therapy of osteoporosis and low bone mineral density.
I individualally detected an aged affected individual in her 80s journey and and maintain a traumatic fall face down on a concrete driveway, but she sustained no fracture wherever on her physique because of preceding therapies with Zometa. The affected individual stricken the concrete with such power that her eyeglasses had been knocked off her head and landed 6 toes away on the base of some bushes. This identical affected individual had sustained a compound hip fracture a number of years earlier whereas taking weekly Fosamax drugs. In one other episode, an old frail affected individual fell backwards and stricken her head so arduous as to trigger her to be dazed, but she suffered no fracture of her skeletal construction wherever --- all because of the efficaciousness of Zometa to strengthen the delicate bones of osteoporotic sufferers.
Before I may even end my speak, the illuminaries from Amgen's Outcomes Research unit started carping at my conclusions. First, a 50-year superannuated Senior Analyst, with grey, curly, shoulder-length hair, who dressed for work every day in blue denims as a insurgent towards the suit-and-tie tradition, mentioned none of my conclusions had been supported by scientific trials. I responded that therapy of osteoporosis with Zometa was then state-of-the-art drugs notwithstandin years forward of scientific trials, and that anecdotal case research evocative of this had been typically the supply of concepts to be examined with scientific trials.
The Amgen Senior Analyst mentioned he wouldn't settle for any of my conclusions, nor allegedly would any competent skilled, and not exploitation a double-blind placebo scientific trial. This identical analyst advised me after my speak that he had been invited to go the Health Economics and Outcomes Research items at two different pharmaceutical corporations, though primarily supported his myopic feedback, I importantly doubted it. Again, I responded to the Senior Analyst by asking if his individualal aged mom or aunt or uncle had beforehand suffered a bone fracture and was in peril of acquiring a considerably faded superiority of life with any extra fracture, would he depend on the weak FDA-authorized oral bisphosphonates or attempt to get Zometa remedy for his individualal family members? He answered he would stick to the FDA-authorized medicative dru, even when it meant his aged dad or mum could be weak with one other hip fracture from which she or he may not recuperate and would quickly deteriorate in mattress and die.
Next, a 6'3" board certified radiologist, who for some unexplained reason gave up an annual earnings of $350,000+ as a radiologist in camera practice to become an industry hack working for Amgen, carped that bisphosphonates, such as Zometa, do not actually subdue the leach of Ca from bones but instead strengthen the lattice structure of the bone. Furthermore, my talk enclosed no head-to-head comparisons of Zometa with Fosamax or Actonel or any other oral bisphosphonate, so he would not accept the conclusion. I responded by asking the radiologist how many patients he had treated for osteoporosis patc in camera practice. He responded "none."
I asked the radiologist if he knew the state-of-the-art treatments for osteoporosis as of 2005, and he responded that the oral bisphosphonates were the state-of-the-art. I then pointed out that no board certified oncologist would consider the oral bisphonates for treating cancer victims with weakened bone structures from chemotherapy. Oncologists need the medical equivalent of a "howitzer" not a pop gun to strengthen their cancer patients' bones, and oncologists' preferred drug for this treatment was Zometa. Osteoporosis has many of the same characteristics of weakened bone structure and low bone mineral density as occurs with cancer patients who have undergone certain types of chemotherapy. Despite his objections, I stood by my conclusions that Zometa was the best available treatment for osteoporosis, and I would recommend it as a life-saving treatment for elderly patients (male or female) susceptible to immobilisation fractures.
I expected Amgen's Health Economics staff to be cautious in describing non-FDA authorized use of drugs, but I did not anticipate determination an entire department filled with narrow-minded, rigid, demagogues incapable of thinking outside the box. To them, it was either the Amgen way (methodology) or no way at all. The Amgen HEOR junior analysts had caustic expressions on their faces during my talk, and when I asked them if they would let their own parents or grandparents die from the debilitating consequences of a hip fracture or get them Zometa therapy if needed, they took their cue from the 6'3" oncologist and mentioned uniformly they'd "let granny die." Do we actually need heartless individuals like this concerned in examination the nation's drug pipeline?
After my speak, I met extra employees inside the Amgen HEOR unit, and every one turned resolute be much less spectacular than the final one. One of the final individuals I met was a apothecary with well being economic science answerability for cardiology medicative dru being developed by Amgen. He advised me he had little background in economic science and consequently couldn't write any clauses appropriate for publication in economic science journals. Yet, he claimed he knew methods to develop the preliminary value that any pharmaceutical agency ought to cost for any new drug being born at the market. In economic science, the value for a standard good is definite as an equilibrium level by the intersection of demand and provide. But this apothecary had no use for demand and provide ideas and appeared to assemble costs for medicative dru on with his individualal advert hoc strategies.
Amgen's HEOR unit is crammed with people who find themselves out of contact with the well being care system in America. The grey, shoulder-length velvety-furred Senior Analyst at Amgen, for instance, advised the first purpose individuals select to go with out medical health insurance is that they imagine they're unconquerable and are prepared to adventure on their well being. Given the overwhelming proof on lack of reasonably priced medical health insurance for the working poor, if a pupil in both my undergrad or graduate Health Care Economics turned in an task with an mindless remark like that, I power make the scholar repeat that task.
Approximately two years after my speak at Amgen, the Associated Press circulated a nationwide story on Sept. 18, 2007, with the lead paragraph, "For the first time, an osteoporosis drug has reduced deaths and prevented new fractures in elderly patients with broken hips . . . .No other osteoporosis drug study promulgated in the last 15 years has shown such a pronounced reduction in deaths." What is the drug talked about on this research? ZOMETA (marketed by Novartis for osteoporosis sufferers below the model identify Reclast). Two years earlier than the Associated Press clause, I expected this drug would turn resolute be in essence the most potent therapy for osteoporotic sufferers in peril of hip and different bone fractures. Amgen's sensible HEOR employees rejected that forecast.
In my opinion, the Amgen HEOR employees must be terminated or reassigned to different areas the place it could contribute to the corporate's backside line. Its pharmaceutical economic science modeling and cognition manipulations appear doubtful, and it seems ethically questionable to research cognition with the supposed aim of proving an Amgen drug rejected in scientific trials has some medical profit that medical doctors inside the discipline missed. If Amgen's CEO and high administration are critical about slice prices and eliminating pointless bills, then they should begin by eliminating the Global Health Economics and Outcomes Research unit. Until the HEOR unit is eradicated, I'll proceed to view Amgen as a poorly managed firm with a bloated, unproductive employees.
QUESTIONS FOR MANAGERIAL ECONOMICS STUDENTS
1. Describe the size of job design in creating the positions inside Amgen's HEOR unit.
2. Do you imagine the job design is acceptable for this agency? How would you measure the productive output of employees in Amgen's HEOR unit?
3. What strategies do you may have for enhancing the job design of Amgen's HEOR employees? Should pharmaceutical corporations make use of employees on this space?
4. Assume you're a executive program of Amgen tasked with eliminating the HEOR unit. What is one of the best ways to implement your job?
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