Having been at the flag-raising ceremony for Hospira when it spun out of Abbott back in 2004, the news of Pfizer’s acquisition was a bit emotional for me. I didn’t cry or anything, but I did feel a little sad, and a little proud, and maybe a little hopeful at the end of the day.
The pride part first. My presence at Hospira on “Spin Day” was a function of the strategy work I was doing with the newly forming entity, trying to create a cohesive plan around the bits and pieces cast off by Abbott – a mishmash of commodity products (e.g. saline bags), mid-tech stuff like drug pumps, and then there was this generic IV drug business. No matter how we sliced and diced the market opportunity, profit, and growth potential of all these product lines, the IV drug business always came out on top (made me wonder whether Abbott overlooked that one in the spin). So I found myself posing the leading question to Hospira management, “How many more of these drugs could you add, and how fast?” I am sure many consultants have given Hospira similar advice in the intervening decade, and apparently Hospira got the message, culminating in the recently announced Pfizer takeover.
Now the sadness part. As someone who makes a livelihood in the device industry, who believes devices are an underestimated part of the solution to our healthcare woes, the transformation of Hospira into more or less a pharma company feels like a declaration of defeat. Maybe the way to be successful in the device industry is to exit it, or minimize it in your portfolio, and start making drugs. As a business consultant I have to tip my hat to Hospira’s strategy. As a medical device professional I can’t help feeling a bit betrayed.
Finally, the ray of hope. Hospira didn’t abandoned devices completely on their path to the Pfizer exit; they shut down aging and failing infusion pump product lines and acquired new ones to follow the market out of the hospital and into the home. While bio-similars are what drove most of Hospira’s valuation, their technology and know-how of drug delivery devices was attractive to Pfizer as well, particularly considering Pfizer’s avalanche of patent expirations. Devices have the potential to breathe new life into drug IP, and often with far less investment in R&D and time. The biopharma business may be more profitable and sexier on Wall Street right now, but some devices tucked into the portfolio might be a worthwhile insurance policy for drug companies to consider purchasing. Maybe drug and device companies need each other more than they think.