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Losing ground

Agility and flexibility win out over size and former glory in the modern marketplace

A greyhound raceI guess I'm getting old. I was born before the invention of the NHS. I arrived on a sweltering summer's night, after 12 hours of struggle, with no gas and air, and no epidural. There were no doctors and no machines that go beep. There were no scans and no blood tests.

There was just a working man and his wife, who had to save up the equivalent of three weeks' wages for a midwife who would help with a home delivery. And I wasn't a simple birth. My mother lost her first baby so, by today's standards, I was an at risk delivery. There would be no question of a home birth by today's standards.

In those days, it made no difference. I was born into an upstairs flat, in the front bedroom, on the stroke of 9 o'clock. My mother slumped into exhaustion, weak from an unassisted labour and blood loss. For years after she was treated for anaemia. And so you can see why there is a generation of folk who are in love with the NHS.

The world has changed and many of the old attitudes, services and products have disappeared along the way. But there are those few things that have remained as emblems of our nation and its imperial past. British Petroleum, for instance, has faced the challenges of global warming, petrol that is more expensive than perfume and petrol stations that make their profits from sandwiches, flowers and newspapers.

The Post Office is still here. Just. It is struggling to survive political dogma that has imposed a ludicrous Euro-competition regime on it, which is as unjustified as it is inefficient. The iconic postman has been diminished to a leaflet distributor, delivering pizza-obezza adverts and double-glazed lies.

The once popular post office counter is now a shambles. My local is a cross between a charity shop and a home for the bewildered. It seems genuinely unprepared for the fact that at lunchtime it will be busy. It sells out-of-date CDs, a selection of Christmas wrapping paper (a must-buy in March) and insurance products that have an ant as a sales logo. We all love ants, don't we?

There is Marmite. I grew up on Marmite. But today it has a Valentine's Day champagne version. And there is Hovis, which now comes in white slices. Why?

Hoover is hanging on in a cyclone of competition, and then there is Glaxo-SmithKline (GSK), which might have been Lacto had the trademarks registrar in London not rejected the name.

Lacto is derived from the Latin word for milk, and Glaxo was the UK name for a dried milk product imported from the company's business in dairy-rich New Zealand, where it was known as Defiance.

In the year I was born, Glaxo began experiments with, and helped to commercially develop, the world's first wonder drug: penicillin.

Sadly, this once great company is now in danger of becoming the Post Office of the pharmaceutical industry ñ bewildered. The BBC's website, business news, reports: Shares in GlaxoSmithKline fell by about 8 per cent after the pharmaceuticals giant said 2008 earnings would be hit by declining sales of a key drug.

The report went on to say that it was seeing lower demand for the diabetes pill Avandia after a US study linked it to a greater risk of heart attacks and greater competition from other generic drugs would dent its profits forecast.

In 2007 sales fell by 2 per cent to £22.7bn. A lot of money and 2 per cent isn't much slippage, however, GSK said it would have grown by 19 per cent were it not for the Avandia woes. A one trick pony? GSK's boss, Jean-Pierre Garnier, said: The shadow of Avandia will continue over us in 2008 and make life a little bit more difficult.

Like British European Airways that has disappeared and jars of fish paste that are extinct, life, time, markets and ideas move on

For the record, annual revenues from the Avandia products fell to £1.2bn in 2007 from £1.6bn in 2006.

GSK argues the benefits of Avandia outweigh the associated risks. However, I'm not sure I'd want to swallow too many Avandia pills if I could use an alternative.

Public confidence is paramount. Pharmaceutical marketers have a challenge on their hands.

At one point GSK shares slumped 10.5 per cent to their lowest level since 2004.

Declining margins, a US tax bill of an extra $680m (£349m) and little good news about other drugs in development all combined to disappoint analysts and some observers have said that GSK's short-term prospects are uncertain. To make matters worse, GSK will soon lose patent protection on several key drugs.

Why am I singling out GSK? Because it has been around for longer than I have and because I admired the company. However, sadly, its business model has scarcely changed in all those years. It is Marmite without the champagne.

Like British European Airways that has disappeared and jars of fish paste that are extinct, life, time, markets and ideas move on. It seems to me that GSK has run out of ideas and has become a huge sprawling muddle that is impossible to manage or motivate. The days of growth by merger must be over. Rewarding pharma  bosses with shares will drive up share prices, but not necessarily efficiency, innovation or originality.

Perhaps it is time to break up this rambling giant. Like a city trader's wife, it is probably worth more divorced. Surely its constituent parts are worth more than the whole?

I judge GSK's glory days as over. It needs a fresh look, new leadership and a new vision. Over-the-counter manacled to the pharmaceutical business model is like trying to pretend Tesco is the same as Amazon.

Research and development chained to serendipity is like driving to Auchtermuchty with no Sat Nav. Developing eye-wateringly expensive drugs to sell to health systems that want generic products is the same as Harrods opening a corner shop in Birmingham Ladywood.

I grew up with Beecham's Powders, Baby-Milk, Complan and Horlicks. I've been saved by penicillin. My fear is I will outlive the company that made them. I've lived through Wellcome, Smith and Kline. I hope I don't witness Goodbye Smith and Decline. Will anyone be able to wake this sleeping giant?

The Author
Roy Lilley is a (sometimes controversial) healthcare author and broadcaster

4th March 2008


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