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Everyone else is talking about our company, so why can’t we? There are more than 120, 000 people who work for Johnson & Johnson and its operating companies. I’m one of them, and through JNJ BTW, I will try to find a voice that often gets lost in formal communications.
This is a big step for us as a company. Anyone working for a large corporation will appreciate that there are many internal limitations on what we say and how we say it. I’ve been reading blogs for only a few months now, but already it’s clear to me how important it is not just to watch, but to join in productively. Doing that will take some unlearning of old habits and traditional approaches to communicating — and I will have to find my own voice. On JNJ BTW, there will be talk about Johnson & Johnson — what we are doing, how we are doing it and why. There will be comment on the news about our company and the industry — occasionally correcting any mistakes (not that that ever happens!) or simply providing more context. I hope and expect that some of my colleagues will eventually join me on this blog.
We may not always be able to talk about product-specific issues, news from our operating companies or issues that fall under regulatory or legal constraints. But we’re going to do what we can to talk openly, directly and to the best of our knowledge. I’m sure we will learn more as we blog, so keep in mind that nothing on JNJ BTW is set in stone. As the debate around how best to provide healthcare to Americans continues, one concept that seems to be catching on is the simple idea of encouraging people to adopt healthier lifestyles.
In a column in Sunday's Washington Post, David Broder described what one coalition, the Partnership to Fight Chronic Disease, is proposing. It is well worth reading. Simply put, the idea is that by focusing on preventive care and management of chronic diseases, costs can be reduced. This is no small opportunity to trim expenses. The numbers speak volumes: "Government records show that 75 percent of health-care costs and seven out of every 10 deaths are attributable to chronic diseases such as asthma, diabetes, heart disease and cancer. Obesity, which has doubled in 30 years, is by itself responsible for 30 percent of the increase in health-care costs during that period. In far too many cases, perhaps a majority, treatment of these diseases is intermittent and inconsistent. What is worse, little has been done to prevent them or arrest them in their early stages."
This makes sense to me. After all, if I could lose a few pounds and reduce my cholesterol, I'm pretty sure that I would not only feel better but I would also reduce my risk of developing heart disease - a condition that plagues my family. Preventive care shouldn't be the only solution worth considering, but it makes sense that it be a component of any health care plan. Note: The PFCD is made up many diverse organizations . In the interest of full disclosure, I want to point out that Johnson & Johnson is a member of two of these organizations PhRMA and the US Chamber of Commerce. We held an analyst meeting today, focusing on our consumer and pharmaceutical businesses. There will no doubt be a fair amount of news media coverage of this event, so I won't rehash what was in our press release or recap all of today's presentations. However, I did want to elaborate on one topic that Vice Chairman Christine Poon touched on. During her opening remarks, Chris provided some "examples of how the breadth of Johnson & Johnson can catalyze innovation at the intersection of our three business segments resulting in the creation of new growth platforms and completely new businesses." (A podcast of all that was said can be found on our website.) I thought it might be worthwhile to highlight one of the more intriguing approaches that has recently been put in place to encourage the kinds of cross-company innovation Chris mentioned. With so many different companies focused on so many different technologies and markets, innovative ideas that do not fit within the core business sometimes fail to get the funding and management support they need. With that in mind, a few years ago, the Johnson & Johnson Internal Ventures Group was created to identify and support the development of internally generated early-stage technologies. The approach is fairly simple. Internal teams that have identified cool new technologies or business approaches that don't fit into our current businesses can submit their ideas to a team lead by folks from the Johnson & Johnson Development Corporation (JJDC) an internal venture capital group and the Corporate Office of Science and Technology (COSAT) a central group that evaluates and tracks scientific advancements and new technologies. If the project passes muster, JJDC will act as the lead investor and will solicit other "investors" — in this case, Johnson & Johnson operating companies — to join the "syndicate." Operating companies can invest in a number of ways: with funding, with professional talent, with information technology, with laboratory space, or with other facilities or services. Fully-funded through the internal ventures initiative, the project team will then try to achieve certain milestones to ensure that the idea is viable. Based on the outcome, the project will either become a new Johnson & Johnson business, be spun-out to external investors or closed down completely.
To date, one of these projects has been spun out Macroflux – a drug delivery approach which was based on technology from ALZA Corp. This morning, Chris described two other internal venture project a treatment for Retinitis Pigmentosa and a technology for "smart" consumer products that use molecules to adhere substances onto the body and allow them to be pulled off quickly and easily. There are others. While our management has talked about the internal ventures program, it hasn't been widely discussed in the press, with the possible exception of a recent article in In Vivo Magazine. The internal ventures approach isn't rocket science. Other technology companies have long had similar "skunk works" funding mechanisms in place. But for a highly decentralized company, with so many different operating companies, business objectives and approaches, to have a central group in place that looks at ways to make sure innovative ideas are developed (or at least fully evaluated) makes good business sense. David Holveck, the former president of Centocor Inc. and well-known biotechnology advocate who is now responsible for JJDC, has told me Johnson & Johnson has to get better at harnessing its own internal expertise and knowledge. The internal ventures is one way to accomplish this goal. A word or two on rumors and speculation. Johnson & Johnson is well-known for its aggressive acquisition strategy, and as such, there are often rumors circulating about whether we are going to make a bid for company X, or do a deal with company Y.
When asked about these rumors, I almost always have nothing to say. We just don’t comment on rumors and speculation. Period. Reporters often ask if we could just signal them “off the record” as to whether there is any truth to the rumor. On the record or off, our answer remains the same. If I were to whisper to a reporter that there’s nothing to what they are hearing, what happens the next time they call and don’t receive the same whisper? If we are in talks regarding an acquisition, such discussions are kept confidential for good reason. A deal is not a deal until it is signed, sealed and delivered. After declining to comment on an acquisition rumor, I’m often asked if I would simply talk about our acquisition philosophy in general what types of companies or technologies Johnson & Johnson would like to acquire.
Again, in the context of a question about a specific rumor, how can I discuss our acquisition philosophy and strategy without seemingly tipping our hand or fueling speculation? The reality is that with such a broad portfolio of businesses, our business development teams cast a wide net. My understanding is that they are always on the look out for companies, products or emerging technologies that will complement our existing franchises or further our strategy for growing the business. Earlier today, Judge Patti B. Saris of the US District Court for Massachusetts issued her decision in a case examining the pricing of pharmaceutical drugs reimbursed by Medicare and private insurers based on what's known as the average wholesale price, or AWP. In the case, the plaintiffs alleged that four pharmaceutical companies including Johnson & Johnson (actually our Centocor and Ortho Biotech companies) engaged in unfair and deceptive trade practices in violation of Massachusetts laws, and grossly inflated the AWPs of certain drugs. The judge dismissed the case against the Johnson & Johnson defendants.
The opinion is 185 pages long - and I understand our lawyers are still studying it. I can tell you that we are pleased with the judge's finding of no liability for the Johnson & Johnson companies involved and with her ruling in their favor.
Some initial coverage here and here.
Lately, there’s been lots of talk about how the pharmaceutical industry needs to adapt to respond to the challenges of today’s marketplace. Pick up any newspaper, scour the web or chat at any water cooler in the “nation’s medicine chest” (AKA New Jersey) , and you will come across plenty of suggestions on how to change the industry. Just last week Pharma Futures - a working group comprised of investors and industry representatives, including people from our own pharmaceuticals business added one more interesting voice to this debate. It was a realistic assessment of today's environment. As the Wall Street Journal Health Blog put it, “the opinions of pension funds mangers, with $1.2 trillion of assets, were stark.”
I’m not going to go through each of the seven core suggestions made in the report - you can read it and the industry’s response to get that information but I did want to touch one point that was made: the suggestion that the industry should provide greater transparency into early stage drug development. As described in the Executive Summary: “Investors are interested in better understanding process and productivity in Phase I and II through the provision of more information. In addition to the progress and the number of compounds in the pipeline, investors are particularly interested in the quality of the pipeline, how quality changes over time and to understand better the underlying factors that affect quality.” A fair point - and one made even more relevant to me since just this month the Johnson & Johnson pharmaceutical business presented its pipeline to the investment community and outlined productivity targets for the remainder of the decade. As described in the industry’s response to the suggestions made in the report, we are certainly going to work to help address the concerns about pipeline transparency, but additional dialogue is needed to help investors appreciate the limited value of the some early stage data. While Johnson & Johnson does try to provide insight into the state of our pipeline, I can tell you there is often a struggle over the amount of information that can or should be provided. When determining how much to disclose about research projects, we consider the competitive impact providing too much information too early could have. It is also notoriously difficult to provide an accurate assessment of the value and potential of compounds based on early stage data - as the failure rates collected by the industry trade group PhRMA illustrate. For instance, of the 10, 000 compounds investigated, only one will make it to the market and of the 250 compounds that enter preclinical testing, only five will make it to the clinic. During my stint in the communications group of one of Johnson & Johnson's pharmaceutical businesses, I saw first hand how often projects that seemed promising in the lab failed to make it into human testing. With this in mind, we tend to be fairly cautious about how much information we provide about our early stage pipeline. We don’t want to raise the hopes of investors or patients too soon. It’s a fine line, but I’m sure that as the dialogue continues we will find its coordinates. It's just one example of how the points raised in the Pharma Futures report are important, complex policy issues that require careful analysis. In fact, I understand that many of the folks in our businesses are looking at the same issues raised here and look forward further discussions.
For those of you who have been following Johnson & Johnson, you know that we tend not to discuss the details around pending legal matters in the media. I’m extending the approach we have used with the MSM to this blog. Just as my colleagues and I generally don’t respond to specific allegations raised in lawsuits from the media, I’m unlikely to do so on JNJ BTW. For instance, while I’m trying to encourage an open and productive conversation about the posts made on JNJ BTW, if your comments concern ongoing legal matters, it's probably not going to be posted. Why take this approach, you may ask? Wouldn’t Johnson & Johnson be better served by openly discussing the allegations raised in the suits facing the company? Well, I’m not a lawyer, but here goes….
Lawsuits tend to concern fairly complex issues that require a careful analysis of the facts as well as an understanding of the laws that are in question. Most cases I've had knowledge of involve thousands of documents and hundreds of pages of depositions and expert testimony. Trials can take weeks on end. Furthermore, both sides in a legal dispute are often precluded from disclosing information obtained through discovery since it may touch on personal or competitively sensitive information. It's therefore very difficult to talk comprehensively about a case before it is brought to trial. It seems to me that intelligent and informed discussions about these matters are best limited to a setting that has rules and procedures - such as a courtroom - so that both sides have an opportunity to make their case fairly and completely. Otherwise information, documents and testimony can be taken out of context, and complex and highly nuanced matters can be oversimplified and misrepresented. This is particularly true early on in a case - such as when a complaint is first filed. The discovery process can take years and often what may appear at first blush to be a fairly open and shut matter will turn out otherwise as the case progresses through the legal process. In addition, there may be people out there who see JNJ BTW as an opportunity to highlight their own position on pending legal matters against the company. The blog shouldn't become a podium for them to make their case - particularly if we are going to limit our response to court filings or to our day in court. I’m therefore generally not going to post comments that raise unsubstantiated allegations or that take a position on ongoing legal issues. It is our blog after all. Though every now and then there will probably be posts on legal decisions that impact Johnson & Johnson, overall I will tend to leave discussions of pending legal matters where they belong - in the courts.
In the most recent issue of Fast Company there is an interesting article about the CEO Roundtable on Cancer. The CEO Roundtable on Cancer believes that it can make a difference in people’s lives by adopting the best practices to combat cancer. For most employees here, the most noticeable change was that smoking was no longer allowed anywhere on campus. But the overall program is much bigger than that. Companies that achieve CEO Gold Standard accreditation from the Roundtable have healthcare plans that cover preventive screenings for certain cancers and ensure quality care for cancer patients. Through this, organizations save lives by improving the health and welfare of their workforce, There is also a business benefit. For instance, according to the Roundtable, by following the best practices needed to achieve CEO Gold Standard accreditation companies can save about $2.35 to $3.75 per employee per month. As mentioned in an earlier post, creating healthier outcomes through prevention is a hot topic these days. This isn’t a new concept for Johnson & Johnson. Our senior leadership has long believed that a healthy and productive workforce is not only good for our employees, but also good for our business. For the past two decades the company has helped its employees identify and then improve behaviors that threaten their health and well being. It’s pretty simple. Through the use of incentives (a $500 reduction in the cost of their health plan) we encourage our U. S. employees to take a health risk assessment which helps them in identifying key health risk factors that are related to their life style, such as tobacco use, high cholesterol , weight and high blood pressure. Those who have gone through the health screening can then elect to contact their health care provider or lifestyle counselors to help them address these risks. In the words of Dr. Fikry Isaac, who heads the program, the aim is to create a “culture of health.”
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