The Whistle Blower Part 1




SOFT SKULL PRESS                     2006


About the author

Peter Rost was a vice president of marketing at Pfizer, the world’s largest pharmaceutical company. Now he reveals the drug industry’s shocking secrets.

“All that is required for evil to triumph is for good men to do nothing.”

Edmund Burke

A study of 233 whistleblower by Donald Soeken of St. Elizabeth’s Hospital in Washington, DC, found that the average whistleblower was a family man in his forties with a strong conscience and high moral values.

After blowing the whistle on fraud, 90% of the whistleblowers were fired or demoted. 27% faced lawsuits, 26% had to seek psychiatric or physical care, 25% suffered alcohol abuse, 17% lost their homes, 15% got divorced, 10% attempted suicide, and 8% were bankrupted. But in spite of all this, only 16% said that they wouldn’t blow the whistle again.

Prologue: Saturday, December 31, 2005

  • My wife didn’t look happy at all. “But this is a David vs. Goliath fight. And we’re going to win.”
  • “Pfizer could’ve fired me tight away when I spoke up. I took a big risk when I did that. I’m taking another big risk with this book.”
  • “People in the drug industry are going to talk about this book. You’ll never work again.”
  • “The complain I filed against Pfizer was sealed by the court, no one was allowed to know, not even Pfizer.”


Chapter 1: Vultures at the Gates

Everyone remembers where they were when they heard about the terrorist attack of September 11. Most know what they were doing when they first learned about the devastation and flooding after the hurricane in New Orleans. Those who are old enough can still picture the moment when they saw the first man walk on the moon. Those were life-altering events to a generation of people. Few people, however, will remember when the drug company Pharmacia disappeared. That is, except for the people working for this pharmaceutical corporation. For them, a day in July 2002 became etched in their minds more clearly than any of the events described above when they discovered that Pfizer would take over their company.

  • As a vice president of marketing at Pharmacia I was responsible not only for U.S. marketing of Genotropin, a human growth hormone, but also for global marketing of the same product.
  • I was far away when I learned that we were being bought by Pfizer. I dialed the office number on my cell phone to retrieve my voicemail messages.


The Surprise

  • The first message was from our CEO, Fred Hassan who had saved Pharmacia when he became CEO back in 1997.
  • Fred had moved Pharmacia’s headquarters from London to New Jersey, and consummated a dramatic, $37 billion merger with Monsanto, giving him Celebrex, a pain and arthritis drug for which Monsanto had signed a co-promotion deal with Pfizer.

This deal may also have sealed Pharmacia’s fate, since Pfizer has a penchant for devouring companies when the products they co-promote start selling too well. This was a major factor in Pfizer’s take-over of Warner-Lambert, which gave them Lipitor, a cholesterol-lowering agent that eventually created sales of $11 billion per year.

  • Fred’s stern message startled me. Pfizer had made a great offer, which would result in an almost 40% premium over Pharmacia’s current share price.
  • Pfizer had developed a fearsome reputation for what they did to employees of the companies they bought. They fired them.


Successful beyond belief

When Pfizer made the decision to buy Pharmacia, they were the most successful drug company in the entire pharmaceutical business. They had grown from$3 billion in sales in 1990 to $26 billion in 2001 – much faster than any other major drug company. Their U.S. sales force was number one in productivity, and the Pharmacia acquisition would vault them into the number one position in size, with $50 billion in sales.

  • Pfizer employees were considered by industry-watchers to be the most arrogant in the business.


Mounting concerns

  • Pharmacia’s employees had the Pfizer/Warner Lambert merger to look to as assign of things to come.
  • Fred Hassan appeared on television to say that he had taken Pfizer’s offer to Pharmacia’s board of directors who had accepted the offer.
  • He undoubtedly sensed the unease among his audience, because as he looked into the television camera he tried to convince everyone that we would be fine.


The bloodbath

  • In the year following the acquisition, Pfizer terminated 11,596 Pharmacia employees – more than half the U.S. employees. During the same period only 1,452 Pfizer employees were let go. Over the following two years Pfizer fired thousands more.


McKinnell’s choice

At this point in time, only one man really knew what would happen to Pharmacia’s employees. His name was Hank McKinnel, CEO of Pfizer, and he had a scary track record in this area.

  • We had two small boys, one of them only a year old, the other six. Things could get dicey if my job disappeared, so I knew I had to work hard on impressing the people from Pfizer.


Chapter 2: The Conquerors

  • Pharmacia didn’t feel like a stuffy old corporation, like many of its competitors. People were happy and energetic, frequently arriving as early as seven and often not leaving until the same time in the evening. In exchange for their efforts, these people were well taken care of.


Preparation for takeover

  • The positive atmosphere vanished quickly in the wake of the news of the take-over.
  • Pharmacia’s employees worked hard and willingly shared as much information as they could, hoping this would reassure and appease their future masters.
  • I participated as much as anyone in this exercise, though I couldn’t help but think of cattle on their way through a slaughter chute.


An uncomfortable question

On one memorable occasion, Pfizer’s entire senior team visited Parmacia. Fred Hassan, our CEO, opened up the floor to questions that hadn’t been prescreened. I wrote on my little white question card, “If you hadn’t agreed to a friendly acquisition, would this have been a hostile takeover?” As the question was read, Fred’s face froze, then darkened. “No comment,” he said abruptly, and pouted with his lower lip.

  • At a third meeting, when pressed with more pointed questions, she yelled to the packed room, “You should realize that it is Pfizer taking over you and not the other way round.”
  • The wolf had just dropped her sheep’s clothing.


An early offer

In December 2002, the first Pharmacia employees started getting job offers from Pfizer.

  • Isadora was, understandably excited when she heard that Pfizer was interested in her, but became concerned when she got her offer letter.
  • What she might not have realized was that Pfizer was a company where senior employees often had toiled for 10, 20, or 30 years with minimal raises, resulting in a pay that was 20% lower than what Pharmacia offered. Salary compression.
  • She did what any good businessperson would do; she e-mailed her prospective boss at Pfizer and asked a few polite questions.


Never ask questions

  • On Monday, January 13, 2003, Pfizer retracted their job offer.
  • Isadora was good, smart, and decisive. She knew that not only was she one of the best marketing people Pharmacia had ever hired, Pfizer really needed her if they wanted continuity in the launch preparations for this important new drug. And now, she was being canned because she asked questions?


Isadora’s response

She stayed cool and professional. In her mind, Pfizer had finally shown its true face, but she knew she mustn’t overreact. So she waited a couple of days before writing back to Harry Otter. She spoke her mind, and to make sure  everyone got the message, she copied a number of people.

Isadora didn’t hold back any punches. After having calmly recapped the events leading up to the retraction of her job offer, she couldn’t contain herself any more and wrote, “As I said, I respect decisions, even bad ones. At least they allow people to move forward. But my God, could you not have come to this determination earlier? How did this offer and retraction fiasco happen? You only want people who will jump blindly to you?”

  • The news of Isadora’s fate swept through Pharmacia like a prairie fire. Everyone was talking about the fact that if you ask questions when you get an offer from Pfizer, they will retract it.
  • It certainly reminded us of Fred’s words – and our fear – about “the other horror stories about what happened to Warner-Lambert.”
  • It is worth noting that Pfizer later went on to launch the drug Isadora was going to put on the market without help from anyone on her marketing team. The launch turned out to be a complete and utter disaster, with the drug not selling half of Pfizer’s forecasts.


Selling out

Meanwhile, according to a revised employment contract for top Pharmacia officers, filed December 20, 2002, with the SEC, Fred and his direct reports had agreed to an unsavory pact with Pfizer, promising not to hire any employees from Pharmacia in return for three years’ base salary and bonus. This meant that if our top management, including Fred, started work at another company, they wouldn’t be able to bring aboard any of their old colleagues or subordinates until such a person had left Pfizer, or until two years had passed.

  • Pharmacia’s managers were told they were forbidden to give references to employees who were leaving the company.
  • Abiding by this edict would make it all but impossible for anyone to get a new job.

I found it reprehensible that the people in charge of the company first negotiated golden severance packages for themselves and then stuck it to rank and file employees. So I decided to write a response to Adrian Hoffman, Pharmacia’s Senior Vice President of Human Resources. I told him that enforcement of this policy could result in employees being locked out of the job market. And I ended my e-mail message suggesting, “You can retract the policy on references. Or you can issue an additional policy, saying that Pharmacia and Pfizer forbid the use of any personal references when hiring new employees.”

After clicking on the “send” button, I printed out a copy of my letter and took it to my boss, Darren McAllister. He read it in silence, then looked up at me. He had only one question. “Did you already send this, Peter? He wasn’t smiling.

In the end, my letter had no impact on the “no reference” policy.

Chapter 3: The Art of Firing People


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