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Restoring the Power of Purpose

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Seeking profit as a primary business purpose is like building a house on sand – it eventually leads to collapse. It may be one reason that 90% of the companies that have appeared on the Fortune 500 …

Seeking profit as a primary business purpose is like building a house on sand – it eventually leads to collapse. It may be one reason that 90% of the companies that have appeared on the Fortune 500 list since it was first published in 1955 have disappeared. Cynthia LaConte will speak on the power of purpose and how this concept has contributed to Dohmen’s success for the last 154 years. She will also explore the importance of applying this concept to the future of the life sciences. As the pharmaceutical industry faces an industry changing paradigm shift, there needs to be a call to action to restore the power of purpose.

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  • Good morning BIOFORWARD! What a pleasure it is to be able to kick off such a great agenda with ya’ll today. A beautiful day, smart people, excellent educational content, the chance to network, and all of it rooted in
  • This - GROWTH and innovation. Wisconsin is definitely on a roll and I’m not just talking about Paul Ryan!. The Bioscience industry is cookin’ in WI. Look at these stats. WI Biosciences grew faster than any other state during the recession. 1366 bioscience businesses currently employ 31,000 people in the sate and WI performs 9% of the nations clinical trials. These statistics are pretty impressive and they’re a great indicator that with organizations like Bioforward, WI is committed to propelling the new economy. An economy fueled by innovation and discovery and an economy that prioritizes the promise of biotechnology as a way to meet the needs of the world. What an incredible purpose!And that’s really what I wanted to talk to you about this morning. Clarity of purpose. How that has influenced Dohmen over the years and how it’s influenced out industry over the years, both by its presence and by its absence. And how a new model is restoring the power of purpose within life sciences.
  • So maybe I’ll get started by giving you a quick intro to Dohmen. We’re a …
  • Oh and did I forget to mention that we’re also in our154th year of continuous operation! Whoa. Not many companies can claim that kind of long-term commitment here in the US. It’s something.
  • So how’d we get from this……. to this?
  • Well for sure there’s this. You definitely have to be comfortable with change in order to grow and thrive. And the pace of change has never been more brisk. Reinvention is no longer something you think about once a year at a retreat, it’s something that successful businesses are thinking about daily. These days, you really need to be managing a constant cycle of change and transfomation just to stay ahead of customer needs. Yup, change is definitely an essential ingredient, and yet lots of businesses have come into the market with new innovation - hell bent on changing the world, but they just can’t seem to sustain over the long term – think Blockbuster, Kodak, Sony, AOL. I think I put this statistic in the conference blurb – since the Fortune 500 list was first published in 1955, more than 90% of the companies on it are gone – bankrupt, acquired, closed – gone. So why is it, that even companies that seem comfortable with change, ultimately fail to endure. What’s missing?
  • I think it’s this - purpose. A purpose that extends beyond self – interest, beyond maximizing profits. Purpose as in a belief that our efforts may lead to a greater good. Sounding too squishy for you? Well I know my audience, so let’s take some shelter in some statistics and a study shall we. Today more than ever people are the real resource that makes or breaks any company. In 1982, tangible assets were worth 62% of the average company on the NYSE. Today, that number is less than 10%. People have become the real resource of our knowledge based economy. And the funny thing about people is they’re driven overwhelmingly by the human need for purpose. McKinsey recently published the results of a multi-year study that asked the question what enables the engagement and everyday progress of people in organizations? They found that people are more creative, productive, committed and collegial in their jobs when they have positive inner work lives. But it wasn’t just any sort of progress in work that mattered. The first and fundamental requirement was that the work be meaningful – that people found a connection to a purpose larger than themselves.Not so squishy now? So if we can allow ourselves to acknowledge that purpose is important, then we have to ask…
  • Where does it come from? It seems like purpose can always be traced to the passion of a few people fueled by the need to transform. Leaders. Leaders that see an opportunity to make things better in an industry, in a business, in a community, in a school. These are people that are dissatisfied with the status quo. They define and shape a new future by questioning the present. Yup, purpose comes from meaning makers and they are at the heart of any organization that endures. So at Dohmen, our meaning maker, was our founder – Frederich Dohmen. The oldest son of two textile workers in Duren Germany, Textile workers that left their family farm to find factory work and a better life for their children. And the key to that better life was education. Frederick was the first one that had the opportunity for a formal education, and he grabs it, studying science, graduating as a chemist and then apprenticing in a pharmacy. But the 1850’s are a difficult time in Germany. there’s not much political freedom and there’s no unified German nation. German states control most business, including the state-run pharmacies. Opportunity is limited, so when Frederick’s father dies in 1856, he realizes that the only way to support his mom and 6 brothers and sisters is to screw up his courage, take the little money he has and make the trip to America in search of a better life and a way to provide for the family he leaves behind. It’s a good story isn’t it? It’s the classic story of the grit and determination that built this country, but it’s not the story of what gave Dohmen our strength in purpose.
  • This is. When this young man arrives in Milwaukee; Wisconsin is considered the West. When he arrives, he finds complete chaos in how healthcare is delivered. He finds a place where there are no rules, no standards, no regulations – nothing governing the practice of pharmacy. He finds a place where home grown remedies are made and marketed without any regard for human safety and people are preyed upon in their most vulnerable state. After years of education and training in pharmacy, Frederick finds himself in the middle of America’s golden age of snake oil sales – a time when profit drives the promotion of false health claims – a time when commercialism overwhelms any sense of professionalism. And he is appalled. At 27 years of age Frederick Dohmen has found his purpose.So in 1858, using his knowledge and training like a weapon against disreputable competitors, he opens an apothecary shop and begins to raise the bar for the practice of pharmacy. He imports only the best and purest raw materials from suppliers he knew back in Germany. He applies standardized measuring and production methods and soon he has built a business based on trust and integrity. A business fueled by a sense of purpose. He’s incensed by every news account of another death caused by poorly made drugs and it drives him to advance standards of care and quality, not just in his business, but in his community. Starting with Milwaukee’s first Board of Pharmacy, then the Western Wholesale Druggists Association, then the state’s first regulatory body, the Wisconsin Pharmaceutical Association. By 1880, Frederick had not only built a thriving business, but he’d helped create a framework for safety standards that would help build the foundation for an entire industry. Quite a story, huh. Pretty inspirational, but the fact of the matter is, I didn’t really know this story when I came to work for Dohmen. History was never one of my favorite subjects and I was busy. I was very, very busy building one of Dohmen’s subsidiaries – DDN. It was the mid-90’s and I just didn’t care that much about what was going on in the mid1800’s. After all we had Y2K to worry about.
  • But in 2006, everything changed. I got a call from our board asking me to help sell and transition Dohmen’s nearly 2 billion dollar pharmaceutical wholesaling business unit. Man that was a call I didn’t want to take. Good thing we had those clam shell phones at the time, no caller ID. I was enjoying success at a business I had built over the course of a decade, and the last thing I wanted to do was step into the land mine of emotion and family trauma that was going to come with the sale of a business that Dohmen had been a part of for nearly15 centuries. But I knew it was the right decision. This part of our business had been struggling for years and it was time. So I became Dohmen’s COO and spent the next two years with bankers, attorneys, integration experts and shareholders. Then one day, I got a call from my dad. He wanted to remind me that we were coming up on Dohmen’s150th anniversary. He asked me- what d’ya have planned? And my heart just sank. We were healing a family, we were healing a business. We weren’t even sure Dohmen would make it to its 150th year. But I wasn’t about to disappoint my father, so I started to think of different low profile, sort of innocuous ways we could celebrate. And someone suggested we commission a book – a history book.
  • Ellen Langill, a UW Milwaukee history professor, agreed to help us sift through decades of archived information and artifacts. And through the course of this year long effort, I learned something. I learned what Frederick and the generations of Dohmen employees that followed him were really doing all those years. I discovered Dohmen’s real reason for being – why we existed. And it wasn’t about IPO’s, ROI’s, EBITDAs or EPS. It was instead this rich legacy of intense human drive to make the world better by making pharmaceutical care safer and more accessible for people in need. Year after year, decade after decade, through the Civil War, two world wars, the Depression, devastating fires, epidemics, personal tragedies and hardships. This company, this group of people that cared about something larger than themselves found a way to continue. They were driven by purpose and I had found it too.
  • And thank goodness I had taken the time to reconnect to our roots and to our history. Because I was able to bring an understanding of that legacy with me when I accepted the role of CEO in 2009. And by the way, just as an aside. if you want to drive transformational and purpose driven change within your organization, hire more women – we’re very good at it. And there’s not enough of us in executive leadership positions in Wi companies only 12%
  • So my first order of business was to find our why. To find the compelling problems within our world that needed to be fixed.
  • And let me tell you, I didn’t have to look far. The US healthcare system is in a state of crisis.As a % of GDP, healthcare costs in our country had risen from 13% in 1991 to nearly 18% in 2011 (CMS)Prescription drug costs had increased an average of 11% every year from 1996 – 2008 (Kaiser Family Foundation)And Insurance premiums had risen 114% for employers and 147% for workers from 2000 – 2010
  • Yet we were lagging behind 41 other countries in life expectancy rates (USA Today) Life expectancy and infant mortality rates decreased for the first time since 1993 (Bloomberg)Diagnosed diabetes has nearly doubled since 1990 and 1 in 3 Americans are obeseJust NOT OK, we’re better than this as a country. So, these compelling problems and the desire to solve them gave us our sense of purpose.
  • And that purpose led to creation of our vision statement and our values. We took the time to write down the values that had guided our company for all those years. So why did we take the time to do that? Why is it important to write this stuffdown and to be clear about what your organizationstands for? Because people aren’t mind readers and they won’t know unless you make it clear. And they need to know because if you write them down, if you talk about them constantly, if you use them to plan, to prioritize to make decisions - the rest of your organization will start to use them too. And you will have found a foundation of strength and stability as your organization changes and grows.
  • So while the words matter. Actions always speak louder than words. If your vision and values hang on a plaque in your lobby and don’t enter into the conversation that is day to day business, they are worse than worthless. Because they immediately become a source of conflict for the people you work with.In addition to weaving our vision and values into nearly every employee communication and interaction, we also decided to create the Dohmen Company Foundation as another way to walk the talk of our values system. We contribute a % of our profits to the Foundation every year and in just four years, we’ve been able to connect 123 million people to lifesaving healthcare products and services. We’re very proud of that and we talk to our employees about how what they do every day connects to both a greater purpose within our business, but also how our business connects to a greater purpose in the world.
  • So purpose anchors change. At Dohmen, we’ve changed a lot over the last few years, buying companies, expanding operations, adding new employees and I know that without the common language of our vision and values to guide these transitions, without a sense of purpose, we would be adrift. So what happens without that anchor? What happens when companies lose their sense of purpose?
  • You go from this… (box one)To this (box 2) One of the most trusted brands in America ends up fraudulently marketing its anti-psychotic RisperalNursing homes are incented to prescribe it for the unapproved use of dementia in the elderly And use of this product for this unapproved purpose increases risk of death by 54% in those that are given it for 12 weeks or longer
  • And from this… (box one)To this (box 2) Merck’s Cox 2 pain inhibitor was withdrawn from the market after growing evidence that showed they had disregarded and suppressed studies tying the drug to heart attack and stroke risk. In the five years the drug was on the market, the low end estimate of deaths it caused was over 27,000.
  • And from this… (box one)To this (box 2) And this summer, Glaxo pleads guilty to criminal charges of illegally marketing drugs and withholding safety data from US regulators and agrees to pay $3 billion dollars to the government in the largest healthcare fraud settlement in US history. Some of the most trusted brands in the world, mired in scandal and prosecution for shoddy manufacturing, suppressing clinical trial data, bribing physicians, promoting products off label and the list goes on. Companies throughout the life science industry, companies entrusted with our care and safety, have broken their promise by choosing profit over purpose.
  • And that’s how an entire industry goes from this, a golden age of scientific research and discovery focused on the world’s most pressing medical needs….
  • To this. An industry thatchose instead to focus on creating large scale consumer demand;prioritizing commercialism over professionalism. An industry that ranked investor well being over patient well being. An industry that used false claims of efficacy and unacceptable marketing practices as a means of optimizing profits. Wow, déjà vu. I think Frederick Dohmen would be shocked to see that after 150 years of scientific advance, big pharma found its way right back to an era that shares a heck of a lot in common with the snake oil sales of his day.And now this industry whose purpose should have been firmly rooted in improving lives has come in just above big tobacco. It has lost the public trust, faces a dearth of innovation and its economic engine is in a tailspin. So how do you begin the process of repair? You restore the power of purpose. There’s a new model emerging for the industry – one that’s focused on doing well by doing good.
  • This new model puts the patient directly at the center of everything we do. And by the way, I don’t mean consumer, I mean patient.
  • There are 25 million Americans that suffer from life threatening, devastating disorders that accompany rare metabolic and hereditary diseases like CF, MS, Hunters Syndrome, Gaucher’s. Diseases that have mostly been left unresearched and untreated because large market profit goals were prioritized over small market patient needs. So for the 7000 known rare diseases, there exist only 250 approved therapies. But things are changing…
  • Increasing scientific progress within molecular diagnostics is enabling the identification of very specific, segmented patient communitiesAnd in turn very targeted drug developmentPatients are increasingly empowered and central to making healthcare sustainableHealth systems are beginning to prioritize significant innovation over incremental improvement Payers are basing reimbursement decisions on outcomes and valueRegulatory support starting with the Orphan Drug Act and, just this summer, the Safety and Innovation Act are accelerating approval of drugs for rare disease by awarding conditional approvals based on ongoing post market studyOh by the way, that last one is my shameless plug for 154 year old private company service providers
  • For too long research has been driven based on what marketing results were most desirable. Generating large quantities of undifferentiated drugs and leaving the patient a passive and powerless observer of the process.
  • But scientific advances combined with enabling technologies and social media have reprioritized the needs of the patient. Advocacy groups and foundations are organizing around the mission of accelerating innovation and treatment and are moving from a role of patient support and awareness to a role of commercialization partner. Using the currency of tissue samples, genomic analysis and longitudinal studies, they are front and center in new, open innovation models with academic researchers and pre-competitive industry consortium.
  • The success of companies like Shire, Vertex and Alexion have proven that putting the patient at the center of our purpose and targeting rare disease not only positively affects the lives of millions worldwide, but also can sustain itself as an economic model. Alexion, one of our clients, founded by two scientists Leonard Bell and Steve Squinto, stayed the course from their founding in 1992 to the 2007 launch of their drug Soliris used to treat a rare cause of anemia. There are only a few thousand people with this disease globally, but this drug seems to help almost every patient that receives it. This year, Alexion will do more than 1.1 billion in revenue while the founders remain in pursuit of the next life changing innovation.
  • The decision to restore the power of purpose to life sciences will be made one person at a time. If the pharmaceutical industry can’t make the transition to one that is driven by patient purpose, it will continue to be vilified and isolated from the future of healthcare, and like so many of those companies on that fortune 500 list, it will reach extinction. Alternatively, the organizations that will adapt and flourish will be those filled with purpose driven people. People that can see beyond self interest to the needs of the world. People that want to pass on a healthierworld to their children. And I have a feeling a lot of those people are sitting right here. Thanks so much for your time and enjoy the day.
  • Transcript

    • 1. HelloBIOFORWARD 09/12/12 1 www.dohmen.com
    • 2. GrowthWisconsin Biosciences…Grew faster than any other state1366 bioscience businesses31,000 employed9% of US clinical trials 2 www.dohmen.com
    • 3. So who’s Dohmen anyway?• Privately held life science services business• Based in Milwaukee’s 3rd Ward• Trusted partner to 600 drug and device companies• Providing services that connect life science innovators with their patients• Pre-commercial regulatory to dispensing & patient support• 800 employees in WI,TN, CA, MO, CO and Israel• 650,000 square feet facility space• Processing $9 billion in transactions annually• Touching 16 million consumers & 16% of US Rx’s 3 www.dohmen.com
    • 4. In our154th year of operation! 4 www.dohmen.com
    • 5. www.dohmen.com
    • 6. Change www.dohmen.com
    • 7. Purpose www.dohmen.com
    • 8. So where does purpose come from? 8 www.dohmen.com
    • 9. 9 www.dohmen.com
    • 10. Cardinal Health completes purchase ofF. Dohmen Co.The Business Journal Date: Thursday, June 1, 2006, 8:58am CDT - LastModified: Thursday, June 1, 2006, 8:58am CDTCardinal Health Inc. said Thursday that it has completed its purchase ofindependent Germantown pharmaceutical distribution business F.Dohmen Co. Cardinal, of Dublin, Ohio, said that the acquisition of family-owned F. Dohmen and its subsidiary, F. Dohmen Wholesale, will expandits range of products and services for the independent retail pharmacymarket. Terms of the transaction were not disclosed. F. Dohmen,established in 1858, is the largest privately held pharmaceuticalwholesaler in the country. Its pharmaceutical warehouses supplypharmacies, hospitals, nursing homes and chain drug stores. 10 www.dohmen.com
    • 11. 11 www.dohmen.com
    • 12. Frederick William F. Frederick W. Frederick H. Erwin John JohnDohmen Dohmen Dohmen Dohmen Dohmen Dohmen www.dohmen.com
    • 13. Purpose first, then a plan Why are we doing this? How will we do it? What will we do? 13 www.dohmen.com
    • 14. The US spends double on healthcare ($8160 PP, 18% GDP) 14 www.dohmen.com
    • 15. Yet, we aren’t very healthy... 15 www.dohmen.com
    • 16. Purpose  Vision & Values… Our Vision: Our Values: Creating a more • Caring efficient, affordable • Committed and accessible • Consultative healthcare supply system. • Creative 16 www.dohmen.com
    • 17. Walking the talk…To connect people in need with lifesaving healthcare products and services.In four years…• We’ve contributed over $9 million to connect people in need w. healthcare• We’ve touched 123 million people with our foundation Values in action. 17 www.dohmen.com
    • 18. Purpose anchors change…Over the last four years at Dohmen….• We’ve moved corporate headquarters• We’ve redefined our strategic future• We’ve rebranded our company• We’ve put a new board in place• We’ve grown our client base by 100%• We’ve grown revenue by nearly 50%• We’ve purchased 5 companies• We’ve added 200 employees to our work force• We’ve expanded operations into three new cities And we’re just getting started! 18 www.dohmen.com
    • 19. “We believe our first responsibility isto mothers & fathers and all who useour product.” J&J Credo, Robert Wood Johnson, 1943• J&J relied on improper marketing to geriatrics to grow Risperdal Bloomberg, 3/10/10• Johnson & Johnson recall: No. 22 in just 19 months, AP 4/16/11• Feds want $1B settlement in J&J Risperdal probe WSJ 5/13/11• J&J Will Pay $181 Million to Settle Risperdal Ad Claims, Bloomberg• Patients versus Profits at Johnson & Johnson: Has the Company Lost its Way? Wharton, 2/15/12 19 www.dohmen.com
    • 20. “We try never to forget that medicineis for the people. It is not for profits.” George W. Merck, 1950• Merck yanks arthritis drug Vioxx, medication boosts risk of heart attack CNN: 10/6/04• FDA Estimates Vioxx Caused 27,785 Deaths, Consumer Affairs 11/2004• Merck reps misled doctors about Vioxxs cardiovascular USA Today 5/5/05• Maker of Vioxx Is Accused of Deception, The Washington Post 4/16/08• Merck to Plead Guilty, Pay $950 Million in U.S. Vioxx Probe, Bloomberg 11/23/11 20 www.dohmen.com
    • 21. “Our mission is to improve the quality of humanlife by enabling people to do more, feel better andlive longer.” GlaxoSmithKline• DoJ hasnt given up on prosecuting execs for pharma misdoings New York Times 8/8/12• GlaxoSmithKline Pleads Guilty To The Biggest Healthcare Fraud In U.S. History• GSK pays $3B to wrap up host of Justice Department claims DOJ 7/2/12• Glaxo paid celeb doctor big bucks to tout Wellbutrin, feds say, Forbes 7/3/12• GSK accused of distorting antidepressant data BBC, 1/28/07 21 www.dohmen.com
    • 22. 22 www.dohmen.com
    • 23. Drug deaths now outnumber traffic fatalitiesin U.S., data show – LA Times 9/17/11Industry last year spent $2.4 billion ontelevision ads, according to Nielsen – FiercePharma 8/9/12Global Pharmaceutical R&D ProductivityDeclining – Thompson Reuters 7/1/10Pharma industry sleepwalking into jump offpatent cliff, Drug Firms Face Billions inLosses in ’11 as Patents End – NYT 3/11Biopharmas facing challenge to demonstratevalue – The Economist 2/6/12Less than 15% of the population see pharmaas trustworthy & honest; and only healthinsurance, tobacco and oil rated lower 23 www.dohmen.com
    • 24. A purpose driven modelfocused on the patient Why are we doing this? How will we do it? What will we do? 24 www.dohmen.com
    • 25. Rare disease as a working model forprecision medicine… • 25 million Americans suffer from rare disease • 7000 rare diseases • Only 250 approved therapies • Historically viewed as “too small” • Orphan Drug Act provides incentives for development • Shire, Biomarin, Alexion, Vertex break the paradigm by doing well from doing good 25 www.dohmen.com
    • 26. Paradigm shifts from… • Mass market to micro markets • Focus on products to focus on patients • “Me too” products to scientific innovation • One size fits all to precision medicine • Selling to co-creating • Generating revenue to creating value • Comparative studies to conditional approvals • Products to therapies • Short term corporate gain to long term purpose driven partners 26 www.dohmen.com
    • 27. Today’s push system of innovation… Research Development Production Distribution Intermediaries Patient 27 www.dohmen.com
    • 28. Replaced by patient driven innovation… Genomics Patient Collaborative Patient Longitudinals Develop IP Commercialize Advocates Research Relationship Family History 28 www.dohmen.com
    • 29. And it’s working… Orphan and ultra orphan launches have the following characteristics: • Less development time: 4.2 years vs. 6-8 years • Higher odds of approval success: 82% vs. 35% • Smaller trial sizes: 100 patients • Lower development costs: $100mm vs. $800mm • Longer exclusivity: 7 years vs. 5 years • Higher growth rates: 26% orphan vs. 20% non-orphan 29 www.dohmen.com
    • 30. We have achoice. Wecan restorethe power ofpurpose. 30 www.dohmen.com
    • 31. ThanksOur prime purpose in this life isto help others. Dalai Lama 31 www.dohmen.com