John Lechleiter’s keynote part of daylong Kellogg conference seeking cure for formidable health industry challenges

Whether they grapple with technology, consumer expectations or new global markets, participants in the Kellogg School’s Nov. 1 Business of Healthcare Conference agreed that, for now, the only constant in their industry is change.

“I’m sure you’ve all heard the expression, ‘May you live in interesting times,’ said John C. Lechleiter, president and CEO of Eli Lilly and Company and a keynote speaker at the event. For the global pharmaceutical company, living in such times has meant adjusting strategy and operations to succeed in a constantly changing environment.

Lechleiter compared the major challenges facing the his industry to “three 800-pound gorillas that seem to follow me everywhere I go.” The first gorilla “is the image of the pharmaceutical industry — and he’s one ugly dude. He can barely win a beauty contest against tobacco or big oil,” Lechleiter told an audience of Kellogg students, alumni and business leaders at the event, which marked its ninth year.

The second gorilla is “the innovation drought,” demonstrated by FDA approval of only 19 new medicines last year, the lowest number since 1983. The third gorilla is company stock prices, which have dropped from an average of $100 per share to the mid-$30s since 2000, Lechleiter said.

“It’s frankly absurd to lay the many dysfunctions of the U.S. healthcare system on the doorstep of pharmaceutical companies … but unless we can restore trust and deliver unambiguous benefits to as many people as possible,” Lechleiter predicted, the industry’s image and stock values will continue to suffer.

To get all three gorillas out of the room, he said, the industry must “create value for shareholders by accelerating the flow of innovative new medicines that provide improved outcomes for individual patients.” To achieve this, Lilly has pushed a “faster and leaner” business model that keeps core capabilities in house while tapping a fully integrated network of global partners to expand research and development, sales and financing.

Lechleiter’s remarks capped off a full day of sessions addressing different aspects of the conference’s theme, “Managing at the Forefront of Change.” The conference began with a keynote address by Elizabeth Bartlett-Flury, who focused on lessons of leadership from her years an executive at the Johns Hopkins Health System and KPMG.

Participants also attended panel discussions that explored adopting environmentally friendly practices; healthcare in underserved markets; and strategic financing and business development in the healthcare industry. A session on consumer-driven healthcare looked at changes that might ensue as patients become more involved in managing and evaluating their own care. A panel on new information technologies highlighted ways that electronic medical records are revolutionizing patient care.

Drawing a large audience, a session on healthcare marketing in the era of globalization featured speakers from three biomedical drug and device companies. When asked what issues kept them awake at night, panelists gave different answers. Access to emerging markets is a pressing challenge for Jim Hassard, executive director for marketing at Amgen. Staying ahead of competitors is a key concern for Phil Nichols, a director in global product development at Ethicon Endo-Surgery, a Johnson & Johnson company. Attracting “smart minds” to an increasingly complex field is crucial for James Fisher ’91, a vice president for global marketing at Baxter.

Conference co-chair Catherine Irwin ’09 said that organizers met their goal of addressing a broad array of topics on the radar of Kellogg participants. “With the changing economy and presidential elections bringing healthcare to the forefront, students have a growing interest in healthcare as a prospective career path,” Irwin said.

“The conference has always been great in the past, and this one continues that tradition,” added Joel Shalowitz, professor of Health Industry Management. “In addition to the opportunity for people to hear thought leaders, it’s also a great opportunity for networking.”

For the first time, this year’s Business of Healthcare Conference coincided with the Kellogg School’s Malcolm T. MacEachern Symposium on health policy and medical innovation, held Oct. 31. The scheduling proved successful, Shalowitz said, and organizers hope to schedule the two events on consecutive days again next year.