In an era of outsourcing and spiraling health care costs, managing the finances of a high-profile, high-risk company such as pharmaceutical giant Eli Lilly and Company is a challenging proposition for even the brightest of minds. But, it was early in his career that a revelation settled any doubt that Derica Rice would be up to the task.
As a young budget analyst, Rice attended monthly meetings at which he presented data to the president of his group. Over time, as he watched the executives debate high-level, strategic issues of global consequence, he came to a surprising conclusion: He could address those same problems, many of which did not require profound solutions, but rather, common-sense approaches.
“The epiphany was that [I realized] they were no smarter than I was,” Rice told a group of Tepper School MBA students who packed Posner Hall to hear him speak as part of the W.L. Mellon Speaker Series. The school's Black Business Association coordinated and hosted the visit as part of the club's Diverse Perspectives Speakers Series.
The mistake that many fresh MBA graduates make is the belief that senior executives are endowed with an imperceptible ability to identify solutions that elude others within an organization, Rice said. Not so, he insists: “The answer to most of the problems is right here with you.”
Now the Senior Vice President and Chief Financial Officer of Lilly, Rice — who assumed his current role two years ago and had been vice president and controller since July 2003 — also serves on the company’s executive committee and operations committee. He joined Lilly in 1990 and worked as a sales representative, manager of global financial planning and analysis for the medical devices division, and global planning manager for pharmaceuticals. Other roles include finance director and chief financial officer for Lilly Canada; executive director and chief financial officer for European operations; and general manager of Lilly United Kingdom and Republic of Ireland.
The early realization that he was capable of proposing viable ideas that could compete with execs higher in the company built Rice’s personal confidence, he says. He found himself asking the question: “Why shouldn’t I try?”
That sense of self-reliance has served him well in an era where pharmaceutical companies are under increased scrutiny and market pressures. The United States spends $2 trillion on health care annually, according to Rice. If growth continues at the current rate, that number will double in 10 years, and account for 20 percent of the nation’s gross domestic product.
As businesses struggle with the spiraling costs of health care, employees are footing more of the bill. Consequently, “consumers are demanding a more explicit reckoning” of where their money is going, Rice says.
On Big Pharma’s side, drugs take much longer to develop than a traditional product: Eight to 12 years, to be precise. Only three of 10 drugs recover the cost of development; only one in five arrives in clinical trials, and the Food and Drug Administration approved 40 percent fewer drugs during the last five years than it did the previous five.
“So there’s a lot of risk in our business model,” Rice notes.
Moreover, there is a lot of risk aversion among consumers, he adds: “Individuals are increasingly less comfortable … with the benefits, as well as the risks, of the drugs that they take.”
And while innovations in medicine must remain part of the bigger picture, the way pharmaceutical companies achieve those innovations must change, or the industry is in danger of becoming obsolete, Rice says.
He told Tepper students that risk, expense, time, and productivity are the industry’s exposure points. To remain competitive, drug companies must reduce costs, speed development, and better leverage their assets. Toward that end, Lilly is evolving from the integrated company it was in the past — in which it managed everything from drug discovery through sales and marketing — to a network structure that shares talent, capital, and resources. It will decide which pieces of its portfolio to keep, sell, or share, Rice explains.
That means outsourcing through increased rules-based chemistry in China, evaluating novel ways to develop Lilly’s assets so molecules don’t sit idle; and creating equity options that provide access to smaller biotech companies.
One Tepper student asked Rice how the company works to avoid compromising quality while still realizing cost savings. Rice noted that PhD-level scientists in India and China are viable outsourcing options, and when Lilly uses outside talent, the scientists must pass the same screens and regulations as its employees.
He also spoke to his longevity with the company, admitting that when he first joined Lilly, he didn’t expect to be there 18 years later. While it is incumbent upon companies to keep people engaged and motivated, he also cautioned students to be wary of the grass-is-always-greener mindset.
“Make sure you exhibit patience,” Rice said. “In my tenure, I have never had time to watch the clock