Meredia withdrawal shows risk of Nestle choice

Summary:A drug company knows that future market studies may come back to haunt them. A food company does not.

A few weeks ago I wrote here about Nestle's decision to organize a new division at the intersection of pharma and food. I noted that Abbott Labs might be a takeover target for that division.

Yesterday's decision by Abbott to pull the diet drug Meredia from shelves illustrates the risks of that path.

Nestle wants to make food more like software. That is they want to add intellectual property to what you eat, aimed at better living through chemistry.

But pharma patents and copyrights,  unlike software patents and copyrights, carry risks which the Meredia case illustrates. Drugs can be found to be dangerous years after their introduction, creating unexpected liabilities.

In the marketplace battle between chemical food and real food, chemical food today only has a chance in niches. Ensure, an Abbott product, is an example of such a niche product. When an aged relative was undergoing chemotherapy some years ago, Ensure proved to be the only nutrition he could tolerate.

But for Nestle's strategy to work it has to go beyond niches. It has to get into more mainstream markets, like weight loss.

The Meredia withdrawal illustrates the risks. A drug company knows that future market studies may come back to haunt them. It will plan accordingly, and its margins let it plan. A food company does not have that luxury. Its margins won't let it plan in the same way.

This may not prove a marriage made in heaven.

This post was originally published on Smartplanet.com

Topics: Innovation

About

Dana Blankenhorn has been a business journalist since 1978, and has covered technology since 1982. He launched the Interactive Age Daily, the first daily coverage of the Internet to launch with a magazine, in September 1994.

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