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Sep 09, 2023

Scherer Force

Unlike many inventors whose patents never earn them lasting fame or fortune, Robert Pauli Scherer revolutionized the pharmaceutical industry in the 1930s with his rotary die encapsulation machine that

Unlike many inventors whose patents never earn them lasting fame or fortune, Robert Pauli Scherer revolutionized the pharmaceutical industry in the 1930s with his rotary die encapsulation machine that manufactured soft gelatin capsules for medications and dietary supplements.

His invention became the engine for a worldwide business empire he established in Detroit.Scherer, born in 1906, was 24 years old when he filed a patent application for his rotary machine in 1931, his first submittal. His breakthrough creation came out of a three-year effort in a metal workshop his father had set up in the basement of the family’s home at 67 Kirby St., just north of the Detroit Institute of Arts.

His father, Dr. Otto Scherer, an eye specialist, and his mother, Josephine, sent their son to public schools before he enrolled at the University of Michigan in Ann Arbor, where he earned degrees in chemical engineering and the arts.

Following graduation in 1928, Scherer signed on as a $30-per-week employee with a pharmaceutical company — an experience that sparked his interest in how drugs and medicines were processed and shipped. He lasted three months before resigning.

“The job had no future but it gave me an idea,” he told his father, according to a profile of him published in 1942 in The Detroit News. During his brief stint at the company, he studied the plate process machines used for making capsules.

“I can make a better one because these machines belong in the horse-and-buggy days. This field is untapped,” he told his father.

“What are you going to do about it?” his father asked.

“I’d like to go to work on my idea in your basement workshop,” Scherer replied.

The production shop was tied to Otto’s long-held theory on education; in addition to earning college degrees, his four sons’ schooling wouldn’t be complete until they learned to labor with their hands.

For three years, young Scherer toiled in the basement, developing his idea for making soluble elastic gelatin capsules using a rotary die process. Needing additional room, he rented space on the sixth floor of a railroad terminal building that he could use only at night.

As brilliant as he was as an inventor, young Scherer would prove he was equally talented as a businessman. In 1933, despite the collapse of banks during the Great Depression, he went ahead with his plans to open Gelatin Products Co. featuring his newly invented machine. To finance his new venture, he tapped his father for a $3,000 loan. His mother-in-law chipped in $2,000 in auto stocks.

Despite the investments, the debut of his new machine didn’t go as planned — it broke down in its first major demonstration, prompting a skeptical executive of a large pharmaceutical company to walk out.

Realizing his capsule-making machine was too bulky to carry without mishap into the offices of drug makers, Scherer hired a crew to make 10 minutes of moving picture film showing his machine in operation.

The effort worked, and pharmaceutical companies were impressed with his soft gel capsules filled with doses of medicine that were easier to digest. At the same time, encapsulating what could be foul-tasting drugs made them easier for patients to consume.In short order, Scherer hired four employees and the team set up a capsule factory in a small store his father owned on Gratiot Avenue. His first capsule sale, a $30 order, came from his first employer. Next was a $500 order for capsules from a larger company.

In September 1933, as word spread about Scherer’s capsule-making machine, the president of Parke Davis Co. in Detroit offered him $250,000 — a fortune in Depression-era dollars — for exclusive rights to his machine for 10 years. As part of the deal, Scherer would abandon the capsule market for that period.

Scherer decided to reject the bid as he and his wife were on their way to the post office to mail an acceptance letter. “This machine is my baby,” he reasoned to his wife. “I’ve worked on it too long. I can’t part with it, and besides, what else could I do?”

Tearing up the letter, Scherer quickly expanded the business, converting three storefronts on Gratiot into his factory. A second-floor apartment served as an office and display area.

One morning in the spring of 1934, as he was sitting down for breakfast, his brother Henry called, shouting excitedly into the telephone: “Bob, we just got an order for 5 million capsules.”

It was the inflection point Scherer had dreamed of in those years spent toiling in his father’s basement, and during the long nights working in the sixth-floor workshop. After his brother’s call, multimillion-dollar orders began flowing in.

By 1947, with an impressive list of major drug manufacturers as customers, Scherer changed the name of the business to R.P. Scherer Co. As it continued to dominate the American drug capsule market, R.P. Scherer expanded into Canada, Europe, and South America, setting up manufacturing plants and distribution centers in more than a dozen countries.

The company would eventually capture more than 60 percent of the worldwide market for soft elastic gelatin capsules. Scherer had similar success when he began producing two-piece fused hard shell capsules, popular with the growing market for vitamin supplements.

In 1951, Scherer, his wife, Margaret, and their four children, two boys and two girls, moved from their Palmer Woods home in Detroit to a new 7,050-square-foot house set on three lots along Lake Shore Drive in Grosse Pointe. The manor was designed by noted architect Hugh T. Keyes.

Overlooking Lake St. Clair, the Scherers’ new home featured a heated four-car garage, a heated in-ground swimming pool, a fully equipped metalwork and woodworking shop in the basement, and expansively landscaped grounds.

In 1955, as a measure of his success, Scherer’s original encapsulation machine was enshrined at the Smithsonian Institution in Washington, D.C.

Scherer’s meteoric rise from novice inventor to an international business titan living among the Fords, the Dodges, and other area industrialists was relatively short-lived. In midsummer 1960, after a brief illness, he died of lung cancer at age 53.

If Scherer’s career was a magical ride of brilliance, the future of the company and Scherer’s heirs was more like a television drama. At age 27, his son, Robert P. Scherer Jr., took over the company as chairman. Over the next decade, the Scherer Co.’s monopoly of the soft gelatin market propelled it to new heights with 18 manufacturing plants in 12 countries.

Robert Jr. also diversified Scherer with a series of acquisitions varying from medical supplies to hair care companies. He took the company public in 1971, when the stock price topped $40 per share.

Ten years later, however, problems emerged with some of the acquisitions. Competitors and economic headwinds cut into Scherer’s monopoly. Board members grumbled about Robert Jr.’s management style, including his personal use of the company’s Lear jet.

The directors included his sister, Karla Scherer Fink, and other family members. In 1979, Robert Jr. left the company, and Karla’s husband, Peter Fink, was installed as CEO.

In 1988, Karla filed for divorce from Peter, and with her brother, John, launched a proxy fight to force the sale of the company. Soon after, a subsidiary of Shearson Lehman Hutton Holdings Inc. paid $407 million for the company. In 1998, Cardinal Health Inc. acquired Scherer for $2.4 billion in stock and assumed debt, and folded it into its holdings.

The family’s history, though, remains. The home that Robert Pauli Scherer grew up in at 67 Kirby received a Michigan Historical Marker in 1984, and now houses the Hellenic Museum of Michigan. His Lake Shore Drive house didn’t last, and was torn down in 2010 to make room for two new houses.

Over the course of his life, Robert Pauli Scherer was granted 52 patents.

“My dad was what some would consider a genius,” says John Scherer. “We couldn’t measure his IQ becasue everytime he took an IQ test, he got a perfect score. He also had an uncanny ability to provide a solution to a problem even before someone completed their thought process to him.”

The son adds the company had numerous milestones, including being the first U.S. company to enter into the German market following World War II with a local partner. The German plant, which opened in the early 1950s, was one of the company’s most successful operations.

“My dad rarely traveled to the foreign plants, because he felt if they were being run correctly, there was no need to visit them on a continual basis. In addition, my uncle, William Scherer, was an architect, and he designed our plant in Argentina.”Apart from revolutionizing the pharmaceutical industry, Robert Pauli Scherer’s machine raised worldwide health and nutritional standards.