Are Investors in Pharmaceutical Companies being Duped or Rewarded?

With the continuing investigations and charges of pharmaceutical companies for off-label and other illegal promotional activities with the subsequent meaningless fines and settlements being levied, (relative to the revenues generated by the alleged illegal activities) one has to wonder whether investors are being duped or rewarded.

If investors were aware of the fact that the blockbuster drugs that pharmaceutical companies are touting could not generate the same billions of dollars of revenue if the company had to stick to labeled claims for promotion and depend primarily on indicated uses, would they invest to the same extent?  In the spirit of full disclosure (think SEC), should companies be required to disclose that off-label promotion and use is part of their strategy (not just a possibility) and a major source of revenue that carries the risk of regulatory and legal action if the company is caught or charged and forced to go through expensive legal proceedings that could result in costly settlements?

Or, with the nominal settlements and fines being levied, are investors being rewarded for recognizing the clever business savvy of the pharmaceutical companies that know how to play the game with full understanding that they have little downside and huge financial upsides for ignoring the regulatory and legal constraints on pharmaceutical advertising and promotion?   We’re not talking about the activities of the one-off maverick sales or marketing person. We’re talking about the orchestrated initiatives where pharmaceutical companies know about  and develop plans to take advantage of the bigger market and revenue opportunity if they encourage and illegally promote their product for off-label uses.

Here is another way to look at this.  What if fines and settlements resulting from illegal promotional activities also required pharmaceutical companies to disgorge (forfeit) all product related revenues (attributed to illegal activities or not) during the period in which the alleged illegal activities occurred?

Would investors be as interested in investing or as forgiving of the companies that had to forfeit their revenues for illegal activities?  How many investors would expect disclosure up front if forfeiture of revenues was a real possibility from the planned off-label promotion?

Without getting into whether companies would legally fight rather than ever “settle” if disgorgement of revenues was a possibility, until the fines and penalties approach the revenues generated from the illegal activities, there is no disincentive ( these companies have already decided to ignore any concerns for patient safety), and every incentive, to continue to take advantage of the nominal financial downsides.

At the very least, however, there ought to be a disclosure requirement so that investors can make informed decisions, which for some investors might include investment choices based on supporting ethical and legal business practices.

Moral Dilemma and the Ethics of Pharmaceutical Marketing

You are the product manager, marketing manager, or even VP of Marketing.  You understand the regulatory and legal constraints on your marketing but are there ethical considerations depending upon how your product compares to other therapeutic options?  Let’s start with the easy one ….

You have the treatment of choice with few, if any, other therapeutic options that can help patients for a particular indication.  Any ethical issues in promoting your product?  Probably not, unless you really go out of your way to exaggerate the efficacy or safety of the product beyond what you can prove.  How about when your product benefit and indication is for a small patient population for which you already have a majority of the market and the company expects you to grow revenues next year? Any ethical issues now? Probably not if you continue to promote within your market but what about bigger “off-label” indications?.

How about a product that is as good as everything else to treat a particular disease?  Your product is no better or no worse than the other products.  You might have a few features that are better but the other products have a few that are better than yours.  Neither your product nor competitors has a clear efficacy, safety, or feature advantage that clinically matters.   What are the ethical issues for promotion in this situation?  How about comparative advertising when you know there is no difference?  Can you make your product look better than the other products? This is probably the most likely scenario for most products today.  Probably not too many ethical issues yet unless you exaggerate your benefits beyond your clinical proof or downplay your safety issues to create a competitive advantage.

Now, same scenario as above (no difference) but you are the branded product and there are several generic versions of therapeutic alternatives (in the same class of drug) for the indication?   Are you tempted to make a difference out of no difference to maintain your branded product sales? Is it ethical to expect patients (or insurers) to pay more for the same therapeutic outcome? I can hear it already…branded products are de facto better than generics.

How about when you have a product that is not as effective or as safe as competitive products or therapeutic alternatives?  Getting more interesting isn’t it?  The company still has revenue growth expectations so what are you going to do?  Should you be trying to get more patients on your product if it isn’t as safe or effective as other products?  You are probably thinking it is the physician’s choice, not you making that decision….right?  If you can convince the physician to use your product, it’s their decision…right? How do you feel about that?  How does your manager feel about this?  How does your company feel about this?  What would they say if you raised the issue with them?

While I’m not certain product managers or companies for that matter are thinking this way,  they are faced with these issues everyday in the pharmaceutical industry.  Think about the products your company promotes.  Which scenario do each of the company’s products fit into?  How are they being promoted?  How do you feel about that? Anybody in the company asking these questions?

What’s the answer to this dilemma?

How about company executives (VP Marketing or higher) recognizing the issues and making the call so as not to put front line marketing managers in a difficult, potentially career jeopardizing position?  In the future,  have more products in the first scenario ….innovative clearly differentiated products that you are proud of and that you can promote without having to compromise your ethics.

Pharmaceutical Sales Healthcare Reform Survival Guide

Most survival guides provide useful hints and tips for increasing your chances but don’t necessarily guarantee your survival.  Survival may also result in you surviving but not necessarily in the same shape as you were before the life threatening ordeal (e.g., appendages lost to frostbite or post traumatic stress from the ravages of war).  For pharmaceutical sales reps, one of the most likely outcomes of your survival will probably be that it will not be in the context of your current job function as a “detailing” sales person.

Survival also requires that you do things differently than you otherwise might. For example, you might be thinking some of the suggestions below are the responsibility of the managed care executives and not yours.  Also, these suggestions are probably not going to be condoned or approved by the District Sales Manager who wants you to focus on delivering the 3 message points per product to your targeted high volume prescribers.

With those caveats, the suggestions that follow may provide you an opportunity to survive (in the pharmaceutical industry) where others might not.

  1. Be aware of your environment and the changes taking place.  You’ve probably been told someplace in your past that you are responsible for the “business” in your territory.  Your survival tip is that you have to take this to another level of market understanding and forge relationships beyond your call list.
    • What insurance companies are operating in your territory? Who are your contact people for that insurance company?
    • Which PBMs are driving the most business in your territory? Who are your contacts?
    • Do you know the people making the formulary committee decisions that affect your territory?
    • Do you have a good understanding of what they are looking for, what they are expecting from the pharmaceutical industry, and how you might be able to accommodate those expectations?
    • If you were managing this managed market for the company, what would you be doing?  What would you be doing differently?
  2. Are you making calls or developing field intelligence?  Your ultimate survival depends more on the field intelligence you gather and assimilate than the number of calls you make.  It provides you a knowledge base and level of expertise beyond your current job function. Most importantly, your field intelligence can help you anticipate changes and the impact of those changes on you and your company.
  3. Do you have enough local support, contacts, and relationships to help you do your field intelligence gathering effectively and efficiently? Do you have a good relationship with company managed care executives in your area? How valuable is your rolodex in the context of the evolving new healthcare market?  Managed market contacts and relationships will be worth a lot more than your collective physician database.  Even if you have to go to another pharmaceutical company, your managed market relationships, knowledge, and expertise have far greater value in the evolving new healthcare market.
  4. Are you developing and strengthening your technical expertise across therapeutic categories?  This goes beyond just knowing your product but also knowing competitive and pipeline products as well.  Do you have disease as well as product expertise?  Do you know the literature? Like in most survival situations where physical strength and endurance are often tested, in pharmaceutical sales, the strength of your relevant technical expertise increases your chances for survival.
  5. Based on survival tips 1 through 4, have you drafted a plan?  Putting it in writing makes it real and will help you identify any shortcomings and gaps that you need to attend to.  As with any survival situation, one slip up or oversight can be disastrous while one right move at the right time can mean the difference between life and death.

Good field intelligence, strong managed market relationships, relevant technical expertise, and a well thought out plan will increase your chances for survival.  Again, your survival may be in a different context, but at least you have a better chance of surviving.

For all those dedicated pharmaceutical sales reps out there today, you have a difficult job in an increasingly challenging market and I genuinely wish you the best of success and hope this helps you at least to start thinking about developing your own personal survival plan.

Preparing Pharmaceutical Company Employees for the Impact of Healthcare Reform

Pharma must continuously adapt to the changing market and align resources including its people assets, to accomplish corporate objectives and satisfy market expectations.   While much of the downsizing over the past couple of years is understandable given Pharma’s rapid growth over the past couple of decades, the recent mass layoffs are not just an adjustment to the weak economy.  For Pharma, these layoffs and downsizings are more a reflection of poor long term planning and mismanagement of valuable people assets.

For those who still have a job in the industry it is critical to understand where the market is headed and make certain that you have the expertise, skills and competencies that are going to deliver value in the evolving new healthcare market.  For example, getting better at traditional sales and marketing tactics might be a good thing for now but in the evolving new market you better have some experience and expertise working in a managed environment.  Making product presentations to HMO physicians doesn’t count.  If you are in research, you need to be looking at your expertise and determine whether or not it is being applied to truly innovative products or companion diagnostics in a therapeutic area that has a critical unmet medical need.

Executives may feel comfortable in your personal position but you have people in your organizations that need your guidance and development support to assure they are not becoming obsolete and destined to be a casualty of the changing market.  If you have people without the skills that you are going to need you should be preparing them to be let go (not telling them at the last minute, when it is too late) or getting them training so they can acquire the skills or expertise they will need to continue to be successful in the evolving new healthcare market.  It would be interesting to know how many people with good performance reviews were stunned with the “pink slip” and unexpectedly let go over the past couple of years.

In the end it is the individual’s responsibility to make certain they have the expertise and skills to continue to add value in the evolving new healthcare market.  It is executive management‘s responsibility to make certain the organization is developing its people assets and preparing them for the organizational changes necessary to align with the realities of the evolving healthcare market.  With effective long-term planning, diligent organizational development focused on expertise and skills needed in the future and done as an ongoing process  you wouldn’t see the major restructurings, disruptive reductions in force, and the unnecessary personal and financial pain suffered by employees and their families.

The implications of healthcare reform and the impact on the pharmaceutical industry require a reassessment of individual expertise,  skills, and competencies.  Do you have what it will take?

Prescription Drug evaluations under Healthcare Reform

Once you have the attention of your customers (aware and interested in your product) they will usually evaluate your offering against other therapeutic options before they try or buy it.

In the past you may have been able to convince individual physicians that you had a better product for their patients by using any combination of sales presentations, marketing brochures, published clinical papers, or by having them attend company sponsored speaker programs.  Some physicians jumped right to using samples as their evaluation process. These were all effective tactics used to provide information for evaluation and biased or not, it was often the only information that physicians had convenient access to that helped them evaluate your product against other therapeutic alternatives.

In the evolving new healthcare market, even if you convince the physician you have a great product, what happens when they write the prescription but the patient’s drug plan does not have your product available on their formulary or it is available at a significantly higher, and perhaps an unaffordable, co-pay than other treatments?

Yes, this same situation can happen today but as the realities of healthcare reform take hold; cost management will intensify, including putting increased pressure on controlling the cost of prescription drug treatment. Managed plans will become more demanding for the information they require to substantiate your differentiating claims of better efficacy, improved safety, or cost benefit.  With the number of very effective mass market blockbuster products coming off patent over the next 5 years, prescription drug plans will have even more generic drug therapeutic alternatives to evaluate against your new product for many of the chronic diseases that drive revenues for the industry today.  Remember, you’ve been telling these same people how therapeutically wonderful these products are for years.  Now that they are available as generic drugs doesn’t make them any less therapeutically beneficial for their patients.

So what does this mean?  The evaluation step of the adoption sequence in the evolving new healthcare market will require marketers to answer two questions.  Marketers will also need to align every pieced of supportive data they have to prove the answers they are giving are based on credible, preferably published, scientific data (and not just implications and marketing hype).   This market will no longer buy into just because it is new, it is better message.  So, what are the two critical questions that must be answered?

“Why should we use your product rather than these other therapeutic options (including generic drug options) we have available?”


“Why should we pay more than we pay for these other therapeutic options that happen to be available as generic drugs?”

The difference between the past (or even the present) and the evolving healthcare reform- driven market is that prescription drug plans will be even more demanding and rigorous in their evaluation process. With so many good generic drug options available at lower cost they will need very good rationale and data to support their decisions and to justify the added costs associated with putting an expensive new branded products onto their formularies.  Patients may always have the option to pay for your product themselves but this is not where marketers are going to want to be, as you will not get the volume or revenues you need to make it worth marketing.

The good news is that if you have a truly innovative treatment that you can demonstrate has a clear clinically meaningful benefit at a reasonable price you will make the formulary decision easier and you may find the plan interested in working with you to increase the rate of adoption and encourage the use of your new product.  Again, all the marketing and sales hype you want to deploy for a “new” and “different” product without a meaningful clinical or cost benefit won’t get you there.  It will take solid credible clinical data to support the answer to the two questions.

It is this evaluation step that will make the evolving new healthcare market more challenging for pharmaceutical marketers going forward.  As physician prescribing practices are guided and constrained by prescription drug formularies and patient co-pay affordability, traditional marketing and sales tactics will have less of an impact on the evaluation step.  A good portfolio of effective treatments available as generic drugs makes this even more challenging.  Good science with strong data to support new product clinical benefits or overall healthcare cost savings will be more important than ever.

Guess marketing better start working even closer with and provide some meaningful input to  R & D.