- High drug prices that seem unsubstantiated in the context of value
- Promoting new products as innovative when they are merely chemical modifications with modest improvements at best over products already available
- Questionable and sometimes illegal marketing and sales activities that unnecessarily put patient health at risk
- Annoying television advertising with warnings that make you wonder why you would want to take the drug in the first place
- Seeking help from a patient advocacy group only to find out it is more likely a Big Pharma front to access and influence patients
- Waiting in the doctors office while the drug sales reps see the doctor
- Hiding or downplaying safety issues, adverse effects, and potentially fatal drug related-events to increase or preserve sales
- Inappropriate payments and other perks going to physicians that suggest companies are buying prescribing influence
- Promotional infiltration of continuing medical education
- Abusive and deceptive use of medical journals for scientific promotion
- Waiting for years to receive nominal compensation for harm done as companies deny responsibility and drag out legal proceedings.
- Arrogant executives dismissing or denying any wrongdoing despite evidence, legal or congressional testimony, and even their own internal communications that suggest otherwise
- C-level executives being rewarded with generous compensation packages in the face of multi-million dollar and even billion dollar fines and settlements for regulatory non-compliance and alleged illegal activities
Did I miss a thing or two? Looks like a check list for Pharma to start reassessing what they can do to improve their image with the public and the healthcare system. I think it is important to note that these are not fixable with multimillion dollar public relations campaigns or policy statements from PhRMA and no amount of life-saving products will make these go away. Why? Because these are the public’s reality based on actions and behaviors of the industry, not misperceptions.
Establishing, or in this case, reestablishing trust and credibility with your customers is critical for long-term success for any business. Without trust and credibility, many yet to be discovered best treatment options may be slower to be accepted and unfortunately, may not get to the patients who need them, when they need them.
Pharmaceutical and biotech company marketers have always appreciated the impact they could have with pharmacoeconomic data to support the advertising and promotion of their products. Unfortunately, it was rarely a prerequisite for commercial success and more often than not, done after product launch using retrospective database analysis and speculative modeling. In the evolving new healthcare market that will change. In an increasingly managed and cost conscious market, even innovative products with meaningful clinical differentiations from other therapeutic alternatives will be expected to substantiate the value of that differentiation. So how do you deliver on those expectations? You start early in development.
Pipeline project evaluation:
- What are the target product profile value drivers? Specifically, what are the points of differentiation; the reasons why this product will be better than what is currently available or that might be available at the time of product launch?
- What are the plans for proving that these points of differentiation are clinically real and meaningful?
- Will it be possible to include these points of differentiation in regulatory labeling (package insert) so they can be used in marketing programs?
- Can marketing ascribe a quantitative value (cost benefit) to these points of differentiation? What are they worth to the patient, to healthcare providers, and to the payer?
- Have you modeled the potential value of the differentiation and the minimum comparative value that is going to be meaningful to payers? At what point, does the differentiation no longer have meaningful value?
- Are trials designed to deliver data to prove the points of differentiation?
- Are the trials designed to capture the quantitative value of the differentiation? Have credible, valid pharmacoeconomic metrics been used?
- Have you eliminated bias from the quantitative design elements?
- Have you built in conservative pricing assumptions and options? Are they sufficient to allow for valid sensitivity analysis?
- Will the value assessment be reproducible in the real world?
This approach relies heavily on the marketing team understanding the value expectations of the market, the competitive value propositions, and the impact of pricing on the value proposition model.
The research teams must look at not only trial designs from a regulatory perspective but also must be accountable for delivering the definitive proof of differentiation and the data to support the quantitative comparative value (pharmacoeconomics).
Many pharmaceutical marketers do a series of market research studies and then typically set a price based on competition and “what the market will bear”. They then try to justify the value when they go to market. Now, marketers will need to appreciate, very early on, the relationship between the price they set and the value they can prove based on that pricing and the available clinical and pharmacoeconomic data. Comparative value assessments by payers will be data driven and will not be influenced by marketing hype.
I’m certain that some who have read this post will think that this process is idealistic, impractical, and some might even argue it is not necessary. That is might be true until they realize their competitors who are developing comparative value data are creating a substantial competitive advantage and increasing the probability for more ready access to drug formularies at premium prices.
Most Big Pharma development programs focus on regulatory requirements for FDA approval. Makes sense. There is no commercial value in a product that can’t get approved. Healthcare reform and the evolving new market, however, are going to impose another level of expectations that go well beyond FDA product approval.
Big Pharma research teams often develop elaborate target product profiles that provide the reasons for developing drugs in the first place. New mechanisms, less of this or more of that, better dosing schedule or something that makes the product worth developing. These profiles often provide the theoretical rationale for why the product is better than what is out in the market. These points are also highlighted every time a budget is reviewed to support continued investment in the product. Unfortunately, few development plans reflect “proving” these points of differentiation. Being able to demonstrate “better” for your product compared to other therapeutic options, including generic drug alternatives is rarely part of a regulatory path to approval. In fact, being “as good as” or “not worse than” is the statistical goal of most programs.
So holding research teams accountable to deliver the “differentiation” proof and data would be one place to start, especially in the face of market expectations for “comparative effectiveness” studies. But here is the real kicker. Even if they can demonstrate some clinically meaningful superiority to an available alternative treatment that doesn’t ensure market acceptance with widespread adoption or that the product will become the “treatment of choice.” I’m not talking about product launch failures or poor commercial execution issues here.
Once the company has demonstrated (solid clinical data) a clinically meaningful difference it will have to have data to show that the difference is worth paying for. This will be especially challenging when the alternatives are less expensive generic drugs. I can hear the formulary verdict already. “We have determined that your product is clinically better than the treatment options available to us but the price difference doesn’t’ justify including your product on our formulary.” What the market will really be asking for is “comparative value” data.
We’ll discuss what companies should be doing to deal with this in the next post.
The recent Johnson and Johnson product recall highlighted a concept I have been researching as I reviewed the rapid growth in the pharmaceutical industry over the past several decades. When the financial institutions and auto companies started to fail and were bailed out because they were “too big to fail” I started looking at why and how big companies could have gotten to that point of failure, near collapse, or just outright dysfunction.
The espoused benefits of being “big” include critical mass and economies of scale arguments with opportunities for increased purchasing power and dominant market presence (I know the antitrust lawyers and FTC don’t like that terminology but it is a reality). Big companies clearly have more leverage and their balance sheets usually allow for more financial and strategic options than are available to smaller companies ( just ask the small banks if they are getting the same favorable terms as the big guys). Being big used to provide a sense of stability and certainty, a sense of lasting power. For all the benefits of being “big” however, one has to also consider the challenges as well as the potential liabilities that come along with being a big company.
Companies seem to eventually reach a point at which they are no longer able to leverage the benefits of their organizational size and their size actually begins to work against them. At this point their organizational size makes it nearly impossible for the company to be managed efficiently and effectively. This size factor is not necessarily related to the amount of revenue or profits but is more about organizational size relative to the complexity of the business and the market in which the company does business. There seems to be some breaking point in terms of the cumulative affect of the numbers of people, numbers of companies or divisions within the company, the numbers of countries the company operates in, the layers of management from top to bottom. It is at this point at which things just start to fall apart.
Here are some things that “big” companies struggle with as they get organizationally larger in size. They may do these things but it becomes increasingly difficult to do them consistently well across their company at the same high level of proficiency as when they were a smaller company.
- Management complexity increases
- Maintaining high personnel standards for expertise, competence, and integrity consistently across the entire organization
- Intense focus on delivering high impact, value creating results
- Pinpointing responsibilities and accountability
- Disciplined expense management and resource deployment
- Frequent and value added management oversight (inspect what you expect)
- Senior management and executives personal interactions with customers and employees
- Frequent, personally engaging corporate communications especially in a global business
- Aligning organizational goals and objectives with the daily activities of front line employees
- Comprehensive, insightful strategic planning that factors and address changing market conditions
So what happens when you get “too big?”
- Expertise and competence are diluted across the larger organization
- Management oversight becomes less diligent
- Operational inefficiencies build over time
- Blurred lines of accountability leads to finger pointing when things go wrong
- Policies and standard operating procedures become management crutches for managing performance and maintaining control
- High quality standards are compromised by diminished diligent oversight and lack of intervention
- Loss of focus on high impact mission critical projects
- Cultural expectations as delineated in corporate mission and visions statements become meaningless as employees witness an increasing number of breaches by management
- People management and career development (organizational development) becomes more politically driven than skill, expertise, and performance based
- Employee morale suffers from management indifference (nobody really cares about what I’m doing anyway)
- Creative people and people with specialized expertise tend to become frustrated and leave
- Mistakes and poor decisions go unchecked and become legal and regulatory issues with greater frequency and increasing severity
- Expenses get out of hand and budgets become bloated
- Strategic planning becomes business maintenance and risk avoidance rather than innovation to meet customer needs
- Management and employee training becoming task oriented, generic, and less focused on personnel development
- Wall Street becomes the customer with executives focused more on quarterly financial results than attending to market needs and expectations
- Opportunities for breaches in personal and corporate integrity increase
Big Pharma grew fast over the past several decades. I believe the negative unintended consequences of that growth are now being realized. I wonder if Boards of Directors and executive teams are considering that their large size may be detrimental to their success and possibly their survival. More mega-mergers anybody?
Biotech has proven to be a viable source for innovative new drug products. The healthcare market’s increasing demand for innovation and the need to fill gaps in Big Pharma’s research pipelines in the face of blockbuster product patent expirations have driven Big Pharma to get a lot more aggressive in seeking innovation outside their own research teams than they have been for decades.
There are five critical success factors that could help the relationship between Big Pharma and biotechs remain a productive source of innovative new products for the healthcare market:
- Pharma must respect the scientific expertise of the small biotech companies and resist the temptation to impose its bureaucracy and corporate expectations on the research teams of the smaller biotech companies
- As much pressure as there is to get products and technologies to market, it is important to make sure the science of these biotech innovations is allowed to be fully vetted before they are advanced to clinical trials. Pushing technologies into and through development only to be disappointed by the clinical results in Phase 3 trials may prematurely, inappropriately, and misleadingly dismiss perfectly good products that are not given a valid scientific chance to succeed. Small modifications or adjustments in chemistry or better defined or better chosen clinical endpoints might lead to success where failure lurks.
- While there is a robust diversity of innovation being worked on at universities and in small biotech companies, the number of projects that will result in commercially viable innovative products is still finite at any point in time. And because innovation often starts in the university lab, Pharma should be looking for ways to finance and collaborate much earlier with basic science programs at universities to make certain the flow of innovation continues.
- Technologies and innovative products directed at a particular therapeutic target or disease are frequently dispersed across multiple companies, across different universities, and even across multiple departments within a university. Pharma should develop programs to help facilitate collaboration amongst these disparate programs and projects to exploit the expertise and increase the probability of finding the best solutions for treating and possibly curing diseases.
- Universities and small biotech companies must better understand and appreciate the financial risks Big Pharma is taking in providing support at early stages of development and manage their financial expectations accordingly.
I have long been a proponent of the need for change and cleaning up the bad behaviors of the pharmaceutical industry to reestablish trust and credibility. At the same time, with the challenges and constraints the industry now face one has to wonder if Big Pharma will be as attractive a place to invest or as attractive a place to work as it has been in the past. Investors willing to make huge investments that carry high risk and talented research scientists with expertise are two essential ingredients to Big Pharma success. If these go away, it is scary to think of a world without Big Pharma (imagine no Big Pharma in the past or future):
- Fewer treatments that have contributed to the health and well-being of society and in many cases, saved lives (contributing significantly to increasing life expectancy)
- Many physicians would be less well educated about drug treatment options, especially any new products, without the advertising and promotion efforts of Big Pharma
- Fewer patients would be aware of or have access to information about their diseases and treatment options
- Medical schools, professional medical societies, scientific meetings and conferences would be financially challenged with severely constrained medical education programming without Big Pharma support
- Medical journals would have far fewer well controlled clinical trials of sufficient size to reach clinical significance to publish
- Many medical journals would not exist without Pharma advertising support
- Millions more patients would not be able to afford their medicines without assistance from pharmaceutical companies
- Start-up biotech companies would find it nearly impossible to find investors who are looking at Pharma as development partners (to help fund expensive development trials) and possible acquisitions as an exit strategy for their biotech investments
- Hundreds of thousands of well paying jobs would not exist and along with those jobs would go the money that those people put back into their local communities (not to mention the corporate taxes and philanthropy).
- There would be a smaller generic drug market (no generics without proprietary products to copy)
- There would be little hope for developing and commercializing (making products readily available to patients in need) the yet to be discovered new treatments
While some may take exception to these points and might suggest there are better alternatives to Big Pharma, and others may also feel I have missed a few points, it is still hard to imagine a world without Big Pharma and I don’t believe it would be good for the healthcare market or for patients.
Unfortunately, the good the pharmaceutical industry does is often overshadowed by sensational misbehavior, the seemingly endless number of product liability cases, and the nagging reinforcement of perceived high prices every time patients get their prescriptions filled. It is time for the industry to change.
“Get the dirt and fog off the windows so the sun can shine in.”
With all the good the pharmaceutical industry has to offer, it should be an industry the market and patients embrace and appreciate, not despise.
Thanks to Dick Bergman comment for getting me thinking about this.