We Hate Your Financial Influence but we Like Your Money

A change of heart at Stanford Medical School allowed it to accept $3 million from Pfizer for CME after having publicly denounced the inappropriate financial influence of industry on CME. The draconian ACCME decision regarding AHA (American Heart Association) meeting restrictions on industry presentations could have had serious financial implications for AHA if they had not defended their peer review screening process and the desire to have industry scientists on their programs.   Although there was considerable support for the research information sharing value of industry participation,  I also suspect a considerable amount of industry financial support could have been at risk including major sponsorship commitments, exhibit space sales, and other marketing opportunity fees.   And now the state of Massachusetts is having second thoughts about restrictions they have placed on pharmaceutical sales representative activities (e.g., pens, sticky pads, and free lunches) because of the negative financial impact the restrictions are having on local businesses.

Are we getting to a point where the level of ethical and conflict of interest concerns about pharmaceutical industry influence will be moderated more by the level of financial impact than the convictions of those imposing the restrictions?

Here is one way to keep people honest about their ethical and conflict of interest considerations when restricting pharmaceutical industry activities.

It is the right of these groups and organizations to regulate and even ban pharmaceutical industry activities.  But,  if industry influence on prescribing and concerns for conflict of interest are seen to be detrimental to patients and are the basis for these decisions to preclude the industry from participation, then the restrictions and the need to avoid these influences should apply in principle to all members of that group or organization as well.   There are now a sufficient number of cases which demonstrate physicians and scientists are not immune to breaches of integrity and have been equally responsible for creating these concerns for biasing information about prescription drugs and participating in the creation of conflicts of interest.  Therefore the restrictions should apply to both sides of the activities of concern.   Here are some examples of how they should apply to Massachusetts or for any other organization with pharmaceutical industry restrictions:

  • No physicians in the state of Massachusetts (faculty member of Stanford or AHA member, for example) should be allowed to accept any fees from industry, even for legitimate advisory, consulting services, or Board of Directors participation.  These individuals are selected for their expertise and they could be influenced by these payments (more so than a free lunch or pen).  More importantly, these individuals, because of their expertise and influence, have the capacity to influence (pass along biased information) far more physicians in private conversations and even in non-industry sponsored programs.
  • Massachusetts licensed physicians and other healthcare providers (or from other restricting groups) should not be allowed to participate in any industry sponsored meetings or conferences.  This includes any national society meetings or conferences or scientific meetings sponsored by industry.  A pharmaceutical company merely being seen as a sponsor could favorably influence a physician about their views of the company and their products. Not to mention the exhibit area influences they would be subjected to.
  • No medical meetings or events sponsored by the pharmaceutical industry should be allowed to be held in Massachusetts as this would be encouraging the very behavior (inappropriately influencing physician prescribing) and activities they are trying to curtail with their restrictions.
  • Clinical studies are powerful ways to influence prescribing, especially for new products.  Therefore, clinical studies should not be done in Massachusetts (or other restricting institutions).  If they are done they should be done for no fees with only nominal, non-compensation related administrative expenses being reimbursed.
  • Research grants and funding have the potential to favorably influence prescribing practice, especially if the data are published under the reputable name of the institution.  Therefore, no industry sponsored research should be conducted at or in institutions other than drug, life science, or biotech companies within Massachusetts.  No industry sponsored research should be allowed at any state facilities or their affiliates.

While these may have significant negative financial implications for individuals, businesses, and organizations, this mutual implementation of restrictions would preserve the integrity of decisions made to avoid conflicts of interest and limit the perks and financial influence of the pharmaceutical industry on prescribing practices.  In fact, these restrictions would have a far greater impact on assuring the elimination of industry influence than taking away pens, pads, and free lunches.

I suspect the negative financial impact will probably be far too great to allow ethics and decision making integrity to prevail in most situations .  As long as it makes financial sense for Massachusetts or other organizations,   the restrictions and expectations for compliance will be one way (only the industry must be controlled and comply) and will not really be driven by the ethical and integrity convictions of those imposing the restrictions.


Hidden Upside for Pharmaceutical Pricing in Healthcare Reform

Recent announcements and news coverage about health insurance company actual and anticipated rate increases may have gotten President Obama’s attention but more importantly, raises serious questions about how and if increasing costs will or can be controlled in the new world of healthcare reform.  Keep in mind that we are all paying for increasing healthcare costs regardless of whether we have private insurance, employer provided (your paycheck deduction increasing for your share ) or  government subsidized coverage (your taxes at work).

One of the near term beneficiaries of out of control healthcare costs is going to be the pharmaceutical industry.  Coverage and use of expensive branded prescription drugs will continue and while adoption and market acceptance may be slowed by higher introductory prices for new prescription drugs, they will most likely still get on formularies and be available for physicians to prescribe.  I believe, however,  this will be a short lived upside.  Without change and a focus on cost control, here is how I see it playing out.

In the near term, as long as insurance companies and pharmacy benefit providers can continue to raise their rates to cover their costs and maintain profitability, there is little incentive to get aggressive about coverage or costs.  If patients and physicians demand treatment, including expensive procedures or branded prescription drugs, insurers may assess the impact on profitability near-term and they may go through the motions of evaluating reasonableness long-term but in the end they know they have the ability to cover costs by squeezing providers and increasing rates.  So, it really doesn’t cost them anything to include coverage for example of expensive branded prescription drugs. Their only incentive to keep costs down is to remain competitive, but in reality there really isn’t that much competition (similar insurance premiums) amongst the few providers available in a particular geographic healthcare market.

Lack of competition and the ability to raise rates to cover increasing costs will eventually make healthcare insurance unaffordable for businesses to provide, for individuals to consider, and for government to adequately subsidize.  At that point healthcare reform will meet a crossroad of needing to legislate cost controls (e.g., limit insurance rate increases) or be forced to a single payer system. Both options will impose reductions in coverage and costs that will seem draconian by today’s standards of care.  Expensive procedure and branded prescription drugs for which there are less expensive therapeutic options or that can not demonstrate real cost benefit will be first on the hit list.

Unfortunately, a real opportunity for healthcare reform will have been missed as cost cutting becomes the quick fix method of choice for reestablishing sanity to healthcare coverage.  Incentives to dramatically reduce costs will be stronger than those to increase efficiency and leverage cost benefit.  Prospects for efficiencies driven by electronic medical records will stall out as funding is seen more as an expense rather than an investment. Wellness programs and personalized medicine will be wishful thinking as they flounder in development without a chance to mature and deliver the anticipated cost saving benefits.

Despite pleading from the president and state governors, current healthcare reform initiatives will not keep insurance premiums in check  or  moderate increasing costs and ensure long term healthcare affordability.  Pharmaceutical companies will definitely benefit from the  lack of  health insurance competition and a healthcare market with no incentives or serious mandates to reduce or control increasing costs but may be among the first and hardest hit when controlling healthcare costs becomes a priority.


Is the Big Pharma biotech well going to run dry?

The healthcare market is becoming increasingly demanding of the pharmaceutical industry to deliver products that are innovative and that can demonstrate clinically meaningful differentiation from currently available treatment options (including generic drug alternatives) .  This hurdle will become even more challenging as more mass market blockbuster products come off patent over the next five or so years.

The sources for these innovative products have historically been Pharma discovery research, start-up biotechnology companies, and university laboratories.  With a disappointing track record over the past decade or more, pharmaceutical companies have been narrowing their focus and downsizing their research efforts in favor of in-licensing technologies for development.  Looking for reduced risk and higher return on investment opportunities Pharma targets late stage technologies with proof of concept and a high probability of scientific and technical success.  Unfortunately, virtually every pharmaceutical company is now evaluating the same finite supply of technologies to find the few that fit the innovative, late stage, high probability of success profile.

Although one might expect a regular replenishing of the supply, this  should not be taken for granted.  While universities are fertile grounds for therapeutic concepts, targets, and interesting compounds,  few can afford or have the expertise to take potential drug candidates to proof of concept in a regulatory acceptable fashion that will mitigate the risk sufficient to warrant Pharma investment.   As a result, the diminishing supply of investment- worthy late stage programs is about to be exacerbated by the lack of adequate early stage discovery research funding.

At the same time, Biotech companies that can transform these promising technologies into viable development candidates have been starved for cash for the past two years making it nearly impossible to sufficiently fund new projects much less keep current programs adequately funded.  What this means is that the university/biotech pipeline of innovative new products that Pharma is counting on may soon become depleted if it isn’t already.

The obvious solution is for Pharma to accept more risk, invest much earlier, and collaborate.  Given the challenges of drug discovery research and the time required to get programs to proof of concept, Pharma may not have much time before the lack of discovery stage funding creates a gap in the flow of innovative pipeline products far greater than has ever been imagined.


Healthcare Reformed Pharmaceutical Companies – Future Reality or Too Idealistic

Imagine a future in which pharmaceutical companies with world-class research teams collaborating to advance the science of healthcare at a pace never before seen in the history of medicine and  finding the innovative new treatment options that have been promised for decades.   A future when years of competent leadership, culture driven corporate commitments to integrity, and responsible commercialization tactics have reestablished the public’s trust, mitigating the need for punitive litigation and earning pharmaceutical companies the reputation of being uncompromising credible and trusted sources of scientific and medical information.  Imagine a future in which pharmaceutical companies leverage expertise, core competencies, and strategic outsourcing to  provide operational efficiencies that generate healthy profits which are viewed by the market as necessary and well deserved.

Continuing with this train of thought, imagine a future in which pharmaceutical companies consistently put patient health and safety ahead of profits.  A future where pharmaceutical executives care more about their employees and customers than they do about their own career aspirations and personal wealth generation.  Imagine a future in which generous pharmaceutical industry philanthropy makes medicine affordable and available to all in need, regardless of their ability to pay or where they live.  A future in which the healthcare market is better informed of treatment options  and freely acknowledges the disease altering and life-saving value of prescription medications.

Imagine a future in which investors appreciate and understand the inherent challenges of the pharmaceutical industry but value its ability to consistently bring innovative new products to the market and are willing to accept the vagaries of short-term financial performance because of the more predictable long-term returns on their investments.

Is this future for pharmaceutical companies possible, or is it just so much wishful thinking?


Are Big Pharma Companies becoming Pharmaceutical Big Box outlets for the Healthcare Market?

The recent article in Financial Times and a posting at FiercePharma noting the shift from Pharma CEOs with science backgrounds to CEOs with business backgrounds got me thinking about the implications for the pharmaceutical industry.  One of the conclusions suggests that if the business model is more dependent on execution and commercialization, a strong business background may be preferred and a science background may be less critical.  This seems to be increasingly the case, especially for larger Big Pharma companies.

As Big Pharma companies depend more on the acquisition of products to fill out their product lines, add generic products to their offering, diversify their product lines (devices, diagnostics, and consumer products), expand their global presence, and shift commercialization efforts to mass purchasers and payers (think government, insurance companies, and Pharmacy Benefits Managers), these companies look more like pharmaceutical Big Box outlets for the healthcare market.

This is not a good or bad thing.  It is a strategic business decision that companies are making which will have implications for the entire industry. These decisions will gradually establish a clear delineation between companies that build their strategies around science and the discovery of innovative products and those companies that supply products to the healthcare market.  Like in the retail market, smaller innovative product companies can go it alone and bring their products to market but they may not have the market reach or support infrastructure to service the payer market as effectively or as efficiently as the Big Box Pharmas.

So what is the fundamental business proposition of the pharmaceutical industry?

Sometimes we may take it for granted but the foundation for a healthy pharmaceutical industry is discovering and developing innovative new treatments.  Without a continuous flow of innovative new treatments, there is no pharmaceutical industry and Big Box Pharma would have to find something else to sell the market.


Skillful Diligent Management Oversight is better than Autonomy for the Pharmaceutical Industry

Ever think your manager is a pain because they are always checking on you, quizzing you,  and making you feel like they don’t trust you?  Do they make timely observations and have an uncanny ability to make insightful comments or have you take corrective action before you get tripped up, deviate from corporate expectations, or get into trouble? Are they always trying to find ways for you to do your job better?  Do they know more about you and what you are doing than you would like?  Do they know how you think, so much so that they seem to care as much about your personal development as they do about the job you are doing?  You may not like it but they are doing their job and they are probably better than most managers.  Here is why you should consider yourself lucky.

You have probably heard and may even think you like the management concept of “hire the right people, then get out of their way and let them do their job.”  Well, I believe this can be taken to the extreme and in some cases, to the point of abdication of management responsibility.  I believe many of the missteps pharmaceutical companies have made over the past and perhaps even the current J & J recall situation could be attributed to a lack of diligent management oversight.  There is some truth to the sayings “inspect what you expect” and “trust but verify.”  No, I am not a control freak but where was management when the quality issues at J & J first surfaced or when pharmaceutical companies were involved in some of the questionable and sometimes illegal activities of the past?

So what is diligent management oversight?  From my perspective, it is knowing what is going on throughout your span of responsibility?  If you are a front line manager, it is knowing what is going on within your team and the jobs they are expected to do.  If you are the CEO, it is knowing what is going on in your company.   Diligent management oversight includes evaluating performance against goals and objectives, ensuring regulatory and legal compliance, and maintaining organizational standards for cultural and behavior expectations.  It also requires management to provide timely feedback and to make decisive interventions when deviations from expectations are identified or have the potential for doing harm by exposing the company to unacceptable risks.

Diligent oversight takes skill to avoid annoying micromanagement and to leverage the value-added benefits of diligent management oversight.  Skillful oversight provides employees with coaching and nurturing to enhance  performance, guide career development, and can convey a sense of caring about the person and demonstrate an appreciation for the job employees are doing.  Even the best of athletes have coaches who are watching, evaluating, and providing insightful corrective actions and encouragement to improve performance.  The better the athlete, the better the coach must be to have credibility and to have a positive impact.  The same is true in business.  The stronger your team, the better the management must be.

So the next time your manager seems to be asking too many questions, trying to understand more about what and how you are doing your job, maybe even challenging you to do better, don’t take it personal.  They are doing their job and you might actually be lucky enough to have a manager who wants you to do well, is willing to help you, and can help keep you out of trouble.


Healthcare Market considerations for Eliminating Pharmaceutical Sales Representatives

There has been considerable debate about the role of pharmaceutical sales representatives in the evolving new healthcare market.  Do they have any role, what is it, and are they worth keeping around at all? It is clear that the market has had enough of the sample dropping reps specializing in the social, relationship building, access gaining tactics like “lunch and learns” and “dine and dashes” that contribute little to physician education.  I believe that despite some of these questionable tactics of the past, pharmaceutical sales representatives have played a far bigger role in physician education about drug treatment options than most physicians, other healthcare professionals, and certainly academics would want to admit.   I’ve always wanted to do a package insert test of doctors who regularly see pharmaceutical sales reps verses those who do not.

This is more than a debate about what information is now available on the internet and the potential for distance learning.  It is about timely awareness and comprehension of treatment options and best practices.  It is about knowing how to use a drug correctly, in the right patients and knowing about potential side effects and adverse reactions that might occur.

It is nearly impossible to stay current merely by having access to the internet, despite what some websites might want you to believe.  Besides, how many hours per day can physicians commit to  staying current (remember it is not just drugs they have to be current about)?  CME requirements to maintain  a medical license vary by state but range from about 20 hours to 50 hours per year.  Not a lot of hours considering the pace of science, technology, and advances in medicine today.  Also, keep in mind that many physicians earn a good share of their CME credits by attending conventions and conferences (subsidized and often sponsored by the pharmaceutical industry).  So what’s my point?

Take the rep out of the picture.  How do physicians find out about new treatments?  The newspaper and television most likely. Who educates physicians about new drug treatments?  The local medical school? Most towns and cities don’t have one.  At the local hospital monthly grand rounds?  Which disease or product treatments are covered this month, by whom? In a year’s worth of grand rounds do they cover everything a physician needs to know about drug therapies? The physician waits to hear from an expert at the next conference? What if the topic isn’t covered?  The textbook on their shelf? When was that written and more importantly, when did it finally get published? How many medical journals are physicians skimming through to stay current? When were those articles actually written? Who is writing the articles?  People who have done work with the drug (hopefully they weren’t paid by the pharmaceutical company to do the clinical trial because they would be biased) or another “expert” who has merely read some articles and summarized a bunch of studies about the new drug?

While I agree that some of the sales tactics of the past contributed little to educating physicians, the collective drug education impact of the industry should not be completely dismissed.  There is a need and role that could and should be filled.  If the healthcare market feels there is no role for pharmaceutical sales representatives in physician education,  then the healthcare market and academics in particular, must be ready to accept the responsibility for providing better alternatives for physician education (there are more than 600,000 physicians in the US) than putting stuff on the web or just going to meetings and conferences to passively learn about new drug treatments. It will be especially challenging to reach the more rurally based physicians and those who can barely keep up with the minimums of CME credits because of their workloads or financial constraints of their practices.

Few societies, medical organizations, CME providers, or even medical schools have stepped up to do mass market education (especially about a particular drug).  Even those that are doing CME are not doing it on a mass market basis (ensuring that they get to most physicians) and few are doing CME without funding from the pharmaceutical industry.

So my point is, if there is a role for pharmaceutical sales representatives in the evolving new healthcare market it is to be a credible source of scientific and medical information that can help physicians stay current with best practice treatment options.  These are not traditional sales roles (you don’t get paid a bonus or commission) but more therapeutic area experts who know the literature, know all the drug treatment options for a disease, and can speak knowledgeably and objectively about competitive products as well as their own company’s products.


Healthcare Market Perceptions create Expectations for Pharmaceutical Companies

The pharmaceutical industry has created market perceptions, right or wrong, that have been transformed into market expectations.   Like for any business meeting market expectations is a critical success factor for the pharmaceutical industry.  There are however, some expectations that are ill founded and meeting these unreasonable expectations could mean financial disaster to pharmaceutical companies.

Reasonable market expectations are best addressed by the consistent actions and behaviors of the company over time.  Unreasonable market expectations, on the other hand, require understanding of the source, empathy, patience, and clear consistent communications to help the market better understand why some of their expectations are not practical or not in the best interest of patients.

The industry must effectively demonstrate that they are delivering on the reasonable expectations, before the market will be ready to accept explanations for why the unreasonable expectations can not or should not be met.  So what expectations are reasonable and which ones might be considered unreasonable?

Reasonable market expectations of pharmaceutical companies:

  • To bring safe and effective innovative new drugs to the market at fair prices
  • To not have to pay premium prices for products which can not be clinically differentiated in a meaningful way that matters (comparative value)
  • To moderate pricing based on substantiation of the pricing rationale with data and clinical information that demonstrate the value of the drug treatment
  • To make certain physicians and patients understand the risks associated with product use. Never putting patients at undue risk for the sake of selling more products.
  • To assure regulatory compliance in development, manufacturing, and commercialization (marketing and sales). Respect that prescription drug regulations are intended to protect patients from undue harm.
  • To act with integrity in support of legal and ethical business practices
  • To be transparent in financial support of societies, patient advocacy groups, and other information sources so as to not secure deceptive implied endorsements for products
  • To be forthcoming and take decisive action to protect patients when concerns for safety arise, even if it means a temporary negative impact on sales
  • To hold executives accountable for their organizations actions and behaviors

Unreasonable market expectations:

  • To sell innovative new products at generic drug prices
  • To operate pharmaceutical companies as “non-profit” organizations
  • To not advertise or promote products for appropriate uses
  • To rely on medical school and professional society medical education programs to educate physicians about drug treatment, especially new products
  • To execute clinical studies or access clinical expertise without paying investigators, advisors, and consultants reasonable fees (absolute “conflict- of- interest”  free)
  • To develop treatments for small patient populations and not charge prices which allow for a profitable return of investment
  • To blindly write checks for product liability claims when the risks have been clearly delineated in product information, advertising, and promotion.

Doing a good job of meeting the reasonable expectations will mitigate the importance of and insistence on many of the unreasonable expectations in the evolving new healthcare market.