First, Pharma companies should not promote products for uses that are not approved by the FDA.  If a company is found guilty of “off-label” promotion, in addition to any corporate fines (which should equal total product revenues during the time of illegal promotion) , responsible individuals should be held legally accountable and convicted, with personal fines, disgorgement of incentive compensation during the time of illegal activities, and even incarceration if warranted.  No corporate settlements.  It is very likely that criminally charged front line employees directed or even trained to promote for off-label uses may be more than willing to offer up and provide evidence against culpable higher level executives who encouraged or approved of the promotion.  I’m pretty sure this would increase executive management oversight to ensure compliance.

To remove the financial incentives for “off-label” promotion, government programs (Centers for Medicare and Medicaid Services and states) should not reimburse for unapproved uses of prescription drugs.  If the patient wants to pay for the unapproved use of a prescription drug that a physicians has prescribed, that should be their choice.  At the same time, that choice carries the liability that if something should go wrong; the only legal recourse for the patient should be to hold the prescribing physician and perhaps their healthcare provider accountable.  Because “off-label“ use is an informed decision, neither the patient nor the physician (or healthcare provider system) could sue the pharmaceutical company for any negative consequences resulting from the unapproved use.  Physicians who prescribe for unapproved uses but post a diagnosis that aligns with approved uses just so the patient can get it reimbursed would face fraud charges and be held personally liable.  Similarly, there would be no need for federal or state litigation against pharmaceutical companies for False Claims that inappropriately causing taxpayers to fund unapproved uses.

If physicians and patients have made a choice to use a product “off-label” and private payers (insurance companies, employers, or PBMs) choose to pay for the unapproved use then they should assume the same liabilities as stated above.  They are making an informed decision and the payer is agreeing with that choice by reimbursing for the unapproved use.  The patient could sue the prescribing physician, healthcare system, and perhaps the payer, but they would have no legal recourse against the pharmaceutical company should a harmful event occur from the unapproved use.

But what about all the “medically established” unapproved uses in treating things like cancer?  The same rules and legal liabilities should apply.  Physicians have the choice to prescribe, patients have the choice to take, and payers have the choice to reimburse for the unapproved use if they want to assume the liabilities with the inability to sue the pharmaceutical company.  If the medical experts, patient advocacy groups, or government programs and insurance companies feel a prescription drug should be approved and reimbursable for a particular use, they should petition the FDA and submit their clinical proof of efficacy and safety to obtain an FDA approved label claim for the product.

While preserving physician, patient, and payer choice these recommendations remove a major financial incentive (reimbursement) for pharmaceutical companies and increase the legal consequences for individuals who inappropriately promote for off-label uses of prescription drugs.  More importantly, it appropriately shifts product liability for unapproved uses to healthcare providers and payers.   www.PharmaReform.com

The conference is the premiere healthcare conference in the industry and has become “old home week” for industry executives to reconnect, schmooze, and initiate discussions for potential deals.  Getting an invitation is near impossible if you are not among the presenting companies or on the JP Morgan A-list.  I am neither, so I spent last week listening to all the webcasts that are available for the Pharma and biotech company presentations.

Perhaps the single most stunning, yet less obvious (non- investor perspective) “take away” for me was how rapidly Big Pharma is moving away from Primary Care.  With almost 75% of prescriptions now being filled with generic drugs, the trend may not be that surprising.  What is surprising is that the pace of proactive strategic abandonment of Primary Care is far more dramatic than what I believe most people in the industry would want to admit or even realize.

This trend really got my attention when companies with traditional Primary Care portfolios blatantly stated or clearly outlined that they have strategically refocused their pipelines and commercialization efforts to target specialty markets.  With very few exceptions, company presentations were absent references to products or commercial strategies targeting the Primary Care market.  Oncology, neurology, psychiatry, rheumatology, and dermatology seem to be the focus of attention unless you had a Hepatitis C compound in your pipeline.

Again, the interest in specialty products is not surprising.  They command higher prices, yielding higher margins with less onerous managed market intervention into prescribing practices.   From a commercial perspective, specialists represent a smaller, more easily targeted and sales force friendly customer base.   Specialty market physicians and their patients also seek out and are more receptive to disease and treatment information making promotional education a viable and efficient tactic.

The implications of this trend away from Primary Care are clear.  Fewer sales reps needed for calling on Primary Care.  Less need for expensive Primary Care sales and marketing support activities such as purchasing mass market prescription data, coordinating the complexities of territory management and sales reporting, and dealing with sales force related employee relations issues.  It also means fewer industry sponsored educational programs for Primary Care.  Fewer Primary Care clinical trials.   And,  fewer new Primary Care products means Primary Care physicians and their patients will have to be satisfied and content with the treatment options currently available to them.

The real message here is that while Primary Care has been at the foundation of Big Pharma growth and financial success in the past and there may well be exceptions in the future, the importance and interest of Primary Care to Big Pharma is diminishing quickly.  If your expertise or responsibilities include pharmaceutical sales and marketing to the Primary Care market, I believe your days are numbered and you probably have fewer days than you might think.  Specialty products and markets are where the action is and where the industry is headed and it is moving fast.   mike@pharmareform.com

Pfizer’s aggressive approach to “competing “ in this market has been met with considerable negative commentary and even Congressional inquiry.  Interestingly, Pharmacy Benefits Managers and their trade association (Pharmaceutical Care Management Association), the same groups that use and advocate similar tactics to encourage generic drug use,  are on the front lines of criticizing the Pfizer co-pay discount tactic.  The contention is that the Pfizer campaign will cost insurance companies and employers more,  even if patients benefit from a lower out of pocket cost.   And some of those in Congress have expressed concern,  wonder if the discounts provided by Pfizer will be passed along to insurers and employers or be pocketed by the PBMs.

Well, if there was such a thing as a “free, open market” there might be a simple answer to this.  Let the market decide.  If Pfizer wants to price their products similar or even lower than their generic competitors,  they can.  If patients want to use the discount coupons to lower their co-pays,  they can.  If generic drug companies want to provide co-pay discount coupons,  they can.  If the PBMs, and their insurance company and employer partners,  want to lower or even eliminate their co-pays for generic drugs, they can.

If this is really about “price” and lowering the cost of prescription drugs, especially for a particular product, within regulatory quality standards, let the low cost producer and provider with the lowest price win.  Why shouldn’t branded product manufacturers be able to compete on price in the generic drug market, if they want to?  m ike@pharmareform.com

 “Merck CEO defends hefty research spending” (Reuters).

Defend research spending?  Since when would investors be concerned about spending too much on R & D,  in any industry for that matter, but for pharmaceuticals? Are you kidding?

There are a couple of underlying issues that make this situation very disconcerting but understandable.  First, the article identifies “investors” as those who have expressed concerns about the amount Merck and other pharmaceutical companies are spending on R & D.   I’m pretty sure they are not talking about individual investors but rather institutional investors and investment analysts.

The problem is that these analysts and the firms they work for are mostly driven by short term financial results.  When long term corporate value-creation compromises short term financial gain opportunities, analyst and investment banking compensation (especially bonuses) can be negatively impacted.   For example, cutting corporate expenses to increase near-term earnings usually creates more positive stock movement and compensation opportunities than any long-term strategic investment will ever create.

Just look at the daily stock price ups and downs for pharmaceutical companies driven by a single piece of clinical data or a letter from the FDA.   For an investor market driven by a short term “make a quick buck” mentality, long term financial consequences become somebody else’s problem.

So why does Merck CEO Kenneth Frazier get so much attention for what is considered by some analysts as a questionably high level of R & D spending?  For most pharmaceutical company executives, their short term incentives are often similar to those of the analysts and investment bankers.   So, in this light, Mr. Frazier’s long-term perspective may be an outlier in not playing to the expectations of Wall Street.

Perhaps Mr. Frazier understands that innovation in prescription drugs is critical for the long term success of Merck.  Perhaps he understands that truly innovative new products are what pharmaceutical companies need to remain relevant and viable in the evolving new healthcare market.  Perhaps he realizes that a reliance on academia and small entrepreneurial ventures for innovative new products carries the risk of a limited supply. This reliance on outside sources of innovation could subject his company to the finite availability of viable drug candidates at any given time which drives up pre-approval (and sometimes before clinical proof-of-concept) prices (think Gilead $11 billion acquisition of Pharmasset) with no assurance the products will ever get approved.

Mr. Frazier gets noticed  and media attention because he’s in the minority of not playing to the investment analysts’ needs for short term financial gains that can drive stock prices up and provide investors with temporary gratification while handsomely rewarding analysts and their firms for being so smart.

It would be one thing for investors to insist on increasing the productivity and output of Merck and pharmaceutical industry R & D.  I have commented before  and the industry has proven that merely spending more doesn’t necessarily get you more innovative new products.   But, to suggest Merck is spending too much on R & D seems to me to be another attempt by analysts to drive for a near-term balance sheet excitement that can help them drive share price, temporarily.

I’m sure there is room for improvement in Merck’s R & D productivity but I believe that to outright suggest they are spending too much money on R & D is not in the best interest of Merck, its shareholders, or patients.   mike@pharmareform.com

Anybody who has done pharmaceutical manufacturing, especially biologics or sterile injectable prescription drugs, knows how challenging it is to repeatedly get it done right in large scale.  From engineering and process controls to supply chain and inventory management to quality systems the expertise required to consistently produce high quality, regulatory compliant prescription drugs is perhaps one of the most unappreciated critical success factors for a pharmaceutical company.   If you can’t make it you can’t sell it.

This expertise is a core competency that has clearly been taken for granted by Big Pharma senior executives.  This lack of appreciation for manufacturing expertise is evident every time a pharmaceutical company faces a recall or needs to shut down due to “quality issues.”   Perhaps best exemplified by the now well publicized drug shortage situation, the inability to manufacture these life saving prescription drugs is putting patient lives at risk.   The lack of appreciation for the complexities and challenges of pharmaceutical manufacturing manifests itself in these shortages.

So what does it take to do high quality, safe, and regulatory compliant prescription drug manufacturing?  It takes a broad range of expertise (not just well trained technicians and operators), significant ongoing capital investment in facilities and equipment, and rigorous, almost obsessive quality systems.  These are not the places pharmaceutical executives  should be looking to cut costs.  And worse,  generic drug pricing generally don’t allow for the levels of continuous investments I believe are necessary in people (expertise), facilities, equipment, and quality systems.

But what about Big Pharma?  Well, who had the expertise?  Who had the robust quality systems?  I’ll even add … who had the proprietary insight into the nuances and complexities of making a particular prescription drug.  Big Pharma.   At least they did until they decided to take manufacturing expertise for granted.  Unfortunately, Big Pharma continues to close manufacturing facilities, outsource more to contract manufacturers, and retire or let go much of their manufacturing expertise.  And, this expertise and know-how doesn’t necessarily get transferred from Big Pharma to the manufacturers that will be making the generic versions of their products.

I often wonder how generic drug manufacturers or even contract manufacturers who take over manufacturing a prescription drug figure out, understand, and know how to deal with all the nuances and complexities of making a particular prescription drug.  Again, if you’ve done pharmaceutical manufacturing, you know how much is learned by doing hundreds and thousands of batches over years of experience.   Perhaps those who are challenged with making the drugs that are now in shortage are finding this out the hard way.  Unfortunately, it is patients who are now suffering and dying because pharmaceutical manufacturing is harder and takes more expertise than most pharmaceutical company executives appreciate.    mike@pharmareform.com

Historical precedent would suggest that pharmaceutical companies are more interested in getting products to the market than making sure their products are safe, effective, or even needed.  They tend to do the absolute minimum to get through the regulatory approval process (fastest, easiest indication first), hoping to argue there way through questionable safety data and relying on marketing to find expanded revenue opportunities in patients for whom they have little or no proof of efficacy or safety.   Some of the antics reported in the trade and lay press would suggest that pharmaceutical companies are continuously trying to find new ways to “game” the system.  If you need the details, there is a good review of the past forty years of industry missteps and flagrant disregard for regulatory expectations in the book Pharmaplasia™.   It is clear that the FDA has been put on high alert police mode by what historically has appeared to be an out-of-control, intentionally non-compliant, almost defiant pharmaceutical industry that can’t be trusted.

In this context, is it any wonder that the FDA is skeptically cautious, more demanding for proof of claims, and sometimes even slow and seemingly uncommitted when it comes to product approvals and issuance of guidance documents yet deliberate and critical, albeit intermittent and inconsistent in their enforcement?

Here are five steps the pharmaceutical industry could take to help improve the regulatory process and FDA efficiency.

1. Focus on Innovation
2. Makes safety issues easy for the FDA to understand
3. Make manufacturing quality an organizational priority
4. Commit to ethical and regulatory compliant marketing and sales
5. Establish a base of credibility

Focus on Innovation

Despite the sunk costs of discovering and developing a product that companies hoped would turn out better than it did, don’t bog down the FDA review process with products that have little or no clinical benefits over what is already available on the market.  If you feel compelled to bring a comparable product to market, don’t try to make it sound better than it really is to substantiate a higher price.  Again, trying to angle for a labeling claim advantage that doesn’t really exist consumes FDA time and resources.

Make safety issues easy for the FDA to understand

It is mind-blowing to me that pharmaceutical companies can get to a final advisory board meeting prior to an expected approval and find out there is a concern and unanswered questions about an animal toxicology study or clinical finding?  Well, maybe the company was hoping it would just slip by and nobody would notice the data or they thought they could argue their way through the questionable or disturbing data.  Why not be proactive, anticipate the concern and just get the data to prove it’s not an issue?  Well, maybe companies still believe in the “don’t look for it unless it is a regulatory requirement” theory because they might find something they don’t like or can’t explain.  I appreciate the need for speed in development but you have at least 3 to 5 years after a product starts clinical studies to sort out any safety issues.  That is, if you really want to take the risk to understand the basic sciences of the concern or potential problem.

Make manufacturing quality an organizational priority

First, the answer to industry manufacturing issues is not lower quality standards, fewer FDA inspections, or less rigorous, less critical inspections.  In fact, I am a proponent of maintaining high quality standards,  more frequent and more rigorous inspections, including of foreign facilities.

As challenging as pharmaceutical manufacturing can be, I don’t see why pharmaceutical companies should expect anything other than a clean slate, no 483′s,  when the FDA inspects their facilities.  With appropriate management manufacturing expertise and robust quality systems in place, avoiding 483’s should not be a matter of chance or wishful thinking but rather a matter of fact.  Clean, high quality, cGMP – compliant manufacturing would make FDA inspections (and follow-up) easier, less laborious, and less time consuming.

Commit to ethical and regulatory compliant marketing and sales

“Pushing the regulatory envelop” and “off-label” promotion can drive revenues and increase your market opportunity but also puts tremendous additional workload on the FDA.   So much so that it is clear that pharmaceutical companies have taken advantage of this burden by trying to be clever in their advertising and promotions knowing full well the FDA can’t police everything and the chances of being caught are remote.  Even if caught, the consequences are minimal (a “slap on the hand” in the form of a letter) unless the Department of Justice pushes for some financial penalty.  And then,  it just becomes a cost of doing business.  Unfortunately, pharmaceutical companies may feel they will be at a significant commercial disadvantage if they don’t “push the regulatory envelop” because “everybody is doing it.”

An industry-wide commitment to ethical and regulatory compliant marketing and selling would make non-compliant outliers more obvious and allow FDA to focus resources  on the more egregious and potentially harmful marketing and sales activities.

Establish a base of credibility

If the pharmaceutical industry were trusted, credible, and committed to regulatory compliance the FDA would not have to spend as much time, effort, and resources trying to sort out the “gamers” from bona fide efforts to bring safe and effective innovative new products to market, to maintain high quality manufacturing standards, and to market products in compliance with the approved label claims.  Yes, I believe there are companies and their CEOs who profess this to be their intent, but the historical record suggests there are few who have been able to deliver or credibly live up to this commitment.

mike@pharmareform.com

The apparent implication from these results is that there is no difference between Crestor and Lipitor and therefore, when available, generic atorvastatin will work just as well as the brand Crestor.  Extrapolating this “no difference” conclusion for a single endpoint to the totality of efficacy for atorvastatin could result in significant cost savings for patients and providers of prescription drug benefits.  You would think this is great news for patients but I believe the ramifications of this study go well beyond cholesterol lowering agents and the impact on future sales of Crestor.

Because of the investor interest, high media visibility, the enormous healthcare cost savings potential, and the mass market served by cholesterol lowering agents I believe there will be significant fallout from this study that is not necessarily beneficial to patients.

First, there are undoubtedly going to be patients who could benefit from Crestor rather than atorvastatin but who will not be given that option.  Smaller patient populations may never be studied well enough to determine if there really are patients who might benefit from one product or another in the face of large comparative trials showing no statistically significant difference.

Second, company executives have always been, but will now be even more, reluctant to sponsor comparative effectiveness studies for established products even when they feel they have an opportunity to demonstrate a difference (as I believe was the case for AstraZeneca).  The requirement for “statistically significant” clinically meaningful differences may be too high a hurdle (and represent too much risk) when complex trial designs are expected to prospectively identify a specific primary endpoint for a patient population with considerable variability.  We may, in an ideal world, feel we know enough about biology, disease pathophysiology, pharmacology, and the nuances of patient populations to be able to precisely design these definitive trials, but we probably don’t for most diseases.

Third, pharmaceutical companies may prematurely stop developing drugs they feel might not be able to demonstrate statistically significant differences to available therapeutic agents.  This would have been a catastrophe for antivirals HIV/AIDS treatments which we now know work best as cocktails of several products rather than one being “statistically  significantly “ better than another.  To further complicate this, regulatory approval studies are designed to establish efficacy and safety, not superiority.  I believe the need for demonstrating a statistically significant difference to meet market expectations and regulatory requirements for making a superiority claim (or to potentially gain approval) will make drug development near impossible where products already exist and efficacy is well established.

And if you are thinking about developing an as effective but “safer” product, good luck.  Regulatory requirements for claiming “safer” are even more challenging and from what I have seen, near impossible.

Lastly, this market expectation for demonstrating “superiority to available treatments” and regulatory requirements for making those claims, I believe will result in fewer therapeutic options for treating specific diseases (think antibiotic drug development over the past decade).  We are getting to a point where if a product is already available to treat a disease,  clinicians and payers want to know if your new product is better.  You would think this is not an unreasonable expectation, but it is an expectation that increases the cost, complexity, and uncertainty of drug development.

At the same time, pharmaceutical companies that demonstrate statistically significant differences for their branded products in comparative effectiveness trials will be able to command “super premium pricing” with an almost monopolistic “treatment of choice” position for the duration of their patent.  When a product demonstrates a clear benefit (statistically significant) over other treatments the bar is  raised for subsequent new products to demonstrate statistically significant superiority.  For products with trial supported superiority, regulators will have no choice but to allow superiority claims,  physicians will have little choice but to prescribe the product, and payers will have little choice but to provide reimbursement.  Unfortunately,  this also dampens drug development interest in therapeutic categories that already have well established “treatments of choice.”

And while we may have more effective and potentially safer products in the future,  if you think prescription drug prices are high now, just wait for these products that establish “treatment of choice” with clinically meaningful statistical differences.    mike@pharmareform.com

For example, pharmacists for years have claimed that they can help patients avoid medication errors and improve patient care through patient counseling and follow up.  They are often the only healthcare provider with that opportunity once a prescription is written, especially for chronic conditions.  Seems logical that pharmacists obviously play an important role here.  But then you read the recent study that suggests that mail order pharmacies may do a better job of lowering costs while improving clinical outcomes than local pharmacies.  Whether or not this study can be replicated or validated remains to be seen but it represents how it is going to be better to have data to support your position than to rely on implication.  Think about pharmacists who now are trying to make their case for improved clinical outcomes with counseling at the local pharmacy.  What data do they present to refute this mail order study?

Similarly, Express Scripts® recently reported on several research studies that demonstrate the ability of Pharmacy Benefits Managers to lower costs and improve clinical outcomes.  Again, even as part of the “managed market,” Express Scripts® felt compelled to support their benefits claims with data.

Why is this important?  Because pharmaceutical companies who still feel they can use traditional marketing and sales advertising and promotion to imply being able to lower costs while improving clinical outcomes  without actually having the data are going to have a much more difficult time convincing decision makers and selling their products.  More importantly, pharmaceutical companies that develop the real world data to support their claims for improving clinical outcomes and lowering overall healthcare costs (and not just shifting costs to another part of the healthcare system), will find a more receptive audience and create a significant competitive advantage.

We are entering a time where the healthcare market will expect you to prove (“show me the data”) that you (as a healthcare provider) or your products or services are delivering demonstrated (data driven) real world clinical outcomes that reduce overall healthcare costs.   mike@pharmareform.com

•  Your work day is expected to be 8 hours per day Monday through Friday between 7am and 6pm.  You must not work more than 8 hours per day or more than 40 hours per week without prior written approval from your District Manager.

• Working weekends (Saturday or Sunday) or holidays is prohibited unless you have prior written approval from your District Manager for a particular weekend or holiday requiring your presence for work related activities.

• You are expected to “clock in” using your iPad when you leave your home for work and “clock out” when you have completed your 8 hour work day.  You must plan to complete your 8 hour work day with arrival back at your home.  You can chose to complete your 8 hour work day in your territory but that will be your choice and you will be on personal time after the point you “clock out.”   Use of the company car from that point to the return to your home must be recorded as personal miles .

• If you receive emergency customer calls (you are not to make customer calls except in response to their call) outside your work day hours, you are to record those (caller name, time of call, purpose of call) in your weekly activity report and include the time in your time log.  You will have to adjust your subsequent work time so as not to exceed the 40 hours per week maximum.

• Failure to “clock in and out” may result in loss of pay for that period of time.  Repeatedly “forgetting to clock in or out” may result in disciplinary action including the possibility of termination.

• You may take personal time during the work day as long as you put in your 8 hours between the hours of 7am and 6pm.  You must clock out and back in for all personal time taken during the work day.  Other than clocking out and back in, you do not have to provide any information regarding personal time activities.

• If you plan to take more than 2 hours of personal time during work day hours (7am to 6pm) on any one day you must get prior approval for a vacation day.

• You will be gps tracked to verify time and location for all work related time during your work day.  This will also be used to verify mileage for business versus personal use of the company car.

• You are required to clock out and back in for your mandatory 15 minute breaks, once in the morning and once in the afternoon.  You can not skip breaks or combine break times. You are not to do work related activities during your breaks.

• You must clock out and back in for your mandatory 1 hour lunch break during which you are not to do work related activities.  You can not skip your lunch break and your lunch break must be taken daily between 10am and 1pm.   If you do a work related food activity with physicians or office staff during lunch time, this can not be your lunch break.

• Nobody, not even your District or Region Manager or the VP of Sales, can require you or request that you do work related activities when you are clocked out, including for breaks and lunches.

• Because all work related travel time counts against your 8 hours per day and 40 hours per week, all territories will be reevaluated and realigned where necessary to minimize travel requirements.

• Where possible, all company required meetings will now be by teleconference or video conference to avoid travel.

• You will not be expected or allowed to travel outside your territory to attend any medical or scientific meetings or conferences, if it means you will exceed your 8 hours per day of work.

• District meetings will be kept to a minimum and centrally located to minimize travel for all attendees.  District meetings will be structured to an 8 hour work day with the mandatory “non-business-related” breaks and lunch for which you must “clock out and back in”.  You will be required to take your lunch break and can not do any work related activities during your District meeting lunch break.   So as to not encourage work related activity during District meeting lunch breaks, you will be expected to determine where you would like to have your lunch and pay for your own lunch.  There will be no District meetings requiring overnight stays.

• Any travel outside your territory, except for District Meetings, will require prior written approval from your District Manager.  If travel time requires you to take more than 8 hours per day to attend and return home from a District meeting, you must have prior written approval from your District manager with the anticipated “Overtime” required to make the meeting.

• Only company provided training programs will be considered “work related” required training for which work day time will be allotted.   Any additional training, reading, or research you choose to do with regards to your job or career development will be your choice and done on your personal time.  These “extra” activities will not be required and are therefore “on your own personal time.”

• You will be allotted 2 hours of “work time” every week to take care of any company required administrative tasks (e.g., expense reports, weekly activity reports, or planning) or training. You must be clocked in during this time.

• Your biweekly pay will be automatically calculated from your time sheets captured from your “clock in and clock out” data.

• Any exceptions to these work rules must be identified upfront with the anticipated number of “work hours” involved, any anticipated overtime hours identified, and must have prior written approval from your District Manager.

• Failure to comply with any of these new work rules will result in disciplinary action including the potential for termination.

I am not espousing these rules and I have probably missed a few.  I’m not an attorney but I tried to look at what pharmaceutical companies might have to do to avoid further Fair Labor Act liabilities by establishing work day expectations and accurately tracking and recording work hours for pharmaceutical representatives who are considered “non-exempt” hourly employees.

Of course, the company will have the choice to just pay the overtime when they want to make the exceptions for business reasons.  But, to manage overtime pay and not have it be abused or extended beyond financial feasibility and to avoid litigation, these types of work rules will almost certainly be required.  One could also argue that these work rules are necessary to protect the “non-exempt” pharmaceutical representative from being taken advantage of by management.

While I’m sure some reps may be applauding the overtime pay rulings, I see this as an unfortunate situation, fostering a distrustful work environment with a demoralizing outcome for “professional pharmaceutical representatives.”  How disappointing that it has come to this.    mike@pharmareform.com

As evidenced by many academic researchers and their teams, it is possible to discovered relevant disease targets and disease altering compounds with far fewer research dollars than Big Pharma has been spending over the past three decades.  Big Pharma R & D budgets, however,  are a misleading indicator of investment in innovation.   In other words, when Pharma holds out the total amount they are spending on R & D ($68 billion), you have to know that only about 30% of that is for discovery and preclinical research.  Still billions of dollars for a disappointing drug discovery return on investment.

Here is another way to look at pharmaceutical innovation productivity.  Let’s say the average Big Pharma has a $1 billion per year to spend on drug discovery and preclinical research.  How do you think that compares to what academic labs (or start up biotechs for that matter) have to spend on discovery research?  Maybe a couple million dollars they have secured in government grants?  Yet, dollar for dollar, who’s delivering the innovation? And why?  An increasing number and percentage of innovative new drugs are being discovered in government or government funded public laboratories.

While they may have less money to work with, academic labs have three essential ingredients that increase the probability for innovative drug discoveries;  expertise, time, and a passionate focus for a comprehensive understanding of the science behind their work (e.g., disease, pathophysiology, biochemistry, and molecular biology).

This is not to say that all Big Pharma researchers lack these essential ingredients.  But even if they do have them, these attributes are mitigated by the distractions of organizational expectations, bureaucracy,  and time pressures to deliver compounds rather than understanding the science.  Perhaps most importantly, expertise in Big Pharma is often rewarded with more work (projects, administrative duties, or increased management responsibilities) that removes (mitigates) the expertise, or at least the focus of the expertise, from the day to day work of discovery research.

Sure, more money can facilitates innovative drug discovery but without expertise, time, and a passionate focus on the science, don’t expect to fill your pipeline.    mike@pharmareform.com

Some pharmaceutical industry executives, healthcare providers, and even patients may view these performance metrics as a biased, bureaucratic process for defining medical practice and imposing the “cheapest, least expensive” treatment options.

Whether or not the ACO concept survives in its current form is not important, but rather, I believe it represents the next level of managing healthcare delivery that can not be ignored.   I believe the draft ACO concept also represents an important new context for how pharmaceutical companies need to be looking at developing, marketing, and selling their prescription drugs.  Here’s why…

For decades the pharmaceutical industry has boasted about cost savings, cost-effectiveness, and the pharmacoeconomic value of prescription drug treatment.  Professing that prescription drugs can reduce overall healthcare costs by avoiding the ancillary costs associated with chronic diseases, reducing office visits, keeping people out of the hospital, and most importantly, preventing and curing diseases.  And despite the industry’s best efforts, these claims and propositions have seemed to nebulous, lacking in credible data, and therefore mostly fell on deaf ears within traditional healthcare provider systems.

In an ACO-type healthcare delivery system, these value propositions have real meaning, especially as they relate to the defined performance metrics.  With electronic medical records, insurers, payors, and providers will now have more robust information systems to track and report performance of prescription drugs and validate the value propositions in their own healthcare system.  That means marketing and research must be aware of how their products will now be assessed against these performance metrics and design clinical trials that go well beyond establishing regulatory claims for efficacy and safety.

Getting your product identified as a “treatment of choice” in a performance metric would be the ideal and almost assure commercial success for a prescription drug in that healthcare system.  In fact, pharmaceutical companies who align their products and deliver data driven proof for improving healthcare delivery performance metrics as defined by ACOs will find healthcare provider systems more than willing to encourage the use of their products over other, less performance impacting therapeutic options.  Rather than trying to find ways to limit the use of seemingly expensive new products, this new perspective provides rationale for healthcare provider systems to proactively promote the use of prescription drugs that can help them meet or exceed their performance goals in a cost-effective way.

In the next post we’ll explore how healthcare statistics can provide an interesting platform for driving prescription drugs in this new performance metric, ACO-type healthcare provider market.   mike@pharmareform.com

Included in this proposal are 65 performance metrics (Table 1, pages 174-194); specific quality and clinical outcome measures of care delivery.  Healthcare providers in an ACO will be required to track, record, and report their performance against these metrics to qualify for what’s called “Shared Savings” …  financial rewards … or essentially bonuses for meeting or exceeding these performance metrics, but they’ll also be subject to financial penalties for delivering expensive care or under-performance against these metrics.

What kinds of metrics are we talking about?

Well … some are more general … like the use of survey results to capture for example;

• The  level of satisfaction with physician – patient communications
• patient feedback about their provider experiences
• And whether or not the healthcare system has best practice processes in place like patient education, the extent of electronic medical records, and the use of e-prescibing

Other performance metrics are clinically oriented and much more quantitative, for example;

• The number of readmissions following hospitalization
• Healthcare acquired conditions (e.g., surgical or catheter related infections, pressure ulcers)
• The percentage of patients vaccinated or being treated with specifically identified treatments of choice ( e.g., beta-blockers, ACE- inhibitors, or ARB therapy for heart failure patients with Left Ventricular Systolic Dysfunction, warfarin for patients with atrial fibrillation)
• or the percentage of patients controlling their hypertension, blood glucose if they’re diabetics, or controlling their cholesterol levels

The ACO performance metrics go well beyond the tracking and reporting requirements hospitals now capture in their quality systems.   More importantly, these performance metrics are more likely to get the attention of healthcare system administrators and individual healthcare providers because they will be held financially accountable for delivering against these metrics.

While there is considerable debate about, and even resistance to,  the details of the draft proposal and uncertainty as to whether or not CMS can actually implement the ACO concept, this should not create a “wait and see” mentality for pharmaceutical marketing and sales.  The ACO draft proposal should be viewed as a feasible strawman proposal which will foster pilot programs at a few healthcare provider systems and will certainly elicit commentary and alternative proposals as to how to hold healthcare providers accountable for delivering higher quality care at lower cost.

In an earlier post we discussed the pharmaceutical sales and marketing challenges created by the complexity of ACO organizational structures and decision making processes. In our next post we’ll explore how this ACO concept and the 65 performance metrics could actually provide a platform to help drive revenues for pharmaceutical companies in this evolving new healthcare market.   mike@pharmareform.com

Pharmaceutical marketers who lack sophistication and try to merely enroll clinical pharmacists as their sales advocates will be woefully disappointed.  Clinical pharmacists are well educated, well informed, and very analytical when it comes to evaluating therapeutic treatment options.  They have an insatiable need for clinical data to support not only efficacy and safety but also the value proposition for a product.

Pharmaceutical marketers should spend some time understanding the different roles clinical pharmacists might play in the evolving healthcare system and better determine the information needs and evaluation criteria used for assessing products in therapeutic categories that pertain to their marketed products.  More importantly, pharmaceutical marketers should understand the best ways for packaging and presenting their product information so as to assist clinical pharmacists with their product evaluations, presentations, and fulfilling their clinical responsibilities.

Assuming you have a high demand product that fills a significant unmet medical need, clinical pharmacists can play a critical role in making sure your product is available in their healthcare system, is a part of treatment guidelines and highlighted in any e-prescribing support systems they use to encourage appropriate use.  They can facilitate educational programs for physicians and patients to ensure that the right patients are considered for your product, are aware of any potential safety issues, and reinforce the value of your product relative to other therapeutic options.  Clinical pharmacists are also well qualified to be clinical care coordinators in Accountable Care Organizations, and are organizationally well positioned to ensure patient compliance and adherence while monitoring and tracking the financial benefits derived from appropriate use of the product.

So tactically, what does this mean for pharmaceutical marketers?  Here are some things to consider.  Who will be making your product presentations to ensure product inclusion on formularies and securing reimbursement?  Do they have the credibility and training necessary to discuss the clinical data and value proposition (e.g., outcomes and quality metric implications) without having to refer questions to the company Medical Affairs department?  Do you have a user-friendly, comprehensive product dossiers with any efficacy, safety, or value claims (including outcomes and quality metric implications) supported by published clinical data?  Can you provide clinical trial designs and templates for doing comparative efficacy trials for your product?   Can you customized your healthcare provider and patient education materials  for specific healthcare systems?  Are you ready with electronic medical records integration technology and patient care support apps for mobile devices (think e-prescribing and adherence support)?  Can you help with customized electronic models for tracking and analyzing improvement in outcomes and quality metrics consistent with the healthcare provider system goals and objectives?

Reception of these tactics will depend on the healthcare provider system and the clinical pharmacists but also the quality and value of the products and tactics being made available.  The key is for pharmaceutical marketing to align with and embrace the needs of clinical pharmacists and find ways to help healthcare provider systems accomplish their goals and objectives in this evolving new healthcare market.  Pharmaceutical marketers who figure this out can create a significant competitive advantage and enhance revenue growth, assuming they have the innovative products, the data to support their claims, and tactics that are supportive and embraced by healthcare provider systems.

mike@pharmareform.com

I’m talking about the clinical pharmacists who evaluate and make formulary recommendations for treatment options within large healthcare systems, managed care, Pharmacy Benefits Managers, government agencies (think CMS), and at healthcare insurance companies.  I’m talking about clinical pharmacists who are rounding in the hospital with attending physicians; monitoring, evaluating, and consulting on drug treatment. And, I’m talking about clinical pharmacists who are delivering and managing chemotherapy and other intravenous drug treatments in the outpatient or home health settings.

Clinical Pharmacy’s power comes from the ability to influence formularies and reimbursement decisions, draft treatment guidelines, and recommend treatment choices.  They are frequently involved in clinical trials and may find themselves increasingly involved in designing, executing, and evaluating “comparative effectiveness” studies.

More importantly, clinical pharmacists could be in the best position of healthcare providers to monitor and manage patient compliance and adherence to treatment, ensuring that treatment outcomes and quality metrics improve, and patients realize the full benefit of drug treatment after the prescription has been written.

The intensifying cost consciousness of the managed healthcare market being driven by healthcare reform and the opportunity for financial incentives from Accountable Care Organizations will further elevate the relevance, importance, and value of the drug treatment expertise of the clinical pharmacist.

It is important for pharmaceutical marketers to understand and appreciate the increasingly influential role of the clinical pharmacist in the evolving new healthcare market.  See why in the next post.  mike@pharmareform.com

Should they get bigger, should they downsize?  Should they acquire, grow organically, or divest? Should they be “pure” pharmaceutical plays or diversified healthcare companies?  Should they continue to exploit the US market or expand into emerging markets?  Should they rebuild and restructure R & D or move to a more flexible outsourcing model?  Should they focus on diseases, products, or technologies?  Are regulatory compliance, manufacturing quality, and integrity important for building trust and credibility or are they “envelops to be pushed” for competitive advantage and financial gain?  Strategic and tactical choices that can affect business today and well into the future.

So what’s the big deal?  Don’t all companies go through this?  Why is this important?

It’s important because, when a company determines who they are, finds its purpose, and develops a passion for what they do; strategic and daily operational decision making become easier and are more likely to deliver the organizational goals and objectives that support the company purpose.  This corporate understanding of “self” includes a deep seated set of behavioral expectations, values, and principles by which the company operates and does business.

Definition, consistency of behavior, and organizational alignment allow employees to embrace and support the corporate purpose in their daily activities.  Decisions become easier as choices and options either fit or don’t fit the behavioral values or purpose.  More importantly, employees, prospective employees, customers, collaborators, and investors all know what to expect from the company.

Despite all the mission and vision statements in their lobbies, I believe many of the Big Pharma companies today have lost their purpose and are confused about their ”self.”  With a fixation on near-term financial performance (their apparent purpose), they seem to be struggling to find the “quick fixes” to business success in the evolving new healthcare market.

Most pharmaceutical companies would never admit they have lost their purpose.  At the same time, if they were to explore this fundamental business principle, many might learn that even their management teams are uncertain, if not finding total organizational disagreement about who they are and what they do.

mike@pharmareform.com

But …  what would happen if the branded product manufacturers (Big Pharma) started to “match generic drug prices” once their product patents expired?   As generic drugs of the branded product come to market, the branded product matches their price or even prices slightly lower than the generic drug to preserve their market share.    Surely, nobody could be a lower cost manufacturer than the innovator, brand manufacturer.

Let’s think about this. The branded company development costs are well behind them.  Manufacturing facilities, equipment, and staff are already in place.  Training, quality systems, and regulatory compliance requirements are also in place.  Operational efficiencies have been honed over years of production.  Branded manufacturers can certainly negotiate at least as good a terms on API (active pharmaceutical ingredients), packaging, and supplies as the generic drug companies.  And while branded manufacturers may have higher “overhead expenses” that’s an accounting allocation issue.  Building a patient base, marketing, sales, and supply chain logistics are already in place for the branded product.

The generic drug company on the other hand has to develop the generic product (formulation and establishing bioequivalence can be challenging), purchase and set up manufacturing capabilities (or retool what they have), source API, packaging, and supplies, put in place new manufacturing SOPs (standard operating procedures) and regulatory required quality processes.  They have to hire and train new personnel (or at least retrain current staff), develop their regulatory filing, and secure FDA approval.  They may even have to challenge the patent validity of the innovator product.  And once approved, they have to market to and negotiate with the supply chain and the managed market.  In the end, these are all new costs for generic drug companies that have to be covered in the price of their new product entry.

In the past, branded products matching generic drug prices would have meant leaving money on the table and forfeiting profits as generic drugs gradually made their way into the market over a period of years.  Today, however, it only takes a matter of months before a majority of branded prescriptions drugs can be converted to generics.

I’m sure somebody has already done the math on this from a Big Pharma profitability perspective but I still believe that “matching generic drug prices” could have value for patients and Big Pharma.   Matching generic drug prices would preserve a large patient base of lifetime revenue (albeit at lower margins) for the branded product.  It also rewards loyal patients with lower prices for the same drugs they may have been taking for years. It would certainly make it easier and more efficient for healthcare providers, patients, and the managed market in that there would be no reason to worry about changing patient prescriptions.   And, while Big Pharma might view this as “throwing in the towel” ,  this approach would be a challenging “game changer” for the generic drug industry.  mike@pharmareform.com

Those looking for or postulating near-term quick fixes from strategic restructurings, mega-mergers, technology acquisitions, or breakthrough serendipitous discoveries to resolve the industry dysfunction will be sadly disappointed.  As described in Pharmaplasia™, the problems in the pharmaceutical industry are deep rooted and involve more than just a lack of  R & D productivity.

Sure there are going to be the occasional successful new product introductions that give us hope that the industry is recovering but even those introductions will have been the result of decades of development work and there will be too few to really make a significant impact on restoring healthy consistent revenue growth for the industry.  For the pharmaceutical industry there are no quick fixes and it could take decades for the impact of the multitude of strategic efforts today to really begin delivering the types of financial results expected from the magnitude of investment being made by the industry.

In addition to fixing R & D, the pharmaceutical industry business model must become more efficient (increase operational productivity and reduce waste), must be more responsive to healthcare market needs, and must replace traditional sales and marketing tactics with healthcare market embraced programs.  Success will depend on competent leadership that is more interested in satisfying evolving new healthcare provider needs and patient well-being than “driving revenues”, satisfying Wall Street, and building personal financial wealth.

In the end, a more prosperous future for the pharmaceutical industry will come from discovering and developing truly innovative new treatments that provide clinically meaningful benefits over currently available therapeutic alternatives.  This will take a major change in R&D philosophy with a much more comprehensive basic sciences approach to finding preventions, treatments, and cures for diseases rather than relying on historical “tweaking of chemistry” and “trial and error” approaches of matching compounds with postulated disease targets.   mike@pharmareform.com

So why was I even paying $130 in the first place, when generic alternatives were available?  Well, when I had prescription drug coverage through my employer provided insurance,  my co-pay for the branded products was about $20.   I not only didn’t think about the actual price of the drug but I didn’t even care to know what it would have cost without insurance.   Generic drug alternatives didn’t enter the thought process.  Besides, how much lower priced could the generic drug be? More recently, until the price increase,  I just kept getting the prescription filled even though it seemed expensive at $130 per month.

Fortunately my physician agreed to try me on the generic alternative.  For once I also felt fortunate that I was not covered by a government program (e.g., Medicare, Medicaid, and TRICARE) which would have made me ineligible for this savings club and these generic drug prices.  There is a wide range of therapeutic categories with over 400 generic medications available from this pharmacy prescription savings club priced at $12 for a 90-day supply (or $9.99 for 30 days).  Again, hard to suggest these prices are unreasonable and they certainly are not expensive in the context of most prescription drug price discussions.  Even without the savings club membership the price would have been less than $30 per month.

Despite the fact that over 70% of prescriptions in the US are now filled with generics drugs, I can’t help but to think from my own experience that there are still a lot of people who could financially benefit from a switch to generics.   I also believe healthcare reform will bring significant cost pressures to get more patients converted to generic drugs.  The Congressional Budget Office reported that in 2007, if all of the 45 million Medicare Part D prescriptions filled with multiple-source brand-name drugs (brand name drugs with generic alternatives) had instead been filled with their generic counterparts, an additional $900 million would have been saved.  And that is without considering therapeutic substitutions (as my case would be considered) or the potential savings from the blockbusters now coming off patent over the next few years.

The biggest downside for patients resulting from this healthcare market evolution to encouraging the use of more generic drugs is that if you need one of the innovative branded products for which there is no good generic alternative, you are going to pay much higher prices than you might have in the past.  If my generic cholesterol lowering agent isn’t as effective (or has more side effects) as the branded product I was taking, I’ll be back to paying the $140 per month.

I believe two factors will drive branded product prices higher with healthcare reform.   First, truly innovative treatments that deliver real clinical value and unique therapeutic benefits will command a premium price because they will be deemed worth paying for and taking.   Second, more generic drugs and more patients taking generic drugs will shrink the market for branded products to people who absolutely need the branded products.   Drug companies will have to exact their profits from fewer products that can deliver these unique therapeutic benefits to much smaller patient populations.   Companion diagnostics will further reduce these already small populations of patients, by identifying responders and eliminating those who might experience side effects.

So the good news for patients is there will be more generic drugs available at low prices resulting in lower costs to government programs (tax payer benefit), private insurance (keeps co-pays lower), and patients.   Pharma companies on the other hand will be able to, and will have to, charge even higher prices when patients need their innovative branded products.

Disclosure:  I am not compensated  by the prescription savings club.  The link is included here only as a reference.

mike@pharmareform.com

If the symptoms are silent and merely precursors for what might happen, people tend to be indifferent and less interested in paying any associated expenses.  If they are sick with symptoms that are uncomfortable, make daily activities impossible, or they are told they are dying from the disease, they will do just about anything and pay just about anything to eliminate the symptoms or disease.

I believe this reflects both a healthcare systems failure and tremendous patient apathy that suggests they don’t feel responsible for expenses (thinking either insurance or the government should pay) related to the consequences of their own poor health.

The report concludes:

“Although treatment of high blood pressure and high cholesterol is very effective and relatively low-cost, most people with these conditions remain at elevated risk for heart attacks, strokes, and other problems.”

• By the Numbers – High Blood Pressure
  • 1 in 3 Adults has high blood pressure
  • 1 in 3 Adults with high blood pressure does not get treatment
  • 1 in 2 Adults with high blood pressure does not have it under control
• By the Numbers – High Cholesterol
  • 1 in 3 Adults has high cholesterol
  • 1 in 2 Adults with high cholesterol does not get treatment
  • 2 in 3 Adults with high cholesterol do not have it under control

The insurance coverage focus of healthcare reform will probably make little difference in these numbers.  In this same CDC report, it is noted that more than 80% of patients who lack control of theses cardiovascular disease symptoms already have insurance.  Additionally, the cost to treat these conditions is relatively low with many highly effective treatments now available as inexpensive generic drugs.

Unfortunately, over the past several decades while healthcare provider systems battled Pharma companies over drug prices and Pharma companies focused on driving the market for “new prescriptions,” a huge market of untreated and ineffectively treated patients was building.

Why should we care?

Well, Pharma should care because there are tens of millions of potential patients yet to be treated.  Perhaps not all these potential patients will be willing or able to pay high prices for branded products but some may and will.

More importantly, beside the thousands of people suffering debilitating consequences or even dying prematurely, this same CDC report notes that cardiovascular disease costs the nation $300 billion each year.

So how do we improve and expand the treatment of patients with high blood pressure and high cholesterol?

The CDC report includes several suggestions and recommendations for programs, systems, and incentives for prevention and improving the treatment of cardiovascular diseases.  Unfortunately, many are similar to tactics being deployed today, previously suggested, or that have been tried before.

I believe the solution to this dilemma is to make the patient take responsibility for their health.  Pharma companies can make effective treatments available, physicians can prescribe the life style changes and medications, insurance companies and the government can pay for the treatments.  But, if patients don’t seek out and comply with the life style changes and treatment regimens, there is little the rest of the healthcare provider system can do to help patients prevent cardiovascular disease.

So how do we get patients to take responsibility?  This may be a little radical but what about making patients personally,  financially responsible for the consequences of not seeking diagnosis and treatment or complying with their treatment regimens.  If you have high blood pressure or high cholesterol and you choose not to find out (get checked) or be treated or not to be compliant with your prescribed treatment (including life style changes), that’s fine,  but you become personally responsible to pay for any medical expenses related to your heart attack or stroke.

While people have a hard time appreciating the health consequences of a heart attack or stroke until it happens, they seem to understand the financial consequences without experiencing the event.  That is why people buy insurance and why health insurance is so important to them when seeking employment.  They can relate to the financial implications more than the health consequences.

Want more patients to have their high blood pressure or high cholesterol controlled?  Make them financially responsible for the consequences of not seeking treatment and not staying in control of their disease.

mike@pharmareform.com

Industry reports, Wall Street commentary, media exposure, and trade journal articles continue to paint a pretty depressing picture for the pharmaceutical industry. Declining revenues, thinning pipelines, prominent blockbuster products coming off patent, an inordinate number of disappointing clinical trial results, and inexplicable regulatory rejections are just a few of the issues haunting Pharma executives.  Collateral damage from mergers and acquisitions, plant closings, downsizings, and continued regulatory and legal consequences from questionable, if not illegal, activities.  The state of the pharmaceutical industry seems more than just a little challenging as a place to work.

In the midst of this challenging environment, pharmaceutical executives need the support and high level performance from their employees more than ever before.  Unfortunately, executive credibility among the rank and file may be somewhat compromised by uncertainty precipitated by their actions of the past and more recently, the pick slips handed to many of their fellow co-workers.  With the continued threat of even more cost cutting and downsizing,  inspiring and maintaining employee morale will take more than visionary leadership and executive cheerleading.

The single biggest factor company executives have to deal with as they try to manage through to prosperity is the psyche of their employees.  What if I’m worried about my job, the financial viability of the company, the stock price (my retirement), more pipeline failures, litigation losses, and bad press?  Can I really be performing at my highest level?  Do I even care?

So, when are people most productive and performing at their highest level?

When they feel good about themselves, their job function, and their company.  When they are well trained and have the expertise to perform at a high level.  When they have the right mindset about who they are, the role they play in what they are doing, and how well they are doing it.  When they feel they can still grow in their jobs, know they can learn and feel good about finding new ways to do it better.  When they don’t feel like their job is a job but rather what they do makes a significant contribution to the good of the company.  When their efforts and performance level are acknowledge in a meaningful way.

How does your company deal with these issues?  Do company executives and managers have a psyche improvement plan?  Do they have the training to help employees create and develop the right mindset and reach these higher levels of performance?  Or,  are they just hoping things will get better?   mike@pharmareform.com