Pharma Reform

While it is hard to argue that you don’t need money to discover innovative new treatments for all the complex diseases that continue to cause illness, disability, and even threaten life.  At the same time, Big Pharma has shown that merely throwing money at discovery research won’t necessarily deliver the results you might expect.

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

In the previous post we discussed the CMS proposed ACO concept for developing healthcare provider systems that engage individual healthcare providers with “shared savings” incentives to improve the quality of care delivery and clinical outcomes as defined by 65 performance metrics.

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

The Patient Protection and Affordable Care Act has prompted CMS (Centers for Medicare and Medicaid Services) in the US to draft a proposal for establishing Accountable Care Organizations (ACO’s).  This draft proposal outlines a concept for enrolling patients into healthcare provider systems (local networks of hospitals, physicians, laboratories, etc) to coordinate a continuum of care to keep patients healthy and to better manage their diseases for improved clinical outcomes at lower cost.

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

The increasingly influential role of clinical pharmacists in the evolving new healthcare market represents an opportunity for pharmaceutical marketers.   At the same time, to take advantage of this opportunity, pharmaceutical marketers will need to redesign their commercialization strategies and tactics.  Clinical pharmacists are not going to be receptive to traditional marketing and sales tactics.

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

The clinical pharmacist has gradually evolved in influence from the early 1980’s to a new point of power with healthcare reform, especially in anticipation of Accountable Care Organizations.  While some may have an extended clinical role out of their community pharmacy (e.g., nursing home services), I’m not talking about the dispensing pharmacist behind the counter at your local pharmacy.  I’m talking about the highly trained drug treatment specialists with extensive clinical experience who now play an even more influential role in the increasingly managed healthcare delivery system.

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

This may sound simplistic and obvious.  But, have you noticed lately that pharmaceutical companies appear to be struggling with a confusing array of seemingly contradictory strategic choices?  Some of these choices leave even the most knowledgeable industry followers wondering and speculating about the rationale behind the decisions.

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

Over 70% of prescriptions today are filled with generic drugs.  Once a branded product loses patent protection, they experience generic erosion and a rapid decline in market share of prescriptions.  With the healthcare market becoming increasingly more managed (think government, insurers, and Pharmacy Benefits Managers) and the dramatic difference in price (generic drugs being significantly less expensive) it doesn’t take long for generic drugs to replace branded products in the market.

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

The commentary and highlights of pharmaceutical industry challenges noted in Duff Wilson’s article “Patent Woes Threaten Drug Firms” in The New York Times (3/6/2011) and the Morgan Stanley report “An Avalanche of Risk? Downgrading to Cautious” come as no surprise if you have read the book Pharmaplasia™.  This disconcerting pharmaceutical industry situation has been decades in the making and unfortunately, will take decades to turn around.

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

Recently, in one month, the price of my branded prescription drug for high cholesterol went from $130 per month to $145 per month at the same pharmacy.  Yesterday I changed to a generic drug alternative (not the same as the brand I was taking) which will cost me $4 per month after joining a $20 per year prescription savings club.  I now get more than two years of medication for the price I was paying for one month of the branded product.  Assuming I will be able to control my cholesterol with this new medication (no reason to believe it won’t as I have taken most of them over the past several years),  at $1 per week it is hard to complain about the high price of prescription drugs.

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

The recent CDC report on how poorly we are doing in preventing the leading cause of death in the US, cardiovascular disease, despite the availability of inexpensive effective treatments, is pretty disappointing.  It is probably a good surrogate for how people think about illness.

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