Pharma Reform

If we are trying to figure out how sales representatives can add value, we must start with those who will determine whether or not there is value being added… the customer.  This may be obvious to some, especially sales representatives, but over the past several decades pharmaceutical industry management has characterized the “value added” in the context of what sales representatives can do for the company or the product and not what sales representatives can do for the customer.  So let’s start with the customer (which is not just physicians in the evolving new healthcare market) and what their needs are and how we can add value by meeting or exceeding those expectations.

I don’t want to get off on a tangent but the needs and expectations I’m talking about here are not for things like lunches being delivered or a return of the tchotchkes.  Unfortunately, the industry trained physician offices into developing these expectations in lieu of meaningful clinical discussions about products.

So let’s review some of the evolving market expectations for pharmaceuticals that the industry must be ready to meet, especially in light of healthcare reform:

• Safe and effective products that can be differentiated (clinically proven and with label claims where possible) from currently available treatment options (including preventive medicines)
• A clear understanding with supportive data for the basic science behind the product, its mechanism of action, and rationale for efficacy and potential side effects and adverse reactions.
• Clinical data to support “comparative efficacy” and other claims of differentiation or even superiority (justify the premium pricing)
• Personalized medicine supported by biomarkers and companion diagnostics that can predict response, determine extent of response, and anticipate side effects and adverse reactions with specificity and accuracy
• Real world pharmacoeconomics data to support the economic value of the product and pricing that reflects the value being delivered. Again, justify the premium pricing.
• Hospitals will want data and methodologies to demonstrate the impact of products on newly established quality metrics and outcomes data that will be used to force rank their institution performance against national standards.

One of the first implications of meeting these more demanding market expectations is that pharmaceutical companies must readjust their thinking to be more selective in their pipeline evaluations and  a lot more comprehensive in their approach to research and development.  In the past, you could just find a compound, identify the potential indications for use, do the clinical studies, get approval, and go to market.  This traditional “get it to market” approach to R & D will deliver products and data that fall short of market expectations and hamper commercial viability of products in the evolving new healthcare market.

It also becomes apparent that regardless of the representative’s scientific or technical expertise, even the best of sales representatives will struggle to address these market expectations if the research foundation and data are lacking.  I believe this is one of the reasons sales representatives are struggling today.  Pharmaceutical research has not kept pace with the demands of the market and sales representatives are being asked to compensate for limited regulatory product labeling, a lack of product differentiation, and minimal real world clinical data that can be used in product discussions.

But let’s assume your company is committed to a much more comprehensive research approach to deliver truly innovative new products with robust data packages.  This has significant implications for how pharmaceutical sales representatives can add value for customers.   You might be surprised by some of the implications we’ll discuss in our next post.  mike@pharmareform.com

More often than not you hear Pharma defend high prescription drug prices as necessary to cover the high costs associated with pharmaceutical research and development.  Over the course of 7-10 years or longer they may spend $1.0 billion or more to get a product to market.  While the time and costs of drug development may be real, the rightfully skeptical healthcare market and patients have never really accepted this rationale for high prescription prices, often pointing to the more visible high cost of marketing and sales.  And now, this high cost of R & D rationale has become even less believable.

What makes this rationale even less believable today then ever before?  The fact that pharmaceutical companies can afford to spend tens of billions of dollars on mergers and acquisitions while dismantling the acquired companies, laying off thousands of employees (including research scientists), and at the same time, reducing the R & D investment the two merged companies might have otherwise spent.

The other area that challenges the credibility of the bogus high pricing rationale is the affordability pharmaceutical companies have to pay hundreds of millions of dollars or even billions of dollars in fines and settlements for alleged and sometimes proven wrongdoing.

Unfortunately, the billions of dollars spent on mega-mergers and litigation settlements don’t go towards producing any innovative new products.  Pfizer spent $68 billion (equal to the total annual amount of industry spending on R & D) to acquire Wyeth and Merck spent $41 billion to merge with Schering, not to mention the hundreds of millions spent by the two on restructuring, legal, and banking fees.  None of this money went to R & D.

Similarly, none of the $2.3 billion in fines and settlement Pfizer recently coughed up nor the hundreds of millions of dollars of settlement paid by other companies for their alleged indiscretions will go to R & D.   In fact, Pfizer’s $2.3 billion settlement represents more than 30% of their anticipated $6 billion spend on R& D this year.  The $2.3 billion alone would have put any other company in the top 20 of pharmaceutical companies in R & D spending.

So when Pharma says they need high prices to support R & D it is no surprise that the healthcare market and patients recoil with skepticism, frustration, and animosity.

mike@pharmareform.com

The role of the pharmaceutical sales representative (Chapter 9 in Pharmaplasia™) has been waning for some time.  The internet is full of discussions about the sales representative (“detail person”, “detail man”, “detailing”) position being dead, dying, or even obsolete. Some discussions are defensive while others are unrealistically optimistic about a return to the traditional role.  At the same time,  Pharmaceutical companies are trying to balance the challenges of physician access with the fact that pharmaceutical sales has been one of the most impactful marketing tools available.  More importantly, the pharmaceutical sales representative was probably the best way to inform, and yes, “educate” physicians about prescription drugs, especially new products.

There is a lot of blame to go around for why pharmaceutical sales is struggling for survival.  There is a rarely talked about and hidden reason but first here are a few of the more obvious and frequently complained about reasons for why pharmaceutical sales representatives find themselves either unemployed or wondering if they will still have a job at the end of the year:

Some have also postulated that the advent of electronic communications and internet availability of medical and drug information have made sales representative obsolete.  I believe electronic communications should not be seen as a threat or replacement for pharmaceutical sales but rather could be a future necessity for handling the large volume of data available and to explain the complexities of new treatment options.

Some have suggested sales and sales management brought it upon themselves with questionable sales tactics and the hiring of less than professionally or scientifically qualified sales personnel.  While these may have ultimately contributed to the continuing demise of this important position, I believe you have to dig deeper to uncover the genesis of this unfortunate evolution.

Some have blamed management for just about everything and in this case, you don’t have to be very specific, from C-level to front line managers.  Unreasonable expectations and “stretch” sales forecasts drove a lot of sales organizations and individuals to do “whatever it took” to meet those sales goals.  Sales management complied with these expectations and was bound and determined to make their incentive bonuses and ensure their place at the annual sales incentive trip.  Again, “whatever it takes” to make or exceed your numbers.

Marketing often built those sales forecasts out of hubris and pushed the sales organization to deliver while also provided the marketing message and resources to do “whatever it took” to  deliver the sales.  Think of the virtually uncontrolled, unlimited (by standards for most other industries) funding for tchotches, lunch and learns, speaker programs, and of course, samples and literature (marketing materials).  Of course reps were encouraged to fully deploy and leverage all their resources.

Some people like to blame the regulatory environment (constraints on what reps can say and do) while others point to a less tolerant healthcare market (increasingly difficult physician access and institutional limitations on promotion).  These, however, while real, were more a response to increasingly aggressive and sometimes questionable (unethical or illegal?) activities rather than being inherent in the market.

No doubt, pressure on sales representatives to make their numbers was and is intense and often requires incredible selling skills and creativity to compensate for the realities of marginal product profiles given the market expectations and sometimes even harmful side effects of the products they were selling.

This leads us to one of the less obvious sources for why I believe the sales representative position has become threatened with extinction.  And that is,  the lack of credible clinical data and appropriate regulatory labeling to support the commercial claims needed to deliver the forecast sales numbers.  Sometimes the clinical data and marketing messages provided to the sales organizations have even been inaccurate, intentionally misleading, or even concocted.

Solid credible clinical data and regulatory approved labeling to support commercial claims mitigates the need for overly aggressive and questionable sales activities and reduces the regulatory constraints that bar sales representatives from having meaningful clinical discussions with physicians.  It is hard to imagine the level of sales that might have been achieved had the talented, skilled sales representatives been armed with better clinical data and stronger, more definitive regulatory label claims.

Research teams pushed (and senior management was pushing even harder) for approval rather than building comprehensive product profiles to support the commercial expectations.  The get-it-to-market drive for approval to attain indication- based label claims without differentiation or consideration for what sales representatives will be able to say or use in promotion unfairly puts sales representatives in an awkward, boring, professionally compromised, and near impossible selling situation.

So before you blame or criticize sales and sales management for jeopardizing the pharmaceutical sales position, look at the clinical data they had to work with.  You might find that they did a better job than might have been expected and you might find the reasons they felt compelled to go to such extremes in some cases to make their sales numbers.

mike@pharmareform.com

“… Pharmaplasia is important reading for anyone with a vested interest in the pharmaceutical industry (especially those who work in it).”

(Four of Five Stars)

ForeWord CLARION Reviews

Unlike other books written about the pharmaceutical industry, Mike Wokasch, a 30 year industry veteran, delves into the causes of the industry’s current state of dysfunction.  He provides practical solutions for a prosperous future, even in light of the increasing regulatory constraints, restrictions on marketing and sales, and the demands of an increasingly cost conscious market with its own challenges imposed by healthcare reform.

The author provides an insider’s perspective with unique insights into the unintended consequences of the industry’s rapid growth and explores why some Big Pharma companies may be too big for the complexities of the science, the business, and the market.  Much like his blog PharmaReform.com, this 180 page book is not an exposé but rather a hard hitting discussion of how the industry’s mistakes and poor decisions have led to serious questions about its outdated business model, its long-term commercial viability, and the imbalance between corporate priorities for “profits and patients” that have driven product sales but often put patient health and safety at risk.

Pharmaplasia™, which is available in hard and soft cover at  www.Pharmaplasia.com,  addresses important management, organizational, functional, and philosophical questions such as:

• How will Healthcare Reform affect the pharmaceutical industry?
• What do pharmaceutical companies need to do to better align with the expectations of the market and to adapt to Healthcare Reform?
• What factors, actions, and decisions led to the current state of industry dysfunction?
• Why can’t $65 billion in annual R & D spending produce more innovative products?
• What did organizational growth do to pharmaceutical companies and the industry?
• Is the role of the pharmaceutical sales representative obsolete?
• What do pharmaceutical companies need to do to reestablish trust and credibility in the market?
• What should pharmaceutical executives focus on as they reconfigure their business models?

Industry executives and employees will relate to the historical insider perspective but more importantly, take away practical recommendations for increasing R & D productivity, preserving profitability in the face of healthcare reform, and reestablishing public trust and credibility.

Pharmaceutical industry service providers and vendors will better understand their customers and comprehend the transformative challenges the industry faces; ultimately they will be in a better position to align their products and services to the address the changing needs of the industry.

Healthcare providers will relate to how the industry needs to evolve, appreciate the need for and value of “conflict of interest-free” relationships with the industry, and gain further understanding of the important role they play in ensuring that their patients receive the best available treatment options.

Patients and the general public will enjoy the insider perspective about Big Pharma while learning what they should be able to expect from an industry we all depend upon for innovative new drug treatments that can relieve pain and suffering and save lives.

Preview Table of Contents

Preview Chapter 1

Go to www.Pharmaplasia.com

Corporate integrity should start at the top of the organization and every employee must do their share to make it a reality but pharmaceutical company physicians and scientists are the best hopes for reestablishing pharmaceutical industry trust… if they can survive in their organizations.

Integrity and objective science were once the hallmark of pharmaceutical research.   Valid testing methodologies, rigorous analysis and interpretation of data, and accurate complete disclosure of findings and understandings provide the medical community with a sound basis for making informed clinical decisions.  Too many case studies over the past several decades, however, have raised serious questions about the integrity and objectivity of pharmaceutical research.

Not to make excuses but, physicians and scientists at pharmaceutical companies are subjected to intense organizational pressures that can cajole them into compromising their objectivity and scientific integrity.  These pressures come in subtle and sometimes not so subtle forms.  Emotional attachment, satisfaction of personal ambitions, peer pressure, and management can all influence decision making and can provide a rationale for questionable actions taken.

Emotional attachment results from years and sometimes careers worth of product development, creating an instinctive need to nurture and protect “their babies”.   Wanting to maintain a positive outlook, securing incentive compensation, enhancing professional stature, and wanting to be a part of the team can all drive the behavior of individuals and groups to do things they might not otherwise consider.

Perhaps the single biggest challenge for industry physicians and scientists trying to maintain scientific integrity is dealing with the implicit and explicit demands and expectations of management.

Some of the types of scientific integrity issues we are talking about include:

• Designing studies around problems without disclosing the problem
• Data manipulation
• Covering up, hiding, or minimizing relevant negative data
• Disproportionately highlighting efficacy benefits to mitigate safety issues
• Not challenging or correcting company statements (or marketing) when they know they are scientifically not valid, incomplete, or misleading

None of these happens in a vacuum as it would be rare that they could be accomplished by a single individual without the knowledge of others.  At the same time, an individual physician or scientist puts their career at risk when they challenge organizational thinking and management prompted or endorsed indiscretions.

That being said, pharmaceutical industry physicians and scientists are often the only ones who have the corporate platform and organizational position power to guide management regarding what can be supported scientifically or what can or can not be claimed clinically.   They are in the best position to insist on integrity in drug development as well as in how the company promotes its products. They are in the best position to clarify and correct misleading corporate commentary, statements, or implications.

When integrity and objectivity of the science around a product are ensured, when scientists hold their management accountable for accurate and complete disclosures, and when they don’t let marketing and sales make misleading or false claims, then pharmaceutical industry physicians and scientists will provide the basis for restoring confidence and credibility in the work they are doing.  An organization that embraces integrity will value these physicians and scientists and reward them for keeping the company honest.  Unfortunately, companies that do not embrace integrity will probably find a reason fire these these physicians and scientists, if they don’t decide to quit first.

mike@pharmareform.com

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

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

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

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

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

mike@pharmareform.com

Pharmaceutical and biotech company marketers have always appreciated the impact they could have with pharmacoeconomic data to support the advertising and promotion of their products.  Unfortunately, it was rarely a prerequisite for commercial success and more often than not, done after product launch using retrospective database analysis and speculative modeling.  In the evolving new healthcare market that will change.  In an increasingly managed and cost conscious market, even innovative products with meaningful clinical differentiations from other therapeutic alternatives will be expected to substantiate the value of that differentiation.  So how do you deliver on those expectations?  You start early in development.

Pipeline project evaluation:

• What are the target product profile value drivers? Specifically, what are the points of differentiation;  the reasons why this product will be better than what is currently available or that might be available at the time of product launch?
• What are the plans for proving that these points of differentiation are clinically real and meaningful?
• Will it be possible to include these points of differentiation in regulatory labeling (package insert) so they can be used in marketing programs?
• Can marketing ascribe a quantitative value (cost benefit) to these points of differentiation?  What are they worth to the patient, to healthcare providers, and to the payer?
• Have you modeled the potential value of the differentiation and the minimum comparative value that is going to be meaningful to payers?  At what point, does the differentiation no longer have meaningful value?

Clinical development:

• Are trials designed to deliver data to prove the points of differentiation?
• Are the trials designed to capture the quantitative value of the differentiation?  Have credible, valid pharmacoeconomic metrics been used?
• Have you eliminated bias from the quantitative design elements?
• Have you built in conservative pricing assumptions and options?  Are they sufficient to allow for valid sensitivity analysis?
• Will the value assessment be reproducible in the real world?

This approach relies heavily on the marketing team understanding the value expectations of the market, the competitive value propositions, and the impact of pricing on the value proposition model.

The research teams must look at not only trial designs from a regulatory perspective but also must be accountable for delivering the definitive proof of differentiation and the data to support the quantitative comparative value (pharmacoeconomics).

Many pharmaceutical marketers do a series of market research studies and then typically set a price based on competition and “what the market will bear”. They then try to justify the value when they go to market.  Now, marketers will need to appreciate, very early on, the relationship between the price they set and the value they can prove based on that pricing and the available clinical and pharmacoeconomic data.   Comparative value assessments by payers will be data driven and will not be influenced by marketing hype.

I’m certain that some who have read this post will think that this process is idealistic, impractical, and some might even argue it is not necessary.  That is might be true until they realize their competitors who are developing comparative value data are creating a substantial competitive advantage and increasing the probability for more ready access to drug formularies at premium prices.

mike@pharmareform.com

Most Big Pharma development programs focus on regulatory requirements for FDA approval.  Makes sense.  There is no commercial value in a product that can’t get approved.  Healthcare reform and the evolving new market, however, are going to impose another level of expectations that go well beyond FDA product approval.

Big Pharma research teams often develop elaborate target product profiles that provide the reasons for developing drugs in the first place.  New mechanisms, less of this or more of that, better dosing schedule or something that makes the product worth developing.  These profiles often provide the theoretical rationale for why the product is better than what is out in the market.  These points are also highlighted every time a budget is reviewed to support continued investment in the product.  Unfortunately, few development plans reflect “proving” these points of differentiation.  Being able to demonstrate “better” for your product compared to other therapeutic options, including generic drug alternatives is rarely part of a regulatory path to approval.  In fact, being “as good as” or “not worse than” is the statistical goal of most programs.

So holding research teams accountable to deliver the “differentiation” proof and data would be one place to start, especially in the face of market expectations for “comparative effectiveness” studies.  But here is the real kicker.  Even if they can demonstrate some clinically meaningful superiority to an available alternative treatment that doesn’t ensure market acceptance with widespread adoption or that the product will become the “treatment of choice.”   I’m not talking about product launch failures or poor commercial execution issues here.

Once the company has demonstrated (solid clinical data) a clinically meaningful difference it will have to have data to show that the difference is worth paying for.  This will be especially challenging when the alternatives are less expensive generic drugs.  I can hear the formulary verdict already.  “We have determined that your product is clinically better than the treatment options available to us but the price difference doesn’t’ justify including your product on our formulary.”  What the market will really be asking for is “comparative value” data.

We’ll discuss what companies should be doing to deal with this in the next post.

mike@pharmareform.com

Biotech has proven to be a viable source for innovative new drug products.  The healthcare market’s increasing demand for innovation and the need to fill gaps in Big Pharma’s research pipelines in the face of blockbuster product patent expirations have driven Big Pharma to get a lot more aggressive in seeking innovation outside their own research teams than they have been for decades.

There are five critical success factors that could help the relationship between Big Pharma and biotechs remain a productive source of innovative new products for the healthcare market:

1. Pharma must respect the scientific expertise of the small biotech companies and  resist the temptation to impose its bureaucracy and corporate expectations on the research teams of the smaller biotech companies
2. As much pressure as there is to get products and technologies to market, it is important to make sure the science of these biotech innovations is allowed to be fully vetted before they are advanced to clinical trials.  Pushing technologies into and through development only to be disappointed by the clinical results in Phase 3 trials  may prematurely, inappropriately, and misleadingly dismiss perfectly good products that are not given a valid scientific chance to succeed.  Small modifications or adjustments in chemistry or better defined or better chosen clinical endpoints might lead to success where failure lurks.
3. While there is a robust diversity of innovation being worked on at universities and in small biotech companies, the number of projects that will result in commercially viable innovative products is still finite at any point in time. And because innovation often starts in the university lab, Pharma should be looking for ways to finance and collaborate much earlier with basic science programs at universities to make certain the flow of innovation continues.
4. Technologies and innovative products directed at a particular therapeutic target or disease are frequently dispersed across multiple companies, across different universities, and even across multiple departments within a university.  Pharma should develop programs to help facilitate collaboration amongst these disparate programs and projects to exploit the expertise and increase the probability of finding the best solutions for treating and possibly curing diseases.
5. Universities and small biotech companies must better understand and appreciate the financial risks Big Pharma is taking in providing support at early stages of development and manage their financial expectations accordingly.

mike@pharmareform.com

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

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

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

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

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

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

and

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

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

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

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

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

mike@pharmareform.com