Pharma Reform

In our last post we discussed the increasingly comprehensive approach that R & D will need to take in order to deliver products that can meet increasing market expectations.  Before we get into the implications for the pharmaceutical sales representative it is important to understand what needs to happen for one of these more advanced products to be used appropriately so as to optimize the clinical benefits and to realize the potential value and cost benefit.  The intent here is not to draft a marketing plan (and I’m sure I’ll miss something anyway) or bore you with all the details about launching and promoting a product but rather to highlight the enormous task at hand.  Here are just some of the steps and hurdles to adoption and appropriate use that will be needed to get the most (clinical benefits for patients, economic benefits for payers, and financial reward for the companies that do it well) out of innovative new products with more comprehensive product profiles:

• The market must be made aware of and educated about the product, who it is for, what it can do clinically, what patients can expect if they take the drug and why it has value as a therapeutic option
• Healthcare providers and laboratory personnel must be educated about the companion diagnostics including the potential use of genomics testing. (What the tests are, who should be tested and who doesn’t benefit from testing, how to do the testing, what the tests can and can not tell you, and how to interpret the results).  Insurers and providers also need to understand the economics of ordering and using a test (when does it make economic sense, when is it cost prohibitive).
• Formularies must have the data they need to evaluate the product, its appropriateness for their patients and the potential clinical and economic impact on their patients and plan or institution.
• Prices and reimbursements must be negotiated
• Supply chains must be informed and stocked (potentially includes lab testing and handling supplies)
• Government decision makers, hospitals, insurers, and physicians will need to understand the clinical value, cost benefit, and impact on quality metrics and patient outcomes
• Hospitals in particular, will need to understand how to evaluate the product (have validated designs and models) for determining the impact on quality metrics, patient outcomes, and pharmacoeconomics within their own healthcare systems.
• Physicians and patients must understand how best to use the product for optimal clinical benefits
• Patients must understand the importance of compliance and adherence and the consequences of neglecting to take the product as prescribed

Some might argue that these are the same issues and tactics that have to be dealt with in the market today.  None of this is a lot different than what companies are doing or at least should be doing now.  If that is true, then with all this to get done for so many products in a large very complex market, why is it that so many pharmaceutical sales representatives find themselves out of a job today with an increase in discussions about the lack of value being delivered and the potential extinction all together of the pharmaceutical sales representative job?  We’ll explore that further in the next post.

mike@pharmareform.com

• High drug prices that seem unsubstantiated in the context of value
• Promoting new products as innovative when they are merely chemical modifications with modest improvements at best over products already available
• Questionable and sometimes illegal marketing and sales activities that unnecessarily put patient health at risk
• Annoying television advertising with warnings that make you wonder why you would want to take the drug in the first place
• Seeking help from a patient advocacy group only to find out it is more likely a Big Pharma front to access and influence patients
• Waiting in the doctors office while the drug sales reps see the doctor
• Hiding or downplaying safety issues, adverse effects, and potentially fatal drug related-events to increase or preserve sales
• Inappropriate payments and other perks going to physicians that suggest companies are buying prescribing influence
• Promotional infiltration of continuing medical education
• Abusive and deceptive use of medical journals for scientific promotion
• Waiting for years to receive nominal compensation for harm done as companies deny responsibility and drag out legal proceedings.
• Arrogant executives dismissing or denying any wrongdoing despite evidence, legal or congressional testimony, and even their own internal communications that suggest otherwise
• C-level executives being rewarded with generous compensation packages in the face of multi-million dollar and even billion dollar fines and settlements for regulatory non-compliance and alleged illegal activities

Did I miss a thing or two? Looks like a check list for Pharma to start reassessing what they can do to improve their image with the public and the healthcare system.  I think it is important to note that these are not fixable with multimillion dollar public relations campaigns or policy statements from PhRMA and no amount of life-saving products will make these go away.  Why?  Because these are the public’s reality based on actions and behaviors of the industry, not misperceptions.

Establishing, or in this case, reestablishing trust and credibility with your customers is critical for long-term success for any business.  Without trust and credibility, many yet to be discovered best treatment options may be slower to be accepted and unfortunately, may not get to the patients who need them, when they need them.

mike@pharmareform.com

Prescription drug prices are a major source of distrust, frustration, and irritation for everybody in the healthcare market except pharmaceutical industry executives.  Payers and insurers find it difficult to justify paying for expensive branded products when they know less expensive generic drugs would probably work just fine for many patients.  Physicians struggle to explain to their patients that despite the high price, the brand they have selected is the best product for their particular situation.  Patients struggle to pay for the biggest out-of-pocket healthcare expense they have, often deciding whether to buy food, split their pills, or go without their medication to make it through the month.  With unemployment hovering around 10%,  more people are without insurance, making prescription drugs even more unaffordable for many.

The pharmaceutical industry has been totally insensitive to these market /patient issues as they continue to raise prices on many of their most popular, highest volume drugs.  The Congress’ Government Accountability Office calling the increases “extraordinary” with prices for many brands doubling from 2000-2008 while some increased substantially higher yet.  A recent study also revealed that branded prescription drugs increased 9.3% when the CPI was running -0.3% during the same period (2008-2009).

The industry response to the market concerns about high drug prices hasn’t changed for as long as I can remember (at least 30 years I’ve been in the industry).  They continue to highlight the dismal research success rate (1 in 10,000 discovery compounds makes it to the market), blame the high cost of R & D, and the need to recover their high costs in a short period of time as the reasons for their high prices.  Nobody in the healthcare market has ever bought that rationale for high prices and I don’t think that is going to change.  More recently the the industry has tried to also deflect high price accusations with stories about lower overall drug prices (which includes over 70% of prescriptions being filled with less expensive generics), drug costs as a diminishing share of healthcare cost (also because of generic drugs use and the out of control other healthcare costs), and claiming their free samples and the industry’s token prescription assistance programs make the high prices more affordable for everybody.

“What the market will bear” pricing strategies have led to unsubstantiated initial high product launch prices (relative to other therapeutic options, adding little or no real clinical benefits) and subsequent price increases which often outpace inflation.

Pricing is a marketing responsibility with huge corporate financial implications.  The internal pressures to set the absolute highest possible price to achieve revenue and profit targets can be intense.  In many cases it becomes a very impersonal, quantitative spreadsheet modeling exercise providing executives with the comfort that forecast numbers (think quarterly revenues and profits) will be delivered.  More often than not, the price leader is the baseline metric against which new product pricing is evaluated, whether or not the new product has real clinical benefits over the price leader.

Price increases are taken as needed to make the financial numbers or to make the numbers look better?  You may even be able to do two small increases in the same year to get a bigger annual increase rather than taking it all at once.  With all the patients currently on a chronic product it is unlikely they will switch just because of the price increase and formularies are not likely to throw the product off just because of an increase,  so the thinking is ….go for it.

So what to do as a marketer?

The industry must start being more market sensitive and value based in its pricing practices.  Eventually, the market will force this issue as cost management becomes an increasing priority for the evolving new healthcare market.  But it shouldn’t take the market imposed price intoilerance to make this change.  Remember the idea is to reestablish market trust.

So, what is the real value and can you substantiate the value of your product against other therapeutic options?  This is not rationalizing small clinically meaningless differences.  It is time to “show me the data” and be more realistic about the value of your products relative to other therapeutic options.  If a generic drug can do the same as your product for most patients, how is it that you can charge 5 or 10 times the generic drug price and say you have “fairly priced” your product?  Can you really expect insurers or patients to pay the equivalent of the price of a new home in exchange for a drug that gives them merely a chance (not a guarantee) of maybe living a few more weeks or months?  Have you really priced your product “fairly” and consistent with its value…as perceived by the market?

For marketers with products that have clinically meaningful benefits that clearly exceed those of other therapeutic options, reestablishing trust comes by setting prices that are considered by the market to be consistent with the product value.  Product value should be proven if the benefits are real and meaningful.  So again, “show me the data” that patients will be able to relate to and appreciate.  Patients and insurers do not mind paying for what they value.  They mind feeling like they are being ripped off and don’t have a choice.

The biggest challenge marketers will face trying to execute this market sensitive, value based pricing strategy is the organizational pressure from executives and senior managers who have expectations for continuing the financial windfalls of “what the market will bear “ pricing strategies.  Unfortunately, I don’t expect many pharmaceutical industry executives to embrace this concept until the market forces them to consider making the change.  It will take strong marketing managers to help organizations realize how important this painful but simple change can make a huge difference in how companies are perceived.    Regardess of whatever else companies do to improve market trust,  without a change in pricing practices, reestablishing market trust is not possible.

mike@pharmareform.com

The residual effects of pharmaceutical industry indiscretions of the past will linger for some time but also make it all the more important for the industry to be more truthful and forthcoming in their marketing and corporate communications.  The recent disclosures and concerns about GSK’s handling of the potential for cardiovascular events associated with the use of Avandia^® just further highlights the challenges facing the industry in reestablishing trust.

So what to do from a marketing perspective?  I fully appreciate the need to grow sales and deliver results but if the only way you feel you can do this is by not being truthful, not being fully truthful,  or not being forthcoming about risks, you can not expect to reestablish trust in the market. Trust requires truth and integrity and consistent behavior over time.

One way to get after this is to assess what you are doing and begin to make any necessary adjustments in your marketing planning to reflect truthful disclosures and integrity in marketing. You can’t expect people to trust you or what you say about your product if you can’t be truthful and honest with yourself in doing your own product assessment.

1)      Product Assessment (based on FDA approved label claims only)

• What indications are approved for your product?

• What limitations on use does your product have?

• What patient population is most likely to benefit from your product? Do you know which patients will not respond well or as you might expect?

• How would you describe this population within the confines of your approved label claims?

• Does your product have two well controlled peer-reviewed published clinical data to support the patient populations you plan to market to? (this means the trial data used for the approved claims are available to clinicians for their own evaluations and interpretations)

2)      Market assessment (given your product profile and label claims as assessed above)

• What market is available to you? How large or small is it?

• What limitations are there on your market potential? (e.g., age constraints, drug interactions, etc.)

• How much of the market is not available to you due to potential for side effects or adverse reactions?

• How much of your current revenue is beyond the approved label claims? Are you actively or passively trying to increase sales beyond your approved label claims?

3)      Competitive assessment

• What other products have similar label claims?

• Is your product the best product on the market to treat the approved indications?  Why?  Why not?

• Is your product risk profile (side effects and adverse reactions) better or worse than competitive products?

• Do you have label claims or two well controlled peer review published trials to favorably differentiate your product from competitive products?

• Do your competitors have label claims or two well controlled peer review published trials to favorably differentiate their product from your product?
• If your product is the market leader, how did it get there?
  1. First to market?
  2. Definitive favorable product differentiation based on label claims
  3. Marketing presence (e.g., share of voice, spend, or execution)?
  4. Market expansion beyond approved claims
  5. Implied favorable product differentiation from competitors

4)      Marketing communications assessment

• Is your messaging consistent with the patients identified in the product assessment above?

• Are the claims you want to make, or are making, consistent with your label claims or two well controlled peer-reviewed published trial data?

• Does your advertising imply or suggest a broader market than label claims might include?  Is this intentional?

• Are adverse reaction and side effects an important part of your communications plan or are they merely a regulatory necessity?

• Is your communications strategy inclusive of building trust in your advertising and promotion?

5)      Tactical plan assessment

• Are programs consistent with label claims and the indicated patient populations

• Are your tactics designed to capture patients beyond the label claims of the product?

• Are your tactics designed to encourage market expansion through off-label use driven by “physician choice”

• Are there veiled inducements (e.g., speaker fees, sponsorships, consulting fees, or promises of clinical trial participation) to encourage healthcare providers to espouse implied product differentiations or implied uses beyond label claims?

• Are your medical education programs designed to capture patients identified in the product assessment above and to encourage appropriate product use or are they intended to expand use beyond that population.

• Do you find yourself rationalizing why something is ok and consistent with labeling?  Are your activities defensible without rationalizing?

• Do you have organizational controls to make certain execution of the tactical plan is consistent with the intended plan and can not stray  (e.g., no maverick sales promotions, no locally funded inducements)

As you go through assessing your own products you should have additional questions that make you stop and think about the intent of what you are doing verses what you say you are actually doing.  To reestablish trust in marketing, communications and actions must be truthful, must not be misleading, must be compliant (regulatory and legal), and must consistently support the best interest of patients over time.  No amount of revenue or profit opportunity can or should be able to change this.  Remember, trust and integrity are not a matter of convenience or circumstance.

Next we will discuss pricing practices and their impact on reestablishing trust.

mike@pharmareform.com

The answer to sustainable growth in the pharmaceutical industry is a continuous flow of innovative new products the market is willing to buy at the prices that make it worth doing.  Back in the 1990’s and early 2000’s, when industry R & D seemed to be able to produce whatever products were needed, it was nearly impossible for struggling small biotech companies to even get an audience with Big Pharma R & D to discuss their innovative new technologies.  The “not invented here” mentality that kept potential new treatments from Pharma R & D I believe has now come back to haunt the industry. Given the 10-15 year development time for new products, the math would suggest the 1990’s would have been a good time for risk taking exploration of innovative new technologies and aggressive licensing.  While some might suggest biotechs wanted to much for their technologies, I would argue, most never got to that stage of discussion.

Unfortunately, we will never know how many truly innovative products met their premature death at biotech companies that could not find sufficient funding to continue development or who were unwilling to give away their companies to Venture Capitalists.  Yes, the industry figured this out to some extent recently, but too late. And even now the rigors of a Big Pharma due diligence reviews are painful and beyond the resource capabilities of most small companies.  How many technologies get written off because the company doesn’t know how to present the technology to Big Pharma or because they didn’t do the studies a Big Pharma would have?

Pharma business development and R & D need to look at technologies not with a “quick to market” mentality but how they might be able to exploit technologies, perhaps even beyond where the biotech has taken the research.  Biotechs need to also be realistic about financial expectations and the value added by Pharma R & D and commercialization capabilities.   Unfortunately, the 1990’s may have been a missed opportunity but I also fear a lot of valuable technologies and innovative product opportunities may have died during the financial crisis of 2008-2009, due to Big Pharma evaluation criteria and expectations.

mike@pharmareform.com

I have tried to come up with  ways for Stanford to have accepted the Pfizer grant without raising concerns for potentially compromising the integrity of the programs or perceived conflicts and potential influence despite the assurances to the contrary.  Clearly the size of the grant makes it notable and more troubling.  I wonder if Stanford would have been as receptive of a $10,000 grant.  I also wondered why Stanford was chosen by Pfizer and not several other Medical Schools, some that might need the funding more than Stanford.  I  struggled to come up with options.  Maybe I’m just not creative enough.  Here are some of the options I considered for Stanford:

1)      Turn it down outright (consistent with their previously stated concerns and philosophy).

2)      Accept

a.  Accept as they did but now ensure Pfizer gets no additional exposure and absolutely has no influence on programming. How do you do that without complying with full disclosure requirements or ongoing continued contact with Pfizer personnel?

b. Accept with understanding that no Pfizer personnel or agent will have any contact with Stanford School of Medicine personnel, staff, or faculty now that the grant has been made.  This would include representative calls on healthcare providers; even by appointment (will Pfizer representatives now have preferential access?) Also, remove the milestone payments which in itself projects and implies the potential for Pfizer influence on continuing the programs or not, depending on what they like or don’t like about past programs.

c.  Accept as a part of a pool of equal shares of funding from multiple pharmaceutical companies. Lower the financial threshold to a point where most companies could participate and thereby also dilute the potential influence and exposure of any one company on programs.

d.  Similar to c. above, insist that the funding come from multiple companies with a non-profit type organization which doesn’t specifically identify individual contributors in advertising.  “Sponsored by an educational grant from MutliPharma interest in CME credibility.”  I’m not exactly sure how this could work for full disclosure without identifying contributors to “MultiPharma…”

I completely understand how ridiculous some of these “accept” options sound.  Option 2c could work and this has been done for years at medical meetings and conferences.  None of the accept options feels right or different from what has been done or tried in the past and that is why option #1 was probably the decision that should have been made.  Surely, for such a worthy cause, Stanford must have other sources for financing CME, even the technology advances in CME as proposed.

mike@pharmareform.com

It appears the pharmaceutical industry may have dodged a few healthcare reform bullets, at least temporarily, with the pending legislation.  Again, maintaining the industry business model status quo while enhancing their potential customer base by tens of millions of newly insured patients.

So the industry “bought” some time.

It is not clear that companies have figured out that the need for change is still there.  Even the hot legislative issues of government negotiated prices,  additional rebates or other price control strategies,  and importation are not going away. Market expectations also remain high for more effective and safer products at market sensitive, value-based prices.   The market is also no less weary from the “hype”, questionable ethics,  and financial “conflicts” of traditional sales and marketing tactics.  Public trust and confidence has probably not improved as a result of the multimillion dollar lobbying campaign.

Healthcare reform should be acting as a catalyst for change.  Now is the time for pharmaceutical companies to formulate new, more market receptive strategies, and retool their R & D to deliver truly innovative new products, dramatically reduce their operating expenses, and reestablish corporate cultures that embrace integrity.  Unfortunately, the “dodged bullets” and “bought time” may have just mitigated the organizational “need for change” and  sense of urgency.

Companies that remain committed to change, address their organizational challenges, and correct the market driven concerns will find they are creating a competitive advantage for when the market, and not legislators, decide how to employ pharmaceuticals in the delivery of healthcare.  An increasingly cost conscious “managed” market with expectations to have better treatments for more patients at lower costs awaits the industry.

mike@pharmareform.com

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With the inevitable US healthcare reform,  delivery of healthcare will become even more “managed” than it is today.  Traditional sales and marketing tactics are already becoming less effective and will eventually become obsolete in the evolving new healthcare market where the ability to influence individual prescribing practices will be significantly limited.  This is especially true for proprietary branded pharmaceuticals which are an easily identified, tangible target for restricting use by private and government payers looking to control the rising cost of healthcare.

Traditional marketing and sales will be replaced in this evolving new healthcare market with “managed market” teams of expertise.   These teams will require a new level of expertise to navigate the increasingly complex labyrinth of bureaucracy, to understand the points of influence within the multiple tiers of decision making, and to negotiate product availability, unrestricted use, and favorable pricing.  Managed plans already have a strong preference for generic drugs with over 60% of the prescription market today.  This means proprietary branded products, regardless of how effective and safe,  will be vying for a diminishing share of the prescription drug market as time goes.  Successful commercialization in this increasingly challenging market will depend on the expertise and credibility of the “managed market” teams.  Finding “world class” or “best in the industry” managed market teams of expertise is a critical success factor for pharmaceutical companies in the evolving new healthcare market and one of the three most important areas of a pharmaceutical company to build teams of expertise.

mike@pharmareform.com

My name is Mike Wokasch.  Wokasch resume

The premise of this site is to explore how pharmaceutical companies and the industry in general must change the way they do business in order to meet, or even exceed, the expectations of the evolving new healthcare market. The intent is not to disparage past industry practices, but to identify what has to change and why.  And despite my 30-year career in the industry, I am neither here to defend nor speak for it.

I invite your contributions. It is my hope that our discussions will help to formulate specific recommendations that can help pharmaceutical companies adapt to the ever-changing needs and expectations of the healthcare market.  As we get into the topics you may find my suggestions, ideas, and commentary to be a bit critical of past or current industry practices.  I would also be surprised if you did not find some of the content to be controversial as we explore the need for change.   The intent is to be constructive and develop high impact, results oriented solutions.  Feel free to leave comments or to e-mail me directly (mike@pharmareform.com).

It is my hope that you find this site informative and useful in your job. I look forward to your opinions, insights, and perspectives on a wide variety of topics as they relate to the pharmaceutical industry and healthcare reform.