Pharma Reform

Companies continue to feel investor pressure and struggle to deliver revenue growth as they downsize and restructure.

An increasingly “managed market” is becoming less tolerant of marketing and sales tactics. Physicians and patients alike, while seek more product information, are becoming less responsive to advertising.  Legislators continue to probe and publicly imply impropriety regarding marketing tactics.  States attorneys general have formulated a process for consistently identifying, filing and winning fraud and false claims actions to recover money from settlements and fines for their ailing state budgets.  And regulators are committed to be increasingly aggressive with reining in compliance violators.

The market, legislative, and regulatory expectation is to stick to the product label claims and drop the “hype”.  Comply with these expectations and you almost certainly put your product at a competitive disadvantage against those companies, and their products, that choose not to conform.  And even if you play up the side effects and adverse reactions, it probably won’t be sufficient to satisfy regulators and certainly won’t prevent the thousands of product liability attorneys waiting to prove you didn’t do enough for their clients.

Despite what their  spreadsheet models might suggest, products in many company portfolios don’t have the differentiation or market opportunities to deliver the revenue forecasts and growth expectations being proposed.  Many products are no longer or never were the best treatment option.  Many that made blockbuster status are or will soon go off patent.  Many company forecasts ignore or mitigate the realities of therapeutic substitutions with generic drugs.

Yet the demands for growth continue to put marketing and sales people in a difficult and often unfair position of producing the revenue growth that may not be achievable with the products they have in this increasingly difficult and demanding market.  Aggressive revenue forecasts without strong product label claims that can help differentiate products gives way to aggressive sales and marketing tactics that go beyond expertise, creativity, and skill.

I don’t believe there are very  many C-level executives or senior managers who are going to be  receptive or empathetic to this reality.  I can hear it now.  “If you can’t get the numbers we need….we’ll find somebody who can.”  And,  I guess based on previous history of questionable ethics, “pushing the regulatory envelop”, and even illegal marketing and sales activities, including “off-label” promotion, that means “do whatever it takes…just try not to get caught”.   It may seem unrealistic and very idealistic to believe that this could stop, but I believe, for the industry’s  sake,  it must.

mike@pharmareform.com

We live in the reality of a world where skillful chemistry and quick structural modifications can develop new but similar drugs.  Some of these new products may provide benefits such as avoiding  side effects or reduced dosing schedules.  But for many, these products create one of the biggest challenges facing pharmaceutical marketing today.  Being able to develop and establish meaningful product differentiation.  In most cases, the lack of sufficient clinical data to support the desired claims makes this near impossible  within the confines of regulatory constraints.  Without clear, science supported product differentiation; marketers are left to creativity and expensive high visibility market presence to create a competitive advantage.  Sometimes this involves stretching the data and claims as far as you can get away with from a regulatory and legal perspective. Sometimes this means outspending your competition to make sure your product gets sufficient market exposure  to create demand.  Sometimes it means competing on price.

There are two solutions to this dilemma.  The first is for R & D to deliver truly innovative new products with the clinical data to substantiate the novelty and value. The second is spending more money doing clinical studies upfront on products that are suspected of having some element of differentiation. Design trials that can support the claims you want to make and make certain the studies and results have the scientific rigor to pass regulatory muster and are sufficiently compelling to make it easy for your marketing staff to communicate the differentiation without exaggeration.

I realize neither of these solutions helps those with difficult to differentiate products today.  Unfortunately, you are left with traditional tactics for trying to create that competitive advantage.  This situation does, however, point out the importance of experienced marketing input to R & D…early.  As the market expectations increase for differentiation (remember “comparative effectiveness”?), building a strong scientific foundation around the product claims you want to make will become essential for commercial success.  The days of clever marketing and sales to “push” products into the market are limited.   Spend the money upfront on more and better clinical studies and increase the credibility of your marketing and sales.

mike@pharmareform.com

During the discovery process, Pharma researchers explore molecular systems searching for and testing biological pathways and targets they might be able to turn on or off in an effort to mitigate disease symptoms or to avoid side effects and adverse reactions.  Drug discovery is becoming increasingly challenging, especially to find those elusive innovative new products the market is demanding.  To find those truly unique compounds, Pharma will have to delve even deeper into the biology and pathophysiology of disease.  This is fertile ground for Pharma companies to exploit by developing complimentary diagnostics to go along with their new treatments.  Developing these diagnostics could become a significant competitive advantage, a market embraced marketing tool, and may eventually be a necessity for commercial success in the not too distant future.

Here are some of the reasons why and how a Pharma company might consider developing diagnostics to go along with their new treatments:

The healthcare provider need for better diagnostics:

1. To more definitively identify diseases and their underlying cause
2. Disease identification rather than indirect diagnosis from lab data interpretation
3. Rapid, easy, “bedside” or office practice testing rather than time consuming, remote laboratory testing
4. To identify high risk patients who should be considered for preventive treatment

The market needs for better diagnostics

1. Desire to know which patients are more likely to respond to which treatments.
2. Desire to know which patients are more likely to experience side effects or adverse reactions
3. Tests to determine whether or not a treatment is actually working (having the desired affect)
4. Better treatment specific diagnostics could lead to less wasteful prescribing and avoid costly hospitalizations related to adverse effects

Regulatory considerations

1. Treatment specific diagnostics may provide a quicker path to proof of concept
2. Treatment specific diagnostics may be able to better establish drug superiority to alternative therapeutic options
3. May provide  stronger, more definitive  clinical support for efficacy and safety

Pharma companies looking to take advantage of this opportunity will need to:

1. Increase their research expertise to include diagnostics development expertise
2. Build corporate expectation that new treatment discoveries will come with a need for diagnostics to support the product
3. Expand discovery research to include looking for diagnostic possibilities
4. Include diagnostic companies, research tools and services companies, and other general life science companies in their business development licensing and partnering plans.

Diagnostics development to compliment drug discovery may be one of the most important strategic decisions a pharma company can make to increase their R & D productivity and stay aligned with the evolving new healthcare market.

mike@pharmareform.com

Most pharmaceutical companies are probably going through an endless series of meetings trying to figure out the potential impact of healthcare reform on their revenue forecasts.  Much of the public press has focused on the industry’s potential windfall and revenue upside from:

• Prescription drug coverage expanded to include an additional 45 million currently uninsured patients.
• Growing, aging population with the potential to treat more chronic diseases over a longer period of time
• Prescription drugs will be seen as cost saving alternatives with the potential to reduce the chances for more costly medical complications and avoid costly hospitalizations
• Cutting the $80 billion over 10 years deal to pay 50% of drug costs for seniors in the “doughnut hole” of Medicare coverage will make those drugs more affordable,  increasing the probability that patients will continue to take their branded medicines and reduce the chance that they might switch to cheaper generics during that time.
• Heightened prospects for establishing programs to enhance adherence and compliance (keep patients taking their medicines as prescribed)

These upsides, however, will come with new market expectations and realities that could have perhaps an even more dramatic downside impact on revenue forecasts.

• A strong preference for generic drugs supported by insurer driven prescribing influence (think compliance through e-prescribing technology) and an intense focus on controlling costs
• An expectation for proprietary brand products to meet “best practice treatment of choice” clinical proof before they are considered therapeutic options to generic drugs
• An expectation for treatment “guarantees”, cost sharing, risk sharing and other, yet to be created, tactics to offset the financial impact of high cost treatments
• Increased pricing transparency will increase market pressure to gravitate to the lowest negotiated price for a therapeutic class
• The potential for government price negotiations.  Private insurance plans will be challenged to do better than they are currently doing in price negotiations.  If they fail, prescription drug prices appear out of control, and  regardless of whether there was a deal struck between the industry and the Obama administration, the government will end up negotiating prices, at least for government sponsored coverage.
• Formularies will leverage their negotiating power and realize the financial feasibility of having no more than 2-3 therapeutic options (e.g., no need for 10 cholesterol lowering agents or anti-hypertensives) on their formulary.
• Formularies will collectively structure to the lowest cost options for drug treatment, reducing the market opportunity for more costly or less preferred branded products in a therapeutic class
• There will be less opportunity to directly influence physician prescribing or patient preference through traditional sales and marketing tactics

So how do your products fit this new world picture?   What do your forecasts look like? In the next post we’ll show you how to pressure test your product portfolio against the evolving new healthcare market.

mike@pharmareform.com

Meeting regulatory requirements for approval of an innovative new product is challenging enough but with healthcare reform, it will be the new minimum acceptable standard.  Past marketing and sales tactics could bolster product profiles and fill data gaps if necessary, including taking products into unapproved “off-label” indications.  A more demanding, less tolerant, less accessible, and more analytical healthcare market with an intensified focus on cost containment will make traditional marketing and sales tactics inefficient, ineffective, and eventually, obsolete.

The solution to this healthcare reform driven change is for pharmaceutical R & D to step up to an even higher level of performance than companies might be anticipating.  Many pharmaceutical companies are struggling to correct diminishing R & D productivity seen over the past decade.  So what else is there besides bringing innovative new products to the market?

Healthcare reform will have these added expectations:

1. Regulatory approval for all indications that are anticipated for product use.  With few exceptions (e.g. cancer treatments), refusing to pay for “off-label” use of prescription drugs (especially new products) will become a cost containment tool.
2. “Comparative efficacy” means de facto clinically proven “superiority” to other treatment options.  This will require more comparative clinical trials against multiple treatment options to demonstrate definitive “best practice treatment “.  Without the data, branded prescription products will be defenseless and subject to more ready generic and therapeutic substitutions.
3. To ensure appropriate use and to help control costs, pharmaceutical companies will be expected to provide diagnostic tools to identify the patients most likely to respond to a innovative new product, tools to determine if their products are working, and tools to help avoid side effects and adverse reactions.  Drug product oriented pharmaceutical R & D programs today are not set up to deliver these expectations and many do not have the diagnostic development expertise to even consider these possibilities. It will be interesting to see if those pharmaceutical companies that do have both drugs and diagnostics (e.g. Abbott and Roche) can make drug supporting diagnostic tool development a priority, leveraging this advantage across their business units, aligning goals and mitigating bureaucratic obstacles.
4. The need for more sophisticated cost benefit data to support pricing strategies and reinforce product value will heighten the need for enhanced expertise and organizational commitment to generating more “real world” and higher quality pharmacoeconomic data.
5. Credible peer-reviewed publications and peer-reviewed data presented at medical meetings will become the scientific basis for the market to evaluate the safety, efficacy, and appropriate use of products.  This will require credible transparency to company research findings and a corresponding increase in scientific integrity, expertise, and communication skills on the part of pharmaceutical researchers.    “Ghostwritten” publications and “expert” guest lecturers hired to provide product endorsements will have little impact on healthcare executives focused on reducing the cost of prescription drugs for their plan participants.

With companies focused on the challenge of discovering and developing “innovative new products”, these evolving market expectations will require new and different expertise.  More importantly, these expectations represent significant incremental costs to current R & D programs.  Affordability will have to come from dramatic improvements in R & D operational efficiency, fewer pipeline projects with narrower therapeutic areas of focus, and more cost sharing collaborations. (e.g. other pharmaceutical companies, biotechnology and diagnostic companies, academia, and government agencies).

mike@pharmareform.com

Integrity is leverage for optimizing the value of your business. Organizational trust built on a culture embracing integrity can facilitate operational business processes, reduce the risks and complexities of organizational growth,  and enhance commercialization initiatives, including market acceptance of pricing.

Integrity and trust are essential to effective leadership.   An organization is nearly impossible to lead, regardless of size, if management is not trusted.  Perhaps an inherent survival mechanism, employees have to trust that the leaders of the organization will make good decisions, even in difficult situations, and will not compromise the well-being of the company or the employee’s personal situation.

Trusted leaders can spend more time leading and can create much more responsive companies that can  adjust quickly and take advantage of unexpected market opportunities.  They spend less time trying to convince their organization (and sometimes their own management) about what needs to be done.

Similarly, organizational size and rate of growth  can be limited by the lack of organizational commitment to integrity.  The extent to which management and employees trust each other to do the right thing, regardless of the circumstances, is a critical success factor for growth.  Simply put, you can manage a larger organization of people  you can trust compared to an organization of people you can’t trust.

An organization that supports and promotes a culture of integrity will also function more efficiently, spending more time exploiting opportunities rather than managing disciplinary situations, dealing with regulatory or legal issues,  or administering corrective actions.  Personal and corporate integrity  enhance the capacity for organizational growth.

As previously suggested, integrity is also at the heart of efficient commercialization practices. Pharmaceutical companies that establish trust with healthcare providers and patients will find a more receptive audience for their product information and new product introductions. Unfortunately, litigation and accompanying negative publicity highlighting past pharmaceutical company missteps in sales and marketing have compromised public trust and will make product promotion and new product launches in the evolving new healthcare market more challenging than it otherwise might have been.

Healthcare reform will bring with it a heightened but reasonable expectation for personal and corporate integrity. To succeed in the evolving new healthcare market, it is critical for pharmaceutical companies to strategically make a demonstrable renewed commitment to personal and corporate integrity, even under difficult and sometimes  financially damaging circumstances.

Perhaps a disappointing commentary on the current state of the industry but, those companies that successfully execute against this single objective (establish a reputation for integrity and being trusted) will create a valuable competitive advantage in the evolving new healthcare market.   They will find their organizations easier to lead and manage, they will increase their operational capacity for growth, and most importantly, their product information and new products will find a more receptive market.  It is the responsibility of corporate executives to set a clear organizational expectation for integrity, to provide visible examples by their decisions and actions, and to ensure unwavering compliance.

mike@pharmareform.com

If people don’t trust you or believe what you have to say,  it is hard for them to buy from you, regardless of how good your product might be.   This can be true for an individual, a company, or even an industry.

Trust is a fundamental, but mostly unspoken,  requirement for success in the healthcare market.   And, when commercializing prescription drugs, trust takes on an even greater level of importance because physicians (and their patients) are relying on the treatment to have the expected beneficial effects without putting patient safety or lives  at risk.

Integrity is the foundation for pharmaceutical company success in the future because it is the basis for establishing trust.  Integrity, as demonstrated consistently through our words, decisions, and actions can build trust over time.  In the pharmaceutical industry and in the healthcare market there is the added expectation for moral and ethical integrity to do what is best for the patient.

A breach of integrity can destroy a solid base of trust that has built up over years.  Unfortunately, as the pharmaceutical industry has experienced, it is often more difficult, and takes longer, to repair the consequences of a single breach of integrity than to establish the trust in the first place.

So what are the benefits a pharmaceutical company can reap if they make  integrity a cultural expectation and priority?   Some are less obvious than you might think.    So, what do you think they are?  Stay tuned.  Answer in the the next post.

mike@pharmareform.com

Without this…. pharmaceutical companies can not succeed in the evolving new healthcare market.

What if you have a breakthrough “blockbuster” new treatment with an acceptable safety profile and few alternative therapies on the market but…

…nobody seems to be buying or prescribing your new treatment or certainly not at the rate you expected.

Why isn’t the market jumping on this new development?  Shouldn’t every patient who has the disease be at least considered for the new treatment?

How many more clinical studies do you need?  How many more patients can you possibly enroll in clinical trials to make your case?  How much more commercial effort will it take to get doctors to prescribe, formularies to consider, or patients to ask for it? How much more money will you spend trying to convince people you have a valuable treatment their patients need?

The answers are not in the product profile.  Your R & D was done to perfection. The answer is not just more clinical studies with more patients. It is not how you are selling or marketing it.  Your price is just fine and not a barrier. You don’t just need more money for advertising and promotion.  You don’t have the wrong contacts in the managed markets.

So what’s missing?  This is worth taking some time to think about…. What do you think?

Answer in next blog.    Stay tuned.

mike@pharmareform.com

Reflecting recently on my 30 year career in the pharmaceutical industry, I have begun to assimilate an assessment of recent industry performance and recommendations for changes that pharmaceutical companies should make in light of the inevitable new market dynamics implicit in healthcare reform.  Despite the uncertainties of what healthcare reform means and the potential implications for Pharma, there are several certainties of the new evolving market that are clearly being signaled  to the industry as healthcare delivery options are considered and debated.

Here are 5 certainties of healthcare reform:

1. Healthcare reform is inevitable with some form of coverage for all US citizens
2. Pricing pressure will intensify as rising costs continue to jeopardize affordability
3. Delivery of care will be very “managed” with increasingly restrictive and limited ability for Pharma to directly influence prescribing at the physician level
4. Traditional Pharma sales and marketing tactics are becoming obsolete and will be ineffective
5. Branded prescription drugs expecting premium pricing will require data supported cost-benefit and clinically relevant, proven  “superiority” to other less expensive treatment options

Regardless of the political wranglings going on in Washington to hammer out the details of how healthcare reform should be implemented, most everybody is supportive of reform to help control the seemingly endless increases in healthcare costs.  The Obama Administration has made healthcare reform a priority and has Congress working feverishly to get at least a foundation of a plan in place by the end of this year.  The general public sees the personal benefits and security of more affordable and accessible quality healthcare for all.  At the same time, the economics of covering more people and the continuously rising costs of healthcare are not sustainable.  Unlike attempts in the past, the inertia today surrounding healthcare reform and the generally accepted need for and commitment to reform make it a certainty.

While much of the debate has focused early on how and who will pay for this new healthcare venture, in the end it will be expensive.  Current estimates put healthcare reform at more than $1.0 trillion over 10 years with US healthcare spending going from $2.5 billion in 2009 to over $4.0 billion by 2018.

Once the details of how it will work (single payer, private insurance vs. government plan) get ironed out, the focus will quickly turn to cost controls to ensure affordability and sustainability.  And, despite accounting for less than 10% of healthcare costs, prescription drugs have always been a target and in the forefront of discussions about controlling the rising cost of healthcare.  Pharmaceutical companies have historically incited a very negative visceral response from the market with seemingly unsubstantiated (little supportive data for the value proposition) high introductory prices, double digit price increases, or even high single digit price increases that frequently exceeded the rate of inflation.   As an easy, tangible target to control and with significant market (physician and patient) support you can expect those negotiating price with pharmaceutical companies to be increasingly demanding in the evolving new healthcare market.

The delivery of healthcare will become increasingly “managed” with proposals already for increased use of electronic medical records to reduce administrative burden but also to help standardize therapy to best practices, and to control the cost of care.   Expect the increased use of restricted formularies, aggressive generic  and therapeutic substitutions, and best practice treatment guidelines reinforced by proactive electronic prescribing interventions.  In this scenario, a pharmaceutical manufacturer’s ability to directly influence physician prescribing diminishes significantly.  Influence on prescribing will have to take place at a much higher level than the physician in the yet to be defined delivery system.  Influence will come mostly from ensuring products are on formularies with minimal restrictions.  The hurdles for encouraging prescribing will be more challenging as products that are not included in “best practice” treatment guidelines and promoted through electronic prescribing reminders and interventions will be significantly disadvantaged.

Most of traditional pharmaceutical marketing and sales tactics are designed to influence physician prescribing, including direct sales and indirect,  patient to physician, Direct to Consumer (DTC) advertising.  These tactics and programs will be mostly obsolete as the market becomes increasingly managed with limited access to prescribers and diminishing flexibility of prescriber treatment choice.

Perhaps one of the most significant market expectations with healthcare reform will be what has already been termed “comparative effectiveness”.   While posed as a scientific method for establishing best treatment practices, this expectation also implies a potential for therapeutic substitution with generic pharmaceuticals.  It also potentially mitigates the value of product differentiation through ease of use (simplicity of dosing), quality of life, and longer term cost benefit implications.  “Comparative effectiveness” studies are conceptually easy to design but very difficult to execute with the necessary statistical power and validity to claim superiority.  In other words, it will be easier, more practical, and more cost effective to conclude similarity than to demonstrate statistical superiority.

These certainties and other, yet to be determined, changes have dramatic and far reaching implications for the pharmaceutical industry.  Pharmaceutical companies need to be strategically planning and changing their business practices to better meet or exceed these evolving new healthcare market dynamics and expectations.

Objective strategic planning and organizational change is hard work and especially difficult for large pharmaceutical companies trying to manage day to day operations and deliver short term financial performance in an already complex and challenging healthcare environment.

Over the course of our discussions I will provide suggestions and recommendations as to how to start planning and making the necessary changes to address these and other issues that will arise as healthcare reform becomes better defined.  Before we get to the answers, we’ll next take a baseline look at pharmaceutical companies,  so stay tuned.

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.