Pharma Reform

The single most important step a company can take in reestablishing market trust is for the CEO and C-level executives to make a definitive personal and corporate commitment to integrity.  This has to be a visible organizational declaration and become inherent in the corporate culture.  You and your company will either have integrity and can be trusted or not.

This renewed commitment should be reinforced in mission and vision statements and even considered for goals and objectives.  Repetitive corporate communications should reinforce what this renewed commitment means and what the expectations are for compliance.  The desired behaviors and responses to potentially compromising situations should be clearly defined with examples of what is expected and what past behaviors, actions, and decisions are no longer going to be acceptable.  Clear instructions for what individuals should do if they are aware of, are about to be a part of, or feel there is going to be a compromise to integrity.   Managers and executives must be vigilant to intervene before breaches occur or have the potential to compromise trust.

Most importantly, executives and senior managers must set the example with their own behaviors, actions, and decisions.  Compliance should be mandated (zero tolerance) with significant consequences including letters of reprimand in personnel files, reduced or complete denial of incentive compensation, and even loss of job depending upon the seriousness of the breach.  Managers and executives should be held personally accountable (including suffering consequences) for breaches in their areas of responsibility.

Having integrity can also not be a matter of circumstance or convenience where it is expected if it doesn’t hurt the revenue, if it doesn’t impact the stock price, or if there is no potential for litigation.  Integrity is expected even if it means being put at a competitive disadvantage or involves upsetting an important KOL. The industry has gotten quite good at rationalizing and finding excuses (CEO’s who claim they didn’t know what was going on?)  to mitigate integrity implications of their questionable behavior and actions.

While you might think integrity should just come naturally and that compliance to the organizational expectation should just happen, in reality, it must be managed. As most good managers know, “you can’t expect what you don’t inspect.”  If you don’t believe integrity needs to be managed …how many companies do you think could go a full year with no breaches in their organizational expectations for integrity?

Assuming your organization is committed to reestablishing trust with a strong culture that supports integrity, we’ll next look at marketing’s role in reestablishing trust.  Stay tuned.

mike@pharmareform.com

Like developing a tactical plan without a strategy is not advisable, before we get to specific actions, it is critical to understand the basis for reestablishing trust.  First, completely restoring trust may not always be possible but that doesn’t mean you shouldn’t try.  Without reestablishing trust, the pharmaceutical industry will find the evolving healthcare market even more challenging as it disregards the industry as a credible source of product information. This will make new product introductions and market adoption more difficult, slower, and more expensive.  To reestablish trust one must:

1. Acknowledge the wrong doing and take responsibility for the distrustful actions
2. Commit to never do it again and to never betray the trust again
3. Establish practices that ensure trust is never breached again. Trust can not be broken just because the circumstances at the time will benefit you.
4. Demonstrate commitment to the relationship with supportive goodwill gestures
5. Have consistent positive behavior (no breaches) over time

The industry has plenty to do and decades of distrusting behavior to mend.  No single act of goodwill or launch of a miraculous drug will put the industry back in good graces.  There is no amount of advertising, eloquent speeches, or contributions to charitable organizations that can replace consistent good behavior.  Making this increasingly difficult is the fact that any breach, by any company, can quickly negate the progress the industry might have made to that point.  So what specifically can the industry do and more importantly, what can pharmaceutical companies and individuals at companies do to reestablish market trust?   Stay tuned.

mike@pharmareform.com

No single event, single offense, issue, or individual company can be identified as the source of or considered responsible for the market distrust of the pharmaceutical industry.  This has been a cumulative affect over the past 30 years or so of modern day Pharma.  It is important to identify, recognize, and acknowledge the sources of distrust before solutions can credibly and effectively be formulated.  Here are the 5 major sources of market distrust of the pharmaceutical industry:

1. Lack of honesty and full disclosure about product information (Corporate, Marketing, Sales, and Scientific integrity issues)
   1. Not disclosing, not acknowledging or downplaying potential serious adverse reactions and side effects (e.g., many including  Fen-Phen, Vioxx^®, OxyContin^® , Ketek^®)
   2. Exaggerated product claims in marketing or in sales presentations…especially comparative claims
   3. Scientific data manipulation to highlight benefits, exaggerate efficacy while carefully downplaying side effects and adverse reactions
   4. Deception in advertising (paid actors or celebrities to project credibility as they play healthcare providers or miraculously recovered or satisfied patients)
2. “Off-label” promotion (e.g., many such as Neurontin^® and Bextra^®)
   1. Companies not willing to spend the money to prove the claims but willing to encourage physicians to subject patients to uncontrolled experimental use
3. Questionable physician payments, inducements, and “conflicts of interest”
   1. Extraordinary Speaking fees and resort location training programs
   2. Excessive consulting fees, including suspect clinical study payments
   3. Board of Director fees (hundreds of thousands of dollars)
   4. Office practice meals, tchotchkes, and other perks
   5. Expensive meals, cultural or sporting events (e.g., Broadway shows, golf outings) for physicians and other healthcare providers who can influence prescribing
4. Pervasiveness of industry influence on scientific and medical communications
   1. Promotional programs presented as CME
   2. CME program development and sponsorship
   3. Medical Science Liaisons as safe harbors for scientific exchange of product information
   4. Publications, including sponsoring ghostwritten articles and books
   5. Journal advertising in medical journals
   6. Scientific and medical conference participation and exhibits
   7. Internet medical information sites
5. Pricing practices
   1. Pricing fraud (especially as it relates to Medicare and Medicaid)
   2. Unsubstantiated high prices (lacking credible rationale or cost benefit data)
   3. High price increases (recent 9.3% increase compared to -0.3% for general inflation (CPI-U)

This is now a complex, multifaceted, and time entrenched distrust. Can the industry afford to ignore it?  If the industry or a company decides to work on this, what should they do?  What can they do?  Stay tuned.

mike@pharmareform.com

One of the most frustrating job situations is when you know the organization is doing something wrong (perhaps even illegal) or you know there is a better way of doing something.  You feel there is a need for change but your management (and company leadership) seems indifferent, is on a completely different page (they really believe it is okay), or is stuck in a safe traditional way of doing things.

Why is it so difficult to stop wrong doing or make a change at a big pharmaceutical company? I’m sure there are company specific reasons but here are some that are likely at many companies.

First , organizations have safeguards built in so that everybody who happens to have an idea doesn’t just run off and do their own thing or execute something that may or may not be in the organization’s best interest.   Process, however, is usually not the reason employees don’t or can’t affect change as much as they might.

Probably the single biggest reason is risk.  The risk is high for low level employees and even senior management, at times.  First your reputation is at stake. You risk being ridiculed by your manager, being chastised and ostracized by your peers, maybe even humiliated in front of your peers.  You risk job security, career growth, and your compensation might suffer as a result of identifying a problem or trying to encourage changing to a better way of doing things.

If the risks are not real enough, the fear that the risks can harbor are often enough to keep employees from stepping up to identify problems and make suggestions for change. If you think I am being to negative and unrealistic, just do a review of some of the litigation cases against pharmaceutical companies and tell me how the whistleblower or anybody else, besides executives, might have been able to intervene or affect change without these risks.  In many cases they and others  did try to intervene and make a change, but obviously they often did not succeed until they went to court.

Why is this important in the context of healthcare reform and the need for change in the pharmaceutical industry? Because, change and knowing how and what to change often lies within the organization, and not necessarily at the top of the organization.

The solution may sound idealistic but in reality the only way to resolve this is for management to make sure you have competent people with integrity in your organization.  This increases the probability that the problems identified are real and the suggestions for change are worth consideration.  These employees need a management culture that encourages open communication that minimizes personal risk when identifying problems and suggesting change.

Employees in this type environment have a higher probability of affecting change and the organization can better leverages the talent they have working for them.    We’ll discuss how employees can be more effective at pointing out problems and affecting change in the next post.

mike@pharmareform.com

This story is making it around the newswires and industry blogs. This may not have even been a story if Stanford had not taken such a hard stand previously about the pharmaceutical industry financial influence. You can go to the Stanford website for their release. http://med.stanford.edu/ism/2010/january/cme.html

I couldn’t resist commenting myself;  so here is what I have posted on some sites:

Unrestricted grants are not a new concept. I’m not sure how, or if, this is different. While Stanford control and lack of Pfizer input on specific content may be the implied distinction being proposed here, that has been the intent and practice of many unrestricted pharmaceutical industry grant supported programs including many ACCME programs in the past. Without more transparency about the negotiations that took place surrounding this grant, it is hard to understand how identifying “programs of mutual interest” with “milestone” payments hasn’t already or isn’t going to influence what topics are going to be covered in these Pfizer sponsored Stanford programs.

It appears that Pfizer merely found the price point at which Stanford was willing to compromise its previously stated position (Stanford Report dated September 13, 2006 “New Policy Limits Drug Industry Access”) that “industry-directed funding may compromise the integrity of these education programs”. The $3 million seems to have also moderated Dr. Pizzo’s concern about “the pervasive presence of the pharmaceutical industry in the medical profession” and his desire for Stanford educational activities to “not be influenced by any kind of financial industry support.”

A couple of things must have happened. Either Stanford could not find sufficient alternative sources of funding for their continuing medical education department and/or the $3 million was just too hard to turn down.

I guess everything still has a price; you just have to figure out what it is. This relationship based on a $3.0 million grant does not help move CME forward for the industry, academia or healthcare providers. It provides validation for those who continue to be concerned about financial influences of the industry. Pfizer merely proved that even Stanford can’t resist…when the price is right.
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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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