Pharma Reform

For professional representatives to flourish in the evolving new healthcare market executives must create a corporate environment that understands the importance of and is committed to changing the commercial model.  An environment where executives and commercial managers are committed to do whatever it takes to help professional representatives be successful in this evolving new healthcare market.  With the professional representative focused on the customer (again, not just physicians), corporate and commercial management should be focused on developing the products, label claims, data, information, and programs that help professional representatives meet the needs and expectations of the evolving healthcare market customer.

This organizational transformation will require that commercial management step up their game and the level of their own professionalism.  Expertise in traditional marketing and sales tactics is not going to help much in this evolving new healthcare market. There are no slick technology quick fixes or gimmicky tactics that will substitute for meeting product and data needs of the market.  It is critical that marketing and sales management understand and accept that tactics that worked in the past and the bad behaviors that drove revenues in the past, are no longer going to be tolerated and will not work in the evolving new healthcare market.  It means marketing and sales management must reformulate their strategies and acquire new skills and expertise that are better aligned with the needs and expectations of the evolving new healthcare market.  This includes being able to effectively deploy a  sophisticated team of professional representatives and arm them with products and support resources that address the evolving healthcare market needs and expectations.

Unfortunately, most executives and the people running commercial teams today are grounded in a traditional mentality about pharmaceutical marketing and sales.  This is where I predict most organizational transformations will fall short and stall out.  Those who can make the changes and should be championing the changes will feel threatened by a move away from their own expertise, experience base, and comfort zone.

Here is something to think about.  Let’s assume the company decides to embrace the organizational changes we have discussed and it is ready to embrace the new professional representative profile. Where do you find marketing and sales management with the new skills, expertise, and mindset needed to formulate and implement the new commercial strategy?  For example, will sales managers understand and appreciate the differences between sales reps and professional representatives?  Will marketing managers understand that they need to spend more time comprehending the complexities of the evolving decision-maker processes and nuances of customer expectations (not just market research) rather than worrying about the copy and graphics for their next TV commercial?

Again, don’t underestimate the need for executives and commercial management to really understanding the market at the customer level and having the right mindset about how to approach this new commercial model.  Some sales representatives and some commercial management may be close to the desired profile and mindset needed for these changes but they also need corporate executives who can create an environment in which these individuals can champion these changes and flourish.   Unfortunately, there are probably more who don’t get it, won’t get it, and will probably fight it, if not actively, passively by doing nothing.

mike@pharmareform.com

As word spreads and the popularity of Pharmaplasia increases so do the requests for more format options.  For those who have been waiting for the convenience of an e-book version of Pharmaplasia, it is now available as the Kindle Edition at Amazon.com ($9.99).

For industry insiders, Pharmaplasia provides a nostalgic look back at the changing pharmaceutical industry over the past five decades.  The book is packed with management and leadership lessons learned as industry veteran Mike Wokasch explores the root causes of mistakes and poor decisions that led to diminished trust and credibility and its current state of dysfunction.  With specific recommendations for change, Pharmaplasia answers many of the questions being asked about how pharmaceutical companies can increase R & D productivity; reduce operating expenses without sacrificing profitability, and what they should do to align with the evolving new healthcare market in light of healthcare reform.

“Wokasch’s insightful view of the pharmaceutical industry offers some logical explanations for the volatile changes and disappointment in that once proud business sector. As a senior level insider with access to key decision makers, Mike is able to provide both concrete examples and an educated perspective of the pinnacles and pitfalls surrounding this important segment of our economy and lives. This is a must read for both senior level pharma executives and those aspiring to bring back the real value to this once respected industry.” Jim Patchen (former pharma colleague of Mike Wokasch)

“(book) Came today and I read it straight thru. YES! I can certainly relate to the things you said in there! I just kept saying, how true, how true! ” C. Karabin (former pharma colleague of Mike Wokasch)

Order your  Kindle Edition of Pharmaplasia at Amazon.com

It’s been going on for decades and there seems to be no end in sight.  Good news for pharmaceutical companies and their executives.  Drive billions of dollars in revenue while saving hundreds of millions, if not billions of dollars in expense.  What are these strategies that seem to be working so well for those who have figured it out and dare to deploy it?

The first strategy involves avoiding expensive clinical trials but capitalizing on markets of unmet medical need where you can formulate a story around why your product might make sense for those patients even when you have little or no data. The second strategy is to take advantage of the fact that all prescription drugs have side effects and possible adverse reactions.  By mitigating and disguising the safety issues hidden in the cloud of prescribing information it is easy to downplaying side effects and adverse reactions, even if they might be fatal for some patients.  You can even create a perceived competitive advantage by implying your product has fewer and less serious side effects and adverse reactions than other therapeutic options.

Yes, it might be embarrassing to get caught and you may have a credibility issue with some physicians who don’t go along with your therapeutic rationale or concocted story but the negative financial consequences are pretty benign.  FDA could send you a warning letter.  The government might even fine your company or make you ante up some money to settle the case.  The same is true for product liability litigation.  Yes, there are legal fees and occasionally the company may have to pay the victims multi-million dollar settlements.   But, none of these consequences has near the financial impact of the positive revenue upside that can be generated over the same period of time.

Here is the best part about these strategies.  Many pharmaceutical companies try to play by the rules, so sorting out those who are intentionally deploying these strategies takes time and it is more difficult to identify than you might think.  Companies do inadvertently stray into off-label promotion and may appear to be understating their product risk profiles, especially as interpreted by the FDA.  This makes it all the more effective to hide strategically intended campaigns.  The FDA has to nit pick every promotion they get around to reviewing for clues of impropriety which ties up valuable agency resources making it all the more difficult to do a comprehensive job of surveillance.  Without any real regulatory consequences for non-compliance, the FDA must rely on whistleblowers going to the Department of Justice with their cases in hopes of putting a stop to protracted and egregious abuses of these strategies.  But that also takes time and years to gather sufficient documentation to legally take a company to task.

I am not advocating these strategies.  To the contrary, I believe these corporate orchestrated strategies are potentially harmful to patients and contribute to diminishing trust and credibility of the industry.   But, unfortunately, until the negative financial consequences exceed the revenue and earnings opportunities there is little incentive to stop the use of these strategies in companies with “whatever it takes”  cultures. mike@pharmareform.com

People with a job in the pharmaceutical industry are fortunate just to have a job given the current state of unemployment in the US.  At the same time, slow revenue growth, patent expirations, depleted pipelines, and layoffs from downsizings can create anxiety and well founded despair, discontent, and insecurity.

If you’re wondering about your company’s viability in the evolving new healthcare market or considering a move to another company, here are a few things you might want to assess and check out:

• Does the executive team describe their vision in terms of patients and value to healthcare or do they talk about how big the company will be and what industry ranking by revenues they are shooting for and how they are going to get there?
• Is your C-level and management team committed to an uncompromised culture of integrity and what have they done to prove it? DOJ Corporate Integrity Agreements don’t count as proof of their commitment.
• Does your company make decisions based on doing what is right or are decisions driven more by what is legal or what is regulatory compliant?
• Is your executive team more concerned about just having something to sell and the ability of sales and marketing to drive sales than they are about having innovative products that can deliver meaningful clinical benefits to patients?
• Is R & D focused on a few therapeutic areas they intend to conquer with a broad basic science approach and a continuous search for expertise to help them or is your company merely searching for any compound or technology that might have a commercial opportunity?
• Are you proud of your management team, their skill and expertise or are you wondering how in the world they got to be managers?
• Is your marketing team dominated by MBAs who have never spent a “real day”, much less a year or more, in the field? Market research focus groups don’t count as “real days.”
• Are the entry requirements for your sales organization based on high standards for professionalism and technical competence or are people hired because they can talk a good story (read BS meter overload) and have exceptional social personality traits (look nice and are very cordial)?
• Are sales managers focused on the value reps are delivering to their customers or are they still concerned about trying to quantify your activities and deliver the marketing message?

No company is perfect, but if your assessment from these questions are not as reassuring as you might like them to be, you might have good reason to be concerned.   We haven’t even gotten into assessing business considerations like financial stability, pipeline strength, acquisition vulnerability, or litigation exposure.

If you like the answers you got from this assessment you are very fortunate indeed.

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 recent article in Financial Times and a posting at FiercePharma noting the shift from Pharma CEOs with science backgrounds to CEOs with business backgrounds got me thinking about the implications for the pharmaceutical industry.  One of the conclusions suggests that if the business model is more dependent on execution and commercialization, a strong business background may be preferred and a science background may be less critical.  This seems to be increasingly the case, especially for larger Big Pharma companies.

As Big Pharma companies depend more on the acquisition of products to fill out their product lines, add generic products to their offering, diversify their product lines (devices, diagnostics, and consumer products), expand their global presence, and shift commercialization efforts to mass purchasers and payers (think government, insurance companies, and Pharmacy Benefits Managers), these companies look more like pharmaceutical Big Box outlets for the healthcare market.

This is not a good or bad thing.  It is a strategic business decision that companies are making which will have implications for the entire industry. These decisions will gradually establish a clear delineation between companies that build their strategies around science and the discovery of innovative products and those companies that supply products to the healthcare market.  Like in the retail market, smaller innovative product companies can go it alone and bring their products to market but they may not have the market reach or support infrastructure to service the payer market as effectively or as efficiently as the Big Box Pharmas.

So what is the fundamental business proposition of the pharmaceutical industry?

Sometimes we may take it for granted but the foundation for a healthy pharmaceutical industry is discovering and developing innovative new treatments.  Without a continuous flow of innovative new treatments, there is no pharmaceutical industry and Big Box Pharma would have to find something else to sell the market.

mike@pharmareform.com

Ever think your manager is a pain because they are always checking on you, quizzing you,  and making you feel like they don’t trust you?  Do they make timely observations and have an uncanny ability to make insightful comments or have you take corrective action before you get tripped up, deviate from corporate expectations, or get into trouble? Are they always trying to find ways for you to do your job better?  Do they know more about you and what you are doing than you would like?  Do they know how you think, so much so that they seem to care as much about your personal development as they do about the job you are doing?  You may not like it but they are doing their job and they are probably better than most managers.  Here is why you should consider yourself lucky.

You have probably heard and may even think you like the management concept of “hire the right people, then get out of their way and let them do their job.”  Well, I believe this can be taken to the extreme and in some cases, to the point of abdication of management responsibility.  I believe many of the missteps pharmaceutical companies have made over the past and perhaps even the current J & J recall situation could be attributed to a lack of diligent management oversight.  There is some truth to the sayings “inspect what you expect” and “trust but verify.”  No, I am not a control freak but where was management when the quality issues at J & J first surfaced or when pharmaceutical companies were involved in some of the questionable and sometimes illegal activities of the past?

So what is diligent management oversight?  From my perspective, it is knowing what is going on throughout your span of responsibility?  If you are a front line manager, it is knowing what is going on within your team and the jobs they are expected to do.  If you are the CEO, it is knowing what is going on in your company.   Diligent management oversight includes evaluating performance against goals and objectives, ensuring regulatory and legal compliance, and maintaining organizational standards for cultural and behavior expectations.  It also requires management to provide timely feedback and to make decisive interventions when deviations from expectations are identified or have the potential for doing harm by exposing the company to unacceptable risks.

Diligent oversight takes skill to avoid annoying micromanagement and to leverage the value-added benefits of diligent management oversight.  Skillful oversight provides employees with coaching and nurturing to enhance  performance, guide career development, and can convey a sense of caring about the person and demonstrate an appreciation for the job employees are doing.  Even the best of athletes have coaches who are watching, evaluating, and providing insightful corrective actions and encouragement to improve performance.  The better the athlete, the better the coach must be to have credibility and to have a positive impact.  The same is true in business.  The stronger your team, the better the management must be.

So the next time your manager seems to be asking too many questions, trying to understand more about what and how you are doing your job, maybe even challenging you to do better, don’t take it personal.  They are doing their job and you might actually be lucky enough to have a manager who wants you to do well, is willing to help you, and can help keep you out of trouble.

mike@pharmareform.com

With the continuing investigations and charges of pharmaceutical companies for off-label and other illegal promotional activities with the subsequent meaningless fines and settlements being levied, (relative to the revenues generated by the alleged illegal activities) one has to wonder whether investors are being duped or rewarded.

If investors were aware of the fact that the blockbuster drugs that pharmaceutical companies are touting could not generate the same billions of dollars of revenue if the company had to stick to labeled claims for promotion and depend primarily on indicated uses, would they invest to the same extent?  In the spirit of full disclosure (think SEC), should companies be required to disclose that off-label promotion and use is part of their strategy (not just a possibility) and a major source of revenue that carries the risk of regulatory and legal action if the company is caught or charged and forced to go through expensive legal proceedings that could result in costly settlements?

Or, with the nominal settlements and fines being levied, are investors being rewarded for recognizing the clever business savvy of the pharmaceutical companies that know how to play the game with full understanding that they have little downside and huge financial upsides for ignoring the regulatory and legal constraints on pharmaceutical advertising and promotion?   We’re not talking about the activities of the one-off maverick sales or marketing person. We’re talking about the orchestrated initiatives where pharmaceutical companies know about  and develop plans to take advantage of the bigger market and revenue opportunity if they encourage and illegally promote their product for off-label uses.

Here is another way to look at this.  What if fines and settlements resulting from illegal promotional activities also required pharmaceutical companies to disgorge (forfeit) all product related revenues (attributed to illegal activities or not) during the period in which the alleged illegal activities occurred?

Would investors be as interested in investing or as forgiving of the companies that had to forfeit their revenues for illegal activities?  How many investors would expect disclosure up front if forfeiture of revenues was a real possibility from the planned off-label promotion?

Without getting into whether companies would legally fight rather than ever “settle” if disgorgement of revenues was a possibility, until the fines and penalties approach the revenues generated from the illegal activities, there is no disincentive ( these companies have already decided to ignore any concerns for patient safety), and every incentive, to continue to take advantage of the nominal financial downsides.

At the very least, however, there ought to be a disclosure requirement so that investors can make informed decisions, which for some investors might include investment choices based on supporting ethical and legal business practices.

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