Pharma Reform

The recent CDC report on how poorly we are doing in preventing the leading cause of death in the US, cardiovascular disease, despite the availability of inexpensive effective treatments, is pretty disappointing.  It is probably a good surrogate for how people think about illness.

If the symptoms are silent and merely precursors for what might happen, people tend to be indifferent and less interested in paying any associated expenses.  If they are sick with symptoms that are uncomfortable, make daily activities impossible, or they are told they are dying from the disease, they will do just about anything and pay just about anything to eliminate the symptoms or disease.

I believe this reflects both a healthcare systems failure and tremendous patient apathy that suggests they don’t feel responsible for expenses (thinking either insurance or the government should pay) related to the consequences of their own poor health.

The report concludes:

“Although treatment of high blood pressure and high cholesterol is very effective and relatively low-cost, most people with these conditions remain at elevated risk for heart attacks, strokes, and other problems.”

• By the Numbers – High Blood Pressure
  • 1 in 3 Adults has high blood pressure
  • 1 in 3 Adults with high blood pressure does not get treatment
  • 1 in 2 Adults with high blood pressure does not have it under control
• By the Numbers – High Cholesterol
  • 1 in 3 Adults has high cholesterol
  • 1 in 2 Adults with high cholesterol does not get treatment
  • 2 in 3 Adults with high cholesterol do not have it under control

The insurance coverage focus of healthcare reform will probably make little difference in these numbers.  In this same CDC report, it is noted that more than 80% of patients who lack control of theses cardiovascular disease symptoms already have insurance.  Additionally, the cost to treat these conditions is relatively low with many highly effective treatments now available as inexpensive generic drugs.

Unfortunately, over the past several decades while healthcare provider systems battled Pharma companies over drug prices and Pharma companies focused on driving the market for “new prescriptions,” a huge market of untreated and ineffectively treated patients was building.

Why should we care?

Well, Pharma should care because there are tens of millions of potential patients yet to be treated.  Perhaps not all these potential patients will be willing or able to pay high prices for branded products but some may and will.

More importantly, beside the thousands of people suffering debilitating consequences or even dying prematurely, this same CDC report notes that cardiovascular disease costs the nation $300 billion each year.

So how do we improve and expand the treatment of patients with high blood pressure and high cholesterol?

The CDC report includes several suggestions and recommendations for programs, systems, and incentives for prevention and improving the treatment of cardiovascular diseases.  Unfortunately, many are similar to tactics being deployed today, previously suggested, or that have been tried before.

I believe the solution to this dilemma is to make the patient take responsibility for their health.  Pharma companies can make effective treatments available, physicians can prescribe the life style changes and medications, insurance companies and the government can pay for the treatments.  But, if patients don’t seek out and comply with the life style changes and treatment regimens, there is little the rest of the healthcare provider system can do to help patients prevent cardiovascular disease.

So how do we get patients to take responsibility?  This may be a little radical but what about making patients personally,  financially responsible for the consequences of not seeking diagnosis and treatment or complying with their treatment regimens.  If you have high blood pressure or high cholesterol and you choose not to find out (get checked) or be treated or not to be compliant with your prescribed treatment (including life style changes), that’s fine,  but you become personally responsible to pay for any medical expenses related to your heart attack or stroke.

While people have a hard time appreciating the health consequences of a heart attack or stroke until it happens, they seem to understand the financial consequences without experiencing the event.  That is why people buy insurance and why health insurance is so important to them when seeking employment.  They can relate to the financial implications more than the health consequences.

Want more patients to have their high blood pressure or high cholesterol controlled?  Make them financially responsible for the consequences of not seeking treatment and not staying in control of their disease.

mike@pharmareform.com

We are definitely living in a “Just Do It” global economy that rewards action and speed of execution.   This sense of urgency is reinforced by our instant access to new information on the internet and capabilities such as high speed trading on Wall Street.  Service providers and advertisers reinforce this need for speed and create universal expectations with offerings to get it done faster, quicker, and in less time.  In fact, we can’t seem to get things done fast enough, all in the name of taking advantage of a fleeting opportunities and staying competitive.

Almost nothing of importance in the pharmaceutical industry happens fast yet an incessant sense of urgency almost seems to be a badge of honor and is often applauded by Wall Street.  There seem to be a pervasive need to get things done quickly at pharmaceutical companies to create a competitive advantage (first to market) and potentially increase the commercial opportunity (more time left on the patent to market the product).

But, is having this sense of urgency always a good thing? Let’s take a look at four areas where an indiscriminately managed sense of urgency can lead to inferior, if not disastrous, results for a pharmaceutical company.  A reckless sense of urgency in research, manufacturing, commercialization, and employee development all carry significant potential liabilities.

Looking for quick hits in discovery research, rushing products through clinical development and even quickly killing product candidates early in development can all lead to disappointing results, even for products that might have otherwise done really well.  Missed therapeutic applications, overlooked safety issues, and product failures in late stage clinical trials can be symptomatic of making urgency and speed a priority in research.

Manufacturing operation with a heightened sense of urgency may be able to get up and running quickly or increase production output but run the risk of operational errors, increased waste, and fostering damaging quality issues.

Similarly, when commercial plans and tactics are deployed without due processes in an effort to get it done or to make a change quickly, marketers run the risk of medical-legal compliance liabilities, market miscommunication, misdirection of the sales force, and potentially slow adoption or even instigate rejection of the product by the market.

Also, when individuals who have accelerated promotions to higher levels of corporate responsibilities before they are truly ready, they are probably not thinking about the potential liabilities of premature advancement. Unfortunately, the realities of their inexperience can quickly catch up with them,  resulting in mistakes and poor decisions that have increasingly greater and longer lasting impacts on the company and the people who report to them.

I’m not suggesting the pharmaceutical industry and executives abandon this sense of urgency but rather to apply it discriminately and manage it carefully.  Not everything should have the same heightened sense of urgency and those that do require a commensurate high level of attention to detail with a disciplined, realistic assessment of expectations and potential liabilities.  Somebody needs to be asking; “Are these timelines necessary and realistic?  Why? And For what end result? “  With these timelines; “What are we missing here?” and “How do we mitigate the risks?”   mike@pharmareform.com

It is alarming to see prominent pharmaceutical industry names in the headlines these days regarding manufacturing issues serious enough to require recalls and plant closings, and for the DOJ to be compelled to seek prosecution.  Is it just a matter of the FDA increasing their surveillance scrutiny and compliance enforcement or is there really something more fundamental going on with pharmaceutical manufacturing?

Even with all the automation, IT support, instrumentation, purpose built facilities, and technical expertise, pharmaceutical manufacturing is difficult.  Those who do or have done pharmaceutical manufacturing know how challenging it is to maintain consistency and the high quality of products, batch after batch for tens of millions of tablets, capsules, or doses, year in and year out.

Pharmaceutical manufacturing is tightly regulated for quality with highly developed quality systems supported by rigorously defined product specifications, detailed SOPs (standard operating procedures), training requirements, job qualification expectations, and mandatory supervisory and quality assurance (QA) checks and balances.  One of the biggest question I  had when these issues started to more frequently hit the press was, “where was  Quality Assurance management?”

I believe with all the regulatory safeguards supposedly built into pharmaceutical manufacturing,  industry executives who have never worked in manufacturing have  very simplistic views of manufacturing, have developed a false sense of security about compliance requirements, and many are probably taking quality of manufacturing for granted.

Here are a few issues, attitudes, and situations that may be at the root of some of these pharmaceutical manufacturing issues.  Many if not all of them have to do with management’s perspective or the perspectives and expectations they project to their manufacturing teams.

• Management thinking that manufacturing is all about efficiency, so “let’s have manufacturing find another 5% reduction in cost of production.”  If you make this request year after year, at what point do you compromise quality?
• With the jobs so well defined in our SOPs, “we can train anybody to do these jobs.  How hard can it be?”
• Once the process is defined, it’s just a matter of production execution and efficiency
• Repetitive, routine operational steps by otherwise competent operators can lead to complacency, including at the checking and double checking steps of the supervisory role
• we don’t need QA people who are going to be difficult to work with (interpretation…we don’t need people who aren’t flexible in their process reviews and sign-offs)
• “we are not making any product when we are cleaning.”  “what is the longest stretch of time between cleanings that we can justify?”   Facility, manufacturing room, and equipment cleaning time, when viewed as non-production time (reduces productivity), puts pressure on performance metrics.
• Similarly, “when people are training they are not making product”
• “We are not going to let a meticulous operator get in the way of making our numbers.  Find a new operator.”
• “I am so busy with paperwork…nobody is going to know if I just sign off on this, even though I haven’t really checked it”
• “Nobody in management needs to know, we’ll just write that batch off as waste”
• “Let’s just do another sampling. I’m sure the batch will pass”
• “let’s just get a management authorized override for that deviation”
• We can’t afford the shutdown time to make the necessary upgrades to the process, even though it makes sense.
• FDA will require a new set of trials if we make these changes to our outdated process
• “We’ll never get caught up with these CAPAs” (Corrective Action and Preventive Action).  Sometimes the hardest but most important never get addressed in a timely fashion despite SOP defined prioritizations and timelines that are supposed to safeguard against delaying the fixes.

OK.  I think I have made my point.  Time for pharmaceutical manufacturing to get some respect and more importantly, some much needed investment.  I’m not talking just about buildings and machines although that may be in order for some.  I’m talking about putting quality standards of production ahead of production output metrics (no game playing, not just lip service).   I believe well managed manufacturing teams of  competent, conscientious operators, supervisors, and QA/QC staff with expertise and integrity will take pride in delivering high quality products as efficiently as they feel is possible.  It is the “well managed” part that I believe may be missing in some manufacturing operations.

It is also time for pharmaceutical company executives to appreciate the contribution manufacturing makes to the revenue line and not just look at the expense line impact.  Some executives, unfortunately, now know the negative impact manufacturing can have on revenues, especially if you take it for granted and don’t pay attention to it.

mike@pharmareform.com

So what keeps representatives from having more engaging, more informative, and more credible discussions with physicians?  One of the most frequent reasons, or excuses, I hear about is the regulatory constraints placed on representatives.  Regulatory restrictions get in the way of being more effective as a sales representative when opportunities for product use exceed the label claims or where representatives could drive more sales by implying or even making comparative claims they can’t support with label claims or “substantial evidence.”

To ensure regulatory compliance, many companies, especially those with Department of Justice Corporate Integrity Agreements, now require representatives to stick to verbatim scripted presentations that mostly do not resonate well with physicians.  This “regurgitation of the company message” is an immediate turnoff for physicians, lacks credibility, and makes for awkward representative – physician interactions.

Now, keep in mind the premise of our discussion here. You are a professional representative and your mindset and focus is on making sure patients in your territory are getting the best treatment possible.  You are not just “driving sales” by doing and saying whatever it takes to get physicians to prescribe your product as much as possible.   Professional representatives don’t need to be reminded of fair balance or to stick to label claims and approved literature, they just do.  The challenge for them is whether or not they have the claims and sufficient regulatory compliant data and literature to meet the information needs of their customers.

Some sales representatives might suggest that they have all they need in terms of claims and published data and regulatory is just getting in the way.  If that is the case, then why would there be a regulatory compliance issue?  Why is regulatory review such a big deal?  Why would companies and representatives feel a need to promote off-label to make their sales? Why would companies feel compelled to script boring marketing messages to ensure sales representative compliance? More importantly, why is the market still clamoring for more comparative trials and better data to help them identify best treatment options for patients?

In this competitive market and knowing that products we now have were developed with a “get it to market “ mentality and indication – driven clinical trials to satisfy regulatory requirements for safety and efficacy, I’m going to suggest you do not have the claims or data you need.  How many of your products have two well controlled comparative efficacy trials to support claims of differentiation that you can use in sales presentations?  Can you claim superiority?  If not, how can you discuss why your product is better than another for a particular patient type? Can you do this and be compliant with regulatory requirements or are you expected to just cleverly implying a difference?

Here is the problem.   Even today, research gets the indications and it is up to marketing and sales to differentiate the product in the market.  When a physician or managed plan decision-maker asks why they should use your product rather than a competitive product, how do you answer?  Blatant claims of superiority or implied differentiation are the only way to convince them why your product should be used over another product.

What’s interesting is that when research and management talk about products to investors or in company presentations, especially before launch, they talk about and always answer questions about how the product is better than anything else out there, often using historical data from competitive products compared to their just released clinical data.  They highlight all the wonderful features and benefits that your product has over the competition, even quote data that imply superiority.

But, when marketing and sales wants to take those same messages to the market they have this regulatory issue.  While the research and management statements may be true,  they don’t necessarily come with the label claims or “substantial evidence” to support those same claims in advertising and promotion.  Yet, revenue forecasts are driven off those claims and expectations for differentiation.   And besides, who ever launched a product that wasn’t considered by their research team and management to be better than anything out there?

Pharmaceutical companies can no longer expect, pharmaceutical representatives to fill the label claim and “substantial evidence” data void for products.  The disconnect between product differentiation assumptions used for revenue forecasts and the regulatory constrained messaging puts the representative in an unfair position of having to deliver sales expectations beyond that which would be or ever could be achievable given a compliant presentation.

To be effective, even professional representatives need regulatory compliant information, comprehensive label claims, and more importantly, “substantial evidence” documented in peer-reviewed published literature.  This is the responsibility of management and the research team.  It is then marketing’s responsibility to develop forecasts that are aligned with the label claims and regulatory compliant information available for presentations and discussions by representatives.   mike@pharmareform.com

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

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

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

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

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

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

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

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

Pipeline project evaluation:

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

Clinical development:

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

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

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

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

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

mike@pharmareform.com

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

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

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

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

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

mike@pharmareform.com

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

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

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

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

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

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

and

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

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

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

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

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

mike@pharmareform.com

Last post we discussed raising awareness and the next step in the adoption process is stimulating interest in your product.  People may become aware of your product but if they are not interested they will ignore the rest of your message and may not even remember your product.  You don’t even get a chance to convince them they should be interested.  This is one of the steps that are most likely to be impacted by evolving market because of the change in customer focus from prescriber to payer and because of the increasing constraints on traditional marketing and sales tactics.

Stimulating interest is about understanding the needs of your customers and finding an effective way to cut though all the market noise to grab their attention so you can let them know you can fill that need, solve their problem by treating a disease or condition safely and effectively.  Sounds easy enough, especially if you really have a product that can do this better than anything else out there and you can advertise and promote that you are better.  The “better than anything else” is often the challenge for pharmaceutical marketers primarily because few products have the data to support such a claim and even if they have the data, they may not have the regulatory label to allow the promotion of that difference.

Previous tactics targeted primarily at physicians:

• Their need is to provide the best, affordable care (including prescription drugs) for their patients
• Graphics and copy implications in journal advertising could stimulate interest in a variety of ways including simply putting the word “New” in the ad.
• Persuasive sales people could imply or make outright claims in their discussions that could stimulate interest
• The sheer volume of advertising and promotion could stimulate interest by implying to the physician “there must be something I don’t know”
• Public relations was great for raising awareness but they were masters at creating interest by making sure corporate communications clearly communicated the reason people should be interested in this new product, new study, most prescribed product, etc.
• The size of an exhibit booth and the value of the tchotchkes could stimulate interest at medical conferences
• You could build an impression of better by careful crafting a story around the product features and benefits that were important to the prescriber

Payer targeted “stimulating interest”:

• Their need, while similar to the prescriber will be more bluntly driven by the cost of therapeutic alternatives.  This can be summed up as “why should we use your product rather than other therapeutic options we have available and why should we pay more when a generic drug (or less expensive competitive product) option is available?”
• Payers will be less influenced by traditional advertising and promotion tactics
• Payers will demand and be more rigorous in their review of data to support any claims being made that might stimulate their interest
• Limited  and gatekeeper encumbered access to payers may require new tactics for stimulating interest with this group

Solutions:

• Traditional tactics will still work where prescribers can still be influenced but the  effectiveness of these tactics will diminish as the market evolves.
• Clinical utility described in a credible peer-reviewed scientific publications can get payer attention as can credible podium presentations at scientific conferences
• Innovative products with data to support clinically meaningful differentiation will make stimulating interest easier
• Have well prepared, data supported answers to “why should we use your product rather than other therapeutic options we have available and why should we pay more when a generic drug (or less expensive competitive product) option is available?”
• A data supported cost benefit story will almost always get payer attention but again, it better be credible and applicable to their situation
• You can always create enough market noise that payers feel compelled to take a look at what you have, but you better have something worth looking at or it will just further alienate them, potentially compromising a future opportunity to get their attention

In the next post we’ll discuss “Evaluation” the single most important step in the adoption process which will represent either the greatest opportunity or biggest challenge for pharmaceutical companies in the evolving new healthcare market.

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