Pharma Reform

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

Those who have read this blog know that I am not into making excuses for pharmaceutical industry misbehavior.  At the same time, it is important to understand the impact of how outsiders (those not involved in the pharmaceutical industry) are going to interpret actions and behaviors.   What might appear to be clearly unethical or illegal to an outsider may require an informed interpretation of circumstances or intent.

Think about it.  At what point are consulting assignments and advisory payments to physicians a bribe or kickback?  Could providing lunch for the office staff really be a bribe or kickback?  Is any comment about product efficacy or safety that is not verbatim out of the package insert possibly “off-label” promotion?  When are graphic interpretations or implications from an advertisement “off-label” promotion?  At what point do random side effects and adverse reactions become “hidden” if not publicly broadcast to the media?  Are systematic miscalculations of pricing always an indication of fraud?  When is competitive pricing considered price fixing?  At what point does editorial assistance become “ghostwriting?”

I am not an attorney and this is not a legal discussion.  Rather, this is about past history of proven and alleged pharmaceutical industry misbehavior including illegal activities.  Perhaps most disappointing has been the fact that as prosecutors pieced together their better informed perspective of alleged illegal activities they often found both willful intent and additional even more egregious activities to support the initial allegations.   The seemingly endless offenses have tainted the perception of prosecutors, legislators, healthcare professionals, regulators, industry critics, and of course, patients.  Virtually everything the industry does is now suspect and often transformed into allegations of unethical if not illegal activities.  Even normal course of doing business activities (e.g., presenting a favorable product profile, trying to influence prescribing, and providing samples) are now being viewed as inappropriate and possibly illegal.

It all boils down to a lack of trust and credibility.  The industry can’t even credibly defend itself to maintain normal business practices because there are just too many cases that demonstrate companies are willing to betray this trust and take advantage of the market for financial gain.  Unfortunately, the pharmaceutical industry doesn’t seem to be too concerned or you would have seen a dramatic change in behavior.

Before trust and credibility can be reestablished the industry and company executives must be on their best behavior.  Once again, actions and consistent behavior will speak louder than words or intermittent gratuitous gestures.  Trust and credibility are much harder to reestablish than to maintain.

mike@pharmareform.com

A change of heart at Stanford Medical School allowed it to accept $3 million from Pfizer for CME after having publicly denounced the inappropriate financial influence of industry on CME. The draconian ACCME decision regarding AHA (American Heart Association) meeting restrictions on industry presentations could have had serious financial implications for AHA if they had not defended their peer review screening process and the desire to have industry scientists on their programs.   Although there was considerable support for the research information sharing value of industry participation,  I also suspect a considerable amount of industry financial support could have been at risk including major sponsorship commitments, exhibit space sales, and other marketing opportunity fees.   And now the state of Massachusetts is having second thoughts about restrictions they have placed on pharmaceutical sales representative activities (e.g., pens, sticky pads, and free lunches) because of the negative financial impact the restrictions are having on local businesses.

Are we getting to a point where the level of ethical and conflict of interest concerns about pharmaceutical industry influence will be moderated more by the level of financial impact than the convictions of those imposing the restrictions?

Here is one way to keep people honest about their ethical and conflict of interest considerations when restricting pharmaceutical industry activities.

It is the right of these groups and organizations to regulate and even ban pharmaceutical industry activities.  But,  if industry influence on prescribing and concerns for conflict of interest are seen to be detrimental to patients and are the basis for these decisions to preclude the industry from participation, then the restrictions and the need to avoid these influences should apply in principle to all members of that group or organization as well.   There are now a sufficient number of cases which demonstrate physicians and scientists are not immune to breaches of integrity and have been equally responsible for creating these concerns for biasing information about prescription drugs and participating in the creation of conflicts of interest.  Therefore the restrictions should apply to both sides of the activities of concern.   Here are some examples of how they should apply to Massachusetts or for any other organization with pharmaceutical industry restrictions:

• No physicians in the state of Massachusetts (faculty member of Stanford or AHA member, for example) should be allowed to accept any fees from industry, even for legitimate advisory, consulting services, or Board of Directors participation.  These individuals are selected for their expertise and they could be influenced by these payments (more so than a free lunch or pen).  More importantly, these individuals, because of their expertise and influence, have the capacity to influence (pass along biased information) far more physicians in private conversations and even in non-industry sponsored programs.
• Massachusetts licensed physicians and other healthcare providers (or from other restricting groups) should not be allowed to participate in any industry sponsored meetings or conferences.  This includes any national society meetings or conferences or scientific meetings sponsored by industry.  A pharmaceutical company merely being seen as a sponsor could favorably influence a physician about their views of the company and their products. Not to mention the exhibit area influences they would be subjected to.
• No medical meetings or events sponsored by the pharmaceutical industry should be allowed to be held in Massachusetts as this would be encouraging the very behavior (inappropriately influencing physician prescribing) and activities they are trying to curtail with their restrictions.
• Clinical studies are powerful ways to influence prescribing, especially for new products.  Therefore, clinical studies should not be done in Massachusetts (or other restricting institutions).  If they are done they should be done for no fees with only nominal, non-compensation related administrative expenses being reimbursed.
• Research grants and funding have the potential to favorably influence prescribing practice, especially if the data are published under the reputable name of the institution.  Therefore, no industry sponsored research should be conducted at or in institutions other than drug, life science, or biotech companies within Massachusetts.  No industry sponsored research should be allowed at any state facilities or their affiliates.

While these may have significant negative financial implications for individuals, businesses, and organizations, this mutual implementation of restrictions would preserve the integrity of decisions made to avoid conflicts of interest and limit the perks and financial influence of the pharmaceutical industry on prescribing practices.  In fact, these restrictions would have a far greater impact on assuring the elimination of industry influence than taking away pens, pads, and free lunches.

I suspect the negative financial impact will probably be far too great to allow ethics and decision making integrity to prevail in most situations .  As long as it makes financial sense for Massachusetts or other organizations,   the restrictions and expectations for compliance will be one way (only the industry must be controlled and comply) and will not really be driven by the ethical and integrity convictions of those imposing the restrictions.

mike@pharmareform.com

Recent announcements and news coverage about health insurance company actual and anticipated rate increases may have gotten President Obama’s attention but more importantly, raises serious questions about how and if increasing costs will or can be controlled in the new world of healthcare reform.  Keep in mind that we are all paying for increasing healthcare costs regardless of whether we have private insurance, employer provided (your paycheck deduction increasing for your share ) or  government subsidized coverage (your taxes at work).

One of the near term beneficiaries of out of control healthcare costs is going to be the pharmaceutical industry.  Coverage and use of expensive branded prescription drugs will continue and while adoption and market acceptance may be slowed by higher introductory prices for new prescription drugs, they will most likely still get on formularies and be available for physicians to prescribe.  I believe, however,  this will be a short lived upside.  Without change and a focus on cost control, here is how I see it playing out.

In the near term, as long as insurance companies and pharmacy benefit providers can continue to raise their rates to cover their costs and maintain profitability, there is little incentive to get aggressive about coverage or costs.  If patients and physicians demand treatment, including expensive procedures or branded prescription drugs, insurers may assess the impact on profitability near-term and they may go through the motions of evaluating reasonableness long-term but in the end they know they have the ability to cover costs by squeezing providers and increasing rates.  So, it really doesn’t cost them anything to include coverage for example of expensive branded prescription drugs. Their only incentive to keep costs down is to remain competitive, but in reality there really isn’t that much competition (similar insurance premiums) amongst the few providers available in a particular geographic healthcare market.

Lack of competition and the ability to raise rates to cover increasing costs will eventually make healthcare insurance unaffordable for businesses to provide, for individuals to consider, and for government to adequately subsidize.  At that point healthcare reform will meet a crossroad of needing to legislate cost controls (e.g., limit insurance rate increases) or be forced to a single payer system. Both options will impose reductions in coverage and costs that will seem draconian by today’s standards of care.  Expensive procedure and branded prescription drugs for which there are less expensive therapeutic options or that can not demonstrate real cost benefit will be first on the hit list.

Unfortunately, a real opportunity for healthcare reform will have been missed as cost cutting becomes the quick fix method of choice for reestablishing sanity to healthcare coverage.  Incentives to dramatically reduce costs will be stronger than those to increase efficiency and leverage cost benefit.  Prospects for efficiencies driven by electronic medical records will stall out as funding is seen more as an expense rather than an investment. Wellness programs and personalized medicine will be wishful thinking as they flounder in development without a chance to mature and deliver the anticipated cost saving benefits.

Despite pleading from the president and state governors, current healthcare reform initiatives will not keep insurance premiums in check  or  moderate increasing costs and ensure long term healthcare affordability.  Pharmaceutical companies will definitely benefit from the  lack of  health insurance competition and a healthcare market with no incentives or serious mandates to reduce or control increasing costs but may be among the first and hardest hit when controlling healthcare costs becomes a priority.

mike@pharmareform.com

Imagine a future in which pharmaceutical companies with world-class research teams collaborating to advance the science of healthcare at a pace never before seen in the history of medicine and  finding the innovative new treatment options that have been promised for decades.   A future when years of competent leadership, culture driven corporate commitments to integrity, and responsible commercialization tactics have reestablished the public’s trust, mitigating the need for punitive litigation and earning pharmaceutical companies the reputation of being uncompromising credible and trusted sources of scientific and medical information.  Imagine a future in which pharmaceutical companies leverage expertise, core competencies, and strategic outsourcing to  provide operational efficiencies that generate healthy profits which are viewed by the market as necessary and well deserved.

Continuing with this train of thought, imagine a future in which pharmaceutical companies consistently put patient health and safety ahead of profits.  A future where pharmaceutical executives care more about their employees and customers than they do about their own career aspirations and personal wealth generation.  Imagine a future in which generous pharmaceutical industry philanthropy makes medicine affordable and available to all in need, regardless of their ability to pay or where they live.  A future in which the healthcare market is better informed of treatment options  and freely acknowledges the disease altering and life-saving value of prescription medications.

Imagine a future in which investors appreciate and understand the inherent challenges of the pharmaceutical industry but value its ability to consistently bring innovative new products to the market and are willing to accept the vagaries of short-term financial performance because of the more predictable long-term returns on their investments.

Is this future for pharmaceutical companies possible, or is it just so much wishful thinking?

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