By Ken Luchansky

Drug makers are starting to collaborate with technology companies as they look for ways to prove the value of their products to governments and insurers. By using smart gadgets to monitor patients in real time, pharmaceutical companies believe they can improve clinical outcomes and establish the cost-effectiveness of their treatments.

The result will be a host of new collaborations between pharmaceutical companies and businesses in non-traditional areas such as computing, telecoms, and even retail. A few such partnerships are already happening.

Novartis, for example, signed a $24 million deal with Proteus Biomedical to create “smart pills” that can transmit data from inside the body to monitor patients’ vital signs and check that they have taken their medicines as prescribed. Johnson and Johnson’s Lifescan unit has an iPhone application that lets users upload readings from their connected blood glucose monitors to their Apple phone.

This movement will be driven by a focus on outcomes, with pharma companies having to commit themselves to deliver more and more. The larger drug makers have traditionally relied on a few blockbuster products to generate their revenue. But, the old business model is breaking down and companies are diversifying into new areas such as consumer health, as well as cutting costs and forging more flexible alliances with small biotech companies. This revised model is sometimes referred to as “Pharma 2.0.” But, coming up next, is an era in which pharmaceutical companies will increasingly look to sell ancillary products and services linked to their medicines by working with IT and other companies.

This new era poses some notable challenges, not least the cultural gap between fast-moving technology companies–with rapid innovation cycles and a more ponderous drug industry–where bringing a new drug to market typically takes 10 years or more.

The reward, however, is worth fighting for. By monitoring clinical data and ensuring that patients take the right medicines at the right time, drug companies should be able to demonstrate their products really work, ensuring reimbursement by governmental agencies or insurers and helping to justify their pricing structure.

So, in the future, if you think your medicine is not working, don’t be dismayed. There just might be an application available to correct that.

Some might say that there’s no juice left to squeeze from the cost of providing care but a new report from Price Waterhouse Coopers says health-care providers are going to have to try.

The primary emphasis for all providers in the year ahead will be on reducing costs and creating value, a focus that will have a domino effect from one sector to another. The report lists 10 issues of concern for insurers, hospitals, physicians, pharmaceuticals and life-sciences companies, and even municipalities.

They are:

1. Reducing Costs: Hospitals, physicians and other providers will have to “squeeze” every penny out of their operations, including renegotiating contracts with suppliers on everything from food to pharmaceuticals. Pharma will be more intensely restricted in its marketing activities and data usage, rebate changes, and at the same time, maintaining its $80 billion contribution agreement with the Obama administration.
2. Regulatory Change: Dozens of new agencies, reimbursement and pricing pressures, with increased governmental oversight, will impose new requirements such as requiring pharma to disclose consulting fees paid to physicians and pharmacists.
3. Incentives and Value-Based Purchasing: 2010 will be a double-bonus year for physicians who act quickly to take advantage of government incentives to adopt to electronic medical records and e-prescribing. Those who do not will face potential penalties later.
4. Focus on Fraud: Health-care organizations will need to tighten their internal controls for fraud detection and prevention. Pharmaceutical executives now face jail time for off-label marketing violations and hospitals are looking nervously at Medicare and Medicaid auditing initiatives.
5. Technology: Stimulus funds for 2009 are boosting funding to initiatives like providing remote consultation and technology for continuing medical education and virtual encounters for hospitals, physician practices, and governmental agencies.
6. Prevention: Pharma companies will be more involved in promoting prevention. Expect to see greater alignment of incentives between pharma, payers, and providers, as well as retailers to address education, product safety, clinical effectiveness, and compliance.
7. Physician involvement: Doctors will seek greater stability and electronic connectivity. Accountable care organizations will require all providers to reevaluate their relationships and payer contracting agreements.
8. Alternate Care Models: Expect an increase in the number and scope of services offered outside physicians’ offices and hospitals. Home health, enabled by technology, will be given a boost through e-mail, tele-health, and remote patient monitoring.
9. Disaster Planning: Another wave of H1N1 will put more pressure on public health outbreak response, vaccine supply and its distribution, sick leave policies, and the role of funding mechanisms and contingency plans.
10. Social Responsibility: Community-oriented health services and consumer access will involve neighborhoods and municipalities in an effort to promote personal responsibility. Many of these efforts will continue to be supported by grants.

To make matters more complicated, today’s health-care providers have to meet the expectations of a growing segment of savvy patients whose consumerism behavior has moved from fad, to trend, to reality as they start squeezing for lower cost and value when making decisions about where they will go for their health care.

Source: http://www.pwc.com ©2008-2010

Biotech drugs that now cost thousands of dollars per month would have to compete with lower-cost generic versions after just five years on the market, under a new congressional proposal. The bipartisan bill recently introduced is the latest salvo in a yearlong effort to lower the price of biotech drugs, high-tech injectable medications that cost the nation more than $40 billion per year.

The proposal suggests generic drug makers are gaining traction for their long-sought goal: a speedy, low-cost pathway to market for generic biotech. Biotech drugs, such as the blockbuster cancer drug, Avastin (Roche), and Aranesp® (Amgen), currently don’t face generic competition because the Food and Drug Administration (FDA) doesn’t have the power to approve copies of such medications. Efforts to change that have been held up for nearly a decade by a lot of squabbling between biotech and generic drug industries and their allies on Capitol Hill.

Biotech companies have demanded at least 14 years on the market before their products face generic competition. That number appears increasingly unlikely as President Obama and congressional law makers hail generic biotech as a way to lower health-care costs. The bill would give biotech drugs just five years of market exclusivity and up to three more years for modifications, such as newer indications or dosage regimens.

Under the new bill, the FDA would have the power to determine whether a company must test its generic biotech drug on patients before launching it. Generic companies are concerned a requirement for clinical testing could drive the price of generics nearly as high as the originals, thus losing their price advantage. Because biologics are so complex, their manufacturing makes them sensitive to small changes that could alter their structure or how they work in the body. Therefore, the new “biosimilar” drug would be given its own brand name, forcing the generic companies to market their version of the drug to physicians which is currently not required for the small-molecule generic industry.

The multiple barriers for biosimilars can potentially limit the number of companies capable of producing them. The high cost of development could mean that the larger brand-name companies, which have the necessary cash, marketing expertise, and technological capabilities, may end up making them: an event that the likes of Merck and Eli Lilly are hoping for based on their plans to expand their biotechnology divisions.

The lawmaker best positioned to hammer out a compromise on the length of exclusivity is Senator Ted Kennedy whose home state is a biotech stronghold. Companies like Massachusetts-based Biogen are lobbying the senator to seek 12 years of market exclusivity to recoup the costs of developing high-tech biologic medications.

The Federal Trade Commission (FTC) has thrown their weight behind the generic drug industry and lawmakers who favor the shortest time possible before cheaper biotech drugs can enter the market. Their support concluded that the biotech companies already have plenty of protection for their products via patents and competitive pricing.

The Biotechnology Industry Organization (BIO) called the FTC’s conclusions “fundamentally flawed” and “highly selective” after the agency issued its report. Their efforts will focus on Congress to take a more balanced approach to biosimilar policy.

Clearly, it’s going to take a lot of pressure from all stakeholders to get legislation that offers equitable, economic relief while protecting “intellectual property” rights. Biting the hand that feeds innovation is not what the public needs to enable a “me-too” biosimilar industry. To ignore either one of these objectives, or to unnecessarily rush into creating this pathway, will only hurt those patients who depend on follow-on biologics the most.

Much of the debate surrounding the economic slowdown and the subsequent recession that the world has yet to get through focuses on the negative impacts of the downturn. However, a different direction was recently outlined in a survey of pharmaceutical industry Chief Executives carried out by Price Waterhouse Coopers (PWC).

This research, bucking the trend for gloom and doom that is predicted in other sectors, actually indicated that a significant proportion of pharma executives are feeling relatively positive about the market’s prospects.

In addition, the study suggested that the credit crunch could actually generate opportunities for the bigger pharma firms, particularly, as PWC noted, those with “low debt ratios and strong cash positions.” The survey questioned 47 CEOs from a range of global pharma companies and discovered that a third are “very confident” that they can boost the revenues of their respective firms over the coming year, something that may bode well for companies seeking partnering opportunities. PWC revealed that the pharma CEOs are less concerned about the slowdown and more confident of survival than their counterparts in other sectors, adding that many of the companies will be using their “healthy cash balances” to fund mergers and acquisitions.

The economic downturn has created a potentially beneficial environment for large pharma companies wanting to expand and build on their research and development base. For instance, in the current climate, with the yen rising against the US dollar and the euro, Japanese companies are potentially well placed to go on a buying spree for US and European “pharma and bio.”

Over half (55 percent) of pharma CEOs polled feel that structural changes, which could be brought about by merger and acquisition activities, will have a positive influence on the industry in the long term.

This outlook may be due to the prevailing opinion that innovation is a driving force for good within the pharma sector, as its cutting-edge nature requires constant changes and technological developments. Firms that may have been happy to keep the status quo back when times were good may be now prompted to take action in order to ensure their survival. Pharma firms may be prompted to move with the times by the onset of the credit crunch. If they keep thinking short term, they will not be able to deal with some of the structural challenges that need to be dealt with. In other words, tough times can make one innovate harder and faster.

So, it appears that in spite of the obvious threats posed by the global economic turbulence that has taken hold recently, every cloud may indeed have a silver lining, no matter how unlikely it seems.

While certainly not a welcome development, the economic downturn that has slowed economies to their very cores may turn out to be a contributing factor for the pharma sector to reach out for help in their efforts to meet the initiatives of restructuring, innovation, and productivity.

Source: http://www.pwc.com ©2008-2010

The current role of the sales and marketing function for pharma companies will become obsolete over the next decade as the industry shifts from mass marketing to target marketing, according to a report by Price Waterhouse Coopers (PWC).

Sales forces will be replaced by a smaller, smarter, and more effective sales force model, requiring pharma companies to recruit and develop people with new skills who can negotiate with increasingly powerful health-care payers and pharma company economic assessment agencies.

In addition, the pharmaceutical companies will adopt new talent management strategies, as well as ensure that performance measures and incentive systems are aligned with the behavior that will be needed to operate efficiently in a more integrated environment.

As the industry moves toward specialty products and away from primary care, fewer sales force personnel will be needed. Companies will likely recruit sales force personnel who have more of a clinical background such as Pharm.D’s, nurse practitioners, and physician assistants.

While the industry has always welcomed people with clinical skills such as pharmacists and RN’s, that percentage will rise primarily because of the nature of the specialty products which are going to require a deeper understanding of pathology, physiology, and alternative therapies. Candidates will distinguish themselves by being able to have an overall health-care perspective. Having the academic background would be good but having been a practicing Pharm.D. or nurse practitioner for a few years in a health-care system would be even better.

The market for specialized medicines is growing and at least 400 of the 2000 different treatments in development are biological or protein-based compounds with sophisticated profiles.

By 2020, according to the report, the global market for specialized therapies alone could be double what the entire prescription products’ market was worth in 2008. Pharma companies will need to restructure their marketing functions accordingly with the appointment of key Account Managers who will be responsible for collaborating with health-care payers to shape the information doctors receive and provide hard proof that a product really is safer, more effective, or more economical then its rivals before they add to it the formulary. Sales and marketing teams will need to master all of these new dynamics and synthesize them into a new system that will ensure skill development and measurement of performance. The ability to prioritize and articulate this mother load of clinical and economic data to the appropriate customer will require a retrofit of existing coaching methods in order to maximize their value. “Pay for performance” will also become the standard for the payer and new medicines will be paid for on the basis of the outcome they deliver. The push for the controversial comparative – effectiveness regulations will provide additional data so that equitable decision-making can occur during the drug-selection process. The antagonistic relationship that has existed between pharma, payers, and physicians should likely end, as the overall health system becomes more patient-centric. Pharma will have to develop products and services the market wants and is willing to pay a premium for because they will no longer be rewarded for incremental innovation, “me-too” products, and marginal credibility. Source: http://www.pwc.com ©2008-2010

The pharmaceutical industry’s landscape is changing before our very eyes. Since we last were in touch, news of the Pfizer-Wyeth, Merck-Schering, and Roche-Genentech mergers have broken and the economy continues to present unprecedented challenges to our government, business, and individual consumers.

As my friends and neighbors sift through all of the press releases and knowing that I have “road warrior” experience in pharma, they continue to ask me compelling questions about the industry. As of late, the most frequent inquiry has been, “What’s the difference between the generic and brand-name medicines my doctor prescribes and why do my prescriptions cost so much?”

First, let’s consider brand-name medicines. New brand-name medicines are on the cutting-edge of science with each medicine representing an average investment of $1.3 billion and 12 to 15 years of research and development. Literally thousands of potential compounds that are discovered never make it to the doctor’s office or to the corner drug store. On average, only five of every 10,000 compounds investigated make it to the clinical trials. Of those five, only one is ever approved for patient use with the reward of a very small window of opportunity for return on investment, the average patent life being five to seven years.

With the time, money, and risk involved to discover new medicines, some may wonder why does pharma bother. The answer is simple: New medicines account for 40 percent of the increase in longer life spans according to a study by the National Bureau of Economic Research. And, it can prove to be potentially profitable. As a result, the industry this year will again spend three times the amount that other major industries spend on research and development. This investment is anticipated to surpass the $65 billion level that was spent in 2008.

Each patient is unique in how their bodies respond to particular medications, and there might be instances where your doctor determines an older medicine with a generic equivalent can be your best treatment option. But what is a generic medicine exactly? The Food and Drug Administration (FDA) defines a generic drug as a copy of a brand-name drug in dosage, safety, strength, how it is taken, quality, efficacy, and intended use. Generic medicines currently account for 67 percent of medicines prescribed; a lofty position for minimal risk and investment. Generic companies merely copy the discoveries of large pharma when their patent runs its course. They do not spend a research budget to create and speed innovation of new drugs to treat global disease.

Everyone wants to save money, of course, and taking the generic equivalent of a brand-name medicine can be a good way to do that. However, generic medicines might not always be the best option for you. First, not every medicine has a generic equivalent. Second, generics may have different dosage requirements. For example, the brand-name version of a medicine may require you to take the medication once daily, whereas the generic version requires you to take it three times a day. This kind of change may not work for you.

Some patient and clinician doubt about generics may have been confirmed recently when the FDA blocked the import of 30 generic drugs from India because of inadequate sterile processing operations. More frequently than expected, refills for generic prescriptions are not dispensed with the same generic brand on each visit. This occurs when the retailer purchased this stock based on price advantages that can create concern and confusion for some patients.

Last but not least, the generic market is heavily supported and driven by the retail segment. Large pharmacy chains are acquiring or partnering with pharmacy-benefit-management companies (PBM) in order to enhance their buying power with drug manufacturers and to increase their influence with public and private payers. Consequently, the co-pay obligation for the consumer is constantly changing and the price differential between brand-name and generics is narrowing.

As with any change in your insurance or pharmacy benefit plans for which you have responsibility to monitor, it is also important to consult with your physician about all of your medication options … brand-name or generic.

As all of our actions are driven by motivation, just remember, Caveat Emptor!

You can’t talk about 2009 in the drug industry without mentioning the “D” word: downsizing. Everyone who is anyone in pharma these days is doing it. Why? For starters, most cases involve generic competition and pipeline problems. Pfizer is ready to slash another 2,400 people from their sales force due to Lipitor® going off patent in 2010. Merck, GSK, Wyeth, Amgen, and Novartis completed a round of purging at the end of 2008.

According to the Wall Street Journal, the size of the drug industry’s U.S. sales force has declined by 10 percent to about 92,000 from a peak of 102,000 in 2006. ZS Associates, a sales strategy consulting firm, predicts continuous drops to as low as 70,000 by 2012.

Not encouraging numbers. It’s even less encouraging to hear that our friends at Merck ran a pilot program last year under which regions cut sales staff by up to one-quarter and continued to deliver results similar to those in other uncut regions. This year, that program may go national. Will a more nimble, innovative, big pharma result? That is a wait-and-see kind of question.

To make matters worse, the Reps who have kept their jobs are facing promotional constraints out in the field. Teaching hospitals such as the University of Pittsburgh Medical Center will not allow freebies of any kind, and if the American Association of Medical Colleges has its way, then no medical school will accept gifts, travel, or Key Opinion Leader grants from drug makers.

An increasing number of physician practices have instituted “no see” policies barring Reps from their offices. Carolinas Healthcare System in Charlotte has banned its physicians from handing out drug samples to patients, one of the most effective tools Reps use to promote their products. The District of Columbia now requires pharma Reps to be licensed. Maybe we should check with the “Beltway Boys” on this one.

Meanwhile, the industry association PHRMA has adopted a marketing code meant to police Sales Rep conduct. As of January 1, 2009, companies that have signed on to the new policy won’t be handing out pens, mugs, t-shirts, or any other trinkets in all 50 states. The policy also reiterates a ban on more expensive gifts like sports tickets and junkets. Free office lunches and restaurant meals are still allowed under the PHRMA’s policy, however, as long as one educational presentation goes along with the food.