As the US Department of Health and Human Services (HHS) circles around the elements of health care that will actually be included in our new “Essential Health Benefits” (EHB), one aspect of the EHB offering has caused a tremendous stir among dozens of health groups.  Their collective concern is focused on the pharmaceutical care that will be provided under EHB.  In particular, the groups have expressed dissatisfaction over the number of drugs that will be covered in each class.  How many drugs per class you ask?  Based on current HHS information, it appears that the number is one drug per class.

Where, specifically, did this minimalist Rx concept come from?  It first appeared in HHS guidance offered to the public on December 16, 2011.  Here’s a brief discussion of the number of pharmaceuticals to be covered under EHB appeared on p. 13.  It stated:

“If a benchmark plan offers a drug in a certain category or class, all plans must offer at least one drug in that same category or class, even though the specific drugs on the formulary may vary.”

How to decipher that phrase?  Admittedly, I found it a bit hard to understand.  However, 104 disparate patient and health advocacy groups, representing 133 million patients and caregivers, had no trouble at all.   They read it to mean that only one drug per class would be required under the new EHB Rx offerings that will go into effect on January 1, 2014.  Based on this interpretation, a deluge of public letters to HHS was released by these organizations, all voicing strong opposition to this idea.  Here’s an example, released on April 11, 2012, signed by all 104 groups:

“The bulletin (12/16/11) states that EHB plans must only cover one drug per therapeutic category or class covered by a selected state benchmark plan to meet the EHB standard. This is wholly inadequate to meet the complex needs of patients with chronic diseases and disabilities, and runs counter to the government’s existing minimum prescription drug coverage standards, including under the Medicare Part D program.”

In their letter, the groups all pointed to a recent study released by Avalere, and funded by Pfizer, which revealed that the largest federal employees health benefit plans and major small-group plans in California, Colorado, Maryland and New York (similar to those that HHS is supposed to use in modeling EHB drug benefits) are all covering many more drugs in each class (an average of 70% of drugs available in a class) than the one drug concept proposed in the 12/16/11 HHS bulletin.

And to be fair, it is true that under Part D Medicare drug rules only two drugs are required to be provided per class (p. 395).  However, due to the private competition between the insurers in the Part D prescription drug offerings, many more products per class are regularly included.

So, how will all this be reconciled?  It’s hard to say, but there are several considerations to think about, should this one-drug-per-class mandate be implemented for HCR’s EHB. Let’s say, for example, you’re a patient who’s been dealing with hypertension.  Getting hypertension under control often entails trying many prescription drugs and often includes very careful titrating of the one drug that seems to be working.  What happens to you if you lose that one drug that controls your disease?  The lack of Rx options for these patients will only lead to major medical episodes down the road.

Or what if you are a physician dealing with rheumatoid arthritis in hundreds of Medicaid patients?  It’s a tough disease to manage because frequently, one anti-inflammatory may work on a patient for a while, and then inexplicably, it stops working for no logical reason.  Utilizing other anti-inflammatories is the only course of action the doctor has to find new relief from the disease.  Limited to just one drug in the anti-inflammatory category, I really don’t know what doctors will do to manage the 30-40 million new Medicaid patients HCR will bring into their offices, many of whom will have rheumatoid arthritis.

And what if you are the CEO of a prescription pharmaceutical company?  What is your response to this mandate for one drug per class?  If each of the single drugs chosen in each EHB Rx class is likely to be the cheapest generic, where does this leave brand drug makers?   Will branded drugs ever be reimbursed under HCR’s EHB Rx program?  Answer:  No.   And if this 100% generic program is likely to impact 40% to 50% of your total American market, what do you do about future R&D?  Put more succinctly, who will your future customers be?  Who will buy brand name drugs after this EHB Rx rule is put in place?

But all is not gloom and doom in this “one drug per class” EHB scenario.  First of all, by restricting the EHB Rx segment, there will be an obvious decrease in overall medical spending across the county.  As an example, consider hospital formularies and pharmacies.  Huge inventory savings will be realized, since every drug chosen for every category will be a low cost generic.  Also, in the important area of medical errors, the reduction in the actual numbers of available drugs used for each disease will insure the proper use of the proper drug in almost every case.  As a result, the billions of dollars wasted on medical errors and unintended deaths will be virtually eliminated.  And then there is the incredible free enterprise competition that will be unleashed among the generic manufacturers that will compete for the opportunity to provide the one drug for any class.  No doubt, low prices such as we have never seen before, will be realized by HHS.  All and all, then, there is a tremendous national health savings benefit, a very real upside, to be realized when this concept of one drug per class is adopted by the EHB.

Nevertheless, despite all this health savings evidence, it is curious to see that several of the fervent supporters of HCR, groups such as Families USA, NORD, The American Academy of Physician Assistants, and many others listed in the group of 104, have now decided that this “one drug per class” policy is just plain wrong.   As noted earlier, they submit that the EHB one drug concept is unfair and medically unsound policy for their members.

This response by these groups is interesting. By now, over two years into this HCR exercise, you would think that these organizations, and all others who strongly supported HCR, would clearly understand that this is where HCR is headed:  “Less is more, don’t you see?”  That’s because by reducing access, denying options, and limiting medical services, millions of people will now have the opportunity to have one drug per class, rather than none at all.

And so, as this HCR concept continues to take shape, and the nation gradually awakens to this new reality across the broad array of medical services, it truly is amazing just how much more — “less” — really can be. That’s my point of view on HCR’s one-drug-per-class EHB concept.  I’d be interested in your thoughts on this matter.

Tom Norton is principal at NHD Smart Communications. He can be reached at tnorton@nhdcomm.com

Cegedim Relationship Management’s second annual report on aggregate spend, transparency and disclosure looks at the how the industry is responding to a number of Sunshine-type measures currently spreading through Europe, including the recently introduced  UK Bribery Act,  legislation similar to the ACA recently adopted in France, and the increased transparency rules about to affect The Netherlands.

Comparisons with last year’s results show that more European companies are enforcing corporate standards for spending on HCPs, and that compliance professionals are more confident in their companies’ ability to meet transparency requirements, with 87% of 2011 participants saying their ability to comply is Good or Excellent, an increase from 73% in 2010. Specific difficulties in 2011 were identified as the struggle to connect a unique identification to HCPs from expense reports; incomplete spend and customer information; and overall system/process shortcomings.

But although the report points to Europe making “significant improvements” in its journey toward full compliance, there was less of a focus on those countries with a less than gleaming reputation when it comes to transparency and disclosure of payments to physicians and regulators. Greece, Poland, Romania and Russia, for example, although now largely engaged in implementing apparently heavy-handed anti-corruption measures, are likely to have further to go before their disclosure practices are ready to face the light of day.

For the Cegedim press release regarding the survey, click here.
For the full Cegedim survey, click here.

A magazine ad for Boniva, fronted by actor Sally Field, generated the DDMAC (now the Office of Prescription Drug Promotion, or OPDP) Untitled Letter last year due to following phrase: “After one year on Boniva, 9 out of 10 women stopped and reversed their bone loss.” That didn’t jibe with the scientific data, DDMAC said in the letter, before requesting that all ads containing the phrase be removed from the campaign.

Genentech went a step further. In September of last year, the company began running corrective magazine ads addressing the overstated claim. The corrective ad states that the violative ad “may have given you the wrong impression.” It goes on to state that “Boniva has not been proven to stop and reverse bone loss in 9 out of 10 women and is not a cure for postmenopausal osteoporosis.” The corrective ads will run though April 2012.

Unlike their mild-mannered, Untitled Letter cousins, Warning Letters are considered more severe, and they typically mandate corrective ads to clear up any overstated claims or minimized risk information. Given that Genentech received the former communique and not the latter, it’s notable that the company chose to run corrective ads without a mandate.

After speaking with DDMAC about the Untitled Letter, Genentech worked with the agency to create and then “voluntarily” launch the corrective ads last September, according to Chris Vancheri, director, public affairs, at Genentech.

In a statement, Genentech said that in addition to the corrective advertisements – which are running in several women’s magazines, including Weight Watchers and this month’s WebMD the Magazine – “our clinical specialists have reached out to health care providers” to inform them about the corrective ads, which intend to “clarify the benefits and risks of Boniva in women suffering from post-menopausal osteoporosis.”

Sally Field was the face of Boniva beginning in 2006, but Vancheri says Field is “no longer engaged” on the campaign. GlaxoSmithKline signed a co-promotion deal with Roche on Boniva in 2001, but the companies broke the partnership in 2010.

In response to off-label inquiries about a drug, biopharma companies can use the kind of boilerplate they’ve been inserting on social media sites for years – thanks for your comment, here’s our contact information, call us for more information – but they cannot address the question publicly, where it appears, a privilege many hoped would be included in FDA’s long-promised and long-awaited social media guidelines. Companies must also include a “mechanism for providing readily accessible current FDA-required labeling,” but cannot include a link to anything that could be construed as promotional, like a “product website, product promotional materials, firm websites, or third-party websites.” Guidance on responding to unsolicited requests for off-label information was published in the Federal Register a few days before the end of 2011.

Responding to an unsolicited off-label question/comment is only appropriate when a specific brand is named, and if the question is “broad in nature,” drug companies should “appropriately narrow the question.” FDA recognizes the fact that companies are “capable of responding to requests about their own products in a truthful, non-misleading, and accurate manner,” and that companies probably know more about their own products than other self-appointed responders:

It can be in the best interest of public health for a firm to respond to unsolicited requests for information about off-label uses of the firm’s products that are made in public forums, especially since other responders may not provide or have access to the most accurate and up-to-date medical product information.

Unlike other forum responders, who can comment publicly in response to any question, manufacturers must wait for the original commenter to respond to the boilerplate message with contact information, before providing “any substantive communication about off-label uses for the product, in response to the original unsolicited off-label question,” and that communication must occur “solely between the firm and the individual who made the request…the firm should not make its detailed response with off-label information publicly available within the same forum.”

FDA’s guidance on industries’ social media interaction with patients, at least with respect to off-label inquiries, seems to be: Don’t participate publicly. According to the guidance document, this sentiment reflects a concern that publicly posted off-label information – in response to an unsolicited query – would be available for an indefinite period of time, and would also reach the eyes of readers who have not requested such information. Even if the drug information is accurate when it’s posted, it may not be accurate next month. For viewers who didn’t ask about an off-label use, but are still party to a public response, the information itself, regardless of its scientific merit, “may promote a product for a use or condition for which FDA has not approved or cleared.”

Those companies that would like to respond to an individual with a question, assuming that person has called or emailed the company in response to the provision of contact information – contact info that leads to a firm’s medical or scientific department, not a marketing department, the guidance clearly states – should include the following materials, according to the document:

• FDA—required drug label
• A prominent statement saying the product has not been FDA approved
• A prominent statement disclosing approved indications, if any
• A prominent statement of all important safety info, including box warnings, if any
• A complete list of references for all of the information disseminated in the response (firms should use peer-reviewed articles whenever possible)

Companies should also maintain the following records about off-label responses:

• The nature of the request for information, including the name, address and affiliation of the requestor
• Records regarding the information provided to the requestor
• Any follow-up inquires or questions from the requestor

The guidance is open for comment for 90 days. Here’s the Federal Register entry.

A repeat of the survey, released last week, found that regulatory and compliance issues had jumped to 16% as a driver for new technology adoption. As a motivation for business model or process change, the percentage of respondents citing regulatory and compliance issues (13%) more than doubled this year.

While executive management and strategic planning still represent the top two influences with respect to new technology adoption and changes to business operations, respectively, both categories decreased significantly from last year.

“Spending at pharmaceutical companies is shifting to compliance,” said Angela Miccoli, Cegedim’s president, North America, during a presentation on the data.

Asked about the biggest changes companies are making, 73% cited an increased focus on market access strategies; 63% cited an increased focus on managed markets; and 59% cited a realignment of primary sales forces.

The survey was conducted online, mostly among pharmaceutical executives, managers and directors in sales, marketing, general management and regulatory departments.

As the country struggles with the current economic malaise, and the pharmaceutical industry enters into yet another difficult quarter of “trying to make the numbers,” one matter that I doubt many Rx execs are thinking about today is the HCR Taxman.  That’s too bad.  They probably should.  That’s because he’s coming for the entire industry on September 30^th.

Now that I have your attention, what in the world am I talking about?  It’s a long story, but let’s just say that the HCR chit that the industry signed in Washington, D.C. during the summer of 2009 has come due, and it’s time to begin paying up.  If your company does more than $5 million a year in sales to various federal government entities, you should read on.

On August 22^nd, the IRS issued temporary rules on the matter that direct the following:

“Drug manufacturers that sell $5 million or more annually through the federal government’s Medicare Parts B and D, Medicaid, Veterans Affairs, the Department of Defense and TriCare programs, are required to make combined total fee payments of $2.5 billion by Sept. 30, 2011.”

The Obama Administration, in the push for HCR in 2008, understood that it needed to bring the Rx industry “into the fold.” The subsequent deal – $80 billion over 10 years – struck between the Administration and PhRMA required the Rx industry to “fill the donut hole in Part D,” offer up other payments to ameliorate the costs of Medicare Part B, and to “contribute” to various military health services. In exchange, the Administration would back off demands for additional HCR taxes on the Rx industry, going forward.  Clearly, the industry’s theory was that the Rx volume to be generated by 35 million newly covered HCR patients would more than offset the costs of the deal. But now, two years later, PhRMA is back in protective mode, as the same fee proposals have begun to resurface. So much for the Administration’s 2009 deal with industry.

Back to the impending September tax obligation. According to the preliminary rules the IRS released on August 22^nd, the aggregate fee amount due from the Rx industry for each year of the HCR funding is:

• $2.5 billion for fee year 2011;
• $2.8 billion for fee years 2012 and 2013;
• $3 billion for fee years 2014 through 2016;
• $4 billion for fee year 2017;
• $4.1 billion  for fee year 2018;
• $2.8 billion for fee year 2019 and thereafter.

The fees for each year will be allocated:

• Using a specified formula, among covered entities (i.e., manufacturers & importers) with aggregate branded prescription drug sales of over $5 million to specified government programs (Medicare Part B program, the Medicare Part D program, the Medicaid program, any program under which branded prescription drugs are procured by the Department of Veterans Affairs, any program under which branded prescription drugs are procured by the Department of Defense, and the TRICARE retail pharmacy program).

Provides that the annual fee for each covered entity is calculated by determining the ratio of:

• The covered entity’s branded prescription drug sales taken into account during the preceding calendar year to…
• The aggregate branded prescription drug sales taken into account for all covered entities during the same year, and applying this ratio to the applicable amount.

So what is the Rx industry’s tax liability?  Here’s a 2010 estimated look at how this lays out, courtesy of Foley-Hoag, LLC:

The table that follows illustrates the graduated structure of the fee for a (hypothetical) covered entity, “ Q Pharmaceuticals,” with $1 billion in total branded prescription branded drug sales in 2010 (under specified programs):

To calculate a covered entity’s share of the statutorily determined aggregate fee, the IRS would multiply the fee by the ratio of the covered entity’s total sales taken into account to the aggregate of all covered entities branded drug sales taken into account.

Under the above scenario, where Q Pharmaceuticals total sales taken into account is $783 million in 2010, and where the aggregate sales taken into account for all covered entities is $10 billion, Q Pharmaceuticals fee would be:

If you’re an Rx firm doing an aggregate one billion dollars of business with the federal entities listed above, you’re on the hook for nearly $200 million by September 30, according to the IRS and the 2010 Foley-Hoag formula. This is a hypothetical, but the above formula is pretty straightforward.  You should be able to load in your federal sales numbers, as appropriate, and figure out where you will actually stand on September 30th.  It could be a very interesting number.

For brand managers who are sweating out sales every quarter, trying to make quota, the idea that the profitability of their product may be adversely impacted by this new HCR “fee” is no small matter. Will these fees have an impact on 2011 bottom line, year-end bonuses, for example? As HCR continues to roll out, keep an eye on the activities happening beneath the surface of the law. Rx industry CFOs and industry tax departments are well aware of this development, but I’m guessing that the September 30^th tax obligation might come as a surprise to many in the C-suite. I would be interested in your thoughts on this latest development in HCR.

But the single most effective tool in the Bad Ad program’s toolkit, according to Arnie Friede, principal at Arnold I. Friede & Associates, and a former associate chief counsel at FDA, is fear. Or rather, in terrorem, a “Latin term that lawyers use” to mean frightening someone into compliance, says Friede.

When the program launched, FDA Commissioner Margaret Hamburg sent an explanatory letter to “more than 33,000” physicians, a fraction of the roughly 972,000 physicians in the US. Sales force management and reps themselves will have to decide if they are willing to play Russian roulette with a physician who may or may not be an informer. “FDA is trying to create the perception that the rep doesn’t know if the doctor is or is not a friend,” says Friede. “Accordingly, reps should be on the straight and narrow.” For FDA, the conversation between a rep and a doctor is one of the hardest areas to regulate efficiently, according to Friede. Creating in terrorem means prevention, he says.

Concerns about the Bad Ad program being abused by competing brands seem to be unfounded. According to FDA’s Division of Drug Marketing, Advertising and Communications (DDMAC), only 4% of the complaints that came in since last May were anonymous. Friede says complaining to DDMAC about competing brand messages is not something new, to be facilitated by the Bad Ad program. “There are plenty of channels for competitive complaints with DDMAC,” says Friede. Companies wishing to complain about marketing materials anonymously can simply do it through a law firm, Friede says, adding that “people that live in glass houses shouldn’t throw stones.”

Of the 328 submissions to the Bad Ad program, 188 came from HCPs, 116 from consumers, and 24 were submitted by industry representatives. The program will be expanded this year, according to DDMAC, to include a “web-based continuing education program,” and a new focus on med students and early career HCPs. FDA will also seek collaborations with medical, pharmacy and nursing schools to “enhance student education.”

Under the new 2011 Code, pharma companies must report financial details (including registration fees, costs of accommodation and travel) when sponsoring healthcare professionals to attend meetings organized by third parties, and declare fees paid to consultants for services such as chairing and speaking at meetings and participation in advisory boards. The practise of giving promotional gifts is also to be strongly curtailed, although pharma companies can still give branded products to HCPs to pass onto their patients.

The amendments were fanfared by a number of assured pronouncements by APBI late last year. Writing in PMLive in October 2010, the ABPI’s ‘Director of Trust’ Andrew Powrie-Smith maintained that “success will not be measured on our ability to hang on to past practices, but on how we meet stakeholders’ expectations going forward.” He added: “We have to earn our stakeholders’ trust and then work hard to keep it, which places an increased emphasis on our behaviours and actions not only being appropriate, but also being recognised as such.” Simon Jose, the Association’s President, followed this (in a November press release from APBI) with: “This vote is a strong symbolic indicator of change and a positive step towards increasing trust in industry as a partner in the healthcare system.”

The timing of the APBI amendments is interesting in that they arrive at more or less hand in hand with the UK’s new Bribery Act. (The ABPI Code becomes ‘operational’ in May; the Bribery Act comes into effect in April). The Bribery Act introduces four offences (two of which are new to the statute books): making a bribe, accepting a bribe, bribing a foreign public official and — of particular interest to pharma — failing to prevent bribery at a corporate level. (This point, wrote Steve Gray on Pharmaphorum [September 20, 2010] “encompasses not just employees, but any agents carrying out an activity to win or retain business for a company.” Or, as his colleague Paul Tunnah puts it, “senior executives are being asked to take greater responsibility for what actually happens on the front-line of the business.”) The upshot is that pharma companies in the UK are suddenly faced with a transparency  ‘double whammy’. So what — aside from the apparent arrival of a climate in which the UK pharma industry no longer appears to be trusted to trust itself — are the implications of this?

Even when waxing lyrical over the ethical importance of its Code changes, ABPI’s Andrew Powrie-Smith conceded that he recognized that their implementation “will present some challenges to individual companies.” The Ethical Medicines Industry Group (EMIG) responded by taking particular exception to the clause on promotional items. EMIG complained about the lack of clarification on what types of promotional items were to be excluded in the APBI ban and expressed concern that the distribution of allowable promotional items is not separated from the role of the medical representative. Adding that that the new clauses “will make the UK market the most restricted promotional environment for pharmaceuticals,” EMIG went on: “This will place smaller and medium sized companies with the majority of their turnover in the UK at a considerable disadvantage compared with similar companies abroad.”

Further, EMIG claimed there was no evidence that ABPI’s proposals would enhance trust between HCPs and industry: “Indeed, many doctors could react negatively to the suggestion that the provision of inexpensive branding items might influence their prescribing behavior.”

A Cegedim survey into regulatory compliance trends published in November 2010 proposed that European pharma will be required to follow more closely the more mature US model in responding to the changes brought about by the implementation of the Bribery Act and the new ABPI Code (which, after all, impose a model of disclosure that has existed in the US for many years). While highlighting that 93% of its respondents agreed that “regulatory compliance will become a major challenge in Europe,” the Cegedim study pointed to wide agreement in Europe, for example, for the uptake of US methods of tracking promotional spend.

However, the UK developments come at a point where the US is preparing for even stricter transparency legislation in the shape of the Sunshine Act. If, as it is suggested, Europe is three to five years behind the US on compliance issues, then the UK’s new transparency laws could just signal the beginning of an increasingly draconian era. And while the challenges they present may be addressed on the ground level by a wholesale adoption of US operational-based compliance solutions, the cultural after-taste — for a country whose pharma companies have enjoyed a history of self-policing — will be harder to take.

Eight strategic issues that should keep “C Suiters” reaching for the NoDoz in 2011

The consensus is that 2011 will be a bad year for Big Pharma.  It must confront a breaking wave of patent expirations, while fiscal retrenchment has created an innovation cycle in reverse as payers find new ways to curb the drugs bill.  Risk-averse regulators are transforming old tools like the FDA “complete response letter” into a registration parking lot, with no exit ramp to connect companies to a distracted — and increasingly impatient — community of clinicians and consumers.

So as the days of January tumble into early darkness, let’s inventory a few of what I call the “night stalkers” — issues that are likely to keep members of the C-suite awake beyond a sensible “lights out” time.  

R&D:  It’s Your Dime!  From both an economic return and societal point of view, the cost of new drug innovation is best shared – across companies and especially across markets.  It is particularly important to maintain the principle that countries make a fair contribution to R&D, through national pricing practices that avoid a “race to the bottom” where every payer seeks the lowest possible transaction cost with the industry.   Yet commitment to this ideal is eroding everywhere, including the US.  A consultation paper on “value based” drug pricing released last month by the UK Department of Health actually puts a clear metric down against sharing the global burden of R&D, calculating that any extra dividend the UK pays for innovation is economically irrational.  It will neither stimulate more domestic R&D or lead to savings – in fact the report says there is no benefit but instead “large costs to be borne exclusively by the UK public.“  Such an argument is predictable had it come from a outlier country like New Zealand, where well-medicated sheep outnumber patients, but as an official statement of policy in the UK it speaks volumes on where this debate is heading.

Corruption and Compliance.  Claims for malfeasances ranging from off-label promotion to deceptive pricing continue to mount, with more than $10 billion in compliance charges imposed on big pharma over the past five years.  With a return on investment of more than 100 to one, in terms of what it costs to litigate, US and European regulators are pushing the extraterritorial reach of enforcement legislation to cover a potentially rich new vein of graft in emerging markets. Here, the industry is finding itself on the front line of a vast cultural disconnect:  in most developing countries, medicines are sold through a web of interconnected relationships dependent on close ties to government. Hence corruption has an entire different meaning — it’s called sharing the wealth — and parsing the cultural divide is going to prove a challenge.

In the US, the scope of action has quietly spread to include criminal charges against individual executives; eventually, a big pharma company will be barred from doing business with government programs that account for more than half the US market.  Despite this, pharma has failed to address the problem from an industry-wide reputational, as opposed to a legal, standpoint.  ”Tops in Fraud” is a ruinous moniker for a business so dependent on basic issues of trust like integrity, quality and safety – when will the industry, as part of a collective action, replace the gamey politicking with good policing?

Technology Transfer Mandates. Know-how and expertise is a tangible asset for pharma, one that should be allocated sparingly to partners who may one day be competitors. This dynamic is particularly evident in the emerging markets, where governments have emerged as formidable industrial policy negotiators in insisting that new innovations be shared with local partners as a condition for market access.  When a drug multinational has to score a deal where it shares production with a local firm, transfers the necessary technology and after a fixed period hands over all remaining exclusive rights to the partner – as Merck recently did in Brazil – one has to ask:  how really different is this from a compulsory IP license that the industry has always characterized as theft?

Conflict-of-Interest Vigilantism.  Governments, academia, activists and the media – all skeptical of the profit motive as driver of a built-in bias – are applying conflict of interest rules to put industry on the defensive and marginalize its role in decisions on everything from publication of clinical trial results to participation in scientific panels that drive access to new medicines.   This narrow view of conflict of interest, which fails to take account of the more diverse factors that motivate and often pre-determine the responses of other interest groups, is a powerful force behind the industry’s eroding reputation.  Yet little has been done to confront and reverse the perception that since drug companies have that simple motive to market, their input on virtually every issue cannot be trusted.  Independent observers like former UN AIDS Program Executive Director Peter Piot have flagged this resistance as a key emerging issue in global health governance, which if left unresolved will limit real progress in disease outcomes.

The Margin Eaters.  There is an emerging social contract that in many ways treats the industry as a quasi-public utility, with pressure to make costly commitments normally not expected of a private enterprise. These now include revenue and profit give backs that conform to fiscal targets set by government, or post-marketing surveillance activity [i.e. REMS] that can require extensive funding of work extending beyond the normal product life cycle marked by expiration of the patent term.  Risk-sharing contracts and the outcomes-based company commitments unleashed by the “total health solution” approaches of personalized medicines are another example.  Such tools may all be positive in the abstract, but the net effect is going to be still more pressure on the bottom line in 2011 and beyond.

Breaching the Registration Firewall.  The era where a marketing license was granted without consideration of cost or pricing is now a historic artifact.   National registration agencies face significant political pressure to build the murky concept of “value” into their scientific review procedures, even though there is no textbook available on how to do this well – because in the end “value” is a matter of judgment and people assess it from different perspectives.  This in turn erodes confidence in the scientific certainty and legitimacy of agency decisions. It is also helping to revive interest in the “medical needs” clause, where regulators can remove existing approved medicines from the market on grounds that the real-world evidence of therapeutic gains fall short of expectations, or where a newer product proves superior.   Predictability through the product life cycle suffers and companies simply grow more averse to risk by shutting down promising research leads prematurely.

Wellcome Foundation — or WalMart? The traditional business model of Big Pharma — with its heavy investment in in-house innovation – is being reconsidered through new approaches that emphasize the outsourcing of R&D:  from research to “search,” with the latter linked to external licensing and partnering.  Taken to its logical extent, the new model could transform companies from innovators to distribution platforms that rely on marketing heft, size and scale to compete rather than science.  Coupled with the ruthless drive for efficiencies that have led to large-scale layoffs of once cosseted professional staff, the trend raises an important reputational question:  if the industry is no longer viewed as a wellspring of science and innovation, what strategy is in play to respond to a world that perceives industry as the WalMart of pills?

Divide and Conquer Marketing.  Stiff competition within therapeutic classes has created unheard of rivalries among companies that once were happy to share the same watering hole.  Some marketers are investing millions in brand-bashing “anti-launch” strategies to limit the uptake of newer alternative products.  The question is whether everyone loses when this logic is applied against the larger patient-first perspective that regulators and the public expect from the industry.