A day on from AstraZeneca’s announcement of 7,300 job cuts, the company was still keeping the UK in suspense with regard to a breakdown of the numbers. UK staff assembled for a meeting at 10 am on Thursday, but as of lunchtime there was still no confirmation of the  numbers , with the BBC’s Business Editor Robert Peston tweeting that it was “odd” that the drugmaker was giving “no public guidance” on the UK element of the job cuts. The expected UK losses are “not huge” — the general union GMB speculates 250 to 300, all from the R&D site in Alderley Park, Macclesfield — but other sources inform me that it could be considerably more than that. Either way, added to the company’s mooted worldwide R&D cull (2200 jobs), it very much reflects the endemic crisis plaguing pharma innovation in general.

And, globally, this is a major downsizing exercise, the third restructuring effort in five years (AZ is lighter by 21,600 global staff than it was in 2007). It also exacerbates the blow to UK R&D dealt by Pfizer’s announced closure of its Sandwich facility, just over a year ago to the day. And, coming just a day after disgraced former Royal Bank of Scotland boss Sir Fred Goodwin was belatedly stripped of his knighthood for leading RBS into financial collapse, some UK pharma bosses may be feeling a twinge of panic in light of the Royal Society of Chemistry’s Professor David Phillips’ reaction to the news: “There has to be some element of state intervention at this stage.” A few Twitter commentators wondered aloud about the former AZ head Sir Tom McKillop losing his knighthood too. Their tongues were firmly in their cheeks, but there is no getting away from the fact that this was a dark day for UK pharma.

Personalized medicine, which targets individualized treatment and care based on personal and genetic variations, holds much promise for the pharmaceutical industry. Several pharmaceutical majors continue to invest in this emerging field as evident by Roche’s $5.7-billion bid last week for Illumina, a provider of gene-sequencing tools and related analytics.

Roche, perhaps, more than any other pharmaceutical company, is banking heavily on the combination of diagnostics and drug development to drive pharmaceutical innovation. In reporting its 2010 results in February 2011, Roche reported that it had 12 new molecular entities in late-stage development, of which six were potential personalized healthcare medicines with planned companion diagnostic tests, which included Zelboraf (vemurafenib) and its companion diagnostic for BRAF mutation-positive metastatic melanoma. FDA approved Zelboraf for treating BRAF V600E mutation-positive, inoperable, or metastatic melanoma and the cobas 4800 BRAF V600 Mutation Test, a diagnostic test developed by Roche, in August 2011.

Earlier this month, the European Medicines Agency’s Committee for Medicinal Products for Human Use recommended that Zelboraf be granted full marketing authorization as a monotherapy for treating adult patients with BRAF V600 mutation-positive unresectable or metastatic melanom. The corresponding European Commission decision on the marketing authorization of Zelboraf is expected in February 2012. Marketing authorization submissions for Zelboraf also are under review by health authorities in Australia, New Zealand, Brazil, India, Mexico, Canada, and other countries worldwide.

Roche also is using its diagnostic strategy to support new indications for existing drugs. Last month, it reported that the cobas EGFR Mutation Test was CE-marked, an indicator of a product’s conformity with EU requirements, and is now commercially availabile in Europe and other countries that recognize the CE mark. The cobas EGFR Mutation Test is a companion diagnostic to identify patients with non-small-cell lung cancer (NSCLC) who harbor mutations in the EGFR (epidermal growth factor receptor) gene and who may benefit from treatment with anti-EGFR tyrosine kinase inhibitors, such as Roche’ Tarceva (erlotinib). Tarceva, an oral EGFR inhibitor, was first approved in September 2004 to treat locally advanced or metastatic NSCLC after failure of at least one other chemotherapy treatment. It later was approved by the European Commission in September 2011 as a first-line monotherapy in people with locally advanced or metastatic NSCLC with EGFR-activating mutations.

Other companies also are reporting success with certain personalized medicines. In August 2011, FDA approved Pfizer’s Xalkori (crizotinib) for treating locally advanced or metastatic NSCLC that expresses the abnormal anaplastic lymphoma kinase (ALK) as detected by an FDA-approved test. The agency approved the drug along with a diagnostic test for the ALK gene abnormality, Abbott Molecular’s Vysis ALK Break Apart FISH Probe Kit. Up to 7% of those patients with NSCLC, typically patients without a history of smoking, have the gene abnormality.

Although personalized medicines will likely hold only a small part of the overall pharmaceutical market by value and volume in the near term, these successes portend of a changing paradigm in drug development.

This announcement came just a couple of weeks after Witty — in his capacity as President of EFPIA — outlined the industry’s “significant concern” to EC Health Commissioner John Dalli over the debt crisis in Europe, particularly in Greece, Italy, Ireland, Portugal and Spain, where, he pointed out, pharma has been obliged to take price cuts and discounts of more than €7 billion ($9.3 billion) during 2010 and 2011. “The pressures on innovation are now immense,” Witty wrote. “I believe it is time to review current pricing and reimbursement practices…” Last month The Telegraph reported that the European price-cut toll has seen GSK’s revenue fall by 4% in the region during the third quarter. Witty predicted that the ongoing crisis (along with the effects of US healthcare reform) will cost GSK about £325m ($507 million) this year.

GSK’s lifeline, of course, is now coming from the emerging markets — outside America and Europe, the company’s Q3 sales grew by 17% — which now represents 38% of its total turnover. But with pharma particularly vulnerable to issues of trust and pricing, Witty’s stance suggests that standing firm and stoically weathering the blows is no longer going to be enough to ride out Europe’s economic storm.

Greek Prime Minister George Papandreou fell on his sword on November 9 after startling the EU by announcing he was pushing for a referendum on whether to accept its latest €100-bn installment of bailout cash. Three days later, Italy’s ‘colorful’ Prime Minister Silvio Berlusconi was effectively removed from office, despite suggesting that he would stay until reforms to calm the Italian economic turmoil were adopted. (Italian government debt stands at nearly 120% of its GDP).

Now, as widely predicted, Spain’s socialist government has fallen, making way for the conservative Popular Party, whose election win is the biggest for the Spanish Right since the end of Franco’ s dictatorship in 1975. The Party’s leader, Mariano Rajoy, will be taking on the Herculean task of, among other things, addressing the rate of unemployment in Spain, which currently stands at a staggering 21.5 per cent.

As for the Spanish healthcare market, the country is saddled with €5.4 billion ($7.1 billion) of unpaid drug bills, equivalent to about 0.5 percent of its entire GDP. Currently, Spain’s regional governments are paying bills an average of 430 days late.

There have been hints that Big Pharma companies such as Roche might do in Spain what they have done in Greece and cut off supplies to hospitals that have failed to pay their drugs bills. The industry has certainly started to show signs of increasing discomfort as far as the most beleaguered European countries are concerned. Sanofi Aventis’s Head of Global Operations, Hanspeter Speck, recently said “I don’t expect anything good in Europe,” while Richard Bergstrom, Director General of the European Federation of Pharmaceutical Industries and Associations, revealed that what worries him most are the debts of “close to €10 billion ($13.8 billion)” just from Portugal, Spain, Italy and Greece.

So will the new government bring hope for the Spanish health system (and, by extension, its global suppliers)? The Popular Party has stated that private sector involvement in the management of the health system, via public-private partnerships (PPPs), will rise sharply under their watch. The British Medical Journal (11 November 2011) reported that a conservative victory will see spending on healthcare PPPs in the community of Madrid increase by a third, from €371m ($505m) this year to €496m in 2012. More hospitals to be run as public finance initiatives are also expected to open in the same time frame.

Needless to say, moves towards partial privatization have long been controversial in a country with strong socialist ties — PPPs were only passed into law in Spain in 1997. The Federation of Associations for the Defence of Public Health (FADSP) is one body that is vehemently opposed to PPPs — it has argued that the building of hospitals under private finance can increase costs by up to seven times.

Whether this unprecedented injection of private money will boost or further derail the Spanish public health system remains to be seen. Either way, pharma will be watching closely as it waits for its bills to be settled.

Thirty years is a long time in any industry. The coalmining industry, the market for air travel, or telecommunications and computing technologies each offer compelling demonstrations of how much can change in such a short period. Few market leaders in those sectors have survived.

Against that background, the pharmaceutical industry has done pretty well over the last thirty years — and so have many of its players. Eli Lilly, Pfizer, Boehringer Ingelheim, Hoffman-La Roche, Merck Sharpe and Dohme — all were big beasts, and they still are. The industry was one of the darlings of the investment community back then, and still today it is seen as one of the safer counter-cyclical havens. And the industry’s enduring qualities as a powerhouse of scientific advance and a generator of high-quality jobs and exports continue to assure drug firms of sympathetic ears in many of the corridors of power.

Survival has, however, been very much the prize of the fittest. In a world grown harshly competitive, many firms have fallen by the wayside, been trampled underfoot, or have simply been lost without trace. Three decades of successive concentrations have thinned the ranks of the industry to a mere shadow of its former self. The roll-call of once-illustrious names has been abbreviated by bankruptcy, mergers and acquisitions. Who now recalls Richardson, which merged with Merrell before being taken over by Dow? There are many working in the industry today who are unaware that a proudly independent Beecham – with its breakthrough work on antibiotics – merged with SmithKline and French before its name was obliterated altogher from the marquee when Glaxo took over the entire operation. The French industry was dominated by Rhône Poulenc and Rousel Uclaf when Sanofi was still a struggling adolescent.

The relentless search for efficiencies, for leaner management, for shareholder value, and for  market share has hit the pharma sector hard. Gone are many of the notorious extravagances of the past. Product launches on the Orient Express or on yachts in the Mediterranean attracted hostility and accusations of a greater focus on marketing than on research. Armies of highly organised sales forces provoked questions among the sceptical about how much success had come to depend on science, and how much on subversion. The rise of a new and assertive form of consumer activism in the 1980s found ample fuel here, and prompted deeper soul-searching among the organisations that were paying for medicines — the consequences of which are still being played out today.

Major advances in diagnosis and treatment (AIDS was an ill-understood but fatal condition in the 1980s) tend to obscure the fact that it is some thirty years since the first blockbuster medicines emerged. Huge optimism was created by the revenues from innovations like cimetidine and ranitidine. But the resulting search for world-beating products not only led to some revolutionary earnings by revolutionary products. It also imposed new economic strains that took their toll of the sector. For many, the development costs and high risk were more than they could comfortably sustain.

In parallel, the operating context was changing rapidly. High-profile cases of big new products with big adverse effects led to some conspicuous withdrawals from the market — and to constantly-rising requirements from regulators who had burnt their fingers through injudicious authorisations. Extensive demands for greater preclinical and clinical testing tightened the screws still further on the industry’s business model, just as the opportunities opened up by biotechnology applications were also making research more expensive and unpredictable. And alongside the strains on innovation, challenges multiplied in the marketplace, from increasingly adventurous generic producers, and the still-sharper elbows of the burgeoning parallel trade sector.

The spectacular increase in international products and international marketing exposed as never before the fundamental weakness confronting the industry in Europe: the divergent national requirements, which split a potentially large market into a patchwork of distinct fragments and hindered the continent-wide launch of innovations. This was the background to the development, throughout the 1980s, of the first attempts at a pan-European system of obtaining marketing authorisations. It was, at times, a painful experience, handicapped (and occasionally even sabotaged) by resistance from national authorities to what they saw as an erosion of their prerogatives, and boycotted by some major firms fearful of concentration of power at European level.

The deficiencies of those initial procedures led to the construction of the more robust mechanisms of the European Medicines Agency. This has, over the fifteen or so years of its existence, brought a new degree of harmonization to product authorization — and extended its authority to a wide range of related issues that have arisen, from advanced therapies to the promotion of smaller biopharm companies.

Over the same period, the industry in Europe managed to persuade the European Union to take action to compensate firms for the growing delays in bringing new products through the ever-lengthening development periods. Patent term restoration legislation and subsequently data protection rules provided some relief for innovators against the depredations of generic competitors.

But if the industry had some success in winning arguments about the merits of innovation, it was conspicuously less successful in convincing national or European authorities to put their money where their mouth was. Attempts by brandname companies to contain the rampant growth in parallel trade  failed repeatedly — and on more than one occasion, spectacularly. European court rulings consistently upheld the EU doctrine of free movement of goods within the EU, and when one European Commissioner acceded to industry urgings to raise the question of overturning this sacrosanct principle, he was left high and dry because industry failed to deliver on its promise to provide him with the supporting evidence. It took years for the industry’s credibility to recover.

More significantly, European countries, even within the EU, retained absolute sovereignty in their decisions on pricing and reimbursement. So the best that the industry was able to obtain was an EU directive requiring national authorities to operate in a transparent fashion about their reasoning for decisions – but the decisions nonetheless remained entirely autonomous, and increasingly parsimonious, so industry gained little or nothing.

This divergence in economic decision-making continues to bedevil the operating climate for the industry — and all the more so as the winds of economic crisis whistle more threateningly. The assumptions that had prevailed for so long, that healthcare spending should continue to rise, are now subject to open challenge. The pressures on drug budgets — which have in any case been an easy target in healthcare financing over recent years — are inevitably increasing as a consequence.

The industry in Europe has been engaged for more than two decades in a protracted  lobster quadrille of round tables, forums and high-level groups with politicians, payers and patients, ostensibly to build a European policy for pharmaceuticals that can guarantee access to medicines while promoting research. But the overall effect has been to blunten rather than sharpen industry arguments for better treatment in terms of market access and adequate pricing and reimbursement.

The recent emphasis on ensuring the sustainability of healthcare systems — a constant theme now in European political debate — is not helpful to industry’s renewed bid for recognition of the importance of innovation.  There is plenty of talk on all sides about the need to promote innovation — in Europe this type of rhetoric has attained epidemic proportions — but the talk is yet to produce any real shift in attitude among healthcare payers. The debates are complicated by new uncertainties over the prospects and perils from advances in areas such as personalised medicine or e-health, or the challenges of providing care for increasing numbers of old people. But it will be unwise of Europe to spend another thirty years looking for solutions. The game has been changed out of all recognition, and the schedule dramatically abbreviated, by the rise of the new economies. No longer will the debate focus on the decline in Europe’s performance compared to the US and Japan. Now the industry lives under the shadow of China and India’s might — and they will not stand patiently aside while Europe reflects on how to maintain industrial competitiveness.

Reflector is Pharmaceutical Executive’s EU correspondent.

“Perception of value drives the willingness to pay, and those perceptions vary from country to country,” said Adam Woodrow, vice president of Pfizer’s specialty care business unit, at a marketing and strategy forum hosted by Simon-Kucher & Partners. “We need to do a much better job communicating value to payers, and that means knowing what turns the payer on,” said Woodrow.

In a global environment where “a simple slip up in one country” can mean losing “half a billion dollars overnight,” – due to the widespread adoption of cross-country reference pricing in Europe, Asia and elsewhere – drug companies need to send a consistent message to stakeholders, said Woodrow. Payers often speak with physicians, for example, when evaluating a product for reimbursement; if sales reps are out saying one thing to doctors, and payers are hearing something else, that disconnect could translate into a less than ideal reimbursement decision.

Patient groups and associations represent another way to boost the perception of value on a given drug, said Woodrow. “Patient groups can be incredibly powerful” in gaining reimbursement, he said, citing the World Federation of Hemophilia as one particularly strong organization. “Hemophilia drugs are reimbursed almost across the board,” due in no small part to governments being pressured by patients, said Woodrow. “We have to be very careful about how we interact with patient groups.”

Woodrow, who jokingly referred to the UK’s National Institute for Health and Clinical Excellence (NICE) as NICER – “No, I Can’t Expect Reimbursement” – said Big Pharma has “failed to communicate value properly, but let’s be real: half the drugs are me-too, so there is no value. We have to begin [the clinical process] with a truly different value proposition” that recognizes the payer’s needs and perception of value, and brings patient advocacy groups on board.

The New York City Life Sciences Marketing & Strategy Forum was held yesterday in Manhattan.

As a member of a working group on the future of the U.S. science and technology research enterprise, which consults with the President’s Council of Advisers on Science and Technology (PCAST), you’ve participated in discussions with Congress and other high-level politicians on the role of government in supporting innovation in the biopharmaceutical industry. How can government help to facilitate job creation, and what barriers exist?

Making changes that encourage innovation are critical, not only for creating jobs but also for lowering healthcare costs, which is one the most serious threats to our economy and our competitiveness across the board, not just within our sector. The 20^th century was an American century in terms of innovation and leadership in the economy, and a large part of that was due to our leadership in science and technology innovation, from winning World War II and the Cold war, to the laser and the transistor, to the rise of the internet and the eradication of polio, to the decrease in death rates from heart disease, stoke, tuberculosis and HIV. All of those developments occurred during the second half of the 20^th century, and came from American innovations in science and technology. In the last five or 10 years, it has become very clear that we are dropping behind, competitively. We are going way down. For example, we used to be number one in R&D incentives offered to businesses among the 21 OECD countries that are offering such incentives. Today we’re number 17. That’s why some of the jobs are going overseas. I have a team that’s thinking about how to create jobs in France. Why? Because they offer a 45% R&D tax credit that is immediately reimbursable to development stage companies like [Synta].

What kinds of incentives should the government provide to stimulate job growth?

R&D tax credits, is one thing. What I want to emphasize is that this is important not just for job creation, but also for our economy overall. If we can’t get healthcare costs under control, then all of our businesses in this country are going to be at an increasing disadvantage relative to businesses in other countries, where they do have healthcare costs under control. We have $100 trillion of unfunded liabilities and an aging population, which is a double whammy. Innovation in medicine is a key ingredient in solving this problem. Just over 50% of all healthcare costs are related to hospital stay and services. Creating innovative drugs – a sector that represents only 10% of the total healthcare cost – can keep patients out of hospitals. Those drugs lower healthcare costs. I would argue that lowering healthcare costs is just as important as job creation, national security, and the overall health of the US population, in terms of competing successfully in the global economy.

There seems to be a disproportionate belief among the American public that drug spending accounts for a lot more than 10% of the total healthcare cost. Many industry critics and others argue that increasing generic utilization, and shortening product exclusivity periods are necessary reforms. What’s your response to that argument?

Every dollar spent on drugs lowers healthcare costs, depending on the disease, by anywhere from $2 to $7. There are a number of studies that have shown this. It’s different for each disease and drug, but you want to be very careful to avoid being penny wise and pound foolish. Imagine that you have a patient going in for kidney dialysis, the patient has to go in to the hospital three times a week or more, or has to stay in the ICU. Imagine the costs that are accruing to our system as a result of that patient, and then multiply that by the doubling in the number of patients that are going to require this type of care over the next few decades, not to mention other chronic diseases besides kidney disease, for example, the various complications from diabetes or Alzheimer’s disease. These are enormous burdens on our system. Take Alzheimer’s. As the percentage of elderly patients increases, and the time that people are living gets longer, the incidences and size of the Alzheimer’s patient population is increasing dramatically. Some very straightforward estimates show that the care required for Alzheimer’s patients in 2050 – a straightforward extrapolation from the size of the population and the incidence rates today, none of which are going to change dramatically – shows that Medicare and Medicaid will have to pay $800 billion a year [by 2050]. When you add in the other costs, it’s well over $1 trillion a year. That’s a major fraction of the government’s budget, for one disease. If you had one pill that could delay Alzheimer’s by even 5 years, the impact – which is fairly straightforward to calculate – would save close to half a trillion dollars in terms of costs that the government would have to pay. Then the question becomes, should we have $200 million of research into Alzheimer’s sponsored by the government, or $300 million? Now you’re talking penny wise, pound foolish. You’re talking about a burden of one trillion dollars to the economy. You multiply that by the burden of treating cancer, the burdens of treating kidney disease and other chronic conditions, and that’s a major threat to our economy and our competitiveness as a country, these looming healthcare costs.

How much has government R&D spend decreased?

We’ve gone from 2% of GDP invested in R&D, to 0.7%.

Why? Obviously the US is facing a significant budgetary deficit, but what are the reasons for this decline?

A lot of people in our generation don’t remember polio, for good reason. It’s gone. But if you think back 60 or 70 years ago, it was a fatal and debilitating condition with a very high cost burden to society. That was a very visible reminder to the public and to Congress of the benefits of R&D.  Tuberculosis almost disappeared in the 50s. When you got TB, and your lungs were going to cave in, you were told good luck and sent to a sanatorium for the final six months or a year of your life. In the mid-50s, isoniazid and a combo isoniazid and penicillin and PAS essentially wiped that out. It was no longer a death sentence. People got that, they saw what happened with polio and with TB. The foundation is people and knowledge. It’s education that generates good STEM talent – science, technology, engineering, mathematics – and investment in agencies like the NSF, NIH and DARPA, which led to these projects. It was the investment in R&D that led to the dominance of the US economy in the second half of the 20^th century.

Almost every form of government expenditure is on trial politically these days. Is there a way to frame this kind of investment that would hold up better with the American public?

You have to start by understanding the benefits of innovation to society, period. Innovation helps national security, health and jobs. Once you get that, then the question becomes, what should the federal government do to reduce the barriers to innovation, and increase the incentives for innovations? R&D incentives for companies are one example. Another example is regulatory and reimbursement reform. The FDA is regulating 25% of this nation’s economy, and you have several hundred people looking at medical products, that’s it. We’re funding this agency at a miniscule amount of the resources it needs to create rules that are consistent, clear, and based on the latest and strongest science. This is counterintuitive for some folks on the Republican side, who may say, “Well, let’s just eliminate all government agencies, that would be great.” That’s not actually the case. If it were up to me, I’d double the size of the FDA’s medical product review group. That would actually reduce the barriers and increase the incentives to innovation. With reimbursement, there should be policies at CMS to allow parallel reviews, so companies can better understand how to get reimbursed. If you go to an investor and say, we’re going to spend 10 years and a billion dollars creating a drug, but when it’s done, we have no idea if it will ever get paid for, what investor would give you money? It’s like a natural gas company saying it’s going to drill 50 wells, and it’s going to take 10 years and $1 billion, and when they find natural gas, some agency comes in and says you can’t sell it, you used the wrong drill. You need to go back again and use a different drill, sorry about those 10 years and billion dollars. It’s not that you want to eliminate these agencies, or that they’re doing a terrible job. There are people there that are national treasures at the FDA, that get flack from every side all the time, and they manage to keep their eyes on the ball, sticking to the data, sticking to the science, looking at benefit/risk as best they can in a difficult situation. But you have to have the resources.

Speaking of resources, you mentioned a decline in the number of US biotechnology companies. What can be done to reverse this trend?

The costs of developing a drug have gone up 1000% in the last 25 years. They’ve gone from $100 to $200 million to $1-$2 billion. The Tufts study cites it as $1.2 billion, but that’s a real underestimate of the true cost today. The true cost is closer to $4 billion. The costs have gone up by this enormous factor, but the rewards haven’t changed. You still have roughly the same patent life or protection once a drug gets developed, once the drug gets approved. It’s basic mathematics. If the risks have gone up and the costs have gone up, and the rewards are staying the same or going down, who’s going to invest in that business? You need to reduce the barriers and increase the rewards. Put in a10-year minimum market exclusivity for an innovative drug. If there’s a drug that comes out that could lower total healthcare costs, give it 10 years of market exclusivity. Why should venture capitalists be investing in a better way to buy pretzels online, or different ways to poke people online? Who cares? That does nothing for our economy. It creates a few jobs, but it does nothing from the more global picture of lowering healthcare costs and creating new jobs.

What about public/private partnerships? Are there any specific policy changes that could better facilitate those kinds of partnerships?

There are many concrete specific changes: Updates of the Bayle-Doyle amendment, policy on the NIH, NSF, policies for getting university technologies into the private sector even faster. What many other countries are doing are government-enabled venture partnership, where the government provides a financial kickstart to sectors that are of high strategic interest, by partnering with venture funds, and augmenting them on a 1-for-1 basis. Additionally, we need a flagship project, a flagship public/private partnership, like the Manhattan Project or the goal to land a man on the moon. We need something like that for our sector. The European Commission representing the EU created a 2 billion euro partnership between the EC and the European Federation of Pharmaceutical Industries and Associations, to fund innovation in precompetitive technologies. Precompetitive technologies lower the cost for everybody and increase the probability of success for everybody. Predictive models in medicine are an example of precompetitive technology. If you can determine if a molecule in preclinical development is going to cause kidney toxicity or not, you can decrease your failure rate by a very significant percentage. Decreasing your failure rate decreases your cost. If we had models that were even 80% predictive of cancer, we could cure cancer in the next 20-30 years. We don’t have those models. If we had more predictive models for Alzheimer’s, of course you could actually get a pill that could lower heathcare costs by half a trillion dollars over the next several decades. Precompetitive technologies are often too expensive for any one company to invest in by itself. What you need is a flagship project like the Manhattan Project, or like Europe has done with a $2 billion investment, to bring together companies, agencies like the FDA, NIH, and universities, around a common goal. Better models for Alzheimer’s, better models for cancer, better models to predict kidney toxicity. Some of these things can only be done as a partnership. For example, there is clinical trial data from individual companies that have sponsored individual clinical trials. Or individual oncology groups like ECOG or SWOG that have sponsored individual trials. Each of those data sets has very rich patterns that could be seen if you pooled them together. But who is going to pool them together, there’s no venue for pooling those data sets together. A public/private partnership, a flagship like the Manhattan Project around precompetitive tools and technologies would help the entire industry, but it has to be funded. Take the FDA Critical Path Initiative, which is designed to find ways that reduce the barriers and increase the incentives for new technology. The funding for the FDA Critical Path Initiative in ’08, ’09, and ’10, was $8 million, $16 million, and $18 million dollars, respectively. Compare that to the close to $3 billion that Europe has committed. How do we expect to be competitive?

The interview has been edited and condensed.

Man can live as a free being only when he is free to develop his innate abilities, maintained Baruch Spinoza, that quintessential European, back in the 17th century. He might have been talking about the aspirations in the European pharmaceutical sector, which is currently struggling to articulate a clear plan for escaping the shackles of outdated rules on clinical research.

“Divergences in requirements and processes, which appeared across countries and continue changing across time, have considerably complicated the registration of clinical trials in the European Union”, according to Celgene, in a recent submission to the EU authorities.

Bristol-Myers-Squibb says new rules should be introduced to “drive consistency” across Europe, notably by “eliminating country-specific required documents”. Any proposal “will only work if countries stop requiring additional pieces to the clinical trial application dossier”.

The same point has been made over recent months by companies as diverse as J&J, MSD, Pfizer and Sanofi – and by the leading European drug industry associations. As EuropaBio, the European association for bioindustries, observes, “it is important to improve the competitiveness of the EU as a location for clinical research and the development of new, innovative medicines”.

The European Union has received 143 responses to a recent consultation on how it should update its clinical trials rules – with hospitals, investigators and non-commercial or academic sponsors the loudest in raising their voices. The pharmaceutical industry big and small, including contract research organisations, were well represented too – but so were national health authorities, ethics committees, and patient organisations. And in true European style, their views do not always correspond.

But not everyone favours radical reform. There is a highly vocal lobby – particularly in academia –for maintaining separate approaches in different countries, partly on the grounds that this generates valuable competition on speed and efficiency of approvals, and partly because it offers a better hearing, they say, to patients. Centralising clinical trials authorisation would be unacceptable to the public, who demand a national perspective, say the defenders of autonomy. “Divergence and variability of assessment is not necessarily negative”, commented an EU official, summarising the inputs.  Organisations ranging from patient organisations to the European Conference of Bishops (really!) maintain that the reformists risk focusing too much on cutting costs and regulatory burdens, and not enough on ethics.

How Spinoza — as a Jew of Portuguese extraction, writing in Latin on questions of ethics posed by the philosophers of classical Greece, and living in cosmopolitan Amsterdam on the eve of the enlightenment — would have relished the debate!

Reflector

Just like with buses, you wait for ages for an international review of health technology assessment to come along, then two turn up at once.

One emerged in mid-July in the shape of a study sponsored by some of the big beasts among the world’s drug industry associations — EFPIA, EuropaBio, Medicines Australia and PhRMA. This was unsurprisingly critical of many aspects of the current arrangements for HTA, pointing to numerous “inefficiencies and inconsistencies” in the 15 jurisdictions it covered, in Europe, Australia and the US. “The most significant observable impact of the HTA process is imposing restrictions on the use of a particular medicine”, the study comments — and restrictions are often linked to the price of a product, it adds.

As might be expected from a study that industry has paid for — and has energetically promoted across the world — the downsides and potential risks figure prominently. Even its opening page warns that a “poorly designed or managed HTA process runs the risk of denying patients appropriate access to medical technologies, inefficiently allocating resources, constraining clinical freedom and sending distorted signals to medical technology providers.” It then goes on to list a string of inadequacies in the current arrangements. Not only are the mechanisms inconsistent, but, worse still, the study suggests, so too are the outcomes: “HTA processes lead to different results in terms of recommendations for coverage, including potential restrictions for the same products.” And “little evidence can be found that HTA on average resulted in higher rewards for higher value medicines”. Overall, it is “difficult to assess whether HTA improves allocation of resources or offers value for money.”
Meanwhile, the European Network for Health Technology Assessment (EUnetHTA) has published its own, rather different report. EUnetHTA is a very different type of organization, bringing together at European level a host of national health insurance organizations, academia, government agencies and health ministries, and national and regional health authorities. Its views, therefore, are not coloured by any conspiracy theories, or any fears of HTA turning into a stick that will beat its members into subjection, submission or worse.

So, what does this report conclude? That there is sufficient common ground for the development of a shared methodology for relative effectiveness assessment of pharmaceuticals.

A contrary view to the industry study? Not altogether. For a start, the EUnetHTA report does not constitute a straight rebuttal of the industry-sponsored study. Its range of reference is more restricted, since relative effectiveness assessment does not cover the entire field of HTA. In European Union discussions of HTA, relative effectiveness is considered as a separate issue to cost-effectiveness, so since cost-effectiveness is excluded, the EUnetHTA study’s findings are accordingly limited in one of the areas that is of most interest to the pharmaceutical industry.

And not unlike the industry study, the EUnetHTA report also reveals a wide range of differences in national approach, even within its slightly tighter scope. It remarks, for instance, on the “variation between jurisdictions in the terminology and definitions that are used for similar processes.”

Further potential complications are signaled in “variations in interpretation due to cultural and legislative differences,” and as a result of language barriers, which are an inevitably complicating factor in any European discussion. Another weakness that EUnetHTA acknowledges is that “methods to do the assessment are in general not explicitly reported — on issues as crucial as which endpoints can be used, or the level of evidence required.” It plans to remedy these deficiencies with a series of guidelines. But these are not yet complete, still less in place.

So does this represent a hands-down, two-nil victory for the industry case, then? Not altogether. Because the industry-sponsored study is itself ambivalent, suggesting that it is “generally agreed” that HTA can be valuable. Even the industry’s own spin on the study, in a statement accompanying its release, recognizes that “there are reasons to be optimistic,” optimism that springs from the fact “most HTA systems are still in development or are evolving.”

But industry is evidently determined to intervene more vigorously than it has done so far in the debates over HTA. it is aiming to fill its ammunition belt ready for the fray. And a fray can be expected to gather in intensity over the coming months — certainly in Europe, and probably more widely.

If the debt ceiling is raised, which seems likely, and the deficit can (or trillion-gallon drum) gets kicked down the road to the 2012 presidential primary stumping season, the momentum to limit federal spending could bring consequences for Big Pharma beyond state-level legislative acts, like the proposed incentive for generic substitution put forward by Senators Scott Brown (R-MA), Ron Wyden (D-OR) and John McCain (R-AZ).

Cost-cutting measures from the once-dismissed Obama budget, like enforced drug rebates for Medicare/Medicaid dual eligibles and a shortened biologic exclusivity period, are now back on the table, as is the removal of the ban on Centers for Medicare & Medicaid Services (CMS) negotiating drug prices under Medicare Part D, and the tax deduction for pharma advertising, once supported by the GOP. There’s also the question of tax repatriations; the White House signaled in March that it would not support a repatriations tax holiday like the one in 2004, which temporarily cut the corporate tax rate from 35% to 5% on dollars flowing in from overseas.

All of these proposals could do significant damage to industry profits. According to CMS, the U.S. government paid a combined $74.8 billion for prescription drugs under Medicare and Medicaid in 2009, a figure that underscores the importance of government as a pharma customer here in the US.

Meanwhile, European governments are subsumed in their own debt crises, with a major ripple effect possible as Greece, Portugal, Ireland, Spain and now Italy struggle to impose harsh austerity measures. Social outlays are so large a part of the debt problem, that health — and drug — spending must figure as a target. Portugal for example is endorsing cross-national reference pricing based on a benchmark of the three countries with the lowest prices. Can the big markets like France, the UK and Germany be far behind? An even more dramatic scenario is the impact of a possible break in the 17-country Eurozone, which would restore parallel trade as a bona fide commercial strategy for drug distributers throughout the region.

Industry’s response to date has been sporadic, ad hoc, and deeply unpopular as evidenced by the negative reaction in Greece over company decisions to terminate business and withhold access to hospital supplies of vital medicines. Apart from recording revenue losses on their balance sheets, industry needs a rethink; how to remain viable players in health systems that have little choice to shrink to something leaner — and meaner. A stronger value proposition and a refusal to remain a silo purchase is one way to start. What other ways can industry respond to the debt crunch?