The decision was not a complete victory for the FTC, in that it stopped short of declaring reverse payment agreements as per se illegal. Instead, the Justices instructed the lower courts to apply a “rule of reason” to these cases, and not the “quick look” approach employed by the Circuit Court case under review.

The ruling in FTC v. Actavis supports the long-held contention of FTC officials and consumer activists that brand-generic patent settlements maintain market exclusivity for brand name drugs, reducing competition and raising costs for consumers and health care systems. Both innovator and generic firms have insisted that these settlements actually permit generic products to come to market earlier than under costly, drawn-out court battles over patent rights. That argument was supported in an April 2012 ruling from the US Court of Appeals, which found that an arrangement that allows generic competition earlier than patent expiration did not violate antitrust laws. The dissenting opinion from Chief Justice John Roberts, which was joined by Justices Antonin Scalia and Clarence Thomas, echoes the earlier Court ruling and also raises concerns about linking antitrust law and patent issues and weakening patent protections for innovators.

However, a 5-3 majority led by Justice Stephen Breyer held that the FTC and other government and private parties have the right to pursue reverse payment arrangements as violations of antitrust laws. Breyer, joined by Justices Anthony Kennedy, Ruth Bader Ginsburg, Sonia Sotomayor and Elena Kagan, express concerns that reverse payment settlements have an adverse effect on competition. At the same time, though, the majority fails to provide guidance on how to structure patent settlements so that they do comply with antitrust policy.

The ruling is expected to encourage the private plaintiffs bar to bring new lawsuits challenging brand-generic patent settlements of all kinds, setting the stage for years of uncertainty in challenging and defending patents on all sides. “It’s going to be a nightmare,” predicted Arent Fox attorney Wayne Matelski, as District Courts struggle to decide what “rule of reason” means in these complex cases.

While companies may be more reluctant to settle future lawsuits, they may face legal challenges to earlier settlements, and new arguments against cases currently before the courts. More plaintiffs may enter the fray, as seen in recent actions by chain drugstores. These cases will require decisions from judges on whether a settlement is illegal primarily due to the size of a  reverse payment, or to other services and arrangements with a generic firm. The Courts also will have to weigh the strength of a patent and the merits of a patent suit and what extraneous financial factors might lead a generic competitor to seek a settlement.

Although the FTC called the ruling a “significant victory,” many legal authorities questioned whether the decision would promote competition and lower drug costs. It remains to be seen if generic drug makers will become more aggressive in challenging patents in order to speed copycat products to market, or if brand firms become more determined to protect intellectual property rights, despite the high cost of litigation.

Congress gets off the hook, for now, as it’s likely to drop efforts to enact FTC-backed legislation to limit reverse-payment settlements. Yet, the issue could end up before the Supreme Court again if lower courts continue to produce divergent rulings on these cases, as they have done over the last decade.

Jacky Law investigates how pharma companies can effectively become part of NHS England.

NHS England is currently undergoing profound changes to introduce a new culture where clinicians and patients are the new stars, where competition is mandatory, where everything rests on patient outcomes and where collaboration and innovation are being encouraged at the highest levels of command. The result is an extraordinary opening up of the health service to pharma companies for not just their money but also their commercial and leadership expertise.

But while pharma companies are being feted by the architects of NHS England, skepticism remains prevalent on the ground and local credibility is all-important, according to a new report from FirstWord. Caroline Dawe, managing director for the Northern Locality of Northern, Eastern and Western (NEW) Devon Clinical Commissioning Group (CCG) stresses the need for patience as these new bodies establish their priorities and find ways of working with industry where everyone wins.

One way may be to help get patients involved, a stated priority at all levels. The patient-centric NHS England has granted its customers a Charter of Patient Rights for the first time and is inviting them to make a contribution not only on the CCGs but also via two new forums where they are being encouraged to be involved in decision-making: HealthWatch and the Health and Wellbeing Boards.

The trouble is patients aren’t exactly scrambling to get on board. “CCGs across the country are really battling with how to build patient involvement through the locality structure,” says Dawe. “It’s difficult because it hasn’t been done consistently well before. How do you get something that starts from the bottom up to the top? How do you incentivise people to want to be able to do it? There’s no set formula and each area is different in terms of either its geography or the way that it’s constructed.”

Everyone is looking for innovative ways of working but, as the report stresses, that can only come from focussing on building trust and on knowing in some detail the local lie of the land, the people who make the decisions, the structures within which they must work and their capacity for innovation and collaboration.  Key account managers must move fast once access to their products is assured and not work in isolation. Collaborative long-term relationships need to be formed, not just by individuals who can leave a company, but by the company as a whole and via a cross-functional team approach. Key account managers need support to identify solutions that will help local health economies realise their objectives and the autonomy to see them through. They also need to learn the language of the new organisations as the CCGs are very different culturally from their predecessors, the Primary Care Trusts.

Some companies, such as Pfizer and Janssen, are focussing heavily on creating generic tested solutions that can be applied across therapeutic areas in keeping with nationally developed outcomes strategies. They have found there is not only a significant first-mover advantage to be gained from building local credibility but also there is a lot of opportunity for industry. Service redesigns, for example, rarely involve rocket science, says Jo Wales at Pfizer Health Solutions (PHS). “Mostly people know what the difficulties are and will have ideas of how to solve them,” she says. “But they just don’t have the time to make it happen. What we bring is the understanding that patients are very receptive to talking to somebody in a way that doesn’t involve their attendance at a formal clinic with a consultant. Patient follow up can be achieved in different ways. What we’re doing is using our experience from our telephone-based work to challenge people’s thinking on how they design and deliver services.”

Marco Mohwinckel, head of Janssen Healthcare Innovation, Europe, agrees there is lot pharma companies have to offer if they approach local NHS organizations in the right way. “We’re sitting on a wealth of information and experience that can be repurposed to support patient outcomes and service redesign,” he says. “There is a lot of inefficiency, fragmentation and inconsistency in the way healthcare is being delivered today and we want to bring that knowledge and expertise to bear in different ways.”

These are exciting times for pharma key account management teams. The conditions for pharma penetrating the clinical and management infrastructure of NHS England could hardly be more perfect.  According to a recent study by Primary Care Commissioning (PCC), more than a third of CCGs report they are either extremely or very concerned about balancing the books, When the moderately worried are added, the figure rises to 80 percent. But pharma companies must act fast to change the habits of a lifetime and focus not only on product sales but on what their payers want, which is a more efficient patient-centric service focused on improving health outcomes.

Jacky Law is Managing Editor at FirstWord.

Pfizer CEO Ian Read, and FT pharmaceuticals correspondent Andrew Jack

After opening remarks from Andrew Jack, FT’s prolific pharmaceuticals correspondent, Pfizer CEO Ian Read took the stage at the sumptuous Metropolitan Club in Manhattan for a chat with Jack. The biggest issue facing the pharmaceutical industry today, said Read, is whether society is willing to pay for clinically meaningful products.

That thread wove through many of the panels afterward. Old debates about cost sharing, which focused on the role of insurance providers in managing the out-of-pocket costs of drugs to patients, have shifted into conversations about shared value, which puts the onus on industry to align societal economic needs with positive health outcomes, and profits. Jeff George, global head at Sandoz, described a company program in Ethiopia that voluntarily tests local pharmaceutical products for bioequivalence, to separate the pure from the placebo (or worse). This program helps protect the public health, while also screening out Sandoz’s counterfeit competitors, said George.

The most pressing quandary for Jan Groen, CEO at MDxHealth, a molecular diagnostics company, is “who will pay for companion diagnostics?” outside of the US. David Meeker, CEO at Genzyme, said “society is willing to pay for things that work” – companion diagnostics increase those odds. Responding to a question on the sustainability of ever-increasing prices for products targeting rare and ultra-rare diseases, Meeker suggested that yes, there had to be a ceiling, but he asked attendees how much it had cost to rescue the Chilean miners in 2010. Answer: “I don’t know, and it doesn’t matter,” since the cause was supported by the global community.

Of course, there aren’t some 200 mine collapses and rescues every month, with another 7,000 collapsed mines and trapped miners waiting impatiently to be rescued (or if there are, developed nations don’t hear much about them, and don’t bankroll the rescue operations). But Meeker’s point is well taken; more than $20 million was spent to save the lives of 33 miners, of which $15 million came from Chilean government coffers. Societies will have to make tough decisions, collectively, about the extent to which an individual taxpayer is willing to be his sister’s keeper, if governments plan to continue reimbursing orphan drugs at their current prices. Those decisions will inevitably increase scrutiny on pharma’s profit margins, requiring ever-greater transparency efforts, and a greater degree of sharing, in order to substantiate the price of innovation.

Colin Hill, CEO and Co-founder, GNS Healthcare

The question then becomes, according to Pfizer’s Read, whether productivity – understood as the successful development of safe and effective new treatments, and better health outcomes – matches the spending levels devoted to such efforts. Currently in the US, it doesn’t, said Read, but sharing clinical data with the general public – all the rage in Europe – is not the solution. Read said making this data too accessible jeopardizes the delicate risk/benefit calculation that is, or should be, the sole province of regulators.  “To dump patient-level data on the pavement and allow dozens of institutions to consider, evaluate, and review it, could have huge negative consequences for healthcare,” said Read.

On the other hand, Colin Hill, CEO of GNS Healthcare, a big data analytics company, said that clinical data sets are used by his company – along with data from hospitals, claims data, demographic data, genetic data, and data from electronic health records – to improve health outcomes. “The question is not, what is the best rheumatoid arthritis drug for the price, but what drug will work best for an individual patient at a specific progression of disease,” said Hill. Reliably predicting the right treatment for each patient, the first time, is the key riddle to solve, he said.

Hopefully that treatment is covered on the formulary. Read frowned at what he perceives as a shift in public focus from insurers to drug-makers. Insurance companies dictate expectations to patients and tell them which drugs they can, and cannot, receive. If drug companies did that, “there would be hell to pay,” said Read.

With all of the emphasis on “sharing,” at pharma industry events and in seemingly every new digital technology invented, it has become imperative to take a harder look at exactly what is being shared and with whom, and to identify the shareholders. Unfortunately when it comes to sharing the costs associated with a healthy population, people use their own unique algorithms to determine what constitutes a fair share. Everyone is an interested party.

Within the billions of daily comments from individuals across open social sources lies deep intelligence into markets, brands, patients, caregivers, healthcare providers and competitors. Several leading pharmaceutical companies are already using big data solutions to extract insights from the social realm. Applying these insights across a number of business functions empowers their decision-making with strategic understanding that digs deeper than ever before possible.

Today, social intelligence has advanced well beyond cursory “buzz” via narrow keyword monitoring. The tandem of big data processing and complex concept modeling delivers deep, powerful views into markets, patients, brands and competitors.

Here are five ways pharmaceuticals are currently leveraging advanced social intelligence to drive strategic decisions:

Patient Personification

Today, with millions of patients sharing their health experiences online across social networks and open source channels, the ability to truly understand the needs of the patient has never been greater.

In fact, social intelligence allows pharma to segment and personify patients at multidimensional levels to enhance a brand’s reach, messaging and education for increased awareness, compliance and ultimately, outcomes. Using these tools, comprehensive patient personas can be constructed to personify patents, leading to a better understanding of patient needs, their decision-making process and their actions.

Patient Journey

The concept of the patient journey has received growing attention in recent years. But social intelligence has transformed the patient journey from concept to reality by constructing the actual path patients take based on their own symptoms, diagnosis, treatment, decisions and experiences.

This offers pharmaceutical and health providers a detailed understanding of crucial (demand?) moments and decision points for patients.

Competitive Insight

Another powerful aspect of advanced social intelligence is that pharma can leverage it to gain deep insights on competing products to better understand the attitudes, behaviors, decisions, actions and perceptions patients have related to the competition.

Comparative analysis is also commonly conducted to reveal the drivers and decisions behind patient switching to and from a provider’s treatment and a competing brand.

Launch Tracking

An increasing number of pharmaceutical companies are conducting ‘milestone monitoring’ for treatment launches in preparation for, during and after the brand’s launch. This real-time launch tracking focuses on the discussions about a new drug and its competitors by a variety of segments, including patients and caregivers, healthcare providers, financial markets, media, influencers, regulators and competitors.

The tracking also provides a deep inspection of

the market over longer monitoring periods, to understand the impact the brand has on the overall market and individual patients.

Influencer Analysis

Several pharmaceuticals are focusing on understanding the motivation, tactics and impact influencers have on their patients, markets, and specifically their brands. These companies are turning to advanced social intelligence to map out the apparent and hidden networks and relationships of these influencers to strategically plan how to engage or counter their initiatives.

On this front, influencers can be advocates and evangelists or activists and ax-grinders, focused on helping or hurting their brands, respectively. Pharma is realizing that understanding these unique influencers and the impact they have on their markets and business are critical to driving the success of their brands.

An Intelligent Impact

It’s never been more critical for the healthcare industry to personify and understand patients on multidimensional levels with respect to their needs, concerns, decisions, behaviors, attitudes, activities and compliance issues. Today, pharmaceutical and healthcare companies are realizing that achieving this is possible on an immediate and actionable level with advanced social insight by extracting the powerful knowledge held within billions of daily comments from tens of millions of individuals across millions of social sources.

The key is identifying a tool that approaches social discussions with a big data solution rather than one with samples of the social universe. This approach allows providers to get a rich, holistic view of their patients, their caregivers and healthcare providers, as well as the influencers, analysts, media and competitors impacting their markets and brands.

Mark Langsfeld is Co-Founder & Chief Strategy Officer, ListenLogic Health. He can be reached at ml@listenlogic.com.

PE:    Prescriptions for a Healthier America is a new coalition of government, industry, and patient groups formed to address the problem of medication adherence and to develop sound strategies for intervention.  Do you believe it’s going to be an effective collaboration?

CM:   It isn’t going to hurt.  There have been similar calls to action in the past. NCPIE, the National Center for Patient Information and Education, published Enhancing Medicines Adherence: A National Action Plan in 2007, but I’m not sure how much it rallied sustained national attention.  The National Consumer League also has their Script Your Future national campaign, running since 2011, which is slated to expire next year. We tend to have these cycles of heightened interest in adherence and then it goes away or something else replaces it. Success for these interventions really depends upon how well they are able to mobilize diverse stakeholders and interest groups behind a clear and cogent reform agenda.

PE:    Today we see a focus on improvements in technology to drive increased adherence. Do you believe that, for instance, dosing reminder apps and flashing pill bottles will be game-changers?

CM:   Personally, as a scientist and as a patient myself, I do not think they will.  I’ve spoken to over 2,000 patients in my career in the past six years, and very few people want to get a text message every day saying, “Take your medication.”  People who have problems remembering are going to appreciate that, but I estimate from Merck’s research, as well as others, that only 20% of non-adherence is due

to forgetfulness.  The other 80% consists of people making intentional decisions about their medications.   You can text people all they want and have sirens go off on their pill bottle caps, but unless the patient feels that they need a medication and they don’t have concerns about taking it, I don’t think technology is going to make the inroads its advocates claim.

PE:    A lot of companies are funding and conducting their own studies on adherence, whether it be for particular disease states, demographic differences, or looking at behavioral economic factors.  Based on your long record of expertise on adherence, do you believe that more information will solve the problem?

CM:   In the past 40 years, some 40,000 articles have been published on medication adherence.  At this point, I doubt more information is going to solve the problem.  However, more targeted and theoretically-driven information may have an impact.  The research I led at Merck went a long way towards elucidating some of the key drivers of non-adherence.  Now it’s about meeting patients’ informational needs. Knowledge is necessary, but it’s not sufficient.  Repeating the same studies on demographics and diagnoses will not get us anywhere.  What’s going to move the needle is figuring out how and what to effectively message to patients about their medications.  How do we communicate to patients exactly what they want to know about their medications in a way that will resonate with them and lay the foundation for their autonomous commitment to therapy? How do we incent providers to spend more than a handful of seconds discussing the rationale for and importance of the medication?

PE:    What are the hot trends in research on adherence?  If you were to remain in industry, what would your adherence agenda consist of in the next two years?

CM:   I would do basic research to document the fact that patients have different adherence patterns for different medications to continue to underscore the fact that there is no such thing as an “adherent personality” (which many providers erroneously believe).  I’m also working on a manuscript now which is documenting the extent of non-adherence at first fill of the prescription, where approximately 25% of patients are gone in the first 30 days.  They don’t come back for their second fill.

I also have a passion for studying adherence at the physician level.  Roughly 95% of all studies on adherence have focused on the patient.  We need to start focusing on dyads (i.e., the relationship between provider and patient), and we need to start focusing on providers.  One thing I’ve always wanted to do is aggregate patient-level adherence data up to the physician level and document that there are some physicians who have lots of high adhering patients and some physicians who have lots of low adhering patients.  Believe it or not, there have been only two studies conducted on inter-physician variability and adherence rates. We need to understand the attributes of those providers and practices that have higher than average adherence rates. In 40 years of adherence research, we’ve almost completely ignored the role of the physician in medication adherence? it’s the next logical step for researchers to take.

If you are an Rx regional sales director or a product marketing manager, I have a somewhat provocative question for you:  How exactly are you planning your 2014 Medicaid strategy?

I ask this because as you look over the Medicaid landscape for next year, there is more than a little uncertainty at hand.  With Medicaid about to become the basic health care delivery mechanism of the 2010 Affordable Care Act, otherwise known as Obamacare, you would think this might be a simple matter of reviewing the new federal law for guidance. But if that’s the approach you are taking for your 2014 Medicaid planning, let me be the first to tell you, you are going down the wrong path.

Obamacare is premised on the idea that federal government and state governments will cooperate in the delivery of healthcare to an estimated 40 million new Medicaid patients starting on January 1, 2014, with sign up for these new services scheduled to begin on October 1, 2013.

That is all well and good, so far as a reading of the law goes.  But when you begin to dig into how the states are actually implementing Obamacare, you soon realize the launch of this new law is not going as smoothly as the framers of the measure had hoped.

As of this writing, and according to the Kaiser Family Foundation, there are 26 states that have said absolutely “no” to state exchanges envisioned by Obamacare and are defaulting to a federal exchange; 7 that have said “no” to parts of Obamacare and have negotiated “Partnership Exchanges” with HHS; and only 18 that have declared they will establish state-based exchanges, and cooperate with new law.

If Kaiser is correct in these assessments and given the current US population of about 313 million, this means that approximately 56% (177 million) of Americans live in states that have said effectively said “no” to Obamacare; 10% (32 million) live in states that have rejected parts of Obamacare; and only 33% (104 million) live in states that will have access to Obamacare’s state exchange offerings.

If these statistics startle you, they should.  Thinking about your 2014 “numbers,” how will you manage this situation nationally?  In particular, what will happen in those states that are “defaulting to the federal exchange?”  Here are two key examples you may want to focus on for your answers.

Florida

Florida’s current population is about 19 million.  Right now, 3.3 million Floridians (approx. 17% of the state) are enrolled in FL Medicaid.  It’s estimated that another 1.3 million Medicaid recipients will be added to Florida’s Medicaid rolls once Obamacare is implemented.  This creates a potential situation in which nearly 25% of Florida’s total population is scheduled to be receiving Medicaid Rx care after January 1.  Any Rx sales manager or product marketer who is responsible for the State of Florida has to take notice of these numbers.

So how is the implementation of Obamacare going in Florida?

This past winter, Florida’s governor, Rick Scott, a Republican, publicly broke ranks with his Republican Governor Association colleagues, and announced that he was seeking a “deal” for Florida that would accept the essence of Obamacare, i.e., the federal financial support, while adopting a 100% federal provision of insurance services, all of which sunset and be reviewed after three years.

Seemed like a done deal. But when Gov. Scott took his concept to the Florida legislature, he encountered stubborn resistance from the Florida House of Representatives.  In the end, the governor gave up and the entire Obamacare package was shelved. Florida, it appears, will default to whatever the “federal exchange” may turn out to be.

So, how as a sales & marketing executive with responsibility for Florida do you plan your sales and/or marketing strategy in this huge, heavily Medicaid impacted state?  What drugs will be covered in the “federal exchange?” Will only one drug per category be covered, per the earlier recommendations of the Essential Health Benefits finding put out by HHS? How will you get your drug covered for Florida Medicaid in 2014? How will you get reimbursed? From the state or the feds? And at what rate? Right now, nobody knows the answers to any of these questions.

Let’s look at another important example that is being impacted by Obamacare: Texas.

Texas

Texas is now the number two most populous state in the nation with an estimated 2012 population of over 26 million. It’s also one of the fastest growing states in the nation.  Given all of this, I don’t think it would be an overstatement to suggest that every Rx sales and marketing director in the country wants a piece of Texas.

So let’s consider the impact of Obamacare’s implementation here. Currently, Texas Medicaid beneficiaries number approximately 5 million individuals, or about 20% of the population. An estimated 2.6 million beneficiaries could be added to the Texas Medicaid rolls under Obamacare. That would total 7.6 million people, or about 29% of the State of Texas population.

Unlike Florida, however, Texas has been a steadfast “no” in cooperating with the federal government on the implementation of Obamacare from the start. Therefore, Texas had no debate about setting up a state exchange for new Medicaid patients. Instead, like Florida, a new federal exchange is supposed to be put into operation for nearly 8 million Texans by January 1, 2014.  How this will be accomplished in Austin is unclear at this time.

Again, as regional sales directors or product managers for Texas, how do you plan on “making your numbers” in this huge market for 2014?

Planning Elements for Medicaid Sales & Marketing in 2014

I could go on from here with the specifics of each “no” state, but I think you get the picture.  Just Florida and Texas, alone, both among America’s most populous states, account for nearly 10% of the estimated 40 million total Medicaid expansion this new law is supposed drive come January 1, 2014.  These two states by themselves stand to generate massive Rx sales that will impact anyone’s national sales or product marketing plan.  However, both are essentially blank pages today in terms of how your products will be included on a formulary, what the reimbursement rates will be, who will pay you for their dispensing, and all the rest that goes into making money in a state Medicaid Rx program.

And the same is true for the other 24 “no” states. Nobody has answers. Overall, you are essentially in the dark as to how to plan for about 22 million new beneficiaries with drug coverage.

So how do you to manage your sales and marketing for Medicaid Rx patients in this 2014 environment?

First, you are going to need much better intelligence on what every state has decided to do with its Medicaid Rx program than you have ever had before.  Given 40 million new potential, paying customers, you would be foolish not to demand the best, most complete information available on each state.  If you don’t have that deep info, frankly, how can you establish sales and marketing goals for 2014?

Second, you will need to figure out how each state will actually administer Obamacare. Will it be by default to the federal exchange; the negotiated “partnership exchanges;” or through separate state exchanges? And depending on which policy the state has chosen to follow, what will that mean to you? Every state will do it differently based on their medical culture, the state’s finances, and the level of cooperation medical providers offer in each state. Understanding all of these factors will be imperative.

Third, I would suggest this situation is anything but static (some states may quickly walk away from Obamacare after it starts; others may decide to join; still more could come up with entirely unexpected solutions for their populations).  You will want onsite staff in many of the major state capitols just to keep track of all of this. That could be expensive, but how else are you going to stay on top of all of these developments?

In short, sales and marketing execs are going to have to think way outside of the box in 2014 if they believe their Rx company will enjoy the financial benefits of Obamacare’s new Rx coverage.  And this is certainly not to say that the prospects for monetary gain don’t exist. They clearly do, but only if you can figure out how to convert on this Obamacare opportunity in each state.

All of this said, I believe this particular reimbursement opportunity will be unlike any other the US drug industry has ever faced. The reimbursement uncertainly, intrusive politics, and the shear market chaos that is likely to result will be challenging. But it’s also equally clear that if you stand around, waiting to see “how things develop” under Obamacare, you run the risk of substantial Rx sales and marketing losses for 2014, and beyond.

The choice is clear. You have to engage, come what may. So, what’s your Medicaid Sales and Marketing plan look like for 2014?

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

The problem we see with the polarity of views is that both sides seem to be cranking up the extrapolation machine and use single studies/data points to draw broad conclusions to gin up opinions about ACA’s success or lack thereof. With respect to investing, uncertainly caused by media/pundit noise often depresses valuations in the short run. We suggest investors avoid the extrapolation machine and stick to observing fundamentals and fact. In the context of healthcare, as we see it, this means focusing on a double bottom line: financial return potential and companies who create value improving quality or meeting a need.

The Kaiser Family Foundation (KFF) recently released a study that showed that 42% of Americans are unaware that Obamacare (the Affordable Care Act) remains the “law of the land.”  News like this seems to us, to act as a Rorschach test on how observers feel about the law. Considering 50% of Americans can’t identify New York on a map we tend not to read too much into these polls. However, according to the logic of extrapolation, since we know that the ACA remains law, we are in the elite 58% (it’s about time we made it into the elite of something).
In almost parallel to the KFF news, the New England Journal of Medicine published a follow-up study of the “Oregon experiment.” For those who haven’t been following closely, the study found that previously uninsured people who were enrolled in Medicaid did not see an improvement in clinical measures when compared to those who remained uninsured. The study did seem to show a reduction in the amount of financial distress for the insured however.

Another contentious study, another Rorschach test (example, example). In light of the fact that for most practical matters ACA doesn’t really get going until 2014, use of the extrapolation noise generator approach smacks of a lack of analytical rigor in our view. We will know soon enough how the program is doing… exchanges start enrolling on 10/1.

As investors, we should state upfront that we tend to give more weight to financial returns than what the philosopher-kings might call the political context. So what caught our eye in the Oregon study was that Medicaid recipients had higher healthcare utilization rates (and associated costs) than the uninsured. The connection between gaining insured status and healthcare utilization should not come as a surprise since there is a very extensive literature elucidating this connection.

We have noticed that many in the political community, especially where it pertains to entitlements, have taken an absolutist utilization=bad view of the world. At Poliwogg we take a more nuanced approach. We view healthcare expenditures not as a cost but as the creation of an asset. In our framework, utilization can be categorized as generating either a positive return or a negative return depending on the outcome. If the expenditure creates additional value it is good, if it does not than it is bad. We would take a good pharmaceutical over a bad diagnostic test any day despite the former often being more expensive upfront.

To be fair, it is not always easy to determine a priori whether utilization will have a positive or negative consequence longer-term. And it should be noted that the system does have significant inertia hard-wired into it (prior mis-allocation of resources, a mal-incentive based reimbursement structure and asymmetry of information, among other things) which needs to be overcome. Nevertheless, there are signs that some things have changed recently to offer some glimmers of hope of a possibility of value creation and system enhancement. Like it or not, ACA is a change-agent and it will alter the status quo. The impact of improvement in technology and telecommunication, which allows for more real-time observation of events and predictive analytics, is first being felt. And, given the downward trajectory of utilization connected to the recent economic downturn it’s a pretty good supposition that healthcare costs (after many decades of rising) are finally starting to alter behavior on the part of patients and providers.

With respect to investing, uncertainly caused by media/pundit noise often depresses valuations in the short run. We suggest investors avoid the extrapolation machine and stick to observing fundamentals and fact. In the context of healthcare, as we see it, this means focusing on a double bottom line: companies with financial return potential (at the appropriate risk level) and companies who create value through innovation either by improving quality or meeting a need (especially true in the case of therapeutics for many currently poorly-treated diseases). If investors do this they can let the extrapolation machine work for them rather than exacerbate the problem.

Not yet. Progress in bringing companies into the fold has been slow. But this Geneva-based wing of the multilateral donor group UNITAID is redoubling its efforts under new, pragmatic leadership more interested in scoring deals that scoring points, particularly as the global health debate expands beyond the ideologically-charged context of AIDS, money and medicine to multiple disease partnerships focused on system-wide solutions.

MPP was established three years ago to support UNITAID’s mission in financing new treatments to fight the AIDS pandemic. It has a mandate to promote development and distribution of low-cost medicines through the negotiation of a “pool” of patents that can be licensed for production and sale in countries where access to HIV treatment is limited by resource constraints or cost. Staff are charged to negotiate licenses and sub-licenses with public and private sector partners; they also administer a data base to identify patented originator products relevant to addressing what the WHO and other aid agencies see as the most pressing treatment priorities in the HIV space. Terms of engagement are transparently clear: MPP only works around “live” patented medicines that can positively impact these priorities; if the patent has expired or is close to LOE, MPP doesn’t bite.

To date, MPP has forged deals with three partners. The first, with Gilead Sciences, gives it licenses on four HIV medicines plus a fixed dose combination of these four in a single pill known as the “Quad.” Three of the five [cobicistat, elvitegravir, and the Quad] are products still in clinical development, and the agreement allows for the development and manufacture of other combinations based on these medicines. One drug — tenofovir — is also licensed for use in Hepatitis B. In February, MPP agreed a license with the HIV joint venture ViiV Healthcare [GSK, Pfizer and Shionogi] for the pediatric AIDS drug abacavir, which will be distributed in 118 countries that cover almost 99 per cent of the world’s children with HIV. The pact calls for additional work to secure licenses and development rights for new fixed dose combinations geared to young patients. The third deal is with the US National Institutes of Health that awarded MPP its licenses on darunavir, a protease inhibitor for HIV, for production in low and middle income countries.

A fundamental sidebar to these deals is the sub-licenses MPP has secured for a whole host of low-cost generic manufacturers, including Shasun, Aurobindo, Hetero and Emcure. Hetero, based in India, alone produces ARV treatments for over 2 million HIV patients, in 100-plus countries.

Greg Perry, MPP’s new Executive Director who took up the post in January, told Pharm Exec that, while three partnerships in three years may seem a modest achievement, each sets important precedents for access. “Our work with the NIH is a badge of political support and established our credibility on public health. The Gilead partnership focuses on products still in the development pipeline, which allows us to accelerate the timing for uptake of these critical medicines in the field. And ViiV has committed to place its pipeline products into the pool once they are approved by regulatory authorities, with additional transfers of technology to assist generic sub-licensors in manufacturing, bioequivalence studies, and quality control. In essence, we are building with them an IP platform to help facilitate the registration of a new drug – you could say our original ‘imitation’ pool is actually becoming an innovation pool.”

Three and counting

MPP is currently in active negotiations with three other pharma companies: BMS, Roche and Boehringer-Ingelheim. Talks are “most advanced” with the first two. Other targets include AbbVie, Merck, and J&J. According to Perry, who most recently served as founding Director of the European Generic Medicines Association, “talking to big companies takes an equally big commitment of time. It’s no different than any other complex bilateral transaction, with the main issues being geographical scope, timing and conditions for transfers of technology, royalty terms, and provisions to structure relations with third parties.“ Perry contends his background as a trade group executive gives him a good understanding of how to work productively with the private sector. Companies seem to prefer him to the political baggage that the MPP’s first director, Ellie ‘t Hoen, carried as a prominent consumer activist, industry public scold – and key target for free-market think tanks financed largely by the big drug makers.

Perry says the message he takes to industry is all about predictability. “We reduce transaction costs and alleviate risk through our guarantees of efficacy and quality for all sub-licensors. With the patent pool, you will get the product on the market and deliver access to the target population we all identify as necessary to reach. It precludes the wasted time and effort when a license is agreed but never activated by the contracting parties. There are no such lost opportunities with us.”

Still, many companies remain to be convinced, with one executive that has been in talks with the MPP noting that it will not budge on one key concern: limiting the geographic reach of concessionary patent terms to bar those high growth, middle-income countries outside sub-Saharan Africa. This comes as no surprise, given that all the MPP’s principal sub-licensors to date are Indian. Other issues are the MPP’s reluctance to tighten and clarify contract terms [the MPP relies on a standardized 30-page text] covering the respective management and execution roles between licensors and licensees. Likewise, while there is much optimism about generic sub-licensors taking the lead in working with patent holders to commercialize new fixed dose combinations and other novel approaches to access, no guarantee exists that this will occur, particularly as the financial incentives for them to do so appear lacking.

Perry seems sensitive to these concerns and told Pharm Exec he is looking to see what additional dividends the MPP can offer to persuade industry to collaborate. “One improvement we’d like to facilitate is helping the industry obtain faster approval times for new drugs that meet a designated public health need. We are talking with numerous LDC governments to accelerate cooperation around faster time lines and more transparency on drug registration. The MPP is also involved in a WHO pilot project on a standard regime for the prequalification of priority medicines.”

So we return to that mission of the MPP – is it truly the vanguard of a new business model for pharma on the global stage? Could it be a tool for the hidden agendas of profit-seeking generic suppliers posing as alms for the poor? Or is it a public policy experiment with no grounding in the brutal logic that drives decisions in real-world markets? For now it’s anyone’s guess, but time will eventually cast a verdict. Licensing is, by definition, a transactional business – someone has to come to the table.

William Looney is Pharm Exec’s Editor-in-Chief.

The Food and Drug Administration appears likely to benefit from sequester-flexibility efforts due to its unanticipated effect on user fee revenues. In addition to FDA contending with the 7.8% reduction in funding for its appropriated funds, as with other federal agencies, the Office of Management and Budget (OMB) has determined that the budget reduction policy applies to user fees paid by manufacturers to support specific FDA approval and oversight functions. FDA thus is collecting all its authorized fees, including recently renewed fees on prescription drugs and the new levy on generic drug companies, but is unable to touch a good chunk of the money.

FDA commissioner Margaret Hamburg explained at the annual meeting of the Food and Drug Law Institute (FDLI) last week that the agency will lose about $209 million this year due to sequestration — $126 million in budget authority and $83 million in user fees. FDA will continue to collect the fees, but the sequestered amount will remain on deposit in the U.S. Treasury and cannot be used to support “critical tasks” such as issuing regulations and guidances, conducting inspections and speeding approvals of new drugs and biologics.

At a recent hearing by the House Appropriations subcommittee that oversees FDA’s budget, Rep. Sam Farr (D-Calif) and other Democrats raised the possibility that Congress will look to provide flexibility in applying the sequestration policy to FDA, especially for fees collected from the private sector.

In response to questions about the impact of the sequester, Hamburg told the panel that without full user fee revenues, “we obviously will fall behind” in meeting performance goals. The agency will be slow putting out guidances, reviewing applications, making new hires to support new programs, improving business processes to make regulatory pathways more efficient and developing new regulatory tools that could “make our system better able to handle more sophisticated products.”

The budget cut could mean fewer meetings between FDA review staff and sponsors of new drugs. FDA’s system for regulating drugs and medical products “works better,” Hamburg explained to the legislators, when reviewers can work closely with sponsors to determine what data is needed and what kinds of studies are important to do to support a new product. And fewer resources “will certainly limit the staff’s ability to engage in those activities,” she said.

Hamburg said at the FDLI meeting that having adequate resources is a “constant concern,” and that she is “enormously troubled that FDA’s responsibilities continue to outstrip available resources.”  And she told the House panel that it was very “troubling” to negotiate commitments with industry to justify fees and then see some of the money going “into a bank” and not available to support FDA programs and activities. If these cuts continue, she stated, “it will have an impact.”

To launch the initiative, PCORI is providing $68 million to fund eight Clinical Data Research Networks (CDRNs) formed by hospitals and health care systems for 18 months. The networks will access electronic patient health records held by members to support observational and interventional studies on large, defined populations. Additional Patient-Powered Research Networks (PPRMs) established by patient and disease groups will collect and analyze patient data on targeted and rare conditions.

The goal of this national research data infrastructure is to improve patient outcomes by accelerating patient-centered and methodological research. The system will examine ways to govern and use large clinical databases to facilitate rapid, efficient conduct of both randomized trials and observational studies.  PCORI will establish a Coordinating Center for the networks, and a Steering Committee will assess policies, best practices and methods needed for an efficient and interoperable research system.

Standards for collecting and analyzing patient health data are particularly important in providing the Food and Drug Administration with “actionable information” that is reliable, pointed out Janet Woodcock, director of the Center for Drug Evaluation and Research. FDA has been developing methodological standards for its Sentinel drug safety data system that obtains drug use information from health system data banks, and the PCORI network would support that program.

John Castellani, president of the Pharmaceutical Research and Manufacturers of America (PhRMA), noted at the PCORI briefing that sponsors are spending billions of dollars on clinical trials, and that “anything done to improve and quality and efficiency of the system will benefit patients.” He expressed caution, though, that “you can’t just take the data and expect it will be useful,” noting that there is a lot of “noise in databases” and that it’s often difficult to identify “true signals” of safety problems. Woodcock explained that linking the use of a specific medicine to any particular health outcome is tricky, and that research on causal inferences requires “a level of rigor.” Studies that can fill gaps in knowledge about interactions of drugs with other drugs and with interventions is particularly important, she noted, as is long-term data on most conditions.

A main benefit of the envisioned research network is to help researchers and clinical trial sponsors identify patients to participate in studies. The data also could help sponsors design clinical trials by providing an understanding of why certain patients don’t respond to treatment and what endpoints may be important for a study,  points out Robert Dubois, chief science officer at the National Pharmaceutical Council (NPC), which tracks PCORI and CER activities.

A coordinated, sustained approach to collecting and assessing outcomes data would be highly beneficial, says NPC analyst Jennifer Graff,  provided it addresses a number of important issues: who has access to research data, ensuring data privacy, considering patient heterogeneity and developing standards for analyzing data. Once a drug is on the market, observes Dubois, broader patient data can help assess its performance in the real world, provided “ the analysis is right.” Graff notes that 18-months to establish these networks is a “very short time frame for data networks to come together and deal with these issues.”

Woodcock further discussed the need for standards and “appropriate analytical rigor” for outcomes research at this week’s DIA-FDA Statistics Forum in Bethesda, Md. Despite considerable enthusiasm for CER, making causal inferences “is a whole other game,” she cautioned.  People need to understand limits on the reliability of health systems information, and that “getting a wrong answer doesn’t help.” She noted that the nation’s enormous investment in electronic health records and CER is generating a massive amount of health data, and urged statisticians and other experts to “help us learn how to use it.”

Many of these challenges will be addressed by PCORI’s newly appointed chief science officer, Bryan Luce, a leading expert in the medical outcomes research world. Luce has been involved in methods and policies related to evidence-based research and will be responsible for leading the development of PCORI’s CER agenda.