In order to incentivize the formation of ACOs, the CMS guidelines for the Medicare Shared Savings Program would reward ACOs that treat Medicare Part A and Part B beneficiary populations at or under a pre-determined cost benchmark; for those ACOs that keep costs below the benchmark, as much as 60% of the money saved would be distributed back to ACO members. Benchmarks for specific ACOs would be determined by average per capita Medicare Parts A and B expenditures, according to the proposed guidelines. Exceeding the benchmark, however, means being held accountable, or paying the government for overage costs.

Are physicians ready to take on that kind of risk? “Frankly I think that [risk] is one of the things that will limit the number of institutions or organizations that are interested in playing here,” said Dan Mendelson, CEO of Avalere Health, a consulting firm. “If you have excellent data systems, and you understand risk, and you have control over your providers in terms of utilization, you’re probably a managed care company already,” he said. Managed care organizations are not eligible for the Shared Savings Program. Jeremy Lazarus, speaker for the American Medical Association (AMA) House of Delegates, said in a statement that “ACPs offer great promise for improving care coordination and quality while reducing cost, but only if all physicians who wish to are able to lead and participate in them.” A spokesperson for the AMA said more time was needed to digest the guidelines, before making additional comment on whether a critical mass of physicians would join or create ACOs.

Regarding the impact of ACOs on drug sales, Mendelson noted a “broad flexibility for ACOs to introduce concepts like step therapy,” or the practice of beginning treatment with the safest and cheapest drug therapy. With ACOs, the “organization controlling the spend is no longer the physician, it’s now the system,” said Mendelson. “From that perspective, [ACOs] look more like Kaiser [Permanente] than like selling into an oncology practice.”

John Kamp, executive director of the Coalition for Healthcare Communication, said ACOs represent additional pressure toward the use of generics and other cheap alternatives. In order to cope with those pressures, drug marketers will need to become more sophisticated in “talking about the system economics of using specific new drugs, as well as the individual patient outcome,” said Kamp. “The short-term cost pressures are much more acute than long-term cost savings.”

To participate in the Shared Savings Program, an ACO will need at least 5,000 beneficiaries on its roster, healthy and sick, according to the guidelines. “One of the things that emerges here is that if you can enroll patients who do not have multiple sclerosis or cancer or other biotech-targeted conditions, you’re going to do better,” said Mendelson. “There’s an incentive for the selection of healthy patients that the government will need to mitigate over time.” According to the guidelines, ACOs taking steps to avoid “patients at risk in order to reduce the likelihood of increasing costs” will face sanctions, which could include “termination from the program.”

Health providers eligible for participating in the Shared Savings Program include physicians in group practices, networks of individual practices, partnerships or joint venture arrangements between hospitals and physicians, hospitals employing physicians, and “other groups of providers of services and suppliers as the Secretary determines appropriate,” according to the guidelines. ACOs must enter into a three-year agreement with CMS to be eligible for the savings incentives, using one of two proposed models described in the guidelines.

A new paper from PwC, entitled “Top Health Industry Issues of 2011,” foretells of change in the coming year due to health reform and other issues that are keeping the industry on its toes.

“The new health reform law will prompt most organizations to do strategy makeovers  as they react to and prepare for new rules and payment models in 2011,” says the opening line of the PwC report. “Industry changes wrought by health reform are far from over. In fact, they’ve only just begun.”

For this Top Industry Health Issues report, PwC’s Health Research Institute asked consumers their point of view on several issues related to reform. Of those surveyed, 50 percent said they would stay within an ACO-like organization for all of their care, and nearly three-fourths said they would trade employer-sponsored insurance for higher pay. Less than half of consumers know what a health insurance exchange is, and 86 percent do not access their medical records electronically.

Also of note is the fact that more than one-third of consumers said that costs and waiting times would increase as a result of healthcare mergers. The survey also found that consumers seek health information from media companies more than from government, healthcare companies, and consumer companies combined.

Other key issues discussed at some length in the report include health information technology (HIT), medical loss ratios (MLRs) and insurance exchanges, accountable care organizations (ACOs), rising deductibles in health insurance plans, and mergers and acquisitions. These and many other issues form the changing landscape of Pharma over the next few years.

FDA’s good guidance practices regulations [GGP] require it to publish for public comment an annual summary of key priorities in the coming calendar year.  The document is intended to ensure involvement of interest groups and the public in how the agency performs its mission and spends its budget.

The following list contains what the Agency and Commissioner hope to spend most of their time on in 2011:

Advertising:

• Standards for making comparative claims in prescription drug promotion

• DTC television advertisements—FDA Amendments Act of 2007 DTC Television Pre-Review Program, with particular emphasis on how the Agency intends to address the issue of certifying the legality and safety of content for TV ads going forward.  FDA has been harshly criticized by consumer groups for acting with ambivalence in this key area of drug promotion.

• Promotion of prescription drug products using social media tools. This includes creating clear guidelines in setting legal boundaries between what may constitute a simple exchange of information and commercially oriented promotion.

Clinical/Medical:

• defining oncology endpoints in clinical trials for non-small cell lung cancer

• General clinical pharmacology consideration for pediatric studies for drugs and biological products

Clinical/Statistical:

• standards for superiority in adaptive trial designs

Combination Products:

• building a clear regulatory pathway for incorporating drug diagnostics in co-development programs with small molecules and biologics.

Current Good Manufacturing Practices Compliance:

• Importation of active pharmaceutical ingredients for use in human drugs, standards to enhance safety and efficacy in international trade.

Drug Safety Information:

• Best practices for conducting pharmacovigilance studies using electronic healthcare data

The list should not be seen as exhaustive or definitive—given the Agency’s vast remit, priorities can shift or be overtaken by events. In that regard, the list includes enough new initiatives in areas outside the remit of pharmaceutical regulation—such as food safety—to suggest FDA resources will continue to be stretched to the limit next year. This guidance will also need to pass muster with the new GOP majority in the House of Representatives, which is likely to tone down any hint of regulatory activism in the Agency as it moves forward.

For the complete agenda, please visit the Federal Register website entry for December 7, 2010.

There is no deadline on when to submit public comment, which can be done by clicking here.

Earlier this week, a federal judge declared the foundation of President Barack Obama’s health care law unconstitutional, ruling that the government cannot require Americans to purchase insurance. The case is expected to end up at the Supreme Court.

US District Judge Henry E. Hudson based his ruling on grounds that the Constitution’s Commerce Clause regulating interstate commercial transactions could not be interpreted to allow the federal government to compel a person’s decision to buy or not to buy a product—in this case, health insurance.

In his order, Hudson said he will allow the law to remain in effect while appeals are heard, meaning there is unlikely to be any immediate impact on other provisions that have already taken effect. The insurance coverage mandate is not scheduled to begin until January 2014.

Hudson is the first federal judge to strike down a key part of the law, which had been upheld by fellow federal judges in Virginia and Michigan. Several other lawsuits have been dismissed and others are pending, including one filed in Florida by 20 states. In practical terms, the decision merely hands action off to the top court, in which the nine Supreme Court justices can decide whether to hear the case or not.

White House health reform director Nancy-Ann DeParle said the administration is encouraged by the two other judges who have upheld the law. She said the Justice Department is reviewing Hudson’s ruling but that implementation of the law will proceed on track.

Regardless, Hudson’s ruling injects another note of uncertainty that will complicate efforts by Pharma and other industries to move beyond the ideology of reform and focus on practical issues linked to implementation of the more than 900 provisions of the bill requiring follow-up regulatory action. At a time when China, other key emerging markets, and the industrialized bloc of nations are all focusing on healthcare as a key strategic sector, this lack of predictability represents a potential strain on US competitiveness. If in the unlikely event that court action scuppers reform, Big Pharma will suffer some unintended consequences, the most important of which is a lower potential customer base—i.e. the currently uninsured—as well as more pressure on the pricing front. Most economic analyses show that the absence of an individual mandate to purchase insurance drives up insurance premiums, raising the visibility of high drug costs and adding to compliance problems among patients.

Recent studies by the National Comprehensive Cancer Network [NCCN] and the American Society of Clinical Oncology (ASCO) predict a large workforce shortage among oncology physicians.  According to ASCO, while the number of oncologists is expected to increase 20 percent by 2020, patient demand is expected to grow by 48 percent. According to Practical Clinical Exchange, an organization that provides educational opportunities to meet the needs of nurse practitioners (NPs) and physician assistants (PAs), NPs and PAs may be the answer to this upcoming shortage.

The ASCO study results showed that physicians who work with NPs or PAs in their practice saw 10 percent more patients per week. This was true with NPs or PAs who performed advanced patient care activities—defined as assisting with new patient consults, ordering routine chemotherapy, or performing invasive procedures. With only 56 percent of clinical oncologists working with NPs and PAs, the potential to expand capacity simply by adding an NP or PA to the mix is great.

According to Practical Clinical Exchange, the roles of NPs and PAs may be underutilized in oncology practice. Researcher Maura Polansky, MS, PA-C, and colleagues write in the November issue of the Journal of Oncology Practice that ASCO may be understating the current roles of these clinicians. Polansky found that PAs were writing chemotherapy orders and prescriptions, as well as performing invasive procedures at a much higher rate than reported by ASCO. Additionally, they found that oncology PAs participated in clinical trials at a rate four times as high as reported by ASCO.

Polansky also pointed out that to effectively increase the use of NPs and PAs in oncology, more of these clinicians should be attracted to work in oncology. Considering the limited exposure to oncology in their formal training, oncology continuing education and training opportunities tailored to these clinicians is essential for NPs and PAs to perform advanced patient care activities, fully practice to their potential, and best improve the efficiency of oncology practices.

The survey is also useful in documenting the importance of physician assistance in enhancing the role of drug therapy and assuring appropriate use.  Incorporating this emerging stakeholder in advocacy work linked to oncology product launches is important but must be handled with discretion – oncologists remain the essential front line in what can only be described as an increasingly complex treatment environment, where the choices facing clinicians and patients are many.

For more information on this survey, please visit the American Society of Clinical Oncology.

Pfizer’s Board of Directors has elected Ian C. Read, currently head of the company’s global biopharmaceutical operations, as President, CEO, and director.  Read succeeds Jeff Kindler in a transition that was sudden and unexpected:  occurring on a Sunday night, by early Monday morning Kindler’s name was nowhere to be seen on the company’s directory or website.  Orderly succession planning it was not, which indicates that Pfizer is once again at a strategic crossroads that could either profit or penalize investors.

Read, 57, joined Pfizer in 1978. Since 2006, Read has led Pfizer’s Worldwide Biopharmaceutical Businesses, which now comprises five global business units—Primary Care, Specialty Care, Oncology, Established Products, and Emerging Markets—and accounts for approximately 85 percent of Pfizer’s annual revenues. Read can point to a track record that is truly global—his latest assignment heading the human pharmaceuticals business units buttressed his lengthy background in managing Pfizer’s international operations with exposure to the mission-critical US market, where he directed an overhaul of the company’s sales and marketing operations around primary care.

The abrupt timing of Kindler’s departure suggests that the company still has some work to do to ensure that revenues deriving from the Wyeth merger will compensate for the unprecedented loss in 2011 of exclusivity for the world’s largest selling drug, Lipitor.  A recent company filing to the US SEC indicates that much of the burden is going to fall on employees, at least in the short-term, with expectations that as many as 3,000 to as many as 5,000 additional jobs will be shed in 2011, on top of the 19,000 Kindler committed to as part of the Wyeth combination. Analysts are expecting more scale efficiencies, noting that Pfizer’s current annual operating costs are still in the high $30 billion range. Kindler focused those efforts on R&D and sales—the company is moving gradually toward an all contract sales force—but allowed staffing to balloon in less prominent platform functions like communications and public affairs.

The Board will elect a non-executive chairman from its current membership at its next regularly scheduled meeting, which will take place within the next two weeks.  That choice is going to be important:  if the Board opts for an activist business leader member like former Gilette CEO Jim Kilts or ex Armstrong Holdings chair George Lorch, then expect a commitment to more internal change, particularly in resolving a longstanding internal dispute over the scale of its investments in in-house R&D, as well as a wide-open race for whoever succeeds Read to the top post. In fact, Read has to be seen as a transitional figure whose background in operations will help right the ship for the next phase—making the combination with Wyeth a viable business capable of generating long-term organic growth, rather than simply an amalgamation of adjacent businesses.

It must be noted as well that the business unit structure put in place during Kindler’s tenure can facilitate the separation of different business lines into independent entities, much like the deal Pfizer engineered with GSK last year around the HIV therapeutic franchise. This may be one answer to the widespread conclusion that Pfizer has become too big for anyone to manage successfully, particularly when the stakes depend on institutionalizing that elusive combination of scientific creativity and organizational enterprise. A big culture change will require that, and there is no management cookbook that the new team can apply to make it happen, because it’s personality-driven.

The US Court of Appeals for the Second Circuit recently ruled that a Vermont law restricting the commercial use of data relating to physician prescribing patterns is unconstitutional. Judge John G. Koeltl wrote the majority opinion overturning an April 2009 US District Court decision, concluding the Vermont law “is a commercial speech restriction that does not directly advance the substantial state interests asserted by Vermont.”

The federal appeals court ruled in favor of IMS Health, SDI, and Source Healthcare Analytics, three health information companies that jointly filed a lawsuit seeking to prevent Vermont from enforcing the state law enacted in July 2009.

Vermont and other states in favor of laws restricting the use of prescription data believe, according to John Kamp, executive director of the Coalition for Healthcare Communication, that with limited knowledge about which brand-name drugs are selling, physicians will more often prescribe cheaper generic drugs, thus saving states money on medications for Medicare patients. “The theory from the states’ point of view is that ignorant doctors prescribe cheaper drugs than doctors educated by a commercial sales force,” says Kamp. According to the Coalition for Healthcare Communication and others who oppose such laws, this ban on sharing such data violates the First Amendment.

“We are very pleased with today’s decision. Patients will benefit from a more transparent, safer, and more competitive healthcare system as a result of this ruling,” said Harvey Ashman, IMS senior vice president and general counsel. “These types of laws do nothing to advance public health and in fact pose a risk to patients by arbitrarily delaying information on new medicine or warnings on existing medicines.”

While more than 100 similar bills have been introduced in state legislatures across the country, only three have been passed into law and none since 2007 when Vermont and Maine joined New Hampshire as the only three states to do so.

The three companies that brought the suit and others affirm that commercial access to physician prescribing patterns has great public health value. That particular information is used for a wide variety of purposes, including to study prescribing trends, monitor the safety of new medications, support safety-oriented risk management programs, prevent prescription drug abuse, expedite drug recalls, recruit for clinical trials, and study treatment variability and outcomes.

“These laws are bad public policy,” says Kamp. “They put a premium on ignorance of doctors. And, the laws violate the First Amendment rights of companies to tell the truth about their product.”

To read the full Second Circuit Court of Appeals decision, click here.