Clayton Christensen

A keynote speaker at the 9^thAnnual SaS Health Care & Life Sciences Executive Conference on May 10, ‘disruptive’ author of The Innovator’s Dilemma and Harvard business professor Clayton Christensen sat down with PharmExec to discuss the future of the pharmaceutical industry, and what Mitt Romney could bring to the White House.

Ben Comer: Like tech companies a decade ago, many pharmaceutical companies are now outsourcing more and more of their core competencies in the name of efficiency, often short-term efficiency. Do they risk losing their core in the process?

Clayton Christensen: We absolutely worry that that’s exactly what is happening. I wrote a book called The Innovator’s Prescription, about the future of healthcare, and chapter nine is our view of where the pharmaceutical industry is headed. But the genesis is that, when we thought that diseases were defined by their symptoms rather than their causes, there were big blockbusters out there that were very attractive for [treatment]. And now we realize that a disease should not be defined by the symptom, but rather by the cause. It used to be that the FDA clinical trials process was like a final exam. If 30 to 35 percent of the patients responded to a drug, it was judged as a passing grade. And if your percentage was less than that, then you failed the test. But now we realize that if only 20 percent of the patients responded, then there must be something different about those 20 percent. They must have a different disease than all the rest. Rather than just project it, now we understand that managing clinical trials is an indispensable element of drug discovery. And so if you outsource that, then you’re outsourcing the activities that in the future will be the critical capabilities.

BC: How can big pharma companies foster a culture of innovation in the context of a large, lumbering bureaucracy?

CC: Rarely is the development or the absence of a product the problem in a company. Almost all companies are awash in ideas for new products. What they don’t do – and they could but they choose not to – is to create new business models that are tailor-made to the characteristics of the new product. You come up with this great idea, and you can’t do anything with it unless you get funded. To get funded, you have to, little by little, morph and shape and modify your business plan so that it fits the current business model. If it doesn’t fit the business model, they don’t perceive that it will be successful. So what comes out of the process is incremental innovation after me-too innovation. It’s not that the original idea wasn’t innovative, but in order to get it funded, you have to change your strategy so that it ultimately conforms to your company, rather than to the problem or unmet need in the market.

BC: Is it a viable strategy for pharma companies to spin out a separate entity, away from headquarters, to facilitate new kinds of development?

CC: It doesn’t have to be totally thrown outside of the corporation, but it needs to be a different business unit underneath the corporate umbrella. And you have to manage it at the level of the CEO, differently, than the mainstream. Almost never do you need to accomplish or accept lower profits when you set up this new business. But the formula by which you make acceptable money will be different.

BC: Is current US public policy harming or helping innovation in this country?

CC: I think that it facilitates a particular type of innovation. But I don’t think government is the core problem. I think finance and hedge funds and private equity funds are the big bad actors in the system. Investors like hedge funds and private equity funds and venture capitalists have a measure of performance called internal rate of return. And internal rate of return is a ratio; the way you get internal rate of return up is that you only invest in things that have a very short time horizon. If you just invest more and more for faster and faster quick wins, IRR goes way up. And you think that you’re innovating, because of the quick returns you’re getting. But what that means is that you can’t invest for the long term, because the truly disruptive business units don’t pay off for five to eight years. So then because the government says, ‘Well if you keep your money in the investment for 366 days, we’ll count it as long-term capital gain.’ There isn’t anything about 366 days that is long term. So the government should re-frame that, so that if you keep your money in for five years, there’s no tax, and if you keep it in for eight years, it’s a negative tax. All of these massive amounts of capital that are in private equity funds and so on, you re-purpose it through the tax code, and it would behave very differently, and invest in very different kinds of things.

BC: What is your message to the pharmaceutical industry, and is there a solution to the productivity gap?

CC: I think I know the right question, but I don’t know the answer. I would love to get together with deep thinkers in the industry to sort it through. As a general rule, when other industries are at this kind of an intersection, what has happened is that, at one stage in the value-adding stack in an industry, at one stage if it’s becoming commoditized and modular, you cannot make money at that level in the stack. But the whole industry doesn’t become unprofitable, rather its activities above and below that original [product or service], that’s where the money is made. And that has to be happening in the pharmaceutical industry, but I can’t see what it is yet. By example, the auto industry is becoming commoditized; cars are being assembled by sub-assemblies from tier-one suppliers. Anybody can get these modules and snap together a car. So it’s really hard to differentiate your car from anybody else’s car, so where the money is being made is in the subsystems that define the performance of the car, and by activities that sit on top of that, like OnStar. That’s where the money is made. Somehow, I have a sense that selling the pill, in the future, is not where the money will be made. It will be the attachments on top or underneath it. I haven’t heard anybody articulate what those look like, but I think they’re emerging, and we need to identify them.

BC: I read in The New Yorker that you’ve lived near the Romneys, and both you and Mitt are active in the Mormon church. Do you have any thoughts about a President Romney?

CC: He’s really a good man. He’s very smart, but it’s true that he was raised in a wealthy home, in a prominent home, and then accrued even more wealth, and his kids have been raised in an even more prominent family. And that’s actually about the toughest environment in the world to be raised in, and have your head be screwed on straight. It truly is. And so people think of that, that he’s not connected with the real world. But he has raised his family to create unbelievably good kids. But more important than that, in the Mormon church, we don’t pay professional ministers to teach us and to take care of us, but we help other people and teach each other the gospel of Jesus Christ. What that means is – because the members have to take care of one another – you meet everybody. And so Mitt was the bishop of our church, and bishop just means that he had responsibility for about 500 members of the church. And he had a family, he was trying to build Bain at the same time, and to be the bishop meant that he spent, on top of all that, 30 hours a week. And I don’t know if you ever saw the first Star Wars movie, but Luke Skywalker came in to meet Han Solo at some kind of a café, and the band that was playing, there was one of every conceivable form of life in the band, that’s what a Mormon church looks like; one of every conceivable type of person. If you’re the bishop, you’ve got to help all of those people. Under his leadership we built three significant new congregations in the inner city, in three different languages. So he really has seen a lot. I don’t think journalists have really realized, when he left [Bain & Company], the consulting firm, to create Bain Capital, that was going great. And the original owners of Bain & Company decided to sell their ownership stake to the next generation of partners. In order to pay the selling founders off, they had to take all of the profits the consulting activity made, and then some, to pay off [the owners]. And these people were just sitting at the side, rolling it in. As a result, Bain & Company would have gone bankrupt in two weeks. So they said, ‘Mr. Romney, could you please leave [Bain Capital] and come here and take presidency of Bain & Company, and somehow you have to prevent bankruptcy.’ So Mitt sat down with the six selling partners, and essentially convinced them to agree to take one-sixth of the amount of money that they thought they were owed, and got them to feel good about it. Just the way that he got these people, instead of knocking their heads together, he led them to agree on something that was very counterintuitive to all of them, and that is the idea that we are all best served if we try to help the other side win. I just think that someone with that instinct in the White House, in the climate of Washington, that would be a good skill.

Christensen’s new book – How Will You Measure Your Life? – takes his experience and thinking in business and applies it to personal decision-making. He has been the subject of lengthy profiles this month in both Bloomberg Businessweek and The New Yorker.

New insights into customer behavior fostered by the revolution in information technology are finally being applied to the age-old quandary of why most patients stop taking prescribed medications after a few months of therapy. This was a key conclusion of last month’s 11th annual Forum on Patient Adherence sponsored by Pharm Exec’s sister organization, the Center for Business Intelligence (CBI). The optimism of the more than 200 registered participants was reflected in what has become a regular feature of the Forum: the Strategic Patient Adherence Awards, which recognize excellence in adherence programs administered by drug manufacturers, PBM organizations, and—for the first time this year—employers.

“Our 2012 awards reflect the increasing capacity to leverage technology so that it can be tailored to the needs and motivations of the individual patient,” said judging panel member Robert Nauman, principal at BioPharma Advisors. “The insights follow—and the harvest is rich.” At a Forum discussion on the winning entries, all the judges noted that technology was enabling improvements in the design of programs, including the ability to reach out to more constituencies and to build coalitions, with a multiplier effect on results. Applicants are also doing better in addressing ROI, which is essential for maintaining support for these programs among senior management. “We call it the ‘why factor,’”  Larry Boress, CEO of the Midwest Business Group on Health, said during the panel debate.

PBM giant Medco—now Express Scripts, after a merger with its former rival approved earlier this spring—snagged the award in the managed care category for its Specialist Pharmacy Care model, which builds on a network of Therapeutic Resource Centers staffed by trained Specialist Pharmacists to provide members with customized information on their condition. This takes the form of periodic written materials, alerts, and, if necessary, direct contact by phone or in person.  The company applied its proprietary Health Action Plan software technology to develop individual profiles of member’s priority conditions, number of medications, gaps in treatment, and potential opportunities for cost savings through preventive care interventions. The network of Specialist Pharmacists has been trained to interpret this highly integrated data set and to make appropriate contacts with the member or his/her physician on ways to ensure medicines are taken for the duration of treatment.

To obtain the greatest benefits, the initiative is focused on 15 prevalent chronic care conditions that account for some 96 percent of Express Scripts total pharmacy spend. “Our company has enormous channels of data that we have synthesized into a tool directed to empowering the pharmacist as advocate for the patient,” Ellen Franzblau-Isaac, Director, Clinical Quality, told Pharm Exec. “Their access to this easily referenced data brings the pharmacist to another professional level, much higher than the norm. It has had a positive impact on member engagement as well as the job performance satisfaction of the employees who serve them.” Franzblau-Isaac relates that the toughest part of the program is classifying members within the 15 covered conditions, since it is often the case that members suffer from multiple chronic disorders.

Coming out tops in the employer category was Chicago-based Evive Health, which serves a varied industry client base with programs that apply insights from data to create personalized adherence communications that shape and change patient behavior, in a positive way. It was recognized for the breadth and variety of these communication programs—applied to a pool of nearly one million covered lives since 2008—in improving evidence-based care, including medication adherence, using new tools like the lessons from behavioral economics. “We have borrowed much of our engagement strategies from outside of healthcare,” relates CEO Peter Saravis. The main delivery channel is direct mail, but the messaging is cutting-edge. “Our goal is not simply to remind the patients about taking their medicine. We build beyond that with approaches designed to elicit a response and persuade them to reveal something about themselves that we can apply to good use later, this time emphasizing prevention and wellness extending beyond the simple act of taking the pill. It’s all about the right information, at the right time, and in the right way.” The judges were particularly impressed by Evive’s ability to document an average 15 to 28 percent increase in adherence over baseline in the populations covered by its sponsor programs.

Rounding out the winners was German-based drug manufacturer Boehringer Ingelheim, which applied the findings of a novel 2009 study on factors that lead patients to cycle off medications—The 11 Dimensions of Non-adherence—to create a highly focused, pharmacist-driven, patient-specific adherence program covering some 950 patients using prescribed B-I chronic use medications. The Patient Empowerment Program was built around a customized non-branded website, integrated with sophisticated pharmacy management software and offering easy access for participating patients. Patients start the process by completing an assessment, which generates an individual patient profile from the 11 dimensions of non-adherence. This profile provides an ongoing series of printed intervention tactics to share with patients when they fill or re-fill a prescription.

On the pharmacist side, a simple training module was designed to introduce the concept of the 11 dimensions and to demonstrate how to administer the program, from using the website to guidance on how to structure the discussion with patients. “Our goal from the start was to design a program that conforms to the workflow of the pharmacy—something that would complement their tasks, not compete with them,” Robert Belknap, Executive Director Trade Sales and Operations, told Pharm Exec. There is a perception that all a pharmacist does is point to “sign here” when you pick up a prescription. “This is an untrue depiction of a profession that wants to do more and has the skills and accessibility to get results from patients. Our program is designed to unlock the potential of the profession by making it easier for them to engage with the person on the other side of the counter.”

For its part, B-I has already unearthed a rich pool of data and insights from the program and is now considering how to “seed it” for a wider audience. “The template is literally something that everyone can own,” says Belknap. “There is no downside, as it represents a win for all—patient, payer, retailer, and manufacturer.”

While French politics has taken a decisive shift to the left with the election of the country’s first socialist president for 17 years, it does not look like Francois Hollande will be changing or derailing any of the existing — and sometimes quite radical — healthcare reforms that the outgoing Nicolas Sarkozy had introduced over the last few years.

Acccording to IHS Healthcare, Hollande will still pursue Sarkozy’s planned price cuts, concentrating on better control of drug prescriptions and volumes delivered. And the new incumbent agrees with Sarkozy’s planned policies to introduce legislation on physicians’ extra-billing (currently, some French doctors are allowed to exceed the limit for reimbursement for consultations and acts) and to renew focus on the limitation of fraud.

For its part, the French pharma industry used the recent Presidential campaign to call for more favourable policies and to boost its public image. To date, it has been worried by the narrow focus on cost containment by successive governments, which is most apparent in the form of various taxes on the pharma sector.

The French pharmaceutical industry association, Les entreprises du médicament (LEEM), has calculated that these taxes account for 5.5% of annual turnover, in addition to other burdensome levies imposed upon all industrial sectors. Officially, the taxes are described as “contributions”, and were introduced to reduce the French health system’s huge deficit, for which pharma was partly blamed because of high product prices. Pharma companies have rejected such accusations, pointing out that since they must negotiate in advance with the government about product pricing, the government is fully aware of, and involved in, the decision-making. The industry believes that the government should pay more attention to the non-pharmaceutical costs within the healthcare system.

Pharmaceutical-specific tax rates have increased steadily, and are likely to continue to do so for the foreseeable future. They secure substantial revenue for the government, which is struggling to deal with the eurozone crisis. These types of industry-focused taxes are likely to continue in a bid to avoid imposing tax rises on the general population. Currently, 13 pharmaceutical-specific taxes generate revenue for the government, but are an irritant to the industry since they can represent between 50% and 100% of companies’ annual corporate income tax.

One, the Promotion Tax, taxes promotional expenses for medicines that have a marketing authorization in France and are included on the official list of reimbursed medicines. Initially, it was set at 5%, but it is now charged at 19–39%, depending on the nature of the company’s promotional expenses. Currently, it brings in between €130 million and €165 million per year for the government. One criticism of the Promotion Tax is its lack of clarity and ambiguous wording, about which certain companies have challenged the government.

Another tax (introduced by Article 12 of the law for Health Insurance Financing of 2004) is levied on sales of pharmaceutical products, and nets annual revenue from €215 million to €250 million. This tax is charged at 1%, but does not apply to exported, generic and orphan products. Since 1999, companies have also had to pay a tax on the basis of the annual increase of sales to prevent an unaffordable increase in health expenses caused by product sales.

French pharma’s ongoing criticism of the tax system was starting to make a mark on the previous government. In 2009 Sarkozy gave a keynote speech to the Health Industries Advisory Board (CSIS), in which he publicly acknowledged that healthcare expenditure could not be viewed solely on the basis of cost containment. In January this year, the CSIS reviewed the tax system and agreed that a simplification of the various measures was required. It recognized that the industry’s views were not being taken into account, and that some of the tax provisions did not appear to align with other branches of government policy to stimulate industrial competitiveness.

But the Sarkozy government remained committed to making difficult cost-cutting decisions and, before the election, Finance Minister François Baroin stated that it would not back down from the policy of containing medical spending. The incoming government faces the same financial challenges. Since considerable revenue comes from the long-standing taxation measures, it is unlikely that any tax reform will be to the satisfaction of the industry.

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According to a new report from comScore, which works with health industry marketers to quantify the success of their online programs and provides competitive intelligence and benchmarking solutions, the most effective and successful digital advertising for pharma is a message that can engage the audience not just by being interactive, but by making the right type of information available at the right time, in the right format, targeted to the consumer at exactly the moment they’re looking for it.

Recently, David Shronk, senior director of the pharmaceutical division at comScore, sat down with Pharmaceutical Executive to discuss what these benchmarks mean and how this data can be leveraged for maximum ROI in online advertising.

PE: What benchmarks are there to measure the success of online advertising in pharma?

DS: We’re looking at brand equity-type benchmarks associated with aided and unaided awareness, favorability to the brand, intent to take action—whether that’s to search some more for information or whether that’s intent to talk to a doctor or make an appointment.

In every campaign and every measurement we do, it always comes back to customizing it a bit towards the clients’ objectives. And so if they’re trying to drive interest in new starts with their drugs, in the end I think the benchmarks that are important are … you always have to consider the soft and the hard measures. Soft measures being: are you driving positive brand equity and brand experience? Those are the awareness and favorability type measures. And in the hard metrics, are you driving short-term revenue? I think in the end you have to have a mix of both as a marketer. Short-term revenue, especially in the last few years with tightened budgets, is extremely important, so I think the follow-through to Rx conversion is usually the ultimate goal. But you usually don’t get follow through to Rx conversion unless you have a good brand equity or good brand experience with your consumers. So I think it’s really important to be able to measure both.

PE: So the measures of success tend to be a little bit different depending on the objectives of each campaign at the start?

DS: Yes, because some campaigns may have a different focus depending on where companies are in their lifecycle. Launch brands are more focused on the brand equity and awareness; those who have been around for a couple of years are really more short-term revenue oriented rather than focusing on driving new starts efficiently with their budget; and brands toward the end of their patent life are more focused oftentimes on building the CRM databases and getting discounts and direct-response advertising out there to get coupons and keep annuity up. So it’s the idea that depending on where you are in your lifecycle and your strategy, things could change a bit depending on where you’re going.

PE: The report states that consumers are moving online for health information so rapidly that growth of health information online has completely outpaced the growth of the Internet as a whole. What factors contribute to this migration for health information?

DS: I think online growth has basically peaked over these past few years—I think everyone who is going to get online is basically online at this point. It used to be—when Internet advertising started 10 years ago—when you looked at changes in the Internet population, you knew that the Internet population was different than the American population. And at this point, the Internet population has become the American population.

But I think, externally, the main driver that gets people to go online is privacy. Going online for health information is a way for you to get private information no one else has to be involved in, and you can delve in. The content has exploded in the last few years, not only through publishers but also user-generated content online. The ability of people to go online and share stories and that community growth has impacted the online migration dramatically also. I also think it’s the aging of America, the baby boomer generation getting older; they’re on a lot of medications and a lot of illnesses occur as people get older. So I think it’s a combination of those external forces.

I also think there’s an internal push in a way—when you look at pharma’s role in this, pharma sees online as the future of how they’re going to interact with customers. We all know budgets have tightened over the last five years or so, but pharma continues to experiment with online and they continue to grow their online presence. So there’s a lot more push in this direction—they have a smaller budget overall, but there’s a lot more of it going to online every year. If you look at the amount of healthcare content that’s available online now versus a few years ago, it’s staggering. Ten years ago, WebMD was the one place you would go and it still is in some sense. But now you can go to something like migraine.com and just talk about migraines. And you have tons of user-generated content like that.

PE: So now that these users are all online, how can pharma leverage that in a genuine, interactive way, rather than using the Internet as a new tool to push out interruption-style advertising? Where does interaction come in?

DS: Interaction is extremely important. The biggest example that we see in our benchmarks has to do with search engine optimization (SEO). Facilitating a natural search that leads to a branded website has the greatest impact on when people go to get prescriptions. Can you interact or be there when a customers is ready to interact with you or engage with you? And can you be in the right place at the right time? That’s the magic moment for all marketers and that’s what they strive for—when someone gets to the right part of the patient continuum and they’re looking for your information, can you get them to the right place on your website or within your marketing material to be able to motivate them to take some action? The benchmarks report really shows the importance of SEO and people getting there naturally—NOT through paid advertising—but just getting there naturally as they seek or search along the Internet.

Beyond that, the whole idea of a patient continuum is pretty important. People come to websites or search for information online for a variety of reasons, and that information ranges from symptom identification to product discounts if they’re already on a script. I think the interaction—if you extrapolate a little beyond our benchmarks a bit—engaging people where they are in that patient continuum is extremely important. And they could be looking for symptoms or they could be looking at discounts—just providing an interrupting brand message may not be the right element for someone who is early on in the patient continuum.

In the end, we know that brand websites are really key in the ability to get people to talk about a product and begin using that product. We know that the interruption advertising of banner ads and even RMU (rich media units), while they have some benefit, are nowhere near as effective as the branded website. So if you extrapolate a little bit, it’s the engagement element that’s really important. In the future, how is promotion going to change and how are people going to engage and interact in different ways, to be able to evolve this beyond just a brand website? So that’s where the potential lies—how do we continue to get past just interruptions and engage people where they are in the pathway, with the right type of content, to be able to move them along the pathway, to move them from symptom identification to thinking about products?

One thing that we see in our studies often is that everyone has an intent and a communication strategy for their website and within their media online—whether it’s data search or what publisher they’re going to go with, or what kind of creative message they have. And what ends up happening a lot of times is there’s a large gap between planning a campaign or planning a website and (after med/reg/legal review) the actual websites that’s created. For example, the greatest intent may have been to have someone who’s searching for safety information be able to get to that safety information on your website. But sometimes what ends up happening is that the person searching for safety information is getting directed to recipes on your website or a discount card sign-up or something like that. So the intentions are there, but in the end result based on med/reg/legal review or other complications is that oftentimes there’s a lot of mismatches between what people want and what people get or are linked to when they get to a website.

PE: Are there elements of the branded websites that are different now than they were 10 years ago? In terms of more information geared towards the patient, more symptom information, safety information—what has changed to accommodate the more informed, empowered patients’ needs?

DS: If you could look at pharma websites from 10 years ago, you’d see how simplistic the websites were, and how in the early days there really wasn’t as big of a med/reg/legal presence as there is today. The most dramatic change to the websites that you see over time is that the visibility and the prominence of safety information has changed dramatically. The real estate and the amount of call-out that safety information takes up now is staggering when you compare it to years ago. What’s interesting in pharma is that because of how the FDA has regulated—or as a lot of people would say has not really regulated—how to promote online, the pharmaceutical companies are being very conservative in their use of technology. And you can even see it in the designs for their website and the use of video and things like that—the pharmaceutical companies are extremely conservative in nature, partly because the FDA has not provided true guidance on how to deal with user-generated content and social media. There’s no true guidance to be able to help people do this, so I think you see pharmaceutical companies lagging behind other industries in their ability to evolve. While their sites look very different from years ago, you don’t see a lot of the same capabilities on pharmaceutical sites—especially around user-generated content—as you would see in other industries.

I think in the end that grey area of uncertainty due to lack of guidelines is more concerning, and to tell you the truth I think the grey area is probably more effective in putting handcuffs on the industry than an actual guidance would be. I think the fear has caused everyone to remain stagnant. So I’d love to say that there are lots of differences in pharma websites today, but when you look at pharmaceutical websites versus non-pharma consumer websites, it’s probably the lack of change over time that’s actually the more interesting thing.

PE: So you’re not really seeing a difference in terms of patient-centered content or pages directed specifically to the patients?

DS: I think pharmaceutical sites are definitely trying to become much more patient-centered, and they’re trying to decide on a strategy around whether they’re promotional or whether they’re patient-centric, and what that means. When we first started, the website was just another promotional channel in a lot of ways, and we see it as people struggle with trying to determine their strategy. Is the website just a promotional arena with an objective to try to get people to do the most important things that the brand would like to communicate? Or is it a customer service portal along with a promotional site, where you’re able to try to be customer-centric and service all different kinds of people’s needs, from diet information to discounts to safety information to efficacy. You can see that companies are having that struggle, but in the end the difficult part is that they have to drive traffic there, but they also have to make sure that they pay for everything that they’re doing. In the end, the traffic that is ready to engage is the most valuable. Communication strategies have always been focused on simple communication, and when you go customer-centric, nothing is simple when you’re customizing for everybody’s needs.

The way you become more patient-centric is by understanding who is coming to your websites, what they are coming for, what their needs are, and how you can address them. Does it come down to consumer literacy, to better explanation of safety information, are they looking for efficacy, or are they looking for financial support for their healthcare needs? And figuring that out and allowing patients to get to it in the most efficient way, whether that’s deep-linking them to their content as best as you can, or making your website user-friendly so that they can get to that information quickly and easily—that’s very important. So that’s where the patient-centricity can come in. When people get to the right content they usually have better satisfaction scores. And usually, whether it’s better satisfaction or better engagement with your website, both of those things end up equating to better brand equity and better pull-through of doctor visits and prescriptions.

PE: One of the words that stood out in the benchmarks report was impact, and how community engagement and interactivity online offers a greater impact that traditional media. How and why can it offer a greater impact? Is it an emotional impact or a behavior change impact—where are you seeing a difference?

DS: The great thing about online is that regardless of whether it’s banners or websites, online is not only a promotional avenue, but it also is supportive of all other media. So to your point, people are interrupted by television ads—a forceful interruption when you’re trying to watch House, MD. And the difference is, online is there and is trying to interact and engage with you when you’re already in the art of surfing. If you think about true surfing, you control left and right for the most part, but the wave is bringing you in. And when you think about how that fits into the Internet, you’re either looking for information, which is important, or you’re surfing along not sure where you’re going, and you’re engaging with content. So either way, whether you’re hunting for something or you’re surfing and just come upon it, you’re engaging with the content and you’re actively touching that material.

In the end the big difference is that you have a better chance to get brand equity online, and what we see is that at least at this point, the branded websites continue to have the best impact, compared to anything else online. And while cross-media is not in this report, we see that it’s important, because the brand website is not only promotional—it’s also supportive. A TV ad may drive people to the Internet, and the Internet will drive them to the brand website. So the website can be promotional, but it can also support your TV ad or your office ad or other marketing efforts. That’s customer engagement—now they’re not just being interrupted. At that point they’ve got a relationship with you. They’ve been to your website, they’ve actively searched it, they’ve been through it, and hopefully they’re generating some brand equity and that’s helping them in some way. And it’s not just pushed upon then—they’re actually choosing to engage with your content.

That’s extremely important online. It’s private, it’s engaged, and I think it’s something they can take with them. More and more brands are finding that if you can optimize media online to people who are searching for information, that’s where the sweet spot is, and you start at the sweet spot and you build out. You don’t start at general awareness with a $150 million TV ad anymore. You try to get the people who are searching for your information first at the right publishers first, and then you build your media plan out from there.

PE: What are the key takeaways and what can pharma do with this information to improve their websites or increase their ROI from online advertising?

DS: When I first came to ComScore from GSK two or three years ago, we were still in this realm where you had people who believed the Internet was the future and you had people who were still kicking the tires and saying, ‘Is it going to work or not?’ The big thing that we take away is that not only do you have impact by looking at our benchmarks—you can use them to help prioritize strategy and determine how you’re going to do your customer-centric advertising. On top of that, while our benchmarks are looking backwards and giving you insights, I still think that there’s a lot of innovation occurring and that the web is generally changing, so while our norms are telling you how things have always happened in the past, there’s a lot of innovation that’s going to continue to occur online in the future. You can use these benchmarks to prioritize and understand, but you also need to continue to experiment online. And as technology increases, as communication increases, and as your capabilities to engage customers changes—more video, more user-generated content, etc.— you need to be able to utilize this type of results-oriented research to inform your opinions about not only what happened in the past but how you’re going to extrapolate that into the future.

Drug shortages, particularly those for sterile injectable drugs, took center stage last year. In response, industry and the federal government, including FDA, took steps to address the problem. Progress has been made, and Congress is further evaluating if additional steps need to be taken.

Late last month, the Senate Health, Education, Labor and Pensions (HELP) Committee approved the Food and Drug Administration Safety and Innovation Act. The bill, which now goes to the full Senate for approval, reauthorizes the FDA user-fee program and also contains measures to strengthen ways to deal with drug shortages. The bill proposes revising the timing of advance notifications of possible shortages, requiring a strategic plan on shortages, broadening the definition of what constitutes a meaningful disruption of drug supplies, and creating a process for physicians and others to report evidence of shortages, as outlined by the American Medical Association (AMA) in analyzing the bill. Industry groups, such as AMA and the American Society for Health-System Pharmacists, support these measures.

In a blog and in testimony before the Subcommittee on Health of the House Committee on Energy and Commerce, which also is considering  measures to address drug shortages, FDA Commissoner Margaret Hamburg outlined the progress made in reducing drug shortages. Last October, President Barack Obama issued an Executive Order that directed FDA and the Department of Justice to take action to reduce and prevent drug shortages. Since the issuance of the Executive Order, FDA has successfully prevented 118 drug shortages and reduced the number of drug shortages. According to Hamburg’s blog, 42 new drugs in shortage have occurred in 2012 thus far compared to 90 new drugs in shortage in a comparable time period last year.

In her testimony, Hamburg outlined FDA efforts. When it learns of a potential shortage situation, the agency works directly with the affected manufacturer in several ways: developing temporary workaround solutions to manufacturing or quality issues; consulting with the manufacturer to resolve the underlying problem; or helping the manufacturer find additional sources of raw materials. It also expedites the review of submissions by the manufacturer that may alleviate the drug shortage while continuing to meet safety standards, which may include requests to extend the expiration date of products, make manufacturing changes to increase capacity, use a new raw material source, or change product specifications. FDA can also use its regulatory discretion for a manufacturer to continue marketing a medically necessary drug if the manufacturer can develop a method to resolve a quality issue prior to the drug’s administration. In addition to working with the affected manufacturer, FDA also does the following: works with third parties to determine whether they can help avoid or minimize the shortage; expedite reviews of generic applications for products facing potential shortages; and in certain situations, when a shortage cannot be resolved immediately, FDA can use its regulatory discretion for the temporary import of non-FDA-approved versions of critical drugs after ensuring there are no significant safety or efficacy risks for US patients.

These measures have had impact, but a question is whether more systematic means should be in play. Some commentary on this subject have suggested national stockpiles, such as those used for vaccines, be used to avert shortages. Whether this is an appropriate solution is unclear. What is clear, however, is that strengthening regulatory oversight to prevent or reduce drug shortages is an important goal for industry and consumers alike.

At the Activate Networks Summit in Boston on Tuesday, a mix of social network scientists, pharmaceutical executives, academics and others convened to discuss the power of social influence, online and offline (but mostly offline). The key insight for pharma brand marketers, repeated by many speakers throughout the day, was that relationships of influence, not individual physicians, are where the big opportunities lie for changing behaviors. But how are those relationships identified and targeted?

By understanding the patient, or more specifically, who treats her/him. Instead of the timeworn tactic of purchasing a list of high-decile prescribers and spending a majority of the available resources targeting them, it’s better to start with de-identified patient claims data to determine “patient flow,” or which physicians have patients in common. From there, quantifying the level of influence between physicians based on how a patient is treated in toto leads to the identification of connections between physicians. “One physician may not write as many prescriptions, but if he’s the nexus of a network [between many other docs], that’s incredibly important,” said David Moore, senior group manager, marketing science at Genentech.

Colorful dot graphs abounded at the summit; Moore’s presentation featured a network graph of cardiologists, endocrinologists and primary care physicians, and the web of influence each physician spins. Smaller nodes or clusters of connected physicians (in terms of their relationship to each other in a social network) will often behave in very similar ways. For example, primary care docs are “reticent to change a therapy initiated by a specialist…they reinforce that regimen,” said Moore. By targeting the physicians with the most connections and influence, marketers can move the needle on a groups of physicians, without the need to use up resources on each individual. Homophily, or in other words, birds of a feather flock together, is common to all social networks.

There are many ways to gauge influence, and Activate Networks didn’t give out all of the secrets of its algorithms; influence is fluid and goes both ways, and harnessing the science of social networks means continuously looking at how physicians are treating patients over time, and how they interact with peers and colleagues. Pete DeWan, co-founder, chief scientific officer and VP analytics at Activate Networks told PharmExec that in addition to patient claims data, other criteria are also used to identify the strength of influence between one physician and another. But, he said, surveys prove that the insights gleaned from the company’s sociometric profiles of physicians are on the money, 80 percent of the time.

“Trust is a powerful tool for convincing someone to do something different,” said John Eichert, Principal at Rivermark, a marketing strategy firm servicing pharma and biotech companies. Without knowing who trusts whom within a given social network of physicians, companies won’t identify the right leaders, which means wasted dollars. Sales reps, for example, often choose the speakers and attendees for physician meetings, despite the fact that reps are “a poor judge of trust and leadership,” said Eichert. They get it right about half the time, he said. “Customers should identify speakers, not sales reps.”

The prevailing consensus of the summit was that social factors influence behavior, to a larger degree than most people recognize. By identifying the structures of social influence among physicians, and targeting the most influential docs, brand marketers can do more with fewer sales reps.

Donald McCaffery, CEO at Resverlogix

The news that Roche scrapped development on its CETP inhibitor dalcetrapib, a drug designed to raise HDL cholesterol in the blood, likely presages the shuttering of Lilly’s development program for its CETP inhibitor, evacetrapib, industry experts and analysts say.

Merck’s CETP inhibitor, anacetrapib, will probably receive additional scrutiny as well, although Tim Anderson, senior analyst at Bernstein Research, identified a “bull case” for the product in an analyst note. The argument in favor of anacetrapib, per Anderson, hinges on the drug’s apparent lack of safety problems compared with torcetrapib (Pfizer’s CETP inhibitor that hit a developmental dead end due to safety problems in 2006), and the fact that it lowers LDL cholesterol, whereas Roche’s dalcetrapib only raised HDL. At any rate, Merck’s Phase 3 trial “is not likely to conclude for two or three years, in the best of circumstances,” wrote Anderson.

The CETP inhibitors – those still being developed– are justified by the assumption that raising HDL levels correlates with a lowering of cardiovascular risk. Donald McCaffrey, CEO at Resverlogix, a Canadian biotech firm, says with HDL, it’s all about “reverse cholesterol transport,” or in other words, plaque removal from the arteries. With HDL, “it’s not about the huge numbers, as Roche’s program has just shown. It’s about functional HDL…and whether you can make more of it.” A simple blood plasma test can show that a patient has higher levels of HDL, says McCaffrey, but HDL differs in function and capability. Resverlogix is developing a product (RVX-208) that acts on the “main protein” in HDL, known as ApoA-1 protein. By causing the body to make more of the ApoA-1 protein, more HDL is created, but it’s “empty” HDL. The idea is to “take the garbage out of the arteries, which requires more garbage bags.” With CETPs, the approach is to stop HDL from leaving the system, which causes it to build up. But the HDL build-up in that scenario resembles a garbage dump. That kind of HDL is “not going to go back into that arterial wall and take out any more plaque…it cannot,” says McCaffrey.

Another concern for CETP inhibitor programs is the class-wide effect of increased C-reactive protein (CRP) levels, a “very serious” inflammation marker, according to McCaffrey. “If you’re increasing your HDL, and you’re increasing CRP, that has been deemed a serious problem,” he says. Lilly and Merck’s respective CETP inhibitors have both demonstrated CRP increases; Lilly’s evacetrapib had the largest increase, followed by Merck’s anacetrapib, and then, in third, Roche’s dalcetrapib. McCaffrey claims that RVX-208, his company’s product, decreases CRP levels by 28%. RVX-208 is currently in two Phase 2 trials, both of which are being conducted by the Cleveland Clinic. The ASSURE trial, which aims to demonstrate plaque regression, not just an HDL increase, is expected to be complete by the first quarter of 2013. The drug is being tested in combination with atorvastatin and rosuvastatin – Lipitor and Crestor, respectively – because “we believe they will be the most efficient statins in the generic market.”

McCaffrey agrees with Anderson on the fate of evacetrapib: “I think the board in Lilly’s case is very conservative, so I think they’ll probably shelve [evacetrapib].” As for Merck’s anacetrapib, “they’ll probably continue on, they’re deep into that program and I think they need to find an answer,” says McCaffrey. (Norman Wong, Resverlogix’s chief scientific officer, outlined the problem with CETP inhibitors in a white paper published last November.)

Analysts have long predicted blockbuster sales for the CETP inhibitor class of drugs, and yet, none have made it through to approval. With the closure of Roche’s dalcetrapib program, is there enough blockbuster potential remaining to justify the enormous development costs these drugs require?

“Traditional market research about advertising is often wrong,” said Yadav, noting that his experience as an ethnographer put the fundamental tool of social science – self-reporting – into question. “I’d spend a lot of time with someone, and then give them a survey, and [on the survey] they were not the same person,” said Yadav. “People don’t have the ability to express emotion…if I ask how you feel, the response is how you think you feel.”

To bypass the speech/articulation process, Australia-based Neuro Insight uses steady-state topography (SST), which records electrical impulses in the scalp via a sensor-bedecked visor worn by test subjects. Put in front of a television and shown advertisements, subjects’ brain waves register their levels of “approach” or “withdrawal” from a given ad, which lets marketers predict the ad’s effectiveness, or adjust the content to prevent a dive into withdrawal. Neuro Insight has pharma clients – GSK is listed on the company website – but the case studies were limited to consumer brands, an unfortunate but familiar trend at digital pharma gatherings.

Moving from brain waves to search results, Steve Rotter, VP marketing at Brightcove, a web video hosting and service provider, cited data from Forrester proclaiming that “videos are 53 times more likely than text pages to appear on the first page of search results.” But the written word isn’t completely dead; Rotter said adding a transcript of a video to a webpage dramatically improves SEO and helps visitors find what they’re looking for more quickly. Brightcove has clients including AstraZeneca, Abbott, Genzyme, Roche and GSK, and is currently working on a platform for videos that senses which specific device is being used by the target consumer or patient, and optimizes or renders the video based on that device, said Rotter.

Doug Seifert, president and CEO at Syandus, an “experiential learning” company, demoed a COPD simulation game targeted to physicians. Created for Pfizer and Boehringer Ingelheim (the companies co-market the blockbuster COPD drug Spiriva), the demo was one of the most impressive displays at the conference. The game allows physicians to adjust variables and see how patients with different levels of severity or disease-state would respond. A doctor can make a patient smoke cigarettes and climb stairs, and then watch what happens in the body, for example. Seifert said simulations work because “humans are pattern recognition machines,” and “pattern recognition creates behavior change.” Besides, “endorphins are released” when people play games, a word Seifert defined as “a series of interesting choices.”

The conference ended on a somewhat hypocritical note, in that Facebook – “a distribution platform that promotes authentic sharing” – struck all sharing of its presentation from the record. Conference emcee Ritesh Patel, Chandler Chicco’s digital and social media lead, asked that all remarks from Facebook’s John Patten be kept within the walls of the Alexandria Center’s conference room, given the company’s upcoming IPO. As a result, the tweeters in the room (conference tweets can be found at #CCCDigital) were silenced for the duration.

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

D'vorah Graeser

While the FDA continues to develop its guidance for U.S. biosimilars, including a one-day public hearing on May 11, 2012, the basic legal underpinnings of biosimilars in the U.S. may be under threat, as the Supreme Court debates the healthcare law, a large chunk of which includes provisions for biosimilars.

As background, biosimilars were discussed for many years in the U.S., but unlike Europe, no regulations were developed. As part of the health care law’s cost controlling measures and to promote biosimilars innovation in the U.S., the Biologics Price Competition and Innovation Act (PPACA) was included in the bill. However, the act was stated to be “non-severable” from the rest of this law, meaning that if the PPACA is struck down, so is the biosimilars part of the law. That means, even if the Supreme Court does not specifically object to the Biologics Price Competition and Innovation Act, its mere inclusion in the PPACA could lead to its downfall.  As a side note, the Supreme Court does not seem to have much of an opinion on generic biologics one way or the other, with Supreme Court Justice Stephen Breyer referring to “the biosimilar thing” during oral arguments.

This uncertainty comes at precisely the wrong time. Innovation in biologics has taken off in the U.S. The FDA reported that at least 35 requests for biosimilar pre-IND meetings were made in reference to 11 biological drugs as of February 15, 2012; as of that date, 21 pre-IND sponsor meetings were held and 9 INDs had been received. The FDA is instituting measures which are likely to further increase the popularity of this program, including providing a path to regulatory approval in the U.S. for similar biological products licensed outside the U.S.

Although the Biologics Price Competition and Innovation Act could be passed again as a separate law, the upcoming presidential election and campaign maneuvering are both likely prevent any real action on that particular motion. The bill will probably be swept to the side as “politicking” takes the place of “policy making.” This would be unfortunate, as the Act would clearly benefit consumers by reducing the price of biological drugs, which are typically among the most expensive on the market. The bill would also prevent originator biotech companies from enjoying a de facto “post patent” monopoly, due to the current expense and uncertainty of achieving regulatory approval for “generic” forms of these drugs.

Dr. D’vorah Graeser is the founder and CEO of Graeser Associates International (GAI), an international healthcare intellectual property firm.

Related: Biosimilars Spend to Reach $2.5 Bln by 2015: IMS