“This repeal effort was started by legislators concerned that the law is hurting the state’s economy,” explained PhRMA’s Senior Assistant General Counsel Marjorie Powell in a prepared statement. “And it is certainly true that it adds an extra level of administrative complexity for companies in the state. Pharmaceutical marketing is already effectively regulated by such federal government agencies as the Food and Drug Administration.”

The Massachusetts ban was part of the larger Health Care Cost and Quality Act. Although the bill is best known for extending health insurance almost universally in the state, it also created a new code of conduct for sales reps and established penalties for wayward reps of up to $5,000 per violation. It also created the Massachusetts Public Health Council, which has the power to create rules further limiting marketing practices.

Last year the Council passed new rules for both pharma and medical device companies, making Massachusetts the state with the most comprehensive marketing and disclosure code. The rules specifically mandate disclosure of fees, payments and other compensation to doctors; ban promotional items such as pens and mugs; and restrict meals to those provided at training or educational events. Payments for research and clinical trials, rebates and discounts, prescription drugs provided for patient use and demonstration units for charity care are exempt. All other payments of $50 or more must be disclosed.

Currently, Vermont and Maine have bans on all food service “gifts” to physicians. Minnesota limits gifts to under $50, while California, Louisiana, Maine, Massachusetts, West Virginia and the District of Columbia all require pharmaceutical and biotech companies to report marketing spending on physicians, but do not ban food service outright.

Personalized medicine has been one of healthcare’s most anticipated and least understood treatment paradigms. Physicians remain optimistic regarding its future, however the 52 doctors surveyed differed in their views in its implications for therapeutic research and development (R&D). Patients, by contrast, were viewed as increasingly interested in embracing the therapy.

Physicians were asked in which therapeutic areas do they feel the use of personalized medicine—for example, the use of genetic testing to tailor drug therapy to an individual—would be most prevalent. Of the doctors surveyed, nearly 58 percent said oncology/hematology, followed closely by cardiology (48 percent), allergy and immunology (38.5 percent), endocrinology (32 percent), and rheumatology (nearly 29 percent). In contrast, doctors felt the therapy would be least common in orthopedic surgery and obstetrics/gynecology.

Clinicians disagreed, however, on whether financial incentives are strong enough to encourage widespread collaboration between developers, payers, consumers, and pharma. When asked, “How will the adoption of personalized medicine affect the priorities and processes for pharma/biotech R&D?” physicians’ anonymous responses ranged from, “More opportunity for profit will drive new genetic testing,” to “No effect.” (It should be noted that a greater percentage of doctors did feel that opportunities for profit and for developing new drugs would increase.)

The Cost of Adoption
Much like a new consumer technology or ‘green’ product, the limits to widespread adoption are directly affected by the costs to the patient or payer. This is backed up by the Lehrman/Bloomberg survey, in which nearly 81 percent of respondents felt the adoption rate was directly affected by the willingness of the patient or payer to pay. And even when personalized medicine is adopted, 79 percent of physicians feel it would be only narrowly embraced.

These numbers are based on several factors, not least of which is the collaboration between diagnostics companies, drug makers (including pharma companies and biotech firms), patients, and physicians, the combination of which is where survey respondents think the big push will come from. Several clinicians believed that therapeutic companies would continue to target known genetic situations where biomarkers are linked to disease. Others believed that the entire R&D paradigm would change to link effective therapy to individual patient genetic profiles. The biggest detriment to adoption seemed to fall on whether the right incentives are in place to foster collaboration between the therapeutic and diagnostic companies toward developing personalized medicine therapies—are the financial incentives strong enough to encourage the collaboration needed?

Overall, what is garnered from the Lehrman/Bloomberg survey on The Future of Personalized Medicine is that diagnostic and therapeutic companies will have to partner to champion wider adoption rates. It is this participation that will help to alleviate payer and patient concerns over paying for additional screenings as well as higher targeted therapy costs.

Over the next two years, Merck will shut down eight manufacturing plants, as well as eight research sites, as part of the ongoing Schering-Plough merger process. The company said in a statement that the various site exits will help “create a flexible R&D organization.”

Taking a page out of Pfizer’s book (Pfizer announced plans to cease production at eight of its global manufacturing sites in late May), Merck said it would try to make the transitions as painless as possible, working with local governments and other manufacturers to sell the plants in the hope of keeping workers employed. Still, Merck expects the worldwide cuts to total 15 percent of its work force by 2012.

Two of the sites being phased out are in the US, seven are in Europe, with the rest scattered from South America to Canada. Sixteen worldwide R&D labs were spared, and the company said it will continue to focus on cardiovascular, metabolic, and infectious disease areas, as well as four others.

Merck is also hoping to find annual savings of $3.5 billion by 2012. In addition to creating a flexible R&D organization, the company will also save $2.7 billion to $3.1 billion as a result of this restructuring.

ACCESS TO MEDICINE INDEX 2010

GlaxoSmithKline ranked number one in a study of pharmaceutical companies offering access to medicines to emerging and developing nations, proving that the UK drug giant has a far stronger grasp on new markets than its US and Japanese counterparts.

The study ranks 20 companies based on significant criteria including pricing, patents and intellectual properties, capacity enhancement, marketing, lobbying tactics, competition, and philanthropy.The study was the brainchild of Wim Leereveld, founder and chairman of the NGO, Access to Medicine Foundation, in partnership with research firm Risk Metrics.

This is the second index that the foundation has published. The first, released in 2008, featured data submitted from only nine companies. This year, 19 of the 20 pharma firms were open and transparent with their information.

High Marks All Around
So what separates GSK from the competition?

“GSK has integrated access to medicine into its core business model, so it’s not philanthropy, it’s really part of the way they do business and part of their understanding of the importance of emerging markets,” said Afshin Mehrpouya of Risk Metrics. “As a result, they are heavily engaged in research for neglected diseases. At the same time [they are] able to sell their drugs in the emerging markets, they help with the development of the infrastructure.”

Companies at the middle or the bottom of the list treat access to medicine as a tactical issue rather than including access to medicines as a major part of their business, Mehrpoua explained.

The biggest mover among Big Pharma companies was Pfizer, which ranked 17 in 2008, but moved up to number nine this year.

“Pfizer is now seen as a player,” Leereveld said. “The company has changed dramatically. All the people [in that division] are gone and there is a new team that see [access to medicine] as a very relevant matter to perform in developing countries and they did their utmost to get their data together.”

European companies, in general, have has a longer history operating in emerging markets, giving them a lead on Japanese and American firms that relied for many years on local markets for sales.

“Given the saturation of the Western market, the decline of the blockbuster drugs, and the fast growth of the emerging markets, companies like Pfizer are moving faster to catch up with their European counterparts,” Mehrpouya said.

The Japanese are taking a play from the US pharmaceutical industry’s rulebook and restructuring itself under the auspices of a fun catch phrase: “Transformation for a New Takeda.”

The punch line, however, isn’t too funny.

According to a two-year mid-range plan announced yesterday, Takeda will cut about 1,400 positions in the US to fend off loss of revenue due to looming generic competition. That number includes about 28 percent of the sales and marketing division and 20 percent of employees at the drug development center, according to Business Week.

Takeda’s billion-dollar blockbuster Actos is set to lose patent exclusivity in two years, and the company is still reeling from generic competition with its heartburn medication Prevacid.

Most of the job losses will be in the Chicago offices, particularly in the Deerfield and Lake Forrest offices and R&D center. According to the company, it plans to “shift to lean and flexible marketing organizational networks that can flexibly respond to changes in the business environment and product mix.”

“Takeda has experienced halted development in some pipelines and delays in obtaining drug approvals,” it stated in a release. “The company has therefore decided to respond flexibly to these changes in the business environment and ensure a sustained growth trajectory by developing and implementing a Mid-Range Plan starting in the fiscal 2010, one year ahead of schedule.”

Takeda is forecasting a net profit loss of 26 percent and a 4.5 percent drop in sales. The company is banking on a number of new products—primarily in metabolic/CV, oncology, and CNS. It currently has four new treatments filed, and another 10 in Phase II trials. The company expects to recover by 2016.

Our magazine is called Pharmaceutical Executive—indicating a focus on the c-suite. But we know many of our readers aren’t executives (yet), and may not have quite the same in-depth knowledge as their bosses. So, for those who hear the term “SaaS” bandied about in conversations and fake their way through discussions about it despite not quite understanding what, exactly, it is, we present: A Beginner’s Guide to SaaS. (Those who do know are hereby dismissed.)

Software-as-a-Service (SaaS) is sort of a misleading term, as it’s not software in a traditional sense. It uses a web-based system and off-site computers—run by another company and operating in a “cloud” that is basically the internet—to collect and sort data and turn it into actionable intelligence. In pharma’s case, this would be the basis for sales force automation (SFA). Sales reps input call notes and set up calls and look at their doctors’ latest prescribing habits through this program. Line and bar graphs, sorted lists with prescribing percentages and past performance not only give reps a leg up, but let their managers keep an eye on them.

The advantages of SaaS are pretty clear: Your company doesn’t have to maintain a huge server farm and large IT department, and the company providing the service is the one that worries about fixing bugs and automatically upgrading the software. Matt Wallach, EVP and general manager of SaaS provider Veeva Systems, says it’s the difference between owning a condo or townhouse, in which you pay fees associated with homeownership and have to mow your own lawn and salt your own sidewalk, and renting an apartment, wherein you’re not responsible for any of those things. Furthermore, customization is a breeze, as customers can suggest features of their own or turn others on and off, with very little turnaround time.

Ed Gemo, Pfizer’s senior director of global SFE/marketing solution center, said switching from the “Excel and paper” model to SaaS can reduce costs per rep $3,000 or more, and Wallach said companies can expect total initial savings of $100K, plus $20K each subsequent year.

And it’s not just a way to cut costs—sales effectiveness can see a big boost from something as simple as a better-prepped rep. As Gemo said: “We’ve always had this data, but we’ve never had a good way of using it until now. Instead of listening to a customer’s needs, we just kept repeating old messages. We just screamed louder.”

SaaS may seem like a “duh” concept, especially since other industries have been using it for 12 years or more. But the far stricter regulations placed on pharma’s sales forces, and the industry’s special breed of mistrust, made SaaS adoption supremely unattractive.

Then technology advanced enough to allow for rapid deployment of new features in response to regulation and policy changes, and pharma saw the risk decrease. At least 90 percent of companies’ customer relationship management teams are using SaaS now due to this marriage of tech and trust.

Still, the SaaS world has remained divided into segments: a company would use one provider for SFA, another for closed loop marketing, yet another for sample accountability and distribution, and so on. Veeva Systems announced this week it’s developed an application network—Veeva Web—integrating its original-flavor system with ones from Exploria, QPharma, and TerrAlign in an attempt to create the Holy Grail of life-sciences SaaS. “We’re looking to eliminate the cost of system integration,” Wallach said.

That pharma mistrust hasn’t completely abated, though, and many companies are waiting to see if this is, in fact the Holy Grail, or if it’ll be another case of dashed hopes.

Last week’s annual meeting of BIO in Chicago once again proved illustrative in showcasing the high profile that governments now plays as the biotech sector’s chief advocate. While private venture capitalists confined themselves to the margins of the meeting, the Convention hall was bursting at the seams with host country “pavilions,” each designed to highlight its status as destination partner of choice for the industry.

Missing from the slick videos, graphics and takeaway tchotskes was any real sense of the importance of pricing and reimbursement levels that can accommodate the high cost of capital, increased regulation and long development lead times that together have sharply lowered effective periods of market exclusivity for biotech. Instead, the talk was all about building more Potemkin villages around infrastructure – tax breaks, R&D allowances, funding for basic research and facilitation of academic partnerships – that do little to compensate those who risk private capital for a profitable return on the investment.

The essential steps required to promote rapid commercialization of research, where government has to pull back and basically let the market work for itself, just didn’t seem to be part of the conversation. It’s another sign that the “public utility” model may well be the most realistic scenario driving the industry’s future; ironically, its the most innovative research segment – biotech – that seems to be leading the way.

One example of this disconnect between advocacy of “front end” support for innovation and neglect of the “back end,” where products face an increasingly skeptical phalanx of payers, was the appearance of Sir Michael Rawlins in a series of impromptu exchanges at BIO hosted by the UK Department of Business, Innovation and Skills. Rawlins heads the National Institute for Health and Clinical Excellence [NICE], which reviews medicines for evidence of cost-effectiveness prior to listing on the NHS,. NICE is criticized in some quarters of industry for holding back access to medicines on grounds that their clinical value is insufficient when weighted against strict metrics of affordability.

Rawlins made a number of useful points in suggesting where governments are heading in this puzzling, increasingly disconnected game to “promote” biotech:

• What’s wrong with good evidence to help politicians decide where to commit scarce public funds for health? Rawlins noted flatly that results of the UK election will not compromise the mandate of NICE in critically appraising medicines for listing in line with the priorities and resources of the NHS – all three major parties support the organization’s role “without hesitation.”
• NICE has broadened its roots as a leader in the politics of public health. Rawlins himself is chairing a bipartisan government commission to review the entire UK regulatory climate for medicines, with recommendations due by the end of the year. By default, NICE is thus likely to survive this critical review unscathed.
• Austerity will help promote the NICE reputation by deflecting criticism away from politicians in making unpopular resource choices. Rawlins believes that drastic cuts in public spending to restore the fiscal balance in the UK will actually enhance the value of metrics-driven tools to ensure decisions are made fairly and on the basis of independent evidence. Hence NICE is actually likely to grow in political stature as a consequence of the urgent need to curb public spending.
• Can you “define” innovation? NICE believes it can. A new priority for NICE in 2010 is identifying areas to “disinvest,” including recommending the removal of some medicines from NHS reimbursement. However, Rawlins is no fan of the big pharma “headroom for innovation” argument – new molecules will still have to prove their merit as “value drivers,” regardless of whether such disinvestment frees up funds for alternative use.
• NICE work carries significant implications beyond the UK. As the financial crisis spreads to more countries, reliance on appropriate evidence to ration health care will increase, and NICE is determined to sell its model to anyone who is interested. Rawlins said NICE has created an international consulting unit with a five person staff. It is working closely with a number of multilateral agencies – including the World Bank and the Inter American Development Bank [IADB] – as well as the UK Department for International Development [DFID] to promote health technology assessment tools in emerging middle-income markets. The focus is on helping countries decide what to spend on medicines through therapeutic targets and clinical guidelines, rather than individual product appraisals. Nevertheless, it’s a trend that will affect biotech fortunes for good or bad in markets that are slated to account for much of the growth in global pharmaceutical spending over the next 10 years.

While Merck’s net profits might be a little low in the wake of the Schering-Plough merger, it’s pipeline—and future sales—are far from bleak.

According to a new report from analyst firm Deutsche Bank, Merck has no less than 18 drugs in Phase III development, with three slated for launch within the next year and a half. Another 25 therapies are in Phase II trials—a good chunk of which are “innovative therapies for unmet needs.”

The three drugs analysts are keeping a close eye on are: boceprevir, vorapaxar (TRA), and sugammadex. Here’s a little bit of info from the report on each of the treatments to get readers up to speed.

• Boceprevir is a protease inhibitor for the treatment of hepatitis C virus is a Schering-Plough drug used for treatment naïve patients. A trial, expected to conclude any day now, is looking for improvement in patients taking the drug in combination with peginterferon/ribavirin as opposed to patients taking that treatment alone.
• Vorapaxar (TRA) is a thrombin receptor (PAR-1) antagonist in development for the prevention and treatment of arterial thrombosis. TRA therapy showed a lot of promise in a large phase 2 study for potentially reducing ischemic events without increasing bleeding risk when combined with agents like Plavix.
• Sugammadex (Bridiron) is a first in class, selective, relaxant binding agent for use in anesthesia that can encapsulate the commonly utilized muscle relaxants rocuronium and vecuronium, reversing and preventing their neuromuscular blocking action.

“Merck’s expanded base business, more diverse product portfolio and agile, increasingly lean cost structure, will support stable earnings per share growth over the next several years,” Deutsche Bank Analyst Barbara Ryan stated in the report. “Further, the Merck/Schering-Plough combined late stage pipeline has the potential to extend this record into the next decade.”

As the life sciences industry continues to grow in complexity, its commercial model is changing too. The traditional ’single message to many’ approach to delivering your product information has been re-focused to building and maintaining relationships to achieve lasting share of mind. Given the imperative to ‘do more with less’ your commercial organization may be re-evaluating the effectiveness of your Customer Relationship Management (CRM) system. What are the questions that you should be asking yourself and your vendor when considering a CRM investment? Please join us for a free live webcast, featuring a panel of industry experts who will share practical insights to help you define your organization?s current and future needs and determine what CRM capabilities are best suited meet them.

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Call it an amuse bouche in anticipation of the banquet to come for consultants, lawyers and economists.

1. Healthcare is now not only a business, but a social good. With passage of the act, the US finally joins all the other OECD industrialized democracies—save for Mexico and Turkey—in declaring comprehensive, universal coverage an objective of government policy. Evidence from abroad shows that this commitment results inevitably in a rise in regulatory oversight as governments assume the difficult task of making equity concerns an element of market practice. In Europe and Japan, decisions are usually made by small elites, but in the US context this means a proliferation of new commissions, panels, and advisory groups, each with conflicting mandates and subject to influence by a range of interest affiliations. In both cases, “equity” eventually emerges as an empty rhetorical construct because where the public interest—let alone the patient—factors in is very unclear.

2. The consolidation “wave” becomes a tsunami. A simple rule of economics is that when demand—bringing more people into the healthcare system—is not balanced by increased supply—through more physicians and providers—prices and costs will rise. This in turn puts more pressure on margins for all players, and the predictable coping response is to try to control these market forces by becoming the dominant player. Hence what were once defining features of US healthcare—diversity, flexibility, and choice, especially among providers—will yield to the imperatives of size and scale. The trend is already evident in the networking of physician practices, multisite and geographically dominant hospital consortia, and the transformation of Big Pharma from product-niche innovators to service-oriented distribution platforms. And in a near majority of the 50 states today, the market for individual health insurance is effectively controlled by a single provider. While attention has been focused on increased payer clout, provider consolidation is growing too and will set the stage for major conflicts in the next few years over who gets paid, how much, and for what service. Renegotiation of reimbursement codes under CMS will serve as the politicized backdrop for the debate.

3. Reform is framed only as legislative intent—responsibility for execution lies elsewhere. Thousands of pages of implementing regulations must be drafted in a process that is likely to run through 2014, when key elements of the bill are slated to take effect; many of the most significant initiatives in the bill are being tested in the form of HHS waivers or pilot projects. These latter can take as long as a decade to furnish the evidence that can drive real policy changes, by which time technology or market realities will have made their findings obsolete. In addition, the 50 state governments are expected to assume responsibility for many provisions, from enrolling new Medicaid eligibles (to meet the law’s goal of adding 32 million new insured by 2019) to organizing the local insurance market exchanges that will allow consumers to obtain coverage at affordable prices.

More important, the confident predictions of the Democratic leadership in Congress that industry will toe the line based on how politicians interpret the law are misplaced—“gaming the system” to wrest competitive advantage will be firmly established as a tradable currency in reform. It is hard to conclude that the new law creates an environment where change is predictable.

4. Like all reforms, the new law has a domestic focus that fails to address healthcare as a driver of future US competitiveness in a global economy. There was little pushback on this score from the R&D industry, which chose to play the myopic “Washington insider card” to limit exposure to Medicare Part D price negotiation. This may have been a good short-term defense, but it ceded a larger opportunity to recast its image around a more positive agenda, focused on sustaining medical innovation as a driver of global competitiveness. The emphasis was on how drugs alone cannot bend the cost curve given their modest 10 percent share of overall health expenditures. Little mention was made of the more than 150,000 high-paying jobs lost in the R&D segment since 2007—a signal that US status as the global engine of new medicines may not endure.

5. No one—other than Big Pharma—thinks reform should preserve the industry’s high margins and profits. Failure to achieve a broader political realignment around support for the industry as part of an enlightened industrial policy agenda sets the stage for a new round of discussions about industry commitments beyond the $85 billion already pledged, as costs from additions to the insured population begin to mount over the next several years. More important, few observers have explored the policy precedent implied by the very notion of a drug industry “contribution” to defray the cost of expanded access. In a practical sense, how different is this from the punitive approaches taken by state systems like France, with its accord cadres that force the industry to bear the burden of compensating the government for annual overruns in budgeted drug spending, or the “one time” rebates in Germany that are now institutionalized through a consolidated network of sick funds?

6. Projected increases in volume sales of medicines do not guarantee higher profitability—the key metric that counts on Wall Street. A “race to the bottom” trend toward the commoditization of medicines through DIN-tagged generics will gather pace, while the service obligations and costs attached to gaining a good price for real innovations will continue to soar. To win access to reimbursement, high-priced biologics and specialty medicines will need to prove value through extensive testing in diverse, hard-to-recruit populations; against direct comparators rather than placebo; and after registration as well as before it. Investment in supplementary diagnostics will also be required, with the likely result of reducing the size of the treated population. All told, the impact could erode the innovator’s potential period of exclusivity and hence the advantages of a higher price point.

7. Reliance on comparative-effectiveness tools to determine access to medicines may be seen as “un-American,” but pressures to rely on an independent third party to render tough judgments on what health services to forgo suggest that barriers to doing so will eventually fall. Ironically, the driver of this change is likely to be the drug industry itself, as some companies seek to gain competitive advantage through more proactive engagement with the “value police.” This has been the experience in the UK, where many initial guarantees agreed to by industry in the operation of the National Institute for Health and Clinical Excellence [NICE] have been effectively removed as a consequence of efforts by individual companies to mitigate the impact of a negative technology appraisal on access to the NHS.