The Indian pharmaceutical market is set to grow to $8 billion in 2010—thanks in part to an expanding middle class and the second largest workforce in the world. Generics are dominating the market at a 92 percent share, according to a study conducted by research firm RNCOS. Rather than set up shop and build brands—or even branded generic offerings—from scratch, attempting to squeeze into an already overcrowded space, acquiring an already-established company (like Piramal) is a more cost-efficient step. Abbott anticipates this move will put it at the top of the (very tall) totem pole on the subcontinent.

Piramal doesn’t yet have any proprietary drugs on the market, but it does have several candidates that have either completed or are near completion of Phase II trials. Two oncology targets are being developed with Merck as a partner; Eli Lilly is partner for two in the diabetes/metabolic arena.

Part of the blame for that 4 percent difference, the company said, lies with the passage of the US healthcare reform bill, which cost the company $60 million in higher Medicare price rebates. While CEO John Lechleiter was careful to laud the bill’s positive effects—more affordable meds for seniors, better access for the uninsured in general—he said Lilly “will incur substantial costs” to its business. Some of those costs will come from increased development fees, some from higher taxes, and yet others from patent losses.

Other members of the Big Pharma club have yet to announce their Q1 earnings—many will release their numbers next week—but a report by Express Script gives cause for caution.

Higher drug costs increased total spending 6.4 percent from 2008 to 2009—an increase tempered in part by patent expirations, since the price of branded drugs shot up 9.1 percent.

The industry is already seeing a shift toward the development of more specialty drugs, and the report supports that move with the reveal of a 19.5 percent spending increase in that area. This includes biologics, a niche in which companies should tread carefully now that healthcare reform has provided an approval pathway for biogenerics.

But after a slight reprieve in 2011, Express Script expects price growth to cross into negative territory again after Effexor (venlafaxine), Lipitor (atorovastin), and Seroquel (quetapine) go off-patent.

Together, the three drug giants will pull together an undisclosed dollar amount in seed funding and create the independent, non-profit Asia Cancer Research Group (ACRG). The new company’s purpose is to grab Asia’s lung and gastric cancer problem by the horns.

Neil Gibson, chief scientific officer of Pfizer’s oncology research unit, pointed out that there’s a “huge unmet need and a disproportionate health burden to Asian patients.” A significant portion of lung cancer in Asia seems to be related to a mutation in a gene that helps regulate cell growth and division—a mutation far more common in Asia than the West. Gastric cancer shares this skew, accounting for 630,000 deaths each year.

The ACRG will have a six-person research-specific board (two experts from each company) to approve major decisions and material. Lilly will provide virtual access through its research site in Singapore. Researchers can cull from at least 2,000 tissue samples as part of the ACRG’s two-year plan to create the biggest pharmacogenomic cancer database in the world. While research avenues into other cancers are a possibility in the future, the group’s focus for now is on lung and gastric cancer.

This is just the latest example of a pharma “open source” policy, a concept adopted by the techies long ago. Open-sourcing takes some of the pressure off R&D units, which have sustained heavy losses the last couple quarters.

Deirdre Connelly

GSK’s Deirdre Connelly has been named the Healthcare Businesswomen’s Association’s Woman of the Year for 2010. Connelly, who just passed the one-year mark as president of GSK’s North American pharmaceuticals unit, is the 21st woman to win the organization’s “WOTY” award, which comes on the heels of another honor: She was ranked #37 in Fortune’s 50 Most Powerful Women last September, jumping five notches from #42 in 2008.

Before making the move to GSK, Connelly was president of Eli Lilly’s US operations for almost four years, a position she ascended to after starting her career with Lilly as a sales rep 22 years prior. The San Juan native worked her way up through the ranks, serving in positions such as general manager of Lilly’s Puerto Rico operations and executive director of HR in the US.

Though she’s only been at GSK for a year, Connelly has already helped turn GSK into one of the most transparent companies in the industry, and her primary focus is on achieving GSK’s—and all of pharma’s—primary purpose. “We have a calling to find a cure for diseases,” she said. “We have a duty to the patients, to respect them and put our money where our mouth is.”

Diversity also plays a key role in Connelly’s strategy, and it’s a role she’s uniquely positioned to implement. Of Irish and Puerto Rican descent, she is also one of two women on GSK’s corporate executive team. “Women leaders like Ms. Connelly serve as role models for all women in the healthcare industry,” said HBA president Susan Torroella.

Upon hearing of the honor, Connelly retained the grounded attitude she’s come to be known for. “It’s an honor,” she said. “But it’s also a responsibility.”

Jacky Law

Guest blog by Jacky Law

A couple of weeks ago I attended an industry awards dinner and had an interesting conversation with an eminent doctor who shall remain nameless. The doctor in question works in a highly specialized area and frequently talks about her research at conferences around the world. She always travels first-class and has come to expect accommodation at the best hotels, courtesy of the people who have invited her to speak, which may be a drug company or the conference organizers. She believes she is worth the extra expense and does not think for a second she is abusing the system.

But she was worried about a colleague in Italy who works in the same area and who has had a holiday home paid for in its entirety by a drug company. He also believes he is worth it. The area of medicine in question is highly competitive and I suspect both doctors earn their perks as far as the pharma companies are concerned.

The trouble is that in an era of transparency, other stakeholders get a look-in and conflicts arise, as UK readers will know from the furore that arose after expenses claimed by their Members of Parliament (MPs) were disclosed recently. In that uproar, it was clear that many MPs also thought they had done nothing wrong, even when their expenses ran to extremes such as the cleaning of a personal moat.

This was not how the electorate saw it and lots of MPs’ reputations and the integrity of the system took a hard knock. The doctor I was talking to wondered if the new fashion for transparency in pharma circles would similarly impact the medical profession.

As well she might. Just a few days earlier, Merck & Co had disclosed it had paid 1,078 doctors and nurses in the US a total of $3.7 million from July to September to talk to colleagues about company products and healthcare related to those products. On average, these professionals were paid $1,548 but the highest earner received $22,693, and several doctors got more than $10,000 — not inconsiderable sums.

Merck is not alone. Eli Lilly was the first to fall in line with new thinking on payments to physicians and GlaxoSmithKline, Pfizer and Johnson & Johnson are among others to say they will follow suit. Indeed, all pharma and medical device companies in the US will be compelled to disclose information on their payments to physicians if the Physician Payments Sunshine Act 2009, which was folded into the health reform bill approved last month by the Senate Finance Committee, becomes law. The act sets fines of up to $1 million for knowingly not reporting payments to doctors of more than $100 in a year.

So far the disclosures only focus on the US, but the arguments of Senators Chuck Grassley and Herb Kohl, who introduced the legislation, are equally persuasive in Europe. Timing is everything. The two senators had tried to introduce a similar bill a couple of years ago but it was not even considered by Congress. Now it is strengthened by incorporating many of the recommendations of the Medicare Payment Advisory Commission, an independent agency that advises Congress. Even if the act isn’t passed, many Big Pharma companies see compliance with its spirit as essential to repairing the damage the industry’s reputation has suffered in recent years. They probably also reckon it will save them money as it dawns on doctors, like the one I was talking to, that they also have reputations to protect and may well settle for less to speak on a company’s behalf.

The truth is that ordinary people, like the UK electorate when presented with what their representatives had been getting away with for years, see things differently from MPs or doctors. And having pharma companies pay for second homes doesn’t sound like a terribly impartial way of doing things.

“New York City has always been at the forefront of scientific innovation, but the City has never fully capitalized on its assets to create a thriving commercial bioscience industry and the jobs that come with it,” stated Mayor Michael Bloomberg. “We joined with Alexandria Real Estate Equities to create the East River Science Park to provide today’s bioscience companies with the state-of-the-art commercial lab space they need to locate and expand.  Lilly’s decision to become its anchor tenant is evidence that our work is paying off.  It also serves as a major boost to our efforts to diversify New York City’s economy.”

Biotech firm Amylin, on Monday, announced that it would trim its sales force by 200, or about 35 percent of its total. The move is expected to save the company about $65 million by 2010, and comes on the heels of an announcement that the company asked FDA to consider a once-weekly injectable version of its Type 2 diabetes drug Byetta (exenatide).

According to the Amylin, the layoffs are part of a new restructuring plan that will merge its primary care and specialty units into one 325-person team targeting endocrinologists and other physicians that treat significant numbers of diabetes patients.

Amylin partnered with Eli Lilly in 2002 develop and commercialize the original version of the diabetes drug Byetta (exenatide). Lilly will handle the bulk of the primary care marketing of the drug in wake of the restructuring plan.

“These changes build on Amylin’s scientific strength, and leverage Lilly’s expertise and reach with primary care prescribers, so that we are well positioned to address the information needs of the complex diabetes market,” stated president and CEO Daniel M. Bradbury in a release. “[These] actions are in line with our stated goal of achieving positive operating cash flow by the end of 2010.”

The diabetes market has been swept by with safety concerns since GlaxoSmithKline’s treatment Avandia was found to increase the risk of heart attack. FDA, last year, issued new safety guidelines in reaction to these reports and Amylin is awaiting a decision from the agency as to whether Byetta will receive additional warnings, up to and including a black box warning.

Amylin said that it expects its operating expenses to be in the range of $600 to $625 million this year, and its operating loss will be between $175 and $200 million. This figure does not include a restructuring charge, expected to be about $15 million for severance packages.

Bill Drummy, founder and CEO of Heartbeat Digital, said the difference between a traditional and a digital-focused agency is that digital is an interactive medium; it’s not interruptive like an advertisement.

William Martino, vice president, digital strategy, of Saatchi & Saatchi Consumer Health + Wellness, took an opposite prospective: “I think traditional agencies have a significant advantage over pure digital [agencies] because of a deeper understanding of the audience or the consumer. However, the traditional agency has to evolve, so they are not labeled.”

Eli Lilly would, ideally, like to have the best of both worlds. However, Lyndsay Younce, the company’s marketing consultant, said that Lilly hasn’t yet found one agency that can bring everything they need to the table.

For e-marketing space, Eli Lilly relies on digital agencies. “I don’t care if they have an integrated offering. But I want them to integrate well,” she said. “A lot of this has to do with the brand. It’s hard as an e-marketer to move away from the traditional advertising mentality, but you have to be able to speak that language in order to move. I have yet to see an agency come in with a specific measurement about their digital work.”

Both types of agencies have their pros and their cons. For example, according to Martino, a digital agency has the tendency to recycle ideas across brands with no understanding that audience and therapeutic areas are different.

“At the end of the day, a really good integrated plan is all about vision,” said Dorothy Wetzel, chief marketing extrovert of Extrovertic. “It really takes the brand team to consider all ideas and options and then put it together. The worse thing you can do is put agencies together and say to them, ‘Come up with a good integrated plan.’ The new school of thought is about building the number of brand advocates.”

Lilly broke the news Monday morning that ImClone had accepted its offer to acquire the biotech firm for $6.5 billion or $70 per share—Lilly’s largest acquisition ever.

With this purchase Lilly gains control of ImClone’s blockbuster, targeted cancer agent Erbitux, which is marketed for second- and third-line colon cancer and refractory head and neck cancer.

ImClone also has five monoclonal antibodies in clinical development—including one in Phase III and two currently moving out of Phase II trials. The acquisition will help Lilly meet the challenge of patent expiration that it will see in the next decade and bolster its 13 oncology drugs currently in development.

One sticking point will be how the deal affects ImClone’s co-marketing pact with Bristol-Myers Squibb in the United States. BMS currently pays a 39 percent distribution fee to ImClone for Erbitux and owns 17 percent of ImClone stock. In an investor call this morning, Lilly said it could not comment on the situation.

Last month, BMS offered $4.5 billion for ImClone. ImClone chairman Carl Icahn shot down the offer stating that it undervalued the company and that a second mystery suitor had made an offer for $70 per share. After more than a week of whispers and second-guessing, Lilly announced that the boards of both companies have approved a definitive merger agreement.

Lilly expects the income stream of Erbitux and the success of one additional drug to cover the cost of ImClone. The company will cover the cost with a combination of cash and debt.

Moody’s Investors Service announced this morning that it was considering the possibility of lowering Lilly’s Aa3 long-term debt rating (the company’s Prime-1 short-term rating would remain unchanged).

“The long-term success of the acquisition will be dependent on receiving expanded approvals for Erbitux as well as favorable execution of other products in ImClone’s pipeline, both of which remain uncertain at this time,” stated Michael Levesque, Moody’s senior vice president.