Consider this: In 2011, IMS projects US Rx market growth to be 2.7 percent. The top 10 pharma companies account for 50 percent of the entire market’s revenue, but will deliver only 10 percent of the growth. In fact, the growth rate of the top 10 is estimated at 0.9 percent.

And it’s even worse than that: Take out the non-organic growth, i.e., the ‘growth’ padded on purely by gobbling up acquisitions, and growth among the top 10 companies is, in fact, negative.

So Pfizer, Merck, GSK … the largest companies keep getting fatter. And slower. And more dysfunctional. And people inside these companies know this. But very few are willing to say it out loud.

If the industry is going to prosper, C-suiters need to do two things: liposuction down their companies to their essential, vital cores; and change the reward system to truly—finally!—value innovation inside and beyond the labs.

There are only a few things a pharma company needs to be good at: 1) developing products and services of true, differentiating value for patients, doctors, and payers; and 2) figuring out how to market and service those products and services powerfully, ethically and efficiently. That’s it.

The ability to deal with information with great speed and agility (what I call ‘knowlagility’) is a critical source of competitive advantage in myriad ways: it provides deep customer insights, it enables more efficient delivery of high value across the healthcare delivery continuum, and, critically, it empowers companies to make credible arguments about the true economic impact of their therapies to the healthcare system.

Yet little of this capability—which is extraordinary in its importance now, and even more extraordinary in the rate its importance will increase—has been built into pharma IT as it is currently configured. The layers in a super-pharma organization actually cover the company in folds of bloat, threatening the vital organs.

Let the Sucking Begin

That’s why it’s essential to cut out any non-essential IT process. Stop obsessing about the trivial—that means please stop talking about social media! Instead implement programs that deliver the ability to see farther and move faster.

The idea is to get smaller, yes. Spin off those divisions that aren’t crucial, sure. But more than that, cleave the processes that are more about ‘control’ than value.

A ridiculous example: We have clients who can’t run basic software or access popular websites. Why? Either because IT plays the ’security’ card and so access to—and insight about—much of the world gets cut off. Or else Finance cries ‘efficiency’ and suggests that if only we could get people off Facebook, then we’d be more profitable.

If you are a CEO and hear these things from your managers, you can do more for your profitability by firing them.

In the Speed of Change era, IT has one of the most important jobs in the entire organization. But it’s not about control; it’s about the discovery and release of value. Sure, you have to do the basics of control: secure your (cloud-based, I hope) networks and endure the Sarbanes-Oxley torture, etc. Just understand that this is a distraction from the real work.

The real work then is in applying knowlagility to unlock potential; by uncovering patterns in the data about your customers, and patterns in the data about potential products and services. In a post-blockbuster world, the winners will be those companies (of whatever size) that are better at identifying the highest-value opportunities and delivering them to customers with greatest possible speed and satisfaction.

Smaller companies, or large companies with ‘federated’ structures (e.g. Johnson & Johnson), stand a better chance of combining the advantages of size and agility. But whatever the size or structure, the organizing principle remains the same: In a Speed of Change world, victory belongs to the swift.

For the full version of this article, click here.

Bill Drummy is the CEO of Heartbeat Ideas. He can be reached at billd@heartbeatideas.com

Ahead of Pharm Exec’s 30th Anniversary Issue later this year, we are assembling a list of pharma leaders who have made the most impact on the industry.

Which individual(s) or institution(s) do you think has had the most influence of the industry in the last 10–30 years?

Please leave a comment in the box below or drop the editor at line at wlooney@advanstar.com We look forward to receiving your suggestions.

Julian Upton
News and Online Editor

Which individual(s) or institution(s) do you think has had the most influence of the industry in the last 10–30 years?

Please leave a comment in the box below or drop the editor at line at wlooney@advanstar.com We look forward to receiving your suggestions.

Julian Upton
News and Online Editor

In its submission this month to a UK Department of Health consultation, the pro-market Stockholm Network claims that VBP could “counterproductively decrease the amount invested in R&D.”

While conceding that the UK’s current pricing system, the Pharmaceutical Price Regulation Scheme (PPRS), “is not allowing for a greater uptake in new innovative medicines in the NHS,” the Network maintains that PPRS has opened a regular dialogue between the government and industry — “with this discourse now developed to a point where both sides better understand each other’s pressures” — and shown itself to be “predictable and flexible”.

Rather than replacing the existing system with VBP, it argues, “certain merits of the PPRS deserve to be considered, given that this system has existed now for 54 years.” PPRS fixes maximum profits for drug companies, restricting them to a target annual return on capital, but allowing an “upper margin of tolerance” where companies can retain additional profits based on innovation and efficiency. Rather than improving on this system, VBP, according to the Network, is likely “to focus unnecessarily on lowering the price of drugs that the government believes have no value.”

“[A]ccurately determing the “value” of a medicine is likely to be incredibly difficult,” says the group. It is also difficult for value to be appreciated “when it is considered by a common currency, Quality Adjusted Life Years [QALYs], which will only ever be compared with alternative treatments and technologies.” If accurately calculating a medicine’s value is highly problematic, then the price established by such a measurement is unlikely to truly reflect its value.

The Network maintains that arguments in support of VBP pander to “the myth that incremental innovation is not real innovation”. “Breakthrough” medicines are not created out of thin air, it argues; rather, they emerge from a gradual process of discovery. And while it is important of course to reward the most innovative medicines, “it is wrong to treat all other new products as worthless and assume that they offer no value for money…” Distinguishing between “good” and “bad” innovation, then, is just far too simplistic.

Policymakers need to find better ways of encouraging innovation, the Network’s submission concludes. And, for this, the architects of VBP need to “go back to the drawing board.”

As for the pharma giants outside Japan, Merck, Abbott, Lilly, J&J, Amgen and GSK have all contributed more than $1 million each to relief efforts, Mark Grayson, a spokesman for PhRMA, told Pharm Exec. He added: “In country offices are responding to product requests.”

But the global industry reaction seems equally preoccupied with the implications of the devastation on the stock market. According to Leerink Swann analyst Seamus Fernandez, of the top pharma companies, Pfizer, Merck, Lilly, Bristol-Myers Squibb, AstraZeneca, GlaxoSmithKline, Novartis and Sanofi Aventis receive 7% to 8% of their sales and 9% to 10% of their earnings per share from Japan. Bristol-Myers Squibb is the least exposed, with 3% of sales coming from Japan, while Novartis has the most exposure.

There are also understandable fears about the longer-term implications of the catastrophe on public spending. The massive cost of the clean-up operation — currently guesstimated as anything between $35 billion and $170 billion — will sharply exacerbate Japan’s existing deficit and result in further pressure on healthcare spending. On Monday, Japan’s central bank pumped $184 billion into the country’s money markets in an attempt to salvage some economic stability, but this was before the extent of the nuclear meltdown was known. Japan already lost its position as the world’s second biggest economy last year (to China). While the fallout from the earthquake will weaken this position still further, it is too early to say at the moment just how far the economic damage will go before recovery kicks in.

In the midst of the potential nuclear meltdown, the disaster in Japan has begun to have a marked influence on US pharma as regards companies developing treatments for radiation poisoning. (Various US producers of such treatments have seen their stock rise in the last couple of days.) One US supplier, NukePills.com, has stepped forward and donated 50,000 tablets of potassium iodide — which shields the thyroid from radioactive iodine — to a disaster-relief team. But, as the Associated Press points out, these pills were “not suitable for US retail sale because of packaging issues and expiration dates.”

More worryingly, the meltdown threat has led to a spike in demand for potassium iodide in parts of North America, the AP reports. This is despite the danger being located over 5000 miles away from California and western Canada. Local health agencies and experts have been trying to quell the fears; the British Columbian health minister was obliged on Tuesday to announce that the region does “not expect any health risk following the nuclear reactor releases in Japan, nor is the consumption of potassium iodide tablets a necessary precaution.” Nevertheless, Alan Morris, President of Anbex Inc. (Williamsburg, VA), a leading supplier of potassium iodide, told AP:  “I can’t tell you how many women are calling up in tears.” His company has since sold out its supply of 14-pill packages.

The irony in all this is that potassium iodide does not even serve as a general radiation antidote. What use it does have, however, would be far better employed on the ground in Japan than in the suburbs of California. Hopefully, that misplaced hysteria will soon blow over and all global healthcare efforts can properly focus on joining Big Pharma and helping to manage the crisis.

To donate to the Japanese earthquake relief fund, visit the Red Cross Japan Tsunami Appeal.

The growth in overall healthcare expenditure in Croatia is slow and the percentage of GDP is expected to remain the same, but the country’s accession to the EU means that European pharma would have access to cheap products and labour costs. The compound annual growth rate (CAGR) is set to steadily increase and generic drugs are likely to monopolize the market. Generics companies such as Pilva and Belupo hold large shares in the Croatian market, and will be eligible for moderate expansion. But a treasure chest of opportunities could be opened up in terms of jobs and access to treatment, information and innovation.

There are, however, a few obstacles surrounding Croatia’s position. The country needs to resolve its corruption problems, and the EU’s anti-fraud organisation, OLAF, is set to investigate potential secondary corruption. The EU has also expressed that Croatia should privatise their shipyards, otherwise the “competition” charter of the EU will not be closed on time.

Furthermore, MEPs are asking Croatia to take better care of their refugee returnees. The country must do its best to acquire permanent resident status, improve reconstruction of housing and help encourage the returnees to mix with society.

The important thing to remember is that completion of Croatia’s EU membership will not only benefit the pharmaceutical industry, in terms of low-cost medicines, low-cost exports and imports and the boosting of the economy, but it will also benefit the population of the country, who will have greater access to medicines, better facilities for refugee returnees and a generally, clean bill of health!

We would like to showcase the best of the year by spotlighting some of the most creative and innovative ads — but we need to know that what peaks our interest works for you too! Please send all suggestions by January 3rd.

Last week, Erskine Bowles and Alan Simpson, co-chairs for President Obama’s bipartisan National Commission on Fiscal Responsibility—formed as an attempt to create a long-term plan to reduce the national deficit—released their preliminary report. Intended as a model for discussion and a way to test the waters before the full Commission report is due next month, proposes to cut federal spending to an overall target of no more than 20.5 percent of GDP by 2040.

Health outlays are given relatively mild treatment in the report.  It proposes no new structural changes to the subsidized Medicare and Medicaid programs, even though most experts agree that a significant overhaul is needed if serious reductions in the deficit are to be achieved. Instead, the chairs rely heavily on existing projections of cost savings as the comprehensive new reform bill is implemented. It also builds on pilot projects linked to cost efficiencies to be drawn from operation of the new health insurance exchanges at the state level that will be introduced in 2013-2014.  In essence, the report carefully avoids throwing a new spanner into the machinery of Obamacare.

There are some add ons to reform that did not make it into the legislation approved by Congress in March, including comprehensive medical malpractice reform. Bowles and Simpson also propose a rise in the rebate floor for Medicare Part D — payments are already slated to rise from 15 per cent to more than 20 per cent — as a way to capture additional savings.  Many of the estimated 30 million new eligibles for insurance cover expected after 2014 will qualify for Medicaid drug coverage; higher rebates will reduce big pharma’s potential revenue gain from this covered population, undermiining one of its key objectives in reform.

Another significant proposal is to strengthen the role of the new Independent Payment Advisory Board, which in the Obama reform bill has the power to mandate – subject to a congressional option to intervene – reductions in both private and public sector payments for Medicare in line with larger indicators like inflation and GDP growth.  Finally, the chairs favor the US joining the rest of the industrialized countries by endorsing an annual global target for total federal healthcare spending after 2020, at no more than GDP plus 1 percent.

Although it is unclear whether these ideas will find their way into law, the direction is clear: health care spending will be subject to formalized cost constraint rather than being left to mediation by market forces. Medicines have never benefited from the reliance on global budgets, because medicines are easy to single out and can be viewed as discretionary commodity purchases, where more of the burden can be shifted to the patient. In other words, global budgets place the industry in the difficult position of being “lender of first resort” when governments start seeking ways to meet their targets, which also are distinguishable by being overly optimistic.

Perhaps the biggest negative of all is the Bowles-Simpson blueprint injects a further note of uncertainty into the long pharma planning cycle.  Companies will have to try to factor in the likelihood of the final Commission report advocating something radically new in controlling drug and health care costs, precisely at a time when the GOP Congress is proposing to rollback or repeal major elements of the Obama reform package.  A predicatable pathway to a new ideal state of US health care new seems more remote than ever.

Last week, Big Pharma’s practice of paying doctors to do medical education, promote its products, or both was the focus of a multimedia blitz launched by ProPublica in collaboration with National Public Radio, the PBS Nightly Business Report, the Chicago Tribune, the Boston Globe, and Consumer Reports. In what must be seen as a wake-up call for the industry on its handling of compliance issues, each of these major media outlets ran its own major story raising questions about the ethics of paying physicians to help increase sales of medicines. Whether the avalanche of data and juicy anecdotes of physician behavior found in ProPublica’s “Dollars for Docs” report actually answered any of those questions l depends on your point of view.

That pharma sales strategies can encompass elements of fraud, kickbacks, and other funny-money exchanges isn’t exactly news. Billion-dollar settlements with the Department of Justice have become so ho-hum over the past decade that the chorus of threats of criminal prosecutions of drug-company executives by officials at Justice, HHS, and FDA is reaching almost credible levels. What is news—and ProPublica’s new contribution to the debate—is the searchable database for consumers containing the names of some 17,700 US doctors and other practitioners who raked in a total of $257.8 million in pharma payments since mid-2009, a considerable technological feat (aided by Google Refiner) given the mix and sloppiness of the data. The list remains far from complete—it records the fees for speaking, consulting, researching, or related activities paid to doctors by only seven of the top pharma firms: Pfizer, Glaxo, Merck, J&J, AstraZeneca, Lilly, and Cephalon. Of the seven, only Merck and Glaxo volunteered the info; ProPublica got the rest from disclosures the other five companies were forced to make as a condition of false-claims and other settlements.

The sharing of its database with other news organizations (and ultimately the public) is central to ProPublica’s alternative business model. The nonprofit Internet news organization’s mission is public-interest investigative journalism—a resource-consuming enterprise increasingly viewed as nonessential by an industry in financial free-fall. Since its launch in mid-2008, the group has earned its credibility, winning many of the nation’s top journalism awards, including a Pulitzer last year for investigative reporting. It counts among its funders the Gates, MacArthur, and Ford foundations; its newsroom is led and staffed by veteran editors and reporters from the New York Times and the Wall Street Journal. By lending its pharma-physician database to other national and local news outlets—and orchestrating a simultaneous delivery—ProPublica ensured that it got maximum bang for its investigative buck. And the investigations into the pharma industry’s financial ties continue this week with a report based on research into its payments to lobbyists and to political campaigns.

In the week since the stories broke, many lines of debate have developed among readers, including physicians, sales reps, patients, and pharma analysts. There is the usual shouting match between the pro- and anti-pharma lobbies, but the conclusions that emerge from ProPublica’s analysis are based on data that has been independently sourced from credible third parties.  ProPublica’s analysis contradicts a  few of the pharma industry’s most frequent justifications for the practice of putting the very professionals who write prescriptions for its products on its own payroll.

Contrary to drug makers’ claim that they only hire thought leaders and other top specialists to move their message, the sheer volume of names in the database indicates this contingency is broadly framed. Among the 384 doctors who earned $100,000 or more during this period, more than one in nine had no board certification in any specialty at all. A search of physician licensing records in 18 states found that more than 250 doctors who accepted speaker fees, including some very high earners, had been sanctioned for misconduct, not surprisingly including inappropriately prescribing drugs. More than 40 got slapped by the FDA for research wrongs, lost hospital privileges, or had criminal convictions, while at least 20 others had two or more malpractice judgments or settlements.

These numbers inevitably give rise to some unsettling questions. For example, why is pharma paying anything at all to doctors who have been sanctioned for professional misbehavior?

When asked if background checks are done on doctors, only Cephalon and J&J said that they review state websites. Nevertheless, ProPublica data base shows that one physician accused of sexual misconduct with female patients was Cephalon’s  third-highest-paid speaker in 2009.

Critics of the ProPublica presentation, including healthcare journalists, point out that the accounting was incomplete, even unfair, because it failed to put the final tally in perspective. Most notably, only 1.5 percent of doctors on company pay  had been sanctioned, while the average payment to a physician came to $15,000, not exactly small potatoes but not necessarily an amount worth risking your reputation over. But at the same time, in a survey by Consumer Reports that accompanied its own reporting, about half of all Americans said that they would be concerned about the quality of care from a doctor who took even as little as $500 from pharma.

According to Medscape, pharma paid more psychiatrists than any other specialists—they also had the highest number in the $100,000-plus club, 116 out of 384. This frequency may be explained by the fact antipsychotics topped the 2009 list of best-selling drugs, while antidepressants came in at no. 4. In addition, the off-label use of these drugs is among the highest for any category.

Neither ProPublica nor any of the other news organizations reports in significant detail about the content of the speaking or consulting or researching for which pharma is paying these many thousands of doctors. While PhRMA reps and many physicians have been quick to point out that all materials must strictly conform to the product label and are regulated by FDA and other agencies, it’s an open secret that many of the scripts and slides that doctors rely on are produced by agencies paid by drugmakers and never vetted by any official. Companies invest in such information in order to reach as many prescribers as possible with a message about a brand-name drug that is as positive as possible. Whether you call this medical education or product promotion is beside the point. ]

Starting in 2013, the new US healthcare reform law requires all drugmakers to publicly disclose the amount and date of every physician payment, the name and address of the physician, and the drug or device that the doctor helped promote. This is should help build confidence in the integrity and accuracy of the data, which some experts have questioned as leading to extreme conclusions when accessed by investigative journalists.   Until then, the ProPublica-based media blitz will continue to spark controversy and conversation over the ethics of industry practices.

To their credit, both Lilly and GSK responded to the ProPublica revelations that the companies had sanctioned doctors on their payroll by launching their own investigations. In a statement, GSK said “we do have criteria in place to evaluate potential speakers.  However, ProPublic has raised issues to our attention that we are investigating further. We will also use this information as we continue to improve the processes by which our speakers are evaluated.”  Likewise, Lilly noted that “reporting by ProPublica and other media outlets has raised valid and important questions about some of our processes, which we take seriously.” And over the past week, all seven of the drugmakers featured in the stories have commented on the reporting. The PBS Nightly Business Report has posted these responses on its website.  Hence the debate continues—and soomer rather than later, expect the investigations to spread to practices in other countries led by renewed regulator interest in provisions of the 1977 Foreign Corrupt Practices Act.

Social networking is no longer something people (patients, healthcare providers, physicians) are merely talking about, or something that’s part of our future. It’s something people are participating in today — right now — as you read this.

A recent report from ROI Research, Inc. — “S-Net (The Impact of Social Media)” — highlights the behavior of 3,000 social media users across 11 consumer categories, including healthcare/pharmaceutical, benchmarking how buyers use social networking websites to get advice on what to purchase, give advice on companies/products, and post content specific to various industries.

The information was collected via a 30-minute online survey from US respondents who access at least one social network regularly. The objective of the study was to determine how various segments of users participate with social networks in their daily lives, specifically with regard to the purchase process for different types of products and in relation to other media channels.

Of the 3,000 survey respondents, 1,888 made a healthcare/pharma purchase in the six months prior to taking the survey. Of those, 441 completed the healthcare pharma section of the survey. The following data, results, and percentages are based on those 441 participants.

Of those 441 participants, 12 percent of respondents follow at least one healthcare/pharma company on either Facebook or Twitter. 12 percent said they discuss pharma/healthcare on social networking sites less than once a month and only 5 percent said they discuss those issues once a week or more. Nearly half (47 percent) of respondents, when they do discuss pharma/healthcare issues, are seeking advice on what to purchase. Other popular reasons for pharma-related talk on social media sites include price comparison (34 percent), current products/releases (32 percent), giving advice (32 percent), and talking about sales or specials (31 percent). Surprisingly, connecting with customer service was the least popular reason for discussing pharma/healthcare online, with only 15 percent of those surveyed citing this as their reason.

Of those who responded to the pharma section of the survey, 33 percent said they are interested in receiving printable coupons from healthcare providers, pharma brands or retailers through social networking sites; 25 percent would like notification of sales or special deals; 23 percent would like information about contests or sweepstakes, and 21 percent would be interested in new product announcements.

However, 43 percent of respondents indicated that they would like to be contacted once a month or less, while only 4 percent would like to be contacted once a day.

Clearly, consumers want healthcare to be part of their online world — but on their own terms, in a manner and frequency they determine, and with participation remaining primarily consumer-driven.