How to Make Rx-Dx Alliances Work

There are big differences between pharma and diagnostic companies-and big rewards for the players who learn to cope with them.
Jul 01, 2003

Partnerships between pharmaceutical (Rx) and diagnostic (Dx) companies are difficult to achieve because most managers don't understand what it takes to make them work.

Some pharma executives see diagnostic tests as a double-edged sword. On the one hand, tests can diagnose patients who should take a particular medication, thereby expanding market share. Yet, diagnostics threaten to limit market share by inhibiting doctors from prescribing a medication without a confirmed diagnosis. (See "Double-Edged Sword," page 50.)

And when a pharma company does decide to partner with a diagnostics company, it often has completely unrealistic expectations about how long it takes to develop and launch a product. The pharma partner typically wants a market-ready test in six months, but even when that is possible the diagnostic partner knows that the situation is no better from the diagnostic angle. With increasing regulatory demands, more sophisticated technology, and low profit margins, Dx companies do not have the marketing, sales, or development resources they need to make a new test commercially successful in a short time. Typical diagnostic test development and market acceptance time lines range from two to ten or more years, and most new diagnostic tests take at least three to five years to become established and used regularly by physicians. Even large integrated companies with both Dx and Rx divisions, such as Roche, Abbott, and Bayer, have been unable to find the ideal synergy between their diagnostic tests and their drugs. But there is still hope for bringing the two sides together.

The good news for partnerships is that the very factors that make Dx companies hesitant to form pharma alliances also represent significant opportunities for both parties. When the might of a pharma marketing and sales force is combined with the technology of a strong diagnostic test, the potential to increase market share is significant.

Consider what the cholesterol test did for Mevacor (lovastatin). (See "Slow Road to Acceptance," page 52.) Merck spent millions on a "know your number" campaign to make HDL and LDL household words. In return, the diagnostic tests helped Mevacor achieve blockbuster status in a relatively short time.

Changing dynamics in both the therapeutic and diagnostic industries will make partnerships an even more important strategic move in the future. As disease awareness expands and therapeutic interventions become more specific and customized to individual patients, the need for diagnostic tests that help a physician select specific drugs will also expand.

Successful partnerships can bring significant rewards to both parties, so it pays to invest the time and effort needed to get them right. (See "It Takes Two to Tango.") This article discusses the steps necessary to make that happen.

Know Your Partner Pharma companies must understand and respect that Dx development and marketing time lines and activities-although they are more similar to pharma now than they were during the past decade-still take a different approach to gaining physicians' acceptance and use. Partners must begin working together as early as possible in the development process-even during the pre-clinical stage.

Small and large diagnostic companies and large reference labs bring different attributes to the table. Large, integrated Dx companies have sales forces and marketing budgets large enough to promote their tests and educate physicians. They also tend to have greater flexibility in developing tests for a variety of therapeutic areas. However, because of the need to run such new tests on instruments previously placed with their customers, large Dx companies ultimately limit their degree of flexibility. Thus, a pharma company may need a diagnostic test to identify patients allergic to dust mites, but such a test may not be adapted to run on the established test platforms of the large diagnostic companies, thereby limiting the use of such a test.

Conversely, because they have fewer resources and don't want to spread themselves too thin, small diagnostic companies tend to specialize in fewer therapeutic areas. Yet they can develop tests to fit specific treatment outcomes and are thus more technologically flexible. Because of their size, however, they may lack the marketing power and direct sales force support required to drive a new product to commercial acceptance. (See "No Promo, No Uptake," page 56.)

Failure of pharma companies to appreciate those differences could lead to mismanagement of expectations in a partnership and, ultimately, to disappointment. Research shows that, to ensure a productive relationship, pharma companies with successful Dx alliances look for a few critical attributes in potential partners:

  • strong scientific and technical capability
  • good reputation and track record for developing tests (See "By Reputation Only," page 56.)
  • manufacturing capability needed to meet market demands
  • an established distribution network.

Products in Sync The choice of test type-laboratory versus point-of-care-also plays a key role in the success of an Rx Dx alliance. By its nature, the lab test may not be the best diagnostic to build a partnership on. Lab-based tests in which samples must be sent out for analysis often require several days' wait for results. That time lag could cause a physician to delay prescribing a drug, much to the dismay of a pharma marketer.

Large central labs, such as Quest and LabCorp, resist doctors' attempts to specify a particular test because such requests impinge on the lab's flexibility. Yet, allowing unrestricted substitution of tests in the diagnostic environment is the equivalent of pharmacists switching a brand-name drug for a generic one without the physician's prior knowledge. FDA "approves for market" a test for a specific indication, but it does not impose restrictions on which test brand should be run if there is more than one test available for that indication.