A Look at the Road Ahead - Pharmaceutical Executive

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A Look at the Road Ahead

Pharmaceutical Executive


Clifford Kalb is one of those shining examples of a pharmaceutical executive done well. He softens his sharp sensibility, refined through almost 30 years' experience in Big Pharma, with a friendly manner, ethical nature, and willingness to tell it to us straight.




But given his expertise in competitive intelligence, we can't help but get the feeling that he knows something we don't. So what follows is Kalb's take on the key issues that management needs to watch for in the next year and a half.

Pharm Exec: What's the biggest issue on CEO's minds? Clifford Kalb: Although the Medicare bill has been passed, and it is in the form in which it should be implemented by 2006, at the time of this interview we do not know whether John Kerry or George Bush will be elected president. If Kerry wins, the likelihood that the bill will change is great—probably to allow the government to negotiate drug prices. On the other hand, if Bush is re-elected, then the bill is likely to stay in its current form. I think industry experts are hoping for a mixed government, where we have one party in the White House and the other party controlling Congress. That would result possibly in a stalemate around new legislation and make the situation that we currently have stick.

How will changes to Medicare affect the industry? It is probably good for generics and probably not as good for the branded portion of the industry, particularly if legislation moves in the direction of price controls. The issue has been tied in with Canadian reimportation, which Kerry supports, and which Bush, at one of the presidential debates, had taken a position that he may move in favor of. That is a major issue for the industry given the US market, which has the greatest innovation and provides the biggest source of income for most of the major multinationals, would be subject to pricing pressure.

What shifts do you see happening within companies? There will be combination and convergence on a number of levels. That can refer to mergers and acquisitions, as we've seen in the past year with Sanofi-Aventis, which is now the third-largest pharma company in the world. At the product level, conditions that previously were thought of as separate—such as hyperlipidemia, obesity, hypertension, hypercholesterolemia, and diabetes—are now coming under the umbrella of "metabolic syndrome." But that disease is not yet clearly defined, nor is it in a category that allows patients to claim reimbursement.

What types of models does that put into play? Companies that are players in those disease areas will consider putting two or possibly three tablets together into one, so that individuals facing metabolic syndrome would ultimately have better compliance. From a cost perspective, there would only be one copay, as opposed to now, where patients have several copays to cover the many medicines that treat this one condition.

A bit further down the road, on the diagnostic side, you'll begin to see gene-based tests linked to gene-based therapies. As far as new possible business models for the drug industry, it is reasonable to suggest that companies in the diagnostics area that have relatively large investments in gene-based tests—if those tests are patentable—can be matched up with companies that have gene-based therapies, so that the test and the drug become a package.

How will the aging of the population affect companies in the short term? Essentially the industry is self-perpetuating. As people live longer as a result of diseases that are controlled, new conditions emerge. There isn't a whole lot of history of what happens to the human body at age 90, 95, or 100. So it is probable and likely that diseases we have never seen before will emerge. As such, they become new targets for the drug companies. So it is an interesting opportunity because as people live longer, the industry has more opportunity.


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