» Toby Jane Hindin, EdD
Editor-in-Chief, Applied Clinical Trials magazine
While profits in the pharmaceutical industry have slowed over the past few years, the clinical trials outsourcing market has
grown by leaps and bounds. The industry has witnessed some unexpected divergences and paradigm shifts over the last year.
This is reflected in sponsors now rethinking how partnerships and alliances with CROs, laboratories, IT firms, public and
private research organizations, and academia can fit together to maximize their resources. Future trends will include innovative
partnerships, the incredible evolution of diagnostic tools, amazing strides in pharmacogenomics, and specific disease treatments
in the development and marketing of new drugs.
Clinical trials: Outsourcing is still on the rise. Look for new approaches to partnerships.
» Jon Resnick Everyone is talking about Canada...
Senior engagement director, Cambridge Pharma Consultancy
Over the past few years, the battle over US pharmaceutical prices has focused on importation. There is a widespread perception
that importation is the primary threat to free pricing. But that perception is not supported by analysis of how importation
is likely to play out over time, or by the European experience of parallel trade. Nor does it take into account other threats
to US prices.
...But Medicare reform looms large.
The largest of these threats is the Medicare drug benefit. Though language in the act bars the government from direct price
negotiation, precedents from Medicare and other federal programs suggest that lawmakers will be pushed to reconsider these
"noninterference" protections. If that happens, the real battle over US pricing in the medium term will emerge not from importation—but
The rest of the world can't supply the US.
One obstacle to controlling US prices through importation is supply. Even if all the drugs currently parallel-traded in
Europe and Canada were made available in the United States, they would meet only 3 to 5 percent of existing US demand. And
parallel trade tends to focus on selected, high-volume categories. Just three classes constitute more than 40 percent of imports
from Canada, leaving many categories in short supply.
"Savings" won't reduce prices to payers and patients.
Would substantial cost savings from importation be passed on to consumers? That hasn't been the case in Europe, where savings
to payers from importation have been moderate; parallel traders absorb most of the gains, and prices gravitate toward local
market levels. Add in proposed user fees, liability exposure, and distribution costs, and intermediary margins are likely
to be squeezed further, reducing the potential to pass gains on to payers.
Most patients will continue to pay the same.
More than of 85 percent of patients' scripts are paid for by a third party. These payers are unlikely to pass along savings
to patients. Payers buying in bulk would consume the majority of the imported supply, leaving little for retail consumers
like our proverbial senior citizen in Buffalo.
Hard choices are on the way.
Even under the most optimistic of scenarios, it is difficult to believe that the Medicare drug benefit can be sustained
within its budget. Updated analysis from the Office of Management and Budget assumes that actual costs may be 40 percent higher
than budgeted. Faced with market failure or cost overrides, legislators will have four options: modify eligibility, reduce
benefits, seek extra financing (or take money from other programs), or control prices. The first three are difficult political
decisions with direct implications for voters. The fourth, taking pricing action, is the least painful way to deliver a sustainable
benefit, although it entails a policy cost (it discourages investment in R&D) and a political one (damage to the pharmaceutical
Setting price or reimbursement levels has a precedent. Since the introduction of DRGs (diagnosis-related groups) in 1983,
Medicare has regulated prices in every sector it touches—hospitals, physicians and Part B drugs. It has also directly set
prices under the health programs of the Department of Veterans Affairs and Department of Defense through the Federal Supply
Schedule and through "best price" rebate legislation under Medicaid.
Don't ignore importation—it will have an impact on the industry—but keep an eye on the real game, which is the application
of a Medicaid "best price" type solution in Medicare.