PharmExec's 2006 Forecast - Pharmaceutical Executive


PharmExec's 2006 Forecast

Pharmaceutical Executive

A Cash Infusion

Hugo Stephenson on Postmarket Research, Even before Vioxx, there was significant growth in peri- and post-marketing activity. The growth rate in Phase IIIb and IV is 20 percent per year or greater, and various reports have predicted that Phase IIIb and IV research may soon equal Phase I and II. Things that have happened in the last year have only added fuel to that.
The event of the year will be the launch of the Medicare prescription drug program. The big question: Will seniors sign up? In a recent poll by Harris Interactive and the Wall Street Journal Online, about half of seniors said they were likely to sign up for a prescription drug plan (PDP) by the May deadline. But only 18 percent thought it would make prescription drugs more affordable—and 21 percent thought it would make them less affordable.

"The initial opt-in period will probably have to be extended," says Peter Pitts, senior fellow at the Pacific Research Institute and senior vice president for health affairs at Manning, Selvage & Lee.

To Tony Pinsonault of Pinsonault Associates, that means companies need to use their sales forces to support the program. "They need to educate physicians, so when a doctor writes a drug for a 65-year old-patient, they're not going to be at the pharmacy for five hours trying to get a prior authorization."

Part D promises substantial potential revenue, but it will be unevenly distributed. "Think of it as red states and blue states," says Mason Tenaglia, managing director of the Amundsen Group. "A lot of blue states have had highly developed patient assistance programs for 15 to 20 years. In Connecticut, New Jersey, and Wisconsin, there's not going to be a big uptake for Part D. It already happened." Tenaglia predicts similar variations by clinical area, PDP, and product. "Companies that built their $2 billion dollar brands on marketing muscle are going to be the most vulnerable," he says.

Bill Trombetta On Marketing, Category captain management is going to become much more important in pharma. It's done in every other industry. In food, autos, telecom, you name it, the supplier is trying to establish a strategic relationship with their clients to add value. This is how companies like IBM and General Electric compete. It is, quite frankly, an alternative to the blockbuster model, and I think it's going to be huge.
Part D should also increase price transparency, which should put pressures on margins. The big question marks: How much? And how soon?

Cost Cutting

If pharma has one piece of good luck this year, it's that Part D revenue will help offset some losses from patent expirations. "But it's not going to be a revenue infusion that can perpetuate itself," says Terry Hisey, US managing principal, life sciences and healthcare for Deloitte. "Companies need to aggressively go after enterprise cost reduction this year, because that's the only short-term profit preservation move for them to bring drugs to market to replace the money they're going to lose."

How can companies respond? "We're going to see headcount reductions in the sales force," says Laurence Poli, associate professor of pharmaceutical business at the University of the Sciences in Philadelphia. "We're going to see more focus on licensing and acquisitions, even more than what we see today. That's going to put a strain on profitability."

"Marketing and sales restructuring would be one of my big priorities, and then enterprise-wide cost reduction and all the things that would imply," says Hisey. "The one wrinkle is how do you lower cost and redirect expenditures so that you still get the innovation from the industry?"

Micheal Rosenberg on Technology, The post-marketing world is likely to change. As we get more information on how products are used in real-world settings, it will allow us to use a lot of micro-marketing strategies and customization. Technology will provide a more efficient system of sorting through large amounts of relatively simple data to refine marketing strategy, and define who should and who should not be receiving a drug.
For Michael Rosenberg, CEO of Health Decisions, the number one issue is efficiency in clinical research. "There's still an enormous cost to develop a new product, and lots of external pressure to reduce that number. It used to be that pharma companies were the only game in town. They did all the discovery, all the development, all the marketing. Now, new smaller players can compete pretty well against big companies, so we may see a big change in the way clinical development is done."


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