The real issue, says Bill Trombetta, professor of pharma marketing and strategy at St. Joseph's University, cuts deeper: "How
do you establish the relationship between rep and physician when quite frankly, the physician didn't want to see the rep even
when the reps were schmoozing them?"
One hopeful development, says Hugo Stephenson, president of strategic research services at Quintiles, is that the alignment
of research and marketing that many in pharma have been advocating for years is finaly taking shape. "Whereas four or five
years ago, there was quite a gulf, today there's communication and understanding of strategy. We're seeing better research,
research that's more aligned with commercial strategy, and more of it."
You Pay Your Money . . .
On the payer side, there are two intersecting trends, says Michael Russo, partner in the consulting firm the Bruckner Group.
One is the effort to dig deeper into the economics, and the other is the move toward so-called "consumer-driven" healthcare.
Payers have spent the past five years building infrastructure, putting people and programs in place, and getting out social
and political messaging, says Russo.
"Now, they're in a position to make demands on individual policyholders as well as providers and pharma companies. They're
looking to reduce utilization and per-use costs. By 2007, the vast majority of the larger companies will have all of that
in place. Specifically, for better or worse, they're cracking down on expensive injectables to treat rare chronic diseases."
Meanwhile, a growing number of employers are trying to shed healthcare costs by moving employees to low-premium, high-deductible,
consumer-driven plans. Russo is not optimistic. "It undermines what insurance is in the United States. It's a direction that
could cause potential disaster if not checked the right way."
Harris Poll's chairman, Humphrey Taylor, agrees: "We are seeing a very rapid growth in high-deductible plans. But the rosy
view advocates have painted of people making more rational decisions are unlikely to work out, and the main consequence will
be that sicker, poorer people will be much less compliant."
Again, consumer education is a key factor. "I can't think of any other industry where the consumer has been less prepared
to take on the purchasing responsibility," says Elizabeth Browning, CEO of the health education firm Lluminari.
Much of the focus in 2006 will be dealing with a collection of short-term problems. But the fact is that major structural
issues remain. "The greatest challenge for the industry today is that these companies are neither growth companies nor defensive
companies," says Deutsche Bank analyst Barbara Ryan. "The market sort of had it right: You can see Merck getting cut in half,
but there's no shot for Merck to double. You could buy a biotech, and maybe the stock will get cut in half, but if their drug
works, it could be a three bagger. The drug industry today characterizes the worst of both worlds."
In the middle run, Albert Wertheimer, director of the Center for Pharmaceutical Health Services Research at Temple University,
sees massive reorganization. "US companies will turn into marketing organizations that outsource not only manufacturing, but
also clinical trials and drug discovery," he says. "I think labs will move to India and China, where they have lots of inexpensive,
skilled people. Next, I see the Indian companies in particular saying, 'Why are we satisfied with 7 percent royalties? Why
don't we come into the States and take the whole pie?'"
In the meantime, says Ryan, mergers are in the offing, possibly starting in 2006. "BMS has a poison pill in the Plavix litigation
because no one knows if Plavix stays or goes. Once the litigation is decided, BMS would likely be taken over, maybe by Glaxo.
Merck could merge with Schering-Plough. Novartis and Wyeth. There are lots of combinations."