Forecast 2007: At Sea - Pharmaceutical Executive

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Forecast 2007: At Sea


Pharmaceutical Executive


The December confirmation of Andrew von Eschenbach as FDA commissioner provides much-needed leadership. Whatever his failings—buckling to pressure on Plan B, for example, or "stonewalling" (as Grassley put it) in congressional investigations—the former National Cancer Institute chief and three-time cancer survivor is known as a strong agency advocate. "He is focused on 'smart safety'—rather than unwanted additional 'authority'—and on innovations like Critical Path," says Peter Pitts, a former associate FDA commissioner under Mark McClellan. "He will also lobby Congress for more funding to hire more staff to stop drug approvals from languishing."

And with many senior FDA staff nearing retirement, Pitts says, the agency will be looking to invest in long-overdue information technology to attract quality employees dedicated to a 21st-century FDA.

DEATH BY A THOUSAND STATE REGS

Industry execs may be having Nancy Pelosi nightmares, but state legislators are likely to be the ones making their days miserable.

More and more states and counties will be playing follow the money with drug companies, requiring them to account for their promotional spending, especially to doctors. Regulators will be sniffing around consulting fees and CME, and parsing off-label prescribing and clinical trials for signs of payola. Meanwhile, the federal Deficit Reduction Act will offer financial incentives to states to pursue false-claims actions via state-level whistleblower laws.

Although pharma has been cleaning up its act, Polaris' Andy Bender warns that Schering-Plough's $435 million guilty plea for Medicare fraud last year may not be the last big black eye. "The industry environment has become a lot stricter since the late '90s," he says, "but with the lag effect, we still haven't seen a peak in cases."

Compliance with dozens of different, often contradictory, state standards will take a bigger bite out of every company's bottom line. "It's death by a thousand cuts," says Buck Luce. "The challenge is for each company to maximize both its compliance and its innovation"—despite the fact that the two goals pull in opposite directions.

But Bender sees an upside in all the red tape. "With pharma finally recognizing that it needs to control its marketing costs, it will be looking for ways to measure performance and productivity," he says. "The information required for compliance can also be used to answer many of these questions." This means knowing, for example, not just how many annual medical meetings your company bankrolls, but also how many more prescriptions for your drugs these freshly baked docs are writing.

Yet it's precisely this information that states will be angling to deny pharma. Following New Hampshire's lead, a growing number of states will vote on legislation preventing the industry from purchasing prescriber data. "This is going to be a bear to fight nationwide," says Jack Angel. Although the New Hampshire law's constitutionality is being challenged in court, that hasn't stopped congressmen Peter Stark and Frank Pallone (D-NJ) from pushing a similar bill in the House.

DOWNSIZING, UPLOADING, OUTSOURCING

Pharma's merger spree of the last decade has yielded to more measured acquisitiveness. Now, in addition to running marathons to develop first-in-class blockbusters, big pharmas, long on cash but short on pipeline, are increasingly racing to snatch up high-on-innovation-but-low-on-investment biotechs. With a global forest of 5,000 biotechs, the trick is tapping the right tree.

Last year the large firms ponied up some $17 billion for more than 250 biotech deals, up from 150 in 2003, according to life sciences merchant bank Burrill & Co. Oncology and infectious diseases are likely to get even hotter. While most mini-mergers are still made at the discovery phase, drugmakers are increasingly reducing risk by delaying the deal until more data are available.


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