Pharma Forecast: Into the Woods - Pharmaceutical Executive


Pharma Forecast: Into the Woods

Pharmaceutical Executive

The government estimates that as much as 40 percent of clinical data is false (or influenced by pharma payments to principal investigators), according to Sinaiko Healthcare Consulting compliance chief Dinh Nguyen. "The speed and extent of government enforcement around this will be truly breathtaking," he says. He notes that the US attorney for the Eastern District of Pennsylvania said he's making this the single focus of healthcare investigations for 2008.

Congress is also poking around in this conflict-of-interest corner. Sen. Charles Grassley (R-IA) is the lead sponsor of the Physicians-Payment Sunshine Act, requiring a national registry to track every exchange of money between a drugmaker and a doctor. Meantime, Minnesota has already banned annual drugmaker-to-doc gifts over $50, and eight states will be voting on similar legislation this year.

Andy Bender gives props to the few firms taking state reporting to the next level and developing an aggregate spend system to measure a payoff to the payout. "Companies are going to realize that spending $5 million on free pens may be worth zip," he says.

A New Voice in the New Normal

Pharma's mandate to innovate is no longer centered simply in the lab. Virtually the entire business requires creative and courageous reinvention. At the same time, bills are coming due for unprecedented levels of transparency, accountability, and drug safety while payers, Congress, FDA, and even the courts are stacking the deck against drugmakers.

A sense of piling on, not to say conspiracy, wouldn't be entirely inappropriate. "The underlying agenda of the various factions that beat up on pharma," Arnold & Porter's Kracov says, "is to persuade the public that we've had enough innovation—we don't need brand drugs, we can't afford $50,000 cancer treatments."

Analysts suggest that it's in this larger context that the tell-it-like-it-is stumping by the new CEOs can be best appreciated. While their immediate audience may be the tens of thousands of people in their own companies—many of whom, Capgemini's Chane says, "lack any sense of urgency because they're still seeing healthy returns by conducting business as usual and focusing only on the short term"—a warning is also being sent to stockholders, Wall Street, the healthcare industry, the pols and regulators, and the American public.

The message? This industry you love to hate is in danger. "The image of Big Pharma pushing pills and printing money is still alive and well," Ernst & Young's Steinberg says. "But from where the CEOs sit, a dramatic drop in revenue inevitably means a dramatic drop in innovation. For Americans, that means an end to what many assume is an endless supply of new medical advances."

The innovation, in 2008 and beyond, will be to find a way to communicate that message so it sounds like the fact it is, rather than a threat.


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