The Steep, Slow Climb - Pharmaceutical Executive

ADVERTISEMENT

The Steep, Slow Climb
The new year presents pharma with so many unprecedenteds and unpredictables that the patent cliff may be the least of its problems. A survey of leading experts reveals 2011's sobering reality and the trends that smart drugmakers will follow into the next decade


Pharmaceutical Executive


7. FRAUD AND ABUSE

As The New York Times reported last month, over half of all state and federal fraud settlements in the last two decades have involved just four drugmakers, earning pharma a dubious distinction that once belonged to the defense industry. The crimes are typically overbilling Medicaid, bad manufacturing practices, and pushing pills off label.

Pharma claims that its stepped-up internal compliance programs have reformed bad habits, and many legal experts agree. PhRMA has also tightened its own guidelines. But efforts by prosecutors have also been stepped up, forcing 10 drugmakers to dole out a total exceeding $4.5 billion last year to end lawsuits. GSK topped the list with a $2 billion bill, partly to settle hundreds of violations at its biggest manufacturing plant as well as flagrant practices leading to the production of substandard, contaminated, and even counterfeit drugs.

In 2011, prosecutions of traditional fraud and abuse may further increase, possibly reaching smaller companies, says Virginia Gibson, a former assistant US attorney and current partner at Hogan Lovells. "There may also be new kinds of prosecution, including cases in which companies—and even CEOs—are alleged to have misrepresented the data from post-marketing research that was published in journals, which are then used as sales tools."

The criminal lawsuit against a GSK assistant general counsel last fall in a case related to off-label promotion was widely perceived as a shot across pharma's bow. Most legal experts predict that there will be more prosecutions of corporate executives this year. The smart money is on repeat offenders, such as Johnson & Johnson, which recorded, in 2010 alone, recalls (and "phantom" recalls) of more than 70 products. Whether longtime head William Weldon can survive as CEO remains to be seen.

8. TRANSPARENCY AND E-TECHNOLOGY


Terry Hisey, Deloitte
Expect record spending on health information technology next year, a boom driven mainly by government requirements for the use of electronic medical records by hospitals and doctors. Also playing a role is the FDA's new transparency makeover, including rules requiring online adverse-events reporting and public disclosure by pharma of clinical trial data and payments to doctors.

Online content is grabbing more and more of pharma's marketing spend, even if most surveys show that only about one in 10 consumers clicks to a pharmaceutical company's site in order to find information about a drug. In 2011, the FDA is expected to release pharma guidance about the use of the Internet and social media, focusing on the legal boundaries distinguishing information exchange from product promotion.

"Every company is rapidly reinventing its commercial organization due to profit pressure—incorporating new digital media, analytics, and data in the backend," says Matt Giegerich.

But healthcare IT is about more than commercial performance. The patient medical data aggregated and analyzed by the technology provide the material from which decisions about health outcomes, the value of drugs, and the cost of care will ultimately derive. Consumer use of digital media to access healthcare information is growing at a staggering rate: Since last February, the number of health-related apps on smartphones has increased by 78 percent, and Apple has more than 7,000 health-related apps for iTunes, iPads, and iPhones.

"Pharma has not yet figured out how to be part of a new business model created around this data and technology," says Carolyn Buck Luce. "Industry leaders need to find a way to collaborate with nontraditional players such as companies that make channels to customers or social media websites." Even more important, says Buck Luce, is to seize the opportunity presented by these disruptions in drug pricing and healthcare IT. "Even if a drugmaker embraces health outcomes, the payer's decision about which drug will make a person healthier is still a very narrow field to compete on," she says. "Pharma is ignoring the rest of the knowledge in the value network stretching from lab to bedside."

That information, which likely cost close to $1 billion and 10 years to accumulate, remains stuck inside the drug, and efforts to recoup the investment through high prices are in vain. All that knowledge beyond the drug's package insert—about the disease, clinical data, reimbursement, adherence, etc.—can be turned into education, support, and other services to improve patient care in real time. With a sustained commitment to transparency and accountability—by cleaning up its act, in other words—pharma might even recover sufficient public trust so that patients value this lab-to-bedside information as essential.

If this forecast is a real downer, at least no one can call us Little Mary Sunshine. The industry will continue on, in some iteration or other, until there are no more diseases to treat and human suffering ends. The confluence of certain demographic and technological trends may signal very bright days indeed for pharmas that make it to the other side of the patent cliff.

The global population is aging at an unprecedented rate—a public health success credited partly to pharma's continuous innovations. In East Asia, the average lifespan has grown from less than 45 years in 1950 to almost 75 today. And the Baby Boomer generation is only a fraction of the current estimated total of 500 million—a population whose complex health needs will increasingly push essential providers like pharma to the limit. Meantime, the global spread of information technology is advancing consumer awareness of all aspects of health and disease, prevention and treatment, risks, benefits, and, of course, cost.

As for the challenge of innovation, many experts predict that the application of the genome discovery chain, however frustratingly slow at the moment, will produce a leap, if not a revolution, in drug development. A series of such advances may not only overcome pharma's productivity drought but transform it into an industry that produces more cures than treatments.


ADVERTISEMENT

blog comments powered by Disqus

Source: Pharmaceutical Executive,
Click here