Sunny Outlook for Biopharm 2020? - Pharmaceutical Executive


Sunny Outlook for Biopharm 2020?

Pharmaceutical Executive

Pharmacy practice: the power of direct mail

By 2020, mail service pharmacy will have grown to over one third of prescription volume, and these mega dispensary organizations will be successful in obtaining deep discounts or rebates from manufacturers for formulary placement and market share positioning. In order to cut costs necessitated by dispensing fee reductions from Medicare, chain pharmacies moved to central fill operations, similar to the airline "hub and spoke" design. It is similar to the 1960s when the photo finishing business used many drop-off sites and couriers to take film back and forth to the processing lab.

Here is how it works: a prescription is brought to the chain pharmacy on 1st Avenue that is picked up within the hour or e-mailed to the central filling site, then dispensed and sent back to the 1st Avenue Pharmacy location. In this model, prescription drug inventory is needed only at the central fill locations (hubs). With economies of scale, 2,000-plus prescriptions might be dispensed per day entirely by automation.

Generic companies: the big blur

Surprisingly, given the near ubiquitous role of generics in prescription volume, there are no longer any pure-play generic companies. Margins have dipped so low that a business built entirely around commoditized generics is no longer viable. What has happened in the last decade is the distinction between branded and generic companies has totally disappeared. Today, in 2020, research intensive firms all have generic divisions, and companies previously described as generic firms have moved into drug discovery by buying smaller branded companies, in-licensing NDA candidates, as well as buying existing patented products. There are new joint ventures with US generic and foreign research companies, and a bewildering array of other arrangements and combinations.

Niche players are virtually everywhere, and a few companies have founded a new business model focusing on the cash pay out-of-pocket market, bypassing the restrictive covenants of managed care and government reimbursement entirely.

Government: the ultimate arbiter of evidence

The brick wall between clinical registration and market value has finally been breached in the United States, based on precedents in Europe and Canada. The FDA is now requiring applicants for a NDA to conduct comparative effectiveness research as part of a process where candidates are no longer tested against placebo but rather against the lead existing drug in its therapeutic category. Up to now, a large company with an extensive field force could detail their latest ARB or ACEI and quickly earn a five to 10 percent market share based on its reputation and field force contacts and prowess. Until now, prescribers had no way of knowing whether the new drug was inferior, equal or superior to the drugs already available. Now prescribers will know this information in advance.

The Agency for Healthcare Research and Quality (AHRQ) in the US Department of Health and Human Services has also become more supportive of comparative head-to-head research with the goal of developing "best practices," based on evidence-based medicines studies. AHRQ has begun distributing objective disease state management algorithms showing doctors what are the optimal steps in caring for specific medical conditions. The protocol states when and what testing should be performed, what drugs and doses should be used, and when the patient should return for follow-up.

In fact, due to the rapidly growing spend on Medicare drugs, and with the mid-term congressional elections safely out of the way, the Obama Administration launched in 2015 without legislative approval a plan to extend the remit of the Patient Centered Outcomes Research Institute (PCORI) to emulate the United Kingdom's National Institute for Health and Clinical Excellence (NICE) by advising on the risk/benefit ratio of new products and whether paying for them can be justified in terms of value to the population.

Precisely because an NDA must incorporate convincing evidence built around a specific value proposition to society, clinical trials have become lengthier and more costly. Trials have to be run longer than three months, with a large, strictly defined base of study subjects, and actual outcomes must be measured. For example, an endpoint around lowering blood sugar levels in diabetics is not enough. That diabetes drug will have to prove it reduces kidney failure or amputations, cardiovascular disease or neuropathies. There is some talk that drugs introduced before 2020 will have to undergo this degree of evaluation within the next five years to remain on the market, as is now commonly the case in Europe. Norway's vaunted "medical need" clause, formerly defunct, is now alive and well.

Federal actions against drug companies for fraud and promotional excesses continue to increase, with cumulative fines over the past decade exceeding $50 billion. More countries have joined the United States and the United Kingdom with tough extraterritorial anti-bribery laws. Since 2016, penalties imposed by the FDA, the FTC, and the Justice Department Office of Inspector General include the possibility of a maximum 50 percent fine against the illicit revenues that must be paid directly by the CEO, not company funds. Compliance, corporate integrity agreements, and other federal government actions against industry promotion practices also include the possibility of criminal actions against individual executives. And more than one CEO has served time in prison.


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