Pharma's competitive responses
Reflecting on the multitude of recent payer challenges, GSK's CEO Andrew Witty announced at the annual EFPIA meeting in June
that the pharmaceutical industry is "adapting to a new [payer] reality." To contend with the increasing power and control
of payers, pharmaceutical companies are experimenting with a variety of approaches, which I refer to as the nine "C's" of
pharma's competitive payer responses:
Cooperation. In 2010, Novartis announced plans to invest $500 million in Russia over five years, including construction of a manufacturing
plant in St. Petersburg. Similarly, Teva, Novo Nordisk, and Nycomed are each investing $80-100 million to build local manufacturing
and other facilities in Russia to try to satisfy the government's new manufacturing requirement.
Collaboration. In June, Novartis announced collaboration with the Malaysian Health Ministry to establish a $700 million fund to support
new healthcare ventures to help enhance its stakeholder relationships and selling opportunities in Malaysia.
Cost-cutting. Roche is significantly cutting the price of MabThera (rituximab) and the breast cancer agent Herceptin (trastuzumab) in India
and giving the cancer therapies new names. The company hopes to boost patient access and prevent a compulsory license transfer,
resulting in potential generic competition. Roche spokesman Daniel Grotzky stated in a Wall Street Journal article that "there is the expectation that companies should do more to improve access to drugs. One instrument that has been
used unilaterally by the Indian government was use of the compulsory license. We'd like to provide solutions to that, rather
than be in a situation where you see unilateral action." Roche is also reducing the price of its non-Hodgkin's Lymphoma agent
MabThera/Rituxan in Egypt and South Africa as part an overall emerging markets strategy in highly price-sensitive markets.
Contracting. In 2009, Merck and the US health-insurer Cigna signed a performance-based contract which provided higher discounts on Merck's
diabetes agents Januvia and Janumet if Cigna's members achieved specified clinical outcomes and adherence measures. "Merck
should be recognized as the first major pharmaceutical company to offer increased discounts on its oral anti-diabetic products,
supporting Cigna's efforts to reduce A1C levels for individuals with diabetes, regardless of what medication they may be taking,"
said Eric Elliott, president of Cigna Pharmacy Management. "Improving people's health comes first for both Cigna and Merck.
We hope this agreement will become a model in the industry." In 2010, GSK agreed to provide the United Kingdom's National
Health Service a partial, retroactive rebate if the company's kidney cancer drug Votrient did not match up to Pfizer's rival
Sutent in a head-to-head clinical trial to be completed in 2012. This special "guaranteed" pricing approach compelled NICE
to recommend Votrient for NHS coverage.
Companion diagnostics. To help ensure US approval and reimbursement, Pfizer coupled its $100,000 per year cancer drug Xalkori with a companion diagnostic
test from Abbott Laboratories to help physicians identify the 5 percent of patients whose non-small cell lung tumors expressed
a specific ALK gene mutation. The goal is to ensure that the cost of the medicine is justified by targeting it only for those
patients most likely to benefit. According to consulting firm PricewaterhouseCoopers, there were over 25 companion diagnostic
deals in the United States in 2010 and 15 in the first half of 2011, up from only seven in 2008. A key question is whether
drug inventors like Pfizer will have to continue to fund the cost of co-developing these diagnostics without any contribution
from payers or patients.
Comparative effectiveness. In the past, pharmaceutical companies rarely conducted head-to-head trials against rival agents. However, with dramatically
increasing competition for provider prescriptions and payer funding, many large pharmaceutical firms are conducting variations
of "comparative effectiveness" studies, typically pitting their new medicine against other widely-used medications. Companies
are also investing heavily in observational studies—real-world evidence—to protect their franchise against the growing tendency
of payers to revise prices downward if exposure to the market suggests a medicine does not perform as expected in advancing
Criticism. Companies are using their global presence to pinpoint instances where payers may be denying access where others do not. In
April, GSK executive Simon Jose publically criticized NICE stating that, "By denying access to benilumab [Benlysta], which
is the first treatment specifically licensed and developed for lupus in over 50 years, UK patients are being left behind those
in other countries, including the United States, Germany, and Spain who already have access to this medicine."
Challenges. Novartis is legally challenging the Indian government's refusal to grant a patent for its leukemia drug Gleevec, which has
patent protection in over 40 countries, but which is facing a potential generic onslaught in India.
Confrontation. In Germany, Novartis recently pulled its anti-hypertensive Rasilamlo from the market three months after launch, while Lilly
and partner Boehringer Ingelheim bypassed the German market for the launch of its diabetes drug Trajenta. Novo Nordisk refused
to give in to price cuts in Greece and Spain by threatening to keep several new agents off the markets until both countries
relented in later negotiations. In response to public criticism, Novo Nordisk CEO Lars Sorensen said, "I think actually it
ought to be the [Greek] government who faces the patients and talks to the patients about why we cannot afford to buy the
products that you have been used to getting because we didn't manage our finances well enough." Statements like these are
controversial and represent just how seriously companies are taking the pressure from governments to serve as "lender of first
resort" once public finances go bad.
Worldwide financial pressures will mount as national economies face low rates of GDP growth, mounting public debt, ageing
populations, and the demands of growing middle classes in emerging markets seeking greater access to medicines. At the same
time, pharmaceutical companies must work to maintain traditionally high margins on existing products to fund investment in
higher-priced biologics. Consequently, the competition between pharmaceutical companies and payers—their long-standing customers—for
funding will become dramatically more intense. Pharmaceutical professionals better get ready to handle the ultimate competitor.
Stan Bernard MD, MBA, is President of Bernard Associates, LLC, a global pharmaceutical industry competition consulting firm. He can be
reached at SBernardMD@BernardAssociatesLLC.com