The Friendly Persuasion — An Interview with Fred Hassan - Pharmaceutical Executive

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The Friendly Persuasion — An Interview with Fred Hassan


Pharmaceutical Executive


Much has been written about the barriers to innovation in big Pharma, but one I have not heard is mentioned in your book: "forestalling victimhood." What does that mean?

In the large R&D cultures that still characterize the industry today, there is a cultural signal to play defense rather than strive for a positive outcome. Job security in these R&D organizations is better assured if fewer risks are taken. Managements have to stop the productivity drain where people think less about innovation and more about keeping their job. People must be taught through example that you can be an innovation leader and also a strong matrix player, and be rewarded for seeking out that area of common ground, working as a catalyst rather than a critic. Again, small groups can help drive this mindset better than more bureaucracy. Scientific leaders able to instill a positive sense of purpose are a prized commodity. They are especially needed now as the R&D enterprise adjusts to a long period of transition toward new modalities such as personalized medicine.

There are two contrasting futures for the industry. The first is that aging demographics combined with strong science will require more medicines and thus keep revenues and profits high. The second is that the industry has lost control of the pricing and value equation to payers and thus faces a decline through relentless commoditization. Where do you stand on this?

Payer power is the big issue right now. However, I am optimistic that the industry has the answer to this challenge—new and better drugs. Even in those therapeutic categories subject to commoditization, such as cholesterol, hypertension, and diabetes, the gravity of the public health threat means that society requires continuous improvement in treatments just to keep up. And this doesn't even address the conditions where there are still no effective treatments at all, led by Alzheimer's and Parkinson's. There is no other industry right now where society has that level of unmet need.

The other response to the payer community is the value of medicines in terms of the overall cost burden from healthcare. In most countries, drugs constitute a relatively small share of total costs, well behind hospital charges, physician fees, and long-term care. What is most exciting is how much of the new medicines innovations coming on stream in the next 10 years will actually contribute to reducing costs through less reliance on these other health services. Personalized medicine is finally beginning to show its mettle through precise targeting of drugs around an individual's unique genetic profile, for a superior therapeutic effect that prolongs life and is cost effective through lower rates of therapy failure and institutionalization. More important, there are major spin offs from this revolution in the biology of disease and the processes that underpin it: R&D becomes more cost efficient in linking a compound to a specific disease target; the long haul of drug registration becomes faster and more focused, because it is easier to identify and assess the population most likely to benefit from a NME (new molecular entity); payers are positioned to obtain better evidence of real-world outcomes; and the patient experience is individualized rather than subject to the hit or miss randomization of a population effect.

This last point is very important. The reason why payers have the upper hand is that they can treat us as manufacturers of products for big populations; for many in this population, there is no clear evidence that our products even work as intended. As long as that mindset continues, payers can commoditize us. However, if we succeed in making this a purchase that carries a measurable value unique to each patient, the conversation changes. With the increased information about the clinical effectiveness of our drugs, the initiative moves back to the patient's interest in receiving the most appropriate therapy for his or her clinical condition, rather than just what a formulary says. I think we are getting to that point now, where payers will be forced to give ground.


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Source: Pharmaceutical Executive,
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