Todd Clark, VOI Consulting

Nov 03, 2007
By Pharmaceutical Executive Editors

Todd Clark
A FEW PHARMA COMPANIES might emerge with revolutionary business models, and the larger industry might evolve toward those positions. But with anything of this size, major change will take time.

What needs to be done right away:

  • Improve management of the nonmarket environment, by which I mean primarily the political arena but also the news media and activist organizations. Politcally, the industry was lucky in 2007. First, the Medicare Part D drug benefit is coming in below cost, which is great news, particularly for the makers of expensive patented drugs. Calls to change the Medicare Modernization Act to allow direct price negotiations with manufacturers were a major part of the Democratic platform in the 2006 elections. Lower-than-expected costs and high member satisfaction with Part D stalled this effort.
  • The recently passed reauthorization of the Prescription Drug User Fee Act (PDUFA) is perhaps more notable for the changes that weren't made than those that were. An approval pathway for biogenerics, restrictions on DTC, prohibitions against both authorized generics and reverse payments, as well as elimination of the preemption doctrine, were all issues raised during the debate over the legislation—but none were contained in the final version of the law. All of these issues are likely to be raised again during the run-up to the 2008 presidential election and beyond. Following Hippocrates, the industry ought to "do no harm" by showing a little pricing restraint and adhering to high marketing standards.
  • Avoid further missteps in the sale of lifesaving drugs to developing countries. The advent of the World Trade Organization has been extremely beneficial in terms of securing intellectual property rights for innovative drugs. Sometimes, however, it's better not to take a rigid stand on patents and pricing.


Here are a few developments that haven't received a whole lot of attention, but have the potential to really change the way the industry operates: For example, consider the preemption doctrine. In short, since federal law has constitutional supremacy over state law, FDA regulations—and actions taken in compliance with them—preempt conflicting or contrary state law, regulations, or decisions of a court of law for purposes of product liability litigation." Thus, the preemption doctrine provides a vitally important defense against a potential deluge of state lawsuits. The issue was addressed, sort of, in the PDUFA renewal legislation, but the real battle over preemption is going to take place in the federal court system over the next few years. Manufacturers should be watching this issue closely.


Another ongoing development to be cognizant of is the move to restrict access to prescriber-identifiable data for commercial purposes. New Hampshire, Vermont, and Maine have all passed laws toward this end. The New Hampshire law was overturned in a federal circuit court but now is being appealed. IMS and the other major data services recently filed suit against Maine and Vermont as well. Outside the United States, Germany has passed a similar law, and Poland is considering doing the same. Most industries can only dream of the depth and breadth of information that IMS and companies like it provide. For pharma this could truly be a case of "you don't know what you've got until it's gone."


Finally, a recent agreement between the Bush Administration and Congress over the country's negotiating position for Free Trade Agreements contains changes in policies on data exclusivity, "linkage" requirements, and patent-term extensions. For a variety of reasons, the administration's new policy is not likely to have a substantial effect on the global drug market. Under the past two presidents, innovative pharma has had no more vocal or powerful supporter than the executive branch of the US government. The FTA stance is one of several signs indicating that this support can no longer be reliably counted on.


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