In the old pharma business model, market research was an open-ended source of insights designed to help gauge market risks by raising questions that management might not have been prepared to ask in an era when development costs were lower, payers were flexible (and forgiving), and promotional strategies relied on platform technologies that changed little over time. Today, the function is expected to respond with more metrics and added focus, in a fast-changing environment where the customer is king. More importantly, market research is expected to quantify ROI risks—chiefly by identifying and managing exposure to the soaring costs of building brand awareness among a fickle, demanding audience of payers with multiple purchasing options. 

This month, Pharm Exec sits down with marketing experts Sanjiv Sharma and Susan Schwartz McDonald to discuss the latest changes in the business model, and what these hold for the future of this important  "c-suite" function.  We also sift through a range of marketing experiences, at all stages of the product life cycle, to uncover five basic principles that can help managers use market research tools to make successful decisions in positioning medicines to meet the escalating expectations of customers.   

PHARM EXEC:  What are the key goals that market research is expected to accomplish in today's business organization? 

  There are two.  The first is to identify, prioritize, and quantify new business opportunities. The second is to wrest maximum value from the opportunities the organization decides to pursue. In this latter case, guidance and support for execution strategies is increasingly important. And it should be done with an eye to obtaining real value at all phases of the product's life cycle, not just at launch or during the early years, when market research helps to build take up by providers and patients.       

PE: How would you describe the role of market research today compared to a decade ago? 

 Management expectations about what market research can do are much higher today. In the past, the predominant view was that market research was a subsidiary activity designed to backstop decisions and confirm the intuition and judgment of the marketing team, which would steer the ship based on close knowledge of the external environment. Today, market research is driven by quantitative approaches that focus on unmasking the will of the customer, and then implementing strategies to meet their expectations. Research has become an instrument of market democracy, where all decisions are filtered through the "customer plebiscite."  Although the motivating factor is to manage risk by making the approach to the customer more predictable, this can work to limit the discretion that an internal marketing team has in driving specific actions to build the brand.  

PE: Doesn't this pose a challenge to the credibility of the market research function, in trying to deliver against such expectations? 

 There is an inherent danger in requiring market research to conform to a rigid ROI calculus. That can actually drive research in the wrong direction, and limit options that can provide more insights. Strict reliance on the will of the customer can mean that marketers don't rely on their discernment skills, which have often produced the most insightful thinking. It can lead to a presumption that the customer always has the right answer, or that marketers are always posing the right question. Sometimes we don't.    

PE: Are you saying that market research is best viewed as a decision support tool?

  Yes.  The problem with the notion that market research should deliver a high ROI is that management will expect too much from the function and skew outcomes away from what really counts, which is creating a true value proposition among the customers most likely to buy your product. There is also the assumption that good decision support requires adherence to a "best practices" model, along with an overwrought reliance on customer insight.  Unfortunately, this is a double-edged sword; it may foster discipline and consistency at the expense of creative thinking while actually driving costs higher.  

PE: Can you clarify why these two "markers of excellence" may be subverting what market research wants to accomplish?

 Under the mantra of best practices, senior management has tasked the market research function to improve decision making with procedures that are tied to specific performance benchmarks. This fosters a sense that marketers can bend the market to their will. There is an appealing logic to this: If we don't follow the same protocols to vet opportunities and assess options, then how can we argue that decisions and follow-up actions are grounded with evidence? The question is that if the FDA holds our drug development process to rigorous standards of scrutiny, then does it not make sense to apply the same discipline to market research? You could say that the stakes are even higher here. It's the task of market research to create what FDA approval alone does not confer—a market for a new drug.  

The challenge is finding the right balance between systems and serendipity.  There are principles and standards that can be incorporated into company culture. But there are limits to its practical application. It is virtually impossible to rely on the same research techniques to define strategies for every product and therapeutic segment because context will have a powerful impact on the options available, as well as the accuracy by which models and metrics can be used in evaluating them. Today's complex business environment argues even more against the notion that machine-tooled, ready-to-use solutions can be drawn from the analytical hopper and applied to shape the market for your products. Market research is instead a process for uncovering insights and making inferences from multiple sources, evidence, and survey techniques. Simply handing a "how to do it" manual to a manager is not going to work, particularly if the manager is young and inexperienced.  

PE: What about all the attention given to identifying, tracking, and defining metrics around "customer insight"? 

 It is ironic that customer insight is being sold as something entirely new, a practice that will somehow reinvigorate market research or take it to a new level as a business guidance tool. That's a misconception. The function would never have survived, much less grown, had researchers not been delivering good customer insights to position our brands. A good example of flawed—and wasteful—thinking is when senior management commissions "insight research" as a separate exercise, with no alignment against the strategic, course-of-business studies that drive market research. This is like adding another course to the banquet, when we ought to be adding more flavor to what we are already serving.  

PE: You mentioned earlier the importance of casting the market research net widely to cover a product's entire life cycle. Does this suggest that the real value of market research is as a forecasting tool? 

 With three out of every 10 medicines failing to obtain a positive return on up-front investment in R&D, both aspects of the market research function—opportunity assessment and opportunity optimization—are critical to P&L success. Companies must be thinking about product positioning in the earliest stages of product gestation, even before proof-of-concept has been established. This is where the market research function has to stretch to prove its mettle.  At the pre-launch stage, the time horizon is longer and market conditions are harder to predict, much less set real numbers against the analysis. As a rule, once the marketing mandate shifts from foresight to oversight, the process is less suspenseful and strategic.  

PE: What about the task of anticipating how customers will respond to innovation, especially in determining access and price for a new medicine? 

 Innovative products and technology platforms require additional marketing foresight and investments in analytics because the risks of miscalculation are greater.  Customers are unimaginative about their unmet needs, and can react negatively when confronted with radically new options that alter their priorities. Twenty years ago, when Merck began to explore physician attitudes toward osteoporosis in preparation for the launch of Fosamax, it was clear that the prevalence and implications of the condition were under-estimated, essentially because it couldn't be seen until significant bone damage had been done.  Merck's effective deployment of market research to highlight the societal cost of osteoporosis, coupled with technical advances in bone densitometry measurement, helped support the introduction of a drug that the medical community has come to recognize as an innovative standard of care for many women entering menopause.  

A lesson here is that in order to minimize risk and uncertainty, marketers must be unsentimental in understanding how a product might influence attitudes in the payer and provider communities. When you bring forward a subtly differentiated medicine that follows a path laid down by others, the market research burden shifts from strategic questions on how to develop a new market, to the tactical questions of securing a beachhead against the existing competition. The more uncertain and uncharted the environment, the tougher it is to predict outcomes by simply relying on customer insight; while the less innovative the product, the more difficult it can be to count on market research heroics to compensate for its limitations.  

PE: How can market research reasonably expect to build accurate metrics that forecast the uptake of a certain innovation? 

 Statistical controls should always be incorporated in the analytical package to guard against the tendency to overstate potential demand for a product. Survey respondents often try to please the research sponsor with the "right" answer, and there is little awareness of how inertia can slow real-life uptake of a new drug. In addition, we have to account for the fact that highly innovative products are subject to a failure of imagination about how the technology might transform medical practice. This means that raw projections might actually understate ultimate demand. Lilly's initial forecast numbers for Prozac prescriptions never encompassed the impact that enhanced tolerability and safety would have on the market for antidepressants, while Pfizer's analysis failed to take into account how interest in Viagra would be fueled  by the health information revolution fostered by the Internet.  

PE: So do numbers really count as a benchmark for evaluating the prospective response to a new therapy?

 Both of those cases [Prozac and Viagra] demonstrate the importance of using market research techniques that tap a vision, rather than simply tally votes. Even when statistics are required to advance the proposition, emphasis should be placed less on large numbers—the reliability test—than on developing a product proposition or scenario that the survey population can meaningfully evaluate. A validity test. In other words, selecting the right targets in survey research is essential to ensuring that the proposition is applicable to a commercial strategy. For example, key opinion leaders are often the best "prophets" of change, and can tell us more about the prospects for an innovation than would a survey of community physicians. But when seeking to identify barriers to the uptake of a new medicine, the community physician's perspective might be more relevant due to their tendency to resist the "re-engineering" of clinical paradigms.   

In addition, careful targeting of a survey audience should not be limited to products promising a dramatic technical advance; it applies also to situations where deeply ingrained customer thinking must be adjusted only a few degrees to render distinctions where none have been made. So market research has to first establish how best to tell a story, and determine to whom that story should be told, deferring costly quantitative research until there is confidence that customers are in the right frame of mind to validate a path forward.   

PE: A standard tool of market research is the product positioning study, designed to help establish a clear therapeutic footprint and drive acceptance by customers. Is this approach still relevant in ensuring success in an increasingly crowded marketplace?  

 Positioning research is applied to a variety of uses, and can be described as a tool to inform the marketing process, to identify a product attribute or benefit, or assess a marketing outcome.  Learning what we need to know about product positioning typically begins when the product is in early gestation, where we start to establish what outcomes or characteristics are necessary to ensure success with the FDA and with customers.  It is based on a program of research that allows us to understand how competitors are viewed, what space is available in the marketplace, how well our product meets unmet needs, and how differentiated from competitors our customers believe it to be.  The culmination is the positioning study, which tests one or more positioning statements with different customer constituencies. Our experience is that such work is a waste of money and resources. It is also potentially dangerous, in that it limits potential market opportunities by framing positioning as a vote on various slogans. It risks inviting customers to vote on the wrong thing—turns of phrase—at the wrong moment—before those phrases have been vetted by regulatory staff or set in a creative context by your brand agency.  

PE: It looks as if we are back to your opening theme, that the "voice of the customer" must be modulated by prudent insight about the product and the overall market environment. 

 Yes. There is a danger in the possibility that by inviting customers to have the final vote on positioning, you are entrusting them with a decision they are not fully qualified to make. Customers will often default to the obvious when asked to vote on positionings because they lack the experience and the judgment to make professional marketing decisions. The outcome may also reflect customers' lack of appreciation for ways in which they can be influenced by execution and repetition. In research, physicians may dismiss as unpersuasive any data suggesting a nearly trivial difference in efficacy, yet in real-life conditions they will learn to do so, once effective repetition creates a powerful response—as the [GSK] Augmentin team did with sinusitis. The lesson is that positioning guidance has to be applied and evaluated in an integrated manner, drawing on multiple data sources and insights rather than reducing the final decision to a single ballot number.   

PE: Doesn't organizational responsiveness play a key role in building a climate that maximizes the value of market research? 

 That's a critical point. Company culture is a determinant of what gets examined and how well market research is interpreted for results. Doing more with less, which drives management expectations these days, requires a refocusing away from research mechanics and creating an organizational climate in which flexible thinking and judgment are highlighted over calculated "answers."  This represents a sea-change from the perspective that market research is an analog to scientific research, with rigid standards of proof and replicatable methodologies. Market research is, after all, a social science in the service of marketing judgment, which means that the metrics and analyses are not always fool proof or universally applied. And the answers are not fixed coordinates but simply signposts that help by pointing managers in the right direction. 

Five Value Drivers for Effective Market Research    

A strong market research function depends heavily on the characteristics and consistency of support from the wider organization, including the senior management teams ultimately responsible for approving strategic and operational marketing plans.  What are the key preconditions for a confident, flexible and effective decision-making culture that will lead to optimal P&L results?  Below, Sharma and McDonald highlight five factors that count.  

1. Insist on leadership from knowledgeable, career researchers who are fluent in market research techniques and can provide insightful decision support.

Seasoned professionals have the maturity to reflect on methodologies and challenge professional wisdom. In thrifty times, it is especially important to harness experience and display the confidence to avoid research when adequate decision support is available. The pharmaceutical industry is notorious for its conception of the market research function as a larval stage for career development—meant to produce young marketing "butterflies."  That conception may enrich the experience of the marketers who emerge, but it tends to drain the intellectual vitality and expertise of the market research function. Experience counts enormously in managing market research. 

2. Nurture an environment in which institutional memory is mined and market research "emergencies" are discouraged. 

Companies that conduct market research are always struck by the propensity of clients to repeat studies in pursuit of questions that have already been answered, or to identify urgent problems that lose management attention midway through. Many companies permit a "triage" climate that insists on urgent answers to questions that might be answered with data already in the pantry or that might profit from a more deliberative conceptual approach. While it's useful for every marketing manager to hear and see customers discuss their worldview, customer insights may be more cost-effectively developed if existing data were better mined.  

3. Beware the tyranny of "best practices." 

At the risk of appearing to endorse something other than the very best of practices, we want to emphasize the importance of flexible use of established and validated techniques in the hands of people fluent enough to manipulate the rules skillfully. The best practice philosophy produces excellence when it inspires knowledgeable understanding of a breadth of good options while still leaving latitude for a customized approach rather than "cookie-cutter" repetition. 

4. In positioning a new product for market introduction, seek decision support rather than statistical verdicts lifted directly from market research.

It is a misconception to assume that our customers know the answers to all the questions we pose, and that those answers must be traced to a statistical outcome in a specific type of study. It is possible to position a product without asking customers to vote on a positioning; indeed, positioning should be  our marketing intervention—something we decide to do to effect change in the market on the basis of cues and evidence that our customers supply. The mission for market research is not simply to poll our customers, or even merely to deliver insights about them. The highest calling for market research is to help us think like our customers so that we are empowered to improvise and even extrapolate when key marketing decisions are made.    

5. Insist on "customer insight" from every piece of market research.

We have accepted an environment in which customer insight is a name attached to specialized studies instead of an orientation that informs and inspires every thing we do.  This is like ordering a meal a la carte: "I'll take that research with a side of insight, please." 

Periodically throughout the lifecycle of a product, it is useful for a team to take stock and ensure that all are empowered to think the way their customers do. But these need not be distinct assignments. Those who argue that there is no time or space in a crowded research agenda to incorporate a broad customer insight perspective, or that insight requires a unique study mandate of its own, may want to rethink the way the research issues are framed. It is difficult to arrive at the correct conclusion if the thinking is not informed by a broader set of customer insights. It's also important that teams not ignore insights because the information does not serve their immediate needs. Insights can define boundaries as well as empowering creative problem-solving. The key to using customer insight is deciding whose worldview matters, in any given scenario, and how to take inspiration rather than dictation from that depth of understanding. 

 is vp of commercial development at NiCox Pharmaceuticals. He can be reached at 

 McDonald is CEO of National Analysts Worldwide. She can be reached at 

Articles

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In a disruptive era of change, old-fashioned intuition still counts.

Reinventing the Market Research Function

As the curtain drops on the first decade of the 21st century, the media has rushed to try to catch history in a jar. Were the "naughty aughties" (Russell Gold in The Wall Street Journal) the "decade from hell" (Time), the "flimflam decade," or the "Big Zero" (The New York Times' Frank Rich and Paul Krugman, respectively)?  

Shifting the focus specifically to pharma, we might wonder if it was both the best of times and the worst of times. The industry began the decade with revenue growth close to 10 percent, and ends it with a growth rate of barely 1 percent, according to IMS Health. On the other side of the ledger, pharma's much-maligned R&D machine produced major medical breakthroughs, including the triple-drug cocktail for the global HIV epidemic and the first vaccine for cancer. 

Looking ahead, the new year promises no respite from the radical disruptions pharma faces, according to the experts we spoke with. If there's one common theme, it's that market forces are mostly out of pharma's control, so the best  M.O. is to go with the flow—or risk not going at all. "Globalization, healthcare reform, enabling technology, rising consumerism, and the focus on health outcomes rather than products are changing the incentives in the healthcare ecosystem," says Ernst & Young's Global Pharma Head, Carolyn Buck Luce. "And when you change the incentives, you change the system. Old players leave, new ones come in." 

With the uncertainty of healthcare reform receding and the economy no longer in free fall, "2010 has a more positive outlook than a year ago," says Murray Aitken, senior vice president of IMS Health. "Above all, there is a more realistic commitment among pharma leaders to ensure that their businesses are sustainable beyond the patent cliff. We are emerging from a period of denial, when hope was the only strategy." 

But not everyone is on board with this new realism. "Turning to emerging markets and buying very expensive biotech revenue streams are not strategies for long term success," says Michael Russo, partner at the Bruckner Group. "There needs to be a fundamental reset of the industry."  

Over the past decade, pharma has been colonized by venture capitalists who invested in "revolutionary technology," along with advertising agencies that preached consumerism and selling Nexium Part 5, according to Russo. "The future has arrived, but the revolution has not," he notes. "We need to wrestle the industry back to making science central." 

Is it possible to go back to your roots and look to the future at the same time? That and more will be required of pharma CEOs in the next decade. 

If 2009 was all about megamergers and healthcare reform, 2010 will at least offer a change of subject. Few headline-grabbing mergers are predicted for the new year; top pharmas are content with smaller, strategic plays. But most analysts agree that this fragmented industry will gradually bend to the law of consolidation. "The growth aspirations of the industry don't match the capacity of the markets to develop it," says Peter Tollman, Boston Consulting Group's global pharma leader. "Consolidation is one way of getting rid of the excess." Meanwhile, the market share of the top players remains in the single digits, although Pfizer could break 10 percent this year as it digests Wyeth.  

Pharma's relentless pursuit of organic growth by tapping emerging markets and specialized drugs is the leading indicator for expansion. At the same time, most major drugmakers will continue to deconstruct the monolithic, primary care business model (with its dramatic spikes and drops in profits) in favor of fast-acting, flexible, independent units. The industry's new, youngish leaders are attempting nothing less than turning drug behemoths into global healthcare networks that girdle the world with as wide a range of products and margins as possible.  

The difference is more than a name change, says Ernst & Young's Buck Luce. "Pharma is moving from selling pills to selling outcomes, from being a low-volume, high-priced, developed-world business to being a high-volume, low-priced global one."  

Internal restructuring—"right-sizing"—will result in more layoffs and other cost cutting. And in R&D, CEOs seem to be daring one another to drive the knife deeper. Sanofi-Aventis CEO Chris Viehbacher currently holds the record, having matter-of-factly told analysts that he will cut R&D by 20 percent, to $5 billion, by 2011. Of the top pharmas, only Merck, Bristol-Myers Squibb, and Lilly plan to increase their 2010 R&D budgets. BMS and Lilly are also the two biggest pharmas to buck the diversification trend by hewing to a strictly pure-play course.  

The road to becoming an industrial healthcare company is paved with many acquisitions, and 2010 will see its share of bolt-on deals. "With over $100 billion in cash on their collective balance sheets, pharma will continue to identify M&A as the only way to ensure growth," says John Campbell, CEO of Campbell Alliance.  

Although biotech has averted an industry-wide implosion (so far), many early stage shops went belly-up in 2009. That trend may slow, but not stop, in 2010. "Over the next year, there will be even fewer VC players," says Sherrill Neff, founding partner of Quaker BioVentures. "That means you can get some extraordinary opportunities, though it takes some looking."  

(Hot tip: In 2010, smart shoppers will check out parallel fields like diagnostics, devices, and healthcare services.) 

Biotechs with "revolutionary technology" or just a good-old Phase III products will still fetch high prices because demand far outstrips supply. Says Peter Young, president and CEO of Young & Partners: "Pharma is in the driver's seat, but with fewer very attractive targets, the competition for an acquisition can drive up the price." 

With M&A being the new R&D, options-based, pay-for-performance biotech agreements will proliferate as Big Pharma hones dealmaking into a science. Yet the jump in the number of givebacks in 2009 may signal a resurgence in acquisitions in 2010, says Jan Heybroek, president of the Arcos Group. "You have to very actively manage licensing relationships, and there's plenty of evidence that the divorce rate is as high as it is for people." 

CEOs may be looking past patent cliffs, but Wall Street is still fixed on quarterly results. Close to $16 billion in brand-name drugs will be exposed in 2010 as blockbusters including Pfizer's Aricept, Sanofi-Aventis' Taxotere, Merck's Cozaar, and AstraZeneca's Arimidex go generic. While every top pharma has its own cliff to leap—with a 40 percent drop in prescription drug sales not uncommon—AstraZeneca, Lilly, and Bristol-Myers are facing even steeper falls, according to Bernstein analyst Tim Anderson.  

For Lilly, in particular, 2010 could be a make-or-break year. With patents on Zyprexa and Cymbalta expiring by 2014, and the firm's future riding almost entirely on its mid-stage pipeline, analysts will be eyeballing its recently launched antiplatelet drug, Effient, as it hastens to grab market share. But Effient's window of opportunity may close in 2011, when knockoffs from Plavix flood the market.  

With FDA under new management, drugmakers can expect to see faster, more decisive action on the drug-review front. "The new leadership is positive for the industry," says Don Hannaford, senior vice president of Levick Strategic Communications. "[FDA Commissioner Margaret] Hamburg has taken on a broader mandate around a holistic view of health. FDA scientists should feel they're not going to get in trouble for making decisions." 

But energy may not translate into approvals, as safety remains the priority issue and the new REMS framework is pressed into service. IMS Health projects 25 to 30 new launches in 2010, which is in line with recent years.  

Here are a few of the  new drugs to watch for: 

: Novartis' first-in-class melatonin receptor agonist, agomelatine (for depression), as well as two next-generation atypical antipsychotics, Lundbeck's sertindole and Schering-Plough's asenapine, all look promising. Novartis also boasts the new front-runner in the race for the first oral Multiple Sclerosis drug, following the "refuse to file" setback at FDA for Merck KGga's candidate. In Alzheimer's, Phase III data will be released for what could be two huge entries: Medivation/Pfizer's Dimebon and Elan/Pfizer/J&J's bapineuzumab. The pileup of codevelopment deals shows how cozy companies have grown.  

: Two first-in-class drugs—Merck's DPP-IV inhibitor, Januvia, and Lilly/Amylin's GLP analog, Byetta—may finally face some competition, as FDA rules on BMS/AstraZeneca's Onglyza and Novo Nordisk's liraglutide.  

: The market will likely embrace its first new oral anticoagulant in 40 years if FDA gives a thumbs-up to factor Xa inhibitors Bayer/J&J's Xarelto, Pfizer/BMS's apixaban, and Daiichi Sankyo's edoxaban. Other blood thinner news: AstraZeneca's just-approved Brilinta proved superior to Plavix and Effient, while Boehringer Ingelheim's Pradaxa for atrial fibrillation bested veteran work horse warfarin. Taken together, these medical advances indicate that the blockbuster model is not entirely dead. 

Meanwhile, 2010 could be decisive for Amgen as it desperately seeks approval for denosumab, a novel monoclonal antibody for osteoporosis and bone cancer, which is the biotech stalwart's sole hope for much-needed sales. 

Cancer will remain the hottest therapeutic category, claiming fully half of the industry's pipeline. Likely stars of 2010 include Cougar/J&J's albiraterone, for prostate cancer; Medarex/BMS's ipilimumab, for malignant melanoma; and two non-Hodgkin's lymphoma treatments—Lilly's Enzastaurin, a first-in-class inhibitor of the wildly popular PI3K pathway; and Cell Therapeutics' Pixantrone, a novel major groove binder. 

Sales of monoclonal antibodies are set to hit $20 billion in 2010, according to Thomson Reuters analyst Alexandra Kibble. Yet the growth rate of the oncology market has already started to fall, from 15 percent in 2008 to 10 percent in 2009. And with a 12-week course of treatment averaging about $20,000 —and survival benefits often measured in mere months—Big Pharma's rush to cancer may turn into a rush off a cliff as payers begin to push back. "Given the level of R&D investments in oncology and the assumptions on which they are founded, one wonders if oncology is a bubble waiting to burst," says BCG's Peter Tollman. 

According to IMS, the total value of the global pharmaceutical market will grow 4 to 6 percent, to more than $825 billion, in 2010. China, at 21 percent, again tops the list of fastest growing markets. By contrast, the US market will expand only 3 to 5 percent. The usual suspects in the emerging world, such as India and Brazil, clock in at 12 to 14 percent. But the economic recession will continue to erode share in markets such as Russia, Mexico, and South Korea, where out-of-pocket spending is high. "China is increasingly in a class of its own," says IMS's Aitken. But China's new policy of favoring domestic innovators over foreign companies for government contracts is already raising protests among US firms. 

The European pharmas will maintain their lead in 2010 in the race for world domination. Says Aitken: "They are broadening their portfolios to meet the specific needs of each market, not only through the acquisition of products but also by developing drugs to treat prevalent diseases." This R&D increasingly takes place in situ; Sanofi and Pfizer launched major labs in China last year, while Novartis will be breaking ground in 2010 for what it bills as China's biggest pharma research plant (which is also CEO Daniel Vasella's $1 billion snub of India for rejecting the Glivec patent).  

Branded generics will continue to gobble up market share, especially in generics-packed markets where consumers hunt for quality. In 2010, Takeda and other Japanese pharmas look poised to make a big push into India's generics industry, following the Daiichi Sankyo/Ranbaxy deal. 

Yet as its commitment to emerging markets deepens, pharma is already dealing with partners' control issues. In Turkey, for example, a budgetary shortfall led the government to reset the benchmark for all brand-name drugs at the lowest price in Europe, cutting private-payer costs by a third. If this trend goes global—what's to stop it?—emerging markets could fast morph into mature ones.  

When the dust settles on the sound and fury of healthcare reform, the actual legislation should remain pretty painless for pharma—at least for a few years. At press time, PhRMA president and CEO Billy Tauzin, who negotiated the trade group's controversial $80 billion, 10-year "back-room deal," predicted that Congress would pass a bill in time for the president's State of the Union address in late January. "But first, the Democrats will do a lot more work in terms of closing the hole in the [Medicare] doughnut," he says. In order to prevent further compromises, the industry is reportedly willing to add $25 billion more in discounted drugs to close the hole. 

Even so, the industry's decision to play ball has resulted in a winning record. The legislation preserves the status quo—flexible drug pricing—blocking consumers from importing drugs from Canada and the federal government from negotiating Medicare Part D prices. In the provision mandating FDA to establish a regulatory pathway for biosimilars, pharma scored 12 years of market exclusivity for innovator products. 

Yet the bill's long term effects are likely to be transformative. By expanding and improving private insurance, the healthcare overhaul is likely to jack up drug sales. Some 31 million more Americans will have access, lifetime caps on insurance will be removed, copays may be more predictable, and coverage for vaccines and other products will be increased. According to some estimates, it will only take four new monthly prescriptions per year per newly insured life to cover the cost of the $80 billion deal.  

But not all the math goes in pharma's favor. To pay for the $871 billion overhaul, the bill mandates a total of $480 billion cuts over a decade in Medicare payments to providers. Big Pharma price gouging, critics say, will be the likely first target, if only because reducing waste and inefficiency caused by hospitals, physicians, and consumers has so far proven politically unpopular. "I look at pharma's 80-plus percent margins and know that there is not another industry alive that depends so heavily on government purchasing," says Sherrill Neff. "That margin level is simply unsustainable." 

In addition, PhRMA's deal with elected officials appears to have secured the industry a victory against price controls and other key issues without making its "protect innovation" case relevant to the public. Future concessions, if not reversals, seem certain. "By not promoting discussion of the central issues of healthcare reform, pharma missed the opportunity to show how drugs are cost-effective," says Aitken. 

The healthcare reform bug is proving contagious in the EU, too, as budget deficits cause governments to "bend the curve" in spiraling spending, says Fabio Pammolli, professor of economics at the University of Florence, and a advisor to the WHO on pharma regulation. "Reforms will shift more of the cost burden from government to the private sector—employers and consumers," Pammolli says. As a two-tiered healthcare system emerges, degrading the time-honored social ethic of equal access for all, the public outcry will force governments to narrow the gap—and the easiest target to hit for more savings will be drug prices.  

Pammolli also expects 2010 to feature a jump in pharma/payer pay-for-performance agreements, such as Celgene's recent offer to pay Britain's National Health Service (NHS) for its $6,000-a-month multiple myeloma drug, Revlimid, for patients who stay on it longer than two years. 

In coming years, the industry will confront escalating pricing pressure on many fronts. Private insurers will pass the costs of increased regulation on to pharma by squeezing prices and reimbursements. One predictable response? Hike prices!  

In 2010, expect to see drugmakers attempt to maximize profits before reform kicks in by raising the wholesale price of their brand-name prescription drugs. How high? The 2009 increase was about 9 percent, the highest annual rate of inflation for drug prices since 1992. Although the media noted that pharma was erasing the first year of savings it had promised in its Senate finance agreement, the bad press got lost in the general din.  

Pharm Exec's 2010 crystal ball reveals an industry in upheaval on many fronts. Is going back to the future the answer?

The Big Reset

Issue PDF

Pharmaceutical Executive Digital Edition - January 2010

Copay offset cards—which reduce patient exposure to the cost of a branded medicine—have emerged as the preferred solution to preserving market share in an era of growing payer dominance over prescribing decisions. Having trouble with a formulary access at launch? Give patients an offset card. Competing with a generic therapeutic alternative? Offer the card—and avoid the switch. Seeking to generate uptake and accelerate conversions to a line extension? A new copay offset will create the incentive.  

Yet despite their simplicity, offset programs can be costly to drugmakers, with spending likely to surpass $3 billion this year. It is thus surprising how few companies have conducted a rigorous analysis of the return on this investment, particularly in brand adherence, or on the larger impact on patients over time. As copay offset programs expand and more companies enter the space, it is critical to step back and pose a few tough questions in return. For instance, what is the real, long term value of these offset programs—i.e., when, where, and for how long should they be used? 

While offset programs look to be a quick, reasonably cost-effective way to cement patient loyalty, lowering out of pocket costs to a manageable $20 or $25 per scrip, there are many pitfalls. These range from implementing a "one-size-fits-all" solution, including every patient as an eligible (much as occurs in a free sample program), to simply bundling offsets with other elements of a larger direct marketing campaign. Over time, this can actually diminish the value of the brand at peak stages of the product life cycle, while wasting scarce resources that could be better spent through more targeted initiatives aimed at specific patient sub-classes.  

If the bottom line in brand marketing is to increase patient and provider uptake of a medicine, then subsidized copay offsets are not always the optimal approach, as confirmed by the following caveats:  

1. Not every patient is eligible (copay offsets are an illegal inducement for Medicare Part D beneficiaries) 

2. Many who elect to use the cards won't get much value—perhaps under $5 

3. Many who do use them and extract high value would have filled the scrip anyway 

4. Those who grow accustomed to the lower cost will face a copay "sticker shock" when faced with withdrawal of the benefit.  

The irony is that over the last 15 years, pharmaceutical manufacturers have become highly sophisticated in their approach to institutional discounts, offering up incentives in the form of rebates to managed care companies and PBMs. The rationale for maintaining access in a world of progressively higher copays on expensive Tier 2 and 3 classified products is self-evident, and there are metrics to measure that. The precedent exists to do the same by building more analytical controls around the task of easing the patient burden through the copay offset.   

A few industry players are creating a set of "first principles" for copay offset programs, covering design, deployment, and monitoring issues. New data, widely purchased by the industry but not yet well understood by senior management, can inform the development of clear answers to these "how much, how long, and where" questions, and dramatically improve the investment return on this promotional strategy.   

More importantly, these principles, combined with appropriate forethought and data analysis, can help minimize potential damage to a brand's value from indiscriminate spending. It is great to change the trend line, but first, brand managers must make sure that 

they do no harm to their brand franchise.

The key to minimizing harm and maximizing return on copay offset programs lies in three basic principles. These are grounded in the ability of manufacturers to tap new streams of data that allow them to allocate and measure their direct-to-patient investments, on a timely basis. 

Principle One—Offset programs should be designed to reflect consumer price sensitivity and brand adherence requirements

. The availability of dynamic claims or rejections and reversals data as well as anonymous patient longitudinal data (APLD) now makes it possible to understand patient price sensitivity at both the initial pharmacy transaction and for each subsequent refill. From these data it is possible to identify the inflection point at which patients increase their rate of abandonment of prescriptions, and what level of monthly out-of-pocket expense will have the most significant impact on patient adherence to continuing with the brand.   

By capturing the entire stream of data for a patient (including scrips that must be reversed due to abandonment by the patient), pharmaceutical marketers can determine the optimal price to be offered. Many companies have targeted a $20 or $25 dollar maximum out-of-pocket payment for patients trying to emulate the typical Tier 2 copay. But who says this is the optimal level? Analysis of actual patient decisions when facing alternative copays can help identify this price point. To the surprise of many, the data show that the price sensitivity threshold (PST) is extremely different between therapeutic classes, and is often very different between two products in the same class.  

Take, for example, the statin class. An analysis of patient reversals shows that the out-of-pocket payment level (OOP) at which Lipitor patients significantly increase abandonment is around $50. On the other hand, for Vytorin, which has a generic simvastatin as a near- alternative available, price sensitivity kicks in at just $10. (See Table 1) 

Longitudinal tracking of patients who fill their first scrip makes it possible to understand the impact of patient out-of-pocket expenses on adherence. In the statin class, commercial Lipitor patients who most frequently fill at copays of $20 can be expected to purchase 280 days of therapy over the next 360 days. When their copay is over $50, the expected adherence drops 

Would a strategy of reducing $50 copays to $30 pay for itself by increasing patient adherence, thus building sales of the scrip? What about reducing it to $20? What would the impact be on Lipitor adherence if class competitor Vytorin opted to offer a copay card that got the patient out-of-pocket payment down to just $5?  

Questions like these are now answerable through data. Using this data it is now possible to design a copay offset program that will optimize prescription sales to new and continuing patients. It's also possible to determine the optimal potential length of the copay offset—be it three months, six months, or "evergreen." The point is to never give away more revenue than you need to. The goal is to determine what actions are sufficient to get and keep the patient. 

Principle 2—Allocate resources to where they do the most good and the least harm

. Copay offset programs cannot legally be used by Medicare Part D enrollees. But while physicians may know which managed care plan is paying for their services, they usually have no clue as to the source of prescription coverage.  

So what happens when a Part D patient gets a copay offset card? The simple answer is: for drug manufacturers, nothing good. If the patient gets to the pharmacy counter and finds that he or she is ineligible for this offer, and then learns that the prescribed drug has a high copay, they will at best be disappointed. And if the prescribed drug hasn't been approved for Tier 2 copays, it can be much worse. In such cases, the patient may ask the pharmacist to call their doctor and return them to their old therapy. Or worse, they might follow the pharmacist's suggestion of a comparable generic or OTC product.  

It may be possible for sales reps to direct the physician's office to provide copay offset kits only to commercial patients, but the simplest and best way to "Do No Harm" is to calibrate the allocation of kits and cards away from those territories that have a high percentage of patients on Medicare. For example, almost 50 percent of potential statin patients in Miami are enrolled in a Part D plan. (See Table 3) In Pittsburgh, the number is only 30 percent. Across the typical 600 territory US pharma sales structure, the range of prescriptions coming from Medicare might be between 10 percent and 80 percent of the total. 

A second problem that can be avoided is giving out cards where they will have little value. After all, what good is an offset card that reduces copay to $25 if a patient's copay is actually only $15? Or what if the card only saves the patient $4? Using transactional data that includes copay, it's possible to identify the territories that have low probability of "value redemption," or a prescription that exceeds the minimum set by the program. For programs in the dyslipidemia market that get copays down to $25, the probability that one of these cards will have any value can range from 15 percent to 50 percent in any given sales territory. 

The final harm to avoid is perhaps the most difficult to identify, and possibly the most counterintuitive. Brands can minimize losses in profit margin by allocating copay offset cards to the sales territories where copay actually matters—that is, where the copay offset will be used by patients who might, without assistance, abandon their prescription altogether. (See Table 4) The abandonment rates—and more precisely, the differences in abandonment rates between low and high patient out-of-pocket expense levels—can be used to focus spending in geographic areas where patients are the most price-sensitive.   

Ironically, those areas may be the places where copays are currently lowest, such as metro New York, where patients have been conditioned to low branded copays subsidized by employers. In other markets, such as Houston and Seattle, patients have been conditioned to pay $45 to fill a prescription, and won't abandon many drugs until their out-of-pocket exceeds $50 or more. Sales managers may not like the idea of distinct allocation of cards to where they are actually needed, because getting a patient's copay down to $10 in Queens might cost the exact same amount as getting a Houston patient's prescription down to $25. In Queens, however, it could make the difference between keeping a patient and losing the prescription altogether. In Houston, it's just giving away margin unnecessarily. 

Principle 3—Measure returns and modify the offer on a regular basis.

 This last principle, though seemingly simple, is one that requires strict discipline. It's critical to measure the returns on investment for copay offset programs with the same analytical rigor that is applied to managed care contracts. Manufacturers should compare test and control groups of patients and physicians receiving copay cards in order to determine whether program objectives (uptake, adherence, loyalty) are actually being achieved. In so doing, they might identify opportunities to modify the offer or focus resources to do the greatest good and the least harm. 

The valuable aspect of applying these principles is that it can make a significant difference in an offset program's financial returns. Results vary by class, but as many as one-third of all territories currently getting an equal allocation of a national copay offset program will still have a negative return on the investment. Another third will have nominal returns. Worst of all, the remaining territories are probably not getting all the investment they need. Even minor modifications to the "one-size-fits-all" approach can reduce the probability of harm (avoiding Part D beneficiaries), and have immediate impact on market share in places like metro New York, where patients have become conditioned to low copays. 

Care in the deployment of these programs is also mandated by the likely reactions of the purchaser community as their own business models change. The biggest harm to pharmaceutical manufacturers may occur in the long term, as managed care plans become conditioned to believe that, as they increase cost-sharing to patients, industry will react by increasing copay assistance programs. Managed care plans may also begin to see offsets as a threat to their ability to extract rebate dollars from the Tier 2 drugs. They could react by closing pharmacy networks or to mandate mail prescriptions, where they can decline to accept copay offsets.  

Slowing the pace of spending on these programs might be the best course for the industry. Although a well-designed and rationally deployed copay offset program can provide a positive result for an individual brand, indiscriminate use of these programs by the industry, with no strategic differentiation, is a race to the bottom. The lasting consequence could diminish the value proposition for 

 are Directors of the Amundsen Group. They can be reached at 

Designing and deploying company copay offset programs without devaluing the brand.

First, Do No Harm...

Many pharmaceutical professionals are aware that the industry in the US and Europe has evolved into the mature or competitive stage of its life cycle. This transition explains most of the key industry changes over the last decade, including fewer new products, stagnant markets, pricing pressures, and greater brand and generics competition. But despite recognizing this new era, many professionals continue to rely on an outdated business tool, such as the traditional business war games wherein brand teams divide up to test their own marketing elements against the tactics of their competitors. In today's market, this business tool requires a complete upgrade.  

Live, qualitative competitive simulations are the new and improved version of business war games. These "War Games 2.0" hold several advantages for pharma professionals over the traditional version. For one, competitive simulations offer new approaches and capabilities to help fix many of the shortcomings associated with war games. For example, unlike war games, competitive simulations are specifically designed to identify action steps that help companies and products win in the market place.  

Secondly, competitive simulations reflect the new era that the pharmaceutical industry has entered. While traditional war games focus primarily on physician detailing and messaging, competitive simulations take a holistic approach to competing, incorporating multiple disciplines and functions, various stakeholders, emerging market factors, and different types of competitors and competitive threats. In fact, performing old war games in the new pharmaceutical environment may actually lead to the wrong competitive and market conclusions, placing a company at competitive risk and disadvantage. The following is a list of important upgrades offered in competitive simulations. 

1. Customization of the Competitive Simulation Exercise

Traditional war game vendors typically use standard frameworks and templates, and simply plug in the names of products and competitors when conducting a war game. In contrast, consultants conducting competitive simulations recognize that every product, market, and competitive landscape is unique, and therefore each simulation must be designed 

 based on the client's specific objectives. Nearly every aspect of a competitive simulation can be customized, including critical issues or topics, competitive companies and products, market assumptions and timing, key stakeholders, the number of exercises and workshop duration, and many other factors. Customization ensures that the simulation reflects the brand team's competitive reality and offers useful insights.  

Competitive simulation consultants understand that companies need to take a comprehensive approach that goes beyond simply marketing and sales strategies and tactics. Consequently, competitive simulations involve multiple perspectives from within the company as well as ideas from external sources. For example, simulations may reveal competitive advantages in functions such as clinical research, manufacturing, and distribution, or in disciplines like managed care, legal, or communications.  

In the old pharmaceutical world, it made sense for war games to include role-playing or actual physicians as the decision makers. However, competitive simulations reflect the new reality, incorporating multiple stakeholders as influencers and decision makers. For example, a typical global simulation may have either internal corporate professionals or external stakeholders playing the roles of managed care or government payers, an FDA regulator, a professional medical society representative, a patient, a key opinion leader, or other roles. The inclusion of these stakeholders enhances real-world perspectives, insights, and, ultimately, the simulation results. 

The biggest complaint following most war games is the lack of follow-up. In contrast, competitive simulations are specifically designed to identify implementable action steps to help clients go to market. And competitive simulations are often integrated directly into a company's brand planning process. 

Unlike war games, senior executives participate in competitive simulations for the benefit of both the simulation and the executive. Typically playing the role of judges, executives provide necessary sponsorship, guidance, and marching orders. Participating throughout a one- to two-day exercise, executives gain a greater understanding of the brand team's market, competitors, and issues. This experience enables executives to drive key action steps following the simulation.  

Unlike the basic battle themes of war games, competitive simulations use entertaining themes such as a sporting event, a popular movie, or a reality show that reflects the feeling of the brand team's actual market competition. The more engaged the participants, the more productive the exercise. 

Competitive simulations can be used not just for single brands but also for franchises, portfolios, and companies—an important application because today pharma competes on all of these levels. For example, oncology products often have multiple indications across different types of cancer and are typically used in combination regimens. Therefore, it makes sense to conduct oncology franchise simulations. Similarly, companies with large portfolios of products such as cardiovasculars or vaccines should consider conducting portfolio simulations.  

Traditionally, war games were conducted during the launch of a company's or competitor's product. Pharma companies now recognize that brand teams need to practice—just like sports teams and music groups—much more often to be at the top of their game. In fact, there are pharmaceutical companies that conduct competitive simulations every quarter for their major products. Appropriate times for competitive simulations include the annual marketing or brand planning process; a company's or a competitor's new product launch; new data, labeling, or indications; when exploring a new strategy or product repositioning; a competitors' transformation of their strategy or tactics; and significant changes in customers, stakeholders, or other market factors. 

Competitive simulations are more realistic, customized, engaging, and productive than traditional war games. By delivering specific competitive insights and action steps, simulations have been shown to dramatically enhance success in the real world. 

 is President of Bernard Associates, LLC, a pharmaceutical industry management consulting firm. He can be reached at 

Competition

Competitive simulations can help pharma adjust to market changes by identifying effective action steps.

War Games 2.0

The worldwide economic downturn, the contentious debate over national healthcare reform, and important changes on the regulatory front have all taken tolls on biomedical research and new drug development. Luckily, the new year brings optimism on both fronts. Healthcare reform legislation will either become law or die a painful death. The new team heading up the Food and Drug Administration will be firmly established and eager to implement new policies and programs. Pharma companies will be consolidating operations following major industry upheavals. And all will be watching the following trends shaping drug development in 2010. 

The rising importance of overseas markets for drugs and medical products, along with pressure to cut production and research costs at home, is driving pharma overseas. Marketers are becoming established in China, India, and other newly industrialized nations that will be major markets within the next five years. Astra-Zeneca recently announced plans to outsource production of active pharmaceutical ingredients to Asia, and Novartis is investing $1 billion in R&D in China.  

A presence in developing countries means more investment in new treatments for malaria, tuberculosis, and other neglected diseases. FDA is encouraging such efforts, and is likely to do more under its public health–oriented commissioner Margaret Hamburg. The agency supports development of new tuberculosis treatments to replace ineffective old therapies, and is promoting a priority review voucher program to stimulate industry R&D in tropical conditions. To better monitor the growing volume of pharmaceutical imports and foreign clinical trials, FDA is establishing overseas offices and doubling the number of foreign inspections it conducts each year. Collaboration between FDA and European regulatory authorities to conduct joint inspections and share information could expand from APIs to other areas. 

The battle against infectious disease has spurred worldwide investment in vaccine development and production; this surge is slated to continue. Global funding of a vaccine to combat the H1N1 influenza pandemic has financed construction of new vaccine manufacturing facilities in the US and abroad. Vaccines to combat malaria and TB are in clinical trials, and scientists remain optimistic about moving forward with a long-sought preventive to HIV infection. Novel antigens are in the works; an anti-smoking vaccine is moving into late-stage testing; and scientists continue to seek therapeutic vaccines for cancer and other conditions. 

Longer supply chains and rising imports raise questions about the ability of drug manufacturers to document the quality and safety of drug products. Because FDA can never check all the thousands of products and ingredients coming into the US, it expects manufacturers to do more to ensure that contractors and suppliers have a commitment to quality, and that products and ingredients are routinely monitored and inspected. The aim is to prevent future adulteration crises, such as contaminated heparin and products with melamine.  

An electronic drug registration and listing system was fully implemented in 2009, and should make it easier for FDA to identify and track products. Industry also could gain from a long-promised FDA guidance on reducing the volume of manufacturing supplements that require preapproval—an initiative designed to provide more predictability for companies contemplating improvements in manufacturing processes.  

FDA continues to implement provisions in the FDA Amendments Act of 2007 (FDAAA), designed to ensure the appropriate use of approved medicines through the product life cycle. FDAAA has authorized postapproval label changes when new safety issues arise, along with penalties for manufacturers that fail to conduct agreed-upon post-marketing studies. There are mandates for more extensive listing of clinical trials and study results on the 

 Web site, and for Risk Evaluation and Mitigation Strategies (REMS) governing postmarket prescribing and surveillance. FDA has approved REMS for more than 50 products, and is formulating a REMS for the entire class of extended-relief opioid medicines in order to provide continued access for patients suffering from chronic pain, while also curbing inappropriate prescribing, unintentional overdosing, and intentional abuse.  

Sponsors, health professionals, and patient groups will be watching closely to see how well these programs prevent drug safety problems, and whether these efforts support more FDA flexibility in approving somewhat risky new products. Internally, FDA is bolstering its safety assessment capabilities. A Safety First program in the Center for Drug Evaluation and Research (CDER) seeks to clarify responsibilities for pre- and postapproval drug safety assessments. The agency's Sentinel Initiative aims to detect medical product safety problems more effectively through an electronic monitoring system linked to healthcare databases. Sentinel eventually should detect emerging safety problems in real time and identify patient subgroups experiencing adverse events.  

FDA's Safe Use initiative, which commissioner Hamburg announced in November, aims to build partnerships with other components of the nation's healthcare system to ensure that medicines are used safely and appropriately. FDA plans to collaborate with other government agencies and healthcare providers to address situations that lead to medication errors and inappropriate prescribing.  

These programs require access to electronic health information systems, a prominent goal of national health reform. Earlier economic stimulus legislation aimed to spur e-health development by providing $19 billion to support adoption of electronic health records by doctors and hospitals and to develop standards and systems supporting electronic health information exchange, including e-prescribing. Electronic databases promise to accelerate detection of drug adverse events and to streamline data collection from clinical trials and population studies.  

At the same time, broader access to personal health information has generated demands for stronger protections against unauthorized disclosure of patient records. The concern for the biomedical research community is that privacy issues could limit access to patient information needed for pre-clinical and postapproval studies. Research experts are exploring alternative models for health surveillance and assessment based on the data-sharing capabilities of electronic information systems, approaches that may gain more attention in coming months.  

E-health systems also are critical for developing personalized, or individualized, therapies and the diagnostics needed to determine who may benefit or experience harm from more targeted treatments. The shift to personalized medicine requires access to personal health data to recruit research subjects who meet genetics-based enrollment criteria, and to identify those individuals who should—or should not—receive a treatment based on specific genotype. Long-promised FDA guidance on developing personalized medicine and diagnostics could give the field a welcome push.  

Researchers also will be tapping health system databases to assess health outcomes and to compare the risks and benefits of medical products. Federal agencies are funding a number of comparative effectiveness research (CER) projects with an eye to assessing a broad range of medical treatments and strategies. Pharma companies seek limits on government-funded studies that compare one drug to another and focus on cost issues, but more CER will inevitably highlight comparative prices as well as health benefits. 

"Transparency" is a recurrent theme in health reform and regulatory matters. Efforts to lower drug prices could require broader disclosure of manufacturer rebates and discounts negotiated by payers and health plans. Congress further seeks to shed more "sunshine" on drug company payments to physicians to reduce industry influence on prescribers.  

More transparency in FDA regulatory decisions also is on the horizon. Commissioner Hamburg established a high-level transparency task force last June to identify ways to better inform the public about FDA operations—and enhance agency credibility in the process. The panel, headed by deputy commissioner Joshua Sharfstein, is examining whether FDA should be able to disclose more information about drug applications filed with the agency; what kind of emerging safety information should be disclosed and when; and whether early communication about ongoing safety reviews would be beneficial or raise needless concerns. The panel will issue a report in the coming year on what information FDA should be able to release on its own, and what changes require new regulations or legislation. 

's Washington correspondent. She can be reached at 

Washington Report

Pharma must confront regulatory and marketing challenges in a global competitive environment.

The Big Shift

Before the emergence of the mammoth database, email, electronic laboratory notebooks (ELNs), and global Centers of Excellence, innovation in pharmaceutical research was actually centered around the company lunch table. That was where project leaders—pharmacologists, chemists, biologists, and other select stakeholders—would gather to share knowledge. Free-form interactions about experiments crossed disciplinary boundaries, with the intersection of ideas opening up new avenues for exploration and resulting in rich insights and faster discoveries. 

  Fast-forward a few decades. Thanks to the swift pace of technological change, our ability to generate data has increased exponentially. But now there's too much content and not enough context. Raw information dumped into databases has replaced knowledge-driven categorization and intelligence capabilities that dominated the lunch table; disjointed processes and disparate data silos have replaced local project ownership and interdisciplinary collaboration.  

To usher in a new era of research innovation, pharma organizations need to re-embrace the concept of the company lunch table, but on a larger, more technologically advanced scale.  

Below are three key steps to building a better lunch table that embraces the global nature of today's information landscape, enables richer collaboration, and supports the delivery of contextually relevant information.   

Pharmaceutical research requires the contribution of a host of specialists. The discovery process could be greatly improved if these experts tapped into each other's knowledge bases, but in today's organizational environment, disciplinary groups have become far too isolated. Collaboration at the lunch table is not entirely practical when an organization's head pharmacologist is in Boston and its lead chemist is in Beijing.     

With the right technology, however, the lunch table can be re-created in virtual form. Project stakeholders should be able to exchange information, organize research findings, and make collaborative decisions in the context of a single project, rather than a specific discipline. In this way, organizations can more effectively ensure that all stakeholders are working toward a common objective, and at the same time allow for the tangential discoveries that can only be uncovered through the mingling of ideas.   

Narrow, discipline-based tools like ELNs create barriers to collaboration by locking important research information within proprietary systems. They can also stifle innovation by imposing information management requirements on researchers, essentially allowing the software to drive the scientific process rather than the other way around.     

Thus, a global IT architecture that is robust enough to support end-to-end information access and integration, yet flexible enough to enable local contributors to do what they do best, is key.    

The knowledge that drives new discoveries comes from many sources. In addition to data generated by current experiments, researchers can speed progress by incorporating relevant information from previous work, scientific literature, and both in-house and publicly available databases.  

But as any pharmaceutical researcher knows, the issue of data integration is a thorny one. Data generated by a single chemist or biologist (much less an inter-disciplinary group or the broader industry) is often spread across an array of formats, applications, and proprietary systems. And the volume can span thousands or even millions of possible compounds, assay results, and more. Stakeholders can spend countless hours finding information, preparing data for analysis, and collating, formatting, and distributing results.  

Fortunately, next-generation technologies like service-oriented architecture are alleviating these problems by enabling a more unified approach to managing complex scientific information related to drug candidates. A Web services-based IT foundation for scientific information management can support the integration of multiple sources of information in a "plug-and-play" environment, so that organizations can create automated workflows that streamline highly complex research projects.  

The flexible nature of this type of architecture is critical; it enables researchers to unlock rich data sources (both inside and outside the organization) without the time and expense involved in writing software for each workflow. In fact, a customized approach would be impossible for IT to support, as there would be no way to keep up with constantly changing user requirements for thousands of different data integration and workflow tasks. With a Web services-based platform, all IT must support only about 50 services.  A researcher can then assemble these services on an "as needed" basis for the specific project and discipline requirements. Thus a global, scientifically enabled, services-based architecture can effectively bring back the lunch table in a way that meets the needs of today's modern pharmaceutical enterprises.      

Here's an example taken from the realm of life sciences. One practice within translational medicine involves using, or "translating," isolated genomic research into a clinical setting. By leveraging gene expression analysis to pinpoint biomarkers that indicate disease or non-disease states, researchers can improve the effectiveness of drug R&D.  

But with more than 20,000 genes existing in a single cell, finding the right biomarker can be like finding a needle in a haystack. Not only do researchers conduct their own gene expression experiments, but they also analyze and compare their findings with data from collaborators, as well as with information found in academic literature, previous clinical trial documents, and patents.  

Leveraging trusted science informatics platforms, one company researching translational medicine was able to bring a wealth of disparate data together to speed biomarker identification, and ultimately save a great deal of time and resources during the discovery process. It was only by intersecting information in the right context that the research team was able to zero in on what they needed to speed discovery.  

 In the past, context was king. The insights researchers were able to gain when conversing informally were extremely rich because each individual brought a powerful data processing source to the table: his or her own mind. Human brains are adept at making contextually relevant associations; they categorize information into loose groupings and can make intelligent connections that a structured database is incapable of. For example, a human would know immediately that the words "auto," "automobile," and "car" mean the same thing, or that a past experiment may be "kind of" like one being conducted in a current project.   

But what happens when the available knowledge base includes an enormous breadth of sources, data formats, and locations? A researcher may be able to conclude that any files containing either the term aspirin or acetylsalicylic acid are relevant to his work, but would find it impossible to quickly or easily access the most important information if he had to actually read through thousands of pages of published literature, or manually search through hundreds of ELN documents to find it.      

This is where emerging technologies that enable less rigid, artificially intelligent search capabilities come in. If applications enabling semantic search and text analytics were built into the services-based scientific information management platform described in the section above, research teams could more easily add context to content, and take advantage of the valuable stores of complex data available to them—structured and unstructured, proprietary and public.  

For example, one of the world's largest global pharmaceutical companies wanted to search a vast amount of unstructured content—ranging from external patents and journal articles to their own internal company documents—in order to identify and extract information related to specific new business opportunities for its existing intellectual property. The organization leveraged a services-based IT platform to integrate both the unstructured data sources, as well as an array of text-mining applications. The outcome of its work clearly indicated that while standard text mining applications were useful, scientifically aware text analysis methods were even more critical to success. These allowed researchers to scan the content for IUPAC, SMILES strings, and common/brand names of interest and quickly pinpoint the most contextually relevant sources of information. Standard text methods, such as FAST, cannot recognize chemical structures or biological sequences in the manner above and thus an integrated approach was the best solution. Without this ability to quickly integrate both an array of applications and content sources, the time and cost constraints involved in leveraging this valuable information would have been too high, and critical insights would have been missed.      

The insights that lead to new breakthroughs are often hidden in a deluge of data, inaccessible to the researchers who need them, and disconnected from other relevant sources of information. In order to transform this data into the knowledge that drives discoveries, today's organizations need to bring back the contextually rich collaboration that existed at the company lunch table, but in a form more suited to the modern research environment. This requires a global, services-based IT architecture that supports cross-disciplinary data-sharing and integration, local information delivery, and scientifically aware search capabilities. As a result, organizations can take advantage of all relevant research sources like never before.   

 is chief science officer at Accelrys. He can be reached at 

Columns

In a new era of research partnerships, targeted information databases can improve collaborative decision making and speed new medicines to market.

Build a Better Lunch Table

This issue marks not only the start of another year—our 30th—it's also the launch of a new decade. If there is a theme to characterize the decade just passed, it is how Big Pharma found its mission and business model defined by others, rather than by itself. Ten years ago, industry could use the hubristic purple poetry of Invictus as its mission statement. Today, Coleridge's albatross might be more apt.   

Pharm Exec's 2010 Industry Forecast contends that success in the new decade will depend on how well industry adapts to market change; resisting is not an option.  Flexibility can be a powerful means to uncover new pathways for growth, so long as industry is comfortable with the terms of engagement and can shape the discussion on decisions affecting its external operating environment.   

In other words, if the industry doesn't want to be redefined as a public utility rather than a profitable business, it has to ensure that the public knows who it is, how and what it does, and for whom. In short, tell your own story or have it told for you.  

Here are a few "theme drivers" where industry can do a better job defining what the issue is, and where it stands.  

Better information is the preferred solution to every problem facing the healthcare system, but underlying this consensus is a startling misunderstanding about how to apply information effectively. Information by itself is not evidence; evidence derived from information is not knowledge; and knowledge is not useful unless it can be translated into actions that drive better health outcomes. This premise must be explained if industry is to shape the spread of "evidence-based medicine" tools whose too rigid application will promote rationing. Information is all about context; the methodologies that payers are using to quantify a medicine's "value" must permit the broadest interpretation of results—in the field, under real time conditions, and with the patient in mind.    

In defining its commitment to medicines innovation, the industry's focus has been on setting metrics around the R&D enterprise.  Not only does this approach lend too much attention to the productivity of the enterprise, which is susceptible to periodic droughts, it is also too narrow. Others are doing a better job of explaining the economic gains from "hidden innovation" in areas like product design, organizational behavior, and copyright. Regulators are following suit, as witnessed by the UK's recent decision to revise its assessment of business innovation capacity to incorporate broader performance measures than spending on R&D and patent citations—the two key areas where pharma ranks high. Preserving the industry's status as "most innovative" will require a redefinition of its own metrics of performance, so that process innovation counts as much, if not more, than product innovation.   

Marketing is another area where definition will drive the outlook for industry. At present, the function is seen almost exclusively as product promotion, with no attention to the fact that registration approval does not confer access to the medical community or to the patient. Rather, it falls to the manufacturer to build awareness of the therapeutic merits of a new medicine.  Considering that it takes an average of 17 years for a drug treatment guideline to be established as standard of practice, this contribution to medical knowledge has never been made plain by industry.     

Finally, industry needs to explain the significant transition occurring in the application of intellectual property. Biopharma is arguably the one sector where IP is still a mission-critical function, but conditions of engagement are shifting. Few stakeholders understand how court rulings are narrowing the grounds for patentability, or that the need to share the higher cost of R&D is driving company interests toward finding alternative ways to safeguard knowledge rights. 

From the Editor

Pharma must get its definitions right to be successful in the new decade.

Pharmaceutical Executive-01-01-2010