Population health is the brick and mortar foundation for much of what is truly new in US health reform: expanding healthy behaviors on a community-wide basis; around broadly defined, well-distributed measures of outcomes; in places beyond the institutional setting where care is actually delivered. For big Pharma, it represents yet another escalation in expectations. With the principles of population health firmly embedded in the Obama Administration's Affordable Care Act, drugs now need to do more than simply treat disease. Instead, they must perform a more holistic function in raising the quality of medical interventions, helping hospitals to save money, and keeping well people healthy while preventing sick people from regressing. The problem pharma faces is the lack of a policy consensus on what 

population health: how can you execute against something you can't define?  

To shed light on this new movement in health care, 

met last month with one of the leading advocates of population health, Dr. David Nash, founding Dean of the Jefferson Medical University School of Population Health in Philadelphia. Nash, like the function he supports, is a practiced multi-disciplinarian. He is a board-certified internist MD; member of the boards of directors of Humana and Endo Health Solutions; chair of the technical advisory group of Pennsylvania's Healthcare Cost Containment Council; and editor of four major peer-review journals. Despite these heady credentials, Nash touts a simple message: to help Americans live longer and better, providers must engage around the patient's 99 per cent – not the one per cent when he/she is "in" the health system.  

 The School you founded here at Jefferson University is centered on the concept of population health. Can you define population health and explain how it relates to biopharmaceuticals? 

 In a word, population health is a management tool designed to acknowledge and respond to the transformations taking place in our health system. It is a systematic approach to coordinating the preventive and chronic care needs of patients: to efficiently manage risk, promote full transparency of information, lower costs and improve health outcomes. We do this through active program interventions based on strong patient data analysis and the cultivation of close ties with community and social service organizations, professional groups – especially primary care providers – as well as hospitals and other institutions directly responsible for care, in both the acute and ambulatory settings. I believe population health management ranks as a true disruptive innovation; we are not defending "business as usual."  

Jefferson University, which houses the School of Population Health launched in 2008 and where I currently serve as Dean, is a living illustration of this focused, integrated approach. There are 141 medical schools in the US, but few of them bear any resemblance to Jefferson. Jefferson is a graduate-level health sciences university, with six schools each representing the key stakeholders in the health care system – biologic science, medicine, nursing, pharmacy, allied health professions, and population health – all arrayed around one of the country's largest urban teaching hospitals, a major academic center in its own right.  

 There appears to be an intimate link between population health and the broader social and economic environment in which health services are financed and delivered. This connection has often been ignored or downplayed by health researchers – but if we are moving toward an incentive system that rewards overall outcomes, isn't it time to shift the discussion on reform back toward the big picture? 

 Precisely. There is unassailable evidence that almost all of the factors that determine healthy well-being are social in origin: the operative estimate is 85 per cent. These factors include socio-economic status, where you live, family background, gender and education. I would also add access to preventive health services such as nutrition, screening for basic diseases, reproductive counseling and vaccinations. This 85 per cent figure renders a sobering judgment about the efficacy of the US health system. Practically, it means only 15 per cent of individual well-being is attributable to the pharmaceutical industry and the complex network of academic medical centers, specialist physician practices and 5,000 community-based hospitals that deliver acute care services for millions of patients. The cost is staggeringly disproportionate: nearly 20 per cent of US GDP is spent on that 15 per cent contribution to keeping people well.  

How do we population health advocates respond to this statistic? We call a time out. Our message is "stop, think and find a better way to allocate resources and obtain more value for the money we spend on health services." 

 Doesn't this imply there is a need for an activist agenda tied to legislation and policy reforms as well as the focus on changing individual behaviors? 

 Yes. We are a society of laws and governance. The social determinants of health can be influenced – for better or worse – by legislative and regulatory actions. The Obama Administration's Affordable Care Act [ACA] is already having a demonstrable impact on the practice of population health, as do rules handed down by the FDA, the Centers for Disease Control [CDC], the HHS Center for Medicare and Medicaid Services [CMS], and many other regulatory bodies, including those at the state level. Our work here at the School and with others seeks to shape the policy environment so that it supports the broad, multi-disciplinary objectives I cited earlier: inclusion, transparency, evidence and value.  

 What about quality standards? There are huge, largely unaddressed costs linked to the high rate of medical errors in treating vulnerable patients. 

 Quality and safety are central to population health, if only because endemic failures in this area diminish the value of that institutional 15 per cent contribution to well-being. Medical errors now constitute the fourth leading cause of death in the US, claiming on average more than 200,000 lives each year. This occurs despite the substantial evidence we now have on best practices that, if applied consistently, would shrink this lamentable statistic. Many experts assume that solving medical errors is a simple task – much like requiring bicyclists to wear helmets or to drive within the speed limit. The truth is far more complex. One of the biggest contributors to the problem is that quality does not follow the patient when he leaves the hospital. The vital outpatient experience is not addressed, patients will fail to follow instructions or not understand them. Either way, the end result is an unacceptably high rate of hospital readmission, often leaving the patient in a worse condition than before. 

 Quality and safety problems are hardly new. The seminal work on this topic remains the National Institutes of Medicine [IOM] study "To Err is Human," which was published 14 years ago. Does this suggest to you that population health is not hitting the mark, in terms of fostering improvements in the standard of care? 

 It's a fair question to ask why there has been so little progress. Data shows the US is actually trending worse; figures updated by the IOM to July 2013 put medical error in fourth place on the mortality charts, whereas the original study had it at sixth. And the IOM cities the US at 17th –just behind Slovenia –among countries in outcomes for the money we spend on health care.  

Why the lag? It's because progress has not been uniform; the implementation of standards is piecemeal and haphazard. We have an inverted pyramid of incentives, where massive resources are being poured into resolving highly complex interventions for the very sickest patients while we neglect longer-term, community-based investments around the social determinants of health. In the former case, we see an explosion of quality and safety measures that hospitals must meet under the ACA; if they don't, they face penalties involving the forfeiture of federal reimbursement payments when patients are readmitted within 30 days of discharge, or where there are too many hospital-acquired infections. There is now an economic incentive to deliver more value, especially when patients are being treated in the more costly acute care setting.  

This change is important. It represents progress. Hospital costs represent the largest category of health spending. Hospitals now have an economic incentive to deliver value. The ACA has several important provisions that also require these institutions to demonstrate their activities deliver a broader benefit to the community, which is a key tenet of the population health approach. Instead of just certifying to HHS that a facility provided x dollars for uncompensated care, the law stipulates the provision of evidence that such spending had an empowering impact on the community.  

 How are these external trends influencing the priorities and work plan of the School? 

 Jefferson's program is but five years old – it also happens to be one of the most exciting and consequential periods in health system reform. Our curriculum has a strong emphasis on learning to navigate within the health sector, with four Master's degree programs: including public health policy [online], healthcare quality and safety [online], and finally a new online Master's in health economics and outcomes research. No one else in academia has put this constellation of inter-disciplinary products in one place, under a single roof. In terms of research, our faculty is working on a variety of projects. One example is a study of Italian pensioners looking at strategies to ensure pharmaceuticals deliver the highest value for reimbursement. Another is a review of the economic challenges to treating cancer here in the US, where we are examining the most cost-effective pathways to new drug therapies based on genomics. And we have a large body of research focused on making the governance structure of US hospitals more efficient – what structure is best suited to improving health outcomes?  

Our faculty also makes a point to participate in the policy arena. I work as an adviser to the Pennsylvania Health Care Cost Containment Council, which advises the Governor and legislature on the efficient delivery of state health services; and where I also chair the Council's Technical Advisory Group. The Council and our group compile and publish outcomes data from every hospital in the state. It should be no surprise that we uncover some really amazing variations in outcomes across the state. Spreading best practices to limit these variations is a key goal, one where we have made some progress. At the federal level, I am a member of a National Quality Forum expert panel charged with the task of creating new standards to measure how well hospitals do on community engagement. Finally, the School is working with the city of Philadelphia on smoking cessation and obesity programs for young people that emphasize direct community involvement outside the health sector, including parents, teachers, pharmacists and employers.  

 In light of this active role in policy, what is your perspective on the direction of US health reform in advancing medical innovation? Where are the real pockets of progress taking place? 

 The US is a very heterogeneous society. There is no one single source of insight or innovation. Hence I would disagree that government – or the Obama Administration – is in the driver's seat where system change is concerned. One example I would cite of a creative response to health care challenges are multi-specialty physician practices like the Everett Clinic in Seattle, where the physicians work together as employees and have a laser focus on producing value for every treatment dollar spent. Another is the proliferation of interest among academics, providers and payers in supporting dozens of peer-reviewed journals publishing good research on quality and safety.  

Likewise, there is no doubt that the US leads the world in generating good data on disease interventions; what used to be unfathomable questions are now being answered. The problem is in executing on the basis of this data to measurably improve outcomes that lead to advances in the standard of care. Even here, however, we can point to significant gains – there are hospitals that go a year without a single case of ventilator-induced pneumonia or an i.v. line infection of the blood stream. Just five years ago, these assaults on patient safety used to be frequent, repeatable incidents in most every facility.  

The states are incubators of innovation, especially Oregon and Arkansas, who are using federal waivers under Medicaid to initiate novel ways to cover patients with chronic disease.  

Finally, consumer engagement in health care is an exploding reality – a source of" creative destruction" as Professor Eric Topol contends in his book. The evidence is clear: if consumers see a positive economic incentive, they will act to change their behavior. When obese people find their insurance rates go up, more will opt for diet and exercise. Wellness programs among employers do appear to lower the absentee rate.  

What binds all this is the capacity to forge consensus out of our diversity. That consensus is simple: every major player in the US system acknowledges there is a better way to treat and pay for the health services our society expects. I believe this consensus is due to the practical intellectual approach initiated through our work in population health  

 It is interesting that none of the innovations you cite involve the use of biopharmaceuticals. Do you support the premise that the industry's expressed support for outcomes – services "beyond the pill" – is more rhetorical than real? 

 I have been a member of the Board of Directors of Endo Health Solutions, so I am familiar with the industry business model. In reference to your question on the industry commitment to delivering outcomes, I would say its half real – and half rhetoric. For many years, drug companies had a winning formula built on the blockbuster product. Sales of these billion dollar medicines helped boost research pipelines along with a commitment of resources unmatched by any other country.  

But the blockbuster model has run its course; the science of drug discovery is harder and the growth of generic rivals means society has less need for a tenth in class beta-blocker or the 12th consecutive version of a drug for erectile dysfunction. What we do need today is the ability to demonstrate, with evidence, that appropriate use of the pharma armamentarium will produce a good outcome, for payers as well as patients. For 20 years, I have advocated precisely this approach, asking companies to work with us on the delivery side to demonstrate value in the products that come from their labs. In fact, I believe this is now one of the key battlegrounds of 21st century health policy: to get big Pharma to move beyond rhetoric to register the true value of their products in the competitive marketplace.  

Some companies are already there. J&J has been engaged with Jefferson for five years on a partnership called Health Policy Excellence, where our faculty conducts regular interchanges with company managers on health economics and other relevant topics.  

Clearly, however, industry has the capacity to do more. These actions must become institutionalized for the industry to show it has moved from rhetoric to reality in demonstrating value. Failure to turn this impression around will prevent a more important industry objective, which is to establish itself as a full partner in the health care delivery system. For years, medicines have been treated as a commodity purchase, separated from the continuum of patient care. Until recently, therefore, it has not been possible to show how use of a drug influences the other services patients receive, often eliminating the necessity for surgeries or other high-cost interventions. Unfortunately, this separation is now being compounded by the increasing scrutiny of drug promotion, in which physicians are barred from seeing field force representatives or participating in company educational campaigns to encourage the uptake of a new medicine.  

Taken together, these trends effectively give the industry no choice but to pursue answers to the following question: how do we get from a business model centered on the volume of pills we sell to the value our customers derive from each purchase? If you don't have a strategy focused on this central point, you are missing the future.  

 One reason why big Pharma has not fully embraced an outcomes agenda is the difficulty it has in leveraging good data. Making data transparent and shareable is complicated by competitive issues, while key outcome indicators are often missing due to the health system's failure to integrate the various parts of the delivery chain. Asking drug companies to perform head-to-head comparison trials against a close competitor or even one its own products requires a big leap of faith. How do you open the floodgates and get people to trust and have confidence in data as the arbiter of access? 

 It requires a change in behavior motivated by incentives to make this change economically feasible. And it starts in one place: the pharmacy and therapeutics committees that both the public and private sectors rely on in choosing drugs for reimbursement. As a member of the committee at Jefferson Hospital, I know that our members will not consider recommending a formulary listing until they see an economic dossier of the medicine's potential impact on costs.  

This is not the same as saying "hand us your proprietary clinical trial information." Instead, our goal is to condition pharma companies to supplement clinical information with a broader economic perspective. Understanding the payer perspective begins with the simple recognition that the payer is bearing all the economic risk. To the payer, "value" means finding drugs that are efficacious, safe and advance the standard of treatment, at a price that also allows for a margin from the sale. Drug companies that understand this basic fact of life for payers will succeed, with the added social benefit of preserving the decades-long hegemony that the US innovative drug industry has enjoyed worldwide.  

 There is much emphasis on the obligation of big Pharma to understand the payer perspective. Might it not be better to see this relationship as a two-way street? Do PBMs and insurers – the major payers for medicines in the private sector – bear any responsibility for advancing the dialogue? 

 Yes. I am a member of the Board of Directors of Humana. Despite the connection, I don't think insurers do a good job in articulating what they provide to the health care system. For example, it's a misnomer that the big insurers tell physicians how to practice medicine. It is also misleading to state that insurers won't pay for drugs, if they don't like the evidence. Humana is a facilitator, not an arbiter, of care. This is the proposition: insurers, Humana among them, say to their providers: "here is your money upfront. Use it to decide what you think is the best way to treat your patients. But because there is a limit to this money, you would do well to practice based on the best available evidence of value for that money. And if you perform that task well, we will add a bonus – if you create more value for money, we will give part of that value back to you."  

 As a population health advocate, what is your view on implementation of the 2010 Affordable Care Act [ACA]? Are you a proponent – or an opponent – of what the Obama Administration is doing? 

 The law is a step in the right direction. The US is the only industrialized nation where upwards of 15 per cent of the population has no health insurance. If nothing more ends up being done than covering these uninsured, then President Obama deserves recognition for a great act of social justice. The problem I have is the way the legislation was enacted, in a series of fudges and compromises required to obtain the bare majority of votes, all from one party in Congress. As a result, few of the cost fundamentals that drive our system – such as rewarding providers for a service, rather than an outcome – will be resolved anytime soon.  

Nevertheless, there are promising experiments under way; many are financed through the law. "No outcome, no income" is the operative concept. The ACA introduces a new model, the Accountable Care Organization [ACO] that promises to attract millions of enrollees, particularly those eligible for Medicare. There is also provision for patient-centered medical homes, a care delivery model centered on transparency, accountability, and evidence-based practice. You can also point to the widespread adoption of electronic medical records, a transition facilitated by the law.  

One downside is the negative media coverage of enrollment in the new insurance exchanges. That too has to be put in perspective. Looking back, no major legislation involving health has been implemented without controversy. The American Medical Association [AMA] fought Medicare and opposed prospective payment reform in the 1980s. Patient power led to repeal of catastrophic care coverage in the 1980s and a backlash against HMO managed care in the 1990s. Liberal Democrats almost torpedoed the Medicare Part D benefit in a fit of partisan pique against a Republican president. So the histrionics over "Obamacare" have to be placed in context. How could anyone believe that confrontation would not occur in a sector that accounts for a sixth of US economic output?  

In a larger sense, the dysfunction on reform underscores how little is known about insurance as a social and economic instrument. Most Americans still have trouble understanding the basic principle behind insurance: diverse pools of people contract to spread the risk of illness equally, among the sick and healthy, thus mitigating the disproportionate financial consequences of illness for the individual. Health insurance is seen as an assault on personal freedom, even though living in an interdependent world should carry some obligations to the collective.  

A significant omission in the ACA is in preparing the health care workforce for the expansion in coverage. We do not have enough primary care physicians to enable full implementation of the law. At present, there are three specialists for every one primary care physician in practice. This distortion in the labor supply is entirely due to economic factors. Medical school students now graduate with an average tuition debt of $190,000 – the equivalent of a new mortgage here in the northeast. As the ACA is phased in, changes are needed to increase training slots for primary care physicians and to raise their reimbursement rates. Incomes for the sub-specialties have to go lower, across the board. And opportunities have to increase for crucial care team members, including nurses, physician assistants and community health workers. One of the priorities of our population health strategy is to insist that all these practitioners work closely together, at the top of their game, and for the purpose for which they were trained: to get people well, and as quickly as possible. That is another challenge in itself.  

But the biggest flaw in the law is the cost. I believe it will drive up spending much faster than anyone has imagined. The precedent is the 1965 Medicare Act, where Congress was off target by a factor of 400 in what it estimated health coverage for the elderly would cost the government then, and what it costs today. Although expansion of insurance cover is a major advance in social policy, it must be weighed against the capacity of society to pay for it. To me, this dilemma is a stimulus to action because promoting a cost control and quality agenda centered on population health is more vital than ever.  

 Will health reform impose any other structural changes to the financing and delivery of care? 

 There are several. The first is the transformation of health insurance around a tableau of consumer choice. Health insurance is going to go retail, in a marketplace where consumers will be forced to choose, just like they buy soap. In net terms, I think that's a good change. I am pleased that my company, Humana, is moving in this direction. The second is the trend away from a defined benefit approach to insurance — where plans are managed through employers who contract with insurers to deliver a specified package of benefits – to a defined contribution, where employers offer a lump sum to workers, who are then on their own to shop for cover and contract and spend separately with an insurer. This shifts more of the risk to the consumer, forcing him to actively manage the insurance package, including covered procedures, deductions, and co-pays. Employers gain from this by linking pay to performance and becoming more competitive against countries where benefits are subsidized by third parties or government.  

 Based on these trends, what will the US health care system look like in 2020? 

 I expect in 2020 the system will be fundamentally reordered around the patient, accentuated by this broader "retailization" of health services. In this  new world, the biggest competitors to pharma will not be other drug companies, but other health organizations that emphasize this retail experience. Patients are going to have access to an extraordinary amount of information, all of it accessible in real time. Instead of being husbanded by the professional elite, information will be "democratized." Will this shift be seen as beneficial by my 85 year old mother? Probably not. But my two daughters now in their late twenties are going to demand it – to know what care they can get, for how much, and when. And the background color of the web site ought to be pleasing to them as well. On balance, I think this is a good thing. We are already seeing an explosion in new businesses – start-ups – to help consumers make sense of all the new options created by the marriage between data and technology. I just met with a company in Minneapolis, 

, which is pioneering the video prescription, reinforced with a direct message from your physician on taking the medicine properly.  

 Can you identify any "disruptive innovations" that will force big Phama to modify or adapt the way it does business? 

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Population health is the foundation for much of what is truly new in US health reform. Pharm Exec talks to Dr. David Nash, Dean of the Jefferson Medical University School of Population Health.

Population Health: The Call to Community

Pharma companies   active in the US market recognize the declining importance of physicians   compared to the increased clout                          of payers, provider organizations and patients.   Many have moved toward new commercial models and repositioned sales   resources                          to achieve greater scale and efficiency through   Integrated Delivery Networks (IDNs). Others have attempted to implement   geographically                          dispersed organizational strategies or   geographic "archetypes" that require differing levels and types of sales   investment. 

In pursuit of   this objective, managers have looked to the traditional metrics of   market share and Tier 2 access to identify                          where to invest or, failing that, on how to   reduce sales force and promotional spend. But the world has changed.   Reliance                          on these tools – applied almost uniformly   throughout big Pharma for the past 20 years – is no longer sufficient to   ensure                          a profitable brand, let alone a sustainable   business. In fact, the old standards may be having a reverse effect: in   sales                          territories dominated by powerful payers or   expanding Medicaid enrollments, continued deployment of traditional   volume and                          access metrics could prompt companies to   maintain investments in geographic markets that end up being the least   profitable. 

Put simply, it's   time for a new set of metrics that will allow pharma companies to align   their strategies around the push                          for greater profitability, putting them on the   right track for growth – right to the end of the product cycle.   Precisely targeted                          data linked to method of payment, insurance   coverage and geographic footprint are now available from both internal   and external                          sources. When combined with insights from   anonymous patient longitudinal data (APLD), these new information   products can help                          management to be more confident in deciding   where and when to expand, redeploy or reduce costly staffing of sales   professionals                          among specific market geographies. Considering   that field force expenditures comprise third biggest discretionary   investment                          that big Pharma makes after access rebates and   R&D, the efficiencies achieved can be considerable. 

Specifically, the application of these new metrics will enable management to move along three important vectors of performance                          simultaneously:

1. From measuring Volume to measuring Net Margin. 

2. From measuring Quantity of Preferred Formulary Lives to measuring Quality of Access. 

3. From measuring Drivers and Barriers to Performance at the National level to the Local level. 

The following   detailed explanations highlight why each of these three transitions is   critical to helping companies maximize                          the effectiveness and impact of their   promotional resources in the midst of mounting competitive market   pressures. 

When   the multi-billion dollar blockbuster model was ascendant, growing   market share was the standard benchmark to evaluating                       the success of a new product launch. Management   could pay for all sales and marketing investments, including an expanded   field                       force, with the additional sales volume that   resulted; all told, the strategy tended to yield very high gross profit   margins.                       Today, in an industry where legacy blockbusters are   in their last years of life, net margin must be measured at a granular                       geographic level to ensure that incremental sales   are actually "accretive" – i.e. adding to the profitability of the   company                       and covering any costs associated with adding sales   volume. When a brand completes this analysis, factoring in the costs   identified                       in Exhibit One, management will often find   significant geographic differences in net margins. Such differences,   once exposed,                       can help impact a decision on whether the company   can afford to risk additional resources in a sales territory.

For example, there   are a number of mandated new reductions to net revenue, like the offset   of 50 percent of the "doughnut                       hole," legislated in the Affordable Care Act (ACA).   For the products we have reviewed, this can be as high as 12 to 15   percent                       of Gross Sales over the course of a year.   Surprisingly, our review finds that this expense is geographically   concentrated                       in a few areas of the country – the Midwestern   states, New York, and California—where there are more CMS "Standard   Eligible"                       patients.

An even more   important indicator of exposure to margin erosion, particularly for   mature brands, is the rebate level paid to                       the Medicaid program, Part D Plans, Commercial   Plans and PBMs – and also now directly to patients through coupon offset   savings                       programs. The toll is cumulative and extensive:   years of double-digit price increases have created CPI penalties in   Medicaid                       that can often lead to reimbursement which is less   than the cost of goods sold for products in their last years of patent                       life. According to IMS Health research, about five   percent of all branded Medicaid prescriptions are reimbursed at only one                       cent per Rx due to cumulative CPI penalties that   exceed 100 percent of the product's Wholesale Acquisition Cost (WAC).

The   minimum access rebate for each new product launch, which due to   therapeutic competition often means a marginally differentiated                       product, is now going up every year. According to a   recent report by Credit Suisse, for in-market brands, voluntary   extension                       of "price protection" clauses in Medicare Part D,   along with recent demands by large commercial payers to get the same   type                       of protection in that channel, drove the average   gross to net margin ratio down by at least seven points between 2008 and                       2012.

Likewise, the   expense of patient support programs is compressing margins – some 400   products had a co-pay offset, coupons                       or evouchers in 2013 and most of them also   contracted for formulary access simultaneously. This can drive up the   gap for lower                       cost prescriptions. For example, paying down a ARB   co-pay to $5 from a Tier 3 average patient out-of-pocket (OOP) charge   can                       knock 40 percent out of a brand's net revenues. If   the manufacturer had already contracted in the geography and patients   use                       the co-pay cards to pay down a preferred OOP,   virtually all the margin in that market can disappear. In 2014, as much   as five                       billion dollars will be spent on co-pay support in   the US, but the money will not be spread evenly. Rather, it will   concentrate                       in places where high deductible plans and   co-insurance are prevalent. In some sales territories, manufacturers   with specialty                       pharmaceuticals will spend more this year on co-pay   support than all other sales and marketing expenses combined. 

One   final margin consideration is the regional differences in patient   adherence. With the breadth of longitudinal data now                       available, brands can calculate adherence at a   local level and thus place more value on new patient starts in one area   of                       the country over another. For example, in the DPP4   diabetes market, there is a 25 percent difference in expected days of   therapy                       when measured across the US geography. In other   words, as indicated by Exhibit Two, all patients are valuable —but some   are                       more valuable than others.

Patient compliance   to therapy is a consequence of many factors, but the most consistent   driver, across all therapeutic classes,                       is patient OOP. Since 2006, many pharma companies   have seen that the quality of access for patients who have qualified for                       the government Low Income Subsidy [LIS] is   unsurpassed in any other patient population. LIS patients will pay only   $6.35 in                       2014 for any branded product on either Tier 3 or   Tier 2 and may use many more days of therapy in a year than a standard   eligible                       patient. Once their total drug spend exceeds $6,455   in a calendar year, their cost sharing per prescriptions goes to zero.                       In chronic care therapeutic classes, it is not   unusual to see 50 percent or more of transactions in the catastrophic   phase                       of coverage in Part D for prescriptions filled in   the second half of the year. Thus, LIS patients, who need no co-pay   support,                       will generate many more net revenue dollars than   other Part D patients. 

The   conclusion from this data? Using Tier 2 Access, specifically the   percentage of lives with preferred formulary status,                       as a proxy for market attractiveness, is no longer   meaningful. Preferred formulary status is not helpful if the patient has                       a $50 co-pay or if the brand is classified as a   stepped therapy, behind a generic. Worse yet, more benefit designs now   have                       coinsurance and higher deductibles that can put a   damper on patient adherence or can drive continuing patients into   switching                       to generics early in the calendar year. The good   news is it is now possible to measure the actual co-pay exposure and   benefit                       designs of patients on a geographic basis and to   incorporate that into the calculation of brand opportunity. Each brand   and                       therapeutic class has a price sensitivity   threshold, perhaps $40 for many cardiovascular and metabolic products,   where the                       evidence reveals patients will abandon a   prescription at the pharmacy counter. For specialty products in MS or   oncology, that                       patient threshold will be higher.

It follows that   pharmaceutical manufacturers must incorporate this understanding of the   patient response to cost sharing or                       utilization management techniques, so that they   know where they have a high level and quality of access to them. This   makes                       it easier to demonstrate that additional sales   effort will actually succeed in turning that written prescription into a   filled                       – and refilled – prescription. 

Today,   the impact of different standards of care or treatment protocols can   also be measured. The nature of the delivery system                       and the conditioning of the providers within it can   either dampen or amplify the profitable, high quality access that a   brand                       will command. A number of large pharmaceutical   companies have made changes to their commercial model around the idea   that                       IDNs as well all other variables affecting patient   uptake must be isolated in order to identify additional competitive   advantage.

In a number of   recent projects, where the quality of access could be taken out of the   equation for success, our research has                       discovered clear geographic patterns in the   standard of pharmaceutical care. These patterns can be measured and   translated                       into a sales opportunity. For example, there are   clear differences between northern and southern regions in the US on the                       length of time a patient stays on metformin before   adding an alternative diabetes therapy. The same is true for   methotrexate                       use prior to and/or concomitant with a TNF   inhibitor. 

This can make   Seattle or Boston far more interesting to some treatments, and   Birmingham and Miami less so. By the same token,                       Boston can be considered "scorched earth" for many   manufacturers who will have to get their products stepped through   multiple                       generics before being eligible to be prescribed.   The insurance formulary may say that all the brands in a class are   covered,                       but the practice of writing generics first is   deeply embedded in all training and practice in the Boston area.

Existing   data sources, when married to physician practices affiliated with   individual IDNs, will allow manufacturers to measure                       and compare the impact of individual networks for a   given insurer, and vice versa. In the example in Exhibit 4, all   physicians                       associated with five IDNs in Chicago appear to be   impacted by United Healthcare's formulaly restrictions on the diabetes   product, 

. Nationally, this formulary action moved 35 points of market share to the preferred products [

]. It proved to be one of the payer actions with the highest impact in 2013.

The same outcome   occurred with unaffiliated physicians, but to varying degrees. The   decline in share among physicians affiliated                       with a rival IDN, Presence, was less significant   compared to the drop for another competitor, Dupage Medical. Knowing   whether                       to invest in resources to move entire blocks of   physicians to amplify the formulary advantage or dampen the impact of   the                       restriction can only come from connecting this   granular performance data in real time physician practices. 

As we move into the   next phase of change in pharmaceutical marketing and sales management,   more sophisticated tools and measurements                       need to be adopted to ensure that companies   continue to invest in the most profitable geographic opportunities. The   traditional                       measurements – quantity of formulary lives and   volume, are just too imprecise for making disruptive, time consuming and   largely                       irreversible cuts in long-standing sales   investments. A new set of metrics, which provide a proxy for "gross to   net margin"                       at a local level, must be deployed across the   industry. Metrics that provide better indicators of branded growth   potential                       – whether these measure quality of access or the   power of local influences – should be identified in each therapeutic   class. 

Accuracy in   evaluating the growth and profitability potential of each market,   incorporating new insights that have only recently                       been extracted from performance, affiliation and   longitudinal data, will be critical to ensuring that cuts in resources,   when                       they do happen – as they must – can be focused on   the markets where this will matter least. As in crafting a suit that   fits,                       bespoke is best. And to do that, managers would be   wise to measure twice, so they only have to cut once. 

Vice-President, Managed Markets Services, IMS Health and a member of Pharm Exec's Editorial Advisory Board, He can be reached                          at 

Profitability now depends on metrics to help companies answer a key strategic question: "stay the course" with more investment in sales and marketing? Or "stand down" and deploy those scarce assets somewhere else?

The New Metrics of Market Success

Pharm Exec's tenth Annual Press Audit of issues in the pharmaceutical industry finds that the level of media scrutiny increased in 2013, driven primarily by a rise in coverage in two high profile outlets: The

Two issues dominated the news in 2013 and neither was a surprise – drug safety, which typically signals bad news for the industry, and healthcare reform

 which drilled down on implementation of the Patient Protection and Affordable Care Act (PPACA) and ongoing questions about the policy behind the legislation. 

Sponsored by the Arrupe Center for Business Ethics at Saint Joseph's University, this year's audit featured the following top findings:  

» Coverage of the industry was up for the third consecutive year, increasing 20 percent from last year to 136 articles in the publications surveyed, exceeding the five-year annual average of 121 articles.  

» Drug safety dominated the news, not only retaining its top position among issues but also receiving more than twice as much coverage as last year, and more than triple the focus of the next two hot button issues – interaction with the FDA and drug prices. 

» The focus on healthcare reform skyrocketed in 2013 from 16 to 60 articles; not surprisingly, 56 of the 60 articles addressed issues related to PPACA, the number one healthcare reform issue. 

» Media coverage of the industry continues to be more negative than positive or neutral; 47 % of articles were negative toward the industry in 2013, compared to 36% in 2012. 

» High drug prices are back in the news, moving up the list of hot button issues to third place and reversing a trend of less media scrutiny in previous years.  

» Media coverage mentioned 97 companies and/or their products this year, which is the highest number of company mentions since we began reporting in 2005.  

We analyzed the top five newspapers in the United States as defined by circulation for a 12-month period and identified all front-page and editorial articles pertaining to "hot button" pharma issues. The purpose of the audit was to shed light on the following questions:  

» What ethical and legal controversies face the pharma industry—and what kinds of coverage do they attract?  

» Do the articles and headlines support or oppose the positions taken by the industry, as defined by the Pharmaceutical Research & Manufacturers' Association (PhRMA)?

» How often do reporters include the industry's perspective in the stories that cover the issues of the day? 

» What pharmaceutical companies and brand names are identified and discussed in the articles?  

» What are the implications of these findings for the industry? 

To be included in the study and in our EthicsTrak™ database

, an article had to be published between October 1, 2012 and September 30, 2013 in one of the top five US newspapers (as measured by circulation) – 

USA Today, Wall Street Journal, New York Times, Los Angeles Times, 

t. It also had to (a) focus on an ethical or legal issue facing the pharma industry and (b) appear either as a front-page story or on the editorial page—an indication of major news and public sentiment. We focused on daily newspapers rather than the broadcast media or weekly magazines for a number of reasons. The newspapers cover a broader range of issues and in more depth than the sound bites reported on radio and TV. Business and news magazines are also constrained by their weekly or monthly formats while the newspapers have the advantage of editorial coverage that takes a specific and unambiguous position – pro or con – toward the controversies in question. 

For each article, we examined four elements:  

Issue: We identified and categorized the hot-button issues that were discussed in each article. Many articles covered two or more issues that were included in relevant sections. 

Headlines: We analyzed the headlines and categorized them as positive, negative, or neutral toward the industry.  

Tone: We also analyzed each complete article to determine whether it took a positive, negative, or neutral position toward the pharmaceutical industry. For example, any article that called for restrictions or a prohibition on DTC advertising—a position that the industry opposes—was deemed negative. In contrast, an article that claimed that DTC advertising resulted in more informed patients was designated as positive from the industry's point of view. 

Balance: Regardless of the dominant position taken by the article, we also looked to see if the stories included the opposing point of view. When no mention of the opposing view was presented, the article was labeled as one-sided. 

Table 1 shows the breakdown of coverage by newspaper. The 20% increase in coverage of the industry for the year is driven almost exclusively by the 

. In fact, the amount of coverage dropped in 

Table 2 identifies the issues covered in the articles, the frequency of their coverage, and how the results compare to previous years. Retaining its top spot on the list of topics attracting media attention is drug safety, an issue that dominated the news in 2013. We identified and tracked 61 articles on drug safety this year compared to 27 last year. Furthermore, drug safety received more than triple the coverage of the next issue on the list, interaction with the FDA, which had a count of 19. Much of the increased coverage in the 

discussed above was focused on drug safety. "Deaths Tied to Painkillers Rising in the U.S." (

, March 30, 2013) is one example of the reaction to reports of increasing cases of overdoses and the mounting pressure to restrict use of certain prescription drugs. Likewise, "Problems Cited for Years at Drug Firms" (

 February 8, 2013) focused on shoddy practices and unsanitary conditions at the New England Compounding Center, whose contaminated steroid shots were linked to a meningitis outbreak resulting in 45 deaths. The 

reported that "state and federal authorities did little to systematically inspect and correct hazards posed by specialty pharmacies, which custom-mix medications for individual patients, hospitals and clinics. In the lightly regulated industry, pharmacies were rarely punished even when their mistakes had lethal consequences."  

Second on the list this year was interaction with the FDA followed closely by high drug prices. Whereas drug safety articles are predominantly negative for the industry, FDA articles are a mixed bag. Compare, for example, "FDA Approves Bionic Eye to Help Blind" (

, February 15, 2013) to "After Tainted Drugs Kill 53, Time to Fix 'Broken' System" (

, April 29, 2013). High drug prices were back in the news in 2013 with a count of 18 articles, compared to only six last year. The 

 focused heavily on drug prices with both editorials (e.g., "Exorbitant Prices for Leukemia Drugs," May 2, 2013) and articles (e.g., "Improper Efforts to Limit Competitive Drugs," February 9, 2013).  

Research and development of new drugs which is typically good news for the industry dropped from second to fifth place on the list this year with 14 articles compared to 24 last year. Also moving down the list this year was marketing and sales incentives, dropping from eight articles to only two. This is a positive change for the industry and seems to reflect changing policies and sales practices in the industry. 

Increased Coverage of Companies and/or Their Products

Integral to our audit is assessment of the number of times a pharma company or one of its products is mentioned to determine what companies are attracting positive, neutral or negative media attention and being covered in the news. For example, the second most reported company this year, Perdue Pharma, was mentioned 10 times. Four of the 10 mentions were the company by name and six of the mentions were by the company's beleaguered product OxyContin. The higher the number of mentions a company and/or its products gets, the greater attention that company is getting in a given year.   

This year there were 97 companies mentioned with 27 of the companies identified by their products. This is the highest number of mentions since we began reporting in 2005 and 10.2 percent higher than the second highest number of mentions, which was 88, in 2009. Clearly responsible for this increase is the tragic problems associated with the New England Compounding Center, which accounted for 26 (26.8%) of the 97 mentions. It also invited mentions about four other pharmacies (e.g., Olympium Pharmacy). Completing the most frequently mentioned companies are GlaxoSmitKline with seven, some of which were about Avandia, its diabetes drug, and its link to cardiovascular problems, and Amgen and Novartis, with five apiece. After that, there are two mentions for 10 companies and one mention for 12 companies. Additionally, there were 11 "other" products mentioned, which were primarily generic drugs. A summary of the number of mentions can be observed in Table 3. 

Newspaper Coverage of Healthcare Reform –Significantly More than Last Year

This year's newspaper coverage of healthcare reform increased about 3.7 times over last year's coverage, expanding from 16 to 60 articles. This is the highest number since the PPACA (a.k.a. Obamacare) was signed into law on March 23, 2010 and Congressional debate continued before and after its passage. A summary of coverage is found in Table 5. 

What Were the Issues Related To Healthcare?

The number one issue mentioned was healthcare reform, which is largely attributable to issues and interactions about healthcare reform and the PPACA. It was the focus of 56 of the 60 articles and was responsible for the significant increase from 12 articles related to healthcare last year. The number two issue was contraception, which was linked to healthcare reform and President Obama's eventual compromise about having insurance companies cover the cost of contraception. Additionally, coverage about contraception was high due to the controversial FDA decision to allow over-the-counter access for Plan B One-Step with levonorgestrel through the Women's Capital Corporation and Teva Women's Health. Overall, coverage about contraception was either the focal point or mentioned in 22 of the 60 articles. Other issues affiliated with PPACA articles and mentioned were high drug prices in U.S. (9), interaction with the FDA (7), drug safety (6) and Medicare/Medicaid coverage for drugs (3). There were also a few mentions about genomics and biologicals (3) and marketing/sales incentives (2). A breakdown of all issues is shown in Table 6.  

Healthcare Coverage and Associations with Pharma Companies or Drugs

For the second time since newspaper coverage has merited collecting healthcare data separately, there were specific mentions about companies and/or their products. This year there were 26 mentions and, clearly the most mentioned was Teva and/or its drug levonorgestrel, which accounted for 18 of the 26 mentions. Not surprisingly, these mentions are linked to the coverage about contraception/Plan B (22 mentions in 60 articles). The other companies mentioned were Amgen (3), Genentech (2), Perdue Pharma (1) and Johnson & Johnson (1). 

From the big Pharma perspective, the most reported issue, drug safety, was linked to the New England Compounding Center and accentuates the benefits of pharma's efforts to enhance GMP protections and expand quality standards throughout global operations. Yet, media coverage continues to remain on balance negative toward the industry, by a slight margin: 47% this year compared to a 46% average over the last seven years.  

This negativity is combined with additional scrutiny by way of the highest number of companies and/or their products, 97, since we began reporting in 2005. Even if the 26 mentions associated with the New England Compounding Center scandal are discounted, the media is paying more attention to specific companies. This increased scrutiny, combined with a 20% increase in coverage from last year, gives the second and third most reported issues, interaction with the FDA and high drug prices, increased traction, especially when those issues are related to a specific company.  

Another key impact for pharma is healthcare reform for which coverage has skyrocketed, largely due to the flawed introduction and controversy over PPACA (e.g., inaccessibility of 

). Along with this emphasis on healthcare, the industry went from the optimism about the market potential of newly insured patients to headlines about the loss of potential customers as a consequence of the delay in the deadline for employers to meet the obligations of the individual mandate for insurance until 2015. Furthermore, it's anticipated that pharma's interface with customers will be with more informed patients and prescribers due to electronic data systems that provide more information to patients, a trend that will make it harder to differentiate their products from those of competitor firms. It also suggests the pharma business model will move from individual prescribers to more networked business-to-business transactions, where image issues will be increasingly diffuse.  

Pharm Exec's latest survey of press issues shows that media coverage continues to remain on balance negative toward the industry, by a slight margin: 47% this year compared to a 46% average over the last seven years.

Pharm Exec: Annual Press Audit 2014

 in the vocabulary of big Pharma today is partnership. Like most fuzzy terms of endearment, the word can be interpreted in two ways. Is partnership an expression of the confidence that comes from an excess of opportunity, or is it a sign of vulnerability, when all those big investments in messaging, money and manpower no longer guarantee a company can succeed on its own? The answer is that the urge to partner is driven by both instincts, which is ultimately good for innovation: opportunity – and greed – leavened by vulnerability – and risk – are accurate reflections of the human condition and thus tend to produce medicines that matter to the patient.  

Regardless of how you define it, partnership is also an institutional necessity as big Pharma adjusts to disruptive changes in the way health services are financed and delivered. Our cover feature this month, on Thomas Jefferson University Dean Dr. David Nash, is a portrait of a revolution in the making, where legislation combined with market forces as well as community and stakeholder advocacy are adding fresh momentum to a population-based approach to health practice. Population health focuses on a system built around three pillars of care: preventive care, primary care, and coordinated care, all driven by a single performance metric, which is value, as evidenced through quality and outcomes. Executing around this integrative model depends entirely on partnerships, especially with non-traditional players like the physician assistant. The mantra around population health is simple and explicit: No outcomes means no income. And where there is no community, there is less health.  

has its own network of partnerships based on the premise that good, independently sourced information is a "force  multiplier,"  with the potential to turn the inchoate idea into actions that, when applied in diverse settings, actually make a difference – to real people. Our chosen vehicle for that dynamic community is the Pharm Exec Editorial Advisory Board, 32 experts representing numerous geographies – from Russia to Canada to the US, India and France – and drawn from nearly all segments of the health enterprise. I choose that latter phrase carefully, as our industry today is all about positioning away from the pill sell. It's the prudent survival mode in markets where value is founded on versatility.  

Our most recent meeting, on January 30, was a deliberate effort to engage an often neglected stakeholder, the academic community: in this case the Erivan Haub School of Business at St. Joseph's University in Philadelphia, which co-hosted the day long discussion. Among other topics, we explored new competition-killing approaches to securing a dominant therapeutic franchise; the next iteration of a two-decade long series of academic studies tracing the average cost of developing an NCE; the growth of "impact investing" among groups with an agenda beyond a simple ROI; and the soft underbelly of emerging country markets, which is the way that inadequate health financing and spotty care infrastructure perpetuates larger business challenges linked to poor governance.  

But the highlight was a group exchange between the EAB and four St. Joseph Business School alumni, focused on one theme: the future. One takeaway was the niche role that companies tend to impose on employees, particularly as the former get larger and the latter gain traction. Careers are becoming like commodities – good for one function, with too many people doing it. What big Pharma really needs in the years ahead is versatility, curiosity and transferable skills. In other words, the question of how well you understand your community may be more important to success than work ethic. And we hope that 

will help provide that window on the wider world. 

From the Editor

Regardless of how you define it, partnership is also an institutional necessity as big Pharma adjusts to disruptive changes in the way health services are financed and delivered. A revolution in the making, where legislation combined with market forces as well as community and stakeholder advocacy are adding fresh momentum to a population-based approach to health practice. Population health focuses on a system built around three pillars of care: preventive care, primary care, and coordinated care, all driven by a single performance metric, which is value, as evidenced through quality and outcomes. Executing around this integrative model depends entirely on partnerships, especially with non-traditional players like the physician assistant.

The Community Ethic

There's a growing clamor for broader access to information on health care practices, policies and costs, and it extends to data from clinical trials, postmarket safety reports, manufacturing records, and pharma financial arrangements and marketing activities. Consumers now expect more detailed information on costs and benefits of competing health plans, including the specifics on drug formularies and coverage. Recent disclosure of vast differences in prices charged by hospitals for routine procedures, with little apparent relationship to quality or outcomes, shocked the public, and physicians are gearing for similar postings on how much money they earn for treating Medicare patients. Research organizations such as ProPublica are publishing extensive information on Medicare services and prices, including how doctors prescribe medications under Part D.  

The latest transparency challenge for pharma marketers is the "Sunshine" initiative for disclosing payments to physicians and teaching hospitals, ostensibly to uncover financial transactions that influence prescribing and treatment choices. Open Payments is now poised for launch based on instructions posted in early February for how pharma and medical product companies should register and file aggregate payment data for 2013 by the end of March. Then marketers will submit by Aug. 1 massive detailed information on all covered transactions, along with legal attestation to the accuracy of the data.  

The roll-out schedule aims to give providers time to review the reports before they are made public September 30. The Obama administration hopes that this phased-in registration and data filing approach will help iron out any glitches and avoid the system failures experienced by health exchanges, but that may be wishful thinking.  

Meanwhile, the clinical trial transparency bandwagon is gathering steam, as pharma companies sign up for programs designed to provide more open access to research results. The European Union is driving this train, looking to mandate disclosure of clinical data from all European trials that support market applications. 

In response, the European Federation of Pharmaceutical Industries & Associations (EFPIA) and the Pharmaceutical Research and Manufacturers of America (PhRMA) launched a voluntary program in January to vet proposals from outside researchers for access to clinical trial data, protocols and clinical study reports for new medicines approved in the US and EU. Johnson & Johnson soon after announced a collaboration with Yale University's Open Data Access Project (YODA), a similar program to facilitate distribution of proprietary research data, initiated last year by medical device maker Medtronic in response to pressure to disclose product safety information. GlaxoSmithKline, Roche and other companies also have established independent boards to review requests for confidential research information. Participating companies hope these efforts will bolster their image as responsible and innovative research entities, while also retaining some control over who can access patient-level data and some protection for trade secret information.  

These initiatives and related issues are being analyzed by an Institute of Medicine (IOM) panel preparing a report on "Strategies for Responsible Sharing of Clinical Data." The group released a "discussion framework" in January to solicit input on proposed data-disclosure principles and activities, issues that were explored at a February workshop on the pros and cons of different data sharing models. 

Total open access, as backed by some academics and advocacy groups, may facilitate study reproducibility and analysis of failed trials, with an eye to preventing repeat studies harmful to patients. However, this model runs the risk of compromising patient privacy, raises difficult informed consent issues, and could lead to "rogue science" that produces biased and inaccurate analyses.  

Controlled access, as provided by YODA and industry initiatives, allows release of some data while protecting patient privacy and intellectual property. Yet, there are questions about the independence of third-party reviewers and about who will set standards and bear the cost of building data platforms and infrastructure for responding to researcher queries. Administration of data sharing programs can cost millions of dollars — equivalent to 15% of a total clinical research budget, according to early analysis of these undertakings. And outlays would be even higher for retrospective study analysis, which can involve tracking down participants to redo informed consent.  

Conflicting legal regimes in different countries and regions, multiple ethical issues, and complex rules for protecting intellectual property further complicate the data sharing landscape, explained attorney Mark Barnes of Ropes & Gray. Certain EU member states place limits on patient data disclosure, while some African nations require special permission for secondary uses of clinical trial data collected in that country. Current FDA informed consent policy, moreover, could block disclosure because sponsors now have to assure participants that only a summary of the clinical trial — not de-identified data – will be made available to outside parties. 

By undermining patent protection and data exclusivity, disclosure of clinical trial data could kill a small biotech company, warned Chimerix president Kenneth Moch. Roger Rosenblatt, chief medical officer of Merck, said that all parties should be concerned about the "unintended consequences" of disclosure requirements, which can generate misleading data and erroneous conclusions about drug efficacy and safety. "This is not a theoretical risk," Rosenblatt stated, noting that negative reports often have dire consequences for vaccines. 

The push for transparency has prompted FDA to propose making available de-identified and masked data submitted in market applications, as described in a request for comments published last June (2013) on whether such disclosure is feasible and if it would lead to new knowledge that promotes public health. Agency data disclosure is limited by laws protecting trade secret and confidential commercial information on regulated products. Most comments from industry indicate that de-identifying massive amounts of clinical data would be challenging and may not be worth the effort, and that the risk of patient re-identification is real. Such concerns may modify current proposals for more data transparency, but probably won't end them entirely. 

Washington correspondaent. She came be reached at 

Column

Transparency initiatives are multiplying, affecting research, marketing and compliance.

Pharmaceutical Executive-03-01-2014

Population Health: The Call to Community

The New Metrics of Market Success

Pharm Exec: Annual Press Audit 2014

The Community Ethic

Data disclosure, integrity challenge pharma