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Despite its small size and lack of natural resources, Belgium is among the most prosperous and competitive countries in the world. The country holds many assets required for the development of a strong knowledge-based economy including an open economy dominated by international functions, the presence of decisive multinational enterprises, the availability of a highly productive and skilled work-force as well as an enviable geostrategic location in Europe. 

Among Belgium's hallmarks is its indulgent frothy beverage, beer, which appears to be limitless in variety and taste ranging from pale lager to Lambic or Flemish red. Simultaneously, Belgium has achieved remarkable success in a loosely related industry that also requires a seemingly magical mixture of ingredients under highly controlled and complex environments to produce a product many also view as indispensable: pharmaceuticals.  

With an economy defined by international trade, Belgium exports roughly 60% of both its barley pop and pharmaceutical drugs production. However, the pharmaceutical industry directly employs in excess of 30,000 people and represented 10.4% of Belgium's total exports in 2011. Belgium is in fact still the world's second largest exporter of pharmaceuticals. As such, the pharmaceutical industry is a significant positive contributor to the country's trade balance.  

Today, the Belgian pharmaceutical market is valued at approximately €4.5 billion (USD 6.1 billion) and is supported by "a highly commendable healthcare system which provides a high standard of services to patients," declares Laurette Onkelinx, minister of Social Affairs and Public Health. Belgium's life sciences industry has evolved into a world-class contender.  The country is regarded as a hub for clinical trials, a leader in the biopharmaceutical industry and a hub for pharmaceutical production and distribution. Belgium has been the driving force behind a number of global giants such as Janssen Pharmaceutica, GSK Biologics, UCB and Solvay Pharmaceuticals. 

In part, Belgium's excellence in pharmaceutical R&D is supported by the government's attractive R&D patent and tax incentives that have served to nurture and attract innumerable life science companies. Yet in terms of market access and reimbursement, Belgium is found to be lacking due to sub-optimal market authorization and reimbursement processes and pressure to balance healthcare budgets. 

Nonetheless, Belgium remains an attractive destination for investment by the pharmaceutical industry. This is illustrated by numerous investments made over the recent past, including UCB's new biotech pilot plant, Janssen Pharmaceutica's new distribution center and Pfizer's new production unit, to name a few. 

Belgium's biopharmaceutical sector enjoys a leading position on a global level. The biotechnology industry is an increasingly important player in Europe and has been playing a central role in supporting Belgium's economy.  

Historically, Belgium boasts an impressive track record in biopharmaceutical innovations. Some of the breakthroughs made in the country include the first unraveling of the DNA sequence of a gene, the discovery of tPA (for dissolving coronary clots) and the discovery of the HIV drug Tenofivir.  

From left: Laurette Onkelinx, Minister of Social Affairs and Public Health; Leo Neels, CEO of pharma.be (The General Association of the Pharmaceutical Industry) 			

Today, there are over 140 biotechnology companies operating in Belgium (7% of all such companies in Europe) that accounted for 16% of Europe's turnover and almost 10% of European R&D expenditures. Patrik De Haes, CEO of ThromboGenics, a successful biotech spin-off from the Katholiek Universiteit Van Leuven (KUL), stated that although Belgium is a small country, "in terms of biotechnology we are right on top." 

Eduardo Bravo, CEO of TiGenix, the first and only company with an approved cell-based product in Europe and also a spin-off of KUL and Universiteit Gent (UG), agrees that Belgium offers unique opportunities in biotech. "Belgium finds itself in a privileged position for cell therapy due to the concentration of cell therapy companies located in the Benelux region, particularly in Belgium."  

Yet Omer Saka, director at Deloitte submits that there is still room for improvement. "With the right policies and incentives in place, Belgium could very easily become the European leader in the biopharmaceutical sector. I consider the biotech sector to be the jewel in the economic and financial crown of the country." More specifically, Saka notes that "Belgium would benefit significantly by setting this as a major objective for her industrial policy. The government therefore has to put the vision out there to be the leading country, not just in R&D, but also in manufacturing biopharmaceuticals." 

In part, Belgium's success in biotechnology can be traced to its excellent academic network, abundance of expertise and the trend towards cooperation and clusterization in the industry. Belgium boasts an academic network of 16 universities within a 60 mile radius and a high concentration of university hospitals. A 2008 study by The Scientist found that four out of the top 10 universities in life science research, as measured by citations, are located in Belgium. This is the greatest academic concentration of any country outside of the US.  

De Haes notes that "in Belgium, the number of drugs in development per million inhabitants is the highest in the world, ahead of the UK or the United States." Likewise, Bravo goes on to say that Belgium maintains a "favorable position that obviously derives from the quality of its universities, especially with regard to the quality of the spin-offs they produce. With the highest concentration of life science employees in the world, the country has become the birthplace of several world R&D centers for the biopharma industry." 

In addition to its positioning as a center for research excellence, Belgium's academic distinction has also contributed towards classifying the country as a hub for clinical trials. Michele Garot, vice president of BeCRO, Belgium's Association of Clinical Research Organizations, explains that one driver for the country's strong competitive position in clinical research is "the time required to gain approvals for clinical research is much shorter compared to elsewhere in Europe and the world (less than 2 weeks for phase I)." 

These rapid approval processes have made Belgium a particularly attractive destination for clinical trials. This is stressed by Patricia Lanssiers, managing director of Eli Lilly Belgium and The Netherlands. "Considering that Belgium boasts one of Europe's most favorable and rapid approval processes for clinical trials, it comes as no surprise that it hosts Europe's highest number of clinical trials per capita.  Needless to say, we are taking full advantage of this situation, shaping the Belgian affiliate as one of the most attractive destinations for clinical studies across Europe." 

Expenditure on R&D by Pharma Companies in Belgium on medical products for human use (in of EUR) 			

"One of the key drivers of our strong presence in the clinical research sector is the high-quality standard of the universities and research institutions," she says. "Furthermore, Belgium is home to several well-known key opinion leaders in the therapeutic areas that we are focused on. This combination of Belgium's outstanding academics and our dedication to innovation makes the country a highly attractive landscape for investment in clinical trials." 

Similarly, Mark Connolly, managing director at Boehringer Ingelheim, highlights that "the main attraction is the number of high quality research centers to work with and the expertise of the investigators. When we work in partnership with these centers we consistently see high standards of management of the studies as well as superior data management. Overall, I would say that it is a mixture of reputation and consistent delivery of results that make the environment so appealing." 

"For Belgium, building such a reputation and level of expertise certainly takes a great deal of hard work and dedication. For that reason, we have continued to invest in Belgium for over 50 years now and we have consistently expanded our clinical development activities in the country." 

Numerous other leading multinationals have made significant investments to establish a strong local base for drug development including Novartis, Merck Sharp & Dohme (MSD), Janssen and UCB. "We certainly make the most of the country's widely recognized clinical research capabilities, from initial phase studies – which are very important for us – up until phase III studies. We have a range of clinical centers across the country recruiting as many as 1000 patients last year in more than 300 sites and developing approximately 40 new compounds," says Jean-Christophe Bencteux, general manager of Amgen. 

From left: Patricia Lanssiers, Managing Director of Lilly Belgium & The Netherlands; Mark Connolly, Managing Director of Boehringer Ingelheim; Tarja Stenvall, Country President of AstraZeneca, Belux 			

Nevertheless, the European Commission has been making progress towards adopting a new proposal from the European Parliament and the Council on clinical trials that will replace the existing Clinical Trials Directive (2001/20/EC). On a European level, the proposal is expected to arrest the general decline in European clinical activities by offering centralized application procedures and harmonize approval times across member states, thereby increasing cost competitiveness. However, in relation to Belgium's rapid clinical approval processes, Garot warns that "the new regulation will unfortunately make Belgium's fast track differentiating factor obsolete."  

Despite the directive's potential impact, many believe Belgium's clinical trials industry is still in a favorable position owing to its expertise and long track record of rapid approvals.  Jan De Backer, founder and CEO of FluidDA, a cutting edge clinical research organization (CRO), accentuates this point. "Generally speaking, I think that Belgium has somewhat of a head start in this respect owing to its familiarity with rapid approval procedures for clinical trials. On the other hand, if certain countries are currently accustomed to a three month time frame for instance, then it will be very difficult for them to quickly adapt to the new time frames. Illustratively, we carry out a number of multi-center clinical trials in Europe as a whole and the differences between Belgium and the Netherlands for instance is huge where these procedures require extended time periods. That is, there is an underlying dissimilarity in mentalities towards these activities. Therefore, even with the introduction of the new policies, I do not believe that the respective people's attitudes will change as easily." 

Although Mark Connolly, managing director of Boehringer Ingelheim, believes that the new regulation will influence their clinical operations to a certain degree, he maintains an equal level of confidence in Belgium's clinical expertise. "The new European regulation could very well have an impact on our clinical research activities. Nonetheless, whatever the regulations, what really matters is the ability to deliver good quality data, good quality management of studies according to the plan as well as recruitment rates. Of course, together these elements are critical to maintaining a healthy clinical trials environment and I believe that Belgium's reputation in doing that will undoubtedly last."  

A push towards openness and collaboration

Considering the increasing costs and complexities associated with drug discovery and development and the urgency to address unmet medical needs, the need for collaboration has never been greater. AstraZeneca has recognized the fact, asserts Tarja Stenvall, country president of AstraZenaca Belux. She emphasizes that, "innovation is very much at the heart of what AstraZeneca is and does. Despite the associated increased risks and long-term investments, we realize that science and a commitment to discovering new treatments can help to drive innovation. As such, we aim to profile the Belgian affiliate as a key contributor to AstraZeneca's global innovativeness. One way in which we do this is through various partnerships with academic and commercial research institutions that provide us with a solid platform on which we can nurture future innovations." 

Stenvall is certainly not the only one to identify the importance and potential for collaborations. Jean-Pierre Delwart, CEO of EuroGenTec, a Belgian biotech that has grown to become a leading international biotechnology supplier, notes that "as a spin-off of the Liège University, EuroGenTec has an inherent propensity for academic collaborations. Since academics are often our customers or regular contacts, we maintain a large base of contacts in Europe as well as the United States with them. For instance, when a researcher is willing to develop a certain type of product, we lend our support to them in whatever way possible, so long as there is the potential for a mutually beneficial outcome, of course. Simultaneously, we also try to develop various partnerships with other academics or researchers to explore new scientific or technological avenues. This is an ideal approach to staying at the forefront of technological breakthroughs and scientific advancements." 

Philippe Baudier, managing director of SMB Laboratories, an independent group of Belgian companies specialized in pharmaceutical R&D and manufacturing, suggests that such a degree of collaboration between academia and industry is a relatively new phenomenon in Belgium. "Over the past ten years, the academic community and industry have been intensifying their collaborative efforts. This runs in sharp contrast to the situation as it was over 30 years ago when I first started in this business. At that time, SMB had partnered with a certain professor from the University of Liège. However, this professor was stigmatized by his academic counterparts for choosing to work with the industry – which at that time was considered to be a dishonest act in Belgium. This was highly divergent from the trends prevalent in the US for instance where academics actively seek partnering activities with the industry." Fortunately, times have changed maintains Baudier "and such industry-academic collaborations are now widely accepted in Belgium and Europe as a whole." 

Jean-Pierre Delwart, CEO of EuroGenTec 			

The pharmaceutical industry has made great efforts to streamline their operations over recent years to achieve greater efficiency and focus on their core competencies. Besides enhanced industry openness and appetite for partnerships, pharma service providers have also observed increased activity in recent years. Philippe Vandiest, founder and CEO of PromoMed, a provider of broad spectrum outsourced services to the pharmaceutical and healthcare industry, says that "an interesting attribute of outsourcing companies in Belgium today is that they are among the very few companies in the pharmaceuticals industry that are experiencing real growth." Not only is this development good for business but Vandiest claims this also makes services providers more appealing to potential employees, increasing the pool of candidates service providers have access to. 

EuroGenTec â Spin-off Success Story 			

At least in terms of sales representatives, the outsourcing industry in Belgium shares a past similar to that of academic collaborations in that they both made a late entry in Belgium. Vandiest explains that "Belgium is perhaps among the last markets in the European Union to develop a pharmaceutical outsourcing industry, which was practically non-existent about 20 years ago. Since Belgium is a fairly dynamic market boasting very accessible people with many competencies in a small geographical area, outsourcing was never a necessity at the time. If you compare this to the French market for example, outsourcing was essential because 40 years ago if you wanted to launch a product in the market, the communication rules were not the same as they are today prompting the need to have some correspondence across all departments in France in order to provide information about the product. This marked the start of pharmaceutical outsourcing in France, and the rest of the EU for that matter with the exception of smaller countries like Belgium."  

Outsourced pharmaceutical representatives in Belgium now represent 17% of of all representatives in the country. A PriceWaterhouseCooper's report forecasts that this figure will climb to 40% by 2015." 

Generally however, the industry has traditionally been resistant to change. Vandiest recalls the difficulty associated with establishing their operations. "As you may know, changing habits is one of the most difficult things in life." The reluctance to change likely stems from the unwillingness to relinquish control over offerings and processes. In order to curtail their anxiety, service providers are putting their customers in the driver's seat.  

Patrick Leyseele, founder and CEO of pi, a Belgian based global regulatory and technical service provider, proclaims, "our ultimate goal is to become a truly global strategic partner for our customers. We envision the most potential where customers have specialized partners who think with them and not for them. That is why I always remind our customers that they should remain in the driver's seat, while we are just the navigators. The advantage of this is that they are reminded that they are still in control and have a good feel for what is happening while we take care of the rest for them. In other words, we do not intend to have our clients rely on us, nor do we want to create monopolies. Instead, we simply aspire to be their partners."  

Articles

Country Report

Belgium is a hub for clinical trials, a leader in the biopharmaceutical industry, and a center for pharmaceutical production and distribution.

Country Report: Belgium

Pharmaceutical   executives devote significant resources to strategic decision making   when launching key products—and rightfully                          so. Many facets of a product's optimal marketing   strategy—from clinical programs, product pricing, competitive   positioning                          and differentiation, to stakeholder value and   messaging, DTC, and sales force deployment—require careful attention and   investment                          both at launch and throughout the product   lifecycle to maximize access.

In our   experience, the power of pricing as a tool to maximize a brand's   financial performance is often overlooked after a                          product is launched. While contracting   strategies are typically adapted over time to differentiate net pricing   for specific                          payer channels or customers, opportunities to   improve financial performance through better list price management over   the                          full course of the product's lifecycle often go   unrealized. Decision makers may lose sight of the fact that on-market   pricing                          is almost costless relative to other marketing   investments, thereby resulting in a high ROI, if implemented   effectively. 

In this article,   we first highlight traditional price-increase strategies for on-market   products and patterns over time. Next,                          we describe how research and analysis can be   used to identify situations in which list pricing strategies should   diverge from                          these traditional approaches without "hitting   the cliff"—that is, actions by payers that could risk a downgrade in   price or                          restricted access to patients. We conclude with   some practical observations based on our experience with pricing   decision                          making for many on-market products. 

How it's done: on-market list pricing strategies for top brands 

To   review the most common approaches to list price management, we examined   the wholesale acquisition cost (WAC) price actions                          of the top 100 pharma brands over the past 10   years. We observed three distinct phases to the product lifecycle with   respect                          to list price strategy. During the first two to   three years following launch, manufacturers tend to be conservative with   price                          increases. Over the "mid lifecycle" phase of the   product, which might extend for 10 or more years, the list price   strategy                          is most often based on annual price increases in   the range of 4 to 6 percent per year, with 5 percent being the most   common.                          The last phase, the three years prior to loss of   exclusivity, is characterized by sharp increases in price in   anticipation                          of generic competition (Figure 1).

When   brands are in the mid lifecycle period, we see evidence of varied   price-increase strategies: some manufacturers take                          multiple price increases per year, make moderate   changes in price increase strategy year-over-year, or vary price   increases                          based on market conditions. Table 1 presents the   annual price increases of the Top 100 brands for the period 2002 to   2011                          (cumulative percent of price increases in each   year in increments up to 10 percent, and percent of price increases that   exceeded                          10 percent). An annual price increase in the 4   to 6 percent range is the most common approach in most years, with   average                          annual price increases ranging from 3.4 percent   in 2009 to 7.7 percent in 2010. Moreover, the majority of price   increases,                          63 percent over the entire period, were below 6   percent, with 85 percent of price increases below 10 percent. Recently,   higher                          annual price increases have become more   prevalent. During 2011, the most recent year we examined, the highest   annual price                          increases among the top 100 brands were for   Strattera, Zyvox, Namenda, and Copaxone, with 18.2 percent, 16.6   percent, 16.1                          percent, and 14.9 percent annual increases,   respectively.

One-time price   increases within a calendar year have been most common, and are often   taken in January or September. Recently,                          taking two smaller price increases during the   year instead of one large price increase has become more the norm,   possibly                          to avoid payer scrutiny and response to larger   one-time price increases. For example, the 16.1 percent Namenda price   increase                          for 2011 was spread across two price increases   (8 percent and 7.5 percent). Whereas previously only 19 percent of price   increases                          were "two per year," this practice has doubled   to nearly 40 percent in the most recent three years. 

The on-market   list price strategies that have been used for top pharmaceuticals   brands, as described in the preceding section,                          have generally been less than optimal. This is   because insufficient research and analyses are applied to support these   decisions,                          likely leaving money on the table. Price is   clearly a marketing tool with high leverage—therefore, even small   increases in                          list price can result in significant increases   in profit margin, provided there is limited impact on volume. Pricing   expert                          Raffi Mohammed has noted, for example, that a 1   percent price increase would result in anywhere from a 16 to 155 percent   increase                          in operating profit, in companies across many   industries with a wide range of underlying cost structures. For   pharmaceuticals                          manufacturers, the key to realizing this   leverage is to know where "the cliff" is; that is, at which point a   price increase                          will result in a downgrade in access by key   payers, and a corresponding decrease in volume utilization. 

The opportunity: the discrete effects of price on payer access

The pharmaceuticals   market is distinctive with respect to the relationship between price and   demand. Unlike many competitive                       markets in which there is a "smooth" demand   curve—where a small change in price may result in corresponding   decreases or increases                       in volume ("demand elasticity")—the pharmaceuticals   market has a more discrete demand response to price. Access decisions                       are highly concentrated, with a relatively small   number of payers controlling the bulk of pharmaceutical benefits. As   prices                       change, payers may or may not change the access   level of a product (access includes dimensions such as copayment tiers,   restrictions                       such as prior authorizations and step-therapy   requirements, and sometimes non–reimbursement of the product).   Typically, payers                       have different thresholds at which they consider   access changes—and these thresholds can vary with the characteristics of                       the therapeutic area, such as size of the category,   severity of patient conditions, therapy options available and their   cost,                       etc. One payer may consider restricting access when   price increases by 8 percent, while another may consider such action at                       a somewhat higher price increase. Of course, most   payers are concerned with their net costs, so price protection and other                       contracts that provide rebates for preferred or   non-disadvantaged formulary access mitigate the impact of list price   increases                       to some, but not all, benefit plans. Understanding   the tipping points for individual payers is critical to correctly   gauging                       how to avoid "hitting the cliff" with price   actions. 

Determining the   threshold price increases, or "cliffs," at which key payers respond with   access changes is critical for optimizing                       on-market pricing. This can be done through careful   analysis of the historical formulary actions of payers, primary market                       research, and sensitivity analysis of the impact of   price changes under different assumptions. We have found that a hybrid                       of qualitative and quantitative primary market   research techniques, combined with analysis of historical list price   data and                       formulary outcomes, has been highly effective in   identifying payer access thresholds and evaluating list price strategies                       for specific brands and market situations.

To   demonstrate the practical applicability of these methodologies, consider   an example, product A, based on a real on-market                       pricing study. In the study, we used interviews   with payers to test threshold price increases generally, to identify   levels                       at which they might trigger a thorough review of   pricing of all therapies in the category, and to determine specific   responses                       to price increases for product A. (We found it most   effective to test a variety of attributes together with price to avoid                       any bias that may result from focusing on price   alone.) We found that increases in price resulted in no access response   up                       to a level of 9 percent annual price increase.   Figure 2 illustrates how this translates directly to increases in   revenue and                       profit up to "the cliff." From the plan's   perspective, price increases need to reach some threshold (both in   absolute terms                       and relative to price changes of competing   products) where the cost and administrative burden of changing the   formulary are                       outweighed by savings realized from imposing   restrictions intended to lower utilization of the product in favor of   other,                       lower-cost therapy options.

Analysis of the   results suggest that the manufacturer can take a price increase of 8 to 9   percent per year without hitting                       the cliff. It is possible to validate the research   using historical data. Comparing the research results on payers' stated                       behavior against historical data on actual payer   responses (both in the category and in similar categories) the   robustness                       of the results can be established and the pricing   strategy can be implemented with confidence. 

As illustrated in   Figure 2, which draws on primary market research with payers and can be   validated with analysis of historical                       formulary changes, increases in price translate   directly to increases in revenue up to the "cliff." However, above this   threshold                       value, an access downgrade more than offsets the   gains of the higher price. From the payer plan's perspective, price   increases                       need to reach some threshold (both in absolute   terms and relative to price changes of competing products) where the   cost and                       administrative burden of changing the formulary are   outweighed by savings realized from imposing restrictions intended to                       lower utilization of the product in favor of other,   lower-cost therapy options. We have found that there are opportunities                       to increase price profitably based on research and   analysis designed specifically to find the cliff for a particular brand.                       However, decision makers need to keep in mind that   the optimal price increase is typically somewhat lower than what would                       be suggested by the "average" tipping point of   payers, due to the asymmetry between risk and payoff as price increases   approach                       the cliff. Simulation analysis that accounts for   the range of uncertainty of estimated payer thresholds can be   particularly                       valuable to ensure that hitting the cliff is   avoided for even a small number of payers that may have significant   impact and/or                       influence in the market. 

 is a Vice President in Analysis Group's Menlo Park office. He can be reached at 

 is Managing Principal and is based in the firm's Boston office. He can be reached at 

Features

List pricing strategies that diverge from these approaches without "hitting the cliff".

On-Market Pricing Strategies

For more than 50 years the basic EU rules about medicines have been clear. Each member country is free to determine the price of medicines sold in its territory, and what level of reimbursement it will provide. An observer of the European Parliament discussions in February wouldn't think so, listening to the discussions on the current attempt to update the EU's so-called "transparency" rules on drug pricing and reimbursement. Many of the interventions adopted a much broader—even tangential—approach.  

Let's be clear. These transparency rules—introduced 20 years ago—don't have any impact at all on the basic freedom of member states to make their own decisions. They merely set out how those decisions are reached: timeframes, criteria, information requirements, etc. The aim of the rules is to make it possible to see that decisions (whatever they may be) are reached fairly— to provide transparency about the national mechanisms used.  

The update now envisaged to these rules makes it equally clear that it is not in any way attempting to encroach on those national rights about what level prices should be set or what to reimburse. It is merely trying to ensure national authorities keep to deadlines and provide information about their systems. So how, an impartial observer might ask, is it possible that so much of the debate turned to a completely different agenda? 

Even allowing for political passion, it is, on the face of it, inexplicable that Alda Sousa, a left-wing Portuguese MEP, should insist that greater transparency is needed because "we should know what we are paying for and why." The state should not be "victims of the pharmaceutical industry, which always demands a high price for its medicines," he declaimed. "Manufacturers should not be allowed to impose prices unilaterally," he said, and "seek to underline member states' powers." A Polish right-wing MEP, Zbigniew Ziobro, criticized drug firms for "abusing the situation by driving prices higher in some countries and trying to influence pricing authorities." 

They must know—or certainly should know—that the debate related only to technical aspects of price and reimbursement decisions, and not to the decisions themselves. So why should they waste their energies inveighing against what they see as misdeeds in entirely different terrain? Andres Perrello Rodriguez, a Spanish socialist MEP, was similarly marching to a different drum with his remarks during the debate that member states should "take account of the old and the unemployed in setting prices." That may or may not be desirable, but has nothing to do with the debate about the transparency directive. Nor does his aspiration—possibly noble in its sentiment—that "European drug pricing systems should be above and beyond financial interests, and more human."  

It was to little avail that French centre-right MEP Françoise Grossetête sought to remind her colleagues that the legislation under discussion had "no impact on sovereignty," and was directed only at "removing red tape." Even her centre-right colleague Miroslav Mikolasik, from Slovakia, chose to insist that "protecting human life must be the foremost consideration, and all barriers to access must be removed"—even if this meant EU-level intervention to require standardization of prices across Europe. It is, he said, "unacceptable that prices vary from country to country." Other centre right MEPs shared some of Mikolasik's wider aspirations: "Any medicine authorized should be accessible to every citizen in all member states," demanded Petru Luhan from Romania, while his compatriot Elena Basescu said the aim should be "cheaper access for all citizens." 

João Ferreira, a far-left MEP from Portugal, expressing sympathy for the plight of old people in his country faced with cuts in reimbursement levels, contended that there was "too much of a market in medicines," and the system was tilted "too much in favor of drug firms." His solution was that all medicines prescribed through the national health service in Portugal "should be free to all users," and for this reason, the EU should leave national authorities well alone, so that they would be free to implement such a policy. 

Cynics might be tempted to conclude that interventions in European Parliament debates are much more about theater than plot, and that MEPs have long shown a lamentable tendency to play to the gallery rather than to follow logic. Those even more cynical might advance a theory that some MEPs are simply too lazy or stupid to grasp what is under discussion, and that their interventions are accordingly misspoken. But there is another dynamic at play here, too, which even the cynics may find difficult to dismiss. 

Underlying the calls for cheaper drugs, wider access, and tighter controls on the drug industry is a new momentum that comes not just from those automatically hostile to drug firms, but from a still more influential community: Europe's ministers of finance and economic affairs. These fresh and even more formidable pressures are evident in a strategy document released by the European Commission later in February, entitled "Investing in Health." This provides an insight into an EU-wide reflection now underway at a senior level among all 27 member countries on "effective ways of investing in health for modern, responsive, and sustainable health systems." It aims to draw conclusions by the end of 2013 on "responses to health system challenges, in particular in relation to integrated care and the use of pharmaceuticals," with special emphasis on "measuring and monitoring the effectiveness of health investments." 

To support these processes, the commission is setting up a multisectoral, independent expert panel to advise on effective ways of investing in health. As part of the exercise, it has commissioned studies on forecasting EU pharmaceutical expenditure, external reference pricing of medicinal products, reimbursement systems of medicinal products, the economics of primary healthcare financing, and the evaluation of public-private partnerships in healthcare delivery. The results of most of these studies, which are being financed by the EU program on health, are expected to become available in the course of 2014, says the commission document. 

This review outranks the debates on the merely administrative questions envisaged in the update of the transparency rules. It is part of a broader consideration of health in the context of the EU's recovery plan for jobs and growth, and takes its strength from new EU powers over national budgets, ceded as part of the escape plan in response to the sovereign debt crisis. The accent is on "evaluating and modernizing current social policies to optimize their effectiveness and efficiency," and on "reforming health systems to ensure their cost-effectiveness and sustainability." The strategy document opens with the conviction that "there is considerable potential for efficiency gains in the healthcare sector," and goes on to speak at length of "using health technology assessment more systematically," and "increasing the use of less expensive equivalent (generic) drugs." It is full of predictions of sharply-reduced drug spending and ever-more rigorous product assessment in terms of outcomes and utility. The hitherto sacrosanct national prerogatives over drug pricing and reimbursement decisions are, by implication, falling under the same EU shadow that has in recent months imposed unprecedented limits on what were equally sacrosanct national prerogatives over setting national budget priorities and macro-economic strategy. 

So, paradoxically, the apparently marginal contributions to the European Parliament debate on the transparency rules may prove to have caught the spirit of the age more sharply than the remarks of those who stuck more closely to the plot. All that sovereignty in drug pricing that is prized by member states could, after half a century, be entering its final days.  

anonymous columnist, a commentator so close to the action in Europe that his identity must be secret. 

Column

The European Union's attempt to update its transparency rules sparks new debate.

Is National Drug Pricing Freedom in Europe Nearing its Expiry Date?

A   leading advocate for the use of precision analytics in marketing traces   the slow—and often stumbling—evolution toward a                          state of analytical grace in tracking ROI for   digital promotion. The next challenge for Big Pharma? Finding a way to   build                          on the knowledge gained in "traditional digital"   to obtain stronger decision metrics for mobile and social media—today's   new                          frontier

I thought this   would be simple. As a responsible pharmaceutical executive, you   naturally want to know which marketing activities                          are most effective for selling your product,   right? And, it seems logical to conclude, if you had that data, it would   guide                          your promotional investment decisions. I wasn't   even that young at the time I began trying to solve the pharma marketing   ROI                          riddle—but I was naïve. 

This was more   than 10 years ago—the early 2000s—and as the head of a digital   marketing agency, I fixated on one of the central                          questions facing a marketer in the pharma world,   a world where billions of dollars in revenue were at stake, with   hundreds                          of millions being spent every year on DTC   advertising. In such a world, it's not a small thing to know what   marketing techniques                          actually work best at driving sales. In fact, I   thought, if a marketer could crack this code, she would significantly   increase                          the success of her brand, and advance her own   career.

So I started out   by doing what my academically-oriented mind told me was the logical   first step: review the existing research                          on DTC ROI to see what was known about the   effectiveness of those expensive "old world" tactics like television and   print. 

I was pretty sure   the data would confirm what I felt in my mind and gut: that for   healthcare marketing, digital is inherently                          more efficient and effective since people are   actively looking for health information and therefore are much easier to   target.                          Moreover, in digital there are many   opportunities along the patient journey to intercept and add knowledge   at key decision                          points. At the same time, the traditional mass   media (television, magazines, and newspapers) were becoming less and   less effective:                          consumers were increasingly using DVRs and   skipping 80 percent of commercials; readership of print publications was   dropping                          precipitously every year. It was rapidly   becoming a digital world and the core qualities of digital—the   lean-forward, information-seeking                          nature of the online experience (which was   particularly well-suited for people concerned about health issues),   along with                          the decline of the other media—made an   overwhelming case in favor of digital. 

I would come to find that I was right about nearly all these things. But I would also find that it didn't much matter that                          I was right. Figuring out

this was the case would turn out to be the much greater challenge. 

So about those   academic papers. In September 2002, Richard Wittink from the Yale School   of Management published a study, "Analysis                       of ROI for Pharmaceutical Promotion" (ARPP). An   update to another study done in 1999 by Scott Neslin of Dartmouth, ARPP   examined                       major promotional activities by the pharma   industry, from 1994-2000, including the "new" DTC. (In the early 1990s,   the FDA                       had loosened regulations to allow DTC advertising.)   Arguably the first DTC TV commercial was a 60 second ad for Rogaine, a                       treatment for male pattern baldness, which first   aired in 1994, marking the beginning of "DTC" as we know it now, and the                       starting point for Wittink's study. Wittink   examined a total of 392 brands, each with a minimum revenue of $25   million; 63                       brands had more than $500 million in revenue. In   this period, DTC advertising grew at an astonishing rate of 44 percent a                       year. 

Despite the   house-on-fire growth and enormous spend levels (quite a few brands were   spending more than $100 million annually),                       the ARPP study showed barely any positive ROI for   DTC. To quote Wittink's paper: "For the 192 brands with intermediate   revenues                       ($100-$500 million) DTC...return is close to zero."   For larger brands (revenue above $500 million) ROI for DTC was just   barely                       positive—.02." So for every dollar spent on DTC for   a big brand from 1994-2000, you got back a measly two cents. If you had                       a medium size brand, you were basically firing up   thousand dollar bills with your Bic cigarette lighter. 

Granted, this   was a long time ago. Other studies were done later, some of which showed   an ROI for DTC of between 1.5-2.0 to                       1. It should be noted that some of these other   studies counted revenue over a three-year period post-campaign, which   made                       the numbers look a whole lot better.

Nevertheless I decided to be generous and use the higher estimates as the benchmark. That meant that for our digital efforts                       to prove themselves "superior" to traditional DTC, we had to show better than a 2:1 ROI. 

The path seemed   clear, but it turned out the road was strewn with obstacles. First, no   one was even measuring digital as a                       channel back then. We had a chicken/egg problem. In   order for digital spend to show up using the standard measurement   models,                       there needed to be much greater spend, but in order   to justify greater spend, we needed to prove it could work. You see the                       problem. 

Just about this   time, Paul Ivans, a young Cornell-educated chemist with a big dose of   computer science and business experience,                       tried to solve this problem. Over the next 10   years, Paul and his company, Evolution Road, would have arguably more   influence                       on the evolution of digital marketing measurement   in pharma than any other single entity. 

"The pharma   marketing and sales model was broken a decade ago," recalled Ivans. "I   saw that the digital wave was coming, and                       there needed to be a better way for patients and   physicians to get information, make choices and create better outcomes   for                       patients. In order to change the model in a   significant way, I concluded that we needed better ways to measure ROI." 

So Ivans set to work   on an approach to measuring the effect of digital initiatives that   would break the industry out of its                       Catch 22 predicament. Along the way, he innovated   new methodologies with the help of a variety of partners. First, around                       2003, he pioneered a technique called PLA (patient   longitudinal analysis), also sometimes referred to as PBM Matchback.   Whatever                       the name, the central idea was this: in cases where   there was a pharma marketing campaign without database name capture,   (i.e.,                       most digital campaigns) these techniques could   connect digital marketing activities to actual script lift, using   de-identified                       patient data so that activity could be matched   without violating patient privacy. 

"At the time, I   thought this would be the best thing in the world," admitted Ivans. But,   as it turned out, for a number of                       technical reasons, "the analytics groups at major   pharma companies had issues with the PLA approach." As he summarizes the                       problem: "The Achilles heel is getting enough   people's names and addresses, and that's historically been hard to do.   Sample                       sizes are the rate-limiting factor in PLA."   However, Ivans notes that recently some players have been developing   approaches                       to address this fundamental issue. 

Faced   with pharma resistance, Ivans believed it necessary to develop a   different approach, which would ultimately prove more                       effective. Instead of matching patients to a   prescription database, Ivans started working with comScore, a major   Internet                       analytics company. He developed a survey-based   methodology, where patients exposed to a specific marketing tactic, such   as                       visiting a website, would be asked questions to   determine whether they were a qualified prospect for a particular   condition,                       whether they had been exposed to a particular   advertisement, and whether that exposure had led them to ask their   doctor about                       the product, get a script, and actually fill the   script. Admittedly, the survey approach relies on patients'   participation                       in the survey, and on accurate self-reporting of   their behavior. But Evolution Road clients found this methodology to be   as                       statistically valid as the PLA approach, while   being much faster and cheaper to implement.

The Evolution Road   methodologies (both PLA and survey) began to be used by many companies   and agencies, including my own,                       and it revealed some pretty startling results.   While virtually no pharma company is willing to share results publicly,   we                       consistently saw campaigns achieve ROIs ranging   from 4:1 on the low end, up into the mid-teens. 

At the same   time, using similar survey techniques, our clients also saw ROI for   traditional channels showing results that                       ranged from barely positive to decidedly negative.   Traditional DTC techniques seemed to work well only for new brands with                       large budgets that needed to build rapid awareness.   Haren Ghosh, Chief Analytics Officer at Symphony Advanced Media, is   another                       leading player in the advertising effectiveness   measurement field, with a long history wrestling with the same problems   encountered                       by Paul Ivans. "The strength of TV is building   brand awareness and influencing people to do research online about the   brand,                       said Ghosh. "But in lower funnel metrics (i.e.,   moving past awareness to consideration and trial), online will have   higher                       ROI than TV."

The story was   compelling: except for large brands looking to build mass awareness at   launch, the ROI of digital techniques                       was clearly superior (and even with large launch   brands, digital was proving to be a very effective complement to TV).   Yet                       budget decisions didn't seem to be much affected by   this pretty indisputable evidence. According to Ghosh, year after year,                       up to the present day in fact, TV consumed some 70   to 90 percent of DTC budgets. In general, online spend accounts for a   single                       digit sliver of those budgets. 

So why would rational marketers looking to maximize returns for their brands refuse to change their investment behavior in                       the face of this evidence? 

To get to the bottom   of what turned out to be the central question—not whether digital   returned higher ROI, but why people                       seemed reluctant to believe it—I turned to other   veterans of the ROI wars. Hans Sjoquist, president of Global Channel   Marketing                       Solutions, has spent 32 years in the pharma   industry, including stints at Pharmacia, Novartis, and Sanofi. In fact,   he worked                       on Rogaine, that DTC pioneer back in the 1990s.   Sjoquist, like Paul Ivans, was also trained as a scientist, and had been   likewise                       frustrated by the lack of sophisticated measurement   for promotional spend. "No one could ever tell me what the TV dollars                       gave me back. If you spent $50 million sales went   up, but no one could say exactly why...I saw the Internet as an   opportunity                       to become more metrics-oriented, more intelligent   in terms of how we reach out to our customers." 

Back in the late   1990s and early 2000s, "ROI was not a big thing for pharma marketers,"   recalled Sjoquist. "Most marketers                       were measured on launching things on time and on   budget. And budgets were based on 10 percent plus or minus last year's   budget.                       Not very scientific." 

Sjoquist was a   hands-on client using many of the new methodologies, including work done   by Ivans and Ghosh. "When Paul Ivans                       came up with proof that if you got more than three   page views on a website you saw a higher conversion rate," recalls   Sjoquist,                       "that was the first attempt to optimize based on a   more stringent Rx change metric." 

The quest: from merely measuring to improving in real time

Sjoquist went on to   experiment with other methodologies, and around 2005 became quite   impressed with a new approach developed                       by Crossix, a startup founded by Asaf Evenhaim,   focused on maximizing the effectiveness of marketing campaign budgets.   "The                       comScore/Evolution Road methodology was useful, but   we struggled with measuring lead generation program. That's where   Crossix                       came in." 

According to Evenhaim, "We have a fundamentally different way of looking at ROI. "For us, it's not so much about measuring                       ROI, but improving ROI in real time." 

"Crossix said I   can get an early read on tendency to convert," said Sjoquist. "Over time   conversion rate became more and more                       accurate. It turned some patient relationship   marketing programs from strongly negative to strongly positive. Everyone   had                       been buying the cheapest leads, but they never   converted. By applying this approach we could buy based on leads that   converted.                       And that turned the whole thing around."

Sjoquist was   experiencing some real, measurable success for major brands. Yet he too   was baffled at the industry's resistance                       to changing budget allocations based on clear   evidence—evidence blessed by their own marketing analytics departments.   "I think                       there is a constant suspicion of new channels in   the pharma industry," said Sjoquist. "And there is also this human   tendency                       to not believe something if it sounds too good to   be true." 

"If sales force does 1.5 or 2.0, they are happy," he continued. "If something comes in at 4:1 or 8:1 they find it hard to                       believe and it shows up the other stuff." 

Symphony's Ghosh   came to a similar conclusion. "They are overspending on TV, absolutely.   You'd be better off allocating some                       portion of their budgets to online. But clients are   risk-averse and they get push back from their agencies, so they   continue                       with the high TV spend." 

Could it be that marketers were just refusing to believe "evidence-based marketing?" Was it a lack of knowledge, a lack of                       courage, or something else entirely causing this seemingly irrational behavior? 

To get another   perspective, I turned to a pharma marketer for whom I have great   respect. She has run major brands for several                       large pharma companies and is highly regarded   inside and outside her company. She prefers to remain anonymous. 

"We are oriented   internally to POA planning and many times we have built up internal   systems/processes in the commercial space                       that are really entrenched and hard to change," she   said. "It's not that it's a lack of courage so much as that in addition                       to courage, it takes Herculean strength and a   strong advocate internally to bring change. These things generally take   time.                       They don't immediately happen and sometimes, even   when they do, the benefits take a bit of time to manifest externally." 

Perhaps enough time has passed; the resistance to evidence-based marketing is finally beginning to wear down. 

"The first time I   have a conversation with a company client, I have to sell the idea that   digital is more effective," said                       Bob Doyle, VP of consumer insights at IMS Health.   "But the second time, they are coming back on their own. They're   convinced." 

Another   expert who did not want to be quoted on the record shared this   observation of current pharma marketing behavior: "For                       our clients, they're getting better ROIs on digital   than they are on offline stuff. For brands that do mass advertising,   they                       want to keep the TV budgets whole, but beyond that,   digital is much better than print." 

As new techniques   enter the market, the "provability" of the digital model is becoming   even more compelling. One such innovation                       comes from the aforementioned IMS Health, which   everyone seems to agree is the 800-pound gorilla in the Rx analytics   business.                       Traditionally, IMS has been the place to go for   analytics because they had the most Rx data. And lately, they have   brought                       some innovation to the market through their   partnership with Yahoo. IMS is now able to cross their 280 million   patient records                       with Yahoo's 175 million consumer database, coming   up with an overlapping group of 100 million patients. That level of   granularity                       is unprecedented in the industry. Consequently, IMS   can provide pharma marketers with more precise measurement of patient                       behavior even for relatively small brands.   According to Doyle, "We are seeing shifts in spending and increases in   spending                       because now people know what they are getting for   their money." 

Finally, pharma marketers are getting comfortable with "evidence-based marketing." "People now understand that they can see                       an ROI, and how click through rate translates to actual script lift," Doyle concludes. 

One of the most   exciting recent developments we have seen in our own work is the ability   to use "Big Data" techniques to directly                       correlate Rx lift for particular sales territories   to a specific campaign. Leveraging multiple data streams, digital's   ability                       to deliver messages with pinpoint precision on both   the consumer and healthcare practitioner sides is finally giving   marketers                       the proof they need to change the way they market.

Of course, the   journey is far from over. Just when we seem to have achieved some   clarity about the efficacy of "traditional                       digital" (to coin a phrase), here comes social and   mobile marketing—about the ROI of which we are freshly clueless.   Although                       there are sure to be techniques in development as I   write this, no one I interviewed knew of a market-tested way for pharma                       to measure the effectiveness of social or mobile   campaign elements. 

He won't be happy   about this, but I am going to call Paul Ivans "the father of pharma   ROI," and give him the last word: "The                       economic environment isn't getting any easier.   Measuring ROI is hard, but we need to be persistent about it." 

And, speaking for myself, maybe a little less naïve, too. 

 is the Founder & CEO of Heartbeat Ideas & Heartbeat West and a member of 

 Editorial Advisory Board. He can be reached at 

Digital Promotion Update: Mirror the Customer in Real Time 

Making sense of the shifting frontier of digital in pharma requires frequent, healthy doses of feedback—and a willingness                       to change course when audiences and technology get ahead of the message.

 sister conferencing organization, CBI, convened its 12th annual Digital   Innovation Forum, better known as iPharma, last month,                       to assess the current confusing state of play. The   theme of the meeting? There is insight and wisdom for the taking when   pharma                       makes technology its friend and turns its eye to   what's happening in other, more e-media savvy sectors of business. 

 Here is a summary of speakers and some of the best practices they shared: 

Don Schreibenreif,   VP of industries research at Gartner Inc., explained how all marketers   need to develop closer relationships                       with IT departments to collaborate in overcoming   digital challenges. He also said big data must be harnessed to provide   predictive                       analysis, and that marketing will increasingly   become about taking advantage of real-time opportunities with the   consumer,                       i.e., via geo-targeting technologies that offer on   the spot deals to patients, as they are shopping. 

Bruce Rogers, chief   insights officer for Forbes Media, advised on content strategy as a way   of engaging customers and creating                       long-lasting relationships. He suggested some of   the following rules: stop selling, use research, "snacks" entice people   over                       time, make content accessible and sharable, measure   ROI, and ultimately, keep your audience satisfied. Above all, fostering                       trust is key. 

Dan Tyre, director at HubSpot explained ways to leverage inbound marketing to capture the attention of patients and prescribers.                       He stressed that, "context allows you to marry the buyer to the right content at the right time." 

Janaki Joshi, CEO of   Iris Interactive discussed how stalls in workflow between departments   of large pharma companies led to                       her idea of creating a transparent and fluid   cloud-computing solution that allows medical, compliance, legal,   branding, and                       other pharma company functional teams to view each   other's activity in collaborative projects to streamline the process of                       producing digital products quicker and more   seamlessly. 

Jeff Rasp, president   of Boomerang US, stressed leveraging search engine optimization (SEO)   as a way to drive traffic to a                       company's website and increase audience exposure to   its products. He noted: "While 80 percent of marketing spend goes to   paid                       advertising, 90 percent of search clicks are   delivered from SEO." 

Augustine Fou, PhD,   founder and chief strategist of Marketing Science Consulting Group,   Inc., was one of the top tweeters                       at the conference. He walked the talk in scheduling   tweets during his presentation, showing the group that timing is a   considerable                       element of any digital strategy. 

Todd Kolm, director   of emerging channel strategy at Pfizer explained that video is an   important element of the company to                       patient dialogue. He stressed using visual aids to   increase exposure, as patients, like all humans, are audiovisual by   nature.                       Additionally, listening to consumers, monitoring   Twitter, and other social media venues is important to gaining valuable   insight                       into patient constituencies. 

Amy West, from Novo   Nordisk's patient relationship marketing talked about the company's   Cornerstones4Care program, which relies                       on digital trials to help users manage their   diabetes as a chronic condition. She explained how customizable apps   embedded                       within the program such as pill reminder schedules   help in creating meaningful dialogue between company and patient. 

Jim Dayton, senior   director of emerging media at InTouch Solutions, talked about media   convergence, and how harnessing emerging                       trends such as SoLoMo (Social Local Mobile), big   data, responsive design, and gamification generate insights and thereby   relevant                       solutions that foster trust with customers. 

Monique Levy, VP of   research at Manhattan Research distinguished the digital behaviors of   pharmacists, nurses, physician's                       assistants, and formulary makers in contrast to   doctors. She stated that there are significant opportunities for pharma   to                       leverage relationships with these emerging audience   members, as they are often overlooked in favor of the oft-sought   physician. 

In summary, as noted by conference participant Wendy Blackburn, EVP of InTouch Solutions, it all comes down to living the                       four "c's" of digital engagement: strong 

The slow evolution toward a state of grace in tracking ROI for digital promotion.

Evidence-Based Marketing: From Rise to Stall—and Ultimate Triumph

PE, April 2013 Cover Image

Improving the quality of clinical trials has emerged as a major strategic activity for Big Pharma, one where efficient management of a demanding set of regulatory requirements—not to mention mounting clinical and patient expectations—can have a positive impact on the bottom line. In the following "leading practices" feature, Pfizer outlines how it has employed a management tool first introduced in the automotive sector to enhance its ability to process reams of data from clinical trials to raise the quality of trial submissions, improve regulatory compliance, and avoid costly rework that ultimately impacts speed to market performance for new drugs. 

Pharmaceutical companies are facing growing quality and compliance concerns because of the increasing complexity of clinical trials and substantial changes in the regulatory environment. To protect patient safety and improve the quality of drugs coming to market, Health Authorities are imposing more stringent requirements and higher levels of scrutiny on companies' compliance with rules and regulations. In 2011, the FDA issued more than twice the number of company warning letters compared to 2005. As a result of greater regulatory hurdles for drug approvals and the need to demonstrate medical differentiation from existing therapies, companies are executing more complex clinical trials in an increasingly cost constrained environment. These challenges have generated an industry-wide imperative to overhaul clinical trial processes in order to improve quality and operational efficiency. 

Pfizer experienced the effects of these pressures as keenly as any other company. These challenges were compounded by changes in the company's operating model. These factors created an impetus to change the way it managed clinical trial processes and the approach to quality and risk management. As such, the company embarked on an organization-wide initiative to improve the overall quality of its clinical trials with the ultimate goal of protecting patient safety, adherence to protocols, and ensuring the integrity of clinical data.  

One of the key tenets of this initiative is the application of a QbD approach to its clinical trial processes. The concept of QbD was initially developed by the management expert Joseph Juran in the 1970s and later applied to the automotive manufacturing industry. Juran believed that quality could be transformed into a process and that most quality issues can be directly attributable to the way in which quality of the final product was planned. In 2002, the FDA adopted the QbD approach to address quality concerns in the pharmaceutical drug manufacturing process and launched a new initiative called "Pharmaceutical CGMPs for the 21st Century: A Risk Based Approach." As stated in a recent guidance from the FDA, "Quality by design means designing and developing manufacturing processes during the product development stage to consistently ensure a predefined quality at the end of the manufacturing process," (FDA guidance "Q10 Quality Systems Approach to Pharmaceutical GMP Regulations). Pfizer has recently taken the innovative approach of applying QbD principles to its clinical trial processes. 

QbD's foundational principle is based on a deep understanding of the process and knowledge of the risks involved. QbD leverages an integrated set of leading edge techniques to build quality into the process by determining critical-to-quality (CTQ) requirements and proactively managing potential risks that are common to the process. The QbD approach focuses on removing waste and reducing variability while driving higher levels of process predictability, excellence, quality, and compliance. This approach enables pharmaceutical companies to achieve sustainable bottom-line benefits, which include avoidance of costly and time consuming rework that can slow down submissions and impact pre-approval inspections. With this in mind, Pfizer is embarking on a broad initiative to apply these same principles to improve the quality of its clinical development processes, starting with the trial master file (TMF). 

The trial master file:  a case for change 

The TMF is the definitive source of clinical trial documentation that provides evidence that patient rights and safety have been protected and that the integrity of the trial data, study analysis, and study conclusions are credible. While the TMF is the primary source of information needed to reconstruct and demonstrate the conduct and validity of a clinical trial, the underlying process of managing and maintaining the TMF for clinical trials is often broken and fragmented. TMFs today, which consist of both electronic and paper document formats, are generally scattered across a large and complex network of clinical trial systems and document repositories. An average clinical trial easily generates 10,000 documents with larger trials producing more than 100,000 documents. This means that a large global pharmaceutical company's TMF can contain millions of documents. With the vast amount of data stored in multiple locations, locating documents becomes particularly challenging, time consuming, and subject to frequent procedural errors. In addition, TMF users and contributors often span different geographies, locations, and functions, making standardization of the TMF processes even more challenging, particularly as pharmaceutical companies begin to heavily outsource their clinical trial execution activities. Finally, with the rapidly changing regulatory landscape and introduction of new requirements, pharmaceutical companies are struggling to maintain compliance with regulatory expectations and requirements for the TMF.  

In recent inspections across a number of pharmaceutical companies, regulatory health authorities, including the MHRA, EMA, and FDA, have placed a higher level of scrutiny on the TMF as supporting evidence that appropriate procedures were being followed during a clinical trial. Pharmaceutical companies and CROs alike have struggled to maintain regulatory compliance and have often been cited for inability to provide a full TMF for inspection. As a result, the industry is making a concerted effort to address these challenges and meet regulatory requirements. One notable example is a multi-year effort led by a Drug Information Association working group that established a common TMF reference model. This group, comprised of participants from more than 150 pharmaceutical companies including Pfizer, as well as regulatory agencies such as the FDA and MHRA, has helped drive standardization across the industry. The discussion and activity around the TMF continue to gain momentum, as evidenced by a number of industry conferences focused specifically on the TMF this year, which has more than tripled compared to two years ago.  

Pfizer addressed the challenges it faced with the TMF by overhauling its processes and technology systems. The decision to utilize the QbD approach rather than other standard process improvement methodologies was based on the desire to achieve "zero defects" in its TMF by building quality into the process. In the specific application of QbD to Pfizer's TMF process, the TMF was treated as the "end product," with a focus on designing the process to reduce the number of defects, i.e. missing or incorrect documents. Though the premise of building quality into the TMF process and routinely monitoring it to enable consistent quality may seem simple and even basic, it is a paradigm shift for the industry. For many companies, the TMF has traditionally been a "graveyard" repository of clinical trial documents filed as an afterthought and relatively forgotten until the time of an audit or inspection. In an effort to reduce the overall cost of poor quality, Pfizer has developed a dynamic solution which enables active contribution, organization, maintenance, and monitoring of TMF documents. As part of the solution, Pfizer has built the necessary controls and measures to proactively manage quality in real time.  

TMF process redesign effort included four key steps. 			

Pfizer's first step was to assign a dedicated process owner to manage the TMF process redesign, implementation, and ultimately, serve as the single point of accountability for the TMF. A cross-functional team was also convened to support the redesign and implementation of the new TMF solution.  

The heart of the redesign is a standardized process enabled by a custom technology solution. The solution allows users to easily access documents through a single interface across all business units, functions, and countries. It also provides the organization the ability to monitor TMF quality for all studies, including those that are outsourced to clinical research organizations. For long-term sustainability, Pfizer created a support infrastructure staffed by resources who guide study teams in the management of the TMF. Additionally, a dedicated group of offshore resources was established to conduct quality control of documents submitted to the TMF. This integrated solution provided the necessary process controls and measures to help Pfizer move towards achieving "zero defects" in its TMF.  

The Pareto Chart was used to identify critical areas for RCA.			

By leveraging the QbD methodology and tools, Pfizer was able to develop a deep understanding of customer requirements (both internal and external stakeholders, including regulators and inspectors) and design a process that met those requirements. The overall TMF process redesign effort included four key steps as described below. 

Fishbone diagrams were developed to identify root causes for prioritized TMF Issues.			

The development of a new TMF process began with defining the desired end state of the TMF and its associated quality characteristics. To that end, Pfizer employed a number of QbD tools, including a voice of business analysis to better understand and elicit the needs of its internal business stakeholders (TMF contributors and users) as well as a voice of customer analysis to determine the requirements of its external customers, namely regulators and inspectors. Additionally, a root cause analysis (RCA) was performed to systematically understand the issues and determine the underlying factors and causes that contributed to any existing quality concerns (e.g., inconsistent filing locations for TMF documents). The RCA was used as a key input to the design efforts as solutions were incorporated in the new process to correct or eliminate the causes, and prevent similar quality issues from recurring. Several process improvement tools were used in the RCA including the fish-bone diagram which helped the team systematically analyze cause and effect relationships and the Pareto chart which provided insights into the vital factors causing the most issues within the TMF. By concentrating the efforts on the most critical issues, the team was able to focus resources on the areas that have the greatest impact on quality. The results of the assessment phase provided key information to inform the design of the TMF process and technology solution. 

The output from Pfizer's assessment of the TMF, coupled with regulatory requirements and industry standards, served as input to defining the critical to quality (CTQ) attributes. CTQs were used to establish the connection between key customer requirements and quality criteria for the new TMF process. Pfizer took the extra step to map the CTQs against major regulatory requirements (Table 1). For example, the ability to identify missing documents was determined to be a critical requirement. As a result, Pfizer designed into its process, continual identification of document placeholders with associated due dates driven by milestone or events to help detect missing documents. Establishment of CTQs enabled the team to design a process that met both regulatory and business critical requirements, leading to consistent delivery of a quality product—the TMF. 

Table 1: Categorized critical-to-quality (CTQ) elements mapped to the requirements of regulatory health authorities.			

Before finalizing the new TMF process, the design team conducted a failure modes and effects analysis (FMEA) to understand potential failure points in the process and incorporate necessary measures to prevent such failures from occurring. The FMEA not only exposed potential failures but also the root causes and consequences of those failures. Examples of potential failure points included poor document quality and delays in error correction which have downstream impact on timely submission of documents and the completeness of the TMF. This analysis allowed the team to determine necessary refinements to the design of the process to avoid potential issues and assure the highest possible quality and reliability in the new process.  

Finally, in order to proactively monitor the new TMF process, key quality control measures were implemented per metrics defined by the CTQ dimensions. The CTQs were rolled up into three key performance indicators: completeness, document quality, and timeliness. Control points were established at key trial milestones which provide real-time feedback on quality performance to study teams and to line management. This enables active management of quality by providing transparent line of sight into quality—when correction requires the least amount of effort. These built-in controls and management reports are used throughout the lifecycle of a study, enabling proactive and continual performance management. As a result, study teams and management have a high level of visibility in monitoring and securing overall TMF quality. This approach also drives increased accountability across the organization.  

Little more than a year since the launch of the new TMF process and technology solution, Pfizer has witnessed significant improvements across all three measures of TMF health—completeness, document quality, and timeliness. In particular, TMF completeness—a measure of the presence of required TMF documents at any given point in the trial—improved by more than 50 percent and is progressing well toward meeting established TMF performance targets. More important, for the first time in Pfizer's history, the entire organization has clear visibility into the status of the TMF and is able to intervene in a timely manner to enable quality.  

The application of QbD principles to clinical trial processes has provided Pfizer the unique opportunity of achieving the consistent quality demanded by regulators, while reducing operational cost and burden. Pfizer's application of QbD principles to the TMF process is a powerful example of this, and the organization is now extending this approach to other clinical trial processes, including protocol development, data management and regulatory submission management. The key outcome has been increased transparency and real-time visibility into process quality. This ability to actively monitor and control quality reduces regulatory risk, protects patient safety, and results in operational benefits that avoid costly and time-consuming rework, which ultimately increases speed to market and, more importantly, brings medicines to the patients who need them.  

 is TMF Process Owner, Senior Director, Development Operations at Pfizer. He can be reached at 

 is Head of Clinical Trial Process and Quality, Vice President, Development Operations at Pfizer. She can be reached at 

 is a Senior Manager at Deloitte Consulting. She can be reached at 

 is Principal at Deloitte Consulting. He can be reached at 

Improving the quality of clinical trials is a major strategic activity for Big Pharma, one where efficient management of a demanding set of regulatory requirements can have a positive impact on the bottom line.

Pfizer's Quality by Design Approach to Trial Management

New York's Yankee Stadium was once again the venue for 

 annual crack at the bat on trends and best practices in biopharmaceuticals licensing and M&A for the year ahead. Our panel of five experts from big and small pharma as well as academia were joined on February 26 by co-host Campbell Alliance, which provided an advance look at its Survey of Dealmaker Intentions, due for rollout at the BIO Annual Meeting in Chicago later this month. The key findings of the group: dissecting payer preferences well in advance is now the essential "due diligence" for any deal; the debate on whether Big Pharma should scale the ivory tower of partnerships with academia is over; and the next wave of dealmaking involves risky bets on cell-based process and signaling technologies that offer entirely new ways to develop medicines. Never has it been truer that "the art of the deal" is all about stretching the horizon of commercial opportunity beyond what a company can do in-house, by itself. The following is our edited summary of the conversation. 

Campbell Alliance has conducted its executive-level Survey of Dealmaker Intentions for the past five years; a period that observers would concede has been one of the most volatile in memory. What is distinctive about the past 12 months and how is this weighing on the current business calculations of pharma companies and the host of new partners emerging in this space? Is the market for deals trending up for 2013? 

We polled 129 key decision-makers here in the United States and in Europe, nearly three-quarters of who rank at the VP level or higher. The focus is on licensing activity rather than M&A transactions. The latest results, indicate that 2012 was a modestly successful year for Phase II and Phase III licensing deals, reversing the downward trend that had been a fixture since we launched the survey in 2007.  

I suspect that the overall dealmaking climate might be even more positive if the survey included M&A data, as we are seeing less concern among companies that once regarded M&A's as an option to avoid due to the dilutive impact on earnings. Reliance on in-licensing may be shifting to actual M&A activity. In fact, one approach that is flying high on the radar is the "earn out" deal structure, which is almost a hybrid of the traditional M&A cash back/equity financing model and the milestone payments that drive negotiations in the in-licensing space. The "earn out" is a useful way of establishing a contingent value for an asset, which is attractive to companies that want to better quantify their risk exposure by tying payment to a goal or an event that has to happen. Earn outs are becoming a mainstream practice and in our view will be a central part of dealmaking in the year ahead.  

What about the prospects for deal activity this year?

 In-licensors and out-licensors are both positive about the outlook for 2013. Significantly, in-licensors continue their interest in early stage [pre-clinical Phase I] assets, for which there is an oversupply in comparison to what is available at later stages. This is particularly true in oncology. Oncology is generating a lot of interest because of the quality of the science and the potential that at least some of these candidates may offer a new mechanism of action compared to existing therapies. However, despite the inventory of attractive assets, investors remain skittish, with some choosing to remain on the sidelines until the technology matures. 

When in-licensors were asked about the likelihood that Phase III deals would move forward, some two-thirds of those polled replied with a flat yes, while the opposite was true for out-licensors: little more than a quarter agreed. This disparity was also a highlight of our survey last year; it can be interpreted a number of ways. Differing views about valuations is certainly one, as is the desire of many out-licensors to find a way to develop that asset on their own. Another is the assumption that an asset at Phase III is already sufficiently "de-risked" and therefore can be considered as a full buyout candidate rather than as a licensing partner—the record shows that companies are still willing to pay a premium to acquire full rights to a good drug at this level.  

In fact, the big integrated drug makers are sitting on a lot of cash; they have money to spend. If you look back at the premium that companies paid on an acquisition in the 1990s, it was typically about 30 to 35 percent of the acquired firm's market cap. Data I referenced from last year indicates that ratio is now around the 70 percent range. That's a dramatic shift in what Big Pharma is willing to pay for a late stage asset. 

In my travels to the biotech companies, I hear a consistent message from them: despite the positive buzz about pipelines, Big Pharma is still skittish about investing too early, at pre-clinical Phase I; they would rather wait for the asset to progress and be "de risked," at which point they will pay for the greater level of certainty about the asset's commercial prospects. The problem is that there are fewer of these final-stage assets available.  

This is the likely reason for another finding of the survey: two thirds of executives from the in-licensing and out-licensing side expect an upturn in preclinical and Phase I deals this year. For projects in Phase II, the expectations are a bit less optimistic, but still clearly on the positive side. As an observation, I'd say most Big Pharma companies will admit to gaps in their development pipelines; with the increased competition in the de-risked asset class, they will need to spread the net a bit further. Nevertheless, I see no evidence that Big Pharma is ready to turn off the faucet on the more expensive Phase III deals. If the opportunity is right, they will pounce and pay up. The bottom line is that we are back to a period where any asset with potential is going to attract the interest it deserves among buyers, who are willing to go the full M&A route as well as licensing.  

 Do these Survey findings concur with what those of you active in dealmaking are seeing in the field today? 

There is a lot of cash out there available for deals, but it is equally true that in the public market the valuations for biotech firms have experienced a big lift—growing at a rate considerably higher than the norm for Big Pharma. No one knows precisely why this is happening: in my recent book, "Healthcare Investing," I suggest it may be due to the inverse relationship between interest rates and biotech investing: when rates are low, biotech assets go higher. The market now expects this—and so the thinking is if you have to pay up anyway, then why not just wait until an asset matures and you can better gauge its commercial potential.  

 Tax and balance sheet implications aside, our approach to targeting an asset as a licensing opportunity or a direct acquisition is largely agnostic. We focus instead on the asset's stage in its projected lifecycle and on a very close understanding of what the two parties want to achieve in the transaction. This is what is important to us. I'd also comment that, while it is true most companies would prefer deals that involve assets in late stage development, the reality is there are few opportunities right now, especially among Phase III candidates. I'm just not aware of many available that fit our strategy. 

Patrick Gallagher, Noven Pharmaceuticals: 

We too look for late stage assets, but these tend to be priced much higher than is acceptable under our financial criteria.  

 Timing is very important. We have a good understanding of the assets that are out there at any given point in time. We look at many opportunities and often we decide to take a pass. But then something changes and we come back for a second look, building on the interactions we already had. The trust and knowledge obtained through these prior discussions are put to good use and this time it results in a deal. We did several transactions in the past year that built on previous contacts. The message for us is it pays to be patient; for the seller, it pays to be persistent.  

My experience is primarily as an out-licensor, which requires a degree of fortitude that is often not reflected in these surveys. I have joked that "BD" isn't an abbreviation for business development but for "Bufo Deosculatore," or, loosely translated, "frog kisser." When you are out-licensing, this is figuratively what you have to do: kiss a lot of frogs and hope that one of them turns into a winner. There are many rejections from potential partners, but we do find that many companies will take another look when there are updates to a program. It's no easy task.  

What does the survey say about the key therapeutic areas of interest this year? Perhaps the courtship is easier when you can find common cause around a particular disease.

Oncology and CNS disorders remain the areas of greatest interest. Diseases of the immune system are gaining rapidly, and we see a revival of interest in vaccines and antibiotics. As a category, orphan drugs are the hot ticket along with antibody drug conjugates. Regarding the latter, the buzz is centered on the promise that this will lead to new and better ways to deliver drugs for maximum therapeutic effect. Likewise, the continued commitment around CNS—Alzheimer's disease in particular—prove that the industry is still willing to take the risks and engage in areas where the need is great because the current standard of care is so poor. In the oncology space, there is excitement linked to our increased understanding of the biology and genetics of tumors, which is leading to more personalized treatments. Yet venture capital firms seem to be pulling back a bit in financing oncology start-ups. This is creating more interest in company to company partnership deals that can help fund the next phase of growth.  

We are also seeing strong interest in immunology drugs. Science is finding immunological effects in many chronic conditions, like diabetes. Some experts believe that inflammation is at the root of all diseases.  

We have discussed trends in deal structures, the preferred timelines in product development, and the type of assets that carry the most favor among investors. What about the size of the deal—is bigger still better? 

There has long been a perception that Big Pharma wants to obtain rights that will deliver blockbuster returns, with revenues in the billion dollar range. We find this to be overstated—the average peak revenue desired by our survey population is $341 million. It's now seen as attractive to have three assets delivering that billion dollars in revenue instead of just one. What matters is the contribution to the full portfolio and the prospect that an asset can be grown out over time, perhaps through additional indications.  

Expectations of revenues also must take account of pricing pressures, which are growing more intense as payers assert a dominant position in formulary access. Everyone is aware that registration approval is not the only parameter that spins revenue anymore: obtaining reimbursement status is the critical hurdle, and it is not guaranteed. Smaller markets are also becoming the norm as the genomics revolution allows for a more stratified, personalized approach to drug therapy. I think the deal environment simply reflects these realities.  

In talking deals today, virtually everyone pitches their asset candidate as a $500 million drug. That seems to be what sellers see as the benchmark for optimal performance, one that will bring buyers to the table.  

In interpreting the overall survey, how should drug makers allocate their priorities and resources to maximize their dealmaking potential in 2013? 

 It is important that dealmakers approach opportunities with a greater degree of flexibility than was the case in the past. Clearly, the "earn out" concept is here to stay and a lot of your partners will expect this as an element in negotiations. The boundaries between traditional licensing and actually acquiring an asset are blurring, so success will go to those who embrace a more creative approach.  

Another requirement is to be well positioned to take advantage of the oversupply of assets in areas like oncology. Finding the best deal here requires close attention to due diligence and building a foundation of trust with potential partners—before negotiations begin.  

Finally, the skills set for dealmaking is expanding. Companies must make the appropriate investments to keep pace. For example, pricing and market access capabilities are now essential to understanding the level of risk in considering an asset. This function has to be included early on in any evaluation or negotiating team. Many people we spoke to on the in-licensing side noted that the offers submitted to them lacked detail on the asset's pricing and reimbursement prospects. For early-stage assets, this is particularly important because such considerations can—and should—influence the design of clinical trials well into Phase III. We also see pricing expectations becoming central to the negotiation of milestone payments. Did the compound obtain a Tier II position on the formulary with no restrictions? Or did it get Tier III with prior authorization and step therapy restrictions? The financial implications are considerable, so the parties to a deal want more specific guarantees around access.  

From a company perspective, what are the mission-critical issues you confront right now in advancing "the art of the deal?"

Noven is a specialty pharma company, a seeker of novel products in niche segments like women's health and ADHD. Our target horizon is focused on the lower half of that zero to one billion dollar asset range. When we look for product opportunities, we start with the assumption that all candidates we can access will carry some flaws; if that was not the case, the big players would have already grabbed it. Hence it is becoming much harder for a company our size to find the good deal, especially because the majors are no longer so picky in focusing only on assets with that billion dollar revenue potential. They are prepared now to outbid us for even the smallest products. Competing with the majors for good, available deals is thus a major strategic challenge for us. Likewise, a company must negotiate with the awareness that margins from a licensed asset are going to be constricted. This is due to cost controlling factors ranging from higher Medicaid rebates to the market power that PBMs wield in controlling access to patients. 

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