 Editorial Advisory Board [EAB] is to provide us with a perspective on what really counts in the business of big Pharma today—at the front lines of the competitive war for market share, how do you differentiate, align strategy with capabilities, motivate winning teams, and deploy resources efficiently, all toward the ultimate objective of building sustainable sources of growth, for the long-term? To help answer this question, 

 convened on Jan. 30 a panel of four alumni from our EAB meeting host, St Joseph's University Business School Pharmaceutical and Healthcare Marketing Program, each representing the commercial operations side of the business, from drugs to consumer products to vaccines. The following contains highlights from the discussion, including input from other members of our EAB community. The big lowdown? Marketing today is so competitive, management only gets one shot to get it right—and if you are not listening to the patient first, you fail. 

Each of you has moved up the ranks on the commercial side of biopharmaceuticals, from serving on the field force to a management assignment with direct P&L responsibility. How has your work and the requirements for success changed over the course of your career? What are the key drivers of competitive differentiation today versus when you started in the industry? 

I began my career in 1989, as a sales representative. At that time, the selling proposition in pharmaceuticals was relatively simple. Prescribing decisions were made at the physician level. Now the market has evolved into a much more complex environment, with many more stakeholders involved in the process. Prescribing decisions are impacted by payers, governments, physicians, specialty pharmacies, PBMs, and patients. Each of these segments requires a targeted commercial plan in order to succeed. 

Isn't it all still a question of how much scrip you can get physicians to write for the product? Has the situation really changed that significantly? 

 Due to the complexities of access and reimbursement, physicians are no longer the only decision makers in prescribing. We have to understand the road map to access and reimbursement very early in the development of a compound to ensure the required data is available to support the launching of a new drug. If this planning is not executed during the clinical phase of drug development, there is a risk that physician uptake could be limited due to barriers to access. For example, health technology assessments conducted by governments now play a vital role in shaping everything from the design and location of clinical trials to the final go-to-market launch strategy. Six years ago, there was no IQWiG agency in Germany to influence the decision on a domestic reimbursement price for a new drug, the outcome of which guides actions by payers in many other countries. 

What other key drivers of change can you identify from the time you entered the industry? 

Gerianne DiPiano, FemmePharma Health Care: 

My area, women's health, is a reflection of changes that have dramatically altered the position of patients in relations with providers. Social media platforms have empowered patients to make their own therapy choices. Nine out of 10 consumers access information on the web before they see a primary care practitioner. Buying decisions are made every time a patient looks his condition up on Wikipedia. Yet industry research indicates that half of the top 50 biopharmaceutical companies in the US lack a strategy to address this change, such as through active involvement in these online community networks.  

 Based on my 20 years in the biopharma and vaccines business, I can point to three transformative changes. The first is the shift in the science, from classic chemistry to biology. This has significant implications for the business, because when you are managing a biologics enterprise, how you manufacture and supply the product is as critical as marketing and market access. Securing the supply chain is a function that traditional managers did not need to focus on—you were just trained to sell doses. The product turned up. Today, a more holistic approach is required. Knowledge of the process is vital.  

The second big change is the necessity to think beyond the home market, to emerging markets and the globalization of most functions in the biopharma enterprise. This change makes it all the more important to understand the patient, in all his/her diversity. In fact, patients in emerging countries have embraced social media more proactively than in the US, largely because there are few institutions to advance their view; many people feel disenfranchised from the health systems. New digital technologies provide an outlet.  

Despite the high profile being given to the patient, our industry has far to go to before we are truly "patient centric." Market access is the hot field in big Pharma today because it reflects our adjustment to the ascendency of payers. Market access is designed to give payers a front row seat in the design of our R&D pipelines. But shouldn't we first be asking what is most important to patients? The huge financial bets on the next generation of biologics demand that we have a better understanding of just how the patient will use the product. This is not a question that can be answered with a reimbursement strategy. You have to dig deeper and determine the conditions under which a patient will use a drug: are there structural or institutional hurdles to integration of the new medicine in the patient's system of care?

The third transformation is around the talent needed to succeed in a very complex business environment, where there is no fixed blueprint for success. The road to the "c suite" is no longer one of starting out "carrying the bag" in sales, then advancing to commercial operations and eventually leading a business segment. Rather, it's all about earning multiple assignments in different aspects of the business, and in varied geographies. You want to be the person who can readily see how all these activities are interconnected. There is a war underway for talent that has a fuller understanding of the business and the capability to operate on the basis of a global point of view. 

Each of these three drivers depends on the ability of the industry to stay innovative. Such an outcome is not guaranteed. In the average big Pharma R&D budget, a significant portion of funding can be devoted to fixed costs and life cycle management of existing products. It raises a serious issue of how much money is really available to fund the next wave of innovation. Everyone is looking for novel, low-risk vehicles to generate investable ideas, such as in-house VC operations.  

Helen Bourret, Amarin Biopharmaceuticals: 

 My career has been entirely in sales. When I joined the industry 15 years ago, it was the land of good and plenty. Products were approved, regularly and on time. The product was automatically covered and reimbursed; formulary listing was not an issue. It was an environment uniquely suited for the blockbuster phenomenon. Today, we face an entirely different situation. Generics are dominant in nearly every class, so by default we have had to become experts in formulary positioning and politics. Sales and commercial teams must be conversant in dozens of managed care plans, most of which operate on the basis of strict prescribing guidelines that accord generics status as first-line treatment. These plans define "new products" as anything up to 5 years old.  

On the relationship side, which is critical to those engaged in selling anything, contacts with physicians and providers are controlled to the point where, assuming you get access, the conversation has to be treated like a script. And when you have the meeting, more than three quarters of all physicians will limit it to two or three minutes. What do you say in two minutes? You can count the words; each one had better carry value. The strategy must be to identify the physician's incentives under the benefit plans he or she works with. For example, if you can show how prescribing a therapy will raise the practice's patient satisfaction score within that plan, then the physician will listen. And you have to build other contacts—with the nurses, community health workers, and others who pull the patient's charts.  

Basically, the sales professional today is seen as redundant. The challenge is to overcome that perception by showing physicians how you can help them meet their obligations to the PBMs and payers. Being able to differentiate your product in a world of "me too" medicines is equally vital. 

Given the consensus that the business climate today is markedly tougher, can we cite instances where a change proved disruptive to your commercial model? How did you respond and what was the outcome, in terms of shaping your own career? 

Prior to my current position, I was given responsibility to position an orphan drug for launch. What I quickly figured out was that, for this launch, engaging the patient was going to dramatically influence the success of the launch. This was a disruptive, eye-opening development, as it contrasted to my previous exposures on the commercial side. It took us awhile to figure how to move the focus to the patient, but we succeeded. We put a product manager in place whose sole assignment was to work with patient groups. We sought out patients in focus groups, listened how they wanted to receive therapy, and incorporated their ideas in the contracts we negotiated with our specialty distribution partners. We actually served as a concierge in a "high touch" approach to drug delivery.  

I would summarize our learnings from the process as follows. Pay attention to the disease community. Show them that what you have is clinically distinctive, advances the standard of care in a way that is tangible to the patient experience, and is appropriately priced. Acting by example, prove that patient expectations identified through the trial phase will be incorporated post-launch.  

Will you leverage any of these learnings in your current role as a developer of new treatments in the very competitive field in HCV? Many of the emerging therapies promise to increase the cure rate for hepatitis C from drug interventions to upwards of 90%, from less than 50% today. The patient benefit is clear. 

 The level of innovation in this disease area is astounding—drugs now coming on the market promise to take patients from an HCV infection to cure in only 12 weeks. As a smaller company, we think there is an opportunity to carve out some "blue ocean" space in this field by focusing on what the patients with this disease really want.  

Any other examples of addressing a disruptive change or transition in your career? 

 Prior to joining Baxter, I served as general manager for an MNC's vaccines business in China. I arrived there and promptly discovered that the conventional model for selling medicines in China—lots of "boots on the ground"— was not working as well for vaccines. Government played a dominant role as the lead purchaser of vaccines and controls on traditional marketing practices in this segment were growing, leading me to pose the question why we on the vaccines side needed to rely purely on the mass mobilization approach. Government influence was so strong it could determine if you even had a sales channel to work in at all. In that case, market access would be irrelevant.  

Recognizing these distinctions, we reconstructed the sales force around a new "customer solutions team" concept to work with government procurement agencies on transparent targets supporting China's five-year health sector development plan. For example, we emphasized the ability of pneumococcal vaccines to reduce pneumonia among young children and the elderly. It was a closely coordinated, patient-centric approach that acknowledged the role centralized health planning plays in penetrating the Chinese market. 

This is a model—non-traditional, built around a new generation of stakeholders—that is relevant not only to China but to most of the industrialized countries as well. Public-private partnerships centered on high-value, innovative vaccines and biologics is certainly the avenue we are taking at Baxter. Last year, we began a 20-year partnership with a Brazilian state-owned company, Hemobras, to produce our recombinant factor VIII therapy for hemophilia so the country can move away from reliance on older, blood-based treatments. This relationship will allow the Brazilian government to upgrade the standard of care for the country's 10,000 hemophiliacs while also supporting the Brazilian biotech industry to leverage its capabilities from this technical transfer to spawn newer technologies.  

 The disruption that matters most to me—and which I might hesitate to describe as innovative—is the massive downsizing of the industry sales force over the past decade. The challenge to those of us in the sales function has been to minimize the damage from the loss of so much accumulated expertise, especially as the implementation of these reductions in force has often been delegated to third-party consultants. Important issues like customer impact, retention of long-standing client relationships, legal and regulatory compliance, internal organization alignment, and staff morale, don't get the proper attention from senior management. The disruption has led to the loss of many high quality contributors. Company reputation is damaged: to fill the gap, you have to go to a physician who had the same rep, often for a decade or more, and try to start over again. In a larger sense, the question is whether any of this advances the claim of so many companies that the patient is at the center of their business? As a manager, my response is to do all that I can to establish continuity and restore trust. I work consistently with my team to get everyone on the same page. 

Looking ahead, what can you identify as the most "mission critical" function that executives will need to successfully navigate this transition in the biopharma business model? 

 The key mission critical function is the ability to digest and synthesize multiple streams of information. An important example would be the ability to manage the increasingly complex process of completing clinical trials, on a global basis; and finding the best way to position a new product for maximum market access, in multiple countries worldwide. In the old era, structuring the trial, filing for registration, and securing market uptake could all be approached separately, in sequence. Looking ahead, we have to anticipate during the proof-of-concept stage what our trial design will look like, what comparators we will select, and what evidence is needed to position the product for reimbursement. The other step is to establish our launch order in a way that reinforces— not dilutes—our market access priorities as we roll the product out.  

There is a great deal of innovation locked up in smaller companies. The problem is the lack of resources to fund it. There will be a premium on people who have the financial, operational, and communication skills to either create partnerships or take a company public. Making a case for the start-up is not easy, so the ability to do that is going to be a prized attribute for anyone in this business. Confidence and assurance is also needed to confront the negative headwinds from the VC community, whose engagement once gave small companies a runway to the future. Now the VC players want all their risks guaranteed—not only does a company like my own have to show it can generate revenue on a consistent basis, it has to shine on key profitability performance metrics like EBITDA. The ripple effect here is that big Pharma wants highly structured transactions, with milestones that shift more of the risk to the smaller partner. In summary, people with the smarts to overcome these institutional deficits and secure the capital to grow an asset internally are going to be in high demand.  

 No one skill or attribute is going to dominate as "mission critical." That said, process capabilities—getting all the functions in an enterprise to work together—will be very important to achieving business targets. It used to be that a good clinical profile coupled with commercial and promotional muscle was sufficient to move the markets. Today, many additional factors must apply to a seamless launch; there are more moving parts. But getting large organizations aligned behind the strategy and to identify and then execute around the right tactical measures is not as easy as it sounds. It may seem trite to state it, but we need to ensure the entire organization is working toward the right end point. It is surprising how often companies miss the mark by presuming that if you tick a box, results will follow. 

Another factor that underscores the importance of process is the externalization of big Pharma R&D pipelines. This requires a high level of "street smarts" and sensitivity among managers in building successful partnerships. Big Pharma must strive for balance: expectations based on internal markers must not be so rigid as to starve a small and medium-sized partner of the oxygen—from know-how to capital—it needs to thrive and realize the potential of the partnership. Finding mutual benefit from the connection between big Pharma and the smaller biotechs is critical to the future of innovation, particularly in generating the resources to ensure the best new science is funded.  

Selling will remain the principal way this industry competes for profits. The sales rep is not going away; there will still be boots on the ground. What is changing is the role of the rep, who is going to be positioned as a knowledge asset and a service provider beyond the pill itself. The value of the relationship between the rep and the customer is going to be quantified. A few pharma companies are trying to make loyalty a metric of performance. Educating sales professionals to conform to this new model is not going to happen overnight; for some the transition will be painful. And there is a question whether this criteria is sufficiently objective to serve as the basis for compensation involving large numbers of professionals. Asking a physician to assess what amounts to a sales rep's personal and emotive skills is subjective. It might help determine what value the rep brought to the relationship, but it's worth emphasizing here that a sales professional is ultimately hired to sell. Going that extra mile, doing the right thing beyond the transaction itself, may—or may not—make a difference in generating prescriptions. 

What does the group feel about the pace of this change? Will the next five years bring still more rapid transitions or are these transitions likely to occur at a slower rate? 

Achillion is active in the HCV space. I can say I have never worked in a segment that has innovated at such a furious pace. Three years ago, the science to treat this condition had given us a single direct acting antiviral, pegylated interferon, and ribavirin that provided cure rates of approximately 70%. Today, we have combination therapies for hepatitis C that have demonstrated cure rates near 100%, at a high level of safety and tolerability.  

Progress in the science has been rapid and we anticipate continued change and improvement. What counts is building a nimble organization that can move quickly to seize opportunities as the science evolves.  

The implication of these new therapies is you may be obliterating a chronic disease in the course of a single 12-week course of treatment. The traditional paradigm of financial success in biopharma is selling a drug that patients must take as maintenance therapy, for years or even a lifetime. As you cure these patients, won't the financial opportunity go away? 

 My experience is that with every new treatment that advances the standard of care, we underestimate the prevalence of the condition. We think hepatitis C is under-diagnosed. And you also have to factor in the time it takes to get all those patients into treatment. Our forecast models at Achillion project a multi-billion dollar market for this next generation of hepatitis C products extending well into the next decade, in the US alone. This doesn't include additional markets with large patient populations like China, Japan, and other parts of Asia.  

Will the business model of the future move us further toward the "virtual company" concept in which efficiency depends on outsourcing many key activities and functions to a third party? 

 The virtual or extensively outsourced company model has great appeal among investors and shareholders, and I don't see that changing, particularly in small companies like my own. Infrastructure is expensive. Investors like the idea of being flexible and to cut SG&A expenses when things don't work out. Pivot is the word that comes to mind: it's easier for a CEO to shift course if you don't have 5,000 people working for you. 

Another benefit of being virtual is the ability to access a huge talent pool of people who have left industry jobs, for one reason or another. Consultancies filled with ex-industry people can be retained on a project basis, avoiding the high fixed costs of employment. It's a great model, as the client also benefits from the varied background of these people rather than keeping people who might only know how to do one thing. 

 At many small companies, major internal functions are outsourced, such as sampling, benefits, payroll, etc. In addition, sales representatives and managed care managers can work on a contract basis. The focus is on building a strong in-house management team with the mindset and flexibility to multi-task. People have to be prepared to rise to the occasion. The largest companies are often preoccupied by strategic issues at the top of the decision chain and thus can devote less attention to the troops on the ground—the field force. This is an omission that small players make at their peril. 

 A larger question shaping the future is the origin of those new drug pipelines that promise so many breakthrough products. Licensed-in products seem to be in the ascendant. Can licensing replace the productivity flaws that seem to inhibit traditional in-house R&D? 

 It makes sense to spread your opportunities—you can't invent everything in-house. The key is deciding when and how to transition assets into your portfolio. It's a decision that must be taken on a case-by-case basis.  

A good licensing program requires management to root out "the not-invented-here" syndrome. The big multinational company I worked for prior to launching my current business had a reputation as a bad partner. It needed to own every part of the deal, which was always scrutinized first for its tax implications. Such ground rules made it very difficult for any smaller partner to ink a transaction that is remunerative and sustainable.  

 Companies able to build "win-win" partnerships will secure a competitive advantage against those that choose to stay solo. The issue is managing the adjacencies: a licensing deal has to make sense to your core market mission or there is the danger the business will get too broad too quickly so that you lose focus. It's worth recalling the aim of any deal must be to do something good for patients. That's the ultimate test of market relevance and it usually takes five or six years for the partners to confirm that their joint efforts paid off.  

Your emphasis on the business being centered on the patient has been very consistent today. Is the industry taking heed, in your view? 

Progress has been made, but there is much still to be done. One example is market access, which has emerged as a new, high-profile function in big Pharma organizations. In many cases, this integrative, more holistic approach to addressing the customer has not worked out well. Why? I believe it's because the overall mindset in marketing and commercial operations continues to neglect the patient—market access is not designed to be patient centric. Such programs were created in reaction to the rise of the payer. It is a company centric response. We don't think consistently and strategically about where the patient fits in this equation – what does he or she get, beyond our own specific needs?  

Articles

Features

Four commercial line executives serve as our jury of peers on what's in store for the future of pharma, and discuss the changing criteria for market success, from drugs to consumer products to vaccines.

Mission Critical: Assessing Pharma's Drivers of Change

The first act in the story of sickle cell disease, one of the oldest known genetic diseases, is not a happy one. Aside from a very small number of young patients undergoing successful bone marrow or stem cell transplants, there is no curative treatment. Other drugs address the disease according to which symptoms present most urgently, or serve as short-term solutions for a long-term problem.  

Sickle cell disease prevents one of the body's most fundamental resources—the blood—from adequately transporting oxygen to the tissue, which can result in organ damage and many other related complications. A sickle cell related vaso-occlusive "crisis" can be extremely painful for patients, and deadly in some cases. Both quality of life and life expectancy are reduced for sickle cell patients, even when the disease is optimally managed with existing therapies, blood transfusions, vitamin regimens and a host of other precautions.  

Beyond the medical pathology of the disease, sickle cell patients in the US—a population of 100,000—also face a social stigma. They often require strong opioids, and the disease is commonly recognized as a "black disease," or one that only plagues minorities, which isn't true. The intermittent pain crises that most patients experience usually result in an overnight stay at the hospital and a heavy dose of pain meds. Once stabilized, they return home until the next crisis strikes. 

However, a quorum made of new pipeline therapies, public research investments, and a renewed sociopolitical focus on the disease is attempting to pen a redemptive second act for sickle cell patients. With a successful Phase 1 safety study completed, Abraham Abuchowski and Glenn Kazo, who serve as CEO and president of Prolong Pharmaceuticals, respectively, are currently working with sickle cell patient associations and foundations to determine which efficacy studies would have the largest impact on sickle cell patients' co-morbidities, and their lives in general.  

In February, a Sickle Cell Disease Congressional Caucus was formed, led by Charles Rangel (D-NY), Danny Davis (D-IL) and Tim Scott (R-SC). The stated goal of the caucus is to "increase support for the largely under-funded disease" and to "address barriers in access to and development of crucial treatments."

Also in February, FDA convened its fifth Patient-Focused Drug Development meeting, this time on the subject of sickle cell disease. At the meeting, patients were asked to speak openly about treatment options for sickle cell, and also which effects of the disease matter most. Kazo, who attending the meeting, says two key messages emerged from those discussions. The first is that "drug development in the sickle cell area doesn't usually look at co-morbidities, or the related diseases that sickle cell patients actually suffer from," says Kazo. "The other challenge is enrolling patients in clinical studies."  

Prolong's approach to sickle cell is to improve overall oxygenation, which gets at the underlying disorder in sickle cell disease. The company's lead product, Sanguinate, is an infused bovine pegylated hemoglobin molecule that Prolong hopes will address the most severe complications facing sickle cell patients. Abuchowski, Prolong's CEO, was instrumental in the development of pegylation technology decades ago, but back then the oxygen delivery characteristics of the hemoglobin protein, human or animal, weren't well understood. Plus, errant hemoglobin in the blood stream is toxic, as any clinician will tell you.  

What's special about cow hemoglobin? Aside from obvious sourcing problems related to the need for large quantities of human blood, Abuchowski says human hemoglobin is extremely unstable compared to bovine hemoglobin; what makes hemoglobin especially toxic in the blood is when it splits apart. "Hemoglobin is a four sub-unit protein...those sub-units break apart in human hemoglobin, but in bovine they do not," says Abuchowski. "In the genetic engineering space, everybody thought anything human is best, but that's just anthropomorphic egotism. Just because it's human doesn't make it the best."  

Prolong's Sanguinate, a play and reversal on the verb exsanguinate (defined as the action or process of losing blood), isn't being positioned as a blood substitute, which Kazo describes as a fool's errand. But Prolong will attempt to distinguish Sanguinate from other products in development by going beyond the treatment of a single symptom to address co-morbidities related to poor oxygen delivery, the root cause of vaso-occlusive crisis and many other debilitating effects of sickle cell disease.  

Nearly 150 open studies targeting sickle cell disease are currently listed at 

, underscoring patient need and industry's interest in addressing it. For patients and their families, a truly disease-modifying therapy could hold the curtain up long enough for a third and final act: the cure. 

Column

Ben Comer reports on how new pipeline therapies, public research investments, and a renewed sociopolitical focus are working toward a happier outcome for sickle cell disease patients.

Sickle Cell Disease In Three Acts

Bioinnovation has been a key driver of US economic development, with notable examples of success in California's Bay Area and the Boston/Cambridge nexus in Massachusetts. Over the past two decades, hundreds of thousands of jobs have been created through start-up companies and the large multinational anchor companies that attract ancillary support services, including venture capital. Today, many other jurisdictions—both in the United States and abroad—are seeking to replicate this productive ecosystem to support their own economic growth. 

It is thus timely to ask: How have these regions become so successful in this space? What factors contribute to their dominant strategic position? What lessons can be applied to help other regions grow their bioinnovation assets? Noting the mutual benefits that pharma companies, academia and government obtain from these successful precedents, we identify the necessary foundations for a strong biotech ecosystem and explore a potential strategy blueprint using Philadelphia and the state of Pennsylvania as a case study.  

The seeds of growth in bionnovation are rooted in four stakeholders: Academic medical and research centers (AMCs); biotech and pharma companies; investors, including VCs; and local, state and federal government institutions. Each of these stakeholders has dramatically different priorities and goals (see Figure 1).  

Figure 1: Overlap of stakeholder missions			

Maximizing the value of these relationships depends on identifying the areas where goals and mission align. While it may appear that the areas of overlap are small, they carry transformative potential. Breaking down silos that thwart the ecosystem of innovation is thus critical to success. For example, AMCs' mission is typically focused on excellence in research, teaching and patient care. But another key part of their mission is to translate basic medical breakthroughs, which are largely funded by public money through institutions like the National Institutes of Health (NIH), into improvements in medical care. These improvements are usually commercialized by the private sector, generating revenue growth and more jobs. Likewise, while VCs are focused primarily on return on investment to their limited partners, that investment remains a viable avenue to achieve substantial investment multiples. Since 2008, average multiples for VC-backed private biotech companies via M&A transactions have been increasing, while the biotechnology IPO market is starting to open up again. Ten IPOs were listed in the first five months of 2013, the largest number in nearly a decade.  

While pharma and biotech firms must focus on shareholder return, there is often a paucity of internal assets to leverage this goal. So this, too, requires an effort to engage with other stakeholders through pre-competitive collaborations with AMCs that provide access to potential new pipeline assets. Finally, for governments, bioinnovation carries a multiplier effect by adding to the tax base and creating jobs through innovation-friendly urban infrastructure. The evidence shows that an interactive matrix supporting innovation has become mandatory for top-line growth in sectors vital to 21st century competitiveness.  

This success story begins with the universities and AMCs in the region, specifically MIT, Harvard University, Whitehead Institute, Tufts University, Boston University, University of Massachusetts, and their associated medical schools, medical centers and business schools. Among these institutions, MIT stands out with a vision of entrepreneurialism that was far ahead of its time. Specifically, MIT encouraged faculty to create start-ups and to collaborate with industry partners. Its Office of Technology Licensing has achieved some impressive metrics, with nearly $150 million in revenue, 16 start-ups and 199 US patents. More important, companies founded by MIT alumni employ 3.3 million people and generate revenues of approximately $2.2 billion annually. Some 6,900 MIT alumni firms are headquartered in Massachusetts and generate $164 billion in annual revenue within the state.  

With MIT as the standard-bearer, neighboring institutions are moving toward relatively low-friction strategies that facilitate more bioinnovation. There is a critical mass of top-tier academic institutions in the Boston region that offer experience, talent, IP and vision that can turn invention into value. Resources derived from here are supporting critical research at a time when NIH funding is declining. Approximately 20% of MIT's overall research budget is derived from corporate partnerships, a figure far in excess of most peer institutions.  

With this academic legacy as a stimulus, large multinational companies like Novartis and Sanofi, began locating their US research headquarters in Boston, Cambridge and surrounding suburbs. In addition, there are substantial home-grown successes, such as Biogen (now Biogen-Idec), Genzyme (now a wholly-owned subsidiary of Sanofi), Millennium (acquired by Takeda in 2008), Vertex, and Alkermes.  

This influx of established companies and crop of new university-based start-ups requires vast amounts of capital. Of the 14 most active VCs worldwide in the biotech space, four are located in the Boston area, six in the Bay Area and two in New York; the remaining three are in Europe. The four VCs in the Boston Area—Third Rock Ventures, Atlas Ventures, MPM Capital (based in the Bay Area and in Boston) and SR One—have raised a total of $745M to invest in mainly local ventures. Interestingly, however, of the top ten VC deals in 2012 in terms of dollar value, only one company, Bluebird Bio, was in the Boston area, while seven were in California, reinforcing the regional bias inherent in VC investing. This is important, because once a region dominates on access to capital, it creates a positive feedback loop where dollars continue to flow into ventures led by known managers with strong track records of facilitating lucrative VC exits.  

A final element in the Cambridge story is proactive government. The state of Massachusetts, through its fiscal policies and life sciences initiatives, has created a positive business environment for the industry. An example is the 10-year, $1-billion Life Sciences Initiative enacted in 2008. As part of this initiative, the Massachusetts Life Sciences Center (MLSC) was created to implement the program. Its goals are to strengthen the state's role as the international leader in life sciences, create high-skill/high-paying jobs, attract investment dollars and support innovation and entrepreneurship.  

The MLSC is structured around a diverse Board of Directors and Scientific Advisory Board charged with allocating a $500 million capital fund, a $250 million tax incentive program and a $250 million investment fund. As of February 2013, $359 million has been committed and used to leverage $1.03 billion in matching investments. Funds provide direct support for research, new investigators, recruitment of top talent to universities, industry/academic research collaborations, start-up capital to early-stage companies, and capital investment for infrastructure support. MLSC has made 77 awards totaling $56 million in tax relief to companies, who have pledged, in turn, to add 2,800 new jobs to the existing 80,000 life sciences jobs in the state. Outside the MLSC program, the state and local authorities have invested in a land use policy that includes new, open corporate space design, common green space, high-quality public transport, mixed residential/corporate neighborhoods, and use of the Boston area waterfront that fosters business collaboration. 

Despite the fact that bioinnovation has flourished in Massachusetts and California, other parts of the country continue to struggle. This raises the question: can their success be replicated? To provide an answer, we examine how various engagement strategies play out among each of the four stakeholders that nurture biopharma innovation.  

 Researchers, clinician-investigators and administrators are the source of all university-based innovation. Understanding this fundamental concept is the first step toward change; in fact, it begins with mobilizing the strength of this "grassroots" network. One way to do it is to encourage researchers to learn more about basic operational realities involved in translational research, including cost, timelines, and regulatory considerations; the process of due diligence to determine the value of an invention or business concept; intellectual property; and sources of funding. Educating this group toward a basic level of business acumen is critically important, but this is seldom done in most AMCs.  

Investigators should be aware of where funding in today's environment is coming from, and to the extent possible, align their research interests with funders' goals and interests. They should get external business advice as "quality control" for their strategy, starting with the real world value of their innovation. Most importantly, researchers must be their own advocates: they must talk often and openly with other stakeholders to monitor the process and identify improvements.  

One priority often overlooked is to detect and eliminate barriers to cooperation. Often, these exist to protect IP or to promote ethical behavior. This requires a revisit of long-standing policies like IP ownership, equity ownership by founders, reach-through rights and conflicts of interest. An extension of this point is developing rigorous standards for fiscal responsibility while being reasonable and creative in negotiating terms with licensees, start-ups and industry collaborators. Too often these institutions insist upon prohibitive financial terms and structures that are non-starters for a partnership. Institutions with traditional, non-entrepreneurial cultures should look at peer institutions that have established bioinnovation-enabling policies without compromising their academic missions; examples include MIT, University of California at San Francisco, Duke University, Stanford and the Cleveland Clinic.  

Faculty should be recognized and rewarded for achievements related to entrepreneurship, in the same way that they are for securing grants or publishing in peer-reviewed journals. Equally important is striking a balance between basic research and translational work—do not forsake the former for the latter. Finally, AMCs and universities must provide resources for their entrepreneurs, including infrastructure to support basic and clinical research, regulatory and business support, and funding in the form of grants or, more interestingly, venture funding in exchange for an equity position.  

Pharma, biotech and other industrial partners.

 Private industry is increasingly interested in working with other stakeholders. More than 350 life sciences academic-industry deals/partnerships were agreed in 2012, predominantly in cancer (15%), infectious disease (14%), diagnostics (15%) and neurology (12%). The top academic institutions in terms of deal flow included Harvard and the University of Texas, with seven each; University College of London and University of California system, with six apiece; and Broad Institute (MIT and Harvard), with four. Nearly all of these deals were discovery-stage, platform-based collaborations.  

Pharma and biotech companies also engaged in a substantial amount of M&A activity, with 27 acquisitions in 2012. Only six of the acquired companies were at the preclinical stage, four in Phase I and the remainder in Phase II or higher. Similarly, total licensing deals continue to decline from 2010 levels, with the vast majority in the discovery or post-Phase II space. This leaves a gap in partnership activity and corporate funding for innovative technologies in the critical pre-proof-of-concept area. It reflects the increasingly low-risk tolerance of potential partners. Very early stage deals are cheap and large payments are back-ended, thus allowing partners exclusive access to a potentially valuable platform for very little upfront investment. Post-Phase II deals are sufficiently de-risked and provide an opportunity to add a near-term clinical asset to often dwindling pipelines. Everything in between is too risky and too expensive. In addition, the most active therapeutic areas in terms of deal volume—oncology and infectious disease—represent areas where regulatory reforms, such as breakthrough designation, make the development timelines more attractive than in other areas.  

In parallel, VC arms of pharma and biotech companies are becoming more active in earlier-stage investments that often fall outside the scope of the parent company's interest and mandate. In fact, of the 14 most active VC firms in life sciences in 2012, five were venture arms of pharmaceutical companies: Novo Nordisk, Novartis, Pfizer, SR One and Shire, which together represent a total of more than $1.1 billion in potential investment dollars.  

While it is difficult to imagine pharma and biotech companies altering their risk-tolerance profiles on new deals given shareholder pressures, a reasonable avenue to maintain early-stage investment for start-ups and access for their partners would be for pharma and biotech companies to shift a portion of their substantial cash reserves into venture investment vehicles. These investments are most typically part of a syndicate of other VCs that further reduces risk but preserves potential ROI and access to early-stage, truly innovative technologies. 

 Many analyses indicate that to be competitive in the bioinnovation landscape, governments must build infrastructure, offer tax incentives for businesses to relocate and add jobs, and fund grants and other direct investments in research. Yet with slow recovery from the 2008 financial crisis continuing, local and state government leaders are under considerable pressure to maintain budget neutrality. 

Given the Massachusetts example, creative government intervention is a powerful tool. Moreover, public support goes a long way to bridge the gap between discovery and proof-of-concept that is currently hobbling much of the true innovation in the life sciences.  

 The final piece of the life sciences ecosystem puzzle is equity financing, provided typically by a robust VC community. At least three important trends have emerged over the past five years. First, VCs and their investments are highly regional (see Figure 2). Second, with a few important exceptions, such as Third Rock Ventures, VCs are not investing in the translational research phase, but rather the peri-proof-of-concept phase. Third, relatively few new start-ups are being funded; the bulk of VC investments are going to follow-on rounds in existing portfolio companies. 

Figure 2: Regional trends in VC investment 2003-2012			

Moreover, in 2012, the amount of VC investment in young, innovative life sciences companies fell to its lowest level in nearly 10 years. This holds true both in the United States, where funding was 4% lower than 2011, and in Europe, which saw a substantial drop of 31%. In addition, this cash is spread over fewer deals, 156 in 2011 in the United States, and highly concentrated into a handful of biotech hubs. This reflects the zero-risk tolerance of many VCs and their limited partners, the overall downturn of the investment markets since 2008, a paucity of quality management teams for start-ups, and, until very recently, inability to access public markets for exit. With biotech IPOs at their highest level in years, strong data supporting ROI, and the overall stock market at an all-time high, perhaps we will see greater risk tolerance among VCs and a return to their roots of funding novel research and new innovation. If so, this will be vital to extending the locus of a strong bioinnovation ecosystem.  

The Cambridge example shows the necessity of engaging and incentivizing all stakeholders to create and maintain a successful and thriving bioinnovation ecosystem. Philadephia and the state of Pennsylvania is as an interesting counterexample, with similar parameters to Cambridge and Massachusetts. Philadelphia has four top-tier AMCs and universities (University of Pennsylvania, Temple, Thomas Jefferson and Drexel); the second-highest level of NIH funding by institution (Penn); many multinational pharmaceutical companies and large biotechnology companies; and a small concentration of early-stage biotech and life sciences companies. The state's second-biggest city, Pittsburgh, is home to the University of Pittsburgh School of Medicine, a top-ten medical school and ranked sixth for NIH funding, and Carnegie Mellon, a leading engineering school.  

Despite this, the city and state is not considered a vibrant hub of bioinnovation. Why? Our premise is that the four key stakeholders have not yet been fully engaged in this goal.  

AMCs in PA don't make realizing the value of their innovations a strategic imperative; none of the top ten AMCs most active in spin-out formation are in PA, despite the fact that Penn ranked third in European and sixth in US patents issued to it in the eight-year period ending in March 2013. In contrast, MIT ranks far below Penn in the number of patents issued, but was the second-most active, behind the UCAL system, in spinning out new life sciences companies.  

In addition, there is a limited amount of VC funding available. While many pharma and biotech partners make their homes in the Philadelphia area, their deals in the last several years are focused geographically in Cambridge and Silicon Valley. Gov. Tom Corbett has spoken openly about making life sciences investment a priority in PA, but there are few tangible results to date. The much discussed "D2PA" program—discovered in PA, developed in PA—allocates just $10 million in the current state budget to invest in new companies. The Life Sciences Greenhouse and Ben Franklin groups, funded by the state to invest in new technologies across all industries, have invested only $23 million into 33 seed and 23 pre-seed companies, and $17 million into 40 companies, respectively, since 2003. Gov. Corbett has put forward several tax incentive plans that will take effect over the next several years and has convened a panel of business leaders to discuss approaches to building and supporting a bioinnovation ecosystem in PA. Taken together, however, these initiatives pale in comparison to the strategies taken by states with highly successful life sciences hubs. If bioinnovation is going to succeed in unleashing new growth in PA, more must be done to incentivize each of the four stakeholders to make investments—and take risks.  

, MD, is Director of Strategic Initiatives at Penn Medicine Center for Healthcare Innovation. She can be reached at 

 is Professor and Director of the Tufts Center for the Study of Drug Development, Tufts University School of Medicine. He can be reached at 

California's Bay Area and the Boston/Cambridge nexus continue to dominate bioinnovation in the US. Pharm Exec looks at the factors contributing to the strategic dominance of these regions.

Regional Trends in Bioinnovation Investment

After decades of cautious equivocation, there is now a clear business rationale for female leadership in the "c suites" of big Pharma. An industry that has embraced the goal of being "customer-centric" knows that in every health care system around the world, the majority of customers are women. That stereotypical "engaged patient" is more often than not a woman too, one who also serves as an influential provider in emerging professions with the power to dispense, from the pharmacist to the community health practitioner. The data is compelling: three-quarters of the US healthcare labor force is female, while the latest work from the New York-based Center for Talent Innovation provides statistical evidence to show just how much women control the "power of the purse" in treatment decisions. 

Future industry profits depend on riding this cresting wave of diversity. Expanding sales geographies and better access to information have combined to bind big Pharma's reputation more closely to societal expectations. And if you want to be seen as "customer facing," it is simply good business to see something familiar when that mirror of perception shines back on your markets.  

Nevertheless, the facts say that big Pharma still isn't ready for its close-up. Of the 13 drug companies listed on the 2013 "Fortune 500" list, only one—the generic powerhouse Mylan Labs, ranked at 374—has a female CEO. The irony is that while the leading consumers of health care are women, the management that oversees development of the products and services to serve those needs remains almost exclusively male.  

Yet business does not align with a vacuum; precedent reveals that those who push for change, fill unmet needs and channel it in profitable directions, will eventually assume the mantle of leadership. In an industry in the midst of so much transformation, leaders are emerging that reflect the demographics of big Pharma's polyglot, increasingly globalized business model. For the past 25 years, the Healthcare Businesswomen's Association (HBA) presents an annual Woman of the Year (WOTY) award to a female leader who exemplifies the managerial talent, cultural tone and community perspective required to advance not only our own industry, but the state of healthcare overall. Each of the past 24 WOTY winner has been profiled in the pages of 

However, for this 2014 silver anniversary, the WOTY award has been expanded to include three leaders across the broad continuum of healthcare. The distinctively unique backgrounds of these women reflect the structural diversity of tomorrow's healthcare—where the successful pharmaceutical company functions as but one element in an interconnected, networked health system, that considers drugs as both an information asset and a platform for services "beyond the pill." 

, President of Healthcare Operations and Chief Operating Officer of Ascension Health, the largest non-profit provider of hospital and related health services in the United States, and the first African-American woman to hold that position. Ascension is the nation's largest Catholic health ministry, which operates more than 100 hospitals and has over $17 billion in annual operating revenue. 

, co-founder of Insigniam, a boutique consulting firm that has served all of the world's largest pharmaceutical companies. An immigrant from Iran, she is an expert on innovation strategy and leading large-scale organizational and culture change initiatives. 

, Executive Vice-President and Head of Global Research and Development for Merck Serono Biopharmaceuticals. A physician and scientist from the United Kingdom, she is the only female head of R&D among the big Pharma companies and was recently named Chair of the Board of Directors of TransCelerate BioPharma, which is coordinating novel industry approaches to the management of clinical trials.  

As HBA President Jeanne Zucker commented to

, "these three top-flight women underscore what HBA believes is the crucial leadership skill in healthcare today: fostering system-wide collaboration—in drug development, care delivery and service management." In the following profile sketches, 

 examines the path of these three leaders to professional success along with the personal experiences and values that keep them rooted to what many insiders, regardless of gender, still see as a business motivated by the strong will to do good works. 

Patricia Maryland: Finding opportunity in crisis

In 2007, Patricia Maryland received what she could only describe as a calling. She was tapped for a new two-pronged position at Ascension Health, as Market Leader for Michigan and President and CEO of St. John Providence Health System (SJPHS). SJPHS is a member of Ascension Health, accounting for 25% of its patients across five hospitals and more than 125 medical facilities in southeast Michigan. It spends significant resources caring for people living in poverty. 

Maryland knew it would be a difficult road ahead. Detroit was facing the most economically challenging time in its history since the Great Depression. By 2009, Michigan had the highest unemployment rate in the country; GM and Chrysler had declared bankruptcy, with nearly one million jobs lost across the state. The idea that workers' insurance could pay the healthcare tab for SJPHS was no longer viable.  

Great leaders can do more with less, and it was up to Maryland to ensure the health system survived and could continue to meet the needs of the community. This was not a job for the faint of heart. She had to act quickly to slash $70 million in operating expenses while maintaining the mission to serve people in need.  

"There was no way to make the cuts and preserve the current operating structure," says Maryland. "We had to do something new for Detroit and for the future...In Detroit, you can get stifled because of the challenges, but instead we looked it as a bold way to extend our creativity. We blossomed in the face of adversity." 

Amidst one of the worst economic crises in US history, Maryland, who has a doctorate in public health administration, proceeded to execute a broad vision based on a preventative, patient-centric approach to care. Patricia believed there was a chance to scale up healthcare services so that patients would have a better outcome while saving the system money—all by distributing health care services differently. It centered on providing an earlier, more interventionist and more holistic approach to care—as Maryland explains, "Our job is to connect the dots and coordinate other services so patients are treated earlier and correctly and thus able to have a better outcome." 

It's the type of healthcare Maryland had wished for while growing up, as she watched her mother struggle with diabetes. "My mother had all the complications that follow with diabetes—problems with eyes, nerves, congestive heart failure, and then renal failure, which she died from," she remembers. "We were frustrated when we used the health system; it was always focused on what we needed to do today. We took on each health problem as it surfaced. Care was provided in a silo way. What my mother really needed was a team of physicians to sit with us and review all the things we needed to be thinking about when it comes to diabetes." 

Wellness and preventive care attract significant attention, but because it calls on distracted service providers to invest today to obtain results tomorrow, few organizations want to risk leadership in this area for the possible negative short-term impact on budgets. But Maryland knew it was an important element to reducing the overall cost of care. She also saw it as an important shift away from the current unsustainable business model, which is based on a disjointed fee-for-service reimbursement system, which incentivizes physicians and hospitals to treat sick patients rather than performing services designed to keep them well. 

The fruits of Maryland's labor is a program called Partners in Care involving St. John's Providence and the Physician Alliance, a network of more than 2,300 physicians in southeast Michigan. Working together, the two groups cut the overall cost of care by shifting treatments away from the hospital emergency room to primary care physicians, who could intervene early on and thus avoid admissions to acute care facilities. The hallmark of the new model is the "medical home"—which is a designated primary physician who meets the patient regularly and focuses on wellness and understanding the needs of the entire family to connect them to the right care.  

It was through this hospital-physician organization that SJPHS secured the first commitment on an outcome-based hospital payment model from the large insurer, Blue Cross Blue Shield of Michigan. Under the agreement, St. John's Providence receives higher reimbursement for successful patient outcomes. The agreement sets a new standard of pay-for-performance by encouraging high quality of care rather than high volumes of services, measured by the successful treatment of patients. 

Maryland was part of the decision to roll out this model and sell it to Ascension's employees. Over the past five years, her team has proved its mettle with metrics that show the overall cost of healthcare for the Ascension workforce has dropped significantly. The company has now taken the model national with some 150,000 associates now enrolled—all based on a risky pilot launched in a Detroit on the ropes during the worst recession since the Great Depression. 

The lesson for fellow women in the management hot seat? Hard times are often the best time—to think big. 

Shideh Sedgh Bina says the biggest influence on her life was her grandmother. Born in Iran, her world was one where all women were required to wear a veil—a chador—as a sign of modesty and morality. But to Shideh's grandmother, the chador symbolized much more.  

Bina's grandmother dreamed of being a doctor. Those dreams were put on hold when at age 13, she was removed from school to help care for her brother. By age 16, she was married.  

In 1936, in an attempt to "modernize" the country, Iran became the first Muslim country to ban the veil. But in the community where Bina's grandmother's lived, the women were hesitant to take off their chadors. Who would be the first? 

Shideh's grandmother felt moved to take action. She was young, in her 20s, married with two daughters, pregnant, and absolutely terrified of retribution and violence in the small city in which she lived. Still, with her husband's blessing, she volunteered. Scared for her life, security came to escort her to a town meeting. It was there that she stood in front of the community and removed her veil. As she talked about why she was removing the chador, other women began to follow suit. Her reason? Decades later, she said it was so her daughter wouldn't have to put away her dreams like she had.  

Shideh was born two generations later and emigrated with her family from Iran to the United States. In 1981, she graduated from the Wharton School at the University of Pennsylvania where she earned a BS in multinational marketing. Wharton would eventually recognize her as one of the top 40 prominent business leaders under 40 in the Philadelphia tri-state area.  

Following graduation, Shideh quickly became a successful entrepreneur. She went on to lead the New England region for an international training and organizational development firm. In 1990, Shideh co-founded High Performance Consulting, which merged with the Rosenberg Group in 2005 to co-found Insigniam. Today, the consultancy has offices in Philadelphia, Los Angeles, Paris, and Hong Kong, and has worked on projects involving all of the 15 top pharma companies. Bina helps large companies create a stronger internal dynamic that generates breakthroughs in management results—whether that's top line growth, strategy implementation, profitability, or culture change.

These corporate transformations are Bina's work, but the first and most important transformation was her own. In the early days of the consultancy, she was charged with, among other responsibilities, business development. But would male clients take her seriously? Shideh was scared of taking on the assignment and possibly hurting the bottom line. It was then one of her partners told her something she would never forget: "He said, 'We are in the business of breakthroughs, thinking outside of what is traditional, separating old beliefs and assumptions,'" says Shideh. "You have to make a choice: You are either going to become the culture or interrupt the culture. This bit of wisdom became my mantra." 

Bina's grandmother took off her chador with the goal of a better future. Given all the challenges in healthcare today, Shideh says, executives have the same opportunity to scrap the veil imposed by conventional wisdom, to envision a better future—and act.  

"There's no question on anybody's part that the healthcare industry is in a state of total disruption, which is also an incredible opportunity for transformation," says Bina. "There is a group of executives that see this as the opportunity it is, have taken the ball and run with it and in doing so are shaping the future of healthcare in our society around their own vision." 

Precisely this is what Bina says is so exciting about being in healthcare right now—there is an opportunity to change society and build a new platform for healthcare. So what distinguishes the executives that are willing to shape the future versus those that are just reacting to it? 

"With all of them, there is fear—fear that emerges from the risk is inherent in disruptions," says Bina. "Except there is a certain group of people who are willing to give themselves permission to envision something bold and inspiring. For these people, being proactive actually reduces the risk." 

It is statements like those that show how deftly Bina is able to channel emotion. Shideh says it wasn't until she was married with children, in her 40s, that she was really able to tap into that compassion. People who know Bina say she is not afraid to wear her heart on her sleeve. She shares herself and is not afraid to be vulnerable in the work environment.  

"What is in your heart?" asks Shideh. "Trusting that doesn't make you soft, it makes you more effective."  

Annalisa Jenkins: Remaking a global organization

Dr. Annalisa Jenkins came of age during the 1980s in the United Kingdom. It was a time when the two most powerful people England were women – Prime Minister Margaret Thatcher and Queen Elizabeth II. Looking back, Jenkins attributes her ambition to the social context of her upbringing. 

"Growing up where the most visible and prominent leaders of my country were women showed me the power of role models," says Jenkins. "I think women gain their ambition largely through role models so seeing successful women is important for young girls." 

Jenkins came from a military family. She wanted to be a doctor, and saw the British Royal Navy as an opportunity to help pay for school. She graduated in Medicine from St. Bartholomew's Hospital London and upon graduating earned her medical degree from the University of London. 

In 1995, following family tradition, Jenkins entered the Royal Navy. She was only the third woman to serve as a medic, the only female in her intake class that year, and would be the first female to serve on the front lines of combat. Jenkins would rise to the rank of Surgeon Lieutenant Commander.  

"During my naval career I was constantly in an environment that I was the only woman on the team or one of very few," says Jenkins. "I was constantly adapting to my environment and working out to how to conduct myself in order to be accepted and respected, and therefore be able to contribute and make a difference."  

The most unforgettable moments in the Navy were during the Gulf War. Jenkins was serving with the Minesweeper Squadron, working with the unit to advance into the northern part of the Persian Gulf, clearing mines so that the American aircrafts could follow. At night, the Iraqis would launch missiles at them, and Jenkins didn't know if she would make it out alive. It was there that she learned some of her most important lessons of leadership. 

"The role of the leader is to engage and energize—to make others want to follow you," says Jenkins. "Being in the military is about building high performance teams, and leveraging leadership that can allow people to overcome what others thought was impossible." 

The Healthcare Businesswomen's Association honored three female leaders this year. We take an in-depth look at each winner's background and career-and what factors helped push them to the top of their game.

HBA's Women of the Year 2014

India's Department of Pharmaceuticals (DoP) released the Drug Price Control Order (DPCO) in May 2013. It increased the number of drugs on the National List of Essential Medicines (NLEM) from 74 to 348 and offers new paradigms for determining and enforcing price ceilings while maintaining stable drug supply. Biopharmaceutical companies that do business in India need to carefully evaluate the consequences of this legislation. 

The DPCO has three primary aims: expanding the NLEM, authorizing the National Pharmaceutical Pricing Authority (NPPA) to regulate prices of India's NLEM, and authorizing the NPPA to regulate price increases of non-essential medicines. The DPCO uses market-based mechanisms to set price ceilings. It works differently, depending on how many products are in a category: 

» If a drug is one of many drugs within a given product category, the price ceiling is the simple average of the prices of all drugs that have at least 1% of market share within that category (plus a 16% pharmacists' margin).

» If a drug is the only one within a given drug category, the new price ceiling for that category will be a fixed percent, based on price reductions in similar categories.  

Moving forward, all drugs in a product category must be priced at or below the price ceiling or the manufacturer will face monetary penalties. If a drug's price is already below the price ceiling, a price increase is prohibited. The NPPA, however, currently has no mechanism to officially penalize an offending manufacturer. For all NLEM-listed treatments, yearly price increases must be in line with or below the wholesale price index. 

The Indian government has also reserved the right to mandate continued production for up to 12 months, to require quarterly drug production reports, and to require six months' notice before production of a given drug ceases. The regulation also exempts all drugs developed and patented in India from price control as a means of incentivizing India-based research and development.  

The DPCO results in three key implications for pharmaceutical and biotechnology companies in India, as well as for the country as a place for future clinical R&D: 

» No let-up in pricing pressure for non-NLEM drugs.  

» No dramatic change in  MNC R&D investment in India.  

To understand how this new policy will impact prices within the Indian market, consider the following three cases: 

is the only drug within its product category, it experiences price reduction as a fixed percentage of its current price. In order to determine the price reduction for desferrioxamine mesylate, the NPAA considers the average reduction in similar product categories. For desferrioxamine mesylate, the price reduction will be 24.80%, the average price reduction for antidotes. This will reduce the price per unit from its current R170.40 to R128.14. 

 is significantly more expensive than the other seven options. Because the new price ceiling is determined by an arithmetic, and not a weighted average, the price ceiling for hepatitis B vaccines will force the price of GSK's vaccine significantly down from over R300 to a maximum of R87, a roughly 75% reduction.  

» A local manufacturer (Pavior Pharmaceuticals) offers a more expensive factor VIII concentrate injection than the only alternative, Baxter's cheaper version.

 According to clearly outlined DPCO policy, the new price ceiling for factor VIII concentrates will become the average of current prices, or about R5400. Baxter's factor VIII is priced well below where the new price ceiling would be, so Baxter will not face mandatory price reduction. This is a particularly interesting case, as the DPCO aims to impact high-priced branded options that compete against a set of generic and "branded generic" alternatives. Baxter's product has over 90% of market share, so the price ceiling will not have any impact on the category spend. 

In order to understand the reach of the DPCO's price reduction policies, one must fully understand the India market. Consumers and physicians in the country are very brand-conscious, even when it comes to medications. As a result, higher drug prices don't necessarily lead to lower market share. Indeed, for almost half of the product categories under the DPCO (47%), the most commonly used drug is also the most expensive. Consider the hepatitis B vaccine market from case No. 2. GSK's product, despite being the most expensive by a wide margin, has a disproportionate 26% market share. This is because market share and price are not inversely related in this product category as would typically be expected. Thus, this category demonstrates DPCO's potential success. Though GSK's drug is the only therapy that will face significant price reduction due to its high market share, the weighted average of prices in this category will be slashed in half from R140 to R70.  

As a result of the DPCO, price differentiation for NLEM-listed medications will become increasingly difficult. More importantly, the DPCO may impact locally-manufactured generic alternatives as it reduces the price of the MNC branded options, thus decreasing the price gap and perhaps making the MNC brand more attractive. As price differentiation within each product category decreases, so too does the potential for a middle tier, products that are neither the most nor the least expensive in the category of "branded generics." This will lead to a decrease in the overall number of "branded generic" NLEM products across all categories.  

No let-up in pricing pressure for non-NLEM drugs 

An estimated 70% of the India drug market is not listed on the NLEM and will not face new price ceilings or mandatory price reductions. However, medicines not listed on the NLEM will only be permitted a 10% annual price increase. In addition, pricing opportunities remain limited by patient affordability and the threat of compulsory licensing. The Indian government has a history of implementing compulsory licensing and revoking patents for drugs it considers too expensive. Nine drugs for either cancer or diabetes have faced patent problems ranging from compulsory licensing to revocation of patents to denial of patent infringement in India (see chart). These patent problems have led to cheaper generic alternatives for high-cost medicines in India, and have also positioned India as a country in which exceptionally high-priced therapies are unlikely to launch successfully.  

MNC R&D investment in India will not change dramatically  

The DPCO incentivizes India-based research and development of drugs. However, the likelihood that this will influence investment decisions by MNCs is negligible. MNCs often have established R&D centers outside of India. Since revenue from NLEM drugs for MNCs in the context of their global revenues is very small, it is very unlikely that many of these companies will make a large R&D investment in India because of the DPCO. 

The Indian government is heavily involved in regulating prices for medicines in India by using the DPCO to set price maximums for essential medicines. Going forward, the Indian government may also look to other larger areas of the pharmaceutical/biotech market to introduce new and increased regulation to make medicines more affordable. To be successful in a changing India market, manufacturers need to constantly review the changing policy landscape and reassess their India strategy carefully. 

Three strategic implications for pharma pricing strategies in India.

"Market-Based" Price Controls In India?

Another of those anniversaries in European pharmaceutical regulation has slipped by unobtrusively. It is just a year ago that bold intentions were almost agreed for speeding up the pricing and reimbursement of generic medicines. An outline consensus was reached within most of the European Union's key institutions that the timelines for getting generics onto the market were too long, because there was too much discussion over what they should cost and who should pay for them. 

So, instead of the six months that the EU's legislation allowed for, EU officials and the European Parliament took the view that a month should be enough for member states to reach a decision on an application to fix a price for a generic, and a maximum of a month for deciding on whether it could be reimbursed too. It was the culmination of an extensive debate that had featured some striking statistics and some energetic lobbying. 

Research by officials in the European Commission had suggested that it was taking an average of more than seven months for generic medicines to reach the market after the originators lost their exclusivity, and that pricing and reimbursement rules were a factor in that delay. The European Generic Medicines Association (EGA) said its members were waiting an average of 153 days after marketing authorization to receive pricing and reimbursement status, and the range across the EU's member states ran from as little as 14 days to more than 270 days.  

In the European Parliament, the influential figure of Antonyia Parvanova insisted that shortening timelines for generic medicines was a key element in the financial sustainability of national healthcare systems. European industry commissioner Antonio Tajani, who launched the proposal to update the EU's 20-year-old rules, said EU member states would benefit from the savings resulting from faster access to generic drugs, and industry and patients would benefit from cutting through some of the red tape currently holding up decision-making. His aides predicted that reducing the time lag would also stimulate price competition, bringing further savings — because originator prices in Europe drop by an average of 20% during the first year after generic entry and 25% in the second year — and by as much as 80-90% in some cases. 

Why, demanded the advocates of change, was it possible for some countries to complete the entire process in a couple of weeks while others needed the best part of a year? Administrative complacency, they alleged — arguing that without introducing specific shorter timeframes for generics, national authorities would continue treating these products within the more generous schedule designed for the more complex process of considering pricing and reimbursement applications for new medicines. It was just an accident of history, they said, that there was no legislative provision for fast-tracking these decisions; back in the 1980s, when the current EU rules were agreed, generics represented only a tiny proportion of the EU — whereas today they account for some 50% in volume. That damage from that accident should be repaired, they urged, with new rules. 

The Commission, therefore, proposed obliging member states to make their decisions within 15 days of an application. It was even ready to consider the introduction of national provisions granting automatic/immediate reimbursement status to generic medicinal products where the corresponding originator already benefits from reimbursement at a higher price — something that roughly 80% of the generic industry had recommended in consultations on the new legislation. 

And the parliament broadly agreed. It reinforced the Commission's proposal with a call for "accelerating the entry into the market of generic medicinal products," and beefed up proposed provisions relating to circumventing intellectual property issues. These "should neither interfere with nor delay pricing and procedures for reimbursement of generic medicines in the member states," said Members of the European Parliament (MEPs). The parliament also saw the merit of cutting the timing, although it took a slightly more cautious approach, calling for a more leisurely 30-day deadline — something that was still within an acceptable timeframe for many in the generic industry. 

In fact, the EGA hailed the parliament's vote last February as a triumph, noting that "MEPs have given a positive impulse" to updating the rules (confusingly known as the "transparency directive"). It praised MEPs' support for the introduction of a shorter price and reimbursement approval time limit for generic medicines, and for banning unnecessary complications relating to intellectual property protection or to quality, safety, and bioequivalence. 

"European generic medicines manufacturers are pleased that the European Parliament has correctly tackled unjustified delays and market distortions for generic and biosimilar medicines," said Beata Stepniewska, EGA's acting director general at the time.  

So why has the anniversary slipped by without much remark? Why were the bold intentions only "almost agreed," and why was outline consensus reached only "within most" of the EU institutions? Because even though the Commission and the parliament were closely aligned, the three-legged stool of EU rules was missing one leg — the Council, where the 28 member states make their decisions. Without the national governments on board, this legislation could go nowhere. And national governments were not — and still are not — on board. 

Part of the resistance in the Council came from member states' concerns about being forced to work more quickly. Granting pricing and reimbursement status to generic products automatically or immediately where decisions have been made on the corresponding originator just hasn't caught on — Spain is one of only a handful of member states to have toyed with the idea. Most of the others have no desire to amend the rules so as to shorten the time limits for the pricing and reimbursement of generics. During the consultation process on the proposal, half of the national authorities and public health insurance bodies that responded took the view that the current time limit of 180 days should be maintained for generic medicines. They say that changes to their current procedures would entail a significant additional burden. As the Commission has laconically observed, "these positions indicate that a reduction of processing times for generic medicines is unlikely to happen across the EU at the sole initiative of member states." 

Part of the resistance comes from another direction, more political than technical. The member states just don't want the EU getting too close to their own privileges and rights in deciding on how they handle drug pricing and reimbursement — a reflection of long-standing (and in these more eurosceptic days, a frequently more pronounced) tension at the heart of all EU legislation. 

The Commission itself has remarked on the apparent paradox that some countries that already make decisions in 30 days or less for generics are still opposed to legislation on shorter timelines, for instance, Sweden and the UK. 

But the paradox is only apparent: both these countries have a strong streak of pragmatic independence, with no enthusiasm for (and indeed a palpable reluctance about) legislation for the sake of legislation. Although EGA's Stepniewska said a year ago that her organization "is looking forward to a swift follow-up of the legislative process and constructive dialogue with the institutions," she hasn't had it.  

To all intents and purposes, the bid to update the transparency directive is dead in the water, and all those pious expectations of change in the parliament or the Commission are no more than vain hopes. The initial proposal emerged during the Danish presidency of the EU — and that most famous Dane of them all, who was from Elsinore, might have had the transparency directive update in mind when he said, "Thus conscience doth make cowards of us all, and thus the native hue of resolution is sicklied o'er with the pale cast of thought. Enterprises of great pith and moment with this regard their currents turn awry, and lose the name of action." 

Instead, the action, such as it is, in relation to generics has moved away from European pricing rules to European competition rules, and in many respects away from European rules altogether, and back to national rules. The impact of EU competition rules has been seen in the fines imposed over recent months on companies found to have breached anti-trust law in pay-for-delay agreements to keep generics off the market. And the shift to national action on generics is graphically demonstrated by the more limited geographical scope of recent key events.  

In France, the authorities imposed a $20 million fine in December on Merck & Co. subsidiary Schering-Plough for attempting to block a rival generic version of its Subutex through systematic denigration; and Sanofi was levied a €50 million fine last May for similar behavior to protect its antiplatelet Plavix. At the same time, Sanofi is fighting a valiant rearguard campaign to limit the damage from the French government's determination to push through generic substitution and price cuts on high-consumption products such as acetaminophen — the active substance in Sanofi's top-selling Doliprane and Bristol-Myers Squibb's Dafalgan and Efferalgan.  

Meanwhile, in Germany the latest debate is on whether generics should be exempted from drug price controls — not European controls, but German controls. In Spain, the arguments center on the fact that half of the drugs sold in the country cost only $5 or less, while a new report in Italy argues that it is generics that are keeping the reimbursement bill in check — not in Europe, but in Italy. And, as they say in Europe, "ainsi de suite" — the same trend to a national focus in discussions of generics is visible across the member states. At the same time, the rhetoric of the EGA has moved away — as if in reluctant recognition of the inevitable — from urging faster pricing decisions to more general engagement in the debate about sustainable health systems.  

By January, Stepniewska's narrative had moved on to how the generic industry should "seize on opportunities in the current period of austerity to amend its way of thinking and push for significant changes to the regulatory environment." None of the changes she highlighted related to faster reimbursement decisions. As Hamlet himself commented, "The rest is silence. 

The plan to accelerate generic pricing and reimbursement has become another tragic European casualty.

Whatever Happened To Faster Reimbursement For Generics In Europe?

THE MONTH OF APRIL REPRESENTS THAT SEASONAL SPLIT BETWEEN SPRINGTIME AND THE LONG SHADOW OF A WINTER DEPARTING.

attention to a similar borderland, where business principles and practice converge in a mud field of contradictions: what industry thought leaders call an "unresolved policy debate." We prefer to call them dividing lines, three examples of which we bring to your attention as part of our feature coverage this month. What they show is, in our industry, there are always two sides—at least—to every question. 

 In our Executive Roundtable with four St. Joseph's University Business School alumni responsible for commercial operations, a recurring theme is being "customer centric." Beyond that basic agreement, however, there was a strong sense of uncertainty on how to cope with the sheer diversity of the audiences the industry now needs to serve. This diversity requires commercial teams to pursue costly, customized approaches to market outreach; many are using big data tools to appease one key party: the payer. But a few brave souls still insist the industry will lose its way unless the patient interest is put back at the center of the picture. Tension between these two pathways is palpable: while you can execute a contract with a payer for a quick, definable payoff, building an asset by meeting eye to eye with the patient, at ground level, is a project only for the long-term. The question is can you strive to do both, and serve two masters?   Market leadership in a future of non-obvious strategic choices may depend on it. 

Diversity in the "C-Suite:" A Dream Deferred? 

This month's cover feature is our annual take on the Healthcare Businesswomen's Association Women of the Year (WOTY) award, which now has been expanded to three winners in pace with pharma's effort to integrate to all segments of healthcare. Our story provides strong evidence that female leadership is a reputational asset; in an industry associated with the production of a public good, it is also good for business. Yet there is evidence, too, that women are still woefully underrepresented in the top echelons of pharma power —so where is that sense of urgency, to reach beyond the tired expression "as it has been, so shall it ever be?" 

The danger is, as a movement matures (HBA's recognition of female talent in the industry now spans 25 years), what was novel can become commonplace. More stimulus is needed, but the direction is wide open to debate. Is the movement promising too much in terms of a culture change? Or should it push harder on the more straightforward economic arguments for diversity in management? One of the most deflating justifications for gender equity I've heard came from Gloria Steinem herself, when she said "it's not that women in the workplace are more moral than men. They've just had less opportunity to act immorally." To move that workplace culture to a better place—maybe more moral, but certainly reflective of the new market demographics—requires that change be felt not just at the top of the food chain, but at the bottom too. That's a harder task, and a much bigger commitment—is the "c suite" ready? 

Who You Gonna Call? Not Pharma (Not Yet).

 Our third feature explores the efforts of Wikipedia, the world's largest online source of health information, to impose some discipline on the legacy it has made—the English language site logs an average 200,000 health visitors a month but only one percent of its content is vetted through external peer review. As the story attests, pressure is on to persuade big Pharma to participate directly in Wikipedia's efforts to improve its standards for completeness and accuracy. As usual, however, the industry must deal with the predictable issue of bias. In this case, the dividing line is drawn on the other side: some Wikipedians just want pharma in, while others want to attach a very big string—to force companies to disclose the results of all sponsored clinical trials, good and bad. Right now, industry seems comfortable deferring any action to the constraints imposed by promotional controls. But, given Wikipedia's vaunting popularity and clout with patients and providers alike, for how long can an industry position based on passing the buck to the regulator be sustained?  Stay tuned—this potentially rotten egg is still gestating. 

From the Editor

Three examples from Pharm Exec's coverage this month show that, in our industry, there are always two sides-at least-to every question.