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Pharmaceutical Executive Digital Edition - July 2012

Meet 2012's Emerging Pharma Leaders. Can these 15 global trend setters set the mark on their unique time in history—by doing better with less, making scarcity a virtue, while tapping new opportunities from science and technology to build competitive scale, globally, and across functions and markets?   

That's a tall order. And this year's Leaders are advancing to the "C-suite" during arguably the toughest times the industry has ever seen. Hurdles in the search for profits include the global debt crisis; a towering patent cliff, with over $50 billion in lost revenues this year alone; harder science and a more skeptical stance on drug approvals; and a continuing massive downsizing in sales forces as marketing trends digital. Yet each of these 15 men and women, scattered on three continents, have learned from challenges, overcome obstacles, built capable teams, retained their passion for the work they do—and stayed on course. 

spoke with them to find out what characteristics, skills, and lessons they've valued most along their journey—and whether it's through good listening skills, impeccable teamwork, or strategic leadership, each seems to have found his or her own North Star. 

As we look at these upcoming leaders who are still on their journey to success, 

 decided to have a conversation with one more leader—one who has reached his destination and stayed long enough to grow from a seedling into a solid Oak with deep roots. Jurek Gruhn is US President of the diabetes-focused drug and device company Novo Nordisk. Last month, the Danish-based company experienced its 40th consecutive quarter of double-digit growth. In April, it announced plans for a 15 percent expansion of its US workforce. Take a look at the staff downsizing, war of attrition M&As, R&D budget cuts, and dwindling pipelines of much of the industry and you can't help but ask, "What's their secret?" 

For starters, says Gruhn, a long history (89 years to date) and a focused specialization in one therapeutic market are key factors in Novo's success. "Approximately 80 percent of our efforts go into diabetes, specifically into therapeutic proteins within diabetes. We know left, right, and center, the needs of patients with diabetes," he says. "I know patient centricity sounds like a cliché and everyone is talking about it, but I've been with this company for 16 years, and the patient has always been at the center of all our activities—we know how to satisfy their needs, regardless of where we do business."  

It follows that the best way to understand the patient is to be involved in the care community. Says Gruhn, "volunteerism is a big focus for our employees, and something we definitely encourage. Our employees take part, in their own spare time—without any pressure from us—in many different activities associated with diabetes, such as camp programs and charity events. When you are this close to your customers, if tough times arise, then you know instinctively the reason you are with the company—you don't need to be told."  

The group dynamic of the Novo team is also critical, Gruhn told

 That dynamic is built on a commitment to diversity and an equal opportunity for access and to be heard. "I direct a team of only 11 people. We have four different nationalities, three women, and an age range from the 30s to the 60s. We value diversity," he says. "And the team is able to speak up—that's one of the key capabilities of any emerging leader, in my mind. We talk. We argue. We discuss. If people are able to fight for their opinion, argue professionally, and then come to a common conclusion and implement it as one team, then that team is going to be successful." The point is clear: the hoary bromides of the famous poem

—I am the master of my fate—is no match for the pure simplicity of mutual trust.   

Head of North American Human Resource Operations, Sanofi

Are there parallels between milk and medicine? To David Ford, a native New Zealander who now runs Sanofi's North America human resources operations but spent his early career working for his home country's Dairy Board, the answer is a qualified yes. Both industries are global, vertically integrated, customer oriented, closely regulated and—at least for most—an essential good. The big difference is that pharma earns its profits by saving lives. "What attracted me to this industry is that the metric of success is simple: bringing medical science forward to improve the state of health." 

What Ford may not have anticipated when he joined the former Sanofi-Synthelabo in 2002 after completing an MBA at INSEAD is the pace of industry consolidation. Since then, his company has merged with another global Big Pharma player, Aventis, and absorbed multiple smaller businesses. The new Sanofi is today the world's third largest drug company by revenue, with one of the most diversified asset portfolios.   

The transition to new business models has upended many of the old assumptions that talent and learning are fixed and finite. Market churn has created rich opportunities for those with transferable skills and an appetite for risk, but it has also exacted a human toll for those reared in a culture of predictable returns and lifetime employment. "The real challenge for the industry today is adjusting to an era where growth is not a given. My first years at Sanofi Synthelabo, as human resources director in the UK, coincided with the peak sales period of a breakthrough product, Plavix. My task then was to rally, recruit, and build, while today it's about rethinking our talent base and finding not more people but the right people."  

In 2005, Ford moved from the United Kingdom to join the senior management ranks of the merged Sanofi-Aventis, as human resources VP for the company's global pharmaceutical operations. It was a pivotal time as the merged company needed to consolidate and restructure its combined country operations. Here Ford learned the vital role that country managers play in a global business—if you can't execute well locally then the best corporate strategy is little more than a door stop.  

 In 2009, Ford was asked by new CEO Chris Viehbacher to serve as global project leader for "transforming talent." This was a signature issue for Viehbacher, linked to his strategy of creating a diversified enterprise with footprints in virtually all sectors of healthcare: drugs, innovative and non-branded; vaccines; OTC; and veterinary. To accomplish this goal, Viehbacher knew the company would require a different kind of leader, one that could collaborate across business lines, establish strong internal and external networks, and be open to different management cultures and points of view—all the while maintaining a keen focus on company priorities and executing for results.  

"I was responsible for developing a talent agenda to advance the company's vision around diversification, one where one business would not dominate the others," said Ford. "We redesigned our performance evaluation and reward structure to move away from command-and-control management and replaced it with training and incentives to promote collaboration, networking, and people development." Emphasis was placed on identifying promising managers from all functions and geographies and then supplementing their progress with assignments that took them out of their comfort zones and allowed for exposure to other business segments. One of Ford's achievements was the establishment of a China Talent Center to get out in front of the competition through closer liaison with all sources of local talent, giving Sanofi first dibs in attracting new staff to counter the impact of a high attrition rate, particularly on the detailing side. The approach is now being adapted in other emerging markets.  

Here in the United States, Ford is pursuing much the same goal, to complete the HR integration of three major recent acquisitions: the Merial animal health business; Chattem, a maker of OTCs; and, most recently, the biotechnology giant Genzyme. "Critical to the success of these acquisitions is looking at the talent base and to create a sense of excitement and opportunity. We need to move toward standardization and harmonization, while still having some flexibility among the constituent parts."   

What advice does Ford have for young pharma managers? He cites three attributes essential to progress. First is the willingness to take on change—there are no fixed rules; complexity and context is all. Second, distill that complexity into priorities understood by those who work with you. Third, be a good communicator. "Clarity of thought is a prize in every situation but especially when your mandate is global."  

Vice President, Sales and Marketing, Oral Oncolytics, Genentech

Rick Fair began his marketing career at PepsiCo, first as an analyst and then in corporate strategic planning. During the latter part of his tenure at PepsiCo, Fair's grandmother died. 

"She had a rash of medical issues, rheumatoid arthritis, Alzheimer's disease, cardiovascular disease. She was a bit of train wreck, medically," says Fair. The loss led to what Fair calls his "early mid-life crisis," and a reflection on his career and goals. "I didn't think I could spend the next 30 years selling snack chips and soft drinks, and I thought that maybe there was something I could do in business that would be more meaningful," says Fair. "My mother had been a nurse, and I had a great appreciation for the healthcare world, so I decided that I would try that out." 

After a search, Fair landed a job with J&J, where he bounced around several of J&J's operating companies in various managed care and marketing roles, before leaving to join Genentech in 2006. Since then, Fair has climbed upward, from director to senior director of sales and marketing, to his current position as vice president, sales and marketing, oral oncolytics.  

Much has been made about the gap between what marketers do in consumer package goods versus what they do (or don't do) in pharmaceutical marketing, in terms of engaging customers, but Fair says that's because there's a fundamental difference between a pill and a popsicle. "You're dealing, without being dramatic, in life or death when you're talking about drugs. You're not when you're talking about Doritos."  

In his current role, Fair leads the commercial organization for Genentech's oral oncolytics franchise, which includes four currently marketed products and several others in the pipeline. His responsibility is to launch and commercialize those products in the United States, leading a team of a couple hundred sales and marketing people, and working with cross-functional partners within the commercial organization.  

Roche acquired Genentech in 2009, and Fair says the merger and cultural integration has exceeded his expectations, and has also provided an important learning experience. Despite stylistic differences between the organizations, both are committed to science, ethical behavior with respect to patients, and investing for the long term, says Fair. The leadership lessons have come from dealing with the "normal human reaction to change," which required Fair to become "a student of how to lead through change." People cope with change at their own pace, and as a leader, "you have to help them along and encourage them to look to the past and say goodbye, and look toward the future, but you can't force that to happen immediately." 

Fair says he's learned that "you have to assume positive intent," and stay away from an "us versus them" mentality. "I have a phrase that I use with my team a lot: 'They is us.' In any sort of change, there's a real temptation to hunker down and say, 'We do it this way and they do it that way, and that's not good.' The collective 'we' need to figure out how we're going to move forward and do things in the future." 

Another skill Fair emphasizes with his team has to do with sustaining focus and alignment. In leading large groups, "it's easy for people to try and do many things and to love every new, good idea, and to explore lots of opportunities. All are well intentioned, but a lot of what we do is successful...maintaining focus and alignment on that front is a key challenge for me." 

Fair says he's attracted to leadership roles that come with an opportunity to help others develop and grow. Asked about the most important leadership skills of tomorrow, Fair says strategic and critical thinking skills are at the top of the list.  

"The industry, with the rate of change in the science, is very dynamic," says Fair. "Being able to think forward and think in terms of scenarios, and to plan, and to explore options and then be decisive in spite of all the ambiguity, is really tied to how great of a strategic and critical thinker you are."  

Senior Vice President, Strategy, Planning, and Operations, US Pharmaceuticals, GlaxoSmithKline

Eric Dube joined GSK in his late 20s, just after the merger with SmithKlineBeecham was announced, and has held seven "very different" roles during that time, providing him with the invaluable gift of perspective across business functions. He's currently senior vice president of strategy, planning, and operations for US pharmaceuticals—a big title for someone under 40—despite the fact that working in the pharmaceutical industry "was definitely not in my professional plans" early on. 

"I got my PhD [from Cornell University] and wanted to teach and do research as a college professor," says Dube. "That was really borne out of a strong desire for learning and teaching...I grew up with about five people in my family who are teachers." There are some natural overlaps between teaching and working in pharma, most important of which is the desire to have a hand in the march of progress: to make things better at the macro level. "I realized that much of what I enjoyed personally about teaching and learning and about helping society was also a mission of the pharmaceutical industry," says Dube.  

With an academic background in social and developmental psychology, which included the study of culture, gender, ethnicity, and "how we relate to one another," Dube is responsible for "the transformation agenda for our commercial model, as well as training and analytics operations, including call centers and incentive compensation for the field." This last piece—GSK's much discussed redesign of sales force incentive structures—represents "a major change," one that facilitates the "move from being a brand-centric industry to one that takes the time to understand the needs of our customers."			

Reporting to Deirdre Connelly, GSK's president of North America pharmaceuticals, Dube says Connelly values diversity, which fits with his belief in the importance of a strong internal corporate culture. From a personal perspective, Dube says he's learned two important things in the last few years. The first is the importance of listening skills, and the second is balancing humility with confidence. Collaboration is also critical. "I have said to my team that my job starts and ends with building a strong, value-based culture of accountability and collaboration, a culture of strong accountability," says Dube. "My team is broad and very easily moved into silos, so the value of understanding, collectively, what's going on in the organization and the marketplace has to come from collaboration...that's how we ensure that we're meeting society's expectations of us." 

Speaking of societal expectations, prior to his current role, Dube served as vice president, oncology, and was brought face-to-face with one of the biggest challenges for pharmaceutical companies: access and pricing. New cancer drugs are very expensive, making them unaffordable for some patients. "While leading GSK's US oncology organization, I was very pleased to have a team that worked on a new patient assistance program that removed an access barrier. For me, business improvement is about listening and removing barriers as a leader, and not just about becoming more lean and continuing to remove resources...it's about aligning your resources to where they can best deliver value to customers." 

In his spare time, Dube enjoys travelling and cooking, and in recent years, yoga. "It's taught me a lot about balance and being present wherever you are in the moment...I've learned a lot about leadership from yoga. Staying focused, being present, and frankly, breathing under times of stress."  

Elaborating on the crucial balance between humility and confidence, Dube says he's seen "a lot of individuals who are incredibly bright, but are so confident that they don't listen to the people that they're leading, or they don't listen to the signals in the marketplace, and they fail." Having the confidence to lead during uncertainty, and the humility to approach new roles and new situations with humility is a "really important combination" of skills, says Dube. 

Dube says his biggest concern for the industry going forward is that it won't "stay on top of the evolution that we see across our customers and across healthcare: understanding the needs of our customers, understanding the challenges around access to medicine, and making sure that our business model continues to evolve at the pace of the marketplace. When we don't do that, the level of trust diminishes very quickly." 

Divisional Vice President, Integrated Managed Care and Policy, Abbott Laboratories 

Lots of kids want to be professional baseball players when they grow up. Abbott's Jeff Haas wanted to be a trauma surgeon, but then his life took "a little bit of a turn," and he became a professional baseball player. Drafted by the Kansas City Royals in 1992, Haas' baseball career was short-lived, but that allowed him to get back into healthcare, which is where he wanted to be from the start. 

Going back to finish his degree after the major leagues, Haas landed a job during an Indiana University job fair, and headed to upstate New York as an Abbott sales rep. Since then, he's held a variety of sales and marketing roles during his 17 years at the company, culminating in his current position as divisional vice president, integrated managed care and policy.  

Features

Meet the rest of 2012's Emerging Pharma Leaders. Can these 15 global trend setters set the mark on their time in history?

Emerging Pharma Leaders 2012

While scientists and biomedical researchers at the recent meeting of the Association of Clinical Oncologists applauded encouraging data on dozens of break-through cancer therapies, analysts pondered strategies for convincing payers to cover the new life-saving medicines. More than 900 cancer drugs are under development, according to Pharmaceutical Research and Manufacturers of America, and the Food and Drug Administration anticipates some 20 submissions for new cancer medicines this year. Not all the reviewed products will make it to market, but those that do will have to demonstrate their value over comparable treatments to achieve market acceptance. Private health plans and payers are demanding more evidence from pharma marketers to support reimbursement for new and old therapies, while striving to reduce their pharmacy expenditures by driving generic prescribing and imposing high co-pays on patients. 

How and when pharma companies should develop comparative effectiveness information on new drugs was the focus of the annual meeting of the International Society for Pharmacoeconomics and Outcomes Research (ISPOR) in Washington last month. With $50,000 to $100,000 price tags on targeted therapies for cancer, rheumatoid arthritis, multiple sclerosis, and other critical diseases, payers are looking to limit prescribing to those patients most likely to benefit based on biomarkers and diagnostic tests. In addition to implementing step therapy, prior authorization, and tiered formularies to control drug outlays, payers seek outcomes studies, comparative effectiveness research (CER), and targeted clinical trial designs to document product value.  

Not surprisingly, there were dozens of posters at ISPOR analyzing the costs of alternative treatments for cancer patients, relevant healthcare expenditures, and the value of new oncology medicines in the United States and overseas. Health technology assessment (HTA) agencies emphasized risk-sharing and patient access schemes, and some experts acknowledged explicit end-of-life treatment criteria. There was great interest in how accountable care organizations (ACOs) specializing in oncology and other innovative delivery programs can offer treatment pathways and bundled payment methods to manage care and drug expenditures. 

So far, payers and insurers in the United States have been willing to cover costly new cancer therapies because the number is relatively small and many target small patient populations, explained Thomas Bramley, vice president of Xcenda, the consulting arm of AmerisourceBergen. But now plans are looking for more convincing cost-effectiveness data and budget impact models, along with companion diagnostics able to direct treatment to those patients most likely to respond. Drug "affordability" has gained currency, as payers realize that there are limits on patient acceptance of high co-pays. 

Marketers are more open to consultation and collaborating with payers and health plans to avoid launching new products that will be rejected in the market. Sean Tunis, president of the Center for Medical Technology Policy, described the Green Park Collaborative, which hopes to develop guidance on effective research designs to meet the needs of payers and HTA agencies, starting with an Alzheimer's disease pilot. Newell McElwee, head of outcomes research at Merck, agreed that industry is talking more to payers about what evidence they require for a positive reimbursement decision, adding that collaboration is preferable to obtaining 10 different research recommendations from 10 different payers.  

Yet, some analysts questioned whether all the budget impact analysis from pharma companies is useful in deciding reimbursement. There's skepticism about such calculations on both sides, and payers seem to prefer models for how patients do long-term on a treatment, noted Kathy Hughes, vice president of Avalere Health. Marketers feel that a budget analysis is necessary to gain market access, but recognize that its usefulness may be limited to certain types of drugs and therapeutic areas.  

Payers can offer helpful advice on designing clinical trials to produce useful CER—and sometimes to support a company's decision to kill a development program not likely to yield a marketable product. However, it's not clear whether marketers can discuss research methods and outcomes claims with payers prior to approval without violating off-label marketing restrictions. Pharma companies also are unsure of the rules for presenting outcomes information that touches on off-label uses to payers and formulary committees and have petitioned FDA for clarification.  

A perennial issue is whether FDA and other regulators can assist in bringing new drugs to market by encouraging the inclusion of outcomes assessments in pre-approval trials. The opening session at ISPOR addressed whether the current regulatory paradigm should be modified so that it's easier for sponsors to study patients with co-morbidities, to compare alternative therapies, and to assess outcomes relevant to patients in Phase III studies. Sean Tunis acknowledged that trials with active comparators are more expensive and take longer, and that many quality measures are not well validated. Former FDA commissioner Mark McClellan, now at the Brooking Institution, noted that rising costs and new healthcare delivery systems support CER, but that the legal standard for new drug approval remains safety and effectiveness, not comparative effectiveness. Trials can be modified to provide additional information, said FDA senior advisor Vicki Seyfert-Margolis, but FDA requires adequate and well-controlled studies to approve new drugs.

A goal for William Crown, president of UnitedHealthcare's OPTUMInsight Life Sciences and ISPOR president-elect, is to further refine CER methods so that the conclusions from observational studies are more reliable. "We need to raise the sophistication of the discourse surrounding randomization and observation," he says.  

Variations in results from randomized trials and observational studies were further explored at the annual CER symposium sponsored by the Agency for Healthcare Research and Quality. Analysts described the differences between efficacy and effectiveness studies for evaluating healthcare delivery systems, understanding responses of diverse populations and variable care settings, and comparing different treatment modalities and interventions.  

Assistance in improving the quality of CER may come from the new Methods Report from the Patient Center for Outcomes Research Institute. A preliminary draft, which is scheduled to be finalized in November, outlines 60 standards to guide researchers in assessing heterogeneity, handling missing data, accessing data networks, utilizing adaptive strategies, establishing data registries, and assessing diagnostic tests.  

Mark McClellan proposed at ISPOR that changes in healthcare delivery systems through ACOs and other models can help measure quality and costs to achieve savings and improve outcomes, as experienced with the Medicare Part D drug benefit. A recent report from the Kaiser Family Foundation (KFF) documents how government outlays for Part D have been about 30 percent lower than originally projected by the Congressional Budget Office, during a period when overall Medicare spending has skyrocketed. The savings arise from a number of factors, said analyst Jack Hoadley of Georgetown University at a KFF briefing: lower enrollment in Part D than expected, a general slowdown in total spending on prescription drugs, fewer new drugs coming to market, and, most notably, a huge rise in generic drug prescribing.  

Karen Ignagni, president of America's Health Insurance Plans, credited the savings to the ability of Part D plans to apply a range of medication management tools to drug utilization, including tiered formularies that encourage patients and prescribers to switch to generics. Even economist Marilyn Moon, a well-known advocate for consumer protection in healthcare, acknowledged that private plans have been able to use financial incentives to push beneficiaries into generics—something that would be hard for the federal government to do. 

But Moon noted that Part D plans have "a very good deal" because the doughnut hole structure relieves insurers from covering very high-cost patients. The program's reinsurance system, plus subsidies for seniors also on Medicaid, reduces the pressure on plans to manage spending on high-cost medicines. That may change, though, if the emergence of more pricey critical therapies raises overall costs for Part D and other public and private drug benefits. 

's Washington correspondent. She can be reached at 

Column

Comparative research documenting value and affordability is key to obtaining coverage for high-cost therapies. Jill Wechsler reports.

Who Will Pay for New Drugs?

PHARM EXEC'S 2012 ROSTER OF EMERGING LEADERS

—our sixth to date—is not only a way to recognize a few individuals who've made a difference in their organizations. It also serves as a barometer to track larger changes in the workplace: how work is done; who does it; where, and with what range of skills; and for what outcome or objective. With the support of 

 Editorial Advisory Board, we've selected 15 executives drawn from a range of mission-critical functions, varied geographies, and diverse gender and cultural characteristics. Together, they symbolize the sweeping changes industry is undergoing, from an era where growth was the assumed baseline for all management decisions to a future of lower margins and bitterly contested market share. 

Pfizer has captured these emerging facts of life in a startling new missive to its 103,000 employees: "do less with less." Apologies to the communications team, but we might suggest a more inspiring alternative, drawn from the life's work of German design guru Dieter Rams: "Weniger, aber besser"—Less, but better." Central to this idea is that which is spare and scarce will always reveal its essence—what is pure and true and fundamental. It follows that the freshest ideas can spring from austerity. There is nothing like a frayed business model to concentrate the mind.  

The 15 profiles compiled by our editorial team is reference in itself to the trends and values that will shape strategy in biopharmaceuticals for the remainder of the decade. Some of the more interesting insights:  

 As companies scale back, the response is not just to "do more with less." All agree that the change is strategic, not temporary, and relates squarely to the higher long-term risk profile of the business. The optimal response to the lean agenda is to contribute to strengthening the efficiency of business practice; sometimes this requires more resources, not less. Making trust, engagement, and loyalty programs really convincing to employees is another necessary leadership attribute of a lean organization, where the impact of a loss of any productive worker is magnified.  

Information is now borderless, posing a significant management challenge to stronger employee engagement.

 Rapid improvements in IT technologies are forcing leaders to be more transparent, requiring in turn a commitment to making information verifiable to employees and team members. Tomorrow's business leaders must be able to certify and validate reams of unsubstantiated information.  

The key emotional chord in today's pharma workplace is to convey a sense of urgency. 

Time and space for action are compressing due to the impact of improvements in technology, accessibility of information, the globalization of competition, and a changing demographic of the market base. Complacency is a trait associated with older forms of organization linked to hierarchical decision-making and a command and control leadership style, where the prudent response for anyone with leadership aspirations was to defer and deliberate. That old strategy remains an option—old habits die hard, particularly the bigger the organization is—but fewer of those raised in the Internet age of instant access to information laced with opinion are likely to embrace it. 

The talent pipeline is spouting in a different direction.

 Under previous generations, drug research and other good ideas germinated in "mature" markets, preferably the home office, with production and secondary services devolved to low-income countries. Looking forward, that pattern may well be reversed, which requires the ability to initiate, analyze, and execute around a global approach that can accommodate diverse cultures and perspectives on doing business. Do we know that some Asian languages don't have a definitive equivalent to the simple word "no"?   

The real driver of "human resources" is the power of the personal connection.

 The tendency in Big Pharma has been to do precisely the opposite, turning the HR function into an information processing service that takes place mainly online. Many of our leaders urged that management restore what is "human" about human resources, through a renewed emphasis on counseling and support for "soft" skills like leadership training, talent development, and mentoring.  

The best innovations are often a consequence of a workplace failure.

 A repeated theme in the interviews is that good organizations impose no sanctions on failure. Making mistakes is "part of the job," and what counts is a willingness to reach beyond a presumed outcome to try something new. Management will need that approach to navigate through changes that are becoming harder to account for in advance. 

From the Editor

Pharm Exec's 2012 roster of Emerging Leaders-our sixth to date-is not only a way to recognize a few individuals who've made a difference in their organizations. It also serves as a barometer to track larger changes in the workplace.

Less, But Better

Will PhRMA endorse a presidential candidate?

 It's not been our policy to endorse political parties. We support individual candidates who support our positions. We've been clear about what we think the important policies and legislation are: those that enable us to do the work of medical innovation, to make our products accessible and affordable for the people who need them, and that promote a balance between incentivizing new effective medicines and ensuring safety, which is very important.  

Do you have a wish list of changes to the health reform bill? 

 I think the major thrust of our activity...has been to call for the repeal of the Medicare spending advisory board, IPAB. As laudable as the objective of controlling costs might be, we believe it's a system that is just not going to work. It's not going to serve the interest of patients; it's certainly not going to accelerate progress in medical innovation. 

Polls show the American public looks at this question and says, well, price controls on drugs is a great idea.

 There is a tendency to look at price controls or controlling input cost as some sort of a solution. But every time we try that experiment it backfires; we've seen that at the state level. The mirror image of that, on the positive side, is Medicare Part D. This is a program where the discounts that the system reflects in cost savings are negotiated between third party payers and the pharmaceutical company; we compete to get on Humana's or UnitedHealth's Part D formularies. The estimated costs of Part D over this 10-year period has dropped by $40 billion because of this market-driven approach. 

What is the industry contribution to addressing the debt crisis in Europe?

We're paying a certain price already with challenges we have on receivables in certain countries, on arbitrary price cuts, and a more stringent application of cross-border therapeutic reference pricing. Germany has a new system in place for a little more than a year that we believe works against innovation by setting very stringent access controls for new medicines, in some cases comparing new medicines to very old and largely antiquated off-patent drugs. This does nothing to reward innovation. Despite that, given the chance, we can demonstrate that the new medicines that we're producing do add value, and save money in the long term. The evidence is there but it is not always reflected or accepted in the systems of health technology assessment adopted by many European countries, led by Germany and the United Kingdom.  The United Kingdom is rethinking its system, and the goal is to work diligently with the NHS to make sure the United Kingdom remains a place, as it has been, that rewards innovation.   

Is there one overriding action that could be done to fix the innovation problem?

There is no magic bullet. We've talked about IP protection: we should have longer data exclusivity guarantees and better enforcement of global standards in other countries. We need regulatory systems that are timely, consistent, predictable, and scientifically based. Opportunity for access and market-based pricing are key incentives as well. There are other things in the constellation: immigration reform is one. It's hard enough for us to hire the best scientists, who may happen to be foreign born and who went to US universities; but then we have to fight to keep them here. Why do we want them to go back to China and compete against us? Or the K-to-12 education system in this country; if it doesn't improve in science and math, it's going to undermine our competitiveness even further. There are primary elements and secondary elements, but I think patent data protection, regulation, market access, and market-based pricing are probably, from a policy domain, the areas that represent the biggest levers, where we will need to continue to do the most work. 

Eli Lilly CEO John Lechleiter on his agenda as incoming chairman of PhRMA, US healthcare reform, the euro crisis, and the small problem, of innovation.

John Lechleiter on PhRMA and Innovation

Mastery of the clinical trial process has become essential to positioning new therapies for leadership in an increasingly crowded—and lengthy—race to registration. Internal capabilities are a key differentiator against the competition, particularly as the cost, scope and complexity of the trials mandated by regulators continues to expand. The Tufts Center for the Study of Drug Development (TCSDD) looks periodically at best practices in the management of clinical trials; in cooperation with software vendor ClearTrial LLC, TCSDD recently completed a research study looking specifically at how Big Pharma plans and executes its budgets for individual trials. On May 15, 

 ClearTrial, and the Center convened a group of leading industry players to review the findings and explore the implications for improving what has become a strategic necessity—to get trials done quickly, across functions and geographies, with the right information required by regulators, and at a cost that accommodates the finely parsed P&L goals set by top management. 

There is an implicit perception that the development cycle in Big Pharma suffers from a lack of attention to operational excellence—the science may be golden, but the process is perfunctory. Is this accurate based on what you have observed from the review of how companies execute around trial budgets, especially as trials now account for a larger proportion of the cost to bring a compound from discovery to market? 

External forces bearing down on the industry—the patent cliff is one—require more attention to the management of resources. With so much uncertainty, the focus is on enhancing efficiencies around internal activities you can control. One red flag is the cost of development failure, which is also a surrogate for risk and predicting the successful performance of R&D investments. The numbers are sobering: roughly 70 cents of every dollar spent on R&D ends up as failures, many at the most costly late stages of the trial process. This figure is unacceptable now that more products face generic competition, pipelines are weak, and new drugs confront a slower take up in the market. An interesting statistic is that drugs coming on the market in the next two years are expected to generate only 40 percent of the revenues foregone due to loss of patent exclusivity. In addition, little progress has been made on speed to market; development cycle time on average is what it was in the early 1990s. 

Complexity is a key factor that creates unpredictability in the trial protocol and leads to higher costs. Our research with companies found that timelines were being slowed by a significant increase in change orders to the protocol, especially at late stages in the trial. On average, we calculated five change orders in Phase III. In contrast, site performance—defined as how well each site selected for a trial does in enrolling the right cohort of patients—is better than we expected; only 11 percent of sites in our survey failed to enroll any patients. The real problem is the time it takes to achieve the enrollment target. Most companies report it is now about double what was originally planned. When resources were flush, companies would simply engage more sites and absorb the costs. It is much harder to justify that ad hoc strategy as margins for existing medicines decline.  

At the same time that a harsh operating environment demands that companies do a better job at forecasting, budgeting, and planning, there is a trend toward outsourcing many critical functions. The result creates a disconnect: while management presses for more certainty and accuracy in meeting development goals, the resources needed to execute these goals are more dispersed and less subject to internal control. In this situation, how well you manage the trial budget makes the difference between success and failure.  

The conclusions from our review of the trial budgeting process are as follows. First, there is no common home for the budgeting function in the 31 companies we covered. Surprisingly, only a quarter of the companies located this task in finance or procurement. Most—more than a third—housed the function in clinical operations, leading to a high degree of decentralization; each therapy unit or even each trial might have its own in-house staff handling this task. In general, what you have is a large degree of fragmentation, leading to silo approaches.  

This is reflected in our second finding, which is a significant variation in budgeting tools and technologies. These ranged from reliance on sheer intuition and experience drawing from previous trials, and captured on simple spreadsheets, to the latest customized software. What was surprising is the poor integration of these tools across functions, within the same company, where the only practical way to share and interpret is through face-to-face meetings—which of course takes time. Lack of standardization and compatibility across functions is a big drain on productivity.  

One factor that may contribute to the confusion is the failure to incorporate budgetary issues into the development of the trial protocol. What tends to happen is the science drives the drafting, and only after that is completed do we turn to discussing how to budget the work. Clearly, the two need to be connected from the very start. 

Our research showed that while most companies acknowledge budgeting should be an integrated, forward-looking activity, few—less than one out of five—have any capability to track budgeting at each stage of the trial. We are talking to companies about this in more detail and a preliminary conclusion is that the emphasis is figuring how to upgrade and improve the process overall—right now there is no baseline to monitor budget performance. This also shows up in our findings on how companies determine a budget variance threshold for each trial, and whether this figure—usually it's 10 percent—is applicable in terms of adherence. We found the variance is subject to constant adjustment, which leads us to conclude, again, that if the system itself lacks sophistication, then the metrics around it are likely to be less than meaningful. Yet the need for accurate budget numbers is more vital than ever.  

What does the study say about why it is so hard to accurately account for expenditures, beyond these basic organizational factors? 

Two things come up here. One is the failure to build the right assumptions into the protocol design; requirements change and the protocol has to be redrawn or adjusted. The other relates to outsourcing activities and decision-making powers to CROs, who tend to get blamed for missed signals around the initial objectives, over-confidence that they can deliver what the trial sponsor wants, or deliberate underbidding to obtain the contract. Regardless of who is to blame, modifications to protocol are proliferating, raising the expense of trials, and ratcheting up the pressure from management to get more control over what is being spent. The growing regulatory requirement for Phase IV post-marketing studies poses a huge burden on companies because of their length, detailed safety profiles, and population size. Such studies have to be done right, from the start. 

Looking beyond the Tufts study, what do those of you representing companies confront in managing your own trial protocols? Are the study conclusions consistent with reality as you see it day-to-day? 

We are grappling with many of the issues highlighted in the research, particularly with managing changes to study budgets. My group is part of clinical operations while much of the budgeting for the company is handled through finance. Their perspective is relatively short term, whereas we often have to plan way forward; some clinical development plans have costs forecasted out to 2025. Our planning process is working toward a more centralized approach, with a better baseline built around hard, quantifiable assumptions. In addition, we are now part of the same unit responsible for the design and execution of study protocols, and the lead for each protocol also has accountability for the budget. This means in practice we will no longer encounter situations where our people worked with the trial physicians and agreed to actions without any idea of what the costs would be. In the latest planning cycle, we made significant strides by being able to present to senior management total program costs and a total budget for each study, from start-up to close out.  

The changes are very important due to the fact that Biogen Idec currently has multiple Phase III programs in progress, with only two major drugs presently on the market. The financial pressures on completing this trial work on time, and at an appropriate cost in line with regulatory requirements, are considerable. Our new CEO has instituted a change in which each therapeutic program lead reports directly to him and has P&L responsibility for that program. If there is a need to adjust the program budget against the operating plan, then an offset has to be found or it won't go through. Significantly, however, the trial budget itself remains a line responsibility. So to some degree we are still devolving accountability for trial costs. 

Hospira is a spin-off from Abbott Labs and our focus is on hospital products, including generic injectables. About three quarters of our revenues are in the United States, but we are seeking opportunities in other countries with particular emphasis on Asia and the emerging markets. Biosimilar products are part of our growth plan. Among other tasks, my role is to coordinate budgeting for two major Phase III programs focused on obtaining approval for a biologic equivalent to Amgen's Epogen. This is a high-stakes move for us. Overall we are earmarking upwards of $100 million for this project; $55 million this year alone, out of a total R&D budget of $300 million. Hospira is mainly a generic business and margins are very thin. Churning that revenue back into R&D represents a sacrifice today in the hopes of a buoyant future. 

My main concern right now is spending this money productively and keeping within the 10 percent budget variance that we adopted at the start of the trial process. With $100 million at stake it's a big deal when you exceed that variance. It may be counterintuitive but I also work to see that we don't underspend too. Spending too little means that you are not working toward the goal of getting a compound to the market as quickly as possible. As soon as a drug moves off patent, we want to be there waiting, ready to go. We have a fixed date; a real deadline when the market opens up. So I follow that spend and make sure we are spending all that we said we would in executing against plan.  

Like Biogen, we have made good progress in coordinating the tracking of our trial spend with a common software system. The challenge is working with our finance people to help them understand that a lot of trial costs involve seemingly unrelated activities that are not invoiced for long periods of time. Trials are now global, which magnifies the importance of good logistics, frequent communication, and sensitivity to cultural variations. If you get these right, you will save money. Hospira is taking a close look at whether our trials need to be global. Can we run a well-controlled trial here in the United States and another in one other region and just combine the data? The proposition that a definitive trial is a global trial is worth challenging, particularly because the complexity can outweigh the benefits of a broader enrollment pool and lower recruitment costs.  

 We are now managing against a five percent target for the overall budget variance. Due to the current nature of the industry, the scrutiny on the financial side has increased.  In order to spend the available budgets, teams need to become more accountable on what we are going to spend on our trials.  In order to improve efficient use of the R&D budgets, the teams are doing a monthly evaluation of actual spend and current plans against the previously submitted plans. This allows for a quarterly review with senior management to address where opportunities may have arisen or if additional funding is necessary. The teams are encouraged to pressure test their assumptions in order to minimize variance against the plans. This also allows for greater transparency on the assumptions and plans across the organization—the "no surprises" philosophy. It is building awareness and managing expectations. So if we know we have a change to the protocol on the way, we can anticipate early any impacts. For example, if more site monitoring visits are required we build that into the budget updates. Instead of a significant 20 percent variance that pops out at the end of the study you have a series of smaller ones that are more easily managed in a fiscal year perspective and don't end up surprising everyone, including senior management.  

If budgets have to be reviewed every month, how do you account for the different perspective and awareness levels of members of the cross-functional oversight teams? Do the monthly reviews lead to significant changes in activities or a frequent reallocation of resources? 

Our reviews are mainly done to help finance get a clear picture of where we are heading and to identify any possible red flags that might require a course correction.  

For us, the process is to build awareness and agreement in from the leadership before decisions are made.  This is critical when you have a cross-functional group that may carry individual assumptions based on the way each group operates.  

We address this by making our accounting activity-based so that all can understand where and how the spending takes place. So if we have to do 40 new monitoring site visits, we tell them what the cost is going to be for this activity and what bill they can expect for that next month.  

Please explain how trial performance around budget variances affects how your work is evaluated. Is it linked directly to your compensation? In other words, how does your company create an incentive to ensure these variance targets are met?  

 Adherence to the annual budget is included in the overall department budgets. Clinical operations teams and individuals are held to the goal and are expected to meet it. Performance is evaluated against that and to how much control your job gives you over meeting the target.  

We have to meet a certain profit and revenue target and the trial spending feeds into that. Failure to meet the thresholds ratchets all the way down through the organization.  

Our target is linked to the overall R&D budget performance.  Management acknowledges that you cannot run each study or program at the same threshold. It's the overall target that counts. The efforts we make around budget transparency and balancing between the different programs facilitates reaching that R&D goal.  

I want to ask Andy Grygiel how ClearTrial sees the budgeting environment for companies today. Are the views expressed so far in accordance with what you see from clients?

There is significant pressure on staying within those budget variances. We see considerable interest in our software tools that help companies prepare accurate—and defensible—trial budgets. Another priority is building platforms that integrate functions and allow for the optimal exchange of information—information that is accessible and understood. Success in budgeting is mostly about having a common vocabulary. Technology is advancing to make that happen, seamlessly.  

It is surprising, however, that few companies are seeking to apply this technology to understand the many marginal differences that occur through the full budget lifecycle, in terms of what was contracted for and what was actually delivered or spent.This can add up and the question should arise, if we performed these tweaks, what kind of additional savings or efficiencies could we expect? It's a question that's just not being asked.  

Do trial budgets figure in thinking at the top of the "c-suite." Wouldn't the typical CEO say getting to registration is what counts and if you have to spend more to get there, then the end justifies the means? 

Trial costs have advanced to the point that they can affect the revenues you expect to obtain once a product is commercialized. The NPV calculation matters and leaders are appropriately focused on that.  

The new reality is that trials are so long and expensive, just as more pressure is put on companies to deliver results in the short term. The CEO has to ensure a balance between the two. Like everything else, the clinical trial has to evidence value in supporting the path to commercialization, efficiently, and at lowest possible cost. In the days when there were blockbusters able to command multiple billions of dollars in sales, companies could overlook a 40 percent variance in trial budgeting. Today, margins are often razor thin so you don't wish to be saddled with a big overhang from the trial, especially as many of these trials are now Phase IV—post marketing.  

With the Tufts study now out, are there other areas where the Center can make a contribution around budget awareness? 

Scrutiny is needed around the complexity of the trial protocol. Industry is collecting massive amounts of data at considerable cost, and often little of it is actually used.  

The Center is about to publish a study that estimates the economic cost of unused protocol trial data. There is so much clutter in protocol designs today. Companies collect data that is not tied to the primary or secondary endpoint because it is assumed that regulators will want to have it. Or that adding a single procedure to the protocol might be useful sometime in the future. The point is the cost of doing all of these tertiary and exploratory procedures really adds up. 

What are the key organization and functional skills that are required to address many of the environmental issues we have discussed and keep pace with rapid changes in the trial process? Do you have the proper resources to excel? 

Coordination is a critical element in the trial manager's toolkit. Clinical operations, therapeutic programs, and finance all have to work together to build more efficiency into what has become a very complex process, with many moving parts. Getting the right information to the right people, at the right time is vital, and that information 

 include the financial implications of every decision that we make on a trial. What we see often in the long range planning around new compounds is a heavy focus on the science. And that is appropriate because if there is no scientific merit, why waste time and resources? Increasingly, however, the costs of development are such that true scientific merit may be unclear for an early stage asset, when you are putting a price tag on getting it to Phase III.  

I would add oversight capabilities to the armamentarium. We have a lot of people who are good at running trials but not so good at overseeing progress and certifying results. The latter cannot really be taught; it comes with experience. And, generally, the industry does not have enough of these people.  

How does the regulatory agency viewpoint on risk affect your mandate and the workload in financing good clinical trials? 

The FDA and also the EMA have lately been very busy, particularly in defining the relationship between risk and benefit. When the agencies act, it usually leads to higher costs to industry. This is because an action by the FDA with the goal of streamlining an activity actually tends to motivate companies to allocate more resources. The one area where this may not hold true is risk-based monitoring. The FDA and the EMA hope to see companies ease study monitor burden through a risk-based approach versus 100 percent source data verification. Given that CROs are the primary provider of monitoring services, with a growing percentage of relationships under preferred pricing arrangements, I expect to see CROs reduce their study monitor headcount in anticipation of risk-based approaches. This practice will boost CRO profitability, but it may ultimately reduce overall monitoring capacity.  

Data is often seen as the solution to efficiency deficits and escalating costs. Is more and better data a prerequisite for accurate planning—if so, where are the gaps? Has technology kept pace with the move toward fully integrated operations? 

Industry collects enormous amounts of data, but much of it is useless. The truth is you cannot manage what you are not measuring correctly. What industry needs is to be much better at articulating a standard set of quality-based metrics—metrics that provide insights. The Metrics Champion Consortium is one such effort underway to do that.  

There is a challenge in the understanding across industry about financial metrics that we can use to track performance in the trials space. We are very good at data built around development cycle times and enrollments and site monitoring. In those cases there is a baseline understanding on definitions and terminology on which to measure.  On the budgeting side, there is less consensus on how comparable metrics would be across companies or what you are measuring against.  

 We are working toward defining a standard for baseline that can be used to evaluate variances in a trial budget.  

I wonder whether any such metric is possible. These trials span different therapeutic areas. They are global, with multiple sites; the metric in Norway just can't be the same as in the United States. Our efforts are focused on developing only a few and to apply them only to the present tense.  

Information is abundant and the tools to make sense of it are there. Our challenge as a vendor is finding the right people in the organization who know what they want and are committed to overcoming the preferences that colleagues may have just because it's comfortable for them. What we look for is good organizational alignment as the starting point for creating systems that provide better metrics.  

For Takeda, the issue is not only the standardization of metrics.  It's also finding processes that allow for flexibility and integration in how all the data can be used and analyzed. We want to be able to tie our systems to something that can be measured consistently and help create future process improvements. There is a need for tools that talk to each other across the functions; both operational and financial. 

Mastery of the clinical trial process has become essential to positioning new therapies for leadership in an increasingly crowded-and lengthy-race to registration.

Today's Mission Critical: Making Sense of Spending on Clinical Trials

To help celebrate the 20th anniversary of its award winning Healthcare Marketing MBA program, St. Joseph's University asked 

 to convene a panel of nine top graduates working in the industry from the past two decades. Convene we did: our May 14 discussion summarized below highlights five themes that tomorrow's managers will need to address if the industry is to prevail in a world where bottled water commands a premium price while essential medicines are the last course in a beggars banquet. 

Photos: Melissa Kelly/Saint Joseph's University 			

 Gathered here today is a diverse panel of business school alumni who are actively engaged in the day-to-day tasks of turning a scientific premise into products that pack punch—with payers, providers, and patients. We also have two distinguished academics with acute powers of observation on how these doers actually "do it." Let's start with a perspective from the latter. What are the three or four issues that young managers must tackle to succeed in Big Pharma today? 

Professor Bill Trombetta, St. Joseph's University Business School: 

 The fundamental issue is to know your customer. It's the prerequisite for securing competitive advantage in a complex and increasingly crowded marketplace. Everyone talks about a new business model, but defining what that is—or whether any single model should suffice—remains elusive. The consensus, however, is that business practices must bend to the reality that after 30 years where blockbuster, small molecule drugs suitable for big patient populations kept falling from the sky, the good times are over. So how do you adjust to accommodate investor expectations for continued high performance?  

You can't start that discussion until you circle back to the core, which is the customer. The industry has never spent much time examining the customer; because the health business is a public good, pharma firms treat the customer as a given. That's a huge mistake because the customer base is changing. The industry is far from the ideal relationship as was once described between Wendy's fast food restaurants and Coca Cola: without its supply of Coke, Wendy's simply could not compete. Clearly, Coca Cola was doing something for the Wendy's identity beyond supplying soda syrup. That is what Big Pharma has to do: identify that secret syrup that makes the customer relationship essential and symbiotic, virtually impossible to break.  

Management is also learning from other industries that successful innovation often has more to do with process improvements rather than the product itself. Toyota, it can be said, has reaped enormous profits not from the flash of its cars but from the relentless efficiency of its global supply chain. Another example is Sysco, a restaurant service company that sells exciting things like canned hams. It set up a free business consulting unit to help its customers run their own kitchens. The motive was simple: If Sysco could help improve their customers business, then that would carry over to boost its own prospects, not to mention making it just a bit harder for competitors to elbow their way into the relationship.  

These isolated examples prove the rule about the importance of thinking beyond the pill. When 

a few years ago completed a major world survey of the most innovative companies, the top ranks were filled with companies who executed brilliantly around a modest platform, such as Ikea and Walmart, whose new idea was to make consumption of consumer durables more accessible to the masses. Interestingly, despite being host and employer for dozens of Nobel Prize winners, not a single pharma company made the list.  

Finally, health reform, not just in the United States but throughout the world, will have enormous impact on how the industry wins—and keeps—that customer. The new German reform legislation, AMNOG, has an important provision that effectively encourages drug firms to seek out ways to generate revenue with health services that "surround" the pill. Here in the United States, the March 2010 health overhaul raises a raft of strategic questions. What happens when the physician becomes just an employee of a networked accountable care organization? If sales reps have less chance now of seeing a physician, what will it be like when United Health Care completes its transition beyond third party insurer to full-service provider, and reaches the target of owning 1,000 group oncology practices that provide care directly to patients? Or when physicians in those practices don't set their own wages but have to bargain collectively for an annual cost of living increase?  

We are not talking about bottled water here. But think about it. Someone has persuaded millions of Americans to fork over $2 on average for an unadorned bottle of water, yet millions more people will balk at taking the same $2 from their pocket for one of your research-intensive pills. Reputation—as exemplified by the treatment of customers—must have something to do with this. Former Lilly CEO Sidney Taurel once noted that "while investors and shareholders love us, there are two groups that don't—physicians and the patient. And the reason for that is they see us as nothing more than pill pushers." That perception has to change, if the industry is to justify its margins going forward.  

For those of you on the business side of pharma, are there other issues that shape the way you approach your work? 

 A number of environmental factors and healthcare market drivers are converging to make this a dynamic—and challenging—time for the pharmaceutical industry. First, healthcare costs in the United States are already at an unsustainable level and are projected to continue rising. We will also experience a significant increase in the number of patients entering the healthcare system who previously did not have insurance coverage. Second, our R&D efforts have been increasingly challenged to discover new innovative medicines for unmet needs while a significant number of branded medicines continue to lose their patents. Lastly, we are seeing the majority of funding and purchasing power shift to the public sector. This is reflected by the US healthcare marketplace demanding a higher quality of care, lower costs, and improved health outcomes. This is having a major impact on how we approach providers, payers, and patients. It necessitates a holistic approach based on providing a range of services beyond the pill—one which depends on knowing our customer's needs much better than in the past and being able to deliver value based on those needs.  

Charles Collins, Engaged Managed Markets: 

 Another critical trend is the extreme price sensitivity of the drug market today. I disagree that the perception of the industry as a "pill pusher" is somehow our fault. Most customers just want us to drop prices or to give them more bundled options in limiting their pharmacotherapy cost exposures. Add-on services don't enter into the equation; there is little understanding that we might actually want patients to get well. To counter that impression, we have to do a better job at positioning around a business platform geared to prevention and evidence-based outcomes.  

 Size and scale remain important, but abandonment of the arms race has created more opportunity for the niche player unable to compete with the big companies and their enormous promotion budgets.  

 One issue today's manager has to address is the impact of digital media on promotion. Brand equity in the digital world is an unending, 24/7 cycle, not the "put it up/take it down" mentality of print, where the battle for market exposure was conducted like a campaign, with a beginning and an end. Social media has also transformed messaging into conversation, not a diktat, and on that score it forces you to differentiate a brand against the competition on something larger than its safety and efficacy.  

Are there special issues that confront the smaller players in the industry? 

Christopher Jarmuz, Eclipse Pharmaceuticals: 

It is hard for small companies to go it alone. "Venture capital" is an oxymoron for biotech start-ups because there is less and less desire to venture when there is so much risk and no predictable ROI. Finding capital to expand is not easy, while up-front costs continue to mount. Legal and regulatory requirements are the same regardless of whether a company is small or large. Compliance is a heavier burden today than it was only five years ago. A small start-up cannot push these obligations under a rug; they must be financed and accounted for. Moreover, given these challenges, smaller companies will need to consider risk mitigation strategies that include "virtual commercial models" when it comes to the deployment of sales and marketing as well as such areas as medical, legal, regulatory, and other front office operations. 

Joseph Truitt, Achillion Pharmaceuticals: 

 Success for a smaller company requires a singular focus on products that fill an unmet medical need. When you have that, things tend to fall together. Investors are more interested, which is critical because access to capital is a precondition for growth. Physicians and patients align with your interests because the consequence of failure is serious. Regulators will provide the feedback to ensure your application is fairly reviewed. Achillion is presently committed to one disease: hepatitis C, a global condition for which there is no available cure. We have carved ourselves a niche, enlisted the right stakeholders, created a dedicated team of scientists and developed a compelling story. We are small enough to be flexible. We are able to take a molecule from lab synthesis to test in patients in 11 months. That is less likely to happen in Big Pharma because, in my view, process tends to discourage timely execution.  

Of course, scale and resources are important. It is common wisdom today that branding and value metrics must begin at the pre-clinical stage. And those metrics have to be built around a global platform, which requires deep knowledge of issues like pricing considerations in emerging markets, or identifying the IP and the generic space for competition. At Achillion, there are only two of us that comprise the commercial development, but we work each day to further the interests of the company to patients, investors, and fellow employees.  

Is Big Pharma getting better at partnering? Is the burden and risk of commercialization being adequately shared? 

 All the big companies recognize the potential in a business relationship with smaller companies that have niche expertise in particular areas of science. The challenge remains keeping the contacts on keel, because the big players tend to move people around too much. When I hear that a deal is under "strategic review," I interpret that as "see you in six months." There is no malice; it's just that the process gets in the way of action.  

 This industry no longer has the luxury of building castles internally. My current employer, Lundbeck, has excellent science and a specialty focus on developing innovative medicines in the challenging field of CNS. However, due to the high development costs required to commercialize these therapies we cannot accomplish this alone; we have no choice but to partner with companies with a bigger global footprint. I also spent years at Hospira and at Merck, and both are having to radically adjust their business models: Hospira, a generics company, has concluded it cannot survive on a diet of ANDAs and injectables alone and is shifting more to devices and biosimilars; Merck has frankly been humbled to the point where it had to abandon its fortress-like stance which said "if we can't invent it here, we don't want it." It is streamlining its R&D bureaucracy and working hard to network as a "partner of choice."  

 What we should expect to see are more models like the deal a few years ago between Pfizer and GSK to consolidate their HIV franchises in a spin-off company, ViV. It was a way to get out from under a burden where neither company could maintain the relentless focus necessary to succeed in HIV.  

 Partnering is not just working with outside contacts. Internal partnering across functions is just as important, and actually the connections can be more elusive. We have all heard about scientists who have trouble working with the marketers, but there is also a lack of collaboration among scientists across the industry. I fear that bad science is going to be repeated because, among other things, drug developers are still holding IP pretty close to the vest, preventing others from learning from what has failed.  

 A key driver for the realignment in the business model is the insistence of payers and providers that medicines evidence real value. There is an important experiment under way in the United Kingdom whereby the government is seeking to clarify the meaning of "value," as a construct that combines two factors: (1) filling an unmet medical need; and (2) advancing the science in its respective therapeutic class. Is this effort to define value a good thing or bad?  

 It is an appropriate effort if the patient interest is at the center of the decision making process. If austerity is the primary motivation, then it will discourage innovation. We as an industry must recognize that everyone in the decision chain wants the most relevant and specific information, more than what has been provided in the past. Industry and payers are seeking to define the terms of engagement around a medicine's value much earlier in the R&D process. Pharmas must have an informed understanding of what a payer is willing to pay for a medicine, what outcomes they expect, and what relevant comparators they want to see in our study trials. 

 The push to prove value is not entirely negative. It exists as a source of discipline—a Darwinian approach. New ideas can spring from austerity. For example, is there a better way to reach physicians when market forces and common sense can no longer accommodate a huge sales force? That question is shaping a lot of the interest in mobile apps, social media, and other alternative non-personal promotional methods.  

 Payer carping about value is forcing drug companies to confront many practices that were condoned when times were flush. A good example is the attention now being paid to low rates of patient compliance with medicines. It's an enormous source of waste—I refer to it as running the air conditioner with the windows open. Yet I rarely see it built into the revenue and return projections that determine where a company puts its resources.  

 A larger point is that our models and forecasting tools still rely on assumptions drawn from past experience. We talk about health outcomes being our focus yet our models are built around traditional financial metrics that cater to the venture capital community.  

 I think that is changing, at least in the big companies. We can't build a value proposition solely on the basis of achieving high margins. Society is expecting a lot more from us.  

Professor George Sillup, St. Joseph's Business School: 

 Evidence is good but your customers are going to want it in ways that are hard to deliver—or around metrics that will tend to diminish the gloss. I know this keeps many CEOs in the industry up at night, especially as we move closer to a day when the FDA will start looking at cost effectiveness as well as clinical safety and efficacy. It's not here yet but some of us think it's coming. When I worked at Roche I produced a large number of economic studies on products. Payers were inherently skeptical about using them to make formulary decisions, asking if they could reproduce the study with their own data, or if we could explain how to translate our randomized data against placebo—a perfect depiction of illness—into what happens under routine clinical practice. Presenting evidence that meets the demand of the payer for certainty at low cost is going to be a challenge.  

 Ultimately wellness is where the value sits in healthcare. This is why industry has to think beyond the pill and contribute with services that position us as integral to promoting good behavior throughout the system, not just the 10 percent we represent of total spending. Diabetes is a good example. Although we have the pharmacotherapy and the primary care intervenors, no one is connecting the dots back to the patient. Couldn't our sales reps do this? It's worth thinking about.  

 It's true that value is a function of good scientific information that physicians and patients can act on. But there is a disconnect, because the industry is increasingly handcuffed and muzzled in terms of just what it can say. Right now the lawyers are running the show to minimize risk. Marketers' promotional options are being limited due to REMs and the Sunshine Act requirements. And there is a lot of push back from regulators, professional advocates, and the public as to what value a therapy is bringing to patients and the healthcare system.  

Can't the service model evidence better outcomes simply by example? Isn't the better metric a satisfied customer who likes to work with you?

 A good distribution partner can perform miracles in the relationship with payers. You need a partner who can monitor the whole transaction with the patient. This by itself tends to foster positive outcomes because it enhances the patient experience. We've worked with a number of big distributors who provided "hub services" that track the contact with the patient from the initial visit to a physician and the prescription. They coordinate specialty pharmacy outreach to make sure the patient adheres to therapy. Although the service is expensive and reduces our margins, it is worthwhile because the payers are happy and we raised our positive profile with patients. We demonstrated improved outcomes—increasing the volume of scrip as patients stay on therapy longer.  

 Having patients advocate for you is priceless. They like to be engaged and educated—and a compliant patient is a customer for life. It matters little for profitability in the long run that margins might be slightly lower. These programs are really about protecting and differentiating the brand while improving patient outcomes.  

Is US health reform—the Affordable Care Act approved by Congress in March 2010—a real game changer in how the industry grapples with the issues of delivery and value we have been discussing so far? 

 I don't see it as a revolution. The law impacts the commercial insurance model, not how healthcare is delivered. We will see a potentially large increase in the insured population.  

 Reform has exposed the large excess capacity in the health system and hence there is a rush to consolidate to become more competitive and efficient. In addition, to better manage risk and bring more value to patients, there will be acceleration in the development of Integrated Delivery Networks or more comprehensive systems of care.  

 More people in the system means stretched budgets and rising outlays for care. The response over time is likely to be a transition to the Veterans Administration [VA] procurement model: send in your bids and the winner takes all. Of course, this will have an adverse impact on margins. So one of the scenarios we are looking at is the cash market for medicines, where you dilute the impact of government reimbursement by asking some patients to pay most or all of the cost of a new drug, out of pocket. This is the case in China. There is a choice between listing on the essential drug formulary or taking your chances on patients with the means to pay on the cash market—culturally that is still acceptable in China, but here it may be different. Nevertheless, there is a complementary trend toward "concierge medicine," where physicians elect to limit the number of patients they see in return for charging rates higher than provided through group insurance plans. It's something that at least has to be considered.  

 It's rash to be complacent about anything related to reform. The scenarios are endless because the legislation emerged from a very partisan political process, which may affect how the Supreme Court rules on the constitutionality question. And we still have a disenfranchised healthcare system. I was a stone's throw from the White House where I was witness to any number of homeless people, all smoking cigarettes. Their problems are not being addressed.  

 Putting aside the politics of reform, we know that half of the spending on Medicare and Medicaid is for chronic conditions related to obesity. This is the biggest unmet medical need and it cannot be resolved solely by administering a drug.  

Discussion so far has reinforced the importance of the US market in providing the subsidy necessary to maintain the momentum of discovery and innovation. What about the rest of the world? Are the emerging markets likely to provide a recourse against declining margins in the mature countries, including the United States?  

In a wake up call to this year's Emerging Leaders a group of St. Joseph's Business School Health Management alumni say time has no limit on surprises-change for pharma is here and its good.

The Learning Curve

At its core, pharmaceutical marketing is   about conversations. Dynamic, persuasive conversations between companies and   healthcare professionals, their patients, and other stakeholders that have   become critical to today's process of marketing a pharmaceutical product and   meeting a patient's needs. 

Patients had illnesses and diseases. Pharmaceutical   companies developed compounds that helped healthcare professionals treat those   diseases. They would tell physicians about their new compounds through   conversations with sales representatives, advertising in medical journals, and   medical meetings. The physicians wrote prescriptions for those compounds, and   their patients did what they were told.

At its core, pharma marketing is about conversations. Dynamic, persuasive conversations between companies and healthcare stakeholders. But one time it was simple; now it's not, writes Al Topin.

Pharmaceutical Executive-07-01-2012