When I was a kid, I remember reading magazine articles that set out to determine the worth of the human body-not its personal value, or its ability to produce valuable labor, but just the market value of the chemicals that composed it. The figure I remember hearing was $1.98. Pocket change for the crown of creation.	

The editors of Wired magazine recently set out to re-create that article. Writer Patrick Di Justo tracked down the the market value of more than 50 bits, pieces, and components of the human body and calculated their market value. He cheated a bit, of course, first by assuming that 100 percent of the substances in question could be recovered from the body, and second, by not considering the practicality or cost of extracting them. Fair enough: Most of us weren't planning to sell out just yet anyhow.	

The results? Well, on the level of basic chemical components, we still aren't worth much. Your body contains $7.12 worth of phosphorous, $5.95 worth of potassium, and about four bucks worth of a dozen other substances for a total of $17.18. 	

But what if we don't break it all the way down? What if we look at the market value of the organs and complex molecules that make up the body? Well, Di Justo calculates that your lungs are worth $58,200 each, that your heart will fetch $57,000, and your kidneys are good for another $91,400. But even more valuable than organs are the body's fluids, tissues, and proteins. Your liver has a market value of $54,100, but it's also the source of a bit more than 22 grams of transferrin, which the body uses to process iron, at $18,900 per gram, or a total of $419,920.20, or more than seven times the value of the organ itself. Your DNA, Di Justo says, will fetch more than $9 million, while your bone marrow, your most valuable possession, is worth $23 million all by itself.	

Your total market value: $45,618,575.82. That's a big improvement on a buck ninety-eight. I have to say that it gives me an odd feeling of satisfaction to know that I walk around in a sort of mobile bioproduction facility that's turning out such a splendid array of products, even though I don't foresee cashing in on them. But, truth be told, I think I'll be happier when the value of my body crashes like the stock of a bad dot-com.	

It will, of course. And you are the ones who will make it happen. Business focuses so intently on building value that we tend to forget that one of its greatest services in the world is to destroy value by making rare things common and difficult things easy. A watch that kept accurate time was once the prize of a king; now they're ten bucks from a street corner vendor. The computer that used to cost tens of millions and fill a building now operates a talking doll for $20. With luck, the substances that give $46 million to the value of my physical being will eventually-like hydrocortisone ($5.75 for a body's worth) or insulin ($23.52)-be cheap and commonplace. And how will we feel? Like a million bucks? No, like a buck ninety-eight. What could be better?	

Articles

From the Editor

When I was a kid, I remember reading magazine articles that set out to determine the worth of the human body-not its personal value, or its ability to produce valuable labor, but just the market value of the chemicals that composed it. The figure I remember hearing was $1.98. Pocket change for the crown of creation.

The $46 Million Man

Before Botox became a popular beauty treatment, Allergan was just a small ophthalmic business that made prescription eye therapies and contact lens care products. But during a decade of off-label use-mostly in Hollywood as a quick fix for frown lines-Botox's (botulinum toxin type A) sales grew and slowly transformed the company's focus and future. Last year, FDA approved the product for cosmetic purposes, opening the door to consumer advertising, and its sales jumped 39 percent from the first quarter 2002 to the first quarter 2003. 	

But CEO David Pyott is quick to point out that Allergan is much more than a one-product cosmetic company. "Sixty percent of the Botox business is, in fact, therapeutic," he says. "And last year, Botox was only a third of our total sales." With a projected annual growth rate of about 23 percent during the next five years, a full pipeline, and a streamlined new focus, Allergan's "future's so bright, you gotta wear shades," as the Timbuk3 song says. (See "Analysts' View," page 34.)	

The company's best strategic move-licensing botulinum toxin type A in the late 1980s-was reluctantly made. Alan Scott, an ophthalmologist, had discovered that diluted doses of botulinum toxin were effective in treating eye spasms and founded a small company called Oculinum. Scott obtained an FDA investigational new drug approval for the neuromodulator but needed a partner to gain marketing approval. So he asked Allergan to take on its development. Company leaders had minimal interest in the project, but two of its scientists saw possibilities and convinced them to run clinical trials. Allergan earned approval to treat blepharospasm (uncontrollable blinking) and strabismus (crossed eyes) and took the toxin to market in 1989 under the name Oculinum.  	

Around the same time, according to folklore, a Canadian ophthalmologist mentioned to her husband, a dermatologist, that her patients' forehead wrinkles faded away after she injected the product around their eyes. Excited by the possibilities, together they experimented on a nurse in their joint practice. The results were impressive. The couple then shared their discovery with other doctors, some of whom were located in Hollywood, and the off-label cosmetic use mushroomed. 	

Meanwhile, Allergan bought Scott's company, renamed the product Botox, and gained approval in 11 countries by 1992. But the company didn't start clinical trials for the cosmetic indication until 1997. Its leaders knew they needed to proceed carefully with FDA, and they wanted to use data from independent studies to support their application. In 2002, Botox Cosmetic was approved in the United States to treat glabellar lines, commonly known as frown lines. It is now marketed in 20 other countries for that use, including France, which okayed it this year with the brand name Vistabel. France will act as the member reference state for the European Union, and more approvals are likely to follow. 	

Over the years, the company gained global approval for the product for various conditions-eye muscle disorders, cervical dystonia, and hyperhidrosis-and now sells Botox in more than 70 countries. In 2002, the product's sales hit $440 million, a 40 percent increase from 2001. (See "Botox Bounty." ) But that's just the beginning. Pyott says, "It's no longer if, but when Botox will be more than $1 billion."		

But when he joined Allergan in January 1998 after a long career at Novartis, the Botox clinical trials had just begun, and the company had been through a rough few years of losing patent protection on several ophthalmic products. He says, "The big assumption of the late '80s, was that generics would never come to ophthalmic pharmaceuticals because the category was too small. Bad, bad assumption." So the board of directors brought in Pyott to make some changes. He was only the third person to lead the company, which at that time had been around for nearly 50 years.	

And he'd been hired to cut expenses, so employees were uneasy, especially when he started closing manufacturing plants. "I had worked in six countries in the last 20 years and whether I was talking to Spaniards or Germans or Americans, I'd say, 'Sorry guys, I'm Scottish, and we all know what that means.' So when I talked about saving money, it was taken pretty seriously." 	

But more important issues arose first. "When I came in, there was absolutely no clarity around the strategy at all," he says. "When I asked my senior group, 'Where are we going?' I got four different answers. So then I reversed the order of what we were going to do. Strategy came first, then we went after the overhead second." 	

One of the main concerns to emerge from those strategy sessions was the disparity between the company's business and its device unit. "The pharma business was growing about 20 percent a year," Pyott explains. "And the device end of the business was growing somewhere between zero and one percent. So it was like having a catamaran with two outboards-one churning out 20 knots and one doing only one." 				

On closer examination, the executive team came to realize that everything about the two businesses was different. That included: 	

gross margins-80 percent of sales for pharma, devices only 60 percent

R&D-much more intense and expensive for pharma

product lifecycle-seven to ten years for pharma; two to three for devices only

So they decided to spin off the device business into an independent company that they have no stake in. "What I learned here and at Novartis is that a well run pharma company will kill everything else in sight, " Pyott says. (See "David Pyott, Up Close.")	

In reality, the spin-off set the smaller business free. Since its birth in 2002, Advanced Medical Optics' growth has gone from zero to about 4 percent. "We were constraining those businesses quite badly, and I had to say, "Hey guys, 	

I need 20 percent earnings per share growth out of you. Otherwise, I'm starving the pharma business to feed a lower opportunity business on your side.' Now that they are independent, they can work some deals that I couldn't have dared to look at, because they are focused on their industry with their set of operating metrics."	

The transition, which he says was executed with "military" precision, went smoothly for both employees and customers. Pyott says the few staff members who lost their jobs later thanked him and that "the customers really perceive the benefits of being serviced by two dedicated suppliers."	

Free to focus on pharmaceutical R&D, Allergan has a pipeline stuffed with projects.  (See "The Next Wave," page 36.) Many of them involve new indications for the Botox neuromodulator, which seems to have virtually unlimited possibilities, especially for relaxing spastic muscles. Pyott says, "I saw an article in Scrip magazine a couple of years ago that said there were more than 90 potential applications for Botox. It's a temporary relaxing of the muscle, and the body is full of muscle."		

The company's lead project is an indication for hyperhidrosis, a condition commonly known as excessive sweating that affects between 500,000 and two million people in the United States alone. Approved in Europe and Canada for that indication last year and already used off-label elsewhere, Allergan hopes to file an NDA (new drug application) for it in the United States this year. 	

In this case, the toxin goes from the muscles into the nerve endings, where it stops neurotransmitters from activating sweat glands. To be effective, the treatment requires 20 or more site-specific injections, typically in the palms, feet, or armpits. Pyott admits injections in those areas can be more painful than cosmetic injections in the face, but the hyperhidrosis treatment also can last for up to 12 months compared with four months for other conditions. 		

Another major indication sought by the company is for migraines-a market estimated at around $2 billion-for which it currently has more than 1,000 patients enrolled in Phase II trials. The project's evolution sprang from the Beverly Hills crowd as well. Pyott says, "Patients kept coming back and saying, 'You know, doc, not only did you make my wrinkles go away, you made my migraines go away, too. What are you doing?'" The question remains unanswered. He admits, "How Botox works to treat an acute episodic migraine…We still don't know for certain." 	

What Allergan researchers do claim to know for sure is that the product is safe. According to Pyott, regulatory agencies' first reaction is often, "'My God, it's a toxin."  But he says, "We have more than 14 years of safety history here. The worse thing that can happen is excessive weakening of a muscle. But it comes back." That's the nature of Botox; it's a temporary treatment that lasts three to four months. Therefore, side effects that may occur are only temporary. The product is also local to the point of injection, so there are no systemic reactions.	

But excessive sweating and headaches are just the tip of the treatment iceberg. According to an article in the New York Times, independent researchers are using and testing the neuromodulator for a host of other ailments, including stroke paralysis, stuttering, lower back pain, incontinence, writer's cramp, carpel tunnel syndrome, and tennis elbow. Botox is also under study to treat morbid obesity by relaxing the muscle that lets food out of the stomach and to prevent ulcers by relaxing the muscles that let gastric acid into the esophagus.  	

One of its most impressive uses has been to treat babies with club foot. Instead of surgically reconstructing several tendons-often with poor results-doctors inject the babies' feet with Botox, stretch the relaxed muscle, then put casts on to keep them stretched. By age two or three, they are walking normally. Many of those markets may be small and some may remain off-label, but together they add up to a product with a seemingly endless lifecycle.	

And so far, Botox's only competition in the United States is Elan's Myobloc (botulinum), which has an indication for cervical dystonia (head and neck muscle contractions) and earned about $20 million in sales last year. Another product, Ipsen's Dysport (botulinum) is approved in Europe, but together, the two products have only 10 percent of the market. Analyst Marc Goodman of Morgan Stanley says Dysport will come to the United States in about five years, but that by then the market will have expanded enough that it won't hurt Botox sales. 	

Neuromodulators are only one of Allergan's three franchises. Much of its R&D is focused on ophthalmology and dermatology. The company has a full line of products to treat eye conditions such as glaucoma, ocular infection, inflammation, and dry eyes and a small but growing group of therapies for skin conditions such as acne and psoriasis. (See "Eyes, Skin, and Muscles," page 36.)				

Ophthalmology. In 2002, Allergan added to its ophthalmology line with the approval of Restasis (topical cyclosporine), a first-in-class product that treats the underlying inflammation causing dry eye and increases tear production rather than just alleviating the dryness. The approval "came as our Christmas present on December 23rd," Pyott recalls. With one million US patients, analysts estimate the market could grow to $400 million during the next four years. Another 2002 approval for Refresh Endura added an emulsion formulation to Allergan's line of Refresh products for dry eyes.	

The year 2003 is shaping up to be even better-with a potential of five new approvals including three in ophthalmology. One of the first is a new indication for Acular LS (ketorolac) to treat ocular pain following corneal surgery. Acular is already marketed for inflammation, photophobia, and ocular itch. Also approved this year by FDA was Zymar (gatifloxacin), a fourth generation fluoroquinolone ocular anti-infective; under FDA review is epinastine, an ocular antihistamine. 		

The Next Wave and Eyes, Skin, and Muscles	

Dermatology. Although this franchise makes up only 15 percent of its revenue, Allergan expects it to grow, partly because it complements Botox Cosmetic. "In fact," Pyott says, "Allergan was the fastest growing company in skin care in the United States last year in our areas of interest: acne and psoriasis." The company hopes to accelerate that growth with an oral version of tazarotene -the molecule used in its topical products for psoriasis and acne (Avage and Tazorac)-for severe acne and psoriasis indications. Phase III studies will wrap up this summer, and the company will file with FDA for the treatment of psoriasis soon after. 	

"The data is really looking good, not just for psoriasis but also for acne," says Pyott. "It seems as if we have very similar efficacy as Accutane [isotretinoin] but a much better side-effect profile. For use in acne, we are having to run FDA-mandated head-to-head trials against Accutane, not just against placebo. So it's going to take a few years to get all that done. But I say there's a strong chance that we have the next new and improved Accutane. For a company of our size, that will be a huge event, and we're enormously excited about the possibility." 	

At its peak, Accutane's sales reached nearly a billion, but its potential has been limited by a black box warning for pregnant woman and speculation that it causes a small percentage of adolescents to commit suicide. Tazarotene will also be counter-indicated for pregnant women. Nevertheless, Pyott says, "There will be some of the same challenges as Accutane but with a much shorter half life. That will be really important for female patients. Our half life is hours, with Accutane it's days." 		

To come up with such molecules, Allergan has been investing 17 percent of its sales in R&D. That was one of Pyott's primary goals in reducing the company's overhead-to boost research. To loosen up that cash, he closed five of ten manufacturing plants between 1999 and 2001. But he increased the R&D staff 43 percent during the last five years. Currently, 50 percent of the company's sales are based on products discovered in house. Most of the rest were in-licensed, then developed in house. The company does very little outsourcing either in development, sales, or manufacturing. Pyott puts it succinctly: "Everything of importance we make ourselves."				

Some of those new scientists are working on Phase II products with great potential. Memantine, approved in Germany for Parkinsons and Alzheimers, is one example. Allergan licensed the molecule from Merz and is developing it for glaucoma, which is also a neurodegenerative disease. The project is a gamble with a potentially big payoff. Pyott says, "This is the most expensive trial in the history of ophthalmology, because we may have to test the patients for up to four years." But considering the prevalence of glaucoma and the aging population, he also says, "This is a billion-dollar market, a billion-dollar drug. If it works." 	

And some of those scientists are working on early-stage projects in new therapeutic areas for the company. "As a teaser," he says, "at the beginning of next year, we hope to be able to talk about something we have for gastroenterology." But he doesn't believe Allergan will stray too far from its core areas of expertise. "Over time, we're also going to become a neurology company: a) because of the confluence between glaucoma and neurology, and b) who is the biggest future user group of Botox? Neurologists." 	

Botox is not one of those drugs a sales rep can introduce to a doctor by dropping off a few samples with a two-minute detail. The product's use-by injection into selected muscles-requires some training. Allergan's "Botox development managers" call on dermatologists, plastic surgeons, and other "aesthetic" physicians. But they do more than teach them how to properly inject the toxin. They also teach the physician's entire staff how to talk about-and thus sell-the product. The training is optional, but only experienced, aesthetically oriented doctors are listed in the company's "Physician Network." A separate sales force calls on ophthalmologists and neurologists, who require somewhat different training. 				

Senior vice-president of specialty pharmaceuticals Steve Pal says, "We provide a whole range of programs to those offices to ensure they are saying and doing the right things so their patients learn about the product and get the best results they can." That training also includes teaching doctors, nurses, and receptionists how to "close the sell" and to follow up with patients to ensure repeat business. The company is currently trying to measure the success of those programs by comparing the sales volumes of trained offices versus untrained offices. Company executives think they're seeing great results, but the final numbers aren't in yet. 	

Allergan also promotes Botox Cosmetic directly to consumers. It works with Grey Advertising on those communications, but much of its other material is developed in house. "Our product managers ensure that we have programs at all levels," Pal says. "We do consumer advertising and physician programs. We have a consumer website and a mall tour program, which is another vehicle we use to communicate the benefits of Botox Cosmetic to the public." The mall tour features representatives and physicians providing product information from kiosks at malls across the United States, and the website contains product information, customer testimonials, and a feature that lets visitors type in their zipcode and find a trained "injector" in their neighborhood. 	

Features

Before Botox became a popular beauty treatment, Allergan was just a small ophthalmic business that made prescription eye therapies and contact lens care products.

More Than Just a Pretty Face

Since the pharma industry uploaded its very first websites in 1994, marketers' perception of the web has moved from intriguing novelty, to must-have status symbol, to vital communications channel for both patients and physicians. Yet even as product managers devote more resources to their brand-name product websites, many still commit fundamental errors with alarming frequency.	

This article identifies some of the most common mistakes pharma marketing managers make, along with potential remedies. It also highlights brands that are doing things right-often because managers have integrated their online tactics into a broad brand strategy.  	

Mistake #1:  Treat the web as an afterthought. Although the internet is consumers' number one source for healthcare information-and one of the top three sources for doctors-pharma companies still treat web initiatives as a poor cousin to other communications channels. Companies' e-marketing spend has increased steadily during the last few years, but it represents just 10 percent or less of most marketing budgets. Insufficient resources may not be the worst problem afflicting web initiatives. In many cases, the online investments brand managers do make are poorly planned and executed. 	

Lack of experience often leads pharma marketers and their agencies to slap the imagery from their offline ad campaign onto a website in the name of "brand consistency," missing out on the distinctly different possibilities presented by the electronic environment.	

One prominent example is Merck's pain reliever Vioxx (rofecoxib), one of the most heavily advertised drugs in the world. Advertising points patients to Vioxx.com, which features a still photo from the TV campaign as the home page's centerpiece. It has no patient stories, no physician presence, and its "Pain Diary" feature, a seemingly perfect candidate for consumer interaction, is in a PDF form that visitors must print out to use. In short, the website provides consumers with few opportunities for engagement and little reward for their efforts to find out more about Vioxx.	

Remedy: Rather than treat a website as a clumsy afterthought to a print or TV campaign, pharma marketers must consider how internet activities can advance their overall brand strategies. Marketers must break old habits, such as relegating e-marketing initiatives to a disconnected interactive business silo. They must also teach their peers and partners about online techniques that drive patients to talk to their doctors about their product: traffic generation campaigns, eCRM loyalty and persistence programs, and interactive patient education.	

Mistake #2:  Don't promote the website. The day when people casually surfed the internet and stumbled across unpromoted websites is long gone. Yet many product managers still pay scant attention to traffic generation. Companies must create clear, compelling incentives in their offline media to lure consumers online, rather than just include website URLs in DTC ads, which does little to generate traffic.	

Remedy: Marketers must use as many resources to promote a website as they do to build it. Brand teams should implement the following tactics:	

Cross-media promotion. Off-line promotion should depict a product website's incentives, such as patient testimonials, illustrations from high-value patient education materials, and, when appropriate, coupons and contests.	

"Pay for performance" key word purchases. Key words are more cost-effective than banner ads. An advertiser might purchase the keyword "diabetes" so that when a health seeker types that word into major search engines such as Yahoo! and Google, the results include a prominent "sponsored link" containing a brief message and link to the advertiser's website. The advertiser pays only when someone searches for specific words, delivering more targeted consumers and cutting down on waste in the online buy.	

Search engine optimization. Companies should improve their listing among the unsponsored search engine results by "optimizing" the way their website appears to the search engine. Some searchers deliberately ignore all banners and sponsored links, so getting the site's ranking improved among the unsponsored links is critical. Search engine optimization is a fairly involved topic, so companies should do some research about it (searchenginewatch.com is a good place to start), or ask a professional. 	

Mistake #3.  Assume doctors are ordinary people. Suppose a brand manager wants to build a consumer-targeted Rx site. Suppose someone asks the team to "throw in" some pages for doctors, in case they check out the site. What should the brand manager do? Assuming that person isn't their boss, laughing him or her out of the room is a reasonable option.  	

Doctors want data-not brand imagery-and they are suspicious of anything that smacks of promotion. Doctors also want companies to acknowledge their position and prestige. Further, because there are severe restrictions on the nature of website content if companies commingle any physician information with consumer content, they are better left as two distinct entities. 	

Most sites do offer separate sections for healthcare professionals, but they leave their data exposed to consumers and they often use the same design to present it. That makes the physician portion of the website look like a lightly considered postscript.	

Remedy: Companies should separate their professional and consumer web communications into discrete channels. Although the professional site may contain a prominent link or "barker" to the consumer content-for doctors who want to see what their patients are looking at-the content itself must be designed and structured very differently. 	

The imagery on a professional site should be serious: text, slides, webcasts featuring prominent physicians, little brand imagery, and no "life-style" photography. Ideally, physicians should also be given access to a completely separate, data intensive "thought leader" website, which they can access with a user name and password. 	

Mistake #4.  Build the site without a blueprint. No company would construct a new building without seeing all the plans. Why, then, does the pharma industry build so many websites without a technical specification document?	

Because websites are so often an afterthought, marketers frequently rush to get them up in time for a product launch or a big sales meeting. They think they can save time by skipping the architectural phase and moving right into production. The result is a poorly designed site that eventually will have to be gutted and re-built-which costs more than if it had been built right the first time.	

Remedy: Product managers or agencies must have the discipline to say no when colleagues ask them to build product websites without undergoing a thorough technical specifications process. And developers must have the flexibility to execute launches in a series of well managed, smaller phases. That way, the developer and the client can learn from the users' experiences and not waste time and money on features and functionality that users don't want. Companies should construct the core "building" first, then live in it for a while before deciding whether to add a sun room or turn half the garage into a workshop. But in all cases, companies should never build anything without a blueprint. 	

Mistake #5:  Underestimate the difficulty of getting content approved. Typically, the biggest bottleneck in online launches is writing content and getting FDA's Drug Division of Marketing, Advertising, and Communications (DDMAC) to approve it. Several obstacles slow down the process: assembling content from various sources, turning it into web-friendly prose, and getting all that information through the laborious marketing and DDMAC approval process. (See "A Fine Line," Pharmaceutical Executive, October 2002.) All told, even a small amount of content can take months to work its way through the copy approval mill.	

Remedy: Marketers can make copy approval more efficient if they follow a few rules. First, executives should ensure that writers have appropriate consumer healthcare and internet experience. It also helps to hire writers who know the legal ins and outs of a particular company's review department. 	

Finally, companies can hold group review sessions with attorneys and regulatory people all in the same room to reduce the traditional medical/legal round-robins, where small disagreements are often amplified rather than resolved. Adding the human element tends to focus everyone on the big issues and cuts down on nitpicking and grandstanding. 			

Mistake #6:  Treat everybody in the world like an American. People outside the United States often accuse Americans of being insensitive to other cultures. Although that charge isn't always justified, cultural insensitivity is a problem on the world wide web because, although much of pharma's web content may be developed in the United States, it is consumed everywhere.  	

Marketers must remember that consumers from all over the world visit those branded websites, even when they are clearly marked "For US Residents Only." International surfers generally use the same search engines Americans do, and many non-US consumers, particularly those who live in countries that prohibit DTC advertising, turn to American product websites. Executives must design their websites so they are accessible and understandable to everyone. 	

Remedy: US managers should consult with international colleagues during the development process, providing them with the opportunity for real input-and not mere political lip service-about the creative design and messaging. And if the company is truly committed to global brand launches, it should also commit to usability testing with key global audiences. 	

Mistake #7:  Don't think about measurement until after launch. Despite the statistical savvy inherent in a computer-based medium, marketers often fail to establish the metrics with which to measure the success of their online initiatives. It is ironic that pharma companies claim that they have a harder time "proving" the efficacy of a web initiative compared with inherently less measurable media, such as television and print. Indeed, it is only a matter of time before marketers and their agencies acquire enough experience to make their electronic initiatives the most precisely measured component of their marketing mix. 	

Remedy: Marketers must establish tangible goals that can be measured at each stage of development. Some basic statistics include unique and repeat visitors, average length of site visit, and registered users.	

Product managers should also consider more advanced measurement, provided by services that determine the demographics of site visitors and map traffic growth back to off-line DTC initiatives, including print and television ads.	

Mistake #8:  Ignore the importance of disease-specific websites. When launching a major global brand, marketers often expect a single, brand-name website to deliver all the messages and speak to all the audiences they want to reach. Although it's true that many patients around the world turn to American websites for product information, companies can't promote a name-brand website outside the United States. And unpromoted websites aren't worth building.   	

Remedy: Companies can build disease-specific websites, which they can promote around the world. Although those websites can't discuss specific brands, they can explain the importance of a particular type of therapy and begin building interest that may lead to product inquiries.	

Mistake #9:  Fail to coordinate online and offline initiatives. Web development is fundamentally different from traditional agency activities, but it can't be lumped in or "siloed" out from other communication approaches. Pharma companies need specific expertise to execute an effective web strategy, but they must fully integrate it into the brand strategy. Ultimately, the responsibility for the web initiative's success falls on brand managers' shoulders. But if the brand budget is big enough, companies should dedicate an integrated marketing manager to ensure that the web strategy is in sync with the overall brand strategy and that the traditional and interactive agencies communicate effectively with one another.	

Web developers, ad agencies, PR firms, medical education companies, and packaging designers all play a big role in a product launch. But if companies don't have a disciplined approach to  integrating those activities, they'll have an expensive, ineffective mess to clean up.	

Remedy: The most powerful cure for poor coordination is also one of the simplest: a series of strategic integration sessions with all the brand's players. The brand manager should begin by presenting the entire strategy, followed by presentations of subcomponents from each of the core groups. That may sound like a lot of PowerPoint slides to sit through, but in the long run, the return on investment is worth it. 	

For instance, if the web developer knows that the PR firm is planning a major outreach campaign in conjunction with a major non-profit's fundraiser, that presents a perfect opportunity to offer a powerful online component such as a pharma-sponsored webcast of the event. All too often the web developer finds out about such plans too late, and the chance to generate significant name exposure and good will is lost. But brand managers should be cautious: Some agencies are extremely jealous of their "turf" and don't want to share ideas with anyone but the client. When that happens, brand managers should insist that everyone work together.	

Mistake #10:  Cut "interactive" out of the internet. Marketers who don't harness the interactive power of the internet are missing major opportunities. As web technology improves, they can make the online experience much richer and more engaging than typical flat HTML pages. Companies have the chance to differentiate new websites from their competitors' older sites and take advantage of more effective interactive techniques such as flash animations, videos, and webcasts. 	

Remedy: Today, 52 percent of US web users have broadband access, so rich media features are now a practical way to distinguish a product site from its competitors, especially if marketers are targeting a high income group. (Patients' income is a good indicator of whether they have broadband.) Depending on the audience demographics, product managers should consider such powerful tools as flash-based patient education modules, mechanism-of-action videos, and webcasts.	

Executives should also include simple, low-bandwidth interactive tools like surveys, quizzes, and polls. Traffic reports consistently show that even basic interactive features receive more traffic than pages with static content. And it's not hard to understand why-visitors enjoy getting a response from a website because it makes them feel that the site is "listening" to them.  	

The unifying theme to all those mistakes is that pharma marketers still aren't as comfortable with the internet as they are with traditional media, which means they leave the consumers' medium of choice dramatically underexploited. It may be a while yet before most pharma companies expand their comfort zones to include the strategic use of the online channel. In the meantime, savvier marketers can turn their competitors' discomfort into a competitive advantage.	

Since the pharma industry uploaded its very first websites in 1994, marketers' perception of the web has moved from intriguing novelty, to must-have status symbol, to vital communications channel for both patients and physicians. Yet even as product managers devote more resources to their brand-name product websites, many still commit fundamental errors with alarming frequency.

10 Classic Mistakes and how to avoid them

Innovative products, and the research and development teams that produce them, are pharma's life blood. So it's no surprise that, according to PE's 2003 Top 50 Pharma, the largest 20 pharma companies alone spent $45.5 billion on R&D.	

Few would argue that the key to pipeline success is the researchers whose ideas generate new products. But leaders of the world's most successful pharma, high-tech, and consumer product companies confirm that R&D pros are some of the most challenging to manage. 	

They have a high level of education and a scientific mindset. Most researchers hold advanced degrees (typically PhDs), have a high regard for the scientific method and empirical observation, and place a high value on independence in thought and action. 	

They strongly identify with their scientific discipline. Many R&D employees consider themselves scientists first and corporate workers a distant second. 	

They may be torn between scientific imperatives and corporate goals. Not all innovative ideas are commercially viable-at least initially-and many of the most promising may be some of the least interesting from a scientific point of view. Developing an alternative formula to enhance an existing drug, for example, may be an important corporate objective, but researchers are unlikely to see that as a scientific breakthrough.	

To manage R&D employees effectively, one must understand their unique attitudes and perspectives. To foster that understanding, this article details the key areas in which R&D employees' opinions differ substantially from those of employees across all other job functions as well as the implications of those differences for working with and managing them. The findings are based on the aggregated results of employee opinion surveys conducted by ISR on behalf of its client companies. The areas of greatest contrast relate to supervision, senior management, empowerment, performance appraisals, employment security, work–life balance, and working relationships. (See "Benchmarks.")	

US national norm data show that most employees have a more favorable view of their immediate supervisor than they do of company senior management. Only 57 percent of employees say they have confidence in decisions made by senior management, and less than half believe top management is doing a good job in such key areas as stating objectives clearly, establishing priorities, making decisions promptly, and providing leadership. 				

In contrast, when asked about their immediate supervisors, employees in general respond much more favorably. The overwhelming majority believe that their supervisor is receptive and responsive to suggestions for change, is competent in the job's technical aspects, is available when needed, and communicates effectively. 	

Yet that tendency to rate supervisors more positively than upper management is substantially more pronounced for R&D employees. (See "The View from Below," page 52.) Compared with those in the US national norm, employees in the R&D norm hold significantly less favorable opinions regarding the competence of senior managers and significantly more favorable opinions of supervisors. Experience in working with R&D pros suggests that the higher the senior-level position, the more negative their views toward it-and to the person who holds it.	

The reason for that difference seems clear: R&D employees tend to believe that only those with whom they interact daily and who have similar training and experience-their supervisors-can truly understand and appreciate the unique nature of their jobs. They tend to respect R&D supervisors in particular, given that they are often principal investigators (PIs) on important projects and are often considered thought leaders in their field.	

R&D employees likely aspire to their PIs' position and identify closely with their values. In fact, many R&D employees may have been drawn to work for their companies precisely for the opportunity to work under the supervision of world-class scientists, a reality noted by Jeff Peris, a 30-year Big Pharma veteran and Wyeth's chief learning officer. That is not to say that R&D employees have an inherent dislike for senior management but that, in general, they value technical expertise over managerial ability.	

The implication of those findings is that immediate supervisor input and direction are needed to effectively manage researchers, and that managing through directives from "on high," without local-level support, is likely to be ineffective. What is apt to work better is leveraging the positive PI–employee relationship by including PIs visibly in companywide initiatives and teams.	

Yet, both R&D employees and those in the US national norm are hard on their supervisors. Only 68 percent of employees in both groups agree with the statement, "My supervisor manages people well," clearly allowing room for improvement. For the R&D group, a common complaint is that researchers are often promoted to supervisory positions based on their scientific accomplishments regardless of their people skills, which are often inferior.				

That frustration is evident. One R&D employee said, "We need more dynamic leaders, individuals who are technically competent but also adept at dealing with people and inspiring the work force. The organization promotes technically competent people to leadership positions, but some of them have little to no real leadership skills. Sometimes, the appointees don't really want the job other than the pay raise it brings." 	

A recent survey of an R&D facility with more than 5,000 employees reinforces that view. "Leading/inspiring people" and "dealing with people" topped the list of things those employees said their supervisors need to improve. (See "Supervisors Can Improve, Too," page 54.) 	

To address that issue, companies can provide training in people skills to current R&D supervisors and reconsider the weight given to such skills when making promotion decisions. They could also give potential thought leaders opportunities early in their career that will prepare them to lead technical teams later on. 	

Jeff Hanke, vice-president for cancer research at AstraZeneca, sees the development of leadership and management skills among research scientists as a critical challenge within the pharma industry. Although Hanke recognizes the vital role companies must continue to play in developing those skills, he also suggests that academic institutions should provide opportunities for students to acquire those competencies, so that by the time scientists enter the corporate world, they have a head start.  	

Another area in which R&D employees differ from others is empowerment. 				

Although employees who are authorized to make their own decisions are vital to innovation, on four fundamental empowerment questions, R&D employees respond less favorably than the general population. A smaller percentage of 	

have sufficient authority to do their job well (78 vs 81 percent)

are satisfied with their involvement in decisions that affect their work (62 vs 65 percent)

believe management trusts the judgment of people at their level in the company (52 vs 60 percent)

believe their company has a culture that allows people to challenge traditional ways of doing things (46 vs. 53 percent). 

R&D employees may respond less favorably to those questions because they expect to have more autonomy than the company allows. Most R&D employees are trained in highly empowering environments, such as a university, where the emphasis is on the quality of one's ideas and where one's judgment is respected. 	

In the corporate world, however, researchers find that completely different standards-namely, marketability and profit potential-are used to evaluate their contribution. Most researchers are not conversant in such areas and, because management's primary concern is a venture's profitability, there are bound to be conflicts with R&D staff over what projects are worthwhile. 	

As Jim Blosser, associate director in central nervous system (CNS) drug discovery at AstraZeneca, has seen firsthand, the transition from the academic world can be challenging: "Scientists who move from academia to a commercial setting need to recognize the fundamental differences between the two environments. In a commercial lab, they need to work as part of a team and to meet clearly defined goals. For some, that could be perceived as a loss of autonomy."	

One researcher's comment illustrates the tension that can arise between scientists and business leaders: "Research projects are dictated by senior management. It is impossible to have good scientific ideas and plans that are generated by the bench scientists come to fruition. Resources are not allocated based on scientific merit and unmet medical need but rather by the whims of senior management. This company will never be successful unless lab heads and division heads are empowered to allocate resources as they see fit."	

R&D employees may perceive such conflicts as unempowering because senior management is overriding the researchers' own judgment. Indeed, during the last 25 years, corporate America's willingness to finance basic research with little foreseeable marketability in the near term has declined substantially. A case in point is the situation at Bell Laboratories, where headcount has been reduced by 50 percent since 1997.	

Thus, R&D managers may need to work harder than other types of managers to help their employees feel empowered. That may include taking time to explain the important risk/reward contingencies that guide research in a for-profit environment and the relative value of scientific versus business contributions. That effort is likely to help scientists understand the justifications required to warrant further work in a particular area. That, in turn, should foster agreement between R&D employees and managers on risk/reward estimates, thereby reducing micromanagement and enhancing employee trust and feelings of empowerment. 	

Managers can also benefit from listening to researchers' perspectives. Scientists may see long-term market potential in areas management overlooks, perhaps because of the latter's focus on short-term results and lack of scientific training. Managers' failure to listen may result in a failure to produce potential blockbusters. Being diligent in allowing employees to present the scientific basis for their belief in the long-term market potential of their projects will likely be valuable to both groups. Formally designating a minimum amount of resources, such as 5 percent of researchers' time, for exploration into areas with non-obvious near-term market potential may both enhance researchers' feeling of empowerment and lead to discoveries with surprisingly large market potential.	

For any manager, providing a high-quality performance review is extremely challenging. Ideally, they should accurately assess and candidly share employees' strengths and weaknesses and guide them to use that information to improve their job performance and help them with career planning. Unfortunately, the process often takes more time and energy than most managers are able or willing to expend.								

The discouraging responses to survey questions that address performance appraisals bear that out. (See "Demanding Critics, page 56.") Only 35 percent of employees believe their last performance review helped them in their career development and planning, only 48 percent believe it helped them improve their job performance, and only 51 percent believe it helped them identify their strengths and weaknesses. This issue is particularly critical because performance appraisals can determine employees' perceptions of their development and career opportunities, which play a key role in employee engagement and commitment.	

On all three performance review questions, R&D employees score even lower than other employees by a margin of at least five points, suggesting that R&D employees are more demanding critics of their own performance evaluations. That is not surprising, given that many performance systems require that reviews be scored-or even downgraded-to fit seemingly arbitrary rating and forced-ranking schemes or performance quotas. Scientists, because of their disposition and training, are inclined to examine, understand the limitations of, and criticize such a system. 	

Furthermore, receiving a poor review in a forced-ranking system is particularly galling for people who, having earned advanced degrees, consider themselves highly qualified. They will often reject a system that rates them low and be comfortable doing so on scientific grounds. They may also bristle at the irony that many companies claim to hire only "the best of the best," then rely on an evaluation system that requires 50 percent of employees to be labeled as "in need of improvement." An additional drawback of using forced-ranking systems in R&D settings is that employees see them as designed to foster a competitive environment among co-workers, whereas they believe a collegial environment is key to innovation.	

Clearly, the type of performance review system used to evaluate an R&D population is critical, as is the need to develop and refine the system over time. Yet many companies resign themselves to the idea that because every system has flaws, it is not worthwhile to improve their own. Instead, they try to convince employees of the current system's merits-no matter how limited-and the value in maintaining it for historical comparison. 	

R&D employees' frustration with performance appraisals is evidence that such arguments don't work. Said one, "I understand the theory behind the ranking; however, the system is useless and artificial. Reviewers try to justify their ranking of employees rather than focusing on their growth and development. Even though an employee can ask for ranking information, how that ranking is determined in the larger group is next to impossible to assess. The current system is cloaked in mystery.	

The openness of the review process is of particular importance to R&D employees. Hanke points out, "I've seen many different systems across two companies, and there is no perfect system. I've found it helps, though, to keep the process as transparent and involving for employees as possible."	

Of course, R&D employees may be no more critical than others of their reviews but may simply receive lower-quality evaluations-or the quality of work within their function may be fundamentally more difficult to assess. In many industries, commercially applicable breakthroughs may be few and far between and related to employee performance in a complicated and unclear way. Much R&D work is also often done by small teams whose performance can be especially challenging to appraise. Furthermore, because much R&D work is highly specialized, some senior-level managers may have no real understanding of how to evaluate performance in the employee's area.	

That is not lost on those being reviewed. One scientist commented: "Upper management should have little or no input into job evaluations since they have no idea what an R&D employee does every day or how that employee performs on the job. Only supervisors who actually see the employee know what kind of job performance is given."	

This last problem is not as easily solved as it is understood. Clearly, the involvement of senior-level managers in an individual's review comes from the need to compare and adjust reviews across separate departments to keep the system fair throughout the company. That is, they need to reconcile the reviews of the weakest member of a strong team with the strongest member of a weak team, or of equally strong performers under supervisors with different standards. 	

The use of standard measurement instruments across different R&D departments and projects, as well as more frequent measurements, will help make adjustments to ratings based on senior management review less necessary. Including peer evaluations in performance reviews, in the form of 360- or 180-degree surveys, can also help to increase review quality and combat the researchers' criticism that "people who don't understand what I do are evaluating me."	

The message regarding performance appraisals is clear: companies should spend more time and effort designing and implementing employee reviews, and those charged with completing R&D performance reviews need more training. Even with those efforts, managers should expect that R&D employees will continue to be skeptical about promotions and salary increases based on performance reviews.	

Sixty-three percent of US employees say they can be sure of having a job with their current company as long as they perform well. For employees within the R&D function, that percentage drops 20 points, to 43 percent. That R&D employees feel insecure in their jobs is unsurprising. Several large multinational companies that collectively employ thousands of researchers and were long thought to be bastions of security for researchers in the private sector, including Lucent Technologies, Agilent, Hewlett-Packard, and Xerox, have recently initiated hiring freezes and large-scale layoffs. In the pharma industry mergers and acquisitions have taken their toll in layoffs as well, though the number of researchers involved is unknown. And federal funding for basic research has been scaled back. 				

Reassuring R&D employees of their job security is difficult, especially in the current economy. Major organizational changes, such as new management teams, mergers, acquisitions, and downsizings, raise researchers' concerns about their future with the company. The more employees fear being laid off, the more probable it is they may embark on a defensive job search and the less time and energy they are likely to devote to discovering the "next big thing" for their current employer. As always, honest and frequent communication is the best remedy. Although insecurity about future employment is difficult to fix, managers should be aware that job security is a top concern for many of their key innovators.	

Innovative products, and the research and development teams that produce them, are pharma's life blood. So it's no surprise that, according to PE's 2003 Top 50 Pharma, the largest 20 pharma companies alone spent $45.5 billion on R&D.

Managing the Innovator

As pharma sales forces grow and their productivity declines, the question on everyone's mind is, "Has the traditional detail lost its punch?" The answer is unequivocally no. The sales force is still the best medium for forging valued and trusted relationships with targeted physicians. But industry's current focus on volumetric measures-the high number of sales reps and frequency of sales calls-rather than the effectiveness of those calls is causing a growing number of doctors to close their doors against detailers.	

Reversing that trend requires a "repersonalization" of the selling process. Integrated physician segmentation, a predictive model that allows pharma companies to better target doctors and make each interaction more valuable to them, aims to do that by understanding and satisfying individual doctors' needs.	

Instead of categorizing-and targeting-physicians by the volume of prescriptions they write, integrated segmentation analyzes individual prescribing behaviors, demographics, and psychographics (attitudes, beliefs, and values) to fine-tune sales targets. For a particular product, for example, one segment might consist of price-sensitive physicians, another might include doctors loyal to a given manufacturer's brand, and a third may include those unfriendly toward reps.	

This article shows how pharma companies can capitalize on integrated segmentation by creating and implementing more personalized brand messages and strategies that resonate more strongly with targeted physicians, leading to more positive doctor rep interactions and increased access.	

In other industries such as automotive and finance, integrated segmentation has a proven track record. Whether it's BMW seeking prospects who value driving performance, Volvo pursuing the safety-minded, or Mercedes looking for "prestige" buyers, those companies use psychographic knowledge as a marketing mainstay.				

Integrated segmentation can drive more effective pharma marketing and sales strategies in the same way. Some pharma companies, like Atlanta-based UCB Pharma, have already bought in. 	

UCB recently worked on an integrated segmentation project for its anti-epileptic drug Keppra (levetiracetam) and now plans to launch the program throughout the company. (See "UCB's Pilot Project," page 68.)	

Steve Banet, UCB Pharma's director of market research, says, "This program enables our reps to customize their approach to physicians, providing greater value and better meeting their needs. I expect continued success as we roll this out throughout UCB."	

There are four steps to designing and implementing integrated segmentation strategies: discovery, design, analysis, and application. (See "Segmenting, Step by Step.")				

Before beginning, pharma companies must explain the project's objectives to all key internal stakeholders from marketing, sales, and sales training. In the initial phase of discovery, those stakeholders help companies, and the consultants they hire, assess the product environment, set goals, identify problem areas, and determine the project's scope. (See "Checklist for Success," page 70.) 	

The second phase, design, defines the project. At that stage, companies employ diverse data sources and analytic techniques to determine how to accurately allocate market and sales strategies for targeted brands. The necessary data include physicians' prescribing behaviors, demographics, attitudes-such as how they feel about managed care-values, and lifestyle factors that may affect their prescribing activity.	

Executives then compile secondary research, such as de-identified longitudinal patient measures that provide insights into physicians' behavior relative to switching, titration, new therapy starts, new patient starts, and concomitant therapies as well as more traditional research, such as physician prescribing and overall promotional data, to create a complete understanding of physicians. The more extensive the knowledge and data that companies factor into the front end of the integrated segmentation process, the more accurate the predictive modeling will be.	

Much of the secondary research and demographic information companies use in that phase already exist, and it can be drawn from current databases. However, pharma companies can survey a sample of physicians to collect additional details about their attitudes, values, and lifestyles. The survey might include, but is not limited to, physicians'	

approach to patient treatment (specific to disease state)

clinical concerns such as efficacy, safety, side effects, and drug interactions

conservatism versus willingness to try new things

association of products with key attributes.

Because the results and the ensuing interpretation are only as good as the quality of the initial survey, prior input from all internal stakeholders and pre-testing the questionnaire with doctors to fine-tune it are critical. It is a good idea to survey several hundred physicians, including some who prescribe the company's product and others who do not.	

Using a variety of statistical methods, including decision tree algorithms, self-organizing maps, and latent class analysis, marketers can marry the responses with the physicians' demographic data and prescribing behaviors and identify the variables that cause greatest differentiation. Out of dozens of variables, typically the top four or five variables as identified by the segmentation technique determine the segment physicians will fall into. As one might expect, that segmentation differs from product to product, depending on the characteristics of the therapeutic category and the drug in question.	

During the analysis phase, executives profile and name the segments to begin building a predictive model. Some physicians might fall into a segment described as "product innovator" and "rep friendly," others into "product conservative" and "rep unfriendly." (See "A Closer Look," page 70.) Once the segments are defined, secondary information, such as prescribing behavior data, managed care influences, and group practice membership help shape the predictive model that projects the segments all doctors within the target market will fall into. And once companies assign physicians to segments, they can automatically deduce their psychographics and attitudes because the segments were initially developed with primary, representative research on those variables. 	

Definition and analsis of segments, and the ability to project psychographics and attitudes, are meaningless unless they are used to transform a pharma company's marketing and sales processes.				

In the application phase, the internal stakeholders agree on the marketing messages, as well as the sales and media mixes for each physician segment. To develop marketing  strategies, the team revisits the responses to survey questions that helped determine physician segments in the first place. For example, do physicians in a particular segment find sales reps useful in keeping them informed of the latest treatments? In prescribing new therapies, do doctors base their decisions on who the manufacturer is? Does a particular segment enjoy socializing with, and is it influenced by, leaders in its field? The survey also produces significant information regarding how, in doctors' minds, the product is competitively positioned within the market, based on critical attributes such as efficacy, tolerability, and side effects.	

Factoring in all such data, pharma executives can develop marketing and sales approaches for each segment. During that process, marketers need to take a hard look at all current promotional materials. Some may still be usable, while new collateral material may need to be created. Marketers may even determine that sales reps shouldn't visit some segments, even those that contain high prescribers, if they are unreceptive to detailing or if the possibility of those physicians prescribing the company's drug is very low. As an alternative to an in-person detail, companies may find that using direct mail or e-detailing is more productive and cost-efficient for those groups.	

For segments that sales reps should concentrate on, the promotional plan will indicate	

messages to support the product and messages to counter physicians' objections

what other promotional tools-such as e-letters, thought leadership and peer influence programs, and programs for fellows/clinical liaison and medical information scientists, should supplement the detail.

"The result of the segmentation process can't be academic," says UCB Pharma's Banet. "If you use the word 'psychographic' with a sales rep, he or she will immediately tune you out. They want to know how to be more effective. Is this physician interested in clinical data? Is he or she influenced by peers?	

"The final product must have real-world implications for interacting with doctors. When a rep identifies a doctor as a 'segment number six,' that rep should immediately be able to paint a picture of what that doctor's characteristics and needs are and be able to customize their message accordingly. At the end of the day, we need something that's not only strategic, but tactical and implementable."	

Before completely rolling out such a program, companies should implement a pilot involving a small percentage of the sales staff. It's important to ensure that participating reps are appropriately compensated, no matter how the effort turns out.				

To make the assessment valid, executives must carefully choose test and control territories. Companies that quantify the effectiveness of the integrated segmentation approach by tracking and measuring results help gain assurance that it works before the full roll-out. In addition, assuming the results are positive, the rest of the sales force subsequently will be more willing to adopt the concept when companies implement it companywide.	

To further strengthen sales rep buy-in, marketers should share how they developed the segments and administer exercises that engage reps in the process. Role playing, in which reps interact with mock physicians, can also teach reps how to best employ the recommended strategies and counter physician arguments against product positioning. No predictive model is 100 percent accurate. However, integrated segmentation can predict the correct segment for any given doctor with 75 80 percent accuracy. 	

For the rest, sales reps are armed with one or two questions to ask physicians or their staff that will tease out the appropriate segment membership. The response to "How concerned are you about managing your patients' pain?," for example, can confirm whether a doctor has been accurately placed in a segment or whether he or she should be moved into an adjacent one. 	

Finally, no pharma company using an integrated segmentation approach can afford to be satisfied with a single study at one point in time. Doctors and markets are constantly evolving. Marketers should review segments and the physicians within them annually or after every major new development.	

In most cases, the segment characteristics will remain stable, but individual doctors should change segments as the sales and marketing approach moves them into higher-prescribing segments, which is the goal of the segmentation and targeting strategy. However, if a major market event occurs, such as the introduction of a new product or generic, companies may find it appropriate to conduct a new segmentation study.	

To optimize their value, pharma companies must transform hard-core quantitative data into more qualitative human factors that marketing departments and sales reps can use effectively. Pharma companies usually outsource that whole process to incorporate the most diverse data sources and technical resources.	

But regardless of how companies get the study done, a robust understanding of physicians as human beings, with distinct sets of attitudes and values, can better position companies to listen and respond to their needs with highly targeted information, such as thought leader testimonials for those who are most influenced by their peers. 	

As insiders and outsiders alike continue to scrutinize pharma's sales forces, the industry needs to undertake new approaches that will make this critical medium more effective. Integrated segmentation promises not only to increase prescribing volumes but also to generate a positive shift in doctors' perception of reps' value. And that's a critical step in harnessing the full potential of industry's sales forces.	

As pharma sales forces grow and their productivity declines, the question on everyone's mind is, "Has the traditional detail lost its punch?" The answer is unequivocally no. The sales force is still the best medium for forging valued and trusted relationships with targeted physicians.

Detailing Gets Personal

Now that patents on several blockbuster drugs have expired, the industry-feeling the pinch-has focused its attention on intellectual property. Because every additional month of market exclusivity can mean an extra $50 million or more in revenue, pharma companies have gone to great lengths to block the entry of generic competition.  	

That competition, in turn, has changed the industry's approach to drug discovery and development. The most immediate change has been Big Pharma's increasing reliance on in-licensing, mergers, and acquisitions to stock dwindling drug pipelines with promising late-stage compounds. Although that represents a boon for biotechs and small to mid-size pharma companies, it is does not address the more fundamental challenges of drug development today. Faced with fewer blockbuster prospects in the pipeline, to maximize a product's profit the pharma industry has been forced to take a closer look at lifecycle management practices.	

One primary area that has received greater attention is intellectual property (IP) strategy. Industry leaders have shifted from a reactive stance, with heavy reliance on a few early-development-stage patents to a more integrated strategic approach that blocks entry by competitors while extending the IP protection of highly profitable drugs. 	

This article examines the state of pharma's intellectual property protection, including how proposed regulatory changes may affect the formulation of an IP strategy. It details the tools and resources necessary to support IP strategy formulation and describes a specific roadmap that will help industry decision makers maximize the profitability of product franchises.				

Patents are granted based on the novelty of the invention at the time of filing. The holder is granted a right to exclude others from making, using, selling, or offering for sale any product covered by the patent. US and foreign patents typically expire 20 years from the earliest effective filing date. 				

The two key aspects of a patent are the priority date and the claims. In the United States, the patent system is based on the concept of "first-to-invent," in which inventorship and priority date are based upon the party with the earliest verifiable documentation of an invention. Most of the rest of the intellectual property world, however, is governed by a "first-to-file" system, in which the first party to file a patent application is granted inventorship and the associated filing date determines the invention's priority date. 	

In either case, a patent document having an earlier priority is held valid over a later patent filing that may cover similar subject matter. In addition, the breadth of a patent's coverage is defined by its claims. As a result, the acquisition of an early patent with broad claims can provide freedom to operate in an evolving market. Conversely, patents filed later must be distinct from the earlier literature and patents in that field, resulting in "narrow" claims. In many instances, holders of recent patents attempt to interpret their claims broadly but are tripped up by the patent file history that documents a narrow scope adopted during the earlier examination process.	

Prior art is a term used to define the state of technology at a given time. Specifically, under Section 102 of US law (Title 35, US Code) prior art can be a patent, prior use, or publication anywhere in the world. In the United States, a piece of prior art must have been disclosed and publicly available at least one year before the filing date of the claimed invention. Under those rules, identification of a US journal article, or a German, Russian, or Japanese patent covering matter similar to that claimed in a patent and published a year prior to its filing, can undermine the patent's validity.	

Many patents can be invalidated based on technicalities or worldwide prior art. Innumerable high-profile patents have been shown to be vulnerable to assault based on anticipatory references or to contain such a narrow claim scope that their effectiveness was limited.	

In the pharma industry, both US patent law and FDA govern a product's exclusivity. One example of that interaction 				

is FDA's ability to confer an automatic six-month extension to a drug's marketing exclusivity period if the manufacturer completes a pediatric clinical trial. The "Drug Price Competition and Patent Term Restoration Act,"  also known as Hatch-Waxman, made several specific modifications to FDA's patent regulations. 	

Passed by Congress in 1984, the act was intended to strike a balance between the need for innovator companies to recoup their research and development costs, while simultaneously offering consumer discounts by encouraging the development of generic alternatives. 	

Two key aspects of Hatch-Waxman influence the formulation of IP strategies for innovator pharma companies. First, it specifically permits generics manufacturers to produce, develop, and test their copies of patented products before the patent has expired-something that would ordinarily be considered an infringement. Second, it forces FDA to withhold approval of a generic product for up to 30 months if the manufacturer believes that introduction of a generic will infringe on an unexpired patent covering the drug. The 30-month stay on the generic's approval remains in effect until either	

the courts deliver a ruling of non-infringement or patent invalidity

Hatch-Waxman has played a central role in companies' strategies to defend their patent rights, as illustrated by AstraZeneca's approach to protecting the Prilosec (omeprazole) franchise. AZ obtained lengthy exclusivity extensions through the combination of a successful pediatric trial and the filing of multiple infringement suits against generics manufacturers threatening to enter its market.	

The regulatory landscape pertaining to Hatch-Waxman is currently in a state of flux. Until recently, there was no limit on the number of 30-month exclusivity extensions a company could invoke. But this June, FDA altered its regulations to limit pharmaceutical companies to a single 30-month stay. Also, the Federal Trade Commission (FTC) is taking aim at the practices of Bristol-Myers Squibb, GlaxoSmithKline, and others who have been accused of abusing the Hatch-Waxman statute by filing for 30-month exclusivity extensions based upon "frivolous" patents covering non-innovative features-pill shape, color, or packaging. So-called "defensive patenting" is a tactic that FTC has threatened to remove from the arsenal of innovator companies to ensure that exclusivity extensions are awarded only when truly innovative concepts are at issue.	

At a basic level, an IP portfolio must provide freedom to operate in desired markets. Companies need to conduct a region-by-region freedom-to-operate analysis to identify all IP that may cover their products and associated processes. At this stage, any relevant patents not under the company's control must be licensed, or the company must be prepared to argue that those patents are invalid based on the prior art.				

Before reaching that point, however, executives must make critical decisions about how to construct the portfolio. The franchise's long-term goals will directly affect the type and scope of the patents that should be filed. In the past, the industry depended on early-stage "composition of matter" patents with narrow, easily defensible claims. Although it guarantees freedom to operate in the desired markets, that strategy is inherently limited in its ability to support lifecycle management goals. That shortcoming is illustrated by Lilly's experience with Prozac (fluoxetine), in which the company's reliance on a single patent in the final years of market exclusivity left it vulnerable to an aggressive generics manufacturer. The alternative is strategic patenting, as demonstrated by AstraZeneca's savvy late-stage patent filings which bought the company the time needed to move consumers to its next generation product, Nexium (esomeprazole). Strategic patenting entails filing numerous patents during the drug development cycle. The filings must contain claims of varying breadth and should cover compounds currently under development while laying the groundwork for future generations of the drug.	

To maximize the long-term profitability of a franchise, pharma companies must take several steps, both IP and non-IP, during the course of the drug's lifecycle. (See "Product Lifecycle Stages.") 				

Early-stage discovery. When researchers identify a promising lead compound, the company must file an initial set of core patent applications covering the specific composition of matter and any related compound classes or chemical structures. Those early applications may form the foundation for the patent protection and associated market exclusivity once various regulatory hurdles have been cleared. As a result, it is critical that their claims be both broad enough to encompass later versions of the drug, as well as narrow enough to withstand an invalidity challenge. A thorough freedom-to-operate study for the compound and its related structures is a prudent step to ensure that the patent fits those parameters.	

Development stage. As researchers optimize the compound's toxicological and biological profiles, the company must file additional patents to cover the new compositions. At this stage, it is also crucial for the company to begin filing IP that covers the demonstrated in vitro biological activity and, by extension, the compound's potential therapeutic uses. Because those patents will also form part of the company's first line of defense, it is critical that their scope be sufficiently broad and still remain protectable. It is also important to mine both patent and non-patent art to explore all possible therapeutic avenues that the in vitro data may suggest. 	

Clinical stage. As the compound moves into the clinical stage, development team members must undergo a fundamental mindset change and start to develop a proprietary strategy. While they must meet the needs of the regulatory machinery by pinning down formulations, dosage forms, and manufacturing methods, they must also think about how to extend the franchise longevity. Thus, the patents filed during this time-mostly formulations and manufacture methods-must cover likely work-arounds that generic competitors will pursue.	

After-market stage. Once FDA approves the drug, the clock is ticking with respect to how soon the company can expect to face the first challenge from a generics manufacturer. In recent years, generics companies have filed legal challenges earlier and earlier in a brand-name drug's lifecycle, often years before its patents have expired. Before the ink is dry on the new drug application (NDA) approval letter, the franchise team should be taking steps to extend and maximize market exclusivity. (See "After-Market Activity.") The key strategies in the after-market stage can be broadly divided into three areas: scientific, regulatory, and marketing. 	

Now that patents on several blockbuster drugs have expired, the industry-feeling the pinch-has focused its attention on intellectual property. Because every additional month of market exclusivity can mean an extra $50 million or more in revenue, pharma companies have gone to great lengths to block the entry of generic competition.

Pharmaceutical Executive-08-01-2003

The $46 Million Man

Table of Contents

More Than Just a Pretty Face

10 Classic Mistakes and how to avoid them

Managing the Innovator

Detailing Gets Personal

Protecting IP Throughout the Product Lifecycle