GETTY IMAGES / GEORGE DOYLE It's rare for advocates and other political appointees, once in government, to show leadership—let alone courage—by placing ethics above politics, for example. That's a curiosity, because advocacy itself often requires courage.  

Our current president, although elected with the largest majority since Reagan, has shown little taste or talent for politics as contact sport—"No drama Obama." Some left-leaning advocates have been recruited into government, but (as is the tradition) mostly for "deputy" positions. Obama's Cabinet appointments have been, with a few exceptions, seasoned politicians. They play the game. 

What makes President Obama's recess appointment in July of Don Berwick as head of the Centers of Medicare and Medicaid Services (CMS) so potentially dramatic is that he made his name as a game changer. The Midwestern son of a small-town doctor, Berwick is a pediatrician and former professor at Harvard's medical school who got bitten by the public health bug. He has spent the past two decades putting the movement for quality and safety in healthcare on the global map. At the same time he has managed to earn the respect not only of his fellow doctors but of competing stakeholders in the hospital, insurance, and pharmaceutical industries, whose cooperation is essential to the success of systemic reform. 

The new healthcare law, called the Patient Protection and Affordable Care Act, showcases many of Berwick's own ideas—not least of which is his oft-repeated article of faith that the runaway costs and waste in our fee-for-service system can be cut dramatically without causing a decline in quality. Reform's rollout of supposedly cost-effective, better-coordinated, outcomes-based healthcare is balanced, however unlikely, on this single "more for less" credo: that 32 million more Americans can be covered by public or private insurance even as innovations and efficiencies in delivery and payment—and, of course, sheer cuts in federal spending—"bend the curve" on costs by $455 billion over the next decade. 

Somewhat astonishingly, Berwick plans to use a weapon that has long been hiding in plain sight: Big Government. In a 2005 interview in 

, he argued for freeing CMS from its congressional restraints and pressuring payers and providers to assume a greater share of healthcare's economic risk. "As CMS goes, so goes the system," he said. "CMS needs to continue to develop to be the best possible purchaser of care, on behalf of its beneficiaries. To do that through giving more choice to individuals is a very weak lead. To do it as an aggregate purchaser—demanding performance—is a very strong lead." 

Whether Berwick can prevail in disrupting the system at a moment when Congress is partisan to the point of dysfunction is an open question. (Berwick's office refused requests from 

Berwick's recess appointment was, unsurprisingly, met with an immediate uproar from the Republicans. The White House rationalized the move in this way: "Many Republicans in Congress have made it clear in recent weeks that they were going to stall the nomination as long as they could, solely to score political points. But with the agency facing new responsibilities to protect seniors' care under the $938 billion Affordable Care Act, there's no time to waste with Washington game-playing." 

With some of the law's most consumer-friendly features kicking in this fall, Democrats are hoping that concrete benefits will win over some skeptics. The first round of $250 checks were mailed to 80,000 seniors in the Medicare Part D donut hole in July. "I don't see politics getting in the way of the implementation of healthcare reform—at least not until January 2015," says Ian Spatz, founder and principal of Rock Creek Policy Group. "But by then, I think most Americans will realize the benefits of reform and be quite happy with it." 

Thomas Scully, who led CMS under President George W. Bush, summed up the view from inside the healthcare industry: "Berwick is a very thoughtful, reasonable, mainstream guy. For people to paint him as an outrageous, radical choice is just plain unfair. But no one who knows him has any doubt that he could more than hold his own in a public hearing with a lot of Republican screaming and gnashing of teeth." 

In circumventing a congressional vote on his nominee, Obama has stoked the controversy. Even a month later, as 

 went to press, Republicans were still demanding a public hearing for Berwick. A letter signed by all Senate Finance Committee Republicans reads: "If [Berwick] is not provided opportunity to present his qualifications for the position in the usual process, it casts a shadow over his legitimacy and authority to serve as administrator during a critical time for CMS."

Don Berwick Administrator, Centers for Medicare and Medicaid Services 

Berwick is already being slammed by opponents as an "academic elitist," but attempts to disqualify him as "out of touch" with the real world is not even remotely accurate. His interest in doctoring wasn't limited to the individual patient—his mission has been to heal the system. After getting a public health degree, he ran quality improvement for Harvard's Health Care System (now Harvard Pilgrim). In 1991, he founded the Institute for Healthcare Improvement (IHI), a feisty startup that grew into a global force backed by donations from top donors such as the Gates, Macarthur, and Robert Wood Johnson foundations. And at IHI, Berwick has worked with large numbers of doctors, nurses, and hospitals to test new approaches. 

"To many in the quality and safety world, IHI became their church, and Don its Pope," Dr. Robert Wachter, associate chairman of the Department of Medicine at the University of California, San Francisco, wrote on his widely read blog, Wachter's World. "[IHI] ran on a shoestring for its first decade, fueled largely by the considerable power of Don's vision and personality. Then came the [Institute of Medicine] reports on safety [2000] and quality [2002]—reports that Don had a major hand in crafting—followed by a national movement that promoted transparency, pay-for-performance, tougher regulatory requirements, increased media, and legislative interest." 

IHI's 100,000 Lives Campaign promoted best practices for hospitals and physicians, while its rapid response team model has been adopted as a national standard of cardiovascular care. IHI has also spearheaded alternative delivery and payment models such as accountable care organizations (ACOs), in which hospitals and doctors are motivated to collaborate—and limit care—because their CMS payment is based on clinical outcome rather than a list of services, diagnostics, and treatments. But Berwick's provocative idea that quality and cost are not inversely related is what most animates reform. To support his claim, Berwick cites the decades-long (and disputed) research by Jonathon Skinner and Elliott Fisher at the Dartmouth Institute for Health Policy and Clinical Practice showing that some regions and hospitals in the US with the highest spending on healthcare, including intensive advanced diagnostics, achieve outcomes that are no better than their cheaper cousins. 

In anticipation of a public hearing on Berwick's original nomination in April, 

' editor John Inglehart wrote, "If Berwick can persuade ... skeptics that the IHI is built on collaborations with healthcare providers, not regulatory regimes formulated by the government, maybe he will have a chance to translate his private successes into public victories." Installed now not by vote but by fiat, Berwick will now have to sell reform to the American people. 

Berwick's advocacy has been nothing if not outspoken. He has shown an admirable mettle in speaking plainly about the inefficiencies and inequities of the healthcare system. And as the crisis has accelerated, his willingness to counter the rhetoric of adherents of the status quo has only grown more pointed. A speech he delivered in London in 2008 was so deliberately provocative that it now reads like a parody. 

"I am romantic about the National Health Service," Berwick said, praising the British single-payer system as "a global treasure." Among its virtues is that "you cap your healthcare budget." He added, "Please don't put your faith in market forces. In the United States, competition is a major reason for our duplicative, supply-driven, fragmented care system." 

On the day of Berwick's appointment in April, Senate Minority Leader Mitch McConnell and other Republicans took to the House floor to rail against him. "Many of us are alarmed by the nominee's focus on the British healthcare system," McConnell said, slamming Berwick for "applauding a system where care is denied, delayed, or rationed." Anti-reform zealots from 

 editorial page to an army of bloggers have followed suit, only identifying Britain's NICE by its negatives—never mentioning the fact that it provides Brits with universal healthcare at a per-patient cost almost 50 percent less than in the US. 

Berwick clearly favors taking the battle to the enemy. It remains to be seen whether he will continue to provoke from his new pulpit—and, if so, whether his plainspeak will prove persuasive. "A lot of people make a lot of money on inefficiency—on production of things that have no value," Berwick told 

. "So the minute you try to become truly efficient, you're going to run into stakeholders who are going to tell you that you're harming care, and the knee-jerk reactions of doctors and others will be to reinforce that idea ... [Efficiency] will not come out of the supplier sector ... It will have to come out of very demanding purchasers." 

The healthcare reform legislation got not a single Republican vote in the Senate. The right's argument is that the healthcare industry operates like any other market, with competition for consumer choice forcing price down and performance up. Certain aspects of the machine may work like that, but the usual link between cost and benefit is generally obscured from the consumer through physician decision-making and third-party payment. Value remains unpredictable at point of purchase.  

Berwick maintains that commercial incentives and competition have mainly contributed to the crisis of escalating costs. "We simply have a toxic dynamic in healthcare, that if you make something it will be used. No other market works that way. We have to target supply-driven care as a matter of public policy," he said in the 

 interview. He says that the goal of reform is in fact to make healthcare function like other markets, with demand rather than supply the driver, and to rid the system of wasteful inefficiencies—goals that would seem to appeal to conservatives who are not simply pro-business.  

The imperative to realign the system's incentives through performance-based delivery and payment may have new urgency, but it is not new for CMS. Nor is it a partisan issue. The trend dates back at least to 1984, when the Reagan administration introduced diagnosis-related group payment. Then-CMS head Tom Scully instituted pay-for-performance reimbursement for nursing homes and hospitals in 2002. "There's agreement across the political spectrum that the private sector has failed to control costs," says Scully. "That's not exactly a radical notion." Yet pay-for-performance can breed its own waste and dangers, like doctors' cherry-picking patients for best outcomes. Similarly, cost-effectiveness drug pricing can produce its own wasteful overprescribing. 

Party politics are but one of Berwick's headaches. He also has to turn around the ship at CMS, a 4,000-person, $759 billion behemoth that must now be motivated to embrace reform. At CMS, demoralization may be especially acute because the agency has been reduced to a rubber-stamp function, which it performs secondhand through subcontracts with the private sector via a regional network of fiscal intermediaries and carriers. Whether Berwick's reported charisma, coupled with the wholesale restructuring, can make these dry bones dance remains to be seen. 

Whatever else he may do, Berwick's success or failure will be measured in dollars and cents: Can he bend the curve of annual federal healthcare spending by 50 percent, from 4 percent to 2 percent? CMS will not be able to meet this goal merely by slashing budgets. Rather than just blindly signing the invoices, CMS will increasingly negotiate better prices for its beneficiaries. In addition, the Affordable Care Act grants CMS new powers to set in motion a realignment of incentives around quality. 

Yet the White House may seek to keep Berwick on a short leash. On the day after President Obama signed the healthcare reform bill, Secretary of Health and Human Services Kathleen Sebelius announced big changes at CMS. The bureaucracy is being restructured around five "centers" intended to align its organization with the bill's key provisions, and five healthcare advocates, all sharing extensive government experience, were appointed as administrators.  

The collaboration of pharma and other stakeholders in the rollout of reform is essential for its success. The drug industry was one of the first stakeholders to come to the table of the administration's reform campaign, trading its support for an $80 billion cap on "givebacks," including a 50 percent discount to seniors in the donut hole. That rebate, going into effect next year, will be a very costly writeoff for pharma. But the law will increase the demand for drugs: Not only does it expand coverage to 32 million more Americans but its focus on cost-effectiveness and health outcomes will result in greater investment in prevention and early diagnosis and treatment. (The elimination of cost sharing for preventive services, for example, means that the use of vaccines will increase.) 

A sharp spike in the demand for drugs, however welcome, will present problems of its own, says Connie Austin, a partner in Ernst & Young's Global Life Sciences Practice. "Companies will have to look carefully at their manufacturing and supply-chain capabilities to make certain that they are adequate—and make necessary investments if not." 

At the top of CMS's agenda is what might be called quality-based cost cutting, which will target payments to hospitals, drug and device makers, and other nonphysician providers. Federal healthcare layouts are slated for a 10-year, $455 billion slashing, with Medicare Advantage cuts alone totaling $136 billion. The Part D donut hole may fall prey to the cost-effectiveness reaper, accelerating its 2020 closing date.  

The law's overall cost to the pharma industry over the next decade is generally estimated to break $100 billion. That's 20 percent higher than the original $80 billion deal, but scarcely a threat to industry innovation—pharma is expected to earn more than $3 trillion in sales over the first 10 years of reform. 

Berwick will be in charge of the new $10 billion Medicare and Medicaid Innovation Center, to test alternative incentive models, including accountable care organizations, patient-centered medical homes, and episode bundled payments. CMS has been entirely under Congress' thumb, with the inevitable result that some 30 previous pilot projects have all been ditcheds, casualties of congressional inaction. The healthcare reform act attempts to overcome this obstacle by shifting decision-making authority largely from Congress to the head of HHS, who can fund and run any one of 18 new delivery and payment models—and approve it for wider application unless Congress issues a kill order. 

Last year's stimulus bill allocated $1.1 billion for comparative-effectiveness research (CER), but this year's healthcare reform bill prohibits the government from making decisions about cost and coverage based on the conclusions. The problem with setting policy based on comparative data is well known: What works best for the "average" patient may not work at all for a particular individual patient. Yet while Congress forbids CMS from "picking winners and losers," managed care and other insurers are increasingly doing so. And in response to growing show-me-the-value pressure from payers in other countries, drugmakers are incorporating comparative measures into clinical development decisions. 

"Pharma is going to have to find new systems and processes of demonstrating the value of its products while getting to market as quickly as possible," says Austin. 

Pharma analysts agree that healthcare reform will accelerate efforts drugmakers are already making to transform their business model and cost structure. As an empowered CMS increases pressure on pricing and outcomes, each company will have to decide what level of risk it accepts, says Austin. "This will encourage them to further refine their overall strategy, modifications to product and customer portfolios, and other changes."  

Berwick spent his first day at CMS singing the praises of electronic medical records—one of the few controversy-free items on his agenda. His "Meet Don Berwick" speech was reportedly a hit with the staff. Says Scully: "I have a friend at CMS, a very conservative doctor, who said he was just floored—Don gave one of the most inspiring talks about healthcare that this guy had ever heard." 

Yet nothing would be less surprising than seeing Don Berwick fail. The Republicans could sink his appointment before the midterm elections. The White House may crush his spirit with caution and compromise.  

Less than a month into the job, he was already on the receiving end of a bipartisan congressional pile-on—for implementing a pre-reform 2.9 percent cut in hospital inpatient payments to recoup $3.7 billion in overpayments over the past two years. According to CMS math, this "correction" averages out to be only a 0.8 percent decrease for 2010, but that was sufficient to unite the two polarized parties around a single cause: Patient care will suffer! 

Still, this is the role that Berwick has been rehearsing for all his life, and his plainspoken powers of persuasion may prove the cynics wrong. Says Berwick: "Healthcare [reform] has some of the properties of major social movements in this country: civil rights, environment. So many oxen to be gored, and a lot of people with oxen that won't get gored but think they will. And this [coalition of] the people who would be better off and the people who are needlessly afraid of change—that's 80 percent of America." 

Articles

Features

Berwick's mission: To successfully translate the new healthcare bill into practice.

Mr. Quality Goes to Washington

Intellectual property rights should provide predictability in protecting valuable knowledge assets from unauthorized commercial use. However, a number of recent court cases in the US cast doubt on that assertion, requiring pharma companies to adjust to growing uncertainty about what the law really says—particularly for new and emerging technologies like diagnostic methods.   

The latest example is last month's Supreme Court decision, in 

, that many patent experts had hoped would resolve the question of what constitutes patentable subject matter for these new areas of discovery. The Court affirmed a decision of the US Federal Circuit Court of Appeals but criticized the rule that the Court applied, explaining that it feared automatic application of this rule "would create uncertainty as to the patentability of" several emerging technologies, including "advanced diagnostic medicine techniques." The end result is that the Federal Circuit will have to decide these issues on a case-by-case basis. 

Insight into how the courts will apply the patent eligibility requirement to medical diagnostics can be found through examination of other  cases. The day after the Supreme Court issued its Bilski decision, it vacated another decision by the Federal Circuit, 

Prometheus Laboratories Inc. v. Mayo Collaborative Services

, and remanded it for further consideration by the lower courts in light of Bilski. Prometheus has a patent covering a medical diagnostic method for determining the appropriate dose of thiopurine, a pre-existing treatment for some gastrointestinal and autoimmune diseases. One representative claim requires measuring a known thiopurine metabolite in a patient who had been administered the drug, "wherein the level" of the metabolite "indicates a need" to modify the amount of thiopurine. Mayo successfully argued to the district court that the patent was invalid for failing to claim patentable subject matter because it attempted to claim an abstract idea—the correlation between thiopurine drug metabolite levels and appropriate dosing levels. 

The Federal Circuit reversed the district court after applying its "definitive test" for determining if a process claim covers patentable subject matter. It had articulated that test in its Bilski decision, which the Supreme Court, by modifying the Federal Circuit's reasoning, has now eliminated as a universal requirement. According to that test, a claimed process "is surely patent-eligible" if it is tied to a particular machine or transforms an article into a different substance . However, "'the use of a specific machine or transformation of an article must impose meaningful limits on the claim's scope to impart patent-eligibility"' and "'the involvement of the machine or transformation in the claimed process must not merely be a insignificant extra-solution activity.'" Although the Supreme Court in Bilski ruled that this "machine-or-transformation test is not the sole test for deciding whether an invention is a patent-eligible 'process,'" it still left the test intact but only as one way to analyze the question of patentable subject matter. It explained that "the machine-or-transformation test is a useful and important clue, an investigative tool, for determining whether some claimed inventions are processes under [the law]." Hence despite the Supreme Court's vacating of the Prometheus decision, the "machine-or-transformation test" remains a valid tool for determining patent eligibility. 

It is worthwhile to look at how the Prometheus ruling applied the machine-or-transformation test to the patented diagnostic technique for determining an appropriate dose for thiopurine. The court found the claims satisfied its test by constituting a transformation. It stated: "The transformation is of the human body following administration of a drug and the various chemical and physical changes of the drug's metabolites that enable their concentrations to be determined." Measuring the level of the metabolites "is also transformative" because the levels "cannot be determined by mere inspection" and require "some form of manipulation, such as ... high-pressure liquid chromatography." The court also stated that one "further requirement" must be met: The transformation requirement cannot be satisfied by "merely insignificant extra-solution activity." The court found the transformation required by Prometheus's patent was central to the claims because they "are part of treatment regimes for various diseases using thiopurine drugs." Whether anything other than a mere visual inspection of the patient would fail to qualify under the machine-or-transformation test remains to be seen. 

One curious aspect of the Prometheus decision is that all of the steps in the claims, up until the final required mental step of "determining" to adjust the dose, appear to be in the prior category and are thus valid, according to the court's opinion. Prior to the issuance of the Prometheus patent, according to the decision, doctors administered thiopurine to patients at various doses and knew of techniques to measure the metabolites, even if they did not yet know how to correlate them with dosing. Now, those same doctors for all practical purposes cannot measure thiopurine metabolite levels without risking infringement—even if they never adjust the dose—because unless they are ill-informed of the literature, it may be impossible for them not to draw the mental conclusion that a different dose would be appropriate. 

The challenge for companies moving forward is the number of hurdles that still must be breached to ensure certainty in fixing the patent eligibility of critical new technologies like diagnostics. These include three sizable ifs: if the Federal Circuit reaches the same conclusion in Prometheus upon remand from the Supreme Court in light of Bilski, which is possible because the machine-or-transformation test is still a "useful tool;" if the Supreme Court's three dissenters in a previous case, 

, never persuade a majority of the Supreme Court to adopt their views; and if subsequent Federal Circuit decisions follow the Prometheus decision. Only then will companies be able to take comfort in knowing that patentable subject matter is applied broadly to diagnostic techniques and be able to determine in the future which diagnostic methods are most likely to be eligible for patent protection. 

 is a partner at the law firm Kaye Scholer based in New York. He can be reached at 

Legal

A recent Supreme Court decision leaves open the debate on patent eligibility requirements.

Patenting Diagnostics: Going Back to the Drawing Board

August is the most deceptive of months, with weather patterns ranging from the dog days of becalmed indolence to hurricane. It is a time when it is easy to be complacent, yet the danger of being caught off guard by the "perfect storm" is never more acute. This analogy is appropriate in highlighting our August editorial offerings, and what we see clearly is the comparative advantage that will extend to those who find ways to fly above the weather, rather than through it. 

Our cover lead sums up results of a June 21 Roundtable with seven industry experts on the current outlook for competition. Drawn from the biggest of big pharma as well as smaller biotechs, the group's diversity did not hinder consensus around a single ringing message: Competition is intensifying, the terms of engagement are brutal, and failure 

 an option, for both big (we can call them mergers) and small operations. An industry struggling to meet rising expectations for new science—delivered in novel, patient-friendly ways, at low cost—may find the best strategy is the "controlled burn." This means cordoning off business practices that no longer work, especially in unwieldy, complex organizations that are hard to change, while investing in next-level relationships and capabilities that can generate better returns. 

One of the best investments is training management staff on how to think about competition in a more disciplined way. An informal survey of some 60 c-suite executives, conducted for 

 by the Ipsos Health market research firm, found that while competition strategy was tagged as critical to future success, few companies are devoting the resources necessary to improve their internal capabilities in this area. While the threat is real and understood, the response is dilutive—a sign of complacency in advance of the coming storm?  

Next is our annual handicapping of growth potential in emerging country markets. Much is pinned on the "pharmerging" bloc as an alternative to slumping revenues in the mature countries. It reveals a fast-changing landscape with an increasingly savvy customer base, and where the impact of government on business is growing. Innovation in both products and business process is coming from here as well, often from local firms eager to leverage capabilities from imported technologies to establish a global presence.  

Our story suggests that dipping the proverbial toe in the water in these markets is not an option. Successful engagement now requires the full monty—commitment and scale. As the stampede to the emerging markets accelerates, companies with the biggest stakes will find themselves best positioned to survive the inevitable downsides.  

 third feature is our annual review of company strategies to build patient compliance with medicines. The story provides many examples of good programs to persuade patients to take their pills, on time and at the right dose. 

. In fact, celebrating success may well be premature, as the key metric of performance around compliance has not budged for decades: 50 percent of patients unilaterally cycle off therapy after only 12 months, on average. The danger is that without more progress in lowering this percentage, the commitment of management to compliance programs as more than a PR exercise will fade. Then it's time to prepare for the real storm, as side effects from non-compliance start ratcheting up. 

All this is enough for industry to beg for new terms of engagement—or a new calendar. Are we ready for the next October surprise? 

From the Editor

An industry struggling to meet expectations for new science may find the best strategy is the "controlled burn."

Learning to Weather a Storm

The pharmaceutical industry has taken a tentative view of digital medicine and, by extension, mobile health (m-health), for far too long. But the industry can no longer afford to ignore a medium that patients will interact with more so than live doctors or any other source. It is predicted that, by 2013, over 21 percent of medicine will be practiced online—much of it via mobile phone—so pharma will need to be fully on board. With over 1.5 

 SMS messages sent last year in the US, and 280 million phones in use in this country, healthcare companies must finally take mobile-mediated health seriously as a communications medium.  

As m-health takes its place in the overall marketing mix, pharma should ask itself several important questions before creating a new initiative: Are you improving adherence? Can you use m-health to effectively survey products? Will this initiative help create relationships with healthcare professionals? Other issues to consider include compliance with Federal regulation and spotting and seizing the right marketing opportunities. 

Over the last decade, the computer has upended the existing health information paradigm, empowering millions of patients to participate more fully in their own healthcare. But the standard computer is being rapidly superseded by mobile technology. Sheer ubiquity makes even a basic cell phone a powerful alternative to the networked computer, and now smart phones like the iPhone and Blackberry are—app by app—achieving true computer-grade power.  

The stats tell a spectacular story. The cell phone represents perhaps the fastest technology adoption in history—trumping even the steep adoption curve of the desktop computer. It is estimated that there are now 4.6 billion phones in use worldwide, with roughly 30 new phones going into service every second.  

In the US, cell phone ownership easily outpaces Internet access: 90 percent of people own cell phones whereas only just over 70 percent have Internet access. Of those with chronic conditions, only 50 percent are online. And an increasing portion—18 percent—of American households now are "mobile phone only." There are now more homes with cell phones than with televisions. 

Consider how the cell phone fundamentally changes how patients interact with healthcare resources and healthcare information: it redefines the "patient-provider cycle," that critical flow of information, which ultimately determines effective allocation of resources and associated health outcomes. This will have profound implications both for patients and industry. 

Mobile phones enable a two-way communications cycle, connecting and sharing information between providers (including physician, nurse, medical technician, etc.) and patients, in a way even more dynamic than the Internet. With m-health, the mobile phone becomes a kind of surrogate health advisor, always close at hand. Using simple SMS messages, phones can deliver timely, tailored health messages and reminders: "Watch your diet;" "Take your pills;" "Report health status signs and symptoms." Cell phones also channel information back from the patient to report health status.   

A recent m-health summit meeting highlighted success stories both in the US and around the world, demonstrating its promise. Francis Collins, former head of the Human Genome Project and now head of the National Institute of Health (NIH), indicated that game-changing developments are just over the horizon and drove home the point of just how central a seemingly generic, mass communication consumer device will be in probing the next frontier of medicine and biological understanding. Some of the advances discussed at the Summit:  

 Numerous applications already exist to help patients monitor diet. But imaging technology linked with complex protocols allow the rigorous collection of field data for large, ongoing nutritional studies; for example, a cell phone is pointed at a plate of food before and after a meal to determine exactly what was presented and what was consumed. Imaging software recognizes each meal component, analyzes caloric content, and compiles the data in the medical record (and clinical trial database). 

» Activity Monitoring using Accelerometer:

 The same type of accelerometer routinely used in smart phones can detect levels of physical activity—running, walking, resting (lying on a couch watching TV). Data captured and sent by phone is used to support obesity control research and behavior modification programs.  

Small devices implanted under the skin or within the body control and monitor drug concentrations and send signals to an external device that is connected to the cell phone. This is ideal for drugs with a narrow therapeutic window.  

Other exciting m-health applications leverage social networking sites like Facebook and Twitter. With these, patients can discuss medical issues with other patients, provide emotional support and share experiences. Similarly, physicians share insights with their peers, discuss emerging trends, innovative solutions, and career challenges.  

M-health technology contains the means for its own measurement, providing a rich data stream on which to evaluate its impact. In one study, smokers receiving smoking-cessation SMS messages had a cessation success rate of 28 percent, versus 13 percent for the control group. And SMS reminders improved primary care attendance from 48 percent to 59 percent in a study of text message usage and attendance in primary care.  

Not to say that there are not some challenging issues, as there will be with any new all-encompassing medium—just looking at the US, there are many conflicting regulatory authorities at the state and federal level and different technical standards. Health recommendations in California may not hold in Massachusetts. Cell phone specs may differ network to network. However, the federal government is exploring ways to promote regulatory and technical cooperation, reconcile differences and thus open the way to a universal system. 

From simple SMS devices to smart phones, m-health is set to leapfrog the Internet-enabled computer as a healthcare communications platform and provide a revolutionary gateway to better health.  

 is CEO of Grey Healthcare Group. She can be reached at 

Columns

The ubiquity of the mobile phone has placed healthcare in the palm of consumers' hands.

What Pharma Needs to Know About M-Health

There is fresh momentum in big pharma's seismic shift toward emerging countries, with the latest surge looking more disruptive to the industry business model than the early wave of interest around revenue growth. In this second-annual review of the emerging market shock, 

 surveyed IMS Health and several pharma players to find that industry's vision for these markets is now much larger and ambitious, extending to the global comparative advantage from creating innovative local precedents in how medicines are developed, distributed, promoted, and reimbursed. The battle is on to lock in the loyalty of an enormous rolling wave of aspiring, diverse, and increasingly networked health consumers.  

Pithy phrasing from a software pioneer in emerging markets is equally fit for purpose in Big Pharma today: "We came for the cost, we stayed for the quality, and we're now investing for the innovation."   

For companies like Pfizer, which hopes to push emerging market sales as a percentage of total revenues to more than 20 percent from 13 percent over the next five years, the appeal is equally simple. "Sheer growth is the allure, particularly in therapeutic areas like cardiovascular, pain, and anti-infectives which have reached their peak in the mature markets," says Guilherme Maradei, Vice President for Strategy in the company's Emerging Market Business Unit. "It's like gaining a second life for these products. The unmet medical needs we find in the emerging markets gives us scope for improving the lives of patients who previously did not have access to our existing medicines while we also have an opportunity for fresh innovations in how we adapt the science to the patient."    

New data and insights provided by IMS Health to 

 confirm that the trends explored in the July 2009 issue are stronger and more pronounced. The focus then was on just seven "pharmerging markets"—China, Brazil, Russia, Turkey, India, Mexico, and South Korea—that were forecast to drive industry growth to 2020. IMS has now expanded this list to 17 countries, whose growth rate in medicine sales over the next three years will comprise about 50 percent of global market expansion. By 2014, IMS predicts the "pharmerging 17" will match the size of Europe and Japan combined, adding $140 billion of incremental sales, with China occupying a class by itself, replacing Japan as the world's second-biggest market for drugs after the US by 2016 (see chart).  

Rising levels of healthcare access and funding, and the changing mix between generic and innovative products are contributing to the market realignment. In the latter case, patents are expiring at an accelerated rate without a compensating flow of new innovations, allowing cheaper generics to expand their reach in the US and Europe. The trend line may even be more pronounced as prices in Europe contract sharply due to high government deficits. Surprisingly, most emerging markets are in far better financial condition, with rising personal incomes, minimal entitlement exposures, and lower levels of public debt. The large personal out-of-pocket segment in the pharmerging 17 is another factor that softens the impact of patent losses on the ability of companies to price to the market.   

While the numbers alone suggest high potential for growth, the landscape for emerging markets is not uniformly fertile. Improvements in IP enforcement and a commitment by many governments to upgrade product regulation must be balanced by insular industrial policies that favor local producers, particularly in generics. Patients still carry much of the burden of healthcare spending, which requires customized investments around willingness and ability to pay for innovations.  

More important, government interest in the sector, while largely positive, could lead to price controls and the adoption of European-style measures to limit the overall size of the drugs bill. Turkey is emblematic of this trend, having imposed earlier this year a new pro-generic pricing and reimbursement regime that will cut market growth to around 5 percent through 2013. "Uncertainty is a killer for investment in any market, and unfortunately the emerging bloc is not immune. Turkey made its reforms with little notice and minimal consultation and as a result industry expectations for the market have dimmed considerably. Actions were taken in isolation of the impact on the country's future as a global competitor in innovative pharmaceuticals," says Jeff Kemprecos, Public Affairs Director for Emerging Markets at Merck.   

To help companies clarify the level of opportunity in each market, IMS has produced a new global analysis that separates out the mature markets (those with a per capita GDP threshold of $25,000 or higher) and then groups the pharmerging segment into three tiers based on each country's minimum anticipated added value to the total pharmaceutical market between now and 2013. IMS Market Prognosis evaluations were also used to provide a broader policy and horizon-scanning context.  

With a GDP of $7.9 trillion in 2008—third-largest in the world—and a pharmaceutical market that is expected to drive $40 billion in growth through 2013, China, as Tier 1, occupies its own space in the rankings. An increasingly affluent population of 1.3 billion is raising pent-up demand for healthcare, and drugs to treat chronic diseases and manage a looming transition to a much older society are keys to meeting the need. At the heart of China's healthcare transformation is a comprehensive $125 billion investment to provide basic health insurance coverage for all citizens by 2011. Massive investments are also under way in health infrastructure, particularly outside the major coastal cities. These moves, which presage a much stronger government hand on the health till going forward, is forecast to double the size of the pharmaceutical market by 2013.  

The growing role of government in healthcare does carry possible downsides. Ray Hill, IMS Senior Vice President for Consulting and Services, told 

 "Public reimbursement rules around the essential drugs list will lead to more government scrutiny of pricing by foreign multinationals. Companies ought to be figuring in their operation plans a possible 20 to 30 percent contraction in margins for products on the essential drug list sometime in the next two years, due to pricing reform." Interestingly, however, the fact that India is not moving closer to a subsidized reimbursement system has led IMS to conclude that growth there will lag the potential indicated by its population size and income expansion. "India shows the trend can work both ways," said Hill.  

 Tier 2: Brazil, Russia, India—Hot on the Heels

Brazil, Russia, and India are each expected to add $5 billion to $15 billion to the pharmaceutical market through 2013. Prospects aside, balancing the relative benefits and risks of these markets will be paramount to developing a clear position for successful entry or expansion. 

Brazil has achieved consistent double-digit pharmaceutical growth over the last few years, growing to 20 percent in 2008. The market benefits from a high percentage (85 percent) of city dwellers, where access to medicine is higher, public health insurance covers around 90 percent of the population, and there is increased uptake of supplementary private health insurance. However, out-of-pocket healthcare costs are high, and income distribution is poor, limiting the number of people who can pay for innovative therapies. The local environment has seen a number of recent changes, including growing competition from generic medicines, increased government investment in state-owned pharmaceutical plants, and greater emphasis on cost-containment initiatives which tend to favor local companies. 

The Russian market has also experienced high double-digit growth in recent years and offers potential from increased private insurance and reimbursement. Physician education is improving, although poor knowledge of prevention, diagnosis, and treatment at primary care level and the overall lack of clinical standards and guidelines still impede successful management of chronic disease. High out-of-pocket prices, increasing government influence over drug prescribing, and powerful lobbies in favor of local manufacturers are also a feature of this market. 

In India, a number of recent developments have helped foreign drug investors, not least of which is the establishment of intellectual property rights (IPR), as well as a rising middle class, emerging rural markets, and improvements in medical infrastructure. The worry is the dominance of local generic firms and lack of enforcement of IPR regulations. Competition from copycat generics and low-cost biosimilars are also problems, which is accentuated by the absence of a transparent drug approval process. 

Following behind the Tier 1 and Tier 2 markets are a group of 13 far-flung nations ranging from Argentina to Vietnam. Generating GDP of under $2 trillion in 2008, with an anticipated cumulative contribution of $1 billion to $5 billion to global drug sales through 2013, these lesser-known pharmaceutical markets offer rich opportunities for growth. 

Romania, for example, has been a consistently high-performing market relative to its Central and Eastern European peers and is currently growing at nearly 23 percent. Notwithstanding a reduction in the healthcare budget and challenging new price regulations, a number of major changes will positively impact the pharmaceutical sector over the next few years. These include improvements in public hospital quality, increases in health insurance contributions, healthcare decentralization, expanded reimbursement for pensioners, and healthcare screening for chronic diseases. 

Although highly fragmented and with ongoing concerns over drug registration and IPR protection, Vietnam is also attractive. There are expanding opportunities in the over 65-year-old patient category, an enlarging private insurance market, and increased public funding that will boost growth in the hospital sector. Egypt, too, while long overdue for increased healthcare investment and tighter IP regulations, offers rising potential, with a fast-growing population, widespread access to healthcare, significant growth in the dominant retail market, and a relatively quick drug approval process. And  

By and large, however, most global drug companies remain underexposed and underperforming in the pharmerging markets. In 2009, the top 15 pharmaceutical manufacturers derived just 0.9 percent of their combined sales from China; 2.9 percent from the Tier 2 markets of Brazil, India, and Russia; and 5.6 percent from the Tier 3 markets. In many cases, this reflects a continued focus on the premium section of the market rather than the typically larger-branded generics segment, where margins are lower. This is beginning to change, with some manufacturers now deciding to operate in the generics sector.  

Over time, IMS predicts a big swing in industry revenues to the 17 pharmerging markets as they continue to gain share at the expense of the US and the top five European markets. Much of this will be volume growth, and the impact will be most pronounced in the short term. In fact, IMS expects a resurgence of growth in the mature markets by 2015 and beyond, with the US leading the way (see chart). The worst of the patent cliff will be over and new product introductions will help address a growing array of unmet medical needs that insurers will be more willing to pay for.  

Assuming the IMS forecasts pan out, there is a premium on companies finding the right strategy. A 

 discussion with IMS anslysts on July 2 as well as feedback from key pharma players revealed seven basic principles that will help drive success in emerging markets. 

There are clear advantages for the decisive early movers. Companies that take the lead in market entry can often reap the benefits of more discernible differentiation and better key opinion leader  relationships, compared to those who choose to wait. Bayer AG is a good example, having picked early on two emerging markets (China and Turkey) as the focus for its investments and then pouring in the resources to secure double-digit sales growth in each. Superior local execution and a stable senior leadership team have also played an important role in Bayer's performance.  

Competition for space in the emerging markets is getting intense, and the choice is to build or buy market share—which, in turn, requires a substantial resource commitment. Examples include the Sanofi-Aventis acquisition of generics manufacturers in Brazil (Medley) and Mexico (Kendrick), making the French company Latin America's market leader. Similarly, GlaxoSmithKline's expanded partnership with Aspen has paved the way for increased access to the wider African market. Novartis has committed to major investments in China, including $1 billion on R&D, and is investing heavily in R&D capabilities in Brazil. Last month, Merck announced a major joint venture with local Chinese manufacturer Sinopharm to collaborate on vaccines and other portfolio products the company does not yet sell in China.  

Understand the Local Market; Each is Unique

No defined strategic blueprint exists that can be applied uniformly throughout the emerging market universe. The IMS statistics make this very clear. There are profound differences in the structure of healthcare, the position of various stakeholders, the capacities and expertise of governments, and the culture of medical practice. Geographic variations in development and urbanization are another important, often overlooked factor: internal regional differences can loom as being more important than contrasts between the countries. Regional and city-based strategies have to be carefully tailored to take account of these differences. Similarly, disease profiles, treatment paradigms, and diagnostic rates in the pharmerging markets are not only different from those of the major developed countries but also carry subtle distinctions between the various tiers. Differences in key market segments, including the role of generics, are a further challenge.  

Finally, competition in pharmerging markets is also different to that in the mature countries, with power often in the hands of local companies who know the operating environment. While the large multinational pharmaceutical companies have no doubt increased their presence in China, they continue to be outnumbered and outperformed by local manufacturers with their strong geographic reach, wide distribution networks, flexible promotional methods, and close engagement with local governments and hospitals. 

Leverage Your Global Portfolio—Then Add Local Value    

Because local competition can be intense, companies must strive to differentiate their offerings, relying on the global portfolio of medicines that with some effort and ingenuity can be adapted to local conditions. Pfizer has found success by building scale while maintaining strict criteria on what it will introduce to the market. "Our core focus is on select products that we can show have been proven scientifically superior to the current standard of care," says Maradei. "It includes not only innovative treatments, but generics, where we can demonstrate that superiority against local players through our quality guarantees and more reliable product supply." 

Bayer also emphasizes a targeted portfolio approach. In China, it opted to invest continuously over time in mature products for diabetes (Glucobay) and hypertension (Adalat). The company has been able to achieve a dominant position in these high-growth therapy areas and now derives 3 percent of its global revenue from China.  

Another tactic is fostering customer loyalty around the portfolio. In the Philippines, IMS helped one big pharma company devise a strategy to deploy a bundle of useful supplementary services, such as free blood tests, for an infusion product where patients undergoing treatment were subjected to substantial down time. These "loyalty programs" can make a big difference in capturing what is in many emerging markets a fragmented, unorganized, and still evolving customer base.  

Identifying who your customer is may sound elementary, but in many emerging markets it is the most difficult task of all. Alignments among the trade are not obvious and it is often counterproductive to hold fast to the traditional perception that the physician is key to purchasing decisions. While this may be true for the very top tier of the market, the physician is frequently irrelevant when companies begin examining how to extend medicine's access to a larger population. Plugging this gap raises the question of whether it is better to build customer relationships from scratch or to in essence purchase the expertise through local acquisitions.  

Marcos Macedo, IMS Practice Principal for Brazil, notes that much of his work today focuses on helping companies understand changes in the local stakeholder environment, with particular emphasis on who is actually making decisions on prescribing and access. "Brazil has a strong out-of-pocket business and a reimbursement-based segment that is rising in importance. In both cases, decision-making power is moving from the physician to the trade, which means companies are facing players more willing to choose among alternative therapies, [so] it's more important than ever to pitch the value behind the brand," says Macedo.    

 A Critical Differentiator: Finding the Right Price Points 

Another key challenge is building a pricing strategy that accommodates the complexity of the purchaser community in emerging markets. It is compounded by a lack of transparency in how basic decisions on pricing are made, with insider status often deemed to be more important than technical competence. The impact of the informal economy on demand is another intangible. And Big Pharma has to accommodate the growing reliance on international price referencing, where low prices accepted in one country can carry forward to depress margins in larger markets.  

It's back to the future in Pharm Exec's second-annual review of industry prospects in the IMS "Pharmerging 17"

Strategies for Emerging Markets: Seven Keys to the Kingdom

There is no question that a large number of patients do not adhere to their treatment regimens. Whether they ignore their doctor's orders and don't fill their prescriptions, refuse to pick up prescription orders at the pharmacy, or just don't continue on their medication, the fact is nonadherence is a huge problem for the pharmaceutical industry and all parties with ties to the healthcare system. 

"People always said that medication nonadherence was a $100 billion weight on our healthcare system," explains Elizabeth Oyekan, area pharmacy director for the Kaiser South Bay Medical Center. "But as of five years ago, that number literally tripled, and in the literature you'll see that it is anywhere from $177 billion to about $300 billion." 

The problem is so deep that all stakeholders in the healthcare industry are struggling to figure out what to do. Pharma companies are hindered, because patients feel their adherence programs are too promotional; physicians complain that they don't have enough time to meet with patients, let alone sign them up for compliance programs; and payers are frustrated because patients that start and stop medications are likely to cost more in the long run, especially if their non-compliance puts them in the emergency room. 

To be fair this isn't a new problem. Adherence has been a pain point for the pharmaceutical industry for decades, mostly due to the lack of knowledge about why patients choose not to take their medicine. Industry was under the impression that most patients didn't follow through with the their treatment because they simply couldn't remember to take it. 

The US Outcomes Research Group at Merck wanted to test this theory and analyzed 79 studies pertaining to the reporting of prescription nonfulfillment rates at the patient and prescription level. 

The report, "Medication Nonfulfillment Rates and Reasons: Narrative Systematic Review," categorizes medication nonadherence into four categories: 

—Patient never fills the first prescription. 

» Patient doesn't refill the medication after the first prescription. 

» Patient does not take his or her medication as prescribed. 

» Failure to continue treatment after first prescription is filled. 

After reviewing nearly 30 years of research, it was determined that 15 percent to 20 percent of patients, on average, do not get their first prescription filled.  

According to Abhijit Gadkari, senior manager, Outcomes Research at Merck, the old adage that patients just can't remember to take their medicine proved to be a myth. Instead, the main reasons for nonadherence are:  

 » Lack of perceived need for the treatment; and 

 The report states that "about one-third of chronically ill adults who underuse prescription medications because of cost do not discuss medication affordability with their providers in advance, and may never raise this issue with their providers at all." 

However, the fears about taking a medication or the feelings that a drug isn't needed fall squarely with the physician. The report cited a 19 percent spike in risk of nonadherence in patients that felt they didn't understand what their physician was telling them. This is a particular headache for the physician, because he or she typically isn't reimbursed for time spent educating patients about their treatment. Add to that the short amount of time a doctor has to see the patient and it is possible that many patients feel overwhelmed and underserved after receiving a prescription. 

Worst yet, new technology such as e-prescribing might make things worse. Merck found that in the few studies that had e-prescribing, if the patient hadn't walked out with the physical copy of the prescription in hand, sometimes they didn't realize that the scrip was written and might not come back to fill it. Either they forgot that the scrip was directly sent to the pharmacy, or they might not know that it was written at all.  

"If the patient doesn't come in for that first scrip—if they don't have a chance to see if the drug works for them or not—there's really no chance that the patients can experience firsthand if the therapy is working for them," explains Gadkari. "In that case, the pharma industry is losing these patients forever." 

The situation is a giant catch-22 that won't be rectified until some kind of paradigm shift happens that makes all of the stakeholders responsible for the success of treatment regimens. 

The closest thing down the pike is pay-for-performance (PFP), a controversial initiative in which insurance companies will compensate physicians based on the outcome of the patient. Physicians are incentivized to make sure that a patient stays on a treatment path and follows the regimen prescribed. Pilot programs for PFP are under way, but how well they will work is still undetermined.   

"With the focus on outcomes, we can't just look at efficacy and know that this drug lowers cholesterol," says Jonothan Tierce, general manager, Health Economics & Outcomes Research, IMS Health. "We realize that we are all in the same situation—the payers, the providers, the patients, and the physicians—and we all have a common interest in getting patients to take their medication so that we can get the outcomes that we are looking for."  

Research shows that if pharma companies send out reminder letters, a few more patients will take their medication more regularly, but it's not a big proportion of patients. The goal then is to target patients based on the exact reason why they rejected the drug.  

"The key is understanding why somebody doesn't come in to take medications and then implementing interventions or messages that are tailored to patient's specific beliefs," explains Gadkari.  

The buzzwords "targeted education" are reverberating throughout the healthcare industry as the best way to help patients stay on their treatment. Kaiser Permanente, the biggest payer in California, recently received an innovation grant to create a framework to systematically address nonadherence to avoid the trial-and-error methods that most pharma companies are implementing.  

"They said, 'Okay, we will give you some money,'" Oyekan says. "'Go work with a team of people to come up with the tools to put this concept into reality.' And so we went to work with that."   

The Kaiser team created tools centered on a handbook titled "Be Smart" that was initially released for pharmacists and nurse care managers. The book outlines the different types of barriers and how to assess whether or not a patient is even willing to address these barriers, the different barriers, solutions, and the different resources within and outside of Kaiser Permanente. 

"The next chapter deals with how to motivate a patient," Oyekan continues. "Here, we started talking about how companies must look at a patient who is on medications—like a marathon runner. You just don't go out there one day and say, 'I'm running a marathon' and you're successful at it." 

The handbook outlines a litany of tools that can be used to get patients invested into their treatment, including: regular e-mails, snail mailers, regular phone calls, meetings with care managers, and informational classes.  

A big part of the program is also about understanding adherence around a particular treatment. Kaiser groups the different medications it dispenses in the outpatient pharmacies by drug class, and then lists key topics associated with the treatments that pharmacists can talk about with patients. 

"So we can actually identify the patients who are nonadherent," Oyekan says. "We can give those patients to the provider, and then the provider can use the 'Be Smart' methodology to identify what the issue is with the patient, give the solution, and then triage them either to health education, to a care manager, to a pharmacist, and to the different other resources that are available to the patient." 

The big question that remains is how can a program like this be tailored to the individual patient? Much of the handbook includes no-nonsense ways to proactively educate and inform, but shouldn't much of the conversation be common sense at this point? 

According to IMS Health, there is no easy—or low-cost—solution. 

IMS Health studied the results of 755 adherence programs (from 1972 to 2002) pertaining to cardiovascular medications—a disease area that has a very poor level of compliance. 

The study agreed with most of Kaiser's assumptions. "We found that the most effective approaches for improving adherence are multifaceted," the authors stated. "Personalized, intensive interventions offered the greatest improvements in adherence, as was found in our earlier study. However, these improvements in adherence with personalized intensive interventions must be balanced against their higher costs." 

And the clincher here is higher cost. A traditional pharmacist program where the patient has a one-on-one session to discuss his or her treatment can cost upwards of $125 per patient. Compared to mailers that are sent out at random to everyone for the cost of a postage stamp and a postcard, the cost is astronomical.   

"By targeting intervention, pharma companies are making the programs more effective and less expensive, because they aren't spending money on a lot of different tools to everyone," says Richard Chapman, principal, Health Economics & Outcomes Research, IMS Health. "Much like personalized medicine, if we can really hone in on a subset of patients that are really going to benefit from the different things, we can be much more effective in how we go after patients." 

One partnership that appears to be working well is the collaboration between Pfizer and Walgreens. The two giants in their respective industries created an informational program that allows the pharmacist to engage customers about their medication. 

"We all know that the pharmacist can and should be playing a greater role in the whole healthcare system," says Adele Gulfo, US president and general manager, primary care at Pfizer. "The pharmacist is an educated person at the point of [dispension]—that's a very impactful point for a patient." 

Pfizer and Walgreens launched an intervention-based program featuring behavioral counseling and education at the point where a patient goes to pick up his or her medication.  

"When you have motivated participants, pharmacists are going to go out of their way to ensure that the patient understands their medicine and disease, and a more educated patient has a better shot at having a better outcome," Gulfo says. 

This particular pilot program is only for Pfizer medicines, but the pharma giant would like to see it spread to other disease states.  

"When you ask a patient, 'Why didn't you take that medicine?' by and large they will say that the physician didn't take the time to explain what the medicine really does," Gulfo says. "The second missed opportunity comes when the pharmacist doesn't explain it. That's where you get a lazy attitude on the part of the patient." 

The Pfizer/Walgreens collaboration encourages the pharmacist to get out from behind the counter and engage the customer in a conversation, allowing the patient to leave with a much more educated mindset about not only their medicine, but their disease and lifestyle. 

Pharma's quest for patient adherence has been trying. Could better patient education be the answer?

Pharmaceutical Executive-08-01-2010

Mr. Quality Goes to Washington

Patenting Diagnostics: Going Back to the Drawing Board

Learning to Weather a Storm

What Pharma Needs to Know About M-Health

Strategies for Emerging Markets: Seven Keys to the Kingdom

Adherence Through Education