Behind the vaulting growth statistics that make China the centerfold in Big Pharma's global playbook is a sobering fact: registering a new drug for local sale is still a slow, dimly lit game of chance. China's regulatory approval system has not kept pace with the needs of an expanding local market, relying on opaque, erratically administered procedures known mainly to staff, many of whom lack the scientific qualifications common among drug reviewers in the United States, Europe, and Japan. You might call it a dated, 20th century pathway to the big market of the future.  

A mix of internal reforms, stakeholder insights and foreign pressure has begun to change that. An overhaul of the Drug Administration Law is pending and has been cited as a priority by the Chinese government. In March, the State Food and Drug Administration (SFDA) was reorganized to give drug regulators more independence and a higher profile. The renamed China FDA (CFDA)now reports directly to the government's top executive body, the State Council, instead of the Ministry of Health, and incorporates several formerly separate bureaus responsible for quality and safety inspections.  

In a measure of how much China has changed, stakeholders outside the government have decided to weigh in. The most prominent example is the intensive review of the entire decision-making chain behind new drug approvals in China just completed by a cross-functional multinational team of experts convened by the Pharmaceutical Law Institute of Beijing's Tsinghua University. The Institute team, led by its chair, Dean of Tsinghua Law School Wang Chenguang, and with tacit encouragement from the leadership of the CFDA and Ministry of Health, has spent the past year examining process and policy in three ­specific areas:  

			» Approval and conduct of clinical trials

			» Institutional functions and capabilities			

Three expert working groups were established around each topic, each led by two rapporteurs, one from China and the other from the United States. A combined report—"Building a 21st Century Pharmaceutical Regulatory System"—was released on June 23 at a Pharmaceutical Law Institute event in Beijing hosted by Professor Wang. The event featured the participation of representatives of the new CFDA as well as the State Council's Office of ­Legislative Affairs.  

The report concluded that ­revision of China's Drug Administration Law should focus on nine integrated objectives. Highlights include the following:  

Improve administrative procedures and put additional resources behind efforts to make China a global center for R&D in innovative medicines, including biologics.

 Greater clarity in rules for the conduct of local clinical trials and allowance for the use of relevant foreign trial data in registration applications are critical if China is to succeed in developing new drugs that will win approval in the global market. "Currently, a Phase I study sponsored by a multinational company can only be conducted in China if the compound is already registered or undergoing Phase II and III trials in other countries. This discourages these companies from including Chinese sites in multinational clinical development programs, which makes it harder for China to realize its objective to be a leader in the registration of new global innovative drugs," said Ken Kaitin, Director of the Tufts Center for the Study of Drug Development in Boston and co-rapporteur for the report on clinical trial issues.  

Increased transparency and outside participation in the drug evaluation and approval process.

 This can be done through such measures as advance notices on regulatory actions and the systematic inclusion of industry, academia, patients, and other stakeholders in decision making. Too often, the report says, regulators operate in "campaign mode," consulting others only as they see fit. An important reference in the report was keeping intact that regulatory "firewall" between the market authorization and "value," i.e., pricing. Such differentiation is fast eroding in the mature country systems.  

Harmonization of local approaches to trial management, ethical oversight/compliance, registration applications, manufacturing, patient safety, and risk management according to internationally accepted norms

—essentially raising the bar on local performance to better prepare Chinese manufacturers to compete in the global market. The team emphasized that China is currently proficient in producing generic drugs, but if the country wants to move beyond that, with new medicines that innovate for undertreated diseases that distort public health, the regulatory system must change—beginning with these and other related ­approval procedures.  

Bolstering the platform is a strong endorsement of IP rights,

 in which the report noted that China's implementation of the WTO TRIPS treaty still lacked "clarity." The problem of patent linkage was addressed by recommending a new procedure to help originator patent holders ensure CFDA is aware and can respond to infringements by generic producers. Another point was the need to formally confirm that both imported and domestic medicines are eligible for data protection, with advance notice to originators given prior to the registration application.  

Improve the institutional capacity and effectiveness of drug regulatory agencies,

 through actions like better defining the CFDA's legal status; introducing formal science-based review criteria; creating a clear ­pathway for accelerated review of the most promising therapies, and applying this equally to domestic and imported drugs; and establishing clear lines of authority between CFDA, other central government agencies with a mandate to maintain public health and—most important – the provincial administrative authorities. At present, the Drug Administration Law fails to set a clear demarcation between the functions and responsibilities of the various regulatory bodies for drugs, and local authorities are subject to strong political pressures that limit their independence. Reliance on independent examiners and experts was also cited as a way to raise the skills base and professional qualifications of regulatory staff, which was profiled as being way below international norms.  

The report provided some interesting data points to buttress this reform agenda. It notes that in China it takes on average a year and a half to obtain approval to launch a clinical trial—the less formal FDA notification process in the United States typically takes no more than 30 days. In addition, staffing for regulation throughout China is kept abnormally low by quotas that link hiring to a tiny fraction of the population being regulated. And the professional credentials of regulatory staff lags significantly against the standard in industrialized countries. Only five percent of CFDA staffers hold a master's degree or above; 45 percent of CFDA staffers lack even a bachelor's degree.  

Susan Winckler, President of the Food and Drug Law Institute in Washington, who served in a personal capacity as co-rapporteur for the work group on institutional structure and functions, told 

 that what is needed to accompany a new Drug Administration Law is adoption by the regulatory bodies of "an internal culture of continuous improvement." She notes that the challenges facing the Chinese system are actually the same everywhere—it's simply a matter of degree. "The US FDA is also resource-constrained and is under similar pressure to be more predictable and transparent in the way it operates." Winckler believes that the Tsinghua project should thus act as stimulus to a broader dialogue to which regulators in all countries can contribute. "Change will come about if that discussion includes not just the regulatory community, but those who are regulated too."  

Looking forward, CFDA officials anticipate that a first draft of a new Drug Administration Law is likely by the end of this year, and it has invited Tsinghua to contribute ideas to help shape the process. In September, the Pharmaceutical Law Institute team will commence a second phase of the project, with three new work streams to address the following topics: pharmacovigilance and risk management standards; a regulatory pathway for biologics, including biosimilars; and legal/product liability reforms. Since the thrust here is to identify and transfer best practices that might prove useful to China, Tsinghua hopes to draw in contributing experts from Europe and other mature countries, in addition to the United States. 

's Editor-in-Chief. He can be reached at 

Articles

Column

With a revision of China's basic drug approval law now underway, a multinational team of experts is proposing major changes to make the country a world class player in innovation.

Breaching the Great Wall

The ink is not yet dry on the European Union's Horizon 2020 agreement to invest some €70 billion ($92 billion) in research over the next seven years, and already contenders for funding are jostling for attention as they prepare their bids. Some of the sharpest elbows are wielded by pharmaceutical organizations, because a large portion of the budget is reserved for life sciences, and the biggest share of that is likely to go to the fittest and fastest in the fray. 

Europe's biggest drug industry association, the European Federation of Pharmaceutical Industries and Associations, scored something of a coup by having breakfast with the president of the European Commission on the very day that the program proposal was agreed in mid-July. EFPIA has won support from the commission (and possibly €1.5 billion) for a new and improved version of the Innovative Medicines Initiative (IMI), its public-private partnership with the European Union on early-stage collaborative research. At a special launch ceremony on the upper floors of the commission's headquarters in Brussels, Joe Jimenez, CEO of Novartis and vice-president of EFPIA, announced that industry would match this with €1.5 billion in cash and kind. 

Others have moved almost as swiftly to press their case for funding. Before July was out, the European Alliance for Personalized Medicine had announced a major conference in the European Parliament in Strasbourg on "Horizon 2020 and the Future of European Research," amounting to a naked pitch for support for this coalition's ambitions to develop the right treatment for the right patient at the right time. Its members—industry, academics and patient groups—also favor public/private collaborations as "a necessary condition to succeed where individual stakeholders' efforts have failed or were delayed." 

A markedly different approach to utilizing the life sciences budget is being advocated by civil society organizations that are less interested in industry success and, they claim, more interested in patients.  Arguing for wider access to medicines, the European Public Health Alliance and its partners, who include Doctors of the World and Health Action International—Europe, are calling for research and innovation that is "needs-driven" and "based on social criteria." The objective, they say, should be "affordable access to R&D outcomes" that can "bring medicines prices down." This is central, they argue, to providing an adequate response to the "dreadful situation faced by millions in Europe regarding access to medicines and the dire health outcomes that result." 

Reaching agreement on Horizon 2020 had been one of the priorities that the Irish government had set for its six-month stint in the chair of the European Union in the first half of this year. "It will boost innovation, jobs, and growth," said Ireland's research minister, Sean Sherlock, as he emerged triumphant from the round of talks that clinched the deal. Until the last minute, and through six months of laborious negotiations, questions remained over the size, scope, and emphasis of the program, caught in crossfire from national governments, political parties, and diverse lobbies from science, industry, and consumer and environmental organizations. At the end of 2012, the program looked as if it might be shredded as the austerity-hit European Union battled over cuts in its long-term budget. But the bulk of the funding was ring-fenced, after urgent pleas from Nobel prizewinners, and industry groupings across Europe representing everything from steelmakers to aviation. 

The European Parliament also fought to maintain the integrity of the program against member state penny-pinching, and to champion the role of smaller researchers too. As the agreement was initialled, Christian Ehler, the center-right German politician who piloted many of the Parliament's debates on the plans, praised the deal, and congratulated himself on winning "a new bottom-up mechanism that will allow for small innovative projects to be funded at any time." His Portuguese colleague, Maria da Graça Carvalho, also closely involved in the Parliament's debates, claimed responsibility for "measures aimed at increasing participation by small research groups and smaller firms." But Swedish liberal Kent Johansson greeted the opportunities for innovative smaller firms as a victory for his political group. And so did the chair of the Parliament's research committee, Italian Amalia Sartori. Even then, not all the Parliament's aspirations were satisfied. Belgian Green politician Philippe Lamberts described it as "a timid agreement" that "lacks ambition." 

In the program's final form, the funding will be split across three strands. More than a third will go to a segment termed "Excellent Science," which will finance pure research, vital infrastructures, and future and emerging technologies. A second component—"Societal challenges"—will receive a similar amount, and focus on what are billed as "areas of most concern to citizens and business." This segment also offers possibilities for funding research into health— particularly in healthy living and active aging— alongside support for research in climate, food, security, transport, and energy. A third strand—"Industrial Leadership," with about a quarter of the total funding—will back selected industrial technologies, notably nanotechnologies, biotechnologies, and ICT, and will offer particular support to smaller firms. 

The research-based drug industry is particularly optimistic about the prospects of Horizon 2020. It believes it can use the program as a vehicle not only for advancing medicines research, but also for gaining broader recognition for the industrial imperatives that lie behind its research activities. IMI-2 will have a focus that goes wider than merely therapy-related categories, or related areas such as biomarker research, innovative clinical trial design, or patient-tailored adherence programs; one of its major ambitions is to bring academia and regulators more closely into the picture, too. EFPIA director general Richard Bergström underlines the attention that Horizon 2020 will devote to the interplay between markets and regulation. This could help ease "the real long-term threat" that innovative medicines face because of the "huge problem of member states and uptake," marked by "increasing reluctance to embrace new products," he says. The drug industry is rejoicing in the elements of the new program that are designed to take account of the need for engagement of authorities responsible for pricing and reimbursement. 

The predecessor of Horizon 2020 won praise in many countries and many sectors. The IMI program, which received €1 billion over the seven years of the EU research program now on the verge of completion, is widely regarded as a big success for pharma and for health. And some countries have done well from the European Union's 2007-2013 program: the United Kingdom will have received around €7.5 billion in funding from it by the end of this year—around 15 percent of the total program allocation. Cambridge University estimates that 20 percent of the work undertaken by its researchers is funded by EU grants. Grants of up to €2 million in life sciences have funded promising projects ranging from high-tech radiotherapy for head-and-neck cancer to supramolecular chemistry. 

But there have been frequent criticisms of undue complexity and bureaucracy in previous EU research programs, so this time the mechanisms for seeking support are simplified and the criteria eased, in order to widen access to a greater number of organizations and promote diversity in research. Even so, the final legislative text, covering the detail of the program's operation, will run to more than 1,000 pages. And who gets what will now depend on how effectively the candidates for funding present their proposals in each of the distinct categories of the program. 

The program is scheduled to come into operation in January 2014, with the first calls for proposals due to emerge shortly afterwards. But—the Europe Union being the European Union —even a done deal is not a done deal until everyone has signed off on it. The €70 billion budget is still subject to final agreement on the European Union's overall spending plans for 2014-2020—and that process will not be completed until September, at the earliest. 

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

The ?70 billion budget is still subject to final agreement on the European Union's overall spending plans for 2014-2020.

Pharma Bids for European Funding in New Research Program

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Ãresund bridge HDR, HÃ¥kan DahlstrÃ¶m			

On the Northern fringes of Europe, those who want to believe that there is a sustainable future for the old continent's generous healthcare systems find a beacon of hope.  

At a time when the healthcare systems of most of the European Union's member states are going through their biggest existential crisis in post-war history, the Nordics (Denmark, Finland, Iceland, Norway, and Sweden) maintain sustainable yet technologically advanced healthcare systems.    

Furthermore, the region's most populous nations (and the focus of this report), Sweden and Denmark, have made impressive contributions to the world's life sciences industry.  

Denmark, a country of 5.6 million, brought the world such pharmaceutical champions as Novo Nordisk, Lundbeck, Leo Pharma, and ALK. Sweden, population of 9.5 million, grooms a thriving life sciences industry while its pharmaceutical market, the largest in the region, is often considered the barometer of Europe due to its progressive nature. 

Denmark and Sweden coming out on top amid fierce competition, despite their modest populations, is often ascribed to the 'Nordic model.' This slightly undefined concept refers to a consensus-based model with a focus on sustainability and high levels of trust and cooperation between government and industry. Is the 'Nordic model' really the key explanation behind the remarkable success of the Danish and Swedish life sciences industry? 

"The Nordic region—the 'quiet North' as it could have been called—counterbalances the turbulence in Southern Europe," said Zinta Krumins, managing director Nordics, Boehringer Ingelheim, when asked about the relevance of the Nordics to the company. "The Nordics are a very stable region, with small but reasonable growth prospects, very good government structures and frameworks, social infrastructure and a solid ­economy." 

Zinta Krumins, Managing Director Nordics, Boehringer Ingelheim			

Although attractive for their stable economies and governments, the Nordics do not have numbers on their side. "We cannot compete in terms of volume and economy of scale," said Stig Jørgensen, CEO of Medicon Valley Alliance, a network organization representing human life sciences in Medicon Valley, a region spanning eastern Denmark and south-western Sweden. 

Stig JÃ¸rgensen, CEO, Medicon Valley Alliance			

Thus, the countries need to work together in order to increase their leverage. "Other countries often have an individualistic mindset and their culture revolves around competing with each other," Jørgensen continued. "Our collective culture enables us to unite doctors, engineers, and business people to work together.  All these disciplines collaborating and working in the same domain is where innovation will flourish." 

Dorthe Mikkelsen, Senior Vice-President Mid-Europe 2, MSD			

With Sweden and Denmark taking spot one and three respectively on the European Commission's Innovation Union Scoreboard 2013, it is hard to argue against the effectiveness of the model. 

Mary Di Marzio, General Manager Nordics, Shire Plc			

For instance, both Sweden and Denmark are overrepresented in clinical trials. MSD conducts about 10 percent of all its clinical trials in the Nordic region. "The attractiveness of the Nordics is a health care system that is state of the art, with strong medical professionals, a high level of scientific leaders both at the universities and at the clinics, and an overall strong infrastructure for clinical research," said Dorthe Mikkelsen, Senior Vice-President Mid-Europe 2, MSD. Furthermore, the Nordics offer a good data foundation. "Their registries are a goldmine for doing research and developing new products," Mikkelsen said. 

Biotech as Business-the Bavarian Nordic story			

Clinical trials are also seen as another avenue for innovation, with many companies breaking out of the traditional sales model. "We see clinical trials as a positive way to collaborate with health care professionals," Tommy Söderman, general manager Nordics, IPSEN, said.  "In the Nordics we have many of our own initiatives; for example, we are running clinical trials on rehab patients recovering from strokes at 30 sites in the Nordic region." 

Pia Olsen Dyhr, Minister of Trade & Investment, Denmark			

The two countries are also a goldmine for acquisitions. Shire Plc recently acquired Swedish biotech Premacure, a biotech developing a therapy for the prevention of retinopathy of prematurity, currently in Phase II. 

Christian Dyvig, CEO, Lundbeck Foundation			

"Before Premacure became part of Shire, the company was already surrounded by an environment that ­allowed them to invest, explore and discover, which we then found was a good fit for us. Sweden provides an environment in which government incentivizes companies to be innovative and rewards innovation with favorable taxation," said Mary Di Marzio, General Manager Nordics with Shire Plc. "That is at the core of what the Nordic nations are encouraged to do and are rewarded for doing." 

Anders Hedegaard, CEO of Bavarian Nordic			

DENMARK: A LAND FLOWING  WITH MILK AND PHARMA 

How has a nation of a modest 5.6 million been able to build a pharmaceutical industry that exported medicinal products worth USD10.1 billion (DKK58 billion) in 2011? "It is a historical success born through partnership between the industry and the Danish government," said Minister of Trade & Investment Pia Olsen Dyhr. 

 "Novo Nordisk, for example, benefits from the government's decision to give all patients with diabetes access to free medication. The company has hence been able to build on the domestic market before going global. In the same way, Lundbeck and Leo Pharma benefitted from Public-Private Partnerships to build an export business." 

Another shared characteristic of Denmark's top pharmaceutical companies is that they are controlled by foundations. As majority owner, the foundation usually decides who sits on the board, monitors corporate activities, and helps whenever the companies need support, including financial backing for acquisitions. "This model has a lot of potential for innovation and the development of new drugs, something we couldn't do to the same extent if we were just focused on what the stock market wanted us to do," said Lundbeck Foundation CEO Christian Dyvig. The Lundbeck Foundation owns 70 percent of Lundbeck's shares and is majority owner of ALK, a supplier of allergy immunotherapy products with a global market share of approximately 33%. 

Can the absence of the stock market as a reality check lead subsidiaries to get too comfortable where they are? 

"That is a risk," Dyvig said. "Academic articles on foundations describe the notion of the dead hand. An owner with a dead hand loses dynamism in the business. That's one of the reasons that we like our companies to be stock listed. The duality between the long-term nature of the foundation and the short-term nature of the stock market brings a lot of benefit. It is in that friction that you end up having the best results." 

Most stakeholders in the Danish and Swedish life-sciences industry praise the outcome of concerted efforts to set up the right pull-factors for innovation—the framework to enable pharmaceutical research to flourish. Finding consensus over the push-factors—government's willingness to pay for new innovative products to be used by the healthcare system—is much more challenging. 

Stepping out of the shadow, technically speaking			

In Sweden Government spending on academic research has increased significantly even throughout the economic crisis, and in October 2012, the government put forward its Research and Innovation bill, under which USD 600 million will be spent between 2013-2016 to boost Swedish research capabilities. One of the bill's six focus areas is the life sciences industry. 

At the same time, Sweden may soon link its existing value-based pricing system with international reference pricing to cut drug expenditures. The pharmaceutical industry warns this change would have an adverse effect on both the attractiveness of Sweden as a market and as a location for R&D activities. 

 "The focus is solely on the push-part of the business," said Anders Blanck, director-general of Swedish pharma industry association LiF. "The government wants to build the infrastructure for a well-functioning life-science sector in Sweden, but does not want to talk about markets, about using new products and paying for them."  

This is especially surprising for a country with GDP far exceeding EU average. "Even though the Nordic region is better off than the south of Europe," IPSEN's Tommy Söderman, said, "it has still been tough for the pharmaceutical industry, especially in terms of pricing for products that have been around for a number of years." 

In some respects the Nordics even lag behind European peers. "In terms of market uptake and penetration, it takes a lot longer compared to other European countries to get market acceptance for innovative products," Krumins of Boehringer Ingelheim said, speaking of Sweden. "It is much tougher now than it used to be, because of the many stakeholders at national but also regional and local levels. Whilst we can have products authorized and reimbursed, they might not be used by the healthcare system at the regional level or local level." 

Tommy SÃ¶derman, General Manager Nordics, IPSEN			

Tom Rönnlund, General Manager Nordic & Baltic Region for IMS, agrees that the industry faces serious challenges. "Austerity measures and efforts to reign in expenditures on pharmaceuticals are coupled to a longer-term trend of changing rules for the way in which pharmaceutical companies are expected to interact with the healthcare system. This concerns rules for meeting and interacting with care providers, how companies are able to arrange different kinds of activities for GPs, etc in the Nordics." 

Country Report

On the Northern fringes of Europe, those who want to believe that there is a sustainable future for the old continent's generous healthcare systems find a beacon of hope.

Country Report: Denmark and Sweden

In today's payer   climate, even innovative products face challenges securing reimbursement   if they come with a premium price.                          The growth of generic products is stunning, and   the blockbuster era, with its broad indications, premium pricing, and   big                          marketing budgets, is a thing of the past. 

Marketers need to rise to the challenge. The greatest value marketing leaders can provide is to harness the power of strategic                          thinking. It starts with developing a compelling product positioning. 

Positioning   defines how a product competes—who it is for and how it is   differentiated versus competitors. In consulting work                          and teaching Kellogg MBA students, we see case   study after case study detailing how companies have significantly   steepened                          their brand's growth curve by developing a   compelling product positioning. There are three core elements in a   positioning:

Defining your target as simply "patients with X condition" or "primary care physicians" is not enough. The target definition                          should be grounded in segmentation and customer insight. 

What comparison   set do you wish to be a part of? For example, if your product is an   asthma drug, are you better off competing                          broadly against all other asthma drugs or, for   example, competing for usage as a preventative therapy in this drug   class? 

Your   primary benefit must be narrowed to satisfy three criteria: it must be   highly valued by customers, truly unique versus                          competition, and credible based on the inherent   strengths of your product or company. If your product is not seen as   "best                          in the world" at something, your benefit may not   be focused enough. 

The three   elements can be summarized in a positioning statement. This is a fairly   fundamental tool for marketing executives.                          To (target), X is the brand of (frame of   reference)that provides (differentiating benefit) because (support). 

A common   misconception is that a positioning statement is primarily to help   create effective advertising or sales brochures.                          It is much more important than that. Products   with no advertising still need a positioning statement. It provides   strategic                          guidance for everything that happens   downstream—development of the marketing plans, sales initiatives,   legal/regulatory approach,                          and financial plans. 

It's difficult   for pharmaceutical companies to develop strong positioning statements.   The core problem is that pharma ­marketers                          dislike niche strategies; when positioning   products, most pharma marketing leaders push for breadth. That's   understandable,                          since the goal at launch is to capture as much   revenue and profit as possible before the patent expires. Pfizer, for   example,                          reached a broad audience with Lipitor and that   worked very well indeed. 

Going after a small group of physicians and patients seems like a bad idea. Why think small? In some organizations, aggressively                          championing a niche launch could well be a career limiting move. 

Broad launches   are appealing, but there's a simple problem: they don't often work in   today's healthcare ecosystem. In a competitive                          market, a broad launch often becomes a "me-too"   strategy, raising the ire of regulators and payers. 

Finding a niche is a far better approach. The key for any pharmaceutical product today is demonstrating a clear benefit, and                          it's easier to demonstrate a benefit against a small target. 

A niche strategy   doesn't mean sales will necessarily be small. Once a physician is   comfortable with a product and appreciates                          the benefits, she will likely use it with   additional patients. It is easy to expand from the initial niche to the   broader                          population of patients that fall within the   label. And once the product is in the market, companies can secure   additional                          indications to expand use further. 

Eli Lilly's   Cymbalta illustrates the power of a niche positioning. Cymbalta entered   the intensely competitive anti-depressant                          ­category in 2004. By ­focusing on depression   sufferers who also experienced pain symptoms, Lilly could have embraced a   broader                          positioning, but this would have diluted its   effort. Eli Lily had a lot riding on Cymbalta; Prozac lost patent   protection                          shortly before the launch, and Cymbalta needed   to fill the gap. The depression category already had several blockbuster   drugs,                          and promotional spending was second only to the   proton pump inhibitor class for heartburn. 

Furthermore,   existing SSRIs were all considered similar in efficacy, with no   head-to-head clinical trials available for the                          class. Lilly received a diabetic nerve pain   indication on Cymbalta two months after receiving its depression   indication in                          2004. This niche gave Cymbalta a reason to exist   in a very crowded and competitive marketplace. It has since received   additional                          pain indications for fibromyalgia and chronic   pain. Prozac sales peaked in 2000 at $2.6 billion—a threshold Cymbalta   blew                          past in 2009. 

Narrowing a positioning can accelerate growth even once a product is on the market. This repositioning technique can breath                       new life into struggling products. 

One company we've   worked with had recently entered the hypertension market with great   promise. The category is huge; it's                       the largest office-based condition treated by   physicians with nearly $14 billion in 2011 sales. The new drug attained   the                       coveted regulatory approvals with clear, clinical   superiority versus its two branded rivals. 

Despite these   advantages, the new product struggled in the market. It faced intense   rivalry from a host of branded and generic                       competitors that were already meeting most every   apparent need. Adding to the challenge, there was little motivation on   the                       part of physicians to try something new, and   intense pressure from payers for them to prescribe generics.

After the new   product failed to meet expectation at launch, further research and   analysis indicated that a niche positioning                       could reinvigorate the brand. The marketing team   concluded that the best way to gain traction would be to narrow the   focus                       in two ways. First, it would focus on its one main   product attribute—strength—where the brand had clinical superiority.   Second,                       it would focus the target audience on those   patients for whom strength mattered most—physicians who treat patients   whose blood                       pressure was not being effectively controlled by   other medications. 

With a clearer positioning focus, the company is now able to intensify the efforts of its sales force against a physician                       audience that has a more compelling reason to consider the new drug. 

Niche positioning   might imply going after a small market. Rather, it means going after a   select market that has intense needs.                       If a niche positioning is executed well, resources   will be more focused where they will achieve the biggest result. The   benefits                       of taking an enterprise-wide approach to delivering   a niche positioning are significant: 
  » Better targeting of physicians, e.g., more   visits to the highest priority doctors, better visibility in their   professional                       associations and publications 
  » Better targeting of patients, which is   especially important if consumer pull is an important part of the   marketing plan
  » Reduced concern from payers/MCOs of inappropriate prescribing and risk to budgets
  » Clinical data and claim support resources focused where they are most important
  » Easier to carve out and defend marketing position from rivals 
  » Improved financial ROI 

To build an effective niche positioning, marketers must focus on doing four things exceptionally well. 

Start by understanding all the key players. 

What are the needs, motivations, and constraints of your targeted audiences, e.g., physician segments, patients, or managed                       care customers? 

Involve your team in developing options. 

Cross-functional   perspectives from all groups are critical to a successful niche   positioning. It can be a time-consuming process,                       but insights and consensus should be obtained from   all the key players: legal, regulatory, medical, manufacturing, and   finance.                       This helps to avoid bigger problems that can result   from having an un-vetted positioning later. 

Conduct rigorous strategic analysis and market research. 

Your positioning options must be put through a strategic filter. Our framework includes evaluations of three core areas: 
  »	 How strong is the value proposition—in   particular, how valued, unique, and credible is it with your target   audience? 
  »	What is financial opportunity balanced against the risk? 
  »	Is the positioning feasible—can your sales   force execute it and will it get legal/regulatory support? 

Develop a marketing plan that delivers the positioning. 

Think   through the implications of your positioning options on your marketing   strategies and tactics. What levers should you                       pull? These differ based on the audience you need   to reach and the message you must convey. Consider all four key   stakeholder                       groups—patients, physicians, providers, and payers.   How will each perceive your value proposition? With which group will   you                       obtain the greatest leverage in gaining awareness   and credibility for your new positioning? 

The positioning   development process takes times and requires thorough use of market   research, analysis, and involvement from                       senior management and cross-functional peers. But   if it's done well, your more focused positioning can drive significant   sales                       growth and enhance careers. 

is CEO of marketing strategy firm AspireUp. He can be reached at 

Calkins   is a clinical professor of marketing, including biomedical marketing,   at the Kellogg School of Management at Northwestern.                       He can be reached at 

The best way to grow in the pharma industry is to think small.

Prescription for Growth: Embrace a Niche

Shire is the standout in the branded industry's lost decade of slowing growth, climbing steadily up the revenue ranks with a strategic focus on the acquisition of specialty medicines, many for orphan indications, which command high margins in a privileged competitive space marked by friendly patients, faster FDA approvals and extended periods of exclusivity. But success in pharma has a notably short lifecycle, so the pressure is on to keep the good times rolling, especially in light of the company's recent transition to new leadership.  

Shire is also a perennial takeover target, but with a market capitalization of close to $20 billion its a prize that won't come cheap. Feeding the speculation is Shire's solid late stage pipeline, which features new entries in undertreated conditions like dry eye disease and major depressive disorder. 

 met last month for a Q&A with new company CEO Flemming Ornskov, an academically–trained physician with a background in pediatrics who has also cut a wide swath through Big Pharma, having served previously in key management roles at Bayer, Bausch & Lomb, Merck, and Novartis. Ornskov recently unveiled a three-year strategy plan that places major bets on undertreated specialty segments in ophthalmology, ratchets up the commitment to leadership in rare diseases, and reinforces Shire's vaunted "just do it" culture through a faster, more agile decision-making structure. The plan positions Shire to take maximum ­advantage of opportunities to innovate by effectively forcing the in-house R&D and business development functions to compete in bringing the best assets forward to commercialization. It was also clear from the discussion that a few things about Shire will not change: a determination to stay independent and to avoid the Big Pharma contagion of bureaucracy and bloat. Yes, it's still true: when a Shire CEO shows up for a talk, there is no entourage. —William Looney, Editor-in-Chief 

Under your predecessor Angus Russell, Shire established itself as a high-growth specialty business with a distinctive culture, a key element of which was to avoid the perceived gridlock of Big Pharma. Since taking up the CEO post on April 30, you have been strong on the same mark, with a new strategic plan to guide the company through its next phase of growth. What are the plan's key elements and how do you assess the response of the investment community? 

 Our strategy has three components. The first is a commitment to leadership in specialty medicines. The second is to maintain our company's status as a growth stock, with a significant inventory of assets to propel us forward. The third is to become even more innovative in all that we do as an organization, but especially through our expanding in-house capabilities on research as well as Shire's traditional strengths in tapping opportunities through business development and licensing. This latter, dual capability is unique to Shire as a mid-sized company in the pharma space. It is an attribute I intend to emphasize going forward.  

Another, overarching aspect of the strategy is the imperative I see to make Shire a truly international organization. We are at the stage now where we need to think seriously about building a stake in markets like China and increasing our presence in Japan. Shire is already in Latin America but we can certainly do more in that region. In Europe, we are well established but there are areas where our footprint can be augmented.  

As far as the investor community is concerned, I think the consensus is the strategy is forward looking and prudent: it will keep us lean as we grow and is appropriately balanced between opportunity and risk. Like everything in this business, time—and the market—will tell.  

Shire set a target several years ago to raise sales outside the United States and Europe so that the two regions would account for no more than 50 percent and 25 percent of global revenues, respectively, in 2015. Are you on track to achieve that goal? 

 At present, 70 percent of our revenues come from the United States, with the remaining 30 percent ex-US, including Europe. Our aim is to grow the ex-US business significantly. Nevertheless, I think for us to anticipate going too far down that road is unrealistic in so short a period of time. I see the United States as the most attractive pharmaceutical market in the world. It is a high-value geography, with a pricing and reimbursement climate that compares favorably to other countries. We are not going to be "hyper-focused" on the United States, but the reality is that for the foreseeable future it will remain our principal market.  

There is a perception that Shire has grown through a commitment to "search" rather than research, with products derived from vigorous licensing activity rather than in-house R&D. Does the new strategy propose a change in that approach? 

 I have experience working in large and small pharmaceutical companies. The lesson I derive from both cultures is that medicines innovation is a difficult quest. There is no fixed formula; in many ways the quest for innovation must be opportunistic. Our approach at Shire is to strive for a balance between in-house opportunities and externally sourced innovation. The key thing we are doing differently is to raise the bar on decision-making by effectively asking our business development and research groups to compete in bringing the best assets forward, whatever the source. As part of that, I've created two senior executive-level committees, which I chair, that will simplify, coordinate, and prioritize decision-making around our entire product portfolio. The first is focused on executing around marketing and sales targets for Shire's current in-line products. The second concentrates on opportunities from all assets in the pipeline, whether these come from internal sources, through partnerships with affiliated institutions, or other external channels.  

The two committees are designed to work together so that as a new asset comes forward, we can quickly assess how it may impact the balance within the full portfolio, particularly in regard to critical resource allocation decisions we must make in moving compounds into costly Phase III development. An example is our latest acquisition of SARcode Bioscience and its key asset, lifitegrast, an ophthalmologic drug for dry eye disease—a condition affecting 25 million US patients—which is now in Phase III trials. Once the deal was struck, the committees pondered the question: how will this promising asset, in a big therapeutic segment, change prioritization around our existing pipeline, particularly those compounds requiring more resources at the late stage of development? Should we de-commission some work to make room for investments that might augment or grow this high-potential acquisition? The answer is, yes, we did, by scrapping a previous decision to initiate a Phase III trial on an internal compound we were working on to address negative symptom schizophrenia.  

The example shows that it is natural and healthy to have competition between these two sources of innovation—internal and external—because it makes the deployment of resources around the portfolio much more efficient. Execution of our strategy depends on this new decision-making structure I have put in place.  

How do you intend to deploy Shire's in-house R&D capabilities going forward? 

 Angus Russell actually did an outstanding job in building up Shire's in-house R&D capabilities. In the field of rare diseases, we are second to none in the work our labs are doing in pre- and mid-stage clinical research. We are improving at the late-stage level as well. I have every confidence that Shire today is able to deliver to the market internally-sourced NCEs for rare diseases. Outside of rare diseases, our preference is to acquire later stage assets, develop them, and win registration. It is also important to note that Shire presently spends about 18 percent of revenues on R&D, or close to $1 billion a year. Hence it's time to change that old image of Shire.  

In what ways does the new organization seek to capitalize on these next stages of growth for Shire? 

 Shire has been posting growth rates above the market norm for many years. To manage that growth, we created a number of business units with a keen focus on the therapeutic area and full responsibility for all our activities there. In due course we had a BU incorporating all the rare disease business of our acquired company, HGT; followed by specialty medicines; behavioral science; and later another BU on regenerative medicine. Looking ahead, however, and taking into account the aggressive expansion plans in a number of new therapeutic areas, I concluded it was counterproductive to continue on this path. There was a scalability issue, with multiple duplicative, mainly service, positions for each BU leading to a lot of bureaucratic overhang, not to mention the risk of silo thinking. In fact, during my early visits as CEO to the Shire marketing and sales force, I got feedback that organizational rigidity was starting to constrict the information flow and slow decisions.  

So I took a step back, and devised a new organizational structure whose principal feature is to consolidate all administrative, non-commercial functions into a single, corporate, service-oriented unit. The plan integrates formerly separate R&D activities into one organization; business development forms another. Then we sharpened the focus around five reconstituted BUs: rare diseases, consisting of the HGT products we inherited from the acquisition; neuroscience [formerly behavioral science]; gastrointestinal; regenerative medicine; and internal medicine, which mainly covers "heritage" assets that are nearing the end of the product cycle. Building on the SARcode Bioscience acquisition, we are likely to create a new BU on ophthalmology. Hematology could be another future BU for us.  

Creating a central, overarching locus for prioritized decision-making across the portfolio are the two executive steering committees, on the pipeline and in-line businesses. I am chairing both committees for now. This is where the buck stops.  

Most important, I took heed of what the sales force told me about the danger of letting internal intrigue push us away from the customer. The feedback told me we had to move immediately to remove all barriers between Shire and the customer. That's precisely what we did: the organization is much flatter than it was before. There is a quick way to get the attention of senior management.  

Why did you abandon the name of your acquired company, HGT, and turn it into a BU now called rare diseases?

 We thought the designation of HGT was too confining—not every rare disease is driven entirely by genetics. The criteria should be as broad as possible. I also like to have names that resonate with customers and patients; I don't think the new name of the BU requires much explanation.  

Has the strategy plan been shaped by your previous management experience in line operations in big companies like Merck, Novartis, and Bayer? 

 Definitely. My years at Bayer gave me a strong grounding in how to manage a BU from the perspective of the customer. I followed the same strategy at Bayer, where I helped set the foundation for its current very strong pipeline through this mixing of internal, in-house R&D and external sourcing through licensing and M&A. Bayer has benefited immensely from its unrelenting customer focus: never strong in ophthalmology, it has broken new ground with the partnership it forged with Regeneron on Eylea, for wet age-related macular degeneration; with Onyx, and Nexavar, it has made itself a major player in oncology.  

The conclusion I draw is that if a BU is closely aligned to the customer base, you can quickly pick up the pace and become a player in segments that historically have been tangential to your core. Whether the asset comes from your own lab or is externally sourced means very little. In fact, allowing both units to compete to identify and develop that asset raises the bar on performance throughout the entire organization. This Bayer model has propelled it from being known mainly for a 19th century product, aspirin, to a company that today has one of the most innovative drug pipelines in the industry. It's not just luck—it's the core focus on learning everything about your customer. This is what is going to drive Shire to the next level as well.  

Shire has a reputation for being very patient centric, where it leverages extensive outreach to disease groups as well as analytics around data detection, trial design, and indication profiling to secure timely registration and launch. Do you intend to build on this as a driver of competitive differentiation? 

 Everyone at Shire has a story about patients—relating to them is part of our culture. In some ways, it comes with the turf: you have to be patient centric if you are active in attention deficit hyperactivity disorder [ADHD], or in extremely rare diseases, where our sales force gets to know many of the patients eligible to treat. I want to bolster this sentiment and keep it as part of our own DNA.  

From a strictly commercial standpoint, patients are important but in many ways the key link is to the physician. This is certainly true in our clinical trial work, where physicians are the critical intermediary in the therapeutic segments where we are strong, especially rare diseases. The close interactivity with clinicians is one factor behind our acquisition of SARcode Biosciences. The company had a strong reputation for conducting excellent clinical trials based on real-world input from the most knowledgeable practicing physicians. Again, I cite it: they were very customer-focused. As a physician myself, I could see their capacity to make the connection, from the business to the physician to the patient.  

How are you incorporating the new emphasis on payer value in your growth blueprint for Shire? 

 Value is the entry point for all discussions on P&R today. It is harder to obtain access to the market without a careful consideration of cost-effectiveness, impact on overall health outcomes, and analysis of the various tradeoffs important to stakeholders. With prices for many rare disease drugs so high, transparency is a given. At the same time, every negotiation is different. The rarer the disease—and we have an estimated 7,000 such diseases where there are no available treatments—the more important it is to get the value story right. Ultimately, that story has to be persuasive for the patient: does our medicine have a significant impact on his or her quality of life? The industry has to demonstrate that its therapies are life altering. Shire has many products that do precisely that, and the requirement on us is to furnish the evidence base to prove it. We have to do it through better clinical trials but also in the many additional real-life observational studies we are committing to as part of the registration process and through negotiations with the HTA authorities and payers.  

As a European, what is your perspective on the growing reliance of governments on cost-effectiveness measures to control access of new medicines to patients? Do the criteria being used in these evaluation systems adequately incorporate the special social value characteristics of drugs for rare diseases, where Shire is strong? 

 I am in regular contact with governments and payer representatives in Europe. All countries in the region are grappling with serious challenges to the sustainability of national health systems. There is no choice but to prioritize. It's fair for them to seek to obtain maximum value for what they can spend. Our industry has to accept and work within that harsh budgetary assessment. HTA is now part of the access process; it's another barrier to market entry that, through rigorous ­attention to evidence, we can address and surmount. The onus is on Shire and all companies to provide the documentation needed to help payers make the best judgment. Where Shire wants to play is at the highest level of innovation. Our goal is to be recognized as a company that specializes in innovation and thus deserves a real opportunity to show a benefit to the health system. It is true that for some of the very small patient populations we serve, it is difficult to make our arguments purely on the basis of cost-effectiveness. We want to open payers to a broader discussion around issues like how to adapt insurance programs to serve rare disease patients as well as solidarity and ethical concerns, which are very important in Europe. To varying degrees, we are succeeding in that.  

Do you believe that the quality adjusted life year [QALY] calculus used by the UK National Institute for Health and Care Excellence [NICE] adequately measures the contributions of a biologic drug for a limited rare disease population versus a small molecule drug for a chronic condition designed for a much larger population? 

 QALY calculations form only part of what is a clinical guidance that also covers other means for establishing whether a drug is cost effective or not. This is a complex decision-making process, as NICE officials have acknowledged many times. That said, I don't think it is helpful to set arbitrary frameworks that conclude if a cost per QALY is over a certain amount, then the drug won't be made available through the NHS. A QALY should never stand alone. By itself it certainly doesn't serve as an adequate measure of value in rare diseases.  

Many companies today are positioning themselves not as pill manufacturers but as "total health solutions" providers, with a heavy services and outcomes delivery component. Is this part of the Shire strategy? 

 Shire, for now, is going to stay focused on developing innovative medicines that address unmet medical needs. This is our competitive advantage. We have a decade-long track record in delivering strong growth and returns to shareholders. A singular commitment to developing and marketing innovative drugs is the best way to continue that performance. Anything else would be dilutive.  

What plans do you have for the Shire sales force? Are there changes underway in how you intend to introduce and sell Shire medicines? 

 The sales function is facing significant changes as information technologies create new ways to interact with healthcare professionals. Overall, the climate has become more hostile to the traditional methods in which companies communicate to this group. At Shire, the sales force will remain central to our marketing and information strategies. What we are paying more attention to is the quality of our relationships: Do we have the best educated sales reps? Is there a better balance we can strike between a purely promotional message and more medically aligned and driven opportunities that further enrich these contacts? How can we supplement direct personal contact with the other channels that technology now offers us?  

What matters most to me is keeping our eye on the feedback loop we get from prescribing physicians. We must ensure that their exposure to Shire reps is of sufficient quality and meaning to them that they will willingly allocate the time to see us. This feedback is going to be reflected in our compensation system as well as the scale and scope of our investments in the Shire sales force going forward. And feedback is not something limited to our people in sales. Instead, receiving feedback is a cultural imperative for the entire organization. It's the only way to remain attuned to the marketplace. If we aren't rated by our customers as ethical, compliant, and a consistent provider of high service, then this new strategy we have in place will not succeed.  

As a newcomer to the c-suite, what differentiates the role of CEO from that of a line manager? 

 As CEO, I must relate to a much wider circle of constituencies. For example, I have multiple outside investors that represent pension funds and depend on our returns to keep their plans healthy and solvent. There is also the responsibility you have to patients, customers, payers and regulators. A successful CEO must be outward looking. He or she must balance these multiple external interests with actions that drive things forward from the inside.  

In addition to being CEO, you are a physician. Are you finding this an asset as you adjust to your new role?

 It has always been an asset. Throughout my career, I have relied heavily on a network of physicians to offer advice on strategic and operational issues facing the business. Being a physician helps retain those essential links to the customer. It's the way I keep myself updated. As an example, my specialization in neonatal care helped inform our due diligence in deciding to acquire Premacure's drug for retinopathy in premature infants. I could see from my experience in intensive care that there was a real need for this indication—that the clinical benefits outweighed the investment risk. I can recall the joy of parents in the successful delivery of a premature baby, only to fade when they find that the child will still be a special needs case because of the blindness or impaired eyesight.  

Are you a believer in corporate culture as a driver of success? If so, what do you intend to do to put your own stamp on Shire's culture? 

 Shire has a distinct culture that has been critical to our success. Each of my CEO predecessors have contributed to the strengthening of this culture. I intend to continue doing the same, as I believe that the fate of any company is ultimately determined at the water cooler. If people at the operations level feel good about their work, if there is broad understanding of what the company stands for and where it is going, then you will retain the productivity and alignment necessary to advance in the marketplace.  

What we have to do now is to build on the legacy of growth over the past 10 years. We've come to a stage where, as we get bigger, it becomes harder to retain that entrepreneurial spirit, the organizational flexibility, which allows us to grab the best opportunities—quickly. I will challenge the Shire organization to make sure we don't become sclerotic, or too slow in decision-making, or too bureaucratic, with excessive layers of decision-making. We must continue to take a balanced approach to risks, so that we stay ahead of the curve of science and keep the focus on what works best for patients.  

 This sentiment is reflected in the new strategic plan, where we have metrics to show we are shortening time to action, retaining a flat organization structure, delegating responsibility to the level closest to the customer, rooting out mental fatigue by ingesting new ideas, and not being afraid to take risk in our business development and pipeline decisions. Shire is a company that will continue to take big bets on innovation. I intend to speak out widely, within and outside the company, to relay this message: Shire will only grow if we continue to innovate. If we stay with innovation, then we avoid the negative side-effects of bigness. I have no plans to stay holed up in a corner office. In fact, I don't have one. Though I am based in Lexington, MA, I am a globe trotter. Shire is many years away from a culture of corner offices.  

What is the biggest external threat to Shire and the industry over the next few years? 

Features

Shire's new CEO has a simple strategy for success: Set the pace on specialty medicines, spread the positive buzz and momentum of a growth stock, and seize the opportunity to innovate.

Succinctly Shire: CEO Flemming Ornskov

Medicare Part D either is the most effective recent government health program—providing low-cost access to important medicines for 37 million seniors—or a program open to abuse and uncontrolled costs that has to be reined in. As the Obama administration struggles to roll out its landmark health reform initiative this fall, analysts are looking at Part D as a model for marketing private plans to millions of consumers, as well as a cautionary example of what can go wrong.  

Those who orchestrated the Part D launch in 2006 recall widespread fears that insurers would shy away and that beneficiaries would not sign up. Democrats were furious that Republicans had pushed through a market-based program and predicted dire results. Despite initial glitches in computer systems and pharmacy operations, the program is a clear success and has cost the government and beneficiaries much less than originally estimated. The savings result partly from fewer people signing up than anticipated, plus a broad drop in drug costs as fewer new therapies came to market and generic prescribing took off. But competitive plans also deserve credit for promoting generics and for negotiating low prices from manufacturers.  

Now intense federal budget cutting is prompting closer scrutiny of Medicare outlays for drugs, which total about $70 billion a year for some 1 billion prescriptions. Pharma companies are concerned that plan sponsors are limiting coverage to reduce outlays, as seen in a study by Avalere Health for drugmaker UCB documenting that Medicare plans cover fewer anticonvulsant drugs and impose higher cost-sharing than commercial insurers.  

Critics, however, are demanding stronger management of pharmacy benefits to prevent inappropriate prescribing of antipsychotics and other drugs, as described in a May report from Pro Publica (see 

 "Washington Report," June 2013]. The public interest health researchers also have documented a link between high Medicare physician prescribing and the fees they get from pharma marketers. 

Similar issues were raised in a June report from the HHS Office of the Inspector General (OIG) documenting millions in drug program overpayments, underpayments, and undocumented expenditures by Medicare drug programs, largely related to the opioid abuse epidemic and associated fraud and waste. The report uncovered more than 700 doctors with "questionable Medicare Part D prescribing patterns" in 2009, in line with earlier OIG reports documenting inappropriate Part D refills, claims with invalid prescriber identifiers, and questionable billing by retail pharmacies. The Senate Committee on Homeland Security and Governmental Affairs examined these issues at a June hearing where OIG officials further described fraudulent Medicare outlays for prescription painkillers, as well as extensive prescribing by unauthorized practitioners such as massage therapists and home care contractors. Officials from the Centers for Medicare and Medicaid Services (CMS) said they were addressing these problems, but Congress may seek further remedies: Rep. Frank Pallone (D-NJ) has proposed legislation requiring Part D sponsors to verify that an authorized physician issued the prescription for a controlled substance and to restrict access to opioids for patients showing signs of abuse. 

The Senate Special Committee on Aging, moreover, is examining Part D marketing and has asked the Government Accountability Office (GAO) to examine how well plan sponsors provide accurate pricing and coverage details to seniors. Aging Committee chairman Bill Nelson (D-FL.), along with most Democrats, continues to press for pharma companies to pay Medicaid rebates on medicines provided to low income "dual eligible" Medicare beneficiaries, who now receive drug benefits under Part D. Such targeted rebates, according to Congressional Budget Office (CBO) analysts, would cut spending by some $140 billion over 10 years, but probably lead to higher prices on new drugs overall.  

Medicare spends about $20 billion a year on drugs administered by doctors, but that could soar with approval of more high-priced therapies for cancer and other critical diseases. Fears of unsustainable program costs thus is focusing policy makers on use of particularly high-cost therapies to treat cancer, autoimmune disorders, and chronic kidney disease, such as the 55 high-volume therapies that account for most Part B spending, as documented in another GAO report. 

This finding was discussed at a June hearing by the House Energy & Commerce Health subcommittee, along with proposals to fix some of the anomalies in the Part B drug reimbursement formula, now set at 106 percent of average sales price. Physicians complained about losses due to the practice of including prompt pay discounts in rate calculations, plus the half-year lag for CMS to update prices, which leaves providers holding the bag for months. The current sequestration process, with its 2 percent across-the-board cut in Medicare funding,  has generated ever louder protests from oncologists, who claim they're losing so much money that they will have to send more patients to hospital clinics for treatment. And that's much more costly for Medicare and often more difficult for patients.  

Separately, CMS has proposed to slash reimbursement for kidney dialysis centers by 9.4 percent next year. That means a 12 percent cut in rates for Epogen and other drugs administered as part of kidney dialysis treatment. These reductions come on top of the 2 percent sequester reduction, plus the prospect of additional adjustments in CMS' base payment for these drugs to reflect lower recommended dosages.  

Most damaging for pharma, though, is CMS denial of coverage for a new therapy altogether. Eli Lilly was rocked last month by a CMS draft proposal to authorize only coverage with evidence development (CED) for Lilly's Alzheimer screening product Amyvid. That means providing the PET imaging drug only to Medicare beneficiaries who enroll in clinical trials designed to produce more evidence that this type of diagnostic screening is worth the money. Lilly and Alzheimer patient groups are lobbying hard for CMS to be more generous in its final reimbursement decision this fall, warning that restricting coverage could "stifle future innovation aimed at improving diagnosis" of this serious condition. 

Pharm Exec's Washington correspondent. She can be reached at  

Rate cuts and fraud concerns create problems for Part D plans and Part B providers.

Costs and Coverage Challenge Medicare Drug Plans

The "tawny streaks and shades" of summer sunlight, as Walt Whitman put it, have a mellowing effect; leisurely hours spent in scenic locales, on vacation or just out on the weekend, provide an opportunity for unhurried thought and easy reflection ("heat dome" notwithstanding). In the spirit of lawn chair cogitation and hammock-spun reverie, 

 invites you to submit your own verses—pharma-related, of course—to be published on our website in late August. Send those jottings from the post-conference tarmac, the hotel bar, or the family vacation to 

, if you are so inclined. Our pseudonymous colleague Stix Daley has contributed one of his recent scribblings to kick things off. Summer will be gone soon, so take it slow while you can, and enjoy.

Longitudinal studies on red meat with clever endpoints.

Freedom to choose cigarettes and their adverse events.

In the spirit of lawn chair cogitation and hammock-spun reverie, Pharm Exec invites you to submit your own verses-pharma-related, of course-to be published on our website in late August.

Take a Chill Pill

Imagine   you're at a local shopping center on a Saturday afternoon. I know it's   not how you'd choose to spend any of your weekend,                          but you need something.

You go into the   first shop that sells what you're looking for and are immediately   accosted by a salesman. This guy is in your                          face—he's assumed you need what he's selling and   he's selling it hard. He assails you with his whole features and   benefits                          pitch and, when you look less than interested,   he goes heavy on the price. He sounds desperate, you leave. 

When you walk in   to the next store, the shop assistant offers a cheery welcome but lets   you browse uninterrupted—a pleasant                          contrast to next door. You think you've found   what you want, but you have a question. You catch the assistant's eye   and ask                          if the thing you want is suitable for   left-handed people. "Funny story about that… " she says and tells you   the tale of a                          customer who bought two of the items in question   for his left-handed twin brothers. She's informative and entertaining.   Guess                          what? You've got your wallet out. 

The biggest buzz   in marketing today is a reaction to what some see as the failings of   traditional advertising. With something                          approaching a monopoly on customer attention,   traditional media channels once had a tight control on the distribution   of information                          and associated marketing messages. Now, people   have options. 

Technology,   from desktop computers to smartphones, has given everyone direct access   to the information they need across a                          huge and varied range of sources. This gives   consumers the means to avoid the hard sell. "Consumers are in complete   control                          today," says Joe Pulizzi, author of "Epic   Content Marketing" and founder of the Content Marketing Institute (CMI).

"Healthcare   companies can position themselves as go-to informational sources by   answering their customers' pain points," says                          Pulizzi. But the best known content marketer on   the planet says the only way to break through and get attention online   is                          to stop the sales pitches and tell interesting   stories that customers will actually engage with. 

Digital media   means there are more ways to get your message in front of more people   than ever before—the web, e-mail, social                          media, games; they all deliver mind-boggling   reach. According to global Internet analytics firm Comscore, there are   13.7 billion                          searches conducted on Google every month. With   60 percent of US consumers saying they looked for health information   online                          in the last year, that's a lot of potential   patients. 

The problem is, that reach is available to everyone else, from the "Pharma 50" to your local plumber. 

In 2010, Google   CEO Eric Schmidt claimed that every two days we create as much   information as we did from the dawn of civilization                          until 2003. YouTube uploads, Facebook status   updates, Tweets, Pins, and Instagram photographs. We're all publishers   now. 

But we're not all   publishers, we're authors. Publishers have a baked-in quality control   filter and would never allow most                          of the so-called content that is out there on   the Internet out of the slush pile. And it's the white noise of the   virtual                          slush pile that's fueling the flames of content   marketing and its focus on creating and distributing relevant and   valuable                          content—content that cuts through the clutter. 

One   of the biggest drivers of the web-world's newly discovered penchant for   quality is Google. The ­big-beast of online search                          got sick and tired of people gaming its search   algorithms with sub-standard content and changed the rules.

Google introduced its Penguin   algorithm in 2012 to combat dubious SEO tactics that delivered marginal   search results, more                       to do with keyword stuffing than real relevancy.   Originally called the "webspam algorithm," Penguin is designed to reward                       websites that offer genuinely valuable content.   Google hopes it will improve its users' search experience by demoting   websites                       that won the rankings game but left searchers   wondering what the page referred had to do with the search terms they   had typed                       in. 

Reaching skittish consumers through objective, storydriven information is digital marketing's hottest digit. But applying this consumer phenomenon in Big Pharma presents some unique challenges, writes Peter Houston.

Pharmaceutical Executive-08-01-2013