Discomfort drives change. But by the same token, change creates discomfort. 

The   tension between these two paradoxical concepts lies at the core of   healthcare marketing planning and communication. And                          as healthcare marketers, our ability to leverage   the comfort/discomfort paradox appropriately defines our ultimate   success                          in the marketplace. This is especially true of   challenger brands, who need to make their competitive value instantly   clear                          by making direct hits on an emotional level.

We human beings are hard-wired to find and sustain comfort: comfort food, comfort zones, and old favorites. We are loyal to                          the tried and true. We move to and try to stay in our place of comfort.

Yet our job as   marketers is to change customers' perceptions, preferences, and   behaviors towards our products or services.                          Our job is to make people uncomfortable enough   to change their current behavior. Their comfort is not in our best   interest.                          Left to their own devices, our target customers   would choose to stay in their comfort zones, which means they wouldn't   use                          or even try the product or service we're   ­offering. 

Discomfort, unmet needs, and challenger brands 

Obviously, not   all product categories are populated by fiercely loyal patrons who cling   to their comfort zones like intrepid                          Chicago Cubs fans. Many categories of consumer   products have users loyal only to the next coupon or sample. In our   industry,                          the ­challenge of changing customer preferences   is made more intense by the seriousness of the healthcare professional's   responsibilities.                          Changing preferences for toothpaste carries a   significantly lower risk than changing preferences for chemotherapy   alternatives,                          diagnostic techniques, or surgical protocols.   There's got to be a very compelling reason to consider changing. 

If we want to   convince a physician to change prescribing behavior, we must first   convince him or her that there is something                          lacking with the way things are currently done.   We must stir the pot a bit to create discomfort with the current brand,   brands,                          or processes that can only be rectified by   changing to our brand. We must move them to the point of discomfort that   creates                          urgency to change, where not changing is simply   unacceptable. 

This process is   especially true when developing plans for challenger brands that don't   have the big budgets. Challenger brands                          need to think differently from market leaders.   They need to offer new criteria for choice. For challenger brands, a   clear                          path to leveraging your target customer's   discomfort is critical to success. 

Enter   Maslow's hierarchy of needs. You remember: it's that pyramid-shaped   chart (like the government's original food chart                          that told us we couldn't eat Frito's and   cheesecake with every meal). The idea is that our most ­basic of needs   (like ­breathing,                          eating, and drinking) must be satisfied before   we can attain higher levels of needs (like self-esteem, respect by   others,                          morality, or creativity). Applied correctly, it   defines the key areas of comfort and discomfort for our species (Figure   1).

Our job is to   engage an HCP in a conversation about a product or service and point out   issues that may: diminish confidence                          in the status quo; limit problem-solving; or   make patients less satisfied with the outcomes achieved. If we can   demonstrate                          how our product or service can help the HCP   perform better, find a clinical issue that might make them doubt their   current                          preferences, or isolate a patient type that   might better benefit from a different product, we can use this   discomfort to drive                          change. 

Let's   see how this thinking plays out in terms of a process. We often   characterize marketing as a process that moves prospects                       from awareness, to interest, to desire, and finally   to action (AIDA). With challenger brands viewing the process (and our                       job as marketers) as moving customers from their   comfort zone to a point of discomfort, then into a new comfort zone that                       includes our product or service, this multiplies   the impact of the marketing plan (Figure 2).

Some call it   disruption. Some call it creating a tipping point in the customer's   beliefs. But it's all based on creating discomfort,                       then moving the customer to a new comfort level.   This creates a more productive framework to evaluate challenges,   ­develop                       strategies, and formulate the marketing mix. The   process consists of five stages: 

 The customer is in his or her comfort zone with the product currently used.

-open a dialogue to make the status quo less secure. 

 The customer becomes engaged and neutral/mildly open to discussion or consideration. 

-clearly define unmet needs with current product. 

 The customer becomes uncomfortable with the current practice and is open to considering new solutions. 

-align your product's strengths and values with your customer's needs. 

 The customer moves to a new comfort zone with your product. 

-make the change as easy as possible and reward the new choice. 

 The customer settles into the new comfort zone as competition begins to attack. 

-defend the comfort zone with expanded support and value. 

Behind the process is an assessment of the underlying comfort and discomfort drivers, somewhat akin to an ATU study. This                       begins with key questions about the physician and his or her practice. 

How comfortable are your target customers?

» How long have they been using the product or service? 
  » What's the risk involved in the use or treatment? 
  » How well do they understand the disease or drug category? (For example, a PCP may be the initial treater for a specialty                       disease and would not have in-depth experience.) 
  » How difficult is it to administer or use the product? 

How and when do they use the product(s) you plan to displace?

» At what stage of the disease? 
  » On which type or profile of patients? 
  » Which treatments do they use and when? 

 
  » Age of physician
  » Department or individual formulary? 
  » Do they practice at a teaching or community hospital? 
  » Are they the decision maker? 

Armed with the details of your customers' basic attitudes, trial, and use drivers and a well-structured process, moving them                       from their comfort zone to yours can help convert a challenger brand into a significant contender. 

 is President of Topin & Associates, and a member of 

 Editorial Advisory Board. He can be reached at 

Articles

Column

The Art and Science of Creating Discomfort

For decades now, financial relationships have existed between pharmaceutical companies and physicians and hospitals, some of which have come under scrutiny and caused considerable public controversy. One example of a common financial relationship are payments made by pharmaceutical companies to physicians for consulting services on experimental products under investigation or development. These transactions have involved research activities, gifts, speaking fees, meals, or travel, and often occur privately so that no one except for the parties directly involved knows the details of the transactions. 

The typically private nature of these relationships has recently changed, as the Centers for Medicare & Medicaid Services (CMS) now requires public transparency about these transactions occurring on or after August 1, 2013. A newly enacted law, the Physician Payments Sunshine Act (also known as the Open Payments program) is intended to make information about these payments between pharmaceutical companies, physicians, and hospitals transparent. Open Payments requires that manufacturers of drugs, devices, biologicals, and medical supplies annually report to CMS most payments and "other transfers of value" that they make to covered recipient physicians and teaching hospitals. Manufacturers and group purchasing organizations (GPOs) will also report ownership and investment interests held by physicians or their immediate family members during the preceding calendar year and payments made to those physicians.  

As a result of the Affordable Care Act (ACA), such financial relationships will be publically disclosed on a CMS Open Payments website so that healthcare consumers, clinicians, and stakeholders can be better informed about the nature and magnitude of these relationships. Industry data collection tracking these transactions began on August 1. Industry will register with the program and submit 2013 data by March 31, 2014. In the fall of 2014—a little more than a year from now—CMS will post the 2013 data on the Open Payments website, which will be accessible to the public. This public posting will occur ­annually. 

You may be considering what this new law means for your organization and have serious questions. Is my organization ready for this new law? Do I know what we have to do to comply or how to go about doing it? How much will compliance cost? And, by the way, what will public transparency of this information mean—will it be helpful or will it distort public opinion and hamper beneficial relationships between our company and physicians?  

Open Payments is designed to do what laws are supposed to do: address widespread public concerns, and in this case, create a window into an area of healthcare previously unavailable to the public. In 2009, the Institute of Medicine published a report, "Conflicts of Interest in Medical Research, Education and Practice" that described such concerns. The influential report also recommended implementing a national disclosure program for payments to healthcare providers and prescribers. The Open Payments program was created to address this and other calls for transparency of these financial relationships between the industry and physicians and teaching hospitals. 

Like industry, CMS fully appreciates the benefits that accrue from ongoing collaborations among pharmaceutical manufacturers, physicians, and teaching hospitals. Those joint efforts have long contributed to the discovery, design, and development of life-saving drugs, and delivered better health to patients worldwide.  

However, certain financial relationships may not be beneficial, and may in fact create conflicts of interest that negatively affect patients. Under Open Payments, the industry will disclose the nature and extent of such financial relationships. The data will help patients make decisions about the delivery of their healthcare. In the process, disclosure may also help to discourage improper influences exerted over research activities, education, and clinical decision-making that can potentially compromise clinical integrity and the quality of patient care—or potentially lead to higher healthcare costs.  

Open Payments will serve as a valuable national resource, addressing a long-standing information void and providing more transparency about the healthcare market. It is in the spirit of transparency that CMS is striving to implement this law, with open engagement and input from the stakeholders.. We have worked closely with stakeholders to better understand the current scope of the interactions between manufacturers and physicians and teaching hospitals. Last December, for example, when finalizing the policy and rule for this program, CMS weighed feedback from nearly 400 interested parties, including pharmaceutical manufacturers. The final regulation was preceded by no fewer than 251 pages of commentary and explanations, an example of the deliberate approach to consider and integrate the comments received and make the rationale for final decisions clear and transparent. 

Still, CMS understands these disclosure requirements will be a major undertaking for many companies. CMS is taking great care to simplify the procedures involved and provide support as industry undertakes this effort. Starting with the regulation, CMS has provided accommodations, such as a longer period of time than was required in the law—six months—for industry to prepare for the start of data collection. 

Already, the CMS website offers considerable information, often in the form of fact sheets, in straightforward language to help make this program understandable. It has provided manufacturers with three customized file specifications to help implement their data collection. An electronic system is being developed to facilitate the registration and reporting process via a portal on a secure website. All participants will then have a voluntary opportunity—45 days—to review, dispute, and correct any information believed to be inaccurate prior to its publication. This review is very important to help ensure that the information made public is accurate and complete. 

CMS has developed new free mobile apps, one for industry and the other for physicians, that can assist in Open Payments implementation. You can download the mobile apps directly from your app store (iOS Apple or GooglePlay) and search for Open Payments. It should be noted that the apps are used for tracking purposes only and do not directly transmit information to CMS 

The benefits of compliance are extremely worthwhile. Several advantages are anticipated. Disclosure will enable patients to make informed decisions when choosing healthcare professionals and treatments. Payers will be better equipped to identify conflicts of interest and make better decisions regarding ordering or prescribing physicians. And providers will have more knowledge about those physicians publishing important data and establish guidelines and standards of care. 

Compliance with this program is being taken extremely seriously, and the companies involved should understand the consequences for non-compliance. Violations carry consequences: civil monetary penalties are capped annually at $150,000 for failure to report and at $1,000,000 for knowing failure to report. 

As implemention of this program in collaboration with the industry begins, CMS encourages you to ensure that your organization is prepared and ready to be in full compliance with the reporting requirements. Start early and integrate the processes into your business operations, and use the CMS website and its resources to help educate your employees about the program. The public deserves to be fully informed about ­financial ­relationships among healthcare providers, and industry should welcome the opportunity to be more transparent than previously required. We are all in the healthcare business. Healthcare means taking care of patients, and the new law will better enable all of us to keep ­putting patients first. 

, MD, is Medical Director for CMS's Center for Program Integrity and the Director of Data Sharing and Partnership. He can be reached at 

Features

The Sunshine Act's Open Payments spending disclosure program is now live. The government's lead compliance officer explains how it will work.

Making Sense of the Sunshine Act

The development, commercialization, and utilization of drug combinations have skyrocketed in the United States. According to PharmaCircle research, the number of fixed dose combinations (FDC) approvals has more than tripled over the last decade compared to the early 1990s. Currently, there are numerous marketed FDCs and other combination regimens spanning multiple therapeutic areas, including infectious disease (HIV/AIDS, Hepatitis C, bacterial infections); oncology; endocrine disorders (diabetes, lipids); cardiovascular disease (hypertension, heart failure); women's health (contraception, menopause, osteoporosis); and respiratory diseases (asthma, COPD). According to an Oliver Wyman analysis, there were over 25 notable novel combination development programs underway in oncology alone in 2011.  

Several factors have driven the dramatic escalation of combination products over the last decade: 

 Recent scientific advances have enhanced our understanding of the pathophysiology of HIV, cancer, and other complex diseases. Highly active antiretroviral therapy (HAART)—the use of at least three HIV drugs acting on different viral targets—reduces HIV replication, viral resistance, patient mortality, and morbidity rates while improving quality of life. Similarly, increasing recognition that most cancers use multiple pathways to grow and proliferate has spurned development of entirely new classes of oncology agents, such as immunotherapies and targeted therapies, which are being combined to inhibit distinct pathway targets in order to improve treatment response while minimizing tumor resistance and side effects. 

Supportive regulatory and clinical environment.

 Historically, the FDA and the US medical community were skeptical about drug combinations. However, regulatory policies and clinical thinking have dramatically changed over the last decade. The FDA established the "Office of Combination Products" in 2002 to evaluate combinations of drugs with other medicine products, such as devices and biologics. In 2004, the US government announced an expedited pathway for the FDA to review low-fixed dose combinations, co-packaged therapies, and single-ingredient HIV therapies for use by grant recipients of the US President's Emergency Plan for AIDS Relief. This past June, the FDA issued guidance for the "co-development of two or more new investigational drugs for use in combination" to address the rising number of novel combinations. 

 FDCs are critically important for managing global infectious disease threats such as HIV/AIDS, malaria, and tuberculosis. The World Health Organization and other public health entities have encouraged the development of fixed-dose combinations which may improve adherence, reduce costs, and facilitate distribution in developing countries.  

With increasing brand competition, companies are eager to demonstrate better efficacy, safety, and convenience using a combination which is synergistic or additive. Companies competing in HIV, asthma/COPD, and diabetes have demonstrated higher efficacy rates with combinations versus single agents.  

 Companies are pairing second- and third-line drugs with first-line products to enhance market access, earlier use, or preferred utilization. For example, many companies have combined their diabetes type 2 agents with first-line metformin, including Merck's combination of its best-selling brand Januvia with metformin to create Janumet. 

 Companies increasingly are adopting a "multi-level competition" approach where they seek to win not only with a single brand but also across their product franchises and portfolios. Gilead Sciences wants to maximize sales of multiple HIV products to enhance its HIV franchise as well as with its new Hepatitis C (HCV) products to win with its overall anti-viral portfolio. Similarly, Roche bolsters sales of individual brands and its overall oncology ­portfolio by ­encouraging the use of combination regimens of its cancer agents.  

 Industry critics note that companies combine drugs nearing patent expiry with newer drugs with longer patents to extend the proprietary rights and marketability of the older agent. Some believe that Pfizer was using this "evergreening" strategy in its failed attempt to develop its powerful HDL-raising developmental agent torcetrapib only in combination with its best-selling, near patent-expiration agent Lipitor, instead of as developing it as monotherapy.  

Combination drugs can be classified into two general categories: "combination drugs," consisting of drug-drug combinations; and "combination products," consisting of drug/non-drug combinations. A 

most commonly refers to a fixed-dose combination, a formulation including two or more active pharmaceutical ingredients combined in a single dosage form. However, companies may promote drug combination regimens which are not necessarily fixed dosed, such as co-packaged products or "free combinations," two or more medicines with separate formulations and specific labeling for simultaneous use. Initially, fixed-dose combination drug products were developed primarily to target a single disease, such as Gilead's anti-HIV FDCs. However, some FDCs target multiple diseases or conditions. For example, Pfizer's Caduet is a FDC containing Lipitor to treat hypercholesterolemia and Norvasc to treat hypertension.  

 as those which "combine different types of medical products, such as drug/device, biologic/device, drug/biologic, or drug/device/biologic, that are physically, chemically, or otherwise combined or mixed and produced as a single entity." Examples of combination products include a monoclonal antibody combined with a therapeutic drug; a device coated or impregnated with a drug or biologic such as a ­drug-eluting stent; an orthopedic implant with growth factors; or insulin injector pens and metered dose inhalers.  

Pharmaceutical companies have leveraged combination products in a variety of ways to gain competitive advantages and enhance product sales: 

 Roche has been masterful in designing and executing winning drug combination strategies as exemplified by its fixed-dosed, free, and drug-conjugate combinations targeting patients with HER2+ breast cancer. For over a decade, Roche's monoclonal antibody Herceptin combined with chemotherapy has been the mainstay of treatment for HER2+ metastatic breast cancer (mBC). Last year, the company launched Perjeta, a first-in-class HER dimerization inhibitor to be used in combination with Herceptin for mBC. Early this year, Roche launched Kadcyla, the first antibody-drug conjugate (ADC) for the treatment of HER2+ mBC. Roche is positioning Kadcyla—which contains Herceptin—to eventually replace Herceptin as a first-line mBC agent in combination with Perjeta and become the monotherapy of choice for second-line treatment of mBC. "Kadcyla is an antibody-drug conjugate representing a completely new way to treat HER2-positive metastatic breast cancer, and it helped people in the EMILIA study live nearly six months longer," said Hal Barron, MD, Roche's chief medical officer and head, global product development. "We currently have more than 25 antibody-drug conjugates in our pipeline and hope this promising approach will help us deliver more medicines to fight other cancers in the future." 

 Gilead is using a similar drug combination strategy to win in the HCV infection space as it did in HIV. Data presented in March demonstrated that a triple regimen of the HCV sofosbuvir, ledipasvir, and ribavirin produced a 100 percent response rate after 12 treatment weeks for HCV genotype 1 patients. In June, the FDA granted priority review for Gilead Sciences new drug application for sofosbuvir, a once-daily oral nucleotide analogue inhibitor for the treatment of HCV infection in combination with ribavirin (RBV) as an all-oral therapy for HCV-infected patients with genotypes 2 and 3 and in combination with ribovarin and pegylated interferon for treatment-naïve patients with genotypes 1, 4, 5, and 6. Gilead is developing a sofosbuvir-ledipasvir coformulation that is being tested with and without ribavirin. FactSet Research Systems estimates that annual sales of sofosbuvir and its combinations will exceed $6 billion and become the company's biggest selling product by 2017.  

 Teva Pharmaceuticals, the world's largest generic manufacturer, has announced that combination drugs and products represent an integral part of its new competitive strategy. Teva is pursuing "new therapeutic entities," new formulations or combinations of older drugs, which would leverage Teva's competitive advantages in generics, innovative specialty CNS drugs, and product formulation. For instance, Teva recently acquired Alexza Pharmaceuticals and its Staccato aerosol delivery system to serve as the platform for many new product combinations using already-approved drugs. In January, the FDA approved Alexza's first product Adasuve, which combines the nearly 40-year-old anti-psychotic drug loxapine with the company's new inhalation delivery device.  

Scientific, clinical, regulatory, and commercial factors will continue to stimulate the development and utilization of drug combinations and shape the competitive landscape. Progressive companies will seek to preempt rivals by evaluating and developing their in-house drug candidates, identifying external drug and product combinations and partners, and by preparing insightful competitive strategies to win the drug combination competition. 

 is President of Bernard Associates, LLC, a global pharmaceutical industry competition consulting firm, and a member of 

Editorial Advisory Board. He can be reached at 

Companies are leveraging combinations of drugs and other products to gain competitive advantage and market share.

The Drug Combination Competition

When asked why he robbed banks, Willie Sutton supposedly responded: "Because that's where the money is." Anyone who has seen a doctor in the last couple of years knows that the computer screen gets more face time than the patient, so it follows that pharma ought to be prioritizing the EHR channel as a way to deliver timely messages to that critical customer, the one holding the Rx pad. Right?  

Maybe. Discussions about EHRs can get complicated quickly, due to the sheer technological heterogeneity among EHR providers, not to mention their differing business models; free and ad-supported, or expensive and ad-free, for example. That's in addition to other important considerations such as, what stage of Meaningful Use has the physician's practice or hospital obtained? Or, how does the EHR fit into a given physician's workflow, and what tasks are delegated to administrative staff?  

Don't be bedeviled by the details, says Ed Fotsch, CEO at PDR Networks, a provider of drug label information and product support that now partners with EHR providers to deliver services to physicians and patients. Between 60 and 70 percent of physicians have now adopted some form or EHR, and as a result, their workflow has altered ­dramatically, says Fotsch. Now, "it's all about information flow into and out of the EHR." For those early-adopting physicians and hospitals that have already been using EHRs, Stage 2 of Meaningful Use is just six months away, and that requires physicians to send "customized patient education" to at least 10 percent of their patients, or sacrifice the Meaningful Use incentive payment. Where will docs get the patient education and resources they'll be required to distribute? 

Pharma, if the industry plays its cards correctly. Drug companies have spent untold millions on developing patient education materials, a lot of it never seen by actual patients. These materials—in addition to financial assistance programs and co-pay cards—can be repurposed to meet the needs of physicians who want to qualify for Stage 2, says Fotsch. The key is to support the doctor's decision to prescribe a given product by providing services that help patients afford a medication, remain adherent on therapy, and understand the risks and benefits of a product. 

Despite a lot of talk (and conferences) about the need to transform industry from product peddler to service provider, you don't hear that many CEOs regaling analysts on earnings calls with stories about what's happening above and below the pill. Some brand managers still don't understand why services like customized patient education matter after a physician has already chosen what to prescribe. Fotsch says he asks these brand managers why they return to the same restaurants, or buy a certain kind of car. "It's because of a good experience" with that restaurant or car, and it's the same for medicine, he says. "If you can help a doctor and a patient at the time of prescribing—with an adherence program, or financial assistance, et cetera—that's a better drug," says Fotsch.  

But patient materials don't appear in EHRs by magic; there's a lot of work that goes into it. Fotsch says Bristol-Myers Squibb and AstraZeneca are two examples of "forward-looking clients that are thinking like service companies" with respect to EHR. Fotsch says biopharma EHR initiatives should consider a physician's full range of prescribing habits, and not try to push single-drug materials into EHRs. It's also important to understand the level of EHR adoption in a given specialty, and to identify opportunities that engage physicians in context-appropriate ways. Finally, it's a good idea to understand the Stage 2 requirements in order to meet the needs of physicians, says Fotsch. 

As more and more physicians spend more and more time looking at a screen, it makes sense to support their prescription decisions through the EHR channel. Newly covered lives coming into the system next year will need to be educated about their diseases and treatment. At the point of care though, patients might find it harder than ever to make eye contact with a doctor. 

Are electronic health records a viable channel for engagement? Ben Comer reports.

Share of Screen: Prioritizing Electronic Health Records

A KEY ISSUE FOR BIOPHARMA MARKETERS TODAY 

is balancing cost and value factors around specialty biologic drugs, particularly those for cancer and other high profile, life-altering diseases. The financial and reputational stakes for players in this hotly contested commercial space are high, compounded by a startling lack of awareness of the incentives that drive specific actions by payers, providers, health professionals, drug manufacturers—and, ultimately, the patient. Bridging this perception gap was the theme of 

 sister organization CBI's annual conference on Access and Reimbursement, held in Philadelphia earlier this month. Speaker after speaker noted that pharmacy spend is now the fastest growing cost segment for insurers, and specialty drugs are the principal factor. 

A highlight of the meeting was the release of a survey by a new community-based practitioner network, The Health Payer Council, examining how US payers are responding to access and financing challenges for specialty medicines. The council conducted interviews over a 10-day period in August with 52 US-based medical and pharmacy directors—whose decisions affect 60 million commercial policy lives. The objective was to identify what payers are doing at present to manage pharmaceutical costs and to assess cost control measures that are likely to be applied over the three years, particularly in the oncology space.  

Current strategies emphasize the application of standard pharmacy benefit techniques to infused medicines and biologics, reflecting their higher visibility in terms of reimbursement exposure. Some 44 percent of the survey group have programs underway or in the pilot stages. Significantly, 39 percent are working on strategies to wean physician practices away from their dependence on revenues from these drugs—a difficult task in light of the fact that most oncology practices would be insolvent without the income from administered drug treatments. Especially relevant here is the offering of performance bonuses to physicians when plan-approved clinical treatment pathways are observed; 36 percent have this in place or under pilot. In lowest order of use are drug capitation/bundling and differential ASP reimbursement, at 31.2 percent and 21 percent, respectively. 

Overall, there was no ringing endorsement of the success of these approaches: the majority of plans consider their efforts to be only "somewhat successful." Pharmacy benefit management techniques (86 percent) were rated the highest in terms of success, followed by differential ASP reimbursement (67 percent). In contrast, efforts to wean physicians off of drug revenues received a high 17 percent score for being "somewhat unsuccessful." And no one was particularly enthusiastic about performance bonuses—a full 100 percent of the survey population ranked this tactic as "somewhat successful" rather than "very successful." 

A sea change is expected in management of oncology specialty drug spending over the next three years. More than two thirds—69 percent—believe aggressive cost controls targeting this therapeutic segment will be in place before mid-decade; half think this will happen over the next year. An interpretation of the poll results suggest in turn that capitation/bundling and pay for performance will be the toolkit of choice for cost cutters, since these two have captured the most interest among payers; they are seen as the most effective methods not currently in wide use. 

Roger Green, an industry veteran who conceived and administers the Health Payer Council, tells 

 the survey evidences a "disconnect" between what payers are doing now to manage high drug costs in specialty and strategies that are not being applied—despite the perception that these are the ones most likely to be successful. "Payers by and large are still fixated on a philosophy that relies on the incentive of the carrot or the stick. This is not the optimal way to accomplish what is necessary to facilitate change, which is getting the various siloed parts of the system to cooperate, share, and work in partnership. More emphasis must be placed on changing basic behaviors." At root, Green says, is a simple lack of awareness. "No one in the system understands how anyone else makes money."  

The council, which now has 107 members drawn from the medical director and pharmacy payer community, has a mandate to do just that. It won't make policy but is to serve as a forum to exchange information and build dialogue, with Big Pharma a principal focus. You might call it a Venn diagram of the payer community, writ real. 

From the Editor

A key issue for biopharma marketers today is balancing cost and value factors around specialty biologic drugs, particularly those for cancer and other high profile, lifealtering diseases.

Trying to Control Pharma Costs?

User fees are going up because it takes more time and resources for the Food and Drug Administration to review applications for more complex products—and because the volume of new drug applications (NDAs) is going down. The dip is slight for submissions expected in 2014, according to an announcement of Prescription Drug User Fee Act (PDUFA) rates published in the Federal Register Aug. 2. FDA expects to see 116 filings  in 2014, slightly less than the 122 submissions in 2012. And because the agency has to collect a certain amount of fee revenues each year, which is revised to reflect inflation and a "workload adjuster" for the new drug review program, fewer submissions means that each sponsor pays a little more.  

So next year it will cost $2.2 million to submit an NDA or biologics license application (BLA) for agency review, and $1 million for a supplement with clinical data, generally to support new indications or expanded labeling. Review of a new biosimilar application that carries clinical data will be just as costly.  

While a $2 million application fee may be relatively inconsequential for a large pharma company, compared to the vast sums it spends on clinical trials and product development, the amount may be considerable for small firms with limited resources. Manufacturers moreover will pay higher establishment fees ($555,000 for each of 455 facilities) and product fees ($104,000 for 2,425 marketed products).  

The drop in anticipated NDAs may reflect an ever-longer and more costly drug-development process that is squeezing pharma investment in R&D. FDA has a ways to go to approve as many new molecular entities (NMEs) in 2013 as the near-record 39 NMEs in 2012, and maintaining momentum will be harder in the future if initial submissions drop. Of course, if sponsors file more high-quality applications that yield a greater percentage of approvals, the final numbers could continue to rise—an outcome that would bring cheers on all sides.  

A more positive view of the approvals-and-innovative issue is to distinguish truly important NMEs—"first-in-class" and "advance-in-class" medicines that account for a growing proportion of new drugs—from "addition-to-class" drugs that are declining, according to FDA analysis (

). A rising number of advanced new therapies are coming to market, according to this assessment, even if total approvals remain static. 

FDA's new breakthrough drug program promises to support this shift by speeding the development and authorization of promising, critical therapies. Not only will FDA accelerate the review of applications for therapies that win the "breakthrough" designation, but agency scientists will provide advice and leeway to streamline clinical development. According to Friends of Cancer Research, a lead advocate for the program, FDA received 73 requests for breakthrough status as of late July—much more than the handful initially expected. The designation has been denied for 22 requests and granted for 25 experimental drugs that demonstrate early signs of clinical improvement over existing therapies for serious diseases, such as cancer and cystic fibrosis.  

The program's success appears linked to advances in genetic understanding of drug response that enable FDA and sponsors to detect efficacy in early clinical trials, noted ­Janet Woodcock, director of the Center for Drug Evaluation and Research (CDER), at a Friends briefing in July. Jay Siegel, head of global regulatory affairs at Johnson & Johnson, described how the breakthrough designation may shave two years off the timeframe for developing ibrutinib, a new oral leukemia medicine.  

At the same time, there are clear challenges in bringing these innovative treatments to market. Insurers and health plans may hold off reimbursement until additional clinical data confirms efficacy and added benefits. Manufacturers also face problems in scaling up quickly to commercial production.  

FDA advice for implementing this and other expedited review and development  programs should help, as seen in a June draft guidance that offers sponsors insight into which factors lead to a breakthrough designation for a drug, plus accelerated testing and review. FDA also plans guidance on accelerating the development of diagnostics that can help sponsors demonstrate which patients respond to therapy. Pharma and biotech firms are happy to announce when an experimental product receives breakthrough or expedited designations, but there's much less information out there on what FDA turns down—and why.  

Biopharma R&D productivity also could benefit from a more robust clinical trial infrastructure that uses biomedical data more effectively, says Woodcock, who would like to see more ongoing clinical trials utilizing standardized data and  methodologies that can rapidly screen candidate compounds for signs of efficacy. "Let's not reinvent the wheel with every trial," she commented at a July conference on biomedical innovation sponsored by the Brookings Institution.  Instead, a "network of data sources" linked by common protocols for data standards could greatly compress the clinical testing process. 

The National Institutes of Health (NIH) similarly aims to help reduce the high failure rate of clinical trials through a target validation consortium, starting with pilots for Alzheimer's disease, diabetes, rheumatoid arthritis and schizophrenia, added NIH deputy director Kathy Hudson.  And the Patient-Centered Outcomes Research Institute (PCORI) has launched the National Patient-Centered Clinical Research Network to improve the conduct of clinical outcomes research. The program will consist of some 25 research networks formed by research organizations and patient groups, each able to tap into health data for over one million individuals, explained PCORI chief science officer Bryan Luce at the Brookings conference. Luce acknowledged challenges, but predicted the program would provide "a dynamically linked clinical research network" that can test hypotheses and do adaptive studies, Bayesian trials and observational studies.  			

Pharma post-marketing studies stand to benefit from the networks' data from real-world patients in usual care settings. Although the PCORI networks may not be that useful in conducting randomized trials for investigational medical products, the program could help identify and recruit patients for clinical studies, encourage use of patient-reported outcomes, and indicate to sponsors why certain patients don't respond to treatments. Key issues are how PCORI develops the governance and structure of the research networks and who has access to the data. 

Washington correspondent. She can be reached at 					

Rising costs will mean a drop in anticipated NDAs next year, reflecting an ever-longer and more costly drug-development process that is squeezing pharma investment in R&D.

Biopharma Innovation in Trouble?

In its present form, healthcare is largely reactionary. The limited knowledge of the external factors that lead to various diseases has led to a "one-size-fits-all" approach to care. But personalized medicine, the idea of tailoring treatment of a patient based on his or her unique physiological characteristics, is poised to change the practice of medicine. It will allow healthcare providers to detect susceptibility to disease and potentially preempt or prevent disease progression by considering genetic and environmental factors that may increase predisposition. 

Pathologists will have an integral role in this new era of care. Personalized medicine relies on new methods of molecular analysis to determine predilection toward certain diseases, but also the likelihood of a certain treatment's efficacy. Relying on these types of precision diagnostics makes the pathologist more visible to physician colleagues, says Gene Siegal, MD, Robert W. Mowry endowed professor of pathology and director of the Division of Anatomic Pathology at the University of Alabama at Birmingham (UAB). Siegal is also the executive vice-chair of Pathology in the UAB Health System, and a member of the American Society for Clinical Pathology (ASCP) Board of Directors. 

"Pathologists are absolutely critical to companion diagnostics," said Siegal. "Companion diagnostic tests reside in the lab. Pathologists have total familiarity with the tests and they are best able to report test results to the clinician who is providing the therapy to the patient." 

Pathology and the future of personalized medicine

James L. Wisecarver, MD, medical director for Clinical Laboratories at The Nebraska Medical Center (TNMC), where he is also the director of both the Histocompatability Laboratory and the Human DNA Identification Laboratory, said pathologists have been making personalized diagnostic interpretations for decades. 

"Pathologists follow new therapies. We've been doing that for many years," Wisecarver said. "Pathologists have to stay familiar with new therapies and learn about certain genetic differences in patients to determine who will respond to which drugs." 

The full scope of personalized medicine has not yet come to fruition, but it is already influencing cancer care.  

Appropriate therapeutic regimens for various cancers are being determined by molecular testing. Tumors might present as a textbook example of a certain type but with molecular techniques like florescence in situ hybridization (FISH) technology, might actually be revealed as a completely different type of lesion.  

"This can especially happen with soft-tissue tumors," said Wisecarver. The ability to understand such differences is a critical skill possessed by pathologists, aiding in effective diagnosis. 

Personalized medicine in a customer service culture

Patients are now more involved in their own medical choices. They are knowledgeable of many medical conditions and options for care; this change requires physicians to work more closely with patients not only as a healthcare provider, but as a partner in treatment and care.  

Customer satisfaction is a common metric by which businesses measure their performance. Pathology services, which are largely unseen, do not normally make patient and client satisfaction a priority. 

As personalized medicine spreads, however, pathologists play a more intricate and visible part in patient care. This new transformation requires more attention to the "business" of pathology, and leading with customer service. 

Pathologists no longer solely perform tests and interpret results—they are directly involved in improving the efficiency and quality of care. Improving patient care is done largely through appropriate test utilization, and pathologists and laboratory professionals are heavily involved in the development of guidelines for both the appropriate use of laboratory tests and advanced laboratory diagnostics. 

In February, my group, ASCP, the world's largest professional membership organization for pathologists and laboratory professionals, released a list of five tests that physicians and patients should question as part of the American Board of Internal Medicine's (ABIM) Choosing Wisely campaign. Our society was one of more than 50 that identified often inappropriate and potentially harmful tests that are frequently used by healthcare professionals. The goal of the campaign is to promote quality and efficiency in healthcare. 

Pathology, personalized medicine, and health reform

The new era of personalized medicine can also be attributed to the changing landscape of new payment models. One of many changes to how physicians are paid, due in large part to the Patient Protection and Accountable Care Act (ACA), is value-based purchasing. The primary goal of the many reforms initiated through the ACA is a reduction in cost and an improvement in quality. 

As pathologists become more involved in the development, management, and application of patient information and health records, they are well-positioned to deliver care that is personally tailored, highly effective, and cost efficient. 

"Pathologists are focused on patient safety and quality," said Siegal. "[Pathologists] bring to the multidisciplinary team of physicians a unique skill set for the better and encourage more interaction between pathologist and physician." 

Highlighting the value of the pathologist to patient care requires pathologists to be more visible in their hospitals, but it also requires appropriate compensation, according to Siegal. 

The economics of healthcare doesn't just apply solely to the cost of care to patients. Changes to reimbursements and laboratory fee schedules are also affecting pathologists. Molecular tests can be labor-intensive and costly. Third-party payer reimbursements do not reflect the cost of performing these procedures and Medicare reimbursement rates are even lower. While pathologists are up to and able to meet the challenges presented in this new era of healthcare, it is uncertain that the United States will be able to maintain an adequate supply of experts in the field without proper compensation. 

Recognition as a vital member of the healthcare team

As the field of pathology has expanded, so have the skill sets, knowledge, and value of its practitioners. The field of informatics, which is growing increasingly important as a diagnostic technique, is becoming an essential area of pathology training. This new knowledge allows pathologists to gather and interpret complex patient data using 21st century technologies. Progress in the field of molecular pathology is poised to move pathology from a referral-driven specialty to one that has direct interactions with patients. Highly specialized training in the area of molecular genetics makes pathologists invaluable as we transition to the new era of personalized medicine and care. It is important to acknowledge the benefits pathologists bring to the entire healthcare team as personalized medicine promises to transform the way healthcare is provided.  

 Founded in 1922 in Chicago, the American Society for Clinical Pathology is a medical professional society with more than 100,000 member board-certified anatomic and clinical pathologists, pathology residents and fellows, laboratory professionals, and students. ASCP provides excellence in education, certification, and advocacy on behalf of patients, pathologists, and laboratory professionals. For more information, visit 

 is Web Writer at the American Society for Clinical Pathology. He can be reached at 

With their knowledge of molecular genetics, Pathologists are transforming the way healthcare is provided.

Pathology in the Era of Personalized Medicine

This sponsored supplement was produced by Focus Reports.  

For exclusive interviews and more info, please log onto 

Ask Indonesians about a bad experience in medical care and each will have a story to tell. The poor state of Indonesia's health care system has turned 'improving quality' into the top priority of the government of Indonesia. Better quality of care has become especially important as the fourth most populated country in the world moves into full traction with its plans to achieve universal health care coverage.  

 (SOURCE: ARTISANS OF BALI, HTTP://ARTISANSOFBALI.COM)			

According to the Ministry of Health, 72 percent of the population, just over 176 million Indonesians, were already part of some type of health financing scheme. Now Indonesia's policymakers are committed to covering every citizen by 2019. The implementation of universal health care coverage will start in January 2014 and is widely seen as a significant step forward for Indonesia's 238 million people. 

Badan Penyelenggara Jaminan Sosial, BPJS as the system is locally referred to, aims to drastically increase the quality and access to medicines and medical treatment to the entire Indonesian population. From policymakers to health care providers, drug manufacturers to distributors, all stakeholders in Indonesia's health care and pharmaceutical sector are now facing the critical task of defining their role within this changing environment. 

Most multinational companies (MNCs) do not expect to play a major role within BPJS but, despite the vast volume, serving BPJS will not be easy or cheap for local manufacturers either. Not only are they required to ramp up manufacturing capacity to serve a growing market, permits to manufacture –due to Indonesia's Pharmaceutical Inspection Convention and Pharmaceutical Inspection Co-operation Scheme (jointly referred to as PIC/S) adherence– have become stricter than ever. 

Increasingly important within Indonesia's changing pharmaceutical landscape is the role of the distributor. Not only will distributors play a key role in making universal healthcare coverage a reality by physically making medical devices and medicines available across Indonesia's complex geography, they will also play an essential role in identifying where and how the market will benefit from BPJS by providing the manufacturer with the latest data from the field.  

Promising macro-economic data, exponential growth rates, demographic potential, and a growing middle class have drawn Indonesia into the international spotlight, earning a place among the world's 'pharmerging' countries. Executives should not stare themselves blind on the double digit growth rate however. Indonesia remains a market where both MNCs and local pharmaceutical companies can enjoy steep growth curves-- provided they are willing to invest in the long run. These long term investments can take on various formats, including manufacturing, partnering, and brand building. All will be central to function as an agent of change while Indonesia heads towards universal health care coverage. 

BPJS implementation ends an era of uncertainty around the government's commitment to launch universal coverage. Assigned as the chairman for the implementation of universal health care coverage in Indonesia is the country's Vice Minister of Health, Mukti Ali Ghufrom MSc, PhD. Ghufron and his team define ­government commitment as a key success factor to a successful implementation. "From a legal point of view, a law has already been formulated and launched. We have created a roadmap, together with all stakeholders, including the unions and the Chamber of Commerce, for the successful implementation of the plan. From a financial point of view, a budget has already been agreed upon: for 2014, an amount of IDR 1.75 trillion (USD 1.7 billion) will be provided to cover the poor and the 'near poor'," he said. 

In parallel, increasing the quality of care is seen as equally important to the Ministry. "My main concern is the quality of our health care services. It would not make sense to provide health care to everyone in the country if its quality is poor," said Minister of Health, Nafsiah Mboi, Phd. "So far, we have been preparing rigorously to improve the quality of care. For health care facilities, our vision is a very strong primary care network combined with a good quality referral system." According to the Ministry, Indonesia now has roughly 9,500 primary care centers or one for every 30,000 people. "Although these numbers match the required standards, we need to work on improving the quality at primary care level," she said. "In terms of hospital care we now have 2,138 hospitals, 829 which are government owned, across the country. These hospitals have standards and accreditation which guarantee the quality of care that we need." 

Parulian Simanjuntak, Executive Director - IPMG			

FROM ROSE-COLORED GLASSES TO REALITY CHECK

MNCs are ramping up their sales force, a scarce resource, to serve a growing medical community at Indonesia's private hospitals, but they remain puzzled about public procurement opportunities to serve public hospitals and BPJS. "These companies are trying to understand what their place will be within the system," said Parulian Simanjuntak, executive director of the International Pharmaceutical Manufacturers Association (IPMG). "In order to contain cost, the government has already proclaimed that generics will be mainly used under the new plan. Therefore, the question arises whether the MNCs are allowed to participate in the generics business. "We would like more clarity on what exactly will happen with regards to the social insurance ­system. There should be no limitation as to who can participate in the universal health care plan." And even though Indonesia is the fourth most populated country in the world, big pharma still only touches a fraction of that market. Universal health care coverage, however, is expected to enlarge the patient base that can afford innovative medicines. 

Dorodjatun Sanusi, Executive Director-GP Farmasi			

"Today, just about half of the Indonesian population has some sort of access to health care insurance," said Eric Ng, president director of Sanofi Indonesia. "When you zoom into the situation however, you immediately see that the most advanced coverage is only provided for the civil servants through the Asuransi Kesehatan Indonesia (ASKES) program. Most of the MNCs primarily operate in this segment of the market, which at present only amounts to an estimated 20 to 30 million people. Universal health care coverage sometimes sounds exciting, but it may not be an opportunity for everyone. The plan targets a very basic package of health care based on low cost generics. However, we believe that the growing base of the population, which the government aims to cover in full by 2019, will serve as a driving force to increase the overall access to medicines. We believe that the base of the aforementioned 20 to 30 million people, which most of the MNCs target today, will theoretically increase to roughly 120 million people in 2014 alone. While we should not assume that our business will increase proportionally because of the price-volume effect, which implies that greater volumes will gradually push down the price of medicines, we do believe that Sanofi will have a much greater role to play in this country when such a large number of population requires access to medicines." 

Johannes Setijono, Chairman-Kalbe Farma			

When it comes to serving the generics-focused BPJS niche, Indonesia's local pharmaceutical companies are in a prime position. "These pharma companies will need to look at ways to increase their current capacity and ensure the readiness of their products," said Darodjatun Sanusi, executive director of GP Farmasi Indonesia, the association of generic drugs manufacturers. "At the same time, they have to find and sustain the competitive advantage of their products, particularly as the markets will open up more and barriers to trade will decrease," 

If Indonesia's local manufacturers supply BPJS, they will also be the ones feeling the much expected price-volume effect. "It will change the whole landscape and turn Indonesia from a self-payers market into a government and private insurance-driven market," said Johannes Setijono, chairman of Kalbe Farma, the largest listed pharmaceutical company in the ASEAN region. "The private insurance companies, which are still small today, are therefore expected to see their bargaining power increase significantly. The plan is expected to not only drive up market volume but also create severe price pressures."  

Two decades ago, one could already see several manufacturers moving out of the big cities and into industry-friendlier outskirts, moves that coincided with a government push to force GMP standards upon the industry. "Meprofarm was founded by my father in 1973. Two decades later, in 1995, we moved premises," said Eric Darius Mardiwidyo, president director of Meprofarm,a local generics manufacturer. Now, the company is based on the outskirts of Bandung, the second largest metropolitan area in Indonesia 87 miles southeast of the capital, Jakarta. "The move was the direct result of the company's rapid growth, as well as new government regulations to comply with GMP standards," Mardiwidyo said. "GMP compliance was achieved by December 1995, boosting the growth of the company further. In 2006 we acquired additional land next to our existing facilities in order to build our new facility 'Meprofarm 2'. This second facility was completed in 2010 and added a number of new lines to the company: injectables, liquid syrup and creams. It also includes storage space that now makes up our central warehouse. Most of the growth will sit in generic tablets and capsules. Specialty products like hormones, oncology and vaccines, for instance, are going to be attractive areas to invest in." 

Santiago Garcia, President Director - APL Care			

Partnering with a top notch distributor may be desirable in any pharma market; it is a must in Indonesia. With over 6,000 inhabited islands scattered across both sides of the equator, the ­Indonesian archipelago is the world's 16th largest country in terms of area.  "As a distributor, you easily have to deal with forty-plus companies for transportation alone," said Santiago Garcia, CEO of APL Care, the country's leading distribution company for the pharmaceutical and health care sector. "Moving goods and people is very difficult because the links between some of Indonesia's key cities are missing. We also notice that truck loads are often incomplete while the discipline among logistics companies is often lacking. Electricity cuts are another big issue, especially when we start talking about cold supply chains. However, the situation is improving and changes are happening in this respect, and these challenges are an integral part of doing business in Indonesia. Every time companies are under pressure, goods are being sold to wholesalers at severe discounts. We, however, target the proper channels consisting of hospitals, doctors, clinics and pharmacies. We want them to work with us and work on demand generation, rather than flooding our channels at discount prices." While Indonesia's leading independent distributors APL Care, Dos Ni Roha and Pentavalent have a significant presence in the market, they compete head-on with in-house distribution companies that belong to local pharmaceutical manufacturers such as Kalbe Farma and Dexa Medica. 

2013 is an exciting year for the industry, a year of preparation for implementation of universal health care coverage in 2014. The industry will see itself forced to reshape business strategies to supply the system with quality medicines, be it branded originals or their generic counterparts. MNCs with the ability to play in the generics space will stand a good chance in excelling in the Indonesian market, while those without generic capabilities are likely to continue along a growth path nurtured by optimistic macro figures. Local companies must professionalize their operations and invest in more capacity and better quality standards. The expectation is for Indonesia to continue its double digit growth path, which makes it an exciting pharmaceutical market with many opportunities. But growth will require more than finding the right portfolio. It will come down to becoming a true partner to Indonesia's healthcare system and its many stakeholders. 

Country Report

Ask Indonesians about a bad experience in medical care and each will have a story to tell. The poor state of Indonesia's healthcare system has turned "improving quality" into the top priority of the government of Indonesia. Better quality of care has become especially important as the fourth most populated country in the world moves forward with its plans to achieve universal healthcare coverage.

Country Report: Indonesia

Whatever used to be wrong with the world of Big Pharma could be fixed with a single tag phrase: emerging markets. Had enough of grumpy, cost-conscious, risk-averse payers and regulators? Consider the vast new opportunities in countries with undeveloped health infrastructure, a largely out-of-pocket payment system and no requirement to negotiate access.  

Facing loss of exclusivity on multiple blockbuster products? Fill the gap with high-margin branded generics that benefit from a privileged market position and local infant industry protection.  

Too many jaded customers skeptical of more "me too" medicines? Tap that billion plus population of aspiring, middle-class healthcare consumers in Asia, Africa, and Latin America, all with untreated chronic diseases.  

 And you say you don't have much to show for all those costly ­investments in corporate reputation? Stand out with imported brands that confer automatic respect because of multinational producers' association with quality, safety, and service—still a hit or miss prospect for drug purchasers in much of the world beyond North America, Europe, and Japan.  

The idea that countries classified as middle and lower income could spawn new growth for an industry increasingly characterized as mature is now an ingrained part of the strategy of every Big Pharma company. It's that rare instance where geography itself qualifies as a disruptive innovation. The biggest players—Pfizer, Novartis, GSK, and Sanofi—tout their stake in emerging markets as a trump card in differentiating ­themselves against the competition, just as a healthy drug pipeline used to do in years past. "Less than a decade ago, no company had a dedicated strategy for these markets," said IMS Consulting vice-president Waseem Noor, in a roundtable discussion with 

last month. "It was all opportunistic and short-term, focused on a small elite segment of the local population. Today, you can't be a true pharma multinational if you aren't present in the emerging markets in a big way."  

But that first blush of anticipation is yielding to some harsh realities glossed over in all those forward-looking statements to investors. The reality is buttressed by some hard truths:  

			» There is no prototype "emerging" market; each is distinctively complex, with its own rules and culture of business, an intimate, ongoing knowledge of which is necessary for success.  

» Most are "emerging" in name only, having capitalized on technologies first developed in rich countries to leapfrog the time span for new business innovation; in some areas of health services and delivery, like biosimilars, these countries are emerging as market leaders, not laggards.  

» Growth, while a blessing, can also be a curse, as exemplified by civil unrest and governance problems spawned by rapid fire social and economic changes that in the West took multiple generations to work through.  

The pace of change in emerging markets is making it harder for unwieldy Big Pharma organizations to execute on strategy. For many companies, results have failed to keep pace with projections. And there are signs of overall market fatigue, as these economies adjust to lower ­global commodity prices and pressure on local capital and currency markets due to the more attractive interest rates now offered on money invested in the United States and Europe. China excepted, real GDP growth is trending flat in the BRICs as well as other standout emerging markets like Turkey; even in China, the official real GDP growth forecast of 7.5 percent for 2013 is only two thirds of what it was two years ago.  

There are real implications beyond the numbers. The expanding middle classes that Big Pharma is depending on to drive demand for medicines are taking a hit. Consumer discretionary spending is down, an important indicator in geographies where drugs are purchased mostly out-of-pocket. Governments are trimming subsidies and scaling back investments in neglected health infrastructure, with a ripple effect on incomes felt by physicians, pharmacists, distributors and others all the way down the pharma supply chain. Lower rates of growth are also exposing deficiencies in institutional oversight and good governance, manifested in the rise of an activist, take-to-the streets civil society determined to pursue reform on its own—and on the fly. Institutions of law are still in the adolescent phase, to the point that a well-intentioned crackdown on corruption can quickly become a vehicle for settling political scores. This only yields more uncertainty for investors. 

 The New Tier 3 Pharmerging Countries Emphasize the Potential of the MEA and Reinforce LatAm Position			

As a result, the narrative has changed. "The buzz about emerging markets has been tempered by a message of constraint. Optimism about long-term growth is still there, but management is being more selective about where they intend to find it," says Noor. Sanofi has abandoned earlier multi-year guidance promising double-digit revenue growth in emerging markets; Pfizer has dropped its revenue projections for 2013 from the high to mid single digits, with "fluctuations due to long-term uncertainties" thereafter; and GSK, while predicting continued solid growth in emerging markets for pharmaceuticals and vaccines, posted turnover increases for the second quarter that put the United States back at top of the league, with a five percent gain compared to only two percent for the Asia (ex-Japan), Africa, Latin America and Mideast regions.  

What is now apparent is a stark difference between straight line forward projections of market expansion and the reality of actual historical growth rates in the emerging markets, which are highly volatile. Companies have no choice but to look at the record and be more cautious about raising expectations.    

Pfizer also announced last month it was shutting down its business unit devoted to emerging markets, preferring to refocus its businesses there around different therapeutic franchises. It simply confirms the new view that these geographies are far too diverse to be managed as a single segment.  

 roundtable exchange with the IMS Health team as well as other experts identified a number of additional factors that are helping to push the reset button on Big Pharma strategies for the emerging markets.  

Real institutions—with the power to drive resource decisions on health—are taking root. 

As their economies expand, emerging markets are increasingly in a position to set their own public health and disease priorities. Brazil is a good example, with its selective government policies that provide 100 percent public reimbursement for medicines for the treatment of HIV and hepatitis C, while most other medicines must be obtained from private insurance or out-of-pocket. There is also the close involvement of Brazil's major public health institutions in industry development of a vaccine for dengue fever, a near-endemic disease in Brazil, a cure for which could generate enormous health savings.  

Almost every emerging market country has adopted a comprehensive plan to guide development in the health sector, the common feature of which is promoting eventual universal access to basic health services. The WHO tagline "Health for All" is the unifying theme, but the larger driver is the idea that health creates wealth.  

This more overt public engagement, along with the choices being made by a more affluent and informed patient community, will transform investment opportunities in emerging markets, in many therapy areas. As local health infrastructure matures, Big Pharma will need to make tough choices on where to focus its efforts—now, before it is too late. It certainly will not work to continue the previous path of touting a few costly imported medicines that attract negative attention because only a fraction of the local population can afford them. "The advantage is to companies that create a locally appropriate portfolio of products, with an aggressive commitment to be number one in each therapeutic category, against those that simply decide to adapt what's already in their global asset set," said Sydney Clark, IMS Consulting group vice president based in Latin America. "It won't work to build a business by repurposing the global pipeline—that's like trying to put a square peg into a round hole."  

Business blunders can go viral very fast. 

Commercial transactions in emerging markets are not transparent and are poorly understood even by locals with years of experience. Interlocking group dependencies rooted in personal relationships often matter more than official rules or legal safeguards, so keeping a  "nose to the ground" is a vital skill for foreign investors wanting to stay out of trouble.  

In many cases, however, the sheer density of these relationships makes this task very difficult. In Brazil, for example, the local drug distribution system is larded with so many intermediaries that it is hard for anyone to track exactly what is going out to the marketplace. Earlier this year, Sanofi discovered this fact when its local management responded to an imminent rise in the VAT paid directly by consumers for medicine by forward-selling huge amounts of inventory that, instead of meeting demand, overwhelmed it. The miscalculation resulted in a bill of nearly $300 million for unsold, returned, and expired products. The loss affected the entire company, forcing it to take a charge that cut €0.17 per share off corporate earnings for the second quarter.  

CEO Chris Viehbacher attributed the Brazil setback to "bumpiness in the trade channels" but the big lesson here is how emerging markets can impose stiff penalties on the unwary. As Ansis Helmanis, Principal of RegLinks LLC, told 

 "The firetraps can come from anywhere, because in these markets no one but you, the investor, is in charge. Is it any wonder that corruption is endemic in China when there is no effective institutional control over the promotional practices of a pharma sales force that is now the second largest in the world?" Another prerequisite is knowing the most about the customer base, which begins with an understanding of each stage of the patient's journey with your ­medicines.  

Emerging market drug companies are taking the blinders off and extending their reach beyond the home market, relying on partnerships, licensing, and M&A activities to acquire technology and know-how from the Big Pharma multinationals. A case in point is Aspen Pharmacare, South Africa's largest generic drug-maker, which has sealed deals with GSK and Merck to acquire underutilized manufacturing capacity in Europe as well as products that appeal to customers beyond its current geographies. Likewise, EMS, Brazil's biggest drug company, is increasing investment in R&D and exploring stakes in research projects conducted by academic institutions in the United States, with a particular focus on new therapies for senile dementia. Due to the increase in life expectancy, this is becoming a leading cause of death and disability in Latin America. 

The IMS Health "Pharmerging" Markets: 21 is a Charm			

Another milestone occurred in June when a small Indian-based drug firm, Zydus, obtained final regulatory approval in India to market a new combination therapy, Lipaglyn, for high cholesterol and the high blood sugar associated with type 2 diabetes. Zydus management touts the drug as the first original patented medicine intended for the global market to be discovered and developed entirely in India, by an Indian company. At the same time, however, many other Indian companies are abandoning their home base due to unpredictable ­pricing rules and controls on investment capital; one of the country's largest generics producers, Lupin, now derives nearly half of its global revenues in the United States and is actually repositioning itself as a virtual US company, with a new CEO based in Baltimore, MD.  

The implications of these moves for Big Pharma are twofold. First, it reinforces the need for a permanent visible presence, on the ground, in emerging markets. Companies there are poised to grow from a lower—and different—base and thus serve as a window on the future of global competition, most prominently as a source of product and process innovation. Today, few, if any, of these local companies can carry an identifiable pharma brand beyond their own borders, but that is likely to change over time. Also, many have a common feature in being family-owned, which avoids all that shareholder baggage and makes them faster than Big Pharma in seizing opportunities.  

Second, the greatest benefit will accrue to companies that find the right way to partner with local market leaders. "Smart companies are using joint ventures with domestic players as part of a new business model, using them to create go-to-market strategies with a lower cost structure. With a strong local partner, you can manage the economics of going broader into the marketplace," says Matt Guagenty, IMS Consulting group vice president  for APAC and China. A good example is Pfizer's new joint venture with a leading Chinese generics company, Hisun, which will help expand the product portfolio in therapy areas where Pfizer is weak while lending sales and distribution muscle to penetrate those second- and third-tier urban centers—China has some 160 cities with more than one million people—that represent the next phase of market growth.  

Industry price and access regulation is morphing—at warp speed. 

Early on in the emerging market gold rush, it was assumed that these governments would take many years to build the capabilities found in mature markets on controlling access and rewards in the medicines trade. But technology and communications improvements are such that regulators in emerging markets are closing the gap. This is particularly evident in pricing and reimbursement, where pharmaceuticals are easy to target, as a highly visible element in the health distribution chain. The issue is also politically sensitive because in most emerging countries pharmaceuticals comprise an uncomfortably high percentage of health spending—upwards of 40 percent or more of the total, compared to less than 20 percent in the industrialized countries. The rationale for action is simple: if countries want to build and finance a modern, integrated health system, then the share of spending on drugs has to fall.  

The bump up in regulation is evident in a number of areas, including the application of domestic competition law to limit pricing freedom in South Africa; adoption of reference pricing in Vietnam; preferential access treatment based on local production commitments in Russia; discriminatory misuse of WTO GMP certification standards to delay foreign drug registration in Turkey; and a requirement for proof of cost-effectiveness for public drug reimbursement in Brazil.  

Emerging governments are also obtaining support from their mature market counterparts eager to share best practices in regulation. Cross-border chatter is increasing. One example is the MOU signed in June between India's Department of Health Research and the UK National Institute for Health and Care Excellence (NICE) to help India establish a national health technology assessment (HTA) board to review the cost-effectiveness of new drugs. The transfer of expertise through this kind of de facto consulting contract is actually becoming a source of income for NICE and several other Western regulators. "Everyone is sharing this economic evidence. Cost effectiveness studies right now are simply nice to have as part of the reimbursement process, but in three years time we think it's going to become a requirement to obtain access in most emerging markets," Cem Baydar, IMS Consulting's senior principal based in Turkey told 

In addition, two of the biggest emerging markets, India and China, are moving to end their historic protection of the profitable branded generics segment, a special focus for Big Pharma as it looks to extend the geographic range of its large inventory of off-patent medicines. India is adopting a plan to require licensing of generics only by their WHO INN name rather than by company brand. China is phasing out price preferences for products that date back to the time when the country did not offer patent protection for drugs, and are now off patent. It is also expanding price controls on a list of more than 300 drugs deemed essential to public health that includes patented and branded off patent products. 

Normal service will be resumed as soon as possible.

Pharmaceutical Executive-09-01-2013