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Beyond the headlines that heralded the start of the Eurozone crisis that rocked the Spanish economy in 2009, and the austerity measures that followed, the Spanish pharma community has remained pragmatic. "Despite the crisis, Spain is still the fifth biggest European market, and the general conditions to invest are favorable to the pharmaceutical industry," says Humberto Arnés, director general of Farmaindustria, the country's association for research-based pharmaceutical companies.

For years, Spain's pharmaceutical industry had been growing at a rate that would eventually become unsustainable.  

Humberto ArnÃ©s, Director General, Farmaindustria			

The breaking point was reached in May 2010, when public pharmaceutical expenditure reached an all-time high. At that point, "Spain had a similar market size to the UK and Italy with a significantly smaller population. It would have been impossible to maintain that situation, and an adjustment of our market was absolutely necessary," remarks Arnés of Farmaindustria. "But after this adjustment that has already been made, further reductions to the pharmaceutical industry are not possible, without causing irreversible harm to patients and companies," he warns.  

The Ministry of Health, under the administration of Prime Minister Mariano Rajoy, introduced a series of austerity measures in 2011 designed to curb costs following a series of similar measures made in 2006 and 2007. Most notably, these measures included a 7.5 percent price reduction for all patented medicines financed by Spain's National Health System (SNS), mandatory prescription by active ingredient, the de-listing of over 400 medications for minor conditions, and the introduction of a ten percent copayment for pensioners and increases of up to 60 percent for employees. As a result of these measures, pharmaceutical expenditure contracted 19 percent for the total market and a staggering 38 percent for the public market. As a country whose pharmaceutical expenditure is 80 percent public, the impact this had on the industry was immense.  

Public pharmaceutical expenditure of GDP in 2013 (0.9%) is at a level similar to that of 1993			

"National companies have been affected in that they do not have enough margins to keep up with the R&D investment needed to compete in international markets," continues Arnés. "Multinational companies have also been affected because they have more difficulties to replace their investments in R&D facilities that could become obsolete. As such, Farmaindustria is working with the Ministry of Health to build a stable framework for the long-term to avoid similar issues in the future by linking the growth rate of the pharmaceutical business to that of GDP."  

Andreas Abt, General Manager, Roche Spain			

On top of the various austerity measures implemented over the last few years, mounting debts by Spain's health authorities to the pharmaceutical industry had also become critical. Fortunately in 2011, Minister of Finance Cristóbal Montoro recognized this as a critical issue and established a plan to raise EUR 32 billion (USD 44.16 billion) to pay providers in a number of industries, including health.  

Javier Anitua, General Manager, Mylan Spain			

"This plan provided significant relief for the industry and was very important to demonstrate to our headquarters that the country is going through difficult times but is simultaneously serious about stepping up to its obligations," notes Andreas Abt, general manager of Roche Spain. "This was very helpful for us and had a big impact on our headquarters and in general for the image of the country."  

Ãngel Luis RodrÃ­guez de la Cuerda, General Manager, AESEG			

The Spanish retail market dropped to EUR 9 billion (USD 11.36 billion) in 2012: sales in pharmacies dropped from 63.5 percent of the total market in 2009 to just 60.7 percent in 2012, according to IMS Health. This drop was due in part to laws implemented that force innovative companies to drop the prices of their brands once off-patent to the same prices as their generic competitors.  

"Generics in Spain only represent 18 percent of the total market in terms of value compared to 59 percent of products with patents and 23 percent of products with expired patents," says Ángel Luis Rodríguez, general manager of Spain's generic association AESEG. "In terms of units, generics represent 36 percent of market share, while patented brands represent 33 percent and brands with expired patents represent 30 percent. Again, this figure is far from the European average of generic market share of 55 percent." AESEG has called for a price differential between generics and off-patent brands as well as clearly defined times for patent expirations. The association also defends prescription by INN: "this is very important to AESEG because physicians and pharmacies study pharmaceutical products by INN, and most patients today tend to recognize pharmaceuticals by INN."  

Luis Cruz, General Manager, Spain & Portugal, CSL Behring			

"The average price of medicines has dropped by 25 percent in just three years thanks to short-term price cuts," says Javier Anitua, general manager of Mylan Spain. "This means that the average Spanish pharmacy has lost its net margin by 34 points over the last five years, with a net margin of less than seven percent. We cannot continue this trend." Anitua is pushing for new channels of income among Spain's pharmacies, which are struggling to make a profit due to price cuts. "This involves the preventive role that pharmacies can play through professional pharmaceutical services," continues Anitua.  

Juan LÃ³pez-Belmonte, CEO of Laboratorios Rovi			

"We need to establish an agreement of sustainability for pharmacies and provision of medicine with every industry stakeholder. Innovation needs to come, but to provide that innovation we need to activate the use of generics instead of creating more short-term price cuts."  

THE SYSTEM IS DEAD, LONG LIVE THE SYSTEM!

 "The old Spanish healthcare system has disappeared as it had proven to be unviable and unsustainable," says Luis Cruz, general manager of Spain and Portugal at CSL Behring. "Now we are in the process of switching to a new system that has yet to be formalized. We are trying to keep up with everything, but the process of defining this new system is not an easy one." CSL Behring, a leader in the plasma protein biotherapeutics industry worldwide, provides hospital-based treatments for a number of rare diseases, all of which are reimbursed by the authorities. "We know that in the future we will not be able to spend in healthcare as much as we have been spending until now," Cruz admits.  

He nevertheless warns: "When new treatments for rare diseases are discovered preventing patients from dying and suffering, we have to generate 'new expenses.' The Ministry of Health must make new resources available for these patients who will not only survive, but who will often need these treatments for life."  

"Spain was living in a bubble-like dream in many ways, above what the country and its economic capabilities could deliver," says Juan López-Belmonte, CEO of Laboratorios Rovi, a Spanish laboratory that has achieved significant growth during the economic downturn. "The recession of 2008 demonstrated across the globe that life is what you generate and what you can spend."  

He notes that companies have adapted quickly to the new conditions: "Consequently, our adjustments have had a lasting effect on all companies. While the pharmaceutical business is fairly stable and regulated, the crisis has forced managers like myself to change our ways of thinking, to restructure our companies to allow for a faster decision-making process and to be more ambitious in R&D programs. Nevertheless, I am very optimistic regarding Rovi – we have prepared ourselves for the future, and the best is yet to come. We have increased our staff from 500 in 2007 to almost 1,000 in 2014."  

Kristian Hart Hansen, General Manager, LEO Pharma Spain			

The path to recovery may not be easy, but it certainly is not impossible for Spain either. "Thankfully, the worst days are behind us; looking at the future, Spain has incredible human talent, financial reforms in place and a very competitive labor market," remarks Javier Ellena, president and CEO Spain, Portugal and Greece of Lilly. "The transition from the past to the present has been difficult and painful, but we can be optimistic in that a new cycle is starting from a very healthy base as a consequence of all the measures implemented. Establishing parameters for handling potential innovation will be critical to ensure that the pharmaceutical sector will have a brilliant future in Spain."  

Rogelio Ambrosi, Managing Director, Merck Spain			

"Spain is a great country," concludes Rovi's López-Belmonte, "and we should keep investing in this country. The best of Spain is also yet to come. We went through difficult times, but the country has done its homework, has grounds for future growth, and will become a success story in the years to come."  

Luigi Antoniazzi, General Manager Spain & Portugal, Baxter			

The decentralized nature of Spain's health system presents its own unique challenges for health-related companies. Regulatory and reimbursement decisions are taken at the regional level, and many rules and regulations can vary from hospital to hospital within a region. While this concept is not new, the crisis has made each community even more stringent about its own laws, which creates a complex environment in which companies operate. As Luigi Antoniazzi, general manager Spain & Portugal of Baxter states, an advantage that this system provides, "is the opportunity to be closer to the patients, which is useful to fulfil the ultimate objective of providing a better service to the population of each region. On the flipside, needless to say, having to deal with 17 regional authorities is quite a challenge. Each one has a unique set of healthcare policies or interpretation of how healthcare services should be provided to citizens." As part of the adaptation to Spain's decentralized health system, many managers find themselves placing increased emphasis on the key stakeholders in each region, be it regional health authorities, hospital managers or others.  

Merck’s biotech plant in Tres Cantos (Madrid)			

"We were used to having one strategy for the whole country for each of our business areas," notes Kristian Hart Hansen, general manager of Leo Pharma Spain. "The first challenge is to understand the differences in the 17 regions and understand the needs of our different customers within each region in order to be able to adapt our plans and strategies to each stakeholder in each region." Hart Hansen notes that when the environment changes like it has in Spain, a whole revamp of strategy is required. "If you manage to do that — which is not easy here in Spain as well as in other countries — the opportunities will arise," he says. "The question is, do you dare to do it? One thing is certain: you need to move from a national to a regional perspective in terms of everything you do; there is no one-product strategy for Spain anymore. We are not there yet, but it has been an exciting part of the journey and it will continue."  

Industry Spotlight: Medical Technology			

"We have returned to a focus on science rather than just the relationship," remarks Rogelio Ambrosi, general manager of Merck Spain. "We have changed our organization from only having sales reps or key account managers to a mixed organization where our people actually promote the products. Companies today talk at great length about science, patient benefits and health economics, along with other departments like market access or government affairs. Merck has ensured that its products are available for all Spaniards by working directly with the responsible people in each region, from the minister and regional counselors to hospital managers. Spain is one country; where you live should not make a difference for accessing medications. There are stark differences in each community, and this is perhaps less to do with money as it is about how they organize themselves to make this happen. Merck Spain has changed its organization from only having sales reps or key account managers to a mixed organization where our people actually promote the products."  

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Spain's recession-battered pharma sector adapts to a changing market environment and repositions itself for a return to healthy growth through expanding opportunities abroad.

Country Report: Spain

In its function of managing medical and scientific information for life sciences companies, accurate and trustworthy communication is a top priority of medical affairs departments. Traditionally, medical affairs is responsible for managing a company's external relationships with the medical and scientific communities, patients, and government regulators. 

Today, the role of medical affairs is taking on greater importance, as relationships between life sciences companies and external stakeholders become more complicated. Medical affairs is required to communicate more often with medical practitioners, scientific researchers, patients, patient advocates, and government authorities, and to provide these groups with more complex and more comprehensive information. 

Unfortunately, many life sciences companies still think the goal of medical affairs should be to limit and control the content that the company gives to external stakeholders. Enterprises often create "silos" within their organizations, where medical affairs, sales and marketing people, and clinical researchers don't share critical data. When this happens, medical affairs doesn't get the information it needs to develop productive external relationships.  

In November 2013, Cegedim conducted a series of interactive workshops with medical affairs directors and consultants and life sciences industry executives to discuss solutions for the tasks and challenges facing medical affairs today. This panel of experts concluded that the ultimate goal of medical affairs should be to drive value for their company. Medical affairs should seek to: 

» Strengthen the relationships between companies and their external stakeholders through more open and frequent communication. 

» Foster better collaboration and exchange of information between internal departments in their own company, and between these departments and external stakeholders. 

» Help to promote a positive image of the company as a reliable and trustworthy provider of drug products. 

» Help companies to get products to market faster and increase sales. 

To accomplish these goals, the life sciences industry must completely reset its approach to medical affairs. Companies must include medical affairs as a full partner in all stages of the drug life cycle, from R&D to commercialization, and must grant medical affairs full access to essential information from all parties involved in this cycle. 

To understand how the medical affairs function has changed, one should look at the external and internal macro trends currently affecting the life sciences industry. The external trends include increasing healthcare costs, the changing dynamics in world population, environmental factors, and more informed patients.  

The internal trends within the industry that companies must address include the increasing focus on specialty care products, and the acceleration of product development, as factors such as the R&D drought, faster launches of "me-too" products, patent expirations, and the emergence of competing generics are driving companies to minimize time-to-market and time-to-peak-sales for new product launches. 

To address these trends, medical affairs must seek to develop partnerships between life sciences companies and their external stakeholders, based on the exchange of accurate, comprehensive, and trustworthy information about the product, the disease, care procurement, and patient management. To do this, medical affairs needs to have better and more complete access to information within their organization. 

Developing successful relationships with external stakeholders relies on medical affairs being able to: 

» Anticipate patient questions and government concerns to ensure compliant product delivery. 

» Ensure the readiness of internal teams' expertise to handle external stakeholders' needs and concerns. 

» Plan out the communication process and adapt content to serve the needs of stakeholders. 

But to truly drive value, medical affairs must take the lead in fostering collaboration and open communication between teams in different departments in their own company, and between these internal teams and external stakeholders. This requires that medical affairs be included as a full collaborative partner in the product cycle. 

Allowing medical affairs to get involved in the drug development process during the early stages of R&D provides the foundation for a successful product launch. Medical affairs can develop a technical expertise regarding the product, which enables it to:  

» Better recognize the stakeholders, and deliver deeper understanding of product value to them throughout the drug life cycle. 

» Identify quality insights about patient flows and scientific community networks. 

» Improve compilation of comprehensive, reliable, and transparent medical information for the entire organization.  

» Prepare market-facing evidence demonstrations to guide the product through the regulatory, market access, and launch steps. 

» Anticipate and prepare effective education to address medical support demands.  

» Create information flows that operate with agility and accuracy, support commercial teams while also managing risk, and ensure that communications remain compliant throughout the entire organization. 

In terms of managing cross-collaboration of departments within their own organization, medical affairs should: 

» Develop communication flows and information sharing across departments, allowing them to seize opportunities, mitigate risk, and better cater to customer needs. 

» Plan effective training to ensure that commercial organizations master the required level of product understanding. 

» Provide the right scientific input to access the market and develop the accounts. 

Furthermore, medical affairs should be responsible for: 

» Producing reports of clinical/observational and drug utilization studies, outcome research, and epidemiological data. 

» Developing a risk management plan to identify risks associated with the product.  

» Identifying and profiling scientific peers (i.e., physicians, scientists) who may wish to contribute information or collaborate in the drug development process.  

» Managing inbound information (i.e., from scientific publications and medical conferences), and distributing it to the right people within their organization.  

» Managing outbound information targeted to consumers (i.e., promotional materials) and to the medical and scientific communities (i.e., scientific publications, medical conference presentations, etc.). 

» Keeping track of local implementation standards and regulatory principles in different countries to ensure that products are properly implemented in foreign markets. 

While life sciences organizations may be reluctant to give their medical affairs departments this much access to and control of information, the cost of 

 doing so can be even worse. A few extreme cases have received considerable media attention, where patients experienced negative health outcomes after getting inaccurate information about a medication. This kind of patient outcome can damage a company's reputation, and may result in product recalls, cancellation of market authorization, and loss of profitability. 

Allowing medical affairs to take the lead in developing collaborative relationships between internal and external stakeholders can only benefit the company. It helps to foster an open exchange of information that can provide valuable insights and calls-to-action to product developers, help speed product time-to-market and time-to-peak-sales, and help to ensure that all products and communications meet regulatory compliance.  

Also, the ability of medical affairs to effectively enable these external/internal collaborative relationships is a key driver in promoting a company's positive public image. It helps to develop a lasting rapport and trust with external stakeholders, making them more likely to recommend the company and depend on it for quality drug solutions. 

is Chief Marketing Officer, Cegedim Group. He can be reached at 

Column

The role of pharma medical affairs teams is taking on greater importance in the value chain.

Medical Affairs: From Info Gatekeeper to Legitimate Value Driver

Ireland's recovery from its deepest post-war recession is being paced by its steadiest long-term performer —pharmaceuticals—with €29 billion worth of basic pharmaceuticals and preparations produced by the local industry in 2013. That's a remarkable one-third of the total value of products sold in the Irish economy, and almost all of it is earmarked for export, which makes Ireland the global locus for trade in medicines. Earlier this summer,

teamed with a student delegation from St. Joseph's University Haub School of Business to bring together a group of local leaders from government, industry and the CRO community to pose the fundamental question: as competition for the global investment top spot increases, what must Ireland do to keep its light shining bright for big Pharma?

, Chief Executive Officer, Team Horizon Ireland 

, Division Manager for Cleantech, Life Sciences and Electronics, Enterprise Ireland 

, Managing Director, McGee Pharma International 

, Chief Executive Officer, Health Products Regulatory Authority 

, Director, Access, Policy and Communications, MSD Ireland 

, Associate Professor and Chair, Pharmaceutical and Healthcare Marketing Program, St. Joseph's University Business School  

 Ireland is emerging from a severe economic downturn. Recovery has required significant—and painful—adjustments to repair insolvencies in the financial and housing sectors, restore the fiscal balance sheet and revive the country's competitiveness in global markets. How is this transition playing out in the biopharmaceuticals business?  As memories of the great recession fades, what actions are necessary to ensure that Ireland remains a key locus for industry investment—is the Celtic Tiger back on the hunt? 

 Ireland has a successful record in positioning the country as an attractive place for manufacturing. Eight of the top 10 global companies have manufacturing facilities in Ireland, and we export more medicines than any other country. Irish industrial policy has made the country attractive for a number of reasons, including a tax regime that encourages FDI as well as a youthful, highly educated, English-speaking workforce. Compared to other OECD countries, Ireland has among the highest proportion of students with third -level academic credentials—that's important to a knowledge industry like pharma. The Industrial Development Agency (IDA) also does a very effective job enhancing Ireland's attractiveness to foreign investors, not only in our specific sector but in other businesses that depend on high technology.  

Nevertheless, the industry is changing and Ireland must keep pace. There is a global shift underway from small molecule manufacturing to a more specialized focus on biologics. Pfizer is contributing through a $30 million upgrade at our Ringaskiddy plant to ensure some of the more complex small molecules coming from our pipeline can be manufactured here. An additional investment of $100 million has been secured for biologics at our Grange Castle facility. We need to be attractively positioned in this space to secure more investment and expand opportunities for the local workforce.   Competition is a given: for example,  Singapore is another small island market vying to attract pharmaceutical investment that performs equally well against Ireland in terms of both tax and education. Education is no longer a unique differentiator for us; we have to keep looking for ways where we can add value.   

One area where improvement is required is Ireland's status as a site for clinical trials, where Ireland is  lagging along with the rest of Europe. This is significant because of the R&D spin offs from a robust trials platform. Our high cost base, forged during the boom years of the Celtic Tiger and led by an uncompetitive labor market, accounts for much of this lag. What I would like to see is a comprehensive plan, working closely with academia and the private sector, to address our long-term competitiveness in the life sciences, with the overall aim of attracting more international R&D to Ireland. Attaining this goal demands we leverage our strong investigational research capabilities through more joint collaborations like the three-year pact Pfizer recently agreed with Science Foundation Ireland to investigate promising drug targets with local university researchers. Last, but not least, the government has to be willing to "walk the talk" and actually fund the innovations that result from these partnerships, by allowing Irish patients greater access to new medicines.    

 One additional attribute of Ireland is the commitment to compliance and quality. The Health Products Regulatory Authority (HPRA) and industry work well together in advancing this agenda. Investing upfront to ensure quality and compliance helps to counter concerns about Ireland's cost base because experience shows that failure to do this will actually increase costs down the line. China and India can claim lower manufacturing costs but there is also evidence of quality problems in their supply chain that have the potential to result in harm to patients. Ireland's track record is spotless in this regard—it's a differentiator that we must leverage in seeking investors.  

We have to dispel the myth that investing in Ireland is only about our low corporate tax rate. Ireland's best and strongest argument is that all the factors that contribute to a positive investment reputation are here, in one place: a solid physical infrastructure; quality; compliance; an educated, English-speaking workforce; and privileged trade access to the entire European market. I'd also point to the support from government, through the IDA, in subsidizing investments in worker training and other activities designed to raise the bar on performance. 

My background is engineering, and from that perspective Ireland is evolving in the right direction. I began my career in the 1990s, when all of my engineering school colleagues were moving into the semi-conductor field and taking jobs—as I did—with firms like Hewlett-Packard. Today, our engineering graduates from the millennial generation are focusing on pharmaceuticals and medical devices. That is important because one thing engineers do well is improve the processes and adapting the technologies that turn the conceptual aspects of innovation into products that actually work. It's an essential service function that Ireland needs if it is to stimulate more homegrown innovation.  

: With specific reference to the local climate for clinical trials, the government has provided seed funding for early phase translational clinical research designed to move ideas generated in the academic laboratory setting forward to the trial stage, in cooperation with industry. The challenge is bringing this work into the crucial Phase II (b) stage, when costs start to mount.  Because Ireland is a small country, finding the right candidates in sufficient numbers for trials can be time-consuming, especially with the current emphasis on "salami slicing" big diseases into targeted treatments geared to sub-sets of patients with specific diagnostic markers.   

We also face a decline in the number of eligible clinician investigators due to fiscal belt-tightening during the financial meltdown. A lot of senior consultant posts in the hospital sector are sitting empty because salaries are now well below the norm internationally. Persuading talent that is better compensated elsewhere to come back to Ireland, while facing the added burden of very high housing costs, is a tough task. It follows that those who remain are increasingly pressed for time and don't want the added burden of participating in trials. This is especially true for physicians grappling with the tsunami of chronic care ailments like diabetes, accentuated by an overstressed and disorganized national health service.    

Oncology is the one exception to this situation, due to a novel cooperative arrangement with the US National Cancer Institute (NCI), which led to the creation of a partnership called the Irish Clinical Oncology Research Group. The Group has effectively organized the oncology profession to take on the task of enrolling virtually every cancer patient into a clinical trial, which has kept the numbers up while also providing financial support. I can also say the regulatory process for registering trials is highly efficient: you can apply in parallel for an IRB and HPRA approval and a go-ahead usually occurs within six weeks, if the protocol is good. In other words, the regulatory system is not skewed to catch and fail you, as is often assumed.    

Pat O'Mahony, Health Products Regulatory Authority: 

I agree that Ireland is a place where many positive elements come together to keep us competitive. The challenge for any regulator today is to understand how industry is becoming more complex and sophisticated. Very often the regulator is behind the curve of what is actually happening in the field—we are playing catch up. The HPRA deals with the largest and most globally sophisticated companies in this industry. We give these companies huge allotments of our time when they come to share their investment plans with us. We dutifully inspect and approve their new facilities, only to have the US FDA come and repeat the same process a month later. To us, this is a duplicative—and unnecessary—step.  We are working hard with our US colleagues to convince them of that.  

On clinical trials, I believe this has to be considered in a global context. Ireland's situation is influenced by the EU regulatory regime as well as trends in the US and in Asia. On a comparative basis, the truth is that trials are moving out of Europe. This is taking place for a number of reasons, perhaps one of which is the impact of the recently revised EU clinical trials Directive, which places additional obligations on sponsors. Ireland's own regulatory framework for trials is among the easiest to navigate in the region. The real problem is how our small and relatively homogenous population makes it hard to recruit the 100 or more people in small niche groups demanded of trials for increasingly rare indications. There is a solution in sight: I would like to see Ireland raise its profile as a preferred site in multi-centered, multinational trials, where we can furnish five to 10 or 20 patients for the protocol.  That is the best position for us.  

From a personal perspective, a stress point for Ireland is the colossal pressure our public health service has been under during the past three years of recession. If Ireland is to make good on its pledge to support medicines innovation, more coordination is required between those who run the health service and those who manage biopharmaceutical industrial policy.  Right now, both are often at odds: while the IDA works to bring drug companies here to invest, the fruits of that investment—in the form of new innovative drugs—are often denied to Irish patients. We need to think seriously about new ways to ensure greater access for the best new innovations. If the national health budget cannot accommodate such spending right now we should still do it, because not doing it influences the way we are viewed as a locale for FDI.    

I have taken this integrative stance in restructuring the HPRA's own work flow, which used to be stove-piped into separate units for human medicines, medical devices, veterinary drugs, etc. Three years ago, I removed the internal barriers and created a single point of entry for all human health products, with separate tracks for pre-market approval and post-market approval, the latter focused on monitoring pharmacovigilance, regardless of product. The HPRA is unique in taking this approach; only Japan is following our lead.  The FDA—so far—is not.  

Enterprise Ireland has a specific remit to support indigenous Irish industries rather than the multinationals, so the comments on supporting local R&D are quite relevant to our work. Ireland has not wavered in its priority to build the science base, despite the severe economic downturn.  Public investment in science has held up well; the numbers show we are now close to the EU norm in the percentage of GDP we devote to research. And we made a commitment more than 15 years ago that a good portion of this investment would center on biotechnology and ICT. A network of technology centers throughout the country, jointly funded by Enterprise Ireland and the IDA, have had a useful spin-off effect on the manufacturing climate in biopharmaceuticals, which carries residual benefit for the multinational investor. We are also taking advantage of the extensive assistance available at the European level through the EU's Horizon 2020 program.  

The group has identified a number of issues that appear to differentiate Ireland as a positive location for biopharmaceutical investment along with a few challenges that require the redoubled attention of the country's policy and business leadership.  Are you confident that the attention and the resources are sufficient to meet these challenges? One of our student observers noted a disturbing parallel between Ireland and Puerto Rico, which has lost most of its manufacturing base in pharmaceuticals and has no realistic prospect of competing on innovative R&D.  Do you share that perception? 

I don't think there is any parallel here with the situation in Puerto Rico. The human capital base in Ireland is far more advanced and we have the advantage of being a part of the world's largest single market for medicines here in Europe. Being a member of the EU forces us to keep up our "A" game.     

One of Ireland's hidden assets is our ability on the corporate side to sell Ireland internally to decision-makers at HQ. At MSD, we have a reputation as a place to bring a problem and then to work out a solution.  We get it done and this example then filters back to other sites. This internal reaffirmation of Ireland's value may be little noticed, but it is critical to maintaining our global credentials as a place to invest. Merck, like other multinationals, recently went through a network consolidation that resulted in a decision to close two sites in Ireland.  But what we retained at our three remaining sites are capabilities that represent the future of the industry—in vaccines, oncology and biologics. This is precisely the avenue we must take because Ireland won't thrive if it can only compete on cost. It's the excellence in innovative strategies and execution that counts.  

One difficult area we have faced is explaining to management why products manufactured here are not always easily available to patients under our national health service. Reimbursement has become a significant challenge in recent years. The industry is committed to finding ways to ensure patients get access to innovative  medicines at a fair price. For example, the industry has taken very significant price reductions on off-patent medicines to allow for some leeway in paying for true innovation—giving patients access to new medicines at a fair price, following an evidence-based health technology assessment. Demonstrating that innovation is actually being supported through favorable actions on reimbursement is a powerful message to those who make investment decisions at HQ.   

 We also are recognized internally as an affiliate that gets things done. One of Pfizer's global business imperatives is to earn more respect from society.  Because of the fellowship within the pharma space in Ireland, we were able to develop an initiative called Healthy Towns, where we select a municipality every year and then develop a joint program with the local council and other stakeholders to achieve certain metrics in promotion of a healthier lifestyle. It has nothing to do with medicines and from it we have gained an enormous amount of good will.  

 Something I have noticed is the high level of collaboration between the drug multinationals with operations in Ireland.  This is a very transparent group; they share information and help one another. It helps explain why Ireland is not in similar circumstances to Puerto Rico.   

As a nation and a people, we are very open. Everyone in the industry is constantly benchmarking their performance against their peers and as a consultant I find there are few obstacles to sharing the insights gained from that. 

My company currently has five staff advising German companies how to manufacture complex biologics. If you can go to a world-class exporter like Germany and tell them how to manufacture, then I think you can be confident your base is covered.  

One student observer has noted the proliferation of APIs from India and China in world pharma trade. Some facilities in these two countries lack the sophisticated quality controls in Ireland and in the US. What is Ireland doing to preserve safety and integrity of the supply chain on which you base that reputation for quality all of you cited in the opening remarks? 

 In July 2013, the European Medicines Agency (EMA) approved a Falsified Medicines Directive that imposes very rigorous standards on manufacturers to guard the quality of APIs. This is a good start, even though a few companies are still relying on some sites in China where the standards for  APIs might not be world class. The Directive requires auditing of these foreign sites down to the level of the composition of the material itself.  This is a more detailed requirement than a simple, locally certified regulatory inspection. It also puts the onus on the company importing the API to take responsibility for use of the compound material:  if the material is unsafe, then you own the problem and are expected to fix it. So what we have is a combination of strong regulation and the self-responsibility of industry to avoid the financial consequences of a supply chain failure.   

 There are enormous pressures on the global supply chain today. Regulators can be inspecting a plant somewhere in the Far East; the day they leave, raw materials come in from five satellite facilities no one even knew about. The complexity of the situation defines our responsibilities as regulator. I tell my staff that because we don't make medicines, we cannot make them safe. That responsibility ultimately lies with industry. Our job is to work in partnership with companies to exercise oversight, always on behalf of the patient. What I worry about as a regulator is how the market can focus attention on short-term financial incentives, which in some quarters may lead to the impulse to cut corners in defending the supply chain. Fighting this impulse demands real collaboration and joined-up thinking.   

That has to start with us. One instrument is the International Coalition of Medicines Regulatory Authorities (ICMRA), a group of the heads of about 20 agencies—including the FDA; EMA; the EU Commission; five national European agencies, including ourselves; Japan's MHLW; Health Canada; and the drug approval bodies from Mexico, Brazil, China, Switzerland, Australia, New Zealand, Singapore, Nigeria and South Africa. ICMRA is a forum to build consensus among agencies on how to promote transparency, remove unnecessary barriers or duplication of effort, and safeguard the integrity and quality of medicines moving in international commerce. HPRA hosted one of the first meetings of the group after its launch six years ago. 

At our last meeting in December, a paper I co-presented with my colleague at Health Canada resulted in the creation of a new steering committee on a two-year appointment cycle, a plan to expand membership based on compliance with the standards we set as a group, and a series of special projects like creating a joint system for managing inspections. Right now, there are no formal mechanisms in place to do that; the process is entirely 

. All of us realize that overall the resources we devote to inspections is way below par given the globalization of commerce in medicines. Hopefully, a more joined-up structure will allow for greater efficiencies in deploying those resources.  

Despite our best efforts, I do worry about interruptions in the supply chain that carry adverse consequences for public health. Maximum vigilance is required. Consider if you are a foreign generics maker who grabs a good deal on APIs on the spot market—will you take it and, if so, will you demand and carefully review any of the certifications that are supposed to be supplied with them? We can't predict what the answer to this question will be, but failure to check could be catastrophic.   

Is ICMRA intended to replace the International Conference on Harmonization (ICH), a similar group where industry has a seat at the table?

No.  ICMRA is a group of agency heads. ICMRA is strategic, while ICH is more staff driven. The aim is to use ICMRA to provide some gravitas, scope and direction to ICH and other collaborative bodies.   

  Regulatory harmonization is a misnomer the way it is done presently. Even when you declare harmonization, there are huge differences in interpretation by agencies across the world, especially here in the 28 EU countries. In a practical sense, transposing Directives at the member state level leaves industry with 28 different interpretations of the same rule. There is a dire need to turn these Directives into Regulations, which by EU law have to be implemented verbatim.  

 This is clearly the trend and overall it is a good move for industry. Governments may spend four years haggling over the text, but once approved as a regulation you have clarity.    

 How vital is a strong industrial policy presence to Ireland's future competitiveness in biopharmaceuticals? Is it possible for government to encourage more indigenous growth in an era where trade and investment flows are dominated by the largest multinational corporations? 

 It depends on the depth, quality and relevance of the strategy you pursue. Initially, Enterprise Ireland followed a course of building on the base created by the global pharmaceutical firms, where we encouraged the growth of suppliers, contractors and service companies for these big investors. Today, the objective is to build local companies that stand out in a particular niche and are ready to compete in the global market. It is founded on the realization that, with only 6.5 million people, Ireland is too small to survive without the ability to export. In fact, where you export is an issue of particular importance to us: many local Irish companies are over reliant on the UK, so we want to help them advance sales in larger markets like Germany. The success of that country's mid-tier Mittelstand companies in global export trade is a guiding example for us.   

Features

Leaders from industry, government, and the CRO community examine Ireland's future as a magnet for life science investments, and what the nation must do to remain the leading exporter of finished pharmaceutical products.

Ireland's Celtic Tiger: Back on the Hunt

These are tumultuous times at the top ranks of the big Pharma c-suite. Changing customer models, a predatory M&A cycle, rising therapeutic competition,  and cost containment spurred by consolidation in the payer base are forcing most companies to rethink their business and marketing strategies.   

The first line of offense in addressing these challenges is an agile, adaptable, and responsive cadre of leaders: the CEO along with a senior management team with the ability to be strategic one moment and tactical the next; who can nurture other leaders in their organizations, and articulate new visions and business strategies on a regular basis. It's all about people who can function across many lines of business and geography, with a truly comprehensive perspective on the complex and often contradictory nature of today's global pharma business.  

Companies are incorporating coaching into their corporate leadership development programs, using these to grow leaders at every level. That's because they've come to realize the importance of grooming top managers who possess the right mix of critical industry skills and personal attributes (e.g., leadership agility, strong self-awareness, and adaptive capacity) necessary to be effective leaders in times of continuous change. 

» Facilitate and accelerate the onboarding of new executives, especially at senior levels. 

» Help already strong corporate performers become truly stand-out performers. 

» Prepare recently promoted executives for new job responsibilities. 

» Position high-potential managers for future promotion. 

» Help executives and managers at many levels develop the self-awareness required to manage and motivate people in today's global business environment.  

Selecting managers best poised to benefit from coaching is but the first step in a long process. Who in your organization is an appropriate candidate for executive coaching? It could be an established leader whom the organization wants to retain, develop, and groom for future advancement to the c-suite. It could be a young, rising star in the organization, who's viewed as an emerging leader with tremendous potential to be a corporate superstar in the near-to-medium-term future. Or it could be someone who's viewed as a strong, technical asset to the organization, but who needs guidance and feedback to improve his or her "soft skills" and personal self-awareness in dealing with others.  

An executive coach might be asked to help a senior executive become more effective at strategy development and execution, or to help a new manager learn how to effectively manage a virtual or multi-cultural team. He or she might be asked to help a newly-promoted executive learn to manage an expanded array of job responsibilities or become more adept at delegation, strategic decision-making, communication, or managing through influence.  A coach might also be retained to help an executive lead a major change initiative or to help the executive learn how to manage relationships with key internal and external stakeholders. 

Doing it right requires four things: strong sponsorship by the organization's senior leaders, careful review and selection of coaches, consideration of the range of coaching services to offer executives and managers, and appropriate matching of coaches to individual executives and managers ( "coachees"). 

Top leadership should emphasize the importance of executive coaching to organizational success. 

If you're thinking of introducing executive coaching into your organization, it's important that it be championed by the CEO. It should be introduced as a vehicle for helping drive execution of business strategy, as part of some large-gauge business or leadership initiative.   When coaching is positioned within an organization this way—as a critical linkage to the success of the business —it sets the tone and expectation for what executive coaching is intended to do, and gives it a strong leadership stamp of approval.  

 As part of introducing coaching into an organization, it's important to build a base of expertise that your company is interested in making available to its executives and managers. The corporate HR department will, in many cases, have access to information about coaches in the local areas where a company operates. Look for coaches who have solid line-business experience as leaders themselves, advanced degrees in business or organization development, and who can relate personally to the challenges that today's business executives and managers face. As part of vetting coaches, the HR department should interview individuals to better understand their personal coaching approaches, their coaching philosophies, and the specific kinds of tools and assessments they use in their coaching engagements. 

Decide on the scale of services to offer.

 Your company needs to decide what level(s) of coaching to offer executives and managers. Some companies, for example, offer a range of coaching options to individuals, based on seniority, specific job responsibilities, and other factors. Some limit coaching services to a stipulated number of meetings or hours over a certain period of time, typically six months to a year. In other cases, and particularly for senior executives, a company may offer a fuller range of coaching options that includes weekly meetings with a coach, administration of 360-degree assessments that are then used as the basis of initial coaching work, 24/7 coach availability, and "shadowing," where a coach travels with and observes a top executive in meetings with employees, other senior executives, and other stakeholders. 

Once your company's coaching program has been put in place, coaching engagements typically follow a series of steps. Those steps include: 

Once a coach and coachee have been paired, it's critical that the HR department arrange a four-way meeting that includes the coach, coachee, the coachee's boss, and sometimes a representative of HR. These "alignment meetings" are designed to ensure that there is broad general agreement at the start of a coaching engagement as to what areas of focus the coaching will have. It should also be made clear that the specific subject matter discussed in one-on-one coaching meetings is confidential. 

Step 2: The initial meeting between coach and coachee

In an initial coaching meeting, the coach normally outlines to the coachee what executive coaching is designed to do. The coach discusses with the coachee issues of confidentiality, accountability, and supervisor "report-backs" and together the two parties "contract" with one another for purposes of going forward.  

As part of the contracting process, both parties make commitments to the other about the roles they will bring to the coaching process. Because coaching is best thought of as a "co-equal" process (an alliance of peers), the coachee must bring a willingness to discuss issues impacting his or her job performance and leadership of others, and be willing to invest time, energy, and attention to develop a coaching action plan with clear and concrete goals.  For his/her part, the coach must bring curiosity, a willingness to ask probing questions, and the ability to challenge the coachee, when appropriate, to help that individual articulate a set of coaching objectives. 

Step 3: Client assessment and goal setting

After contracting occurs, the coaching engagement begins in earnest. The coach typically queries the coachee about what his or her coaching goals are, and initiates the process of getting to know the coachee in more depth. In some cases, a coach will meet informally alone with a coachee's supervisor and sometimes with the coachee's direct reports, to further gather contextual information that can inform the coaching process. 

Early conversations between coach and coachee often pivot around several core concerns:  

» To what extent does the coachee feel aligned with the company's mission and values?   

» To what degree does he/she understand its culture, politics, organizational dynamics, and history?   

» To what extent does he/she feel aligned with his/her boss and colleagues?   

» To what extent does his/her own management style match that of the boss and co-workers?   

All these factors can directly influence an individual's success and effectiveness in an organization.  

As conversations proceed over several coaching meetings, the coachee typically delineates four to six specific coaching goals he/she wants to pursue, given the organizational context in which the person works, and the nature of the position the individual currently holds.  

A key element in making executive coaching work is ensuring the coachee and coach agree on specific metrics that will be used to assess their coaching progress. Thus, a coachee who decides that one of his/her goals is to improve team leadership skills might decide to query their executive team about this at the start of the coaching process, and then again six months later. Or, a coachee who decides one of his/her coaching goals is to improve the clarity of the communications with their direct reports might agree to use data from a 360-degree narrative assessment conducted before coaching work begins, as a baseline for measuring progress with this goal six months after coaching begins. 

Step 5: Create a coaching development plan

As the coach and coachee work to define development goals (and associated metrics and timeframes for accomplishing them), it's also important that the coachee develop a personal mission statement to drive their actions and shape their development plan. In addition, the coach and coachee need to pinpoint specific skill gaps in an executive or manager's background, and identify available training or leadership development (LD) programs that may be available to help address these skill gaps.  

Today, there are many LD and continuous learning options that a company may want to make available to executives, based on needs determined in coaching discussions.  For example, coaching may determine that a high-potential executive would benefit from a special set of rotational job assignments that expose him or her to other parts of the business, or that participation in a senior leadership program offered by a leading business school would help that person develop stronger skills in the areas of global strategy formulation, brand building, and business execution.  

Once coaching goals have been established, timeframes for completion have been agreed to, and action steps initiated, it's important that the coach and coachee continue to meet on a regular basis to review progress in achieving goals, and to discuss issues of interest or challenge to the coachee as they arise. During this same phase of coaching, a coach will sometimes check in with a coachee's direct reports, or "shadow" his or her coachee, to see how the individual is applying ideas and principles discussed in coaching in real-life situations with employees and co-workers. Also during this phase, a coach may do role-plays with coachees as a way to address specific challenges.   

As coaching proceeds, it is clearly important for the coachee to provide feedback to the coach on how he/she feels the coaching is going.  

» Is the coachee being successful in implementing his/her action goals?   

» Does the coachee feel both supported and challenged?   

» Has trust been firmly established, and is there good chemistry between the coach and coachee?   

Because coaching relationships are co-equal, it's appropriate for the coach to occasionally ask the coachee for feedback, for example, by asking "Is the approach we're taking here helpful to you?" Good chemistry between coach and coachee is important because it creates momentum in the relationship, and binds the parties together in a mutual endeavor. 

Step 8: Wrap-up — completing the formal coaching engagement

Most coaching engagements last from six to 12 months, sometimes longer.  And they can involve different levels of service, depending on the seniority of a particular executive or the needs of a company or organization. That said, there comes a time when formal coaching engagements end; when the coachee has achieved good progress with their coaching goals, and structures have been put in place to evaluate continuing progress. 

Defining the critical coaching steps necessary for top managers to realize their potential in an industry undergoing significant restructuring of human and financial capital.

Executive Coaching: Transforming Big Pharma from Within

2013 delivered a decisive stroke of good luck to the 27 companies participating in 

's 13th Annual Industry Audit on shareholder performance. Revenues were up sharply from 2012's unprecedented plunge into negative growth, but the turnaround accentuates a larger trend apparent for several years: the growing divide between companies stumbling with the legacy of tired pipelines and the expectations burden imposed by sheer size, and those smaller, more nimble players with the price freedom that comes from charting a clear course toward therapies driven by unmet medical needs. The lesson is a simple one—on that strategy and vision thing, clarity counts.

 Industry Audit occupies a unique position in the increasingly crowded field of data sets evaluating industry performance. Since its debut in 2002, the audit adheres to a simple objective: to identify how well companies are doing in advancing shareholder value. Our goal is to rank this performance on 10 metrics among the top 25 publicly traded companies by sales revenues. Most, but not all, of these metrics are financial.  

This is admittedly a measure open to interpretation because there is no other standard accepted reference point that looks at performance from this perspective. But no one can argue that the approach is not relevant, given how "shareholder value" has become the rationale of choice in driving the surge in M&A and licensing transactions to near record levels so far this year. 

Idiosyncratic or not, we like that the audit reveals the importance of metrics that often escape scrutiny by the major investor ratings institutions. One example is the return on assets against profits, which allows for the valuation of intangibles like patent holdings. More important, shareholder value is also a good indicator of long-term success because of its association with stability: when the investment community is happy, there is less pressure for changes in the "c-suite" and management has some leverage to place riskier bets on investments that may play out only over time.  

This year's audit has been expanded to 27 companies, three of which are new to the ranking: Regeneron, Vertex, and Valeant. Regeneron and Vertex were included due to their strong impact on the product mix through home-grown innovations that especially in the former case have fueled a fairly spectacular rate of growth in both sales and share price. We also looked for evidence of any correlation between shareholder value and the high pay packages awarded to their CEOs, at $36.3 million for Dr. Leonard Schleifer of Regeneron and $13.1 million for Dr. Jeffrey Leiden of Vertex. As for Valeant, its Tyco-like strategy of eschewing organic growth in favor of acquisitions of undervalued and underperforming assets has coined a new business model, not to mention empowering a new industry stakeholder: the activist hedge fund investor.  

The 2014 scorecard relies on data from the 27 companies' 2012-2013 reporting periods. We rely on 10 metrics to assess performance, up from nine last year. The new entry is a powerful one: return on invested capital (ROIC), which is a measure of how well a company uses its capital investments to generate profits. This is a hot issue in the financial press. The others are unchanged from last year, and include sales growth; growth in enterprise value; enterprise value to sales; gross margins; earnings before interest, taxes, depreciation, and amortization (EBITDA) to sales (a key measure of profit margin); sales to assets (or asset turnover); EBITDA to assets, combining margin management, or profit margins, with asset management and sales to assets, resulting in a much more powerful metric than simply profit margin alone; sales per employee; and sales, general, and administrative costs to sales, an indicator of overhead.   

With the exception of this last metric, on overhead, each metric is weighted, with the highest weight of three given to growth in enterprise value; enterprise value to sales; EBITDA to assets; and return on invested capital. Weights of two are given to the remainder—sales growth; gross margin; EBITDA to sales; sales to assets (asset turnover); and sales per employee.  

The higher a company scores on each metric, the better the performance. For example, if a company places 27 on a metric, that is the highest performance compared to a score of one, which is the lowest performance. Each placement rank per metric is multiplied by the weight of that metric. Hence, if a firm places 22 out of 27 on enterprise value growth, that firm would score a total of 66 points (Rank 22 times a weight of 3 = 66). Each company's points over each metric are then added to arrive at a total point score per company from which the 27 firms are ranked to determine the audit's top performer of the year.   

In addition to the above nine weighted metrics, the audit includes a few "macro" benchmarks designed to capture external influences on companies in the audit. These include economic indicators like US GDP and CPI, standard market measures like the Standard & Poor investor grade rating and the Nasdaq and Dow Jones indices, and some specific sector growth metrics. While the exposure to broad market forces is shared, companies often react—or are affected—differently.  We find that those who adjust well to such forces tend to have a leg up on competitors in the final rankings. 

Individual company performance must first be examined in the context of the sector's growth against expansion of the economy overall. The bar has been set low in recent years, but is slowly picking up, with the US, the UK, and other mature economics plodding along at real growth rates of around 2%. 

While growth in healthcare spending has slowed as well, underlying trends suggest that the health sector is poised to outpace the overall rate of GDP growth, certainly by the end of the decade, when the demographic bulge of aging baby boomers really starts to be felt across the US and Europe. For now, however, the 27 companies in the audit easily surpassed the bar, averaging a 5.3% rate of growth in revenue over 2012 (see Annual Sales table) compared to posted 2013 US GDP growth (2.2%) and CPI (1.5%). What is noteworthy is how quickly the "Heavenly 27" marked out its solid recovery from the slip into the 2% negative growth the industry experienced in 2011-2012, which IMS reported as being the first such decline in the US market in 50 years.  

The industry also compared favorably against the general trend in stock market valuations, with the Dow Jones biotech and pharmaceutical industry group rising 69.9% and 30.6%, respectively, against the overall year-end Dow Jones industrial average of 29.65%. Reflecting the searing hot market in small caps, the US Nasdaq biotech index soared into record territory in 2013, expanding 66% over 2012, compared to the 40.12% averaged for all listed companies. While the jury remains out whether this year will see sector performance trending even higher, the important point is that expectations have been set. Your last performance simply becomes the new normal.   

Taking a closer look the Annual Sales table, our "grow or you die" principle remains firmly in place. Valeant led the pack in increasing sales revenue by more than two-thirds over 2012, fueled largely by its absorption of various externally acquired assets; Actavis, in third place, took the same route.  Regeneron, in second, was the standout in achieving real organic growth through some highly successful new product introductions, followed by Biogen Idec and Celgene. Vertex, another top performer in the past, pulled up the rear this time as sales of its once vanguard hepatitis C treatment 

 hit free fall, contributing to a 120% drop in revenues.  

But there is always an exception that proves the rule. It is possible to grow by subtraction, evidenced by the decent year experienced at Bristol-Myers Squibb. BMS sold off its diabetes franchise to AstraZeneca yet even with lower sales, increased its profitability by balancing the 7% drop in sales against a 36% increase in shareholder value. Still, the audit reveals a significant red flag for the truly big players—Pfizer, Merck, Sanofi, and AstraZeneca—all of whom have seen their sales drop in the audit for two years in a row. This helps explain the interest of these companies in swapping assets, to bolster those areas where bench strength is already established and is thus most likely to contribute quickly to freshening the revenue base.  

Enterprise value consists of evaluating market capitalization (the number of common stock shares outstanding times price of the stock on a given day) plus cash and cash-like liquid assets, minus debt and liabilities. It is a powerful metric, one that can be influenced positively by the pursuit of an aggressive M&A strategy, as evidenced by the high scores posted by Valeant, Actavis, Endo, and Forest this year. Forest, with activist financier Carl Icahn leading the way from his perch on the company's board, came in first on this metric, with a whopping 216% increase in enterprise value, compared to the 62.7% average for all 27 firms. At the bottom end, in percent change, were most of the big Pharmas, where scoring high on this metric presents challenges due to their focus on spinning out steady high dividends and buybacks of company shares.  

Enterprise value is also shaped by the breadth of a company's product line. Vertex was able to isolate some of the losses from the collapsing market for 

 with an expanded market reach for its blockbuster cystic fibrosis drug, 

. Recent trial results show that the drug in combination with other agents would be applicable to nearly half of cystic fibrosis patients of the most common genetic mutation.  Similarly, the impact of 

 on Gilead's enterprise value ranking cannot be gainsaid. Gilead's $11 billion acquisition of PharmAssets may go down as one of the premier prescient buys of all time. With annual sales in the first year heading to between $7 billion and $8 billion, payback is likely to be achieved in fewer than three years, versus the more typical four to five years. On the opposite side of the coin, Novo Nordisk posted an anemic 9.6% rise in enterprise value due in part to cardiovascular risk factors associated with its flagship diabetes drug, 

This metric complements enterprise value growth. While growth in EV reflects the accumulation of shareholder value over time, EV to sales is a good predictor of future growth: the higher the ratio, the more a company is viewed as having upside promise in terms of sales and profits. The lower the ratio, the lower the company is moving—at a headlong pace down the other side of the mountain.  

As shown in the Enterprise Value to Sales table, Wall Street's registering of astounding growth in shareholder value is reflected in 2013's average EV to sales ratio of 6.59, compared to 2012's 3.38 ratio. Note that Valeant is ranked at a high 23, with a ratio of 9.7. This indicates there is real sentiment on the street validating CEO Michael Pearson's opportunistic "growth by acquisition" strategy. Nevertheless, organic growth registered around perceptions of a productive new drug pipeline counts as well. BMS is a standout in sales prospects in oncology, while Novartis, Johnson & Johnson, Sanofi, and Pfizer get credit for a high sales profile in vaccines. AbbVie's 

 suggests there is still strong growth to be had in the anti-rheumatics category, while there is positive speculation about its stake in a more competitive hepatitis C market.  

To put the Vertex, Regeneron, Celgene, and Gilead EV to sales ratio numbers in a cross-industry perspective, the 2013 ratios for Apple, Google, and Facebook were 2.99, 5.19, and 17.10, respectively, which means that only Facebook scored better than our audit leaders—and, given the pervasive turmoil in the social media space, that advantage is likely to be temporary. 

Gross margin (GM), or markup, is all about pricing power.  It represents the difference between the cost of goods and services sold and revenues. The higher the gross margin, the more power a firm has to price with impunity while a lower GM suggests the presence of intense price competition. The average GM for the 27 companies in 2013 was 71.25%, a slight increase over 2012's 69.4%.  

In our industry, GM tends to be higher for companies with a portfolio geared to drugs for rare diseases and specialty care conditions, where competition is still relatively low. But the key ingredient is how well management takes advantage of that position in the market: it is interesting to see that the GM for highly diversified Sanofi is not much better than Teva's, which happens to be the biggest producer of very low-margin generics. GM is also a metric that should be showing an increase, because cost-efficient management can raise that number even in the midst of intense category competition. The deck for 2013 was fairly split, with 14 of the 27 companies showing an increase in GM; the remainder declined. GM actually dropped slightly in many of the most innovative companies, largely due to the cost burden of numerous new drug launches. Biogen Idec experienced the biggest drop, from 86.3% to 82.7%.  

Perhaps the best example of sheer pricing power is in treatments for multiple sclerosis (MS). The average price increase from 2011 to 2013 for Biogen Idec's 

After a dip into negative territory in 2012, 2013 delivered a resurgence in sales revenues, but the turnaround only spotlights a larger trend: the growing divide between the big Pharmas and the more nimble players.

Pharmaceutical Executive-09-01-2014

Country Report: Spain

Medical Affairs: From Info Gatekeeper to Legitimate Value Driver

Ireland's Celtic Tiger: Back on the Hunt

Executive Coaching: Transforming Big Pharma from Within

Pharm Exec's 13th Annual Industry Audit

Peril, Not Progress on Transatlantic Trade Deal

13 Years Right

Pharma Battles Hospitals Over 340B Pricing