Compliance with new standards on disclosure of industry promotional ties to health providers is emerging as a global policy challenge—the United States is no longer an outlier. While pharmaceutical and device companies began tracking payments made to teaching hospitals and physicians on August 1, under the US Physician Payments Sunshine Act (Sunshine Act), a similar trend is underway in Europe. In June 2013, the European Federation of Pharmaceutical Industries and Associations (EFPIA) adopted a code requiring disclosure of certain payments from pharmaceutical companies to healthcare professionals and organizations (Disclosure Code). As pressure for transparency continues across the globe, the costs of compliance are slated to rise for each pharmaceutical and medical device company affected by these initiatives. This column suggests cost-mitigating strategies for companies designed to comply not only with the technical requirements of these global initiatives but also the spirit of the law. 

The Sunshine Act requires pharmaceutical and device manufacturers to report annually "any payment or transfer of value" made to physicians and teaching hospitals, who are collectively known as "covered recipients." The first reports are due to the Centers for Medicare and Medicaid Services (CMS) by March 31, 2014 for the tracking period of August 1 to December 31, 2013. 

US law mandates that all transfers of value be reported, unless an exception applies. Important exceptions include: 

» Payments less than $10, except when the annual value of such payments to a covered recipient exceeds $100.  

» Educational materials that directly benefit patients or are intended for patient use. 

Penalties for failure to report in a timely, accurate manner, range from $1,000 to $100,000 per payment not reported, with a maximum penalty of $1,000,000 for each annual submission. 

Europe has opted to take a self-regulating approach to promotional disclosures but the aims are similar to what is occurring in the United States. The region's major industry association has endorsed a strong Disclosure Code that requires the constituent members of the EFPIA Associations in Europe and corporate members of EFPIA to disclose annually any transfers of value to healthcare professionals (HCPs) and healthcare organizations (HCOs). The Disclosure Code will be imposed on member companies through the implementing codes that the EFPIA national member associations are required to adopt by December 31, 2013.  

The scope of the disclosure obligations is very broad, and includes: 

Transfers of value must be disclosed and attributed on an individual basis for each recipient. Disclosures must be made within six months of the end of the relevant reporting period. The first reporting period will be 2015. The Disclosure Code allows companies to disclosure either on their website, or on a central platform, such as the one provided by the relevant government, regulatory body, professional authority, or member association. Unless expressly exempt by the Disclosure Code, transfers must be disclosed on an individual basis.  

While the Disclosure Code does not provide for specific sanctions for noncompliance, it calls upon the national member associations to include sanctions for violations of their national codes.  

While it is difficult to estimate precisely the total costs incurred by multi-national corporations operating both in the United States and Europe in complying with these transparency initiatives, it is undeniable that these costs have skyrocketed in recent years. CMS predicted that the average labor costs for an applicable manufacturer in complying with the Sunshine Act would be $159,234 in the first year and $119,426 in the second year. CMS estimated that large manufacturers would spend $50,000 in the first year and $5,000 in the second year for infrastructure costs, while small manufacturers would spend significantly less, $4,000 in the first year and $400 in the second year. The threshold size for "small" pharmaceutical manufacturers is 750 employees. Thus, for a pharmaceutical manufacturer, the US government estimated that the cost of implementation would be roughly $200,000 in the first year.  

Industry contacts have scoffed at this low estimate, noting the vast resources needed not only for actual tracking but often for purchasing databases. Fellow consultants and company personnel responsible for marshaling a company's resources have noted figures well above $1 million to comply with this US law in the first year. Based on initial estimates from the industry, the EFPIA Disclosure Code compliance costs are expected to be in the same range.  			

There are also costs that are difficult to capture, including the loss of opportunity to collaborate with leading physicians or institutions who have instituted a no-industry payment policy, and the financial consequences for noncompliance as a result of enforcement actions. In Europe, new data protection regulations could also affect compliance costs around promotion.  

The increase in public scrutiny through both voluntary and legally mandated disclosures is designed by both organizations to bolster public confidence in the pharmaceutical industry. Here are a number of recommendations for reducing overall cost while not short-changing the legal obligations around compliance efforts: 

» Designate personnel with compliance responsibility as early as possible and shop around for experienced outside firms. 					

Tracking and reporting accurately is important not only because of the legal fines that can be imposed, but the risk of investigations by the US Department of Justice for Anti-Kickback allegations or potential False Claims Act suits that could arise after publication.

» Determine whether any exceptions apply. 					

Does the 10 percent of annual revenues limit apply under the Sunshine Act?

Can any of your separate divisions be considered exempt from US reporting obligations because it only manufactures non-covered products? 

Does the transfer of value relate to over-the-counter medicines, items of medical utility, meals and drinks, or medical samples which are excluded from EFPIA's Disclosure Code?

» Anticipate strategic growth areas and analyze whether transparency rules will apply to those business sectors. If so, plan compliance efforts early. 

There are many additional legislative transparency mandates, spanning countries as diverse as France and Slovakia that companies must monitor. Countries in Asia, such as Japan, have their own transparency initiatives. Pressures and interest to do the same is growing in key emerging country markets like China. We believe this global trend of seeking transparency between manufacturers and providers will require sustained focus on managing these rising compliance costs, in much the same way that companies have tackled the cost burden in product registration and approvals. 

 is Partner at Sidley Austin LLP.  She can be reached at 

 is Counsel at Sidley Austin LLP. He can be reached at 

Articles

Column

As the burden of promotional disclosure expands beyond US shores, understanding the rules and then controlling the cost of compliance is a strategic necessity.

Big Pharma's Newest Cost Center

The issues of patient safety and device usability have become hot topics in the drug-delivery market as healthcare costs continue to rise, while adherence rates have fallen to 50 percent. This strain on the healthcare system has led to stricter regulations and scrutiny for companies bringing new biologic or biosimilar products to market. Many of the challenges associated with these issues revolve around the increasing role patients are playing in the self-delivery of their treatments and their access to relevant and easy-to-understand instructions for use. This becomes increasingly important as HCPs experience tighter time constraints and a higher volume of patients, resulting in decreased interaction between patients and physicians. Reduced training times lead to poor on-boarding experiences for patients, and an inability to effectively use and maintain drug-delivery devices. As a solution to these issues, many companies have implemented device training programs to increase patient confidence with device interfaces and usage techniques. In recent years, products have integrated multisensory technologies, such as audio, video, and tactile feedback to strengthen the resonance and connectivity of their device training messages. This approach has been effective in promoting consistent learning experiences, and can help brands overcome the following challenges: 

 In today's drug-delivery market, devices and delivery methods are becoming more complex. Device training has emerged as a preferred approach to mitigating risk and promoting safe delivery techniques.  

 Clinical trials and new product launches are exciting times for companies bringing new products to market. These milestones however, are often delayed due to usage errors associated with complex device interfaces and user errors during human factor and viability testing. Providing patients with the right educational resources during this critical time reduces launch delays and time to market.  

 While the demand for HCP services continues to grow, providers are being increasingly pressured to provide high quality care at the lowest cost possible. This results in an average time spent with a patient amounting to roughly 23 minutes on average. Twenty-three minutes isn't much time for patients to ask questions and learn detailed information about their delivery device.  

Today, let's focus mainly on the patient challenge. The first 30 days of treatment are the most critical in establishing and reinforcing adherent usage behaviors. During this time, patients learn about their initial diagnosis and are first introduced to their drug-delivery device. Experts often view these devices as intuitive; patients, however, are frequently overwhelmed due to limited knowledge and experience with drug-delivery mechanisms. These feelings often lead to fear and anxiety, resulting in avoidance behaviors that cause patients to end or switch treatments. Providing patients with effective device training tools allows them to overcome these fears and safely manage their treatment plans.  

An important trend in the drug-delivery market is the use of patient-centric care to contain cost and increase the quality of care provided to patients. But as new drug formulations in the biologic and biosimilar drug markets have entered the market with advanced delivery technologies—ostensibly designed for patient ease of use—their complex interfaces have instead led to an increase in preventable injuries and adverse events related to device misuses.  

A common thread in the drug-delivery market is the need for device training solutions that connect and resonate with patients, while effectively communicating brand values and benefits to HCPs. Traditionally, products fulfilling these needs have been restricted to rep-delivered or direct mail pieces that have struggled to improve patient behaviors and/or error reduction. Building better device training tools requires a deep understanding of how patients learn, combined with an improved understanding of patients' emotional and behavioral patterns that occur after a diagnosis and throughout their treatment. Integrating effective training solutions throughout the phases of device training education ensures that patients receive consistent and relevant information associated with the stage of their treatment.  

 Beginning at the initial point of diagnosis, diagnosis education seeks to inform patients about what they will be experiencing during their first 30 days of treatment in order to promote a positive onboarding experience and to build patient confidence with a new delivery device.  

 The educational purpose is geared toward a patient's family, and the lifestyle changes necessary to build a strong social network in support of a patient's medication regimen. Education in this category promotes lifestyle changes to compliment the goals of treatments. 

 As the centerpiece of self-administration, usage education introduces drug-delivery techniques required to effectively self-administer and overcome the initial fears of self-administration.  

 Promoting long-term adherence has never been more important. Adherence education provides patients with an understanding about the importance of remaining compliant, and the risks associated with non-adherence to treatment. Long-term communication reinforces adherent behavior and increases brand loyalty at the patient and HCP level.  

At this point, many companies traditionally turn to uni-sensory and generic device training products that fail to recognize the specific therapeutic and patient needs associated with various conditions. This approach commonly results in mechanical training devices that have had little success reaching and preparing patients for the drug and non-drug influences that can affect their ability to successfully administer their treatments. 

As currently marketed products continue to mature towards patient expiration, the market landscape is being continually augmented by advancements in drug formulation and drug-delivery technology. This has led many brands to seek completive advantages outside the industry norms. Multisensory device training has emerged as a provider of such an advantage by creating added value, which can translate into brand preference at the physician and patient levels. Multisensory device training, used correctly, has been proven to increase the connectivity and retention of educational messages. This trend is likely to continue as markets continue to consolidate and become more competitive.  

When developing multisensory products for patients and HCPs, environmental influences become key determining factors affecting a patient's ability to process and store information. These influences include considerations such as where the product will be used (e.g., home, doctor's office, or pharmacy) and what features it will contain. Due to the multisensory world we live in, the human brain has selectively adapted to respond best to multi-sensory sensory stimuli. One of the biggest advantages associated with multisensory learning is its stimulation and encoding within multiple lobes of the brain. This results in stronger connections across patient's audio, visual, and motor networks, leading to improved associations and transitions between educational messages and usage behaviors. When used in conjunction with the continuous phases of patient education, multisensory product features increase patient confidence and reduce risks associated with ineffective product use, and give patients confidence in their treatment. 

 is CEO at Noble Rx Marketing. He can be reached at 

New drug delivery mechanisms and devices are an opportunity to build relationship with the ultimate customer: the patient.

Special Delivery

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Rumor has it the BRIC palace is crumbling. Perhaps that's overdramatic, but at the very least the BRIC oven is cooling off. Where to now? The US and Europe remain in a state of languid stagnation, while Asia and Africa are largely addressing basic healthcare needs with low-cost generic medicine. 

As the world reveled in the glory of the BRICs and the MISTs (Mexico, Indonesia, South Korea and Turkey) for the past decade, the Middle East and North Africa (MENA) region was generally disregarded as a blind spot for the pharmaceutical industry. Decades of conflict and strife in the region have done a great disservice to attract business, but recent events like the Arab Spring have unveiled a vibrant MENA, eager to shed its inadequate reputation.  

Vibrant Future by Khalid Mezaina www.khalidmezaina.blogspot.com			

Leading this move for international recognition is the United Arab Emirates (UAE), who for more than a decade has dazzled the world with its economic growth and opulent lifestyle. Holding the seventh largest crude oil reserves in the world, the UAE experienced one of the most unprecedented transformations from a land of desert dwellers and seafaring trade-posts 40 years ago, to becoming a global business foci and tourist destination. As we speak, this tiny nation of 4.8 million is bidding to host the 2020 World Expo and has made it a sport to break world records.   

Striving to diversify their economy away from oil revenues, the visionary royal leaders have most recently endeavored to transform the nation into a model of healthcare development, successfully attracting pharmaceutical companies of every nationality and erecting dozens of world-class hospitals. In many ways, the UAE is leading the Middle East region as the new source of satiety for pharmaceutical companies. At last, an oasis for the industry surfaces; and no, it is not a mirage.  

"Over the past twenty years, we have seen a drastic change in the socio-economic climate of the Gulf region and neighboring countries. There has been considerable growth in terms of wealth and a sharp increase in health expenditures, which was mandated by the Ministry of Health", explains Ayman Sahli, CEO of Gulf Pharmaceutical Industries (Julphar), the UAE's leading manufacturer.   

H.E. Amin Al Amiri, assistant undersecretary for medical practices and licensing, Ministry of Health			

This trend of increased expenditures in healthcare can be seen across the entire Middle East and North Africa (MENA) region, yet it is led by the oil rich Gulf Cooperation Council (GCC) countries whose spending on healthcare has averaged a 7.9% annual increase since 2000. "Within the Middle East, demand is driving the development of advanced infrastructure, inclusive of clinics, hospitals and universities.  It is essential that local and regional companies focus on supplying these modern organizations with the right pharmaceuticals", adds Sahli. Recent years have shown that for GCC countries, the right pharmaceuticals have generally been the most innovative and advanced treatments available.  

The sharp rise of healthcare spending is commensurate to the demographics of the region, with more than 50% of the population under 25 years of age and fertility rates higher than those of India, China and the US. In light of such a young and expanding population, governments are taking heed of a future ballooning healthcare burden and are ­therefore laying the ground to rein in forthcoming costs. It is estimated that GCC health expenditures will reach US$79 billion for a population of almost 50 million by 2015, of which 64% will come from government coffers. By 2020, the pharmaceutical market alone is expected to reach US$20 billion. 

Burgeoning wealth has also sparked a shift towards westernized lifestyles that have raised the prevalence of diseases typically related to unfit diets and sedentary routines, such as diabetes and cardiovascular conditions. It is no coincidence that Qatar, the UAE and Kuwait all rank amongst the top 10 countries with highest GDPs per capita, while at the same time standing within the top 10 countries with the highest prevalence of diabetes alongside the rest of the GCC nations.   

Ayman Sahli, ceo of Gulf Pharmaceutical Industries (Julphar)			

"The incidence of diabetes is a major issue for Gulf countries, and it must be addressed today. Whereas current estimates place the incidence of diabetes at 1 out of 4 people, this is soon expected to reach 2 out of 4 given current trends", details Paolo Carli, head of Middle East, Saudi Arabia (KSA) & Egypt for Merck Serono. There are many factors that exacerbate the situation, including environmental, genetic and lifestyle conditions. Environmentally, the weather here is simply too hot for people to be sufficiently active outside, particularly since air conditioning is now a staple comfort in all settings. People move from their air conditioned home, to their air conditioned car to reach their air conditioned office, and so on." 

"Furthermore, given that locals were originally desert dwellers, their genetic makeup had adapted to live under conditions of general food scarcity and strenuous conditions. These genetic predispositions are now overwhelmed with modern eating and lifestyle habits, which include lack of exercise, consumption of excess sugar and non-healthy food. Finally, there is an added factor of Arab culture that values great hospitality involving long meals with abundant food. When you combine all these factors it becomes evident that we have a ticking bomb on our hands that we must avert as best we can. The same goes for hypertension, which is diagnosed in 25% of the population", Carli concludes.  

Pharmaceutical companies, both local and international, have been feverishly working with health authorities to address this spike in lifestyle diseases before costs overtake national budgets. Whereas most of Big Pharma used to operate in the region through local distributors, the last five years have witnessed the greatest wave of investments the Middle East has ever seen from the pharmaceutical industry. Most of the top 20 companies have established dedicated sales & marketing offices throughout the region, and in some cases even localized training centers, logistics depots and manufacturing facilities. The UAE has snatched the bulk of these investments due to its political and economic stability, coupled with a keen penchant to cater to international businesses.  

				"Over the past 3-4 years we have started very comprehensively to attract foreign investments in the field of pharmaceutical industry and medical practice", asserts Amin Al Amiri, undersecretary for medical practice and license at the UAE's Ministry of Health (MOH). "In general we have been very convincing in getting international pharmaceutical companies here, considering that almost 90% of them have opened regional offices here and UAE is their hub for this region."  			

GSK's vice president and general manager for the GCC and Levant, Mohammad Zafrullah, arouses awe when speaking of the transformation that the UAE has witnessed in the past decade "If you came to Dubai 10 years ago, you would not believe your eyes. What this country, United Arab Emirates has achieved in such a short period of time is truly exceptional. This is the result of the vision of the leadership of this country. They haven't done this without private overseas investment, which has come from all parts of the world. You see similar things beyond UAE in the region."   

GSK is the leading pharmaceutical company in the UAE and most Middle Eastern markets, due to its longstanding presence in the region for over half a century. Zafrullah adds that they "have managed to build strong partnerships not just with healthcare authorities but also our business partners. There is trust in these relationships in the true sense of the word and this has been developed over the years on the basis of transparency and open communication. Trust takes years to build but can be broken in an instant, so this is something we protect, no matter what." Their constant investment in the region, such as through the establishment of manufacturing facilities in Saudi Arabia and Iraq, are testaments to their conviction that this region holds bountiful rewards.  

Ashraf Allam, former managing director of Middle East and Africa for Amgen			

Indeed this is the notion that the UAE has been trying to sell to healthcare companies for the last ten years. "What we are witnessing in the UAE is a general move to diversify the country's economy beyond oil revenues. As part of this evolution, healthcare has been identified as a priority segment within which the government is investing heavily. This includes the construction of new hospitals, the updating of the regulatory environment, as well as setting in place business incentives for healthcare companies to enter the market, such as through free trade zones like Dubai Healthcare City and Dubiotech", explain Bassem Abdallah, Bayer Healthcare's country division head for Gulf states.  

In 2002, the Prime Minister of the UAE and Ruler of Dubai, HH Sheikh Mohammed Bin Rashid Al Maktoum, established Dubai Healthcare City (DHCC) as the city's prime location for healthcare provision. Covering an area of 4.1 million square feet comprised of two hospitals and hundreds of laboratories and medical centers, DHCC is the most comprehensive healthcare conglomeration in the country, focusing on patient-centered solutions. The vision behind this project was to attract some of the most respected healthcare companies to Dubai in order to offer their first-class services to the local population. In 2005 the city bolstered appeal to such companies by setting up the Dubai Biotechnology & Research Park (DuBiotech).  

Marwan Abdulaziz, executive director of Dubiotech			

"Aligned with the government's vision of promoting this sector, DuBiotech was set up as a free zone to attract foreign companies and investors. Our aim is to be close to the companies that set up their operations here by trying to understand their needs and accommodating that as much as possible. Whether they are setting up a laboratory, or a business center or a logistics warehouse, it is up to us to make any possibility a reality", details Marwan Abdulaziz, executive director of DuBiotech. As its name suggests, this free zone area was established by one of the UAE's top real-estate developers, ­deeply tied to the government, to attract research-based scientific companies to Dubai.   

Abdulaziz further adds that, "in addition to the infrastructure we provide, we also have two unique services that we offer companies. The first is what we call 'delivering partners', which entails connecting companies who need each other or partners outside of the park, such as distributors, investors, bankers, etc. The second service we offer is providing regulatory advice for all types of companies, in order to facilitate the initial stages of their operations." DuBiotech today boasts over 125 companies registered under its name, including majors such as Pfizer, Genzyme and Amgen, some of which only came to the country since the opening of the free zone.  

Ashraf Allam, former regional managing director of Middle East & Africa (MEA) for Amgen, pioneered the company's incursion into the region when he established the regional offices from scratch. "We are very proud to have been the first biotechnology company to establish itself in Dubai back in 2006. It took us a couple of years to become fully operational while we built up our local team and waited for our products to receive regulatory approvals from the local authorities. Today, the MEA region is the fastest growing area for Amgen across the world, even more than other larger emerging markets. Due to this, the region is perceived as an icon of success, and I am quite certain that many multinational pharmaceutical companies view MEA as a key growth region." Last year Amgen recorded 45% annual growth in comparison to the previous year. Allam has since moved on to become the vice president of Middle East & Africa for Mundipharma.  

"Unlike other governments in the region, the UAE administration is welcoming and understanding of international companies, trying to accommodate as much as possible their needs. They treat companies as customers rather than simply ­enforcing laws and regulations without listening to the industry. In some cases they go as far as assigning specific representatives to work together with a company, to facilitate the start-up phase that typically involves large volumes of paperwork", explains Allam. It is no wonder that some companies who had regional offices in legacy markets, such as Egypt or Turkey, have now opted for Dubai's juicy offer of spanking new buildings and affluent clients.   			

But how quickly can a country truly transform its healthcare system, while making it sustainable for the future? The mindset of Emiratis is that anything that is feasible and beneficial for the country should and will be done, regardless of the cost. This is why health authorities have been moving at record speed to build new infrastructure and shape regulatory frameworks worthy of a first-class healthcare system. 

Walid Kattouha, head of Middle East Cluster for Novartis 			

Al Amiri from the MOH augurs that "the UAE is different from all other Arab countries. Certainly we are moving to improve harmonization with GCC countries and other Arab countries, but the UAE has a different situation. Our ­business opportunities are unique, the system of governmental procedure and regulations implemented here in the Emirates are completely different. We do everything as a fast-track process, we support foreign investment and we consider them as strategic partners. The UAE does not have difficulties with regulations because we are used to high transparency in our work and are moving to digitalize our services so that they are available online."  

Moritz Hartmann, general manager of Middle East for Roche Diagnostics 			

While the transparency of the country's government is generally lauded as exceptional in the world, particularly for the Middle East region, some inefficiencies regarding health authorities do exist. Most notably is the tripartite split of regulatory agencies, consisting of the MOH, Health Authority Abu Dhabi (HAAD) and Dubai Health Authority (DHA). Similar to the American system of governance, where states are responsible for the laws specific to their geographies, the UAE is composed of seven Emirates, each with its own government. 

Giles Platford, area head of Middle East, Africa & Turkey for Takeda 			

Abu Dhabi is the political seat of the country as well as the oil basin, whereas Dubai has transformed itself into a financial powerhouse by leveraging a service-intensive economy. As both these Emirates have progressed light years ahead of their five other counterparts, they each decided to establish independent health authorities to regulate healthcare services. The MOH is responsible for country-wide regulations, including product registration, import/export processes and pricing, as well as overseeing healthcare provision in the less fortunate Emirates. In parallel, HAAD and the DHA each establish independent regulations for reimbursement and the distribution of products in their respective Emirates. Basic economic theory would alert to redundancies in such a system, where resources are wasted due to overlap and fragmentation.   

Despite this unusual set up, the common goal of bringing innovation as speedily as possible does seem to unite all three parties. Executives in other parts of the world believe that innovation comes late to the Middle East, but nothing could be further from the truth. Whereas in the past the region was slow to bring innovation, doctors today are very eager to use new products and to have access to them. Now with the internet and all the available media, practitioners learn about the latest treatments and immediately start searching for ways to use these new products for their patients. 

Mohammad Zafrullah, vice president and general manager of GCC and Levant for GSK  			

Having arrived in Dubai only a few months ago to head Takeda's Middle East operations, Giles Platford provides his first impressions of the GCC markets. "The UAE and KSA are markets where you have very professional healthcare institutions. Your private hospitals are like five-star hotels, you've got public hospitals that are like private hospitals in other countries. Definitely the standard of care here is good. The willingness to receive innovation is very high. An efficient approval process is reflecting that. Typically, companies will foresee that the UAE will be the first market to launch in the region. I think the perception of the UAE is very positive in the least."  

Tailoring Diabetes to the Middle East 			

Almost unanimously, the UAE is considered the fastest adopter of innovation in the Middle East, allowing for the registration of products immediately after they have been approved by the US FDA or the European Medicines Agency (EMA). This process can take as little as 3-4 months, which has led some companies to designate the UAE as a priority launch country ahead of any other ­emerging market. 

Bassem Abdallah, country division head for Gulf States at Bayer Healthcare 

AstraZeneca's president for the Gulf, Samer Al Hallaq, recounts that "generally the challenges in the Gulf region are related to the fast pace of the market, which demands the introduction of new products into these markets. I would say these are positive challenges and we are lucky to be considered early launch markets within the Middle East, because the healthcare system here allows for speedy approvals and registration.  We can bring innovation very quickly to this part of the world because of this support to bring breakthrough and innovative medications."  

Country Report

Rumor has it the BRIC palace is crumbling. Perhaps that's overdramatic, but at the very least the BRIC oven is cooling off. Where to now? The United States and Europe remain in a state of languid stagnation, while Asia and Africa are largely addressing basic healthcare needs with low-cost generic medicine.

Country Report: UAE

Most pharmaceutical executives breathe a sigh of relief when they hear that discussions in Brussels on the regulation of medical devices are becoming ever more complicated. "Thank heavens I don't have to deal with all that" is a common response, with only a half-sympathetic glance towards their colleagues laboring in what is one of the junior partners in the business of European healthcare.  

Think again. The shockwaves of the current European Union debates on devices are likely to echo through more and more of the medicines business over the coming years. So the message to drugmakers is relax and take that extra breath while you can. 

Those with scant knowledge of the medical devices sector should start here. The European Parliament's health committee is scheduled to come to a consensus view on the two major regulation proposals launched last year by EU officials—one on devices, and one on in vitro diagnostics. This month, the full parliament is due to agree on its definitive opinion on the proposals, taking account of the health committee's thinking. And before the end of the year, governments of the Europoean Union's 28 member states are expected to finalize their position on the proposals too. So in all likelihood, in early 2014, new rules should be signed off that will change the face of EU controls on these products. 

And why should anyone other than the manufacturers of hip replacements or home blood-pressure monitors care? There are three good reasons. One is the wide scope of the legislation. Another is the atmosphere in which the new rules are being discussed. And the third is how all this is related to the progress of medical science. 

As to the scope, much more than the proverbial prosthetic hip is covered. The new legislation on devices will bridge the gap between devices and advanced therapies, by introducing rules that cover products manufactured from non-viable human tissues or cells or their derivatives when they undergo substantial manipulation (such as syringes prefilled with human collagen). Rules will be tightened for products containing viable biological substances that are to be ingested, inhaled, or administered rectally or vaginally.  

The new rules on in vitro diagnostic medical devices specifically legislate for tests that provide information about the predisposition to a medical condition or a disease (such as genetic tests) and companion diagnostics—tests providing information to predict treatment response or reactions. 

				And overall, new requirements are envisaged on author-ization, identification of suppliers, product information, traceability, pre-market clinical evaluation and post-market clinical follow-up, and surveillance, with manufacturers required to nominate a "qualified person."

The prospects for introducing reasoned and reasonable updates to the EU's earlier legislation, some of which is more than 20 years old, might not have been so delicate if the context had not been contaminated by the PIP scandal that coincided with the genesis of the new measures. But, as the European Union admitted when it made its proposals last year, the existing regulatory framework has "come under harsh criticism, in particular after the French health authorities found that a French manufacturer (Poly Implant Prothèse, PIP) had for several years apparently used industrial silicone instead of medical grade silicone for the manufacture of breast implants contrary to the approval issued, causing harm to thousands of women around the world."  

PIP may have had nothing to do with the world of pharmaceuticals, but it certainly had plenty to do with the rigor that marked the regulatory proposals for devices and diagnostics, and the vigor that characterizes the debates around them. This is why the proposals are prefaced with abundant allusions to the regulatory framework failing to keep pace with scientific and technological progress, and to "gaps or uncertainties" over some products. And that is why the proposals aimed to put in place "a robust, transparent, and sustainable regulatory framework," and to "overcome the flaws and gaps" and strengthen patient safety.  

It is also why the European Parliament's health committee is having to work its way through 399 proposed amendments on diagnostics, and through 907 amendments on devices. The changes the parliament is examining range widely, from attempts at clarification ("in some cases it is difficult to distinguish between medical devices and cosmetic, medicinal or food products") or enhanced transparency ("adequate levels of access for the public and healthcare professionals...on medical devices that may pose a risk to public health and safety is essential") to new regulatory procedures: "A swift centralized marketing authorization procedure should be introduced for innovative implantable devices, for innovative devices which incorporate, as an integral part, a substance which, if used separately, would be considered to be a medicinal product, with action ancillary to that of the device, for innovative devices intended to administer a medicinal product, and for innovative devices manufactured utilizing tissues or cells of human or animal origin, or their derivatives, which are non-viable or are rendered non-viable." 

In his draft report on the proposals on diagnostics, German physician and MEP Peter Liese has also urged particular attention to companion diagnostics, and is insisting that they should comply with the new rules. He is also advocating further toughening up of the rules, because in vitro diagnostics, far from being the poor relations of the medical sector, "may be the parents of all therapies, including pharmaceutical products and surgery." Arguing that without a proper diagnostic there is no proper treatment or prevention of diseases, he goes on to conclude that the proposed rules fall short in their coverage of clinical testing—and to recommend further provisions on ethics assessment and on informed consent. 

Liese also makes an explicit link with the aspect of these proposals that has the most significant implications for pharmaceutical executives. With the recent progress in medical science, companion diagnostics represent a key tool in evaluating whether a specific therapy will work in a specific patient, he says. And he points to "the huge opportunity of personalized and stratified medicine" that this opens up. This "needs to be addressed properly," and while the commission proposal "is a good base," it "needs to be further clarified." 

The clarification Liese calls for is long awaited—and not just in relation to companion diagnostics, but in relation to personalized medicine in general. But here pharmaceutical executives in Europe are still awaiting a crucial paper from the commission, announced five years ago, but still not finalized. According to the latest draft, in vitro diagnostics represent one of the principal hopes for promoting personalized medicine. 

The paper, entitled "The Use of '-omics' Technologies in the Development of Personalized Medicine," suggests major new opportunities for the treatment of patients in the European Union, with better targeted treatment, fewer medical errors, and reduced adverse reactions. And it argues for greater attention to diagnostics, rather than merely focusing on therapies. "A better consultation process for companion diagnostics intended to assess patient eligibility for treatment with a specific medicinal product will improve coordination of regulation relating to pharmaceuticals and diagnostics," it says. 

Meanwhile, without the benefit of the commission's final version of its strategy paper, the debates on devices, diagnostics, and the future of the drugs industry roll onwards. And as they roll, they are likely to start rolling very soon across the paths of many pharmaceutical executives too. 

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

European efforts to crack down on safety and pricing issues in the marketing of medical devices may portend long-term problems for Big Pharma.

Divining the Future of Devices

June 17–18, 2014
Philadelphia, Pennsylvania

Changing the DNA of Pharma Patient Adherence Programs 

The First and Last Word on Medication Adherence: Keep Trying

Paradigms change   when questions emerge that the old paradigm can no longer answer. Market   access has become a buzz word, as                          access to markets is as significant a hurdle to   product uptake as registration itself. Initially a topic for   pharmaceutical                          companies concerned about sales volume, it now   affects all aspects of healthcare. The current understanding of market   access                          will undergo a fundamental shift in perspective,   away from a company-centered toward a patient-centric view of the   problem.                          This column identifies several forces that   challenge the current understanding of market access and lobbies for a   comprehensive                          approach that aims to address the needs of all   stakeholders, with a primary focus on what creates value for patients. 

There are four reasons why the current approach to market access is doomed to fail: 

The term   "market access" itself says a lot about the self-centered mindset, which   is one of the reasons for the paradigm change.                          Healthcare companies want access to markets,   revenues, and profits, and market access aims to persuade those that   control                          access to let them in. But the market access   framework often does not address the needs and goals of all the parties   involved.                          Market access looks at the world from the   perspective of healthcare companies with the ultimate goal of gaining   access to                          markets for their products and most of their   attention is focused on convincing a few payers of the value of their   products.

Market access is   considered a remedy to address the pricing pressures the healthcare   industry is facing—a result of a marketing                          model that basically ignored the fourth P every   marketer learns about in business school: Price. As policy-makers and   payers                          search for ways to control cost without   compromising care, the failure to communicate a convincing value   proposition to these                          stakeholders results in our being forced to   compete on price. The increased use of tenders as a means of cost   containment                          should be interpreted as a failure to   communicate the value of a medication. 

Market access is   based on a one-size-fits-all, product-driven marketing model. However,   while patients have similar needs,                          the healthcare systems they live in go about   pursuing the same common goal—improving public health—differently. A   one-size-fits-all                          approach is not effective at addressing the   different needs in each market, yet to manage market-by-market is not   realistic.                          A practical approach is to define market   archetypes and address the needs of each archetype effectively while   leveraging limited                          resources efficiently. 

Traditional   marketers tend to focus on lagging metrics such as number of patients   diagnosed and number of patients receiving                          treatment (often illustrated as a waterfall   chart), but they fail to understand and appreciate the patient and payer   journey:                          Why does the market look the way it does? What   are the incentives and success metrics? Marketers need to focus on   understanding                          the 

We suggest focusing   on patient access as a remedy for a marketing model that was for a long   time geared towards addressing                       the needs of a single stakeholder—the professional   writing the prescription. Patient access is a mindset that focuses on   providing                       patients with access to the medicines they need at   acceptable prices. Providing patients with access is the one common goal                       all stakeholders can agree on. While each   healthcare system differs in how its patients, providers, professionals,   payers,                       and policymakers go about improving public health, a   patient access mindset helps to develop a compelling value proposition                       aimed at addressing the needs of the various   stakeholder groups, tailored to the needs of the local market, yet based   on a                       well-understood positioning. Most importantly,   patient access provides a unified focus for healthcare systems and   companies. 

What are the changes a healthcare company has to make as it moves from a market access to a patient access mindset? 

» Drop 'market   access.' Words matter. It requires organizations be aligned on   researching, developing, and delivering the                       products that improves people's lives. A company   has to recognize that its goal is to demonstrate the value proposition.

» It is a uniting focus of all stakeholders in a healthcare system, since it is everyone's goal to achieve improved patient                       outcomes. 

» Patient access focuses on actual product usage. Market access is oftentimes tasked with obtaining strong pricing and favorable                       reimbursement status, but this mindset ignores real product uptake. 

» Breaking the traditional development paradigm: Registration is all that matters. Market access today is often just paid                       lip service to as a 

—aligning   internal stakeholders from research to representatives toward a new   principle: A product only matters when a patient                       uses it. The journey from R&D to sales becomes   smoother as all the internal stakeholders are aligning towards a common   goal. 

» Patient access   re-orients marketing analysis from looking beyond patient flows from   diagnosis to treatment adherence toward                       a comprehensive understanding of the payer flow:   Where actually the costs incurred? Who stands to gain or lose   financially?                       A patient access mindset aims to understand the   patient and provider pathways, with the ultimate objective to ensure   access                       for those patients who can optimally benefit from a   product. 

Instead of a win/lose mindset at the core of market access, patient access tries to create win/win/win solutions that lead                       to value for patients, companies, and the healthcare system at large. 

The first step is a change of mindset. What is the objective? Get products to those patients who can benefit from it. Educating                       the internal and external stakeholders is a key. Beyond that, here are some suggestions to consider: 

» Embed patient access as a guiding principle across all functions. Clarify how each function impacts patient access. 

» Develop a deep   understanding of the goals and key performance indicators of all   stakeholders. Map the complete patient journey.                       Understand the payer flow. Ask yourself: What is   the healthcare system trying to achieve? How is the healthcare system   funded?                       How does this intervention help? Could this   intervention create concerns? Make sure your plans address these issues. 

» Develop a clear and compelling value proposition for each stakeholder group. 

» Create a formal framework for understanding the impact of decisions on patient access. Get payer input and advice early                       on. 

Look for metrics that matter to all stakeholders, for example: percentage of people using the product for the designed use                       or percentage of physicians freely choosing the product for a certain therapy. 

"The future has   already happened, it's just unequally distributed," the famous quote   from the acclaimed science fiction author                       William Gibson, helps to explain the various   pathways healthcare companies are exploring as they struggle to come to   terms                       with the end of the blockbuster era. Almost every   healthcare company has created a market access function. Many have   started                       to look at the competencies required to communicate   the value of their products in a language payers and policy-makers   understand.                       But to be truly successful, healthcare companies   are well advised to consider patient access as the overall objective and                       adopt a multi-stakeholder approach that aims to   meet the needs of all the critical decision-makers. It is not about "we   used                       to look at physicians, now we look at payers."   Patient access uses a system view with the patient at the center. 

 is Global Head of Emerging Therapies and Market Development at Baxter Healthcare Corporation. He is based in Chicago and                       can be reached at 

Patient access is the new driver of change and progress in healthcare marketing, says a senior industry player in market development.

Market Access is Dead

On June 19, the European Commission hit major Danish pharmaceutical company Lundbeck with a fine of € 93.8m. Four other major European generic drug manufacturers (Alpharma, Merck KGaA/Generics UK, Arrow, and Ranbaxy) were similarly subject to fines, totalling € 52.2m. Their offense was violating EU anti-trust rules. In 2002, Lundbeck entered into patent settlement agreements with the four manufacturers, delaying entry of cheaper generic versions of Lundbeck's popular citalopram (a "blockbuster" antidepressant) onto the European pharmaceutical market. 

The ruling is a significant milestone, marking the first time the European Union has sought to clamp down on "reverse payment patent settlements," better known as "pay for delay" deals. This column will examine the trend toward finding an antitrust claim to vacate reverse payment patent settlements and review the precedents set by the Lundbeck decision. 

The application of antitrust rules to patent settlements is controversial, as it casts a spotlight on the inherent tension between intellectual property rights (IPR) and competition law.  

The essential characteristic of IPR is that they confer upon their owner an exclusive right, affording them a legal monopoly. Once a patent has been granted, the owner has the power to exclude others from doing anything that infringes the patent. Antitrust rules, on the other hand, generally exist to keep markets open to competition, and view any kind of monopoly as inherently negative. 

Today, it is often asserted that this inherent tension is anything but apparent as IPR and antitrust rules share the same fundamental goals of enhancing consumer welfare and promoting innovation. This statement is, however, to some extent debatable. 

Article 101 in the Treaty on the Functioning of the European Union (TFEU) prohibits anticompetitive agreements and stipulates that all agreements between undertakings; decisions by associations of undertakings; and concerted practices which may impact trade between member states, and which have as their object or effect the prevention, restriction or distortion of competition within the internal market, are prohibited. They are deemed incompatible with the internal market. 

Generally, there are three different ways of analyzing reverse payment patent settlements under Article 101: 

Under this test, a reverse payment patent settlement may not infringe Article 101, as long as it remains within the scope of the patent and is strictly limited to preventing products that potentially infringe the patent from being introduced to the market. Thus, where there are bona fide grounds for a dispute, the settlement may be said not to go beyond the exclusionary power of the patent itself. Until recently, the US courts consistently applied the "scope-of-the-patent" test. With the US Supreme Court judgment of June 17, 2013 in FTC v. Actavis, however, this has now changed.  

 The opposite view is to take the position that reverse payment settlements presumably restrict competition by object and may thus generally be considered to constitute an infringement of Article 101, without it being necessary to demonstrate any negative effect on the market. Under this test, payments from the original patent holder to the generic drug manufacturers are generally presumed to have as their object the delay of generic entry, and the sharing of monopoly profits.  

An intermediate view is to provide room for antitrust scrutiny of reverse payment patent settlements even where these clearly remain within the scope of the patent, without, on the other hand, presuming them to be unlawful. This "rule-of-reason" test has been adopted by the FTC v. Actavis judgment. According to the Supreme Court, the likelihood of a reverse payment bringing about anticompetitive effects depends upon its size, its scale in relation to the payer's anticipated future litigation costs, its independence from other services for which it might represent payment, and the lack of other convincing justification. 

In 2002, citalopram was Lundbeck's best-selling medicine. Citalopram's patent was nearing the end of its lifecycle, with patent protection for the chemical composition lapsed outright, and remaining patent protection limited to particular manufacturing processes. 

On January 28, 2004, the Danish Competition Authority announced that it had made a preliminary assessment of the settlement agreements, and discussed the agreements with the Commission. 

According to the Authority, the Commission at that time stated that reverse payment settlement agreements resided in a "grey area," that the amount of the payments made by Lundbeck did not at first hand imply that the company was paying a compensation to the generic drug manufacturers to stay out of the market, and that the Authority and the Commission therefore did not at that time wish to commence legal proceedings against Lundbeck (see the Authority's case no 1120-0289-0039 at 

				Nevertheless, based on the knowledge acquired during the sector inquiry finalized in 2009, the Commission decided to initiate formal antitrust proceedings against Lundbeck (see IP/10/8).

In July 2012, the Commission sent a Statement of Objection (see IP/12/834) to Lundbeck and, on June 19, 2013, the Commission decided to initiate damage proceedings. The infringement decision itself is yet to be published, but it appears from the Commission's press release that "Internal documents refer to a 'club' being formed and 'a pile of $$$' to be shared among the participants. Lundbeck paid significant lump sums, purchased generics' stock for the sole purpose of destroying it, and guaranteed profits in a distribution agreement. The agreements gave Lundbeck the certainty that the generics producers would stay out of the market for the duration of the agreements without giving the generic producers any guarantee of market entry thereafter. These agreements are very different from other settlements of patent disputes where generic companies are not simply paid off to stay out of the market."  

Joaquín Almunia, vice president of the European Commission responsible for competition policy, announced at the same time that, "by today's decision we are confirming that these so-called 'pay-for-delay' deals constitute severe infringements of EU competition law. They may cause severe harm to patients and taxpayers and must be sanctioned accordingly."  

It appears that, according to the Commission, the settlement agreements in question constitute a restriction of competition by object. It is, however, not entirely clear whether all reverse settlement agreements will in future be deemed to constitute a restriction of competition by object, and thus an infringement of Article 101. 

Thus, in his speech, Almunia also states that the decision is in "good company" as it is in line with the US supreme-court judgment in FTC v. Actavis. In other words: the commissioner seems to indicate that the Commission has opted for a rule-of-reason test under which reverse payments are not presumed to be unlawful, but may be found to be so in individual cases, and in particular, if the payments made are found to be unjustifiably large and/or not motivated by genuine disputes. 

Lundbeck announced that the company will appeal the Commission's decision to the General Court. Thus, it is the company's view that the settlement agreements were entered into in order to enforce its patents rights, and not in order to exclude generic companies. Nothing has yet been published about the appeal case. According to the latest statistics, the average duration of proceedings before the court is 48 months; a judgment is therefore not to be expected in the near future.  

The state of the law in this respect is, therefore, yet to be finally settled. As a follow-up in 2010, 2011, and 2012, the Commission monitored settlement agreements in the pharmaceutical sector and the Commission has, besides proceedings against Lundbeck, initiated proceedings against French drugmaker Servier on similar grounds. Proceedings have also been initiated against Dutch subsidiaries of Johnson & Johnson and Novartis, as well as Cephalon and Teva. 

The Lundbeck case is the first antitrust decision taken by the Commission on reverse payment settlement agreements. 

Following the decision, it is clear that paying a company to avoid market entry is anticompetitive and thus constitutes an infringement of the EU antitrust rules. However, it is unclear under which circumstances other settlements involving payments between originators and generics could also be anticompetitive, since this requires a case-by-case approach. For now, however, it seems advisable not to enter into settlement agreements involving reverse payments, unless one is willing to run the risk of an antitrust case before the Commission. 

The other cases pending before the Commission and the General Court's judgment in the Lundbeck case are expected to deliver further legal clarity, hopefully in the form of a more nuanced and balanced approach to reverse payments. 

Reverse payments may often be the best solution to a deadlock situation and the competition authorities should, in our opinion, be cautious not to "overregulate" within this field of the law.  

In general, the competition authorities should only intervene when the settlement is, in reality, just a cover-up for an agreement in which one manufacturer eliminates competition by paying other manufacturers to stay out of the market. When, on the other hand, the reverse payment is motivated by a real patent dispute and broadly seems to reflect the parties' risk relating to the dispute, no intervention should be requested, or required. 

 is a partner in the EU & Competition Law group at LETT, a Danish law firm based in Copenhagen. He can be reached at 

Europe follows the United States with a harsh new spotlight on agreements that slow generic entry for medicines losing exclusivity.

Pay for Delay?

The ongoing changes, and challenges, to the way drug companies promote and sell products to their customers are too numerous to recount in one place. But there is one overarching factor that continues to influence every aspect of the decision-making process with respect to managing an effective professional sales operation: cost.  

To win in the offline, outdated, and broken share-of-voice model, pharma companies needed to simply outspend the competition by putting more boots—or cap-toe oxfords and high heels—on the ground. If you had a physician's ear more often than someone else, market share consistently followed. Post patent-cliff, there are fewer resources to throw at professional promotion, and when money does talk, it's mostly the government that's listening. Physicians in general are less available to sales reps—less than half of the physicians surveyed by CMI/Compas recently said they'd see a sales rep in person without restrictions—and many have ceded the fundamental choice of which drug to prescribe to formulary committees overseeing networks of clinics and hospitals, where a growing number of physicians now practice medicine.  

Like the US economy, the drug market seems to have turned a corner, with key indicators like the number of FDA approvals on the increase. But also like the US economy, external forces in the healthcare ecosystem are having unpredictable effects on the recovery. Outside of specialty companies in key therapeutic areas—like Novo Nordisk, Biogen Idec, and Gilead—most companies are experimenting with new ways to get more bang for their buck, while simultaneously promoting a culture of compliance. "The industry is in middle school right now, everybody is trying out new behaviors to figure out what works and what doesn't," says Matt Gurin, vice president, Hay Group. As the Hay Group finishes tabulating the results of its annual pharmaceutical sales force effectiveness study, a portion of which is devoted to compensation, Gurin says the reemergence of potential blockbuster products has some companies scrambling to ­retain the reps they still have.  

Companies have downsized their sales forces so dramatically that managers ­believe the only reps left in the stable are the cream of the crop, and they don't want to lose them to competitors, says Gurin. As a result, there hasn't been much experimentation with compensation, at least outside of managed care (GSK notwithstanding, but that's another story). The longtime standard in terms of salary to bonus ratio has held at between 75/25 and 80/20 for salary/bonus, plus or minus five percent, says Gurin. Gerry Melillo, president of sales services at PDI, a contract sales firm, agrees that "most companies have not followed GSK" regarding that company's arm-twisted methodology for assessing sales reps and awarding bonuses. As for base salary, Melillo says the figure hovers between $65K and $75K per year. Bonuses—determined by the volume of product a rep successfully moves—typically run about 25 percent of total compensation, equal to between 30 percent and 35 percent of the base.  

Do you see pharmaceutical sales representatives in person?			

Andrew Ajello, SVP, national diabetes sales at Novo Nordisk, says he feels good about offering Novo reps a 75/25 salary to bonus split. "Reps hate what GSK did," says Ajello. "We hired all their good people." In addition to direct compensation, Ajello says Novo offers solid benefits and "awesome cars," the latter of which many younger generation reps find attractive. "We're unique in the cars," says Ajello, adding that while Novo is shifting toward a diabetes education and patient-management approach with physicians, the company is "still selling something, and if you do it right, you'll get a nice compensation based on the volumes that you generate." 

Ajello notes that when Schering-Plough launched Claritin, in 1993, the company offered up a Dodge Viper to the top selling rep in the nation, and set compensation at 50/50, salary to bonus. In that kind of situation, "people are going to go overboard," says Ajello. (Novo's cars aren't bonus prizes—they come with the job.)    

Among therapeutic areas, oncology reps are still the highest paid in general, and greater specialization usually commands a greater base salary, somewhere between $80K and $90K, says Melillo. For smaller pharma companies with only one or two products on the market, it's not uncommon for the salary base to be down around $55K per year, with another possible $25K or so in bonus. Then there's the recent college grad getting paid "thirty something thousand dollars a year just to go in and make sure there are samples in the office," says Melillo.  

If most pharma companies aren't upending the sales model with respect to how reps are compensated, they are experimenting with a more service-oriented model that focuses on channel specific resource allocation. The mix of roles and responsibilities that round out a company's field force are beginning to reflect changes that consumer packaged goods and the tech industry instituted years ago: expect to see more of those pharma conference speakers from Hewlett Packard and Pepsi that everyone used to criticize for being irrelevant to the heavily regulated drug industry.  

"The [drug] industry is focusing on the end customer experience," says Jennifer Colapietro, a partner at PricewaterhouseCoopers. Industry executives are "reassessing their go-to-market business models and practices to figure out how to provide more value, or added services to the end physicians in the clinics and hospitals." This requires reps to maintain an active knowledge of an individual physician's business and patient population, says Colapietro. "It's no longer just coming in and detailing a product...[sales managers] are organizing around a portfolio of products, programs and services, so that the field rep has a broader arsenal regardless of the individual they happen to be speaking with." That includes services that flow through the physician to the patient, like disease education materials, financial assistance or co-pay cards, or call center information for patient questions about a therapy.  

Other channel-specific roles are emerging to help service physician practices and other healthcare delivery systems in an attempt to differentiate a product by the added services that come with it. Matt Gurin says Pfizer has been able to pivot away from one of the most extreme patent cliff scenarios—Lipitor—in part by experimenting with new service roles. One such role is reimbursement specialists; instead of talking to physicians about drug attributes, these "specialists" come in to help ensure that patients can get access and reimbursement for a drug after the prescription has been written, or that the physician practice itself will get reimbursed. Another is long-term care reps. "Long-term care is as much about reimbursement and Medicare as it is about understanding the product," says Gurin. These reps are tasked with "understanding the demographics and symptomology of elderly patients, and the economics of long-term care," Gurin says.  

IBM went from marketing PCs to marketing "solutions," and Procter & Gamble went from huge sales forces calling on grocery store chains—and making sure the Ivory soap was well positioned on the shelf—to having account managers calling on Walmart and Target, recalls Gurin. "You have 10 customers who make up 95 percent of the business."  

Payer consolidation in the healthcare market—the combined Express Scripts/Medco PBM now represents some 155 million US covered lives, and some 40% of the total drug volume in the United States, according to concerned letters Sen. Tom Harkin (D-IA) and others sent to the FTC prior to the merger approval—has led to a shift in the core competencies required for certain account managers, and a change in career path for others, says Gurin. "Increasingly, there is not a direct path from field sales into managed care, or market access. Companies are looking for business to business, account management people, not pharmaceutical sales insiders who are looking to make more money or get out of managing people directly."  

Pharma is willing to train people for the new account manager role; it's an economic buy at the corporate level, says Gurin. For an account manager in the context of consolidated, enormous payer accounts, the core competencies "aren't product knowledge...it's the ability to negotiate your way into the corporate hierarchy or sophisticated matrix to find out who the buyers and influencers are, what their buying triggers are, what the economics of their value chain are, and to be able to put together a solution, or a value proposition, that will get their attention."  

Gurin says he doesn't see a lot of district managers that have the business acumen or the executive presence to step into that kind of role, given the stakes. The days of the traditional RAM, or regional account manager—the person who typically called on small managed care networks and reported in to the sales organization—are coming to an end. A RAM used to be "somebody good with numbers and relationship management, but either wasn't good at managing a sales force, or had done something weird," says Gurin. "We have several clients who have cut the cord on that in terms of a career path. To us, that's a bellwether in the change of the kinds of people working in these roles." 

The Digital Dynamic: Changing the Pharma-Physician Interaction			

In response to a question about reimbursement pressures in managed markets—prior to the news that Novo Nordisk lost two contracts with Express Scripts—Ajello insisted that Novo "is not going to give our products away. That's a decision we've made. It might not drive the market share, but we'll be very profitable as a company." That may be true in Novo's case, for now, but consolidation in the commercial payer space will demand some careful math and deft maneuvering going forward. Considering the drug volume Express Scripts and others like it represent, pharma companies will have to come up with an increasingly sophisticated answer to the question of, "How low can you go?" 

Even if "the most effective selling tool we have is a credible, experienced ­pharmaceutical rep," as Gerry Melillo of PDI puts it, pharma still faces a difficult environment for accessing physicians. Reps are expensive, too, which is making it easier for executives to flirt with new technology; after all, iPads don't pull much of a salary after the initial investment. Most of the first generation, million-dollar physician portals have died quietly online due to physician neglect, but other kinds of non-personal or remote physician engagement are part and parcel of the multi-channel strategy most companies have adopted. Multi-channel engagement is as much about cost savings as it is about serving physician needs. "You're seeing a lot more virtual speaker programs to reduce costs and to reduce travel," in addition to being able to service physicians outside of normal business hours, says Colapietro.  

In access-restricted zones like hospital-based networks or academic medical centers, it's important to support other channels for physicians. And for older products at later lifecycle stages, it makes sense to provide basic services digitally; physicians familiar with a product over time don't need a rep coming in again with the same information. But for launch brands and products early in the lifecycle, Melillo says "personal promotion is still what drives [sales]." An Accenture survey from last March found that the top strategic priorities for senior sales and marketing executives in 2013 were, in descending order: reducing costs; mastering multi-channel marketing, improving use and effectiveness of digital marketing; harnessing analytics to drive improved ROI and customer satisfaction; and improving sales force effectiveness.  

Ajello says Merck is one of the few companies to successfully build and execute a centralized, closed-loop marketing function based on a technology platform, but he remains unconvinced about the ROI from a "double-digit million dollar investment" in iPads for the entire field force. Gurin says the iPad won't save the rep, "but for the ones who are left, it will probably make them more effective." Not because they can dazzle physicians with interactive promotional materials or let docs self-navigate through a detail, but because companies can push dashboard data out to reps as they sit in the waiting room. That gives reps a chance "to see the latest information on the physician, his patients, his peers, and what he might be interested in," says Gurin. "Companies are moving away from just using iPads as a marketing platform, and are using it more as a business platform to arm reps with the latest business information or relationship information, as opposed to just the e-detail and targeting tool."   

As the acronyms start to pile up—ACOs, IDNs, PHOs, etc.—face-to-face access to physicians is expected to decrease even more, as detailed further in the adjoining Quantia/CapGemini study. According to the study's authors, reps will need to become coordinators of information sources, not the predominant providers of it. The technology platforms themselves will take a backseat to the data they generate, and new analytic capabilities allowing headquarters to take a closer look at what's happening everywhere around the world, from the duel perspectives of sales strategy and compliance. 

Nothing helps to level the playing field like a new, all-encompassing regulatory requirement. While the cost burden of CMS's recently rebranded Open Payments initiative is significant, it's possible that the law will effectively rein in some of the more excessive "transfers of value" to physicians, many of whom won't like having their names listed next to a pharma company and dollar amount on a public website. If that happens, companies will be pushed even harder to engage physicians and KOLs in ways that don't involve jet setting and haute cuisine. If they succeed, that could be a good thing for the bottom line. 

Sales reps, as the first point of pharma contact for many physicians, may serve as whipping boys for potential problems with Open Payments, namely the dispute period, a 45-day dogfight next summer when physicians will be shown their respective dollar amounts prior to publication, and have a chance to dispute them. Colapietro says PwC's clients are trying to figure out ways to "send this information out ahead of time, particularly to their top docs and top teaching hospitals, and to vet that with them outside of the whole dispute process, so they can resolve anything off to the side." In the event that doctors aren't able to resolve a dispute over how much "value" they've received since August 1, the amount will get posted anyway, but it will be posted as being "in dispute."  

Colapietro says CMS has "indicated that they're going to monitor companies with an excessive amount of disputes, which could kick off an investigation based on concerns about data accuracy and integrity." In the spirit of controlling costs and doing more with less, sales reps might make a splash with their managers by mitigating disputes beforehand, by explaining the rules and requirements to physicians and addressing any concerns.  

Even with a lot of new drugs launching and soon to be launched, sales forces aren't likely to expand very much. But the reps still out there in the field will have to zero in on the key influencers and high-decile docs, and offer them something more, without transferring more value. Relationships, in this context, will matter more than ever.  

Features

Environmental changes on all sides of professional sale are forcing biopharmaceutical companies to select for new traits in the makeup of the field force function.

Field Force Evolution: Adapting to a New Ecosystem

As revenues continue to be eroded by generic competition for numerous blockbuster drugs, pharma companies are ramping up efforts to delay marketing of copycat products and to protect new therapies moving through the pipeline. Brand manufacturers have to contend with insurers, payers, and drug plan operators, who eye increased generic drug use as key to cutting healthcare costs. And the Food and Drug Administration is under pressure to do all it can to speed new generic drugs to market.  

Contention has emerged on the international trade front, where generic firms are contesting pharma efforts to include hefty exclusivity provisions in the Trans-Pacific Partnership (TPP) agreement and other trade pacts. At home, discord has been mounting over actions by brand manufacturers to block access to drug supplies needed for bioequivalence testing by generics makers. Pharma companies point to risk evaluation and mitigation strategies (REMS) that impose strict controls on distribution of certain medicines, and that strategy seems to extend to products without limited distribution requirements. FDA officials have stated that REMS provisions are not intended to block generic drug development. Lawsuits are moving forward, with the Federal Trade Commission (FTC) supporting generic company claims that blocking access to test supplies violates antitrust laws.  

Citizens' petitions and lawsuits continue to pit manufacturers against each other and FDA. Teva Pharmaceutical, for example, is appealing a recent court decision denying patent protection for its lead multiple sclerosis treatment Copaxone, which opens the door to generic competition in May 2014. Teva could retain market share longer if FDA requires full, placebo-controlled clinical trials on generic versions, which Teva says are needed to  ensure the safety and immunogenicity of this hard-to-characterize product.  

Similarly, GlaxoSmithKline faces generic competition for its asthma treatment Advair (fluticasone/salmeterol) following FDA publication of guidance last month for developing bioequivalent versions of this blockbuster inhaled powder. FDA calls for some clinical trials—in addition to in vitro and pharmacokinetic studies—to document bioequivalence. But Sanford Bernstein analyst Tim Anderson predicts generic versions of this lead Glaxo product by 2016, noting that FDA gives Sandoz and other generics firms three years to "iron out all the wrinkles" in their development programs. 

FDA officials have come down hard on brand companies that file late or trivial citizens' petitions to delay generic drug approvals, as seen in its recent blast of Novartis for "misuse of the petition process" in seeking to block generic versions of  bone-loss drug Reclast (zoledronic). The agency's harsh language, notes Hyman, Phelps, McNamara attorney Kurt Karst (

, August 28, 2013), could fuel private litigation.  

Meanwhile, pharmacy benefit managers (PBMs) are working hard to promote generic drug use. The Pharmaceutical Care Management Association issued a report in May (2013) projecting $75 billion in savings for Medicaid pharmacy programs over the next decade from increased use of generics, as well as other formulary features; reduced pharmacy dispensing fees; and the formation of limited pharmacy networks. 

A prime target of payers and PBMS are co-pay coupons from innovator firms, which have become a popular alternative to drug samples for promoting new therapies. The coupons usually cover all or part of the patient's co-pay or coinsurance for a drug to equalize outlays for a new therapy compared to older brands or generics.  

But the strategy is costly in the long run for plans and payers, according to a recent article in the 

 (August 28, 2013) that analyzed some 374 brand-name medicines offering coupons, 62 percent facing competition from generics or cheaper brands. While patients may benefit greatly from coupons for essential life-saving medicines that have no alternatives, the authors note that insurers still have to pay the higher cost of the promoted medicine. And that can add up when patients with chronic conditions become reluctant to switch to a less expensive generic or brand once comfortable with the new drug.   

Tension mounts over biosimilars, co-pay coupons, trade, and testing.

Pharmaceutical Executive-10-01-2013

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