Despite the scope and breadth of the new US health reform law, it contains little that observers see as likely to curtail the rising cost of care. This conclusion may be premature; the bill passed by Congress (PL 111-148) in March includes significantly increased funding for comparative effectiveness research (CER). This comes at the same time as a range of initiatives from private payers to drive a tighter link between evidence comparisons and treatment decisions. For Big Pharrma, CER will require a stronger focus on price and access, as it changes the scenarios which must be evaluated when determining what drugs and what evidence programs to fund. Early-stage intervention is critical, as medicines that might be viable if launched today (with a particular evidence package) may fail commercially in the environment we will be faced with five years down the road. 

Recognizing that CER will affect portfolio assets unevenly, developing a framework for assessing how review of clinical and economic evidence in a post-marketing context may affect commercial success is key. The following lends examples of how to apply the framework to particular strategic portfolio management decisions and integrate CER assessment into portfolio planning and forecasting activities.  

Evolution of CER: New Opportunities and Risks

Comparative effectiveness research in the US has entered a new phase with the establishment of the Patient-Centered Outcomes Research Institute (PCORI). This element of the healthcare reform law follows the previous allocation of $1.1 billion for CER in last year's stimulus bill. The law places limits on the use of formal cost-effectiveness measures, particularly the cost-per-QALY metric favored by the UK's National Institute for Health and Clinical Excellence  (NICE). Nevertheless, in Section 6301 of the reform law, PCORI is given freedom to set a research agenda based on a broad set of criteria, which includes "impact on national expenditures." Inevitably, the budget impact associated with innovative therapies will play a role in the priorities for CER. 

The impact this new research agenda will have on reimbursement and marketplace outcomes is not yet clear. With respect to Medicare, limits on cost-based decision making remain in place, and experts such as Louis Jacques, director of the Coverage and Analysis Group in CMS's Office of Clinical Standards and Quality, suggest that research generated by PCORI will not be a "game-changer." However, some analysts have proposed that Medicare link reimbursement with comparative effectiveness determinations, making payments equal for services with evidence of comparable clinical effectiveness and higher for those with evidence of superior clinical effectiveness.  

The use of evidence of comparative clinical effectiveness to inform healthcare decision making has advanced furthest in oncology. The National Comprehensive Cancer Network (NCCN) is currently piloting its Comparative Therapeutic Index (CTI), categorizing products as "preferred," "appropriate," or "acceptable." Given the influential nature of the NCCN guidelines, this approach to implementing comparative effectiveness evaluations may have significant impact on treatment decisions. 

In other therapy areas, the private sector has moved more aggressively than statutorily limited federal Medicare administrators. WellPoint is moving to an outcomes-based formulary process, which includes explicit determination of whether a drug is favorable, comparable, or unfavorable compared to another drug. Pharmacy benefit managers such as Medco are funding comparative studies on their own to help drive coverage decisions. Most recently, US private payers have begun to adopt indication-based tiering, reflecting inputs from comparative effectiveness research, in which patient copayments are used to limit usage to specific indicated patients. A recent survey of 20 managed care organization pharmacy directors revealed that a few have already linked tier status to indication, as will several more in 2011. Therapeutic areas with multiple biologics on market, and an array of indications, are scenarios where this approach is likely to emerge first.  

Looking forward, it remains unclear how rapidly and to what degree decisions such as these will influence commercial success in both US and global markets. Prudent innovators, though, will consider scenarios in which comparative effectiveness decision-making is adopted widely and aggressively. With the right evidence, this environment is one in which products can achieve greater success with potentially less post-market commercial investment. But the risk of losing ground for lack of appropriate comparative evidence will be high in those areas facing the greatest scrutiny.  

In our observation, the keys to adapting CER decision making at biopharmaceutical companies include: 

» Understanding what CER is—and is not—and building scenarios for how it may evolve to influence specific areas of medicine relevant to the company;

» Creating a framework for semiformal assessment of the CER impact on portfolio molecules—primarily to foster shared understanding across scientific and commercial groups and to stimulate consideration of development options at early stages; and

» Integrating CER risk/opportunity into more formal portfolio and financial decision making—once an agreement has been reached on the importance of comparative effectiveness research. 

Although the way in which comparative effectiveness evidence will be applied remains uncertain, companies will benefit from a systematic mechanism for forcing the dialogue into both early and later stages of pipeline review. While a strategy to pursue a broad market indication with limited comparative data at launch may be appropriate in some cases, the question must be asked and it must be asked early. For example, the targeted cancer therapeutic Erbitux found sustained marketplace success only after the dissemination of data demonstrating superior efficacy in an identifiable subgroup of patients with the wild-type KRAS mutation in their tumors. A framework for considering these issues early—both at the category level and the individual product level—will prove increasingly useful. 

The likelihood of evidence review and other forms of comparison that may affect a product's commercial success rely on two factors: 1) the potential budget impact of the therapy in question and 2) the availability of comparable alternative therapies. The former creates the incentive for payers to measure, even if cost is kept nominally out of the equation, and the latter creates the opportunity for action. Thus we see that chronic and highly prevalent diseases such as hypertension, with many available therapies showing some degree of efficacy, have already been the subject of comprehensive evidence review from bodies such as AHRQ. However, because the generic mechanism has created a vehicle for cost control in mature and relatively undifferentiated categories, the practical focus of much evidence review will be associated with the diseases experiencing the most innovation, where newer therapies are expanding treatment at higher cost. 

Manufacturers can characterize the CER sensitivity of the environment along these two dimensions: Threatened budget impact can be quantified by current market size and volume of innovation activity, while the availability of comparable alternatives can be observed in the number of available drugs and the degree to which generics are available. (Figure 1, illustrates the positioning of a range of diseases within major categories.)  

Figure 1. CER Assessment Framework Applied to Selected Competitor Groupings			

In general, the further "north" or "east" on the graph a disease may fall, the more important the innovator's comparative effectiveness strategy will be. The need to demonstrate superiority to standard of care, a focus on health outcomes rather than intermediate measures, and selection of patient subgroups in which evidence is stronger are all hallmarks of development requirements in these diseases. Areas such as diabetes and rheumatoid arthritis (RA) have become intensely demanding for innovators. Recent launches such as Onglyza in diabetes and Simponi in rheumatoid arthritis have resulted in slower-than-anticipated uptake. These products have good data but lack the comparative superiority that is becoming essential to gain share over incumbents in these categories. Not surprisingly, biologics for inflammatory diseases such as RA also topped IOM's list of priority drug classes for comparative effectiveness review last year. At the other end of the spectrum, certain orphan diseases such as Gaucher's and Fabry disease present a combination of limited potential budget impact and an absence of alternatives. Both factors offer greater insulation from the effects of CER initiatives. 

In general, companies can anticipate the most intense comparative evidence requirements in the "northeast" of the framework and the most rapid escalation in comparative evidence requirements (with the potential for unpleasant surprises) in the "northwest" quadrant (see Figure 2).  

Figure 2: CER Assessment Framework Implications for Developers			

The framework of potential budget impact and availability of comparable alternatives can be applied to an individual indication or competitive grouping with adjustment for the narrower frame of reference. Within an individual area, potential budget impact is a function of drug cost relative to others in the group and of the number of patients targeted, which can vary by product given potential subgroup strategies and label indication. The availability of comparable alternatives within a single category varies as a function of the product's level of differentiating evidence relative to the group. 

Figure 3 illustrates this ranking for colorectal cancer (CRC). The anti-EGF monoclonal antibody therapies Erbitux and Vectibix initially faced the unfortunate combination of high potential budget impact and weakly differentiated evidence. However, these therapies improved differentiation and reduced potential budget impact through evidence of effectiveness in the subgroup of CRC patients with KRAS wild-type tumors. Although this limited the total available market for the products, it greatly improved the commercial results.  

Figure 3: Application to Colorectal Cancer Pipeline Products			

Looking forward, a number of products currently in Phase III CRC trials (aflibercept, brivanib, cedarinib, and Sutent) could face particularly rigorous evidence review. Already, despite its strong evidence, Avastin has experienced the effect of heightened payer scrutiny and the lack of a subgroup in this competitive category, as evidenced by markedly reduced revenues in EU5 markets (UK, France, Germany, Spain, and Italy) relative to the US and a negative decision from NICE.  

Without a successful subgroup strategy and/or compelling demonstration of outcomes superiority in the broad population, would-be entrants in categories such as CRC or RA face the threat of experience like that of Johnson & Johnson's Simponi. Recent evaluation of an antithrombotic agent in clinical development revealed that, although efficacy projections based on early trials appear able to meet regulatory hurdles for safety and efficacy, superiority to current standard of care is likely to be demonstrable only in a subset of high-risk patients (see sidebar). The company's clinical and commercial strategy had been to aim at the broad indication for which the product will likely be approvable and comparable to existing agents. But in that broad indication the product likely would not fare especially well under a comparative effectiveness assessment. Five years ago this might have been the right strategy for US commercialization, but this no longer appears to be the case for a program in Phase II today.  

New Tools for Evaluating Potential CER Outcomes on P&R			

Most organizations have recognized the need to approach these markets with a greater level of evidence, but fewer are using tools like this to force systematic consideration. Eli Lilly has been an early adopter in considering CER; its executive in charge of that area, Mark Berger, has written that "the companies that survive and thrive in this new environment will be those that embrace comparative effectiveness research."  

While the challenges of comparative effectiveness are increasingly recognized, a consensus approach for integrating these risks into formal portfolio and financial planning has not emerged. Assessment of risk for one manufacturer, a leading global company with a broad portfolio in the US market, revealed a 10 percent swing in revenue expectation (see Figure 4) associated with CER scenarios and also highlighted the opportunity to enhance portfolio value with a more proactive evidence stance, though this implied dropping marginal programs to enable the incremental investment.  

Figure 4: CER Expected Revenue Impact, Large Pharmaceutical Portfolio			

Portfolio realignment is still a work in progress in this organization, as individual programs are evaluated in detail and the likelihood of an "aggressive" CER scenario is weighed against the cost (and risk) of developing the evidence needed to counter it. 

While the decisions are difficult, the direction is clear. Even if a Republican-controlled Congress in 2011 were to withdraw funding from the newly mandated PCORI, comparative effectiveness is becoming firmly entrenched in the commercial payer market in the US. The companies adapting their portfolio decision making to this new reality will have the best chances of thriving in it.   

Article authors include Managing Principal Edward Tuttle (

); Vice President Anita Chawla, Ph.D.; and Managers Dave Nellesen, Ph.D., and Justin Works of economic and strategy consulting firm Analysis Group, which provides strategic consulting to clients in the biopharmaceutical industry 

Articles

Features

New CER tools grant payers the evidence they need to control drug costs

The Fruits of Comparative Effectiveness

Despite a population of 95 million and a growing economy, the Philippine pharmaceutical industry has been largely overlooked in the past—but things are about to change. The industry has been radically reshaped in the last year, following the approval of the Universally Accessible Cheaper and Quality Medicines Act, that includes the Maximum Drug Retail Price (MDRP) scheme. After years without any regulation, the MDRP called for a 50% price reduction on 21 molecules, and introduced some systematization to drug pricing in the country.  

"Bayanihan" (Working Together), artist Carlos "Botong" Francisco; commissioned by Unilab. Bayanihan is a Filipino word that refers to the spirit of communal unity and cooperation.			

The law is meant to increase access to medicines for the poor, in a country where the price of pharmaceuticals is among the highest in Asia and 60% of the population has no access even to basic drugs. So far, the effects of the Cheaper Medicines Law—as it is informally called—have been negative on the pharmaceutical industry. Reiner Gloor, president and executive director of the Pharmaceutical and Healthcare Association of Philippines (PHAP), points out that "there have been no real volume increases, and particularly the molecules which have been touched, have been flat. It is still too early to say if it has really expanded the market, but it has taken [even by recognition of Department of Health (DOH)] PHP 12 billion (approximately US$270 million) out of the pharmaceutical market."  

Reiner Gloor, Executive Director, Pharmaceutical and Healthcare Association of the Philippines (PHAP)			

Critics claim that in addition to negatively affecting the pharma industry, the law has not truly increased access to medicines for the poor. But former secretary of health Esperanza Cabral, who was a promoter of the voluntary price reductions adopted by the industry, believes that "the industry may be right that the very poor are still not able to afford the medicines they need. However, there are many people who were struggling before—a group in between rich and poor—who could only afford some, but not all, of their medicines before the MDRP. These people have benefited from the MDRP because now they can afford the medicines they are prescribed."  

Esperanza I. Cabral, M.D., Former Philippines Secretary of Health			

The MDRP is the first step in increasing access to medicines. The next step is increasing social support. Currently, PhilHealth, the national insurance, covers only 38% of the population. The recently elected Aquino government, which took office on July 1, has set universal healthcare coverage by 2013 as one of its primary objectives. If it becomes reality, universal healthcare will further change the competitive landscape in the Philippine pharmaceutical industry.  

The industry will also be reshaped by the prospective harmonisation on pharmaceutical regulations that is currently being discussed by the Association of Southeast Asian Nations (ASEAN). The harmonisation will provide opportunities for local Philippine companies to expand beyond national borders; it will also facilitate entry into the Philippine region for foreign pharmaceutical companies. Within the Philippines, of course, this legislation will increase competition as more products flow in. According to Edward Isaac, president of the Philippine Chamber of the Pharmaceutical Industry (PCPI)—the voice of the Philippine companies—the harmonisation will, at the beginning, "be a threat." Yet he continues, "There will be a learning curve for us, but in the long run it will be good. We believe in competition, so we are getting ready for that."  

Edward Isaac, President, Philippine Chamber of the Pharmaceutical Industry (PCPI)			

AN INDUSTRY ADAPTING TO A CHANGING ENVIRONMENT

Local players are indeed getting ready for increased competition. While historically, multinationals controlled 80% of the market, in recent years local companies have steadily increased their share, and locals now represent 27% of pharma business in the country. In addition to United Laboratories (Unilab), the No. 1 company in the Philippine pharmaceutical industry and a local Phillipine brand, other local players have carved out a space for themselves, including Pascual Laboratories, GX International, and Natrapharm. These companies have gained leading positions in some therapeutic areas, and are challenging multinationals.  

To that end, multinationals are coping with the challenges presented by the MDRP by making modifications to existing pharmaceutical lines, and expanding their offering outside of traditional pharmaceutical products altogether, by moving into areas such as consumer healthcare and nutraceuticals. Otsuka (Philippines) Pharmaceutical, an affiliate of the Japanese company—and active in the Philippines since 1998—has adopted this strategy. As Leopoldo Dimerin, president and general manager, explains, "as a solution to cope with unpredictable scenarios, we have extended our pipeline by introducing line extensions with a new delivery system—like we did for our antiplatelet product, from a tablet to a powder preparation, for stroke patients who had difficulty in swallowing." The company continues to invest in various pharmaceutical products, and as Dimerin points out, "there will be new products and line extensions in the next three to four years and we expect them to be the growth drivers for the pharma segment." There are still a number of pharmaceutical products developed in Japan that are not yet available in the Philippines, and a key objective of the company is to expand their pharmaceutical portfolio in the coming years.  

In addition to its pharmaceutical business, which currently accounts for 90% of its total revenue, Otsuka (Philippines) Pharmaceutical has diversified with the recent launch of new medical devices. The company also plans on strengthening its consumer healthcare and its nutraceutical businesses—areas that have strong growth potential—and is looking into the possibility of introducing other products to accompany their successful health drink, Pocari Sweat. Dimerin hopes these strategies will bring the company into the top 15 in the next seven to 10 years.  

DPI â The New Frontier Of The Pharma Industry			

Multinational companies are not the only ones who have diversified their production; local players have also branched out. Market leader Unilab—which was founded in 1945 as a drugstore, and evolved into the leading pharmaceutical company, with affiliates in Indonesia, Thailand, Malaysia, Singapore, Hong Kong, Vietnam, and Myanmar—is now looking into consumer healthcare. In the words of Joey Maria Ochave, corporate vice president of the business development group, "the basic DNA of Unilab is to provide a more affordable quality option. Initially we were offering only medicines, but we have expanded our mandate to include healthcare. We are not focusing on pharmaceuticals only. We have started going into other businesses as well."  

Drilling down further between Ethical and OTC, where Ethical is now at its lowest of negative 4.19% while OTC still above the line at 2.09% [Source: IMS Philippines]			

While the biggest players are focusing on diversification, more nimble companies are looking for a niche in which to position themselves.  

Multinationals such as Novo Nordisk and Lundbeck have chosen to focus on diabetes and central nervous system (CNS) diseases, respectively. They are prime examples of how specialization has led companies to achieve stronger positioning in the market. For instance, the vision of Lundbeck Philippines is "to become the world leader in psychiatry and neurology," while its mission is "to improve the quality of life for people suffering from psychiatric and neurologic disorders," says Joan Alvarez, country manager of Lundbeck Philippines. To achieve this result, the company has to overcome some challenges, namely the social stigmas surrounding CNS, and low patient compliance due to high medicine prices and a lack of reimbursement.  

In the case of Lundbeck, specialization has proven a more successful strategy than diversification. In the words of Alvarez, "While everybody else is into diversification, we remain focused on CNS, which is believed to lead to the largest amount of debilitating disorder cases by the year 2020." In addition to a number of drugs that will be launched in the next three years, Lundbeck has recently signed an agreement with Teva Pharmaceutical Industries for the Parkinson's disease drug Azilect®, which will allow the company to further strengthen its position in the Philippines, and eventually become the preferred CNS provider in the industry.  

A specialization strategy has also been adopted by some distributors. For example, Phoenix Pharmaceuticals specializes in distributing steroids, while GenAsia Biotech focuses on orphan drugs. For these distributors, specialization allows them to succeed in a market in which 85% of distribution is concentrated in the hands of the two leaders, Zuellig Pharma and Metro Drug—and where specialization is the best way to compete.  

Pioneering unibranded generics in the Philippines			

While the Philippine pharmaceutical industry registered a negative growth in 2010, the generics segment has been growing steadily. Historically, generics have not been positively perceived, mainly because of lack of support from doctors. The Philippines is a prescription-driven market, where patients put utmost trust in their physicians—the doctors' non-endorsement of generics, derived from a limited promotional effort by the generics players, hampered the sector's development. 

However, since 2001, the generics market has been on the rise, fuelled by the opening of The Generics Pharmacy—the first generics retail pharmacy—which started franchising in 2007. The company recorded impressive growth, expanding from one store in 2007, to more than 900 in 2010. Benjamin Liuson, president and founder of The Generics Pharmacy, believes that "the retail prices of generic medicines dropped in the Philippines because of The Generics Pharmacy. Thanks to our company, the market started following the law of supply and demand." With a forecast of 1,000 stores by the end of 2010, The Generics Pharmacy is now the chain with the highest number of outlets, overtaking the market leader Mercury Drug—which currently controls 60% of the market, but has 800 drugstores.  

Amongst its target areas, The Generics Pharmacy is establishing stores in rural regions, supporting the development of pharmaceutical retailing in zones that were previously devoid of drug distribution. Historically, businesses in the industry have focused only on the three Philippine centers of Metro Manila, Cebu, and Davao. Only recently have companies started to see the potential of outlying areas of the country.  

The increasing importance of the generics segment is confirmed by the number of new players that are entering the market. Sandoz, the generics arm of Swiss multinational Novartis, Pakistan's Getz Pharma, and the Taiwanese corporation OEP are amongst the fastest-growing companies in the Philippines. Several Indian generics players have also started operations in the country, including Torrent Pharma, Ranbaxy, and Lupin—the latter having acquired a 51% stake in the Philippine company Multicare Pharmaceuticals. However, Indian companies are facing additional challenges in entering the market as Filipinos are very brand conscious, and they prefer either Western (i.e. European and American) brands, or locally manufactured products.  

INCREASING ACCESS TO MEDICINES: A COMMON GOAL OF THE INDUSTRY

Reduced medicine prices due to the MDRP scheme and the increased use of generics are contributing to the improved accessibility and availability of medicines. However, to truly achieve greater access to medicines, more cooperation is needed between the stakeholders. 

Several pharmaceutical companies have already shown their commitment to this cause. Following the MDRP, a number of multinationals have declared 50% voluntary price reductions on key drugs. Sanofi-aventis initiated the Innovation for Life program, which reduced medicine prices for indigent patients in government-run hospitals. Novartis started a partnership with the Department of Health (DOH) to make the drug Valsartan available to public hospitals. 

Janssen Pharmaceutica, a division of Johnson & Johnson Philippines, volunteered a 50% discount for products used in hospitals for open heart surgery. Jane Villablanca, general manager of Janssen Pharmaceutica, affirms that in her company, "there is a high commitment to making new innovative products available through partnering with the government and doctors, and to delivering healthcare to the people." Janssen also launched the Family Link program, which educates families of patients suffering from mental disorders, as well as a program that helps policemen deal with people suffering from mental diseases on the street. According to Villablanca, "these little steps have been accumulating for five years as small contributions in making a huge difference," and Janssen plans to continue making a difference in the Philippines. 

Another company that has been contributing to improving healthcare in the Philippines is OEP Philippines (a subsidiary of the Taiwanese company Orient Europharma). OEP entered the Philippines in 2003 by acquiring Elan Pharma. The company, one of the key players in the generics segment and currently the 24th pharmaceutical company in the Philippines, launched several initiatives tailored to increasing access to healthcare. 

JP Chang, general manager of OEP Philippines, explains how the company has been leveraging Taiwanese expertise to improve service delivery in the Philippines: "the insufficient budget allocated for public hospitals limits service for patients. Since the healthcare programs in Taiwan are mature and successful, we are seeking to put in place collaboration programs between the medical centres of the Philippines and hospitals in Taiwan for long term cooperation." In addition to inviting prominent Taiwanese doctors to the country to exchange knowledge and hold seminaries, OEP has also sponsored some patients to travel to Taiwan to undertake surgery in local medical centres. As Chang illustrates, "we can leverage our connection with institutions in Southeast Asia and Taiwan, and it will make us a unique generic company that better serves Filipino patients. I believe this will have some impact in the future, since healthcare should have no boundaries. Part of our obligation is to look into the welfare of the patients." 

The majority of the multinational companies present in the Philippines are engaged exclusively in sales and marketing activities. Over the years, the MNCs which had manufacturing plants in the country closed down their facilities, and began to import from corporate production centres abroad, or turn to local contract manufacturers. 

One prominent example of a multinational that kept production in the Philippines is GlaxoSmithKline, the No. 2 pharmaceutical company in the Philippines, and No. 1 among the MNCs. Roberto Taboada, general manager of GSK Philippines, explains that "manufacturing is mainly about costs. There are some products where manufacturing in the Philippines provides cost advantages, compared to bringing these products from other GSK plants." GSK also exports some products manufactured in the Philippines, especially for its consumer brands.  

Roberto C. Taboada, General Manager, GSK Philippines			

While many multinationals abandoned the Philippines, the local manufacturing industry became livelier. The number of laboratories declined over the years, as many were not able to cope with technological advancement and increasingly stringent requirements, but the ones that survived are Good Manufacturing Practices (GMP) compliant and at par with the latest technologies. 

Some of these companies specialise in toll manufacturing, as in the case of Interphil Laboratories and Hizon Laboratories, the two leading players. Hizon Laboratories is one of the oldest pharmaceutical companies in the Philippines, established in 1898 as a manufacturer for drugstores. Over the years, it survived two World Wars, a Japanese occupation, and the destruction of its factory by a fire—but these events did not stop the company from becoming one of the leading players in contract manufacturing, thanks to its focus on quality products and services.  

Even with decreasing medicine prices, Hizon Laboratories has never compromised on quality. Rafael Hizon Jr, member of the third generation of the family that founded Hizon Laboratories and currently its chief executive officer, points out that "at Hizon Laboratories, quality is built into the entire system of producing each batch. Manufacturing in relatively high volumes or big batches has helped us keep our prices competitive. There should never be a trade-off when it comes to the quality of our products."  

In their quest to maintain high quality, Hizon Laboratories has been following international standards not only in developing and manufacturing products, but also in testing and evaluating. As the Philippines is getting ready for the ASEAN harmonisation and the local FDA is applying to join the PIC/S scheme, the company is prepared for more stringent requirements. Hizon explains, "as part of our continuous improvement, we have already incorporated some PIC/S standards into our system so as to be in stride with the Philippine FDA. We have also adopted most of the requirements of the ASEAN harmonised standards." Hizon's clients trust the quality of its products and services, and the experience that comes with more than 100 years of history—these are the factors that allow this local player to be the giant it is today. 

The entire pharmaceutical industry in the Philippines is now waiting to see how the market will further evolve. The MDRP transformed the competitive dynamics, and further changes will soon follow as the new government seeks to achieve universal healthcare. But one thing is sure—the potential of the market. In a country of 95 million people, wherein only 30% of the population can currently afford medicines, the opportunities for future growth are significant. 

Novartis is already taking advantage of this potential. The company has placed its South East Asian headquarters in the Philippines, and believes the region can be a strong epicenter for conducting research and development. "We have made significant investments in R&D over the last six months focusing on key therapeutic areas, as we see a huge potential in research. We would like to conduct trials in the Philippines for some of our future key products, especially vaccines," explains Eric Van Oppens, country president of Novartis Healthcare Philippines and South East Asia cluster head for Philippines, Singapore, Indonesia, Pakistan, and Bangladesh.  

Eric Van Oppens, South East Asia Cluster Head, Country President, Novartis Healthcare Philippines			

We will soon see if other companies will follow Novartis' example, and if the Philippines will play a more central role in South East Asia. It is well-positioned to do so, with a large population, widespread use of English, and a favorable investment climate. It is clear that this formerly quiet, emerging market, has finally started to raise a clamor.  

Country Report: The Philippines

What do you think is the biggest misconception inside the pharma industry about the FDA?

There are two. The first is that people tend to see the FDA as a monolith, when in fact it's an organization with sharp internal disagreements about process and outcomes. The second myth is that the FDA is power hungry. FDA officials usually want authority when they think they can use it for public health purposes, but there are also a lot of searching discussions within the agency about what constitutes a credible line of action, given a particular regulatory problem.  

The title of your book—"Reputation and Power"—highlights two themes at the heart of your approach to understanding the FDA. The reference to  "reputation" may surprise many readers. As you explain in the book, reputation offers an alternative to the two most common (and opposing) ideological views—"regulatory capture" (the FDA as a servant to industry and its interests) and "regulatory overreach" (the FDA as an obstacle to industry and its innovations). Why this emphasis on reputation? 

 A reputation is any set of beliefs that an audience holds about an individual or organization. What makes things complicated is that the audience is not homogeneous but a diverse population with varying interests and histories. So a reputation usually is a multifaceted set of beliefs. The same organization can have a good cop face, a bad cop face, or a facilitator face, and can show different faces to different audiences.  

A reputation-based perspective succeeds where "capture" and "overreach" hypotheses fail. The "capture" explanation fails to account for most of the FDA's history, as many of the FDA's growing powers were strongly opposed by the pharmaceutical industry and the American Medical Association. An "overreach" hypothesis ignores the FDA's record of flexibility on a host of drugs, from HIV to cancer and even alternative medicine. 

I'm not saying that a reputation-based account gets everything right, but it suggests that under some conditions the agency's approach to pharmaceutical innovation will be stringent and cautious; under other conditions, the FDA will be facilitative of drug development and will emphasize safety less (postmarket regulation is an example, until recently).

What is the relationship between the political context of "power" and regulation as it plays out at the FDA? 

 I understand power in three ways: directive, gate-keeping, and conceptual. Directive power is the ability of the FDA to order companies to do things such as inspections and manufacturing requirements. Gate-keeping power is the power that results from the FDA's ability to veto a new drug. When companies abandon what may appear to be an apparently promising and profitable compound in Phase II because they think that it will not meet the FDA's approval criteria, we rarely see that reported in the news. Yet the FDA's power has been exercised nonetheless, because companies and medical researchers are anticipating the FDA's behavior to inform their decisions.  

Conceptual power is the ability of the FDA to shape the vocabulary, methods, and tools of medicine and drug development. The three-phase system of clinical trials and the architecture of bioequivalence are examples where the FDA officials established processes that have been replicated throughout the world, affecting the very nature of science. 

You characterize the pharma industry as historically intimidated by the FDA, for example adopting the agency's increasingly stringent preapproval rules for how drugs are tested. If that is true, why is there such a widespread perception that the FDA is in the pocket of pharma?

 Most of the book is about the era from the 1930s to the early 1990s, when intimidation held true. Yet it is fair to say that things have changed. Perceptions matter, and when the agency reversed its longstanding position on pre-emption, it made the agency look inconsistent and obsequious. 

User fees have added to the perception problem; it's not just me saying that, but [former general counsel at the FDA] Peter Barton Hutt, too. 

The solution is not clear. Marcia Angell and others would have us do away with the fees altogether. I tend to favor Rep. Maurice Hinchey's (D-NY) solution, which is to keep the revenue, be honest and call it a tax, and sever the contractual tie between the taxes and agency performance.  

You write that FDA officials view some pharma companies more favorably than others. For example, Merck was seen as having considerable scientific integrity, and this may have swayed the FDA officials to approve Vioxx despite early safety signals. What determines a pharma company's cachet at the FDA?

 Scientific integrity is often witnessed through full disclosure—the capacity to admit weaknesses in one's own arguments or data. Assuming that the problems identified by FDA drug reviewer Dr. Thomas Marciniak in the Avandia case [reporting that at least a dozen patients on the drug in a major clinical trial had suffered serious heart problems but were not counted by GSK as adverse events] could have been identified by GSK officials beforehand, the company would have fared far better if it had admitted to these problems and focused on showing alternative interpretations of its results.  

When you present a study as fully robust, it's easy for someone to cherry-pick the problems. Every study, and every drug, will have its "soft underbelly," so why not be rigorous about disclosing it? That kind of circumspection could serve the pharmaceutical industry well in its dealings with the FDA, the public, and the various scientific and medical professions. 

The reputation of the FDA has been tarnished over the past decade. In your analysis, this decline in trust coincides with the ascendancy in national politics of an antiregulatory ideology. This culminated during George W. Bush's administration with the appointment of FDA officials to carry out that agenda. What effect did this have on the career staff at the FDA?

 It had several effects. First, a lot of very talented people left the agency, and that damage will take a long time to repair. Second, a number of the people who remained began to adapt in different ways to the new reality. Some waited it out, others changed their minds. A large number of people were demoralized. The evisceration of regulatory capacity under the Bush administration is an inescapably sad tale.  

President Obama's top FDA appointees, Margaret Hamburg and Josh Sharfstein, came to the agency with distinguished records as public health officials and as previous heads of big city health departments. After their first 18 months in office, both have remarked at how long it takes for even small changes to work their way through the system. Is this just typical bureaucratic pushback or is some other kind of resistance at work?

 What may seem like bureaucratic pushback or intransigence is often attributable to the rule of law. Many of the FDA officials I've met are nervous about their obligations and limits under the law. In a constitutional system like ours, it can be a good thing when change comes slowly to administrative and regulatory agencies. Ultimately, governance of science or industry has to be consistent with the public good as encoded in law and regulation. It's a point that often gets ignored in the debates. 

After watching Commissioner Hamburg at the helm for 18 months, what kind of a job do you think she is doing? 

 I'm impressed with her. One thing the commissioner has to do is to make good appointments and to communicate credibly. I think most would agree that Hamburg does both. Unlike the commissioners under George W. Bush, she understands that the FDA's credibility has been tarnished, so she is not overstating the agency's case on scientific or policy matters.  

In addition, Dr. Hamburg and Dr. Sharfstein are pursuing a much-needed transparency initiative. With transparency, there are risks. As Hamburg's unprecedented decision to post on the FDA's website the conflicting memos of various FDA officials about what to do in the Avandia decision shows, by not presenting a united front to the public and the scientific community, people will perhaps begin to view the FDA as characterized by massive infighting. That said, in an age when anyone can tweet, blog, or talk to a reporter, I think she understands that there is a greater risk from trying to present a united front when there isn't one. 

s, Marcia Angell allowed that your book is "exhaustively documented" and "ambitious," but she was critical of you for neglecting what she perceives as the central problem at the FDA: "How to ensure that CDER, free of industry influence, protects the public from unsafe, useless drugs." Why did you decide not to identify "problems" and recommend "solutions" after doing such a deep dive into the FDA?

 I'm not against making judgments. I agree with several of her suggestions, such as a fuller clinical trial database and faster generic approvals. But I believe in the value of an analysis that tries to understand the FDA for what it is, rather than what it should be.  

 It is generally said that the FDA's priorities swing on a pendulum, between approving more drugs as fast as possible, and rejecting more drugs due to safety fears. Do you think that the "pendulum" metaphor is accurate?

 Pendulum metaphors should always be regarded with caution. The binary tradeoff between safety and access is far overplayed in our discussions about pharmaceutical policy. The transformative issues lie not in "safety versus innovation," but in providing good information that gives confidence to patients, physicians, health providers, and others who believe that the drug supply is characterized by safety and efficacy. My hypothesis is that the FDA's testing requirements establish not only a safer but also a more trustworthy marketplace.  

We seem to be entering an era where confidence in drug safety/efficacy evidence development and assessment is under assault due to a combination of factors, including the growing public accessibility of data, which leads to much expert "second guessing" of the decisions of advisory committees; the development of more sophisticated tools to analyze ever larger sets of data; and the effort by drug companies to be more transparent, which paradoxically has exposed corruption in their own disclosure processes. How can the FDA preserve its critical role as a gatekeeper if its authority to make even the most informed assessment of the data is increasingly undermined?

 You're right that the FDA and drug companies no longer have an oligopoly on possession of the data about drugs and those who test and market them. In terms of the FDA as gatekeeper, I suspect you will see more of what we saw in the Avandia decision, namely the FDA acknowledging that there are different hypotheses and arguments about the drug in question, and offering a rationale for its decisions. We live in a data-rich world where everyone is going to get second-guessed. But we still need a regulator to make final decisions according to public health criteria.  

And as more second-guessing is done, I suspect you will see greater skepticism about the second-guesses themselves. The role of meta-analyses, epidemiologic studies, and even certain forms of randomized clinical trials is coming in for greater criticism. The FDA has issued its own guidance about meta-analyses, which suggests more doubt about their value. The agency is also trying to invest heavily in pharmacoepidemiology and statistics so that it can be a pivotal player in the public and scientific debates.  

How do you think the increasing globalization of the pharma market will impact the ability of the FDA to do its job? 

 Globalization can weaken the FDA but also strengthen it. As other nations' drug markets grow larger, the pivotal nature of the FDA's gate-keeping power will decline, as it becomes less and less vital to get into the US market for drug companies to make a profit.  

Another globalization effect is the growth of other nations' regulatory capacities; for safety's sake alone, we might welcome this. Americans' drug safety will increasingly depend upon the ability of regulators in India, China, and other countries to police the good manufacturing practices and quality of drugs produced there. The FDA knows this and is aggressively trying to help boost capacities and proselytize its models and practices overseas. 

That said, the FDA model has been copied worldwide. As regulators in other countries begin to develop independent governmental capacities, they are seeking direct assistance from the FDA and more quietly copying (sometimes resisting) the FDA's decisions, structures, and processes. 

Harvard professor Daniel Carpenter offers a piercing analysis of the FDA and sheds light on its biggest challenges

Science and Politics at the FDA

As healthcare markets adjust to a global mindset, Big Pharma has no shortage of options on where to place its considerable resources in pursuit of more predictable, top-line earnings growth. Today's restorative tonic is centered on building a bigger stake in the "pharmerging" markets—those 17 countries of the middle-income world where many analysts say the opportunities are as plentiful as finding good beer in Belgium. The risk is that as every competitor seeks to inhabit the same "open" space, that same rich brew of opportunity can become tomorrow's empty vessel—a market of all "head" and no "body."      

Hence it may be time for the industry to tap some more mature draughts—and a good place to start is Japan. Although it continues to rank as the world's second-largest drug market after the US, Japan appears to be suffering from an analytical case of benign neglect. Many observers simply extrapolate to the biopharma industry the overall vision of a fading country, slow to re-emerge from a "lost decade" of impaired policymaking and limited growth. This is evident even though close observation shows a much more dynamic environment in healthcare, where local drug companies, pressed by a strong multinational segment, have little choice but to restructure to address government-orchestrated changes to make them more internationally competitive. 

After a decade of limited growth, a much more dynamic healthcare environment in Japan is brewing up strength for the world's No. 2 drug market to re-emerge as a global pharma player over the next five years. (GETTY IMAGES / CW HANLEY)			

As attention and resources flock to the pharmerging bloc, Japan also finds itself compared unfavorably to China, whose skyrocketing rate of growth is skewed by the fact that it starts from such a low base. Latest IMS forecasts indicate Japan will retain its No. 2 position in the global market through 2014 and perhaps beyond, with the local market growing by upwards of 7 percent in 2011 alone—to well over $80 billion in total sales. This is likely to be by far the best performance among the so-called mature markets that include the US, Europe, Canada, and Australia.  

Viewed in the specific framework of the emerging markets, it means that Japan can expect to post revenue growth of at least $4 billion to $5 billion for each of the next few years, a figure equivalent to the combined sales of the three countries in the IMS pharmerging Tier Two segment after China: Russia, India, and Brazil. And China, which is estimated to reach the $50 billion threshold in annual sales next year, has some distance to go before it overtakes Japan. Again, context counts: In Japan, much of the growth—some 30 percent to 40 percent—will accrue to the non-Japanese multinational players with active investments in the country; in China, where the foreign presence is much lower, growth will yield a consequently larger payoff to the domestic industry.  

There are also insights beyond the numbers that highlight Japan's continuing importance in a changing global marketplace. "Many of the CEOs here in Japan refer to it as the true emerging market," says Ira Wolf, PhRMA's Japan Representative. "There are significant therapeutic opportunities linked to unmet medical needs, which is a factor in emerging markets, but in Japan you also have the resources of a rich country to pay for them." Wolf notes that Japan has been slow to approve numerous cancer therapies available in other industrialized country markets, but this is changing as the disease burden grows—malignant neoplasms now account for about one-third of all deaths annually. Recent regulatory reforms are likely to increase the pace of new drug approvals, not just in oncology but in other under-represented therapeutic areas like CNS disorders as well.   

Another growth segment is vaccines, where observers say Japan is poised to reverse two decades of policies designed to discourage their reimbursement. Denial of "mandatory" status for the administration of vaccines was a highly effective tactic to limit uptake, since it signified non-reimbursement: Japanese patients are historically resistant to paying out of pocket for any medication. Since the H1N1 outbreak, however, attitudes within the Ministry of Health Labor and Welfare (MHLW) have changed. Earlier this year, decisions were taken to list vaccinations covering hepatitis, cervical cancer, and pneumococcal virus as mandatory. In addition, an allocation equivalent to $175 million has been recommended in the FY2011 budget to expand vaccination as a public health priority.  

Advocacy pressure may have also played a role, with some female members of the Diet (Japanese parliament) caucusing to demand vaccination as a preventive against cervical cancer, the incidence of which is growing in Japan. "It also indicates Japan is becoming more like other industrial country markets in spawning a more articulate patient movement able to move the needle on access to drug innovations," Wolf says.  

All told, vaccines present a big opportunity for foreign-based manufacturers with scale and expertise in the segment. At present, foreign-based manufacturers control only 2 percent of the domestic market, but due to their global reach possess a far more sophisticated set of capabilities and resources compared to the four local firms that account for the remaining 98 percent. "The potential to build your market share in a more welcoming domestic environment is there for the taking," Wolf tells 

Like other mature markets, Japan is not without its downside. Pricing for innovation remains a contentious issue, though the system is at least predictable: companies know they will not have to gird for any mandated price reduction until at least 2012. Likewise, MHLW has publicly acknowledged the need to pay more for innovation. Special price premiums for new drugs classified as a breakthrough have been increased, though the number of drugs granted eligibility for the premiums has stayed low.  

On the other side of the coin, there is now a clear domestic strategy on generics, where the goal is to increase volume to 30 percent of the market by 2012; currently, generic penetration is just under 20 percent. Reaching the target depends on MHLW attracting greater investment interest from foreign-based generics players. The many companies moving into that space as part of a diversification model should set Japan in their sights—again, domestic generic firms suffer from comparisons against the foreign houses whose global presence and diverse portfolio offerings make them far more efficient.  

Finally, there is now a government consensus—in place since Prime Minister  Koizumi left office five years ago—that biopharmaceuticals is a "strategic" sector deserving the sustained attention of the country's vaunted planning bureaucracy. On balance, it's a positive, if one believes the adage that Japan takes a long time to act, but once it does it moves with a strategic focus, good execution, and much common sense. Turbulence in the markets aside, and acknowledging the allure of the emerging countries, it's still hard to be a global pharma player without maintaining a strong front-line presence in a market as richly diverse as Japan. 

Columns

With all the money and momentum focused on medicines in emerging markets, it may be time to take a closer look at business opportunities in this more familiar neighbor to the East

Japan: The Real Emerging Market?

Six months after the passage of landmark health reform legislation, industry has completed its preliminary assessment of the impact on drug revenues and margins. As we move toward full implementation of the law, price and access pressures will be a particular challenge in the specialty care segment (defined as those products routinely prescribed by specialist physicians) due to its relatively expensive procedure and pricing base as well as the pace of individual product cost increases—overall, this makes the class a big target for payers. 

The combination of increased Medicaid rebates, $340 billion in coverage, Medicaid managed care, donut hole liabilities, and the industry tax are now largely understood. Individual companies have announced their revenue exposures from these changes for 2010 (see chart). 

Estimated impacts over the next two to three years are higher still (for example, $900 million in 2011 and another $800 million in 2012 for Pfizer alone). More importantly, the outlines of several key pieces of the legislation are beginning to take shape, including indications from FDA as to how follow-on biologics will be reviewed, PCORI (Patient Centered Outcomes Research Institute) leadership appointments, and some insights as to where the CMS innovation projects might focus. 

Where does that leave specialty care? Products and services in this segment can expect more scrutiny, and more than their fair share of price pressure. The utilization of specialty tiers will become more widespread, and, as companies increase co-pay support in the private plans, pharmacy benefit managers (PBMs) will inexorably increase the size of these copays. Most importantly, the legislation creates a powerful Independent Medicare Payment Advisory Board (IPAB) that will have enormous influence over future coverage decisions for the public plans. 

PCORI has potential as an important player in shaping the access climate for specialty drugs. While it will not have the administrative power to drive reimbursement like the UK National Institute for Health and Clinical Excellence (NICE), it will play a crucial role in establishing a permanent institutional platform for using formal comparative effectiveness tools—if its recommendations are credible with payers and the prescribing community.  

The recent announcement of PCORI leaders is encouraging. It includes people with experience in conducting comparative effectiveness research and broad representation from physicians and patients. Unlike its predecessor, it is not dominated by public sector payers, and includes industry representatives. The Institute of Medicine recommendations for PCORI are encouraging as well. They suggest taking a broad view—comparing surgical interventions to drugs, health system changes, etc., and not focusing exclusively on drug-to-drug studies. 

IPAB, the vehicle for cost controls, has extraordinary administrative power (its recommendations become law barring an act of Congress) and unrealistic cost control targets (keeping Medicare inflation at CPI +1). Worse yet for the specialty care business, primary care physicians are promised increased rates, while IPAB is prohibited by law from proposing cost controls on hospital or long-term care facilities until 2020. 

If we are going to achieve IPAB targets, increase payments to primary care physicians, and hold hospitals harmless, then where do we find the resources to pay for the expansion of health insurance for 32 million people? One key customer group, specialist physicians, appears vulnerable. Unlike hospitals and primary care physicians, there is nothing in the new legislation that protects their status or income. Many such physicians rely heavily on income from specialty infusion drugs dispensed and administered in office. 

Intellectual Integration of PCORI and IPAB

The combination of credible data from PCORI on cost effectiveness with a powerful IPAB could dramatically alter prescribing behavior. The anti-TNF class of biologics, for example, will receive immediate scrutiny. These medicines have provided huge benefits to patients suffering from rheumatoid arthritis, psoriasis, and other serious ailments, but their dispensing and administration together represent one of the largest and fastest-growing cost centers. The opportunity might go to the oral medicines being developed for these indications. They may provide equivalent safety and efficacy—and could be less expensive to manufacture, store, and distribute—thus entering at a price that encourages a positive review from PCORI. This, plus a powerful IPAB, could fundamentally alter the adoption and ultimate market penetration of new therapies—driven by existing tools such as prior authorization or "fail-first" strategies. 

First, continue to support advocacy at the federal and state levels to ensure that the rules that are implemented going forward are pro-patient, pro-innovation, and not anti-industry. This requires teams to become more sophisticated about the implications of healthcare reform on their business so that they can articulate a lobbying strategy that supports it. For example, pay particular attention to IPAB membership. Can you support the appointment of a physician who understands the therapeutic area of interest to you? What about the PCORI—can you engage? Drafting guidance is complicated and highly technical. What support can you provide? AHRQ has been open to input from industry in developing methods for comparative effectiveness studies. Industry has tremendous intellectual resources that can be very influential—for all the right reasons—in shaping the rules under which we will operate. 

Second, put together a small team of individuals to conduct scenario planning. This team should include commercial, policy, strategy, finance, and public affairs colleagues. They should look at impacts from three perspectives: 

What are the known impacts on sales over the planning horizon, for each key product? What steps, if any, could be taken to minimize these impacts? What is the medium to long-term impact, again by product? What do follow-on biologics, comparative effectiveness, and IPAB mean for your development portfolio? Given that there are more people with health insurance, estimate potential new patients by therapeutic area. 

 What are the implications for your prescribing community? For example, how will specialty physicians fare in this new system? If primary care physician rates are increased and hospitals held harmless, then which specialty practices are most at risk? Talk to the key specialty groups and engage their policy specialists in this analysis. 

 How will these changes impact the overall business environment for industry? What lessons have we learned from Europe? Work with EU colleagues to do scenario planning and propose specific estimates on impacts to sales, IBA, etc. These observations should then be integrated in the long-range forecast as well as the strategic plan for the business.   

Finally, healthcare reform represents a golden opportunity for the pharmaceutical industry to reconnect with physicians, patients, and managed care customers—to work collectively to make the case to patients on the importance of innovation. The new healthcare legislation includes very few elements that pit industry squarely against doctors, patients, or other key constituents. If the reform plan is implemented as presently constituted, the "bad guy" in the room will be the IPAB, which will be responsible for controlling costs across the entire system. Developing partnerships to make a 

case—working with physicians, for example—can be a win-win situation. The faster the start on building these coalitions, the better positioned the industry will be when the real cost pressures are applied in 2015. 

 is Vice President of Public Affairs for Pfizer's Specialty Care Business Unit. He can be reached at 

There's been much talk of how US health reform will impact physicians, patients, and insurance companies. But how will it affect the often overlooked specialty drug market?

Specialty Care Medicines: Managing the Impact of US Health Reform

It is often said that pharmaceuticals is at base an information industry. Actually defining what that means holds a clue to the industry's identity. Our editorial offerings this month demonstrate how difficult a task this can be, if one accepts the fact that information is only raw material, not evidence—and evidence is not knowledge unless it can be applied in a way that is both relevant and accessible to those who use it.          

 lead feature this month provides an influential outsider's view on how FDA is grappling with a basic contradiction in its central mission: maintaining public confidence about risk versus benefit while coping with criticism of the quality and integrity of the evidence that guides its decisions. Our interview with Harvard University professor Daniel Carpenter exposes the root issue of how to render definitive judgments about drug safety and efficacy in an era where technology is making data more available, with more options to address a broader range of clinical—and policy—questions. This means not only that trial results required for authorization are increasingly open to interpretation but that the FDA process itself is looking more like the unsavory "sausage factory" associated with drafting partisan legislation.  

Leveraging evidence to increase uptake of new medicines is also the theme of our second feature, which evaluates the business impact of US government support for comparative effectiveness research (CER). Although the health reform legislation enacted in March bars government-sponsored CER from being applied to pricing, the authors conclude that the distinction between clinical measures and cost is porous; the barrier has already effectively been breached in the private sector.   

Again, building consensus with other stakeholders on how to address the fallout from CER ought to be a key industry priority, but the task is complicated as companies can suffer commercially from getting too far out front on this issue. Our Strategy column (page 34) this month by Pfizer's John Swen is illustrative of this reality, suggesting the main target of CER advocates will be specialty drugs, due to their high price tags and the difficulty in establishing value on a prospective basis, particularly in emerging areas of therapy like oncology.        

The best advice? Build your approach on CER around three fundamental planks: 1) challenge the specific methodologies used to gauge cost effectiveness, not the legitimacy of the institutions that administer them; 2) demand that industry associations do the heavy lifting—including the role of "bad cop"—in contesting efforts to extend the reach of CER into P&R; and 3) insist that CER evidence be evaluated at a level closest to the patient, as an aid to clinical decision making rather than as an expression of ministerial fiat. In fact, "globalization" of CER may be the most unanticipated side-effect of the big bucks the federal treasury is now devoting to CER—the $1.1 billion allocated to CER by the stimulus bill is more than eight times the annual budget of the UK National Institute for Health and Clinical Excellence (NICE). It is thus likely some of this money will support expansion of CER tools beyond our own shores, to places where cost controls do drive access.   

Finally, our annual review of the best in drug promotion—the Rx Club awards—confirms the adage that nothing changes when it comes to using evidence to persuade the consumer. Despite new technology that permits ever more detailed dissections of purchasing preferences, the most effective campaigns still connect in a way that is accessible and relevant to the individual, and presented with that non-quantifiable "human touch" top of mind. In an industry where the obsession is for scored, scalable, and skin-tight metrics driven by reams of data, the ability to sift out what is "core to the pore" remains key to launch success. 

From the Editor

The FDA process itself is looking more like the unsavory 'sausage factory' associated with drafting partisan legislation

Pharma's Identity, From I to T

There are many changes in the healthcare industry these days, leading to more pressure on sales and marketing budgets. How do you recommend pharmaceutical executives attack the evolving market?

 First, healthcare reform is bringing approximately 32 million previously uninsured consumers into the process. Government oversight will become even more of a factor, and cost containment will be even more critical. Second, focus on ROI is not just for the big picture, but for all marketing programs—where should I spend my next dollar? Third, we're facing other market factors, such as access to physicians, that change the way we do business in healthcare. These factors lead to more scrutiny of budgets. We need a more in-depth view of the marketing mix, making sure we gain the most impact for the programs we fund. This evolving market makes us view healthcare in a whole new light.  

I am hearing "regional marketing" a lot these days—what is regional marketing?

 We define regional marketing as targeted allocation of resources to markets for the greatest return on investment. It is an important part of the marketing mix and can help brands optimize their spending to achieve the best returns.  

What are the forces that are driving the need for regional marketing?

 The main drivers are the need for rapid response to market conditions and the need for better ROI. Also, there's a need to address the variability across markets, such as different demographics or managed care situations, making districts even within the same states very different. Back in the day, a blockbuster brand could afford to do "one-size-fits-all" marketing—they had lots of representatives and plenty of budget, so if the tactics didn't work in all markets, it was ok. But in today's environment, brands have tighter budgets, so tailoring strategies and tactics to market drivers allows for increased ROI.  

 Regional marketing is important when a product has variability at a geographic level. We have analyzed and worked with brands in over 30 disease states and we typically see significant product variability in market share and volume per 1,000 people. The variability is usually 200 percent from the top-performing district to the lowest one, but can be as high as 400 percent.  

 We have identified six "drivers" of product variability. We call them the "Six P's." They are: "Population," which deals with demographics; "Prescriber," which focuses on physicians; "Provider," focusing on entities administering the healthcare, such as managed care, hospitals, and clinics; "Payer," which deals with who pays, such as the government or employers; "Product," dealing with competition; and finally, "Place," which covers Field Force dynamics and regional legislation. 

There is a perception that it's all about managed care—if you are on second tier you are golden. What else is there to know about each market?

 In today's environment, it is never that easy. It really depends on the product and category, and we've found that it actually depends on all the Six P's. We have seen many instances where brands have some markets with Tier 2 access and some with Tier 3. We've seen Tier 2 markets have the same or lower market share than Tier 3 markets. I know this drives brand managers and managed market folks crazy ... that is why we need to look at all Six P's.  

When a growth brand is currently winning, why would it need regional marketing? 

 An incremental script is worth a lot of future revenue and profit ... so growing a brand even faster is always a great idea. The opportunity is finding the markets where the brand can grow even more, and deploying the right resources to those markets. 

 is a founding Principal at Healthcare Regional Marketing in Cincinnati. He can be reached at 

Pharm Exec sits down with an expert on regional marketing to ascertain what it takes to drive strong brand results

Regional Marketing, National Growth

With nearly 10,000 employees and an annual budget of $2.3 billion, the Food and Drug Administration (FDA) regulates about one-quarter of all consumer goods sold in the US, including foods, prescription and OTC drugs, medical devices, vaccines, veterinary products, cosmetics, and, most recently, cigarettes. Even amidst the current antiregulatory climate, the FDA remains largely exempt from the pitchforks and torches. Here is a timeline of some of the landmark legislation, court decisions, and drug scandals that helped forge the FDA. 

 The Biologics Control Act is passed by Congress to control the "purity and safety of serums, vaccines," and other products used to 

, the first-ever federal regulatory authority over drugs. 

 The first Pure Food and Drug Act is passed prohibiting interstate commerce in "misbranded" or "adulterated" foods, drinks, and drugs. 

 The Sherley Amendment is enacted to prohibit drug labels making "false and fraudulent" claims of "curative or therapeutic effects" that are intended to defraud the purchaser.  

 The federal Bureau of Chemistry is reorganized into two separate entities, with all regulatory functions housed in the new Food, Drug, and Insecticide Administration, a name shortened to the Food and Drug Administration in 1930. 

 Following scandals of radioactive beverages, blindness-inducing cosmetics, and, in particular, the deaths of 107 people from the so-called Elixir of Sulfanilamide, formulated from an untested toxic solvent, the 

Federal Food, Drug, and Cosmetic Act gives the FDA broad new regulatory powers

, including requiring that all drugs be proven safe before being marketed. From 1938 to 1962, the agency would review some 13,000 New Drug Applications (NDAs). 

a drug's label must include the specific treatment for which it is shown to be effective

, confirming the FDA's authority to pull unsafe or ineffective drugs off the market. 

 The Durham-Humphrey Amendment codifies certain drugs as restricted to prescription-only use. 

 Sen. Estes Kefauver holds the first major congressional hearings into shady pharmaceutical industry practices, responding to public concerns over the high price and uncertain efficacy of many drugs. 

 Thousands of birth defects in newborns caused by the new sleeping pill Thalidomide rock Western Europe. The rejection of FDA approval for Thalidomide 

. Calls for increased regulation of the drug industry lead to the Kefauver-Harris Drug Amendments, increasing safety standards and requiring for the first time that all NDAs must show "substantial evidence" of efficacy before marketing. Thus was born the FDA approval process as we know it today. 

 The Fair Packaging and Labeling Act is passed, as the FDA contracts with the National Academy of Sciences to evaluate the effectiveness of some 4,000 drugs approved on the basis of safety alone between 1938 and 1962.  

commercial success does not constitute evidence of a drug's safety and efficacy

, upholding the 1962 drug effectiveness amendments. The first patient package insert (for oral contraceptives) is required by the FDA, listing risks and benefits.  

The Medical Device Regulation Act is passed requiring manufacturers to 

. The Vitamins and Minerals Amendments are passed forcing the FDA to regulate these products as foods rather than as drugs.  

The FDA establishes its Bioresearch Monitoring Program for quality of data submitted by manufacturers and protection of human subjects in clinical trials by focusing on preclinical trials in animals, institutional review boards, and other measures. 

 The Orphan Drug Act is passed, offering pharma incentives, including seven years' market exclusivity, priority review, and waiver of NDA fees, to develop drugs for rare diseases. 

gives the FDA authority to approve cheap generic versions of brand-name drugs

 based on short-term equivalency data and gives brand-name drug manufacturers five years' additional patent protection as the original clinical trials extend the length of time it takes to bring a drug to market. 

 The FDA institutes an expanded access program for drugs in Phase II or III for untreated life-threatening diseases such as AIDS and cancer, as well as a parallel-track program for patients disqualified from the clinical trials for such drugs.  

A timeline of some of the landmark legislation, court decisions, and drug scandals that helped forge the FDA

Pharmaceutical Executive-11-01-2010