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Pharmaceutical Executive Digital Edition - December 2012

The re-election of President Barack Obama means an end to threats to dismantle the Affordable Care Act (ACA) and an opportunity to demonstrate that reform will expand coverage for the uninsured. Healthcare policy was a key point of dispute during the election campaign, marked by promises of better care and predictions of soaring costs by both candidates. Now the Obama administration is under pressure to implement the ACA as expeditiously as possible to establish insurance exchanges and new reimbursement models that will provide quality care at lower cost. 

The election result avoids a wholesale change in leadership for the Department of Health and Human Services (HHS), the Food and Drug Administration (FDA), and other federal agencies, but many top administration appointees may move on to other roles. House Republicans will continue to question various ACA requirements, and more legal challenges will surface in federal courts. But key provisions for pharmaceutical companies, such as rebates on drugs for seniors in the Medicare Part D coverage gap and authorization of a pathway for biosimilars, are unlikely to change.  

Despite the importance of implementing health reform, the immediate priority for the administration and Congress is to tackle the so-called "fiscal cliff," as nearly $500 billion in tax increases and spending cuts are scheduled to kick in January 1, 2013 under a budget sequestration process. With Republicans maintaining tight control over the House of Representatives but losing ground in the Senate, much depends on the ability of President Obama to engineer some kind of compromise. A likely strategy is to agree now to raise the federal debt ceiling and to postpone serious debate on a more comprehensive budget plan until next spring.  

Executives at biopharmaceutical companies are watching closely at how tax and budget proposals will affect their finances and the investment climate for biomedical R&D, as well as funding for healthcare programs, FDA, and NIH. The business community has pressed for corporate tax reform to make US firms more competitive globally and seek to head off broad tax hikes as a threat to investment and growth. Sharp spending cuts, however, would limit reimbursement for medical products and curb funding for research and efficient regulatory programs. Where a company stands on specific tax and spending options may depend on its recent profit and loss history, corporate structure, sales to public health programs, and overseas business operations. Pharma companies that rely more on sales to Medicare and Medicaid may prefer across-the-board budget sequestration than cuts in entitlement programs. 

Yet, there's unlikely to be any budget deal without reducing both public and private outlays for US healthcare, and drug prices and reimbursement are a prime target. Prior to the election, the Obama administration proposed to curb Medicare spending largely by reducing fraud and abuse and adopting reimbursement models that pay more for quality care. Now there's more talk about raising the eligibility age to 67, increasing the Part B premium and reducing utilization of new technology. And House Democrats have pressed for added rebates on drugs purchased by Medicare drug plans for low-income "dual-eligible" seniors, which could total more than $100 million over 10 years. 

Outlays for drugs face challenges on all sides, including proposals to reduce spending on pharmaceuticals by federal employees and other federal health programs. The White House further proposes to save money by ending "pay-for-delay" generic-brand patent settlements and by limiting the exclusivity period on data for biotech therapies from 12 years to seven years. Some pharma critics are pressing for longer expiration dates on drugs to reduce waste and spending. Others champion academic detailing to disseminate findings from comparative effectiveness studies more objectively to providers. Payers and plans have taken aim at pharma co-pay coupons as a scheme to build patient demand for new, more costly medicines.  

More transparency in drug prices and reimbursement, moreover, could steer providers and patients to less costly medicines, using tiered co-pays and benefit designs to influence choices. Expensive specialty medicines are a prime target, as seen in the recent campaign against the price for colorectal cancer treatment Zaltrap by physicians at Memorial Sloan-Kettering Cancer Center. Sanofi responded with 50 percent discounts for private payers, according to 

 a case that promises to encourage more physician and patient involvement in drug pricing issues.  

Budget-cutting also threatens FDA and NIH initiatives. An 8.2 percent cut in the FDA budget, as proposed under the budget sequestration process, would reduce FDA's 2013 budget by $320 million and prompt the agency to lay off some 1000 employees, according to consultant Steven Grossman. And proposals to reduce NIH funding, which range from about $2.5 billion under sequestration to some $4 billion, would eliminate more than 2000 research grants and jeopardize the pace of new drug and biotech discovery, just as a number of R&D initiatives are helping to fill depleted new drug pipelines.  

A related concern is that serious budget-cutting will slow ACA implementation and discourage states from building insurance exchanges and expanding Medicaid programs. HHS has revved up its rule-writing operation to meet multiple deadlines for establishing exchanges and defining regulations and benefits. Many state governors and legislatures have been reluctant to commit to new ACA programs amidst political uncertainty. HHS responded by giving states extra time to submit plans for establishing their own exchanges, and more time to decide whether to "partner" with the feds on this operation. But continued talk about cutting promised premium subsidies and extra Medicaid funds makes states nervous about future support for new health programs.  

The challenge for the second Obama administration is to determine whether Washington can work with states to establish and operate exchanges, and if this and other initiatives will succeed in extending coverage to millions of uninsured. Pressure to reduce healthcare expenditures at the same time will require a shift to pay for value vs. volume, notes Paul Keckley of Deloitte Center for Health Solutions. Pharma and providers will be affected by the emergence of medical homes, accountable care organizations, bundled payment approaches, and value-based pricing, and will have to adapt to survive.  

Pharmaceutical Executive's Washington correspondent. She can be reached at 

Column

Tax and budget decisions will shape the healthcare market and drug research and regulation.

Obamacare, Innovation and Pricing

Drug budgets are being crushed. Pharma depends heavily on the fiscal balance sheet of governments. When the public share of health spending rises beyond 50 percent—as is now the case in all the major OECD countries, including the United States—any necessary surgery starts with the drug budget. The reason is it's a product with a virtually invisible social footprint. Of course, we can be optimistic and hope that economic adversity in places like Europe will spawn a serious debate about government priorities. For example, is it prudent to be spending only €230 million a year on the European Medicines Agency (EMA), responsible for protecting the health of 500 million patients, and most of whose budget is already paid for indirectly by industry? That €230 million represents about four tenths of one percent of the €55 billion the region lays out for its Common Agricultural Policy of subsidies to a dwindling, statistically irrelevant community of gentlemen farmers. 

. The peak tide of patent expirations this year took its toll on small molecules, with the BMS blockbuster Plavix, AZ's Seroquel, and Merck's Singulair going generic on the heels of global top seller Lipitor's November 2011 LOE. Symbolic of the biologic transition is the rise of monoclonal antibody Humira to the top of the US sales charts, at an estimated $9 billion in sales this year, pumped by significant gains from multiple new indications and a burgeoning therapy base in rheumatoid arthritis. Though they are tough to manufacture, biologics tend to be target-specific and thus in synch with payer and patient demands for personalized medicine. So the stage is set: If it didn't happen this year, biologics will likely outnumber the traditional small molecule in the list of top 15 drugs by the end of 2013.  

. The legality of the 2010 Affordable Care Act (ACA) was upheld by the Supreme Court and then reaffirmed last month by the outcome of an extremely partisan presidential election. This means the United States may be first to provide a definitive answer to a central—and unresolved—question of global health economics: Is rationing of care the inevitable outcome of universal coverage? An early sign comes from the ACA's smaller mirror image in Massachusetts, which this year enacted what amounts to a fixed global budget for healthcare, through caps on spending for the most common treatments and procedures. Physicians already seem to be voting with their feet, leaving their patients behind and the state with a mounting crisis in primary care.  

That red line separating drug registration from reimbursement is turning...pink

. Regulators on both sides of the Atlantic are bowing to the reality that a market license for a new drug means little if payers won't make it accessible to patients. Payers already have a seat at the approval table in Europe, while even the FDA is talking up "performance" as a euphemism for products that will appeal to a "show-me-the-money" world. More important, the concept of a fixed permanent license is morphing into a moveable object: once proffered, that license can be revised—and even withdrawn—if the market talks back to regulators. In our cover story on the EMA, Executive Director Dr. Guido Rasi put it this way: Scientific advice must run in parallel to the larger forces in society, not opposite. Obtaining access is all. That's why the red is bleeding pink.  

. Despite its status of a universal good, someone still has to pay for healthcare. And when budgets are tight and costs high, it's not a good position to be a silo purchase, disaggregated and not part of the "solution." Roche leaped a critical barrier in repositioning itself as a provider and a player by joining reinsurance giant Swiss Re to sell plans with drug coverage to a potential market of millions of Chinese patients. It represents a final break with the longstanding industry position that, since we don't know health insurance, we don't do it—stick to selling drugs. It's also a good reputational bet on the future of the middle class in emerging markets, where unanticipated medical costs are a key source of downward mobility. 

From the Editor

The calendar says its wrap-up time, not just for gifts but for some of the trends that shaped the industry-for good or bad-in 2012.

2012: Year of Record

The Introduction in January 2011 of the Act on Reform of the Market for Pharmaceutical Products (AMNOG) has transformed the German pharmaceutical business like no law before, with significant long-term implications for the way companies develop and commercialize their products, not only in Europe (where 19 countries use Germany as the reference point for local pricing) but globally as well. Prior to last year, pricing for new drugs was basically free at time of launch; AMNOG drastically changed the equation by introducing an administratively-complex pricing system based on evidence of a new drug's additional benefit over established, often generic therapy. Now that we have nearly two years of practical exposure to the law, with more than 30 drugs assessed under the new rules, it's useful to examine some key precedents that will shape the pricing environment going forward. 

The government expects the new law to generate savings for the statutory health insurance system of up to €2 billion annually. This objective illustrates the pricing pressures now facing research-based pharmaceutical companies. The new framework for price negotiations is widely forecast to reduce industry revenues, not just for drugs under review but across the entire therapeutic portfolio. Achieving a raise in net income for a drug by a few percentage points will require significant long-term investments in infrastructure around a new model for establishing and maintaining market access—one that depends less on marketing savvy aimed at patients and providers than on the capacity to build evidence and establish outcomes with direct appeal to a small community of payers.  

Progress of the law to date is not encouraging. The first assessments under the new law had hardly begun when two big multinational drugmakers announced that because of the evidence requirements their products would not be made available to the German market. Novartis withdrew its antihypertensive drug Rasilamlo (Aliskiren/Amlodipin) after only four months, while Boehringer Ingelheim and Eli Lilly acted to forgo the price negotiation for their new anti-diabetic agent Tradjenta (Linagliptin). The decisions seemed to confirm the initial apprehension of industry about how AMNOG would hinder pharmaceutical innovations, especially if a negative assessment caused other countries to adopt the same position, thus depressing global sales projections. Actions by the three companies were subsequently echoed by Pfizer and GSK, who after a negative assessment decided not to negotiate and withdraw the hand contracture drug Xiapex and the anti-epileptic Trobalt, respectively.  

Nevertheless, over 30 benefit assessments have been published to date. At least four launch prices have so far been negotiated, of which two are known—and these are 19 percent and 27 percent below list price. The net result is more clarity about how the law will actually work, giving industry the opportunity to evaluate what factors lead to better outcomes. But more clarity has not changed the misgivings the industry has about the law, while some unanticipated political controversy surrounding the assessment of individual products is making for increased discomfort around what is supposed to be a purely technical exchange among authorized experts.  

Indeed, what the assessment process has exposed is a deep fault line between the expectations of the pharmaceutical companies and those of the statutory health insurance system. In the assessment, a drug's additional benefit over the comparator is rated along a grid of one out of six grades, ranging from a "major," "significant," or "marginal" additional benefit, on the one end; to "not quantifiable," "no," or "smaller" additional benefit, on the other. In their dossiers submitted to regulators for review, pharmaceutical companies allocated the highest grade of "major additional benefit" to more than 75% of subgroups. In contrast, this grade was not allocated once by the formal assessment review body, the Institute for Quality and Efficiency in Health Care (IQWiG). Instead, "marginal" and "no" additional benefit have been the most common outcomes of IQWiG assessments. 

For the national confederation of SHI's, this is a clear sign of the success of the new process, ratifying their premise that many newly-marketed pharmaceuticals are only me-too products with scant benefit over established therapies. The sick funds are eager to extend the new process beyond new medicines, which account for less than 2 percent of total healthcare expenditures. 

Compiling a value dossier requires the management of interdisciplinary and complex processes.			

Indeed, the sick funds see the greatest potential for savings from the assessment of drugs that are already established on the market. "The sales volumes at issue in the current negotiations are too confined," Johann-Magnus von Stackelberg, vice chairman of the SHI confederation, is quoted in press releases

 "Significant savings can only be achieved when we start assessing drugs in the established market." On June 7, the sick funds got their wish when the Federal Joint Committee (G-BA), which administers the AMNOG law, called for the assessment of eight marketed diabetes products, including the Merck blockbuster Januvia. It is expected that new prices for these widely used medicines will be set by the fourth quarter of 2013, and the worst case scenario anticipates an average drop of about 90 percent—equivalent to the prices of a generic comparator. 

The definition of a comparator product—specifically, whether this should include evaluating a patented innovative molecule against a generic equivalent—is the greatest source of discord for Big Pharma. Under the new pricing system, the price of the existing comparator is a key determinant of a new product's price. Because the price of the assessed drug is negotiated on the assumption that it will carry some form of premium against the price of the comparator, the higher the price of the comparator, the better the later-reimbursed price for the new entrant. Hence if the AMNOG law is viewed purely as an exercise to lower the nation's drugs bill, the SHI and G-BA have an incentive to choose a comparator with a low price.  

The choice of comparator thus poses a real dilemma to a pharmaceutical company seeking access to the German patient population for a new product. By refusing to be evaluated against the comparator set by the G-BA, the drug's additional benefit will not be recognized, and by complying, the price level can be minimal. This was the rationale for each of the four companies that refused to enter price negotiations after a negative IQWiG evaluation and thus opted out of the German market. The prospect of having to adhere to the G-BA comparator meant being compared to a generic drug with a cost of a few cents per day, a bridge too far for most companies with a commitment to operating as a global business.  

It is not only the pharmaceutical industry that has expressed dissatisfaction with the new process. Pressure from patients and politicians resulted in legislative action earlier this year for a transitional rule that would give companies under selected conditions a second chance for an early benefit assessment. Boehringer Ingelheim and Eli Lilly are the first to make use of this regulation with their Tradjenta medicine for diabetes.  

The concession, however modest, shows that even after two years the new system has not secured a consensus among the social partners, politicians, and individual companies. It is thus difficult to rate the long-term effects for the international pharmaceutical industry. Although small alterations to the process are likely, the basic framework of evidence based prospective and post approval price review is here to stay. Irrespective of size and business volume, pharmaceutical companies must continue the work of setting up the structures, strategies, and expertise to receive positive results in the early benefit assessment—for both newly-marketed or established drugs.  

How to cope: strategic recommendations for companies

. The importance of the value dossier required of applicants under the law cannot be overestimated. It forms the core of the complex price formation process—it is used as reference from the benefit assessment to the price negotiation and arbitration. Arguments and perspectives not included or supported in the dossier can be introduced later as well, but the law provides little guidance as to whether this evidence will prove decisive at the final price negotiation phase. 

From the experiences made with early benefit assessment in Germany, four interdependent fields of action have been identified.			

To ensure the value dossier meets the law's criteria and makes the best case for the product under review, four aspects have to be considered: 

» Develop a baseline value argument and apply it consistently. Explain thoroughly the clinical benefits of the drug and frame your argument on the basis of the health and treatment outcomes most relevant to the local patient population. To increase the drug's chances of success, anticipate and address the perspective of the statutory health insurance funds, as the key player and ultimate decision maker.  

» Collect and incorporate comprehensive healthcare data. The evidence needed to support a strong value proposition constitutes a significant logistical challenge. Participants in the assessment process contend that companies have failed to verify their proposed additional benefit by not providing relevant epidemiological, healthcare, and budget impact data. Amassing the evidence required to satisfy the pricing gatekeepers is a task that must be introduced into company clinical development programs as early as possible. Evidence from randomized clinical trials used to win authorization from the FDA or EMA will have to be accompanied by additional data to secure an acceptable price. A value dossier that consists of material drawn mainly from an NDA package of evidence from prospective trials against placebo may end up being used to justify a price at generic levels. 

» Invest to demonstrate strong methodological certainty and expertise. A methodologically clear presentation of the evidence that is resistant to challenge is crucial. A common phenomenon in IQWiG assessment of the dossiers is harsh scrutiny of endpoints and a critical evaluation of subgroups presented by the pharmaceutical companies. Considering the downstream effects of a poor benefit assessment, an investment in methodological, and technical expertise is going to be more important to success than money spent on promotion materials under the old market conditions. 

» Build an internal organization that reflects the new requirements for price approval. Market access and health economics should be designated core functions and coordinated with other mission critical activities like R&D, commercial development and business development, and licensing. Although companies realize this, there are practical tensions in coordinating and modulating rivalries among competing interests, which means that the necessary skills and expertise are often not effectively brought to bear in making the best case.  

. Besides the value dossier itself, the pharmaceutical company has one other window of opportunity to shape decision-making: the hearing procedure. In its assessment, IQWiG rates the extent of a drug's additional benefit over the designated comparator product. However, the final decision on additional benefit is taken by the G-BA. Before this decision is taken, an official hearing enables all affected players to be heard. In several cases, IQWiG's proposed rating has been altered by the G-BA, both up and down, based on arguments that were put forward in the hearing procedure. The transparency accorded here is an opportunity for companies to make their own case with arguments that embellish the dossier.  

. By understanding the interests of all the relevant stakeholders, the pharmaceutical company can ensure that both the health context and the clinical benefit of its product are understood prior to the hearing. Detailed knowledge of the local realities and practices of care and the different perspectives of patients, payers, and physicians can foster coalitions to bolster the case for an optimal outcome in the assessment and the negotiation process; this alone makes a comprehensive stakeholder management strategy worthwhile. 

For successful negotiations pharmaceutical companies have to excel in four dimensions.			

Preparing and conducting the price negotiation

. In contrast to the decision-making process on additional benefit, only two players are involved in the price negotiations: the statutory health insurance body and the pharmaceutical company itself. Currently, both parties have little experience when it comes to working within the new price framework under AMNOG, but the payer side is gaining experience at a much faster pace 

Preparations for the price negotiation have to start early, ideally before the value dossier is handed in, to ensure that all essential information is included in the documents. The available internal resources and expertise have to be planned and interconnected to form a multidisciplinary negotiation team. The team has to excel both in terms of content and negotiation techniques. A clear and congruent story line should bring together the arguments from the dossier over the hearing procedure to the price negotiation and a potential arbitration. Qualitative and quantitative war gaming, mapping different scenarios, are tools to develop strong and resilient arguments.  

However, good arguments must be accompanied by a strong presentation and that in turn demands a team that can function with confidence under conditions of intense emotional pressure. Therefore, roles in the team have to be clearly set out and rehearsed, as there is little room for improvisation. Team building exercises, training in negotiation and rhetorical skills, and anticipatory definition of each team member's leeway in decision-making are all important in securing a positive result.  

Finally, although the reform primarily targets the pharmaceutical industry, it reinforces the importance of a close interdependence of all players in the healthcare sector. Recognition and incorporation of multiple perspectives optimizes the prospects of success in the process created by AMNOG. It is vital that pharmaceutical companies open up, strengthen their networking, and develop their understanding of the views of their counterparts in the new pricing-process. It is the lack of an overall strategic view of the healthcare market that will limit the capacity to manage the new environment in Germany.  

Melanie Hager and Thomas Temme are senior consultants at the strategy consulting firm SKC Beratungsgesellschaft in Hannover, Germany. Matthias Schönermark is Professor of Manage-ment at the Hannover Medical School and CEO of SKC. He can be reached at 

Features

At two years and counting, what's the secret of success in negotiating pricing under the new AMNOG legislation?

Germany's Price Reform Revolution

The opportunity for innovation in drug discovery has never been brighter. The understanding of relationships between genetic makeup and disease is expanding. Our population is aging and in need of new treatments to  prolong and improve the quality of life. Expectations for access to medicine on a global basis are increasing. 

In spite of all of the opportunities, there are many factors acting in opposition to pharmaceutical innovation including: rising costs of R&D, longer development timelines, shorter periods of exclusivity for innovators to recover investment, pricing pressures, increasing regulatory expectations and expectations for demonstrating benefit over existing standards of care. The juxtaposition of opportunity with the need to improve productivity calls for innovators to consider new options for increasing value and reducing costs. 

Eli Lilly is a global pharmaceutical company with approximately 46,000 employees operating in more than 146 countries and $22 billion in sales. Lilly invests more than $5 billion a year in R&D, but, like most pharmaceutical companies, must manage patent losses and an evolving R&D business model. In 2008, Lilly sought to reduce fixed overhead to focus on internal investments by selling or closing facilities and creating strategic partnerships with third parties. The Greenfield Laboratories in Greenfield, Indiana, were part of Lilly's history for nearly 90 years but had become underutilized due to an increase in global capability and affordability of third party contract providers. The Lilly Clinic for Pharmaceutical Research located at the Indiana School of Medicine was also underutilized for similar reasons. Lilly had dramatically increased the quality and volume of molecules in development, but needed access to broader and more flexible capacity than its own facilities could provide. Lilly also sought to create value from a highly capable but underutilized plant site for its employees, and for Indiana, which has been Lilly's corporate home for more than 136 years. 

In 2008, Lilly was preparing for the pending patent loss of several of its successful innovative medicines while managing a full and flowing pipeline of molecules in development. In this evolving landscape, all portions of the R&D enterprise were evaluated and placed in a capabilities matrix in order to assess how the generous, but limited, R&D investments could be used to produce value (Figure 1). This evaluation was conducted against the anticipated patent expiry time period, where revenue growth would be negatively impacted, but where significant resources would also be required to advance the portfolio. 

One fixed asset was Lilly's 600,000 square feet Greenfield Laboratory. This laboratory had become the home of Lilly's toxicology facility and was a strong contributor to Lilly's pipeline of innovation with years of demonstrated excellence in the design, conduct, and interpretation of safety studies for exciting investigational medicines in development. As Lilly's pipeline grew, more flexible and cost effective alternatives were required to advance the pipeline and reduce costs. 

The goal: a new strategic partnership model 

Lilly's initial outsourcing efforts date back to the late 1990s and were focused in toxicology. The long live-phase studies (oncogenicity and chronic toxicology) were the first to be fully outsourced starting between 1998 and 1999 with the redirection of internal Lilly resources for shorter term studies. By 2004, approximately 80 percent of all Lilly GLP toxicology study support was being provided by contract research organizations (CROs). Lilly challenged itself at that time to understand the efficiency of its operating model which maintained full GLP certification for the Greenfield facility despite outsourcing the majority of the GLP study work. The subsequent business analysis revealed that cost savings could be captured by either running all GLP work internally, utilizing the resources needed to maintain GLP certification to their fullest, or moving all GLP work to CROs. The business analysis also revealed that, based on portfolio growth projections, bringing all GLP toxicology work back "in house" would require major capital investments in expanding the Greenfield vivarium space and additional human resources to support that work. In mid-2005, Lilly took the calculated risk of moving all GLP study activities to an external network of qualified CRO providers to reduce fixed expenses and increase flexible capacity to deliver the portfolio. 

Lilly wanted a strategic and reliable partner to maintain the quality of research and products while expanding the volume of capabilities available. Lilly developed the concept of becoming a Fully Integrated Pharmaceutical Network (FIPNet) and was evolving its thinking of CRO relationships to more strategic commitments across a smaller base. The three most important criteria Lilly selected to conduct this assessment were quality, capability, and reliable delivery.  

Four options were evaluated for the Lilly Greenfield site prior to the ultimate decision to sell the facility and enter into a strategic partnership with Covance. The first option considered was to continue operation at the site by spinning off the location as a standalone contract service provider to compete with other CROs. This option was not selected due to the size, cost, lack of experience of Lilly's employee base in managing a CRO, and the need to leverage the available CRO capacity across the industry. Additionally, there was a low probability that competitors would place studies in a previously owned Lilly facility without significant time for transition. The second option was to vacate the site and outsource work to existing contract laboratories. A third option explored was to sell the site to the state of Indiana and designate it as a technology park and lease back only one or two buildings at the site for Lilly's use. This option proved to be minimally cost effective, not strategic, and difficult to manage. The fourth option was to sell the site to a strategic partner under terms and conditions equally beneficial to both parties. Lilly wanted a capable partner that would maintain the quality of research and fully utilize the capability of the site and staff. After careful consideration, Covance became the preferred partner with which to negotiate this historic transition. Additionally, Lilly's history and experience working with Covance was a determining factor because of their documented performance, trust in the dependable delivery of quality work and the strategic engagement of their leadership team.  

In order to establish a mutually acceptable agreement between Lilly and Covance, strategic drivers and an increased understanding of each company's business needs were established. Lilly wanted to divest its Greenfield research site to an organization that could operate it with greater utilization at reduced expense and maintain capability through continued employment of the skilled employee base. Lilly's second goal was to send a greater percentage of work to a CRO in order to reduce fixed costs and improve flexibility and value. Covance wanted to expand its business into early research support and clinical pharmaceutical drug development while mitigating the risk of this increased commitment through a long-term partnership. Both companies were eventually able to align their goals in the form of a long-term strategic alliance. The terms of this alliance included a 10 year, $1.6 billion dollar service agreement, the sale of the Greenfield research facility to Covance for $50 million dollars, the closure of the Lilly Clinic in Indianapolis and a negotiated volume and commitment-based discount in pricing for the duration of the deal. 

Lilly views people as its most important asset. When this strategic partnership was negotiated, one important element for Lilly was that the highly skilled employees at the Greenfield site remain employed. The business model utilized in this case retained the majority of highly trained scientists for business continuity while enabling Covance to rapidly acquire new capabilities. In arriving at this landmark deal, Lilly was able to sell an underutilized R&D site and repurpose it for future growth.  

Covance was also able to achieve several of its business objectives with this acquisition. First, Covance was able to acquire a functioning R&D site that contained new scientific capabilities and complemented their current investments in the pre-clinical and clinical development space. By increasing their presence and investment in the early discovery area, Covance was able to provide clients with a greater footprint of services across the drug development value chain in a world class toxicology facility, and at a discounted price. 

One of the crucial elements to successful implementation of this agreement was the use of key performance indicators (KPIs). Before the Lilly-Covance deal was signed, Lilly communicated a set of KPIs to gauge the quality and efficiency of the contracted work. Covance provided a pricing scorecard for each deliverable required in each of the eight business lines: GLP Tox, Non-GLP Tox, in-vivo Pharmacology, Imaging, Quality Control Labs, Central Lab Services, Clinical Pharmacology, and Late Stage Clinical Trials. KPIs ensured that both parties were aware of what results were expected for each project. An examination of KPI trends over the course of the agreement shows that they have improved and evolved over time to accommodate changes in standards and expectations (see table on page 27). Metrics were also added or removed depending on their relevance and target values were modified as necessary. This flexible approach to measuring success has allowed more KPIs to be achieved, allowing each company to continue to raise its standards of excellence. In the first year of the contract, Covance conducted over 3,500 studies without missing a deliverable, while maintaining quality in spite of the issues of transition. 

A second key element of the contract included annual minimum commitments (AMCs), establishing the amount of work and the cost of each study that Lilly would contract to Covance. AMCs were established in each of the eight business lines. A review of the first three years shows that Lilly has surpassed the allotted spending in each year by 30 percent or greater. This is a testament to Lilly's satisfaction in the quality and reliability of Covance in providing the contracted services. 

Announcement day and the transition phase

The strategic partnership was announced on August 6 and completed on October 3, 2008. The scope and complexity of the deal was unprecedented for Lilly as was the transition of a R&D site that was never previously anticipated to be outside of Lilly's control. Complex integration issues like the separation of information technology (IT) systems, utilities, site security, and facility maintenance needed to be quickly and effectively planned by a joint oversight committee. Closure of the Lilly Clinic also needed to be executed in an efficient manner. Regular operational briefings allowed Covance personnel to understand the current systems and processes, highlight issues, and begin to develop a gap analysis for the transition plan. Once the announcement was made, a joint transition team was formally introduced and expectations and priorities were set. The leaders of the transition team were responsible for integrating and coordinating a complex set of workstreams ranging from facilities and human resources to IT and in vivo pharmacology. In order to demonstrate their commitment to employees and ease their transition into a new corporate culture, Covance developed an on-boarding program that paired existing Covance employees with affected Lilly employees from their area of expertise. The effectiveness of this program was evident immediately. The retention rate of employees by Covance was 98 percent after the announcement and after one year, 95 percent of former Lilly employees remained. 

Overall, the success of the joint transition team was due to essentially three key activities: clear and unambiguous objectives, support of the transition leaders by senior leadership, and rapid issue resolution.  

In order for a partnership of this magnitude to continue to succeed, a governance structure was created to provide oversight on the objectives both companies had set forth in their partnership agreement. The governance structure was designed to promote clear communication and establish trust between staff members at multiple layers within the two companies. The governance structure was comprised of an executive steering committee (ESC), a business operating committee (BOC), and a business unit steering committee (BUSC) that monitors each of the operational groups.  

The objective of the ESC is to set the mission, vision, and direction of the strategic alliance. The BOC monitors KPIs, implements the strategic aim of the partnership, and oversees critical initiatives such as cycle time improvements for study conduct. The BUSC forecasts future work demand, develops KPIs, and oversees project execution for each of the eight business lines. 

Covance was concerned with their ability to retain employees through the transition in order to meet the needs of the contract. Employees were given the opportunity to apply for positions at Covance that were similar to their previous positions with Lilly. As previously mentioned, a majority of employees, the most critical resource to the transition, remained at the Greenfield site, allowing this partnership to smoothly transition. 

Lilly-Covance Partnership Economic/Fiscal Impact Analysis			

To gauge the progression of the partnership each year, voice of the alliance (VOA) surveys are distributed to employees from Covance and Lilly to gain insight on many elements of the alliance. Questions are asked in 13 areas related to cultural, operational, and strategic fit to address strengths and weaknesses of the alliance.  

Data from the 2009 survey showed a variance of more than 10 percent in three areas of employee answers: roles, team coordination, and skills/competence. In the other 10 areas, the difference between the two results was smaller than 10 percent, indicating that both parties were in agreement in how they viewed each other. By 2012, there was no variance of more than 10 percent in any category surveyed and the gaps in each area narrowed relative to 2009, demonstrating that both companies had made great strides in improving the site operations. Additionally, in 2012 the response of the percent favorable for each area was =70 percent which according to Lilly's historical data sets indicates a highly functioning partnership. Based on this analysis and trends of the previous three surveys, the next area of opportunity lies in making both sides more satisfied. 

Corporate growth is difficult to effectively manage, but Covance was able to grow a high quality business with committed volume and acquire new facilities in a single deal structure. Forming this strategic partnership with Lilly has enhanced Covance's discovery and pre-clinical capabilities to engage a broader set of clients. In the course of executing this strategy, it was apparent that Covance also needed to change its business processes to understand and adapt to the speed and efficiency of newer, less linear study designs, such as 

Very quickly, Covance recognized the value of integrating the scientific disciplines at the site by utilizing a full service model for the discovery work instead of adapting the functional approach used in the past. Prior to the partnership, Lilly research, including pharmacokinetics, toxicology, and ADME, was often performed in a "siloed" structure with each scientific group conducting studies within their area of expertise, without a view of the overall study plan for the project or compound. It was common that once a study was completed and reported back to the requestor, it was up to the project team to aggregate the data sets. Once the transition was complete, the site staff soon realized that integrating these independent functions provided an opportunity that had not existed inside Lilly. As a result, value was also created through the integration of pharmacology and non-GLP toxicolgy. Additionally, Covance learned that applying their standard study systems that were run effectively at their other sites required an adjustment to the non-linear nature of early discovery work conducted at Greenfield. There was also a need to immediately build fire walls against other companies conducting work at the facility.  

One transition element for former Lilly employees was their need to recognize a shift in relationships and perspective as previous colleagues became sponsors rather than co-workers. Four years since the deal was completed, communication and flexibility are crucial as Lilly's proportion of the site's capacity decreased while the site built a new client base that supports more than 100 unique sponsors. Another key benefit of the strategic partnership is access to unique external viewpoints which allow for the sharing of non-proprietary information. This information can benefit approaches to protocol development, study design, insights on how to improve standard cycle times for routine studies, and even data analysis.  

In retrospect, the decision to opt for further expansion of the Lilly Covance strategic partnership, reaffirmed the significant positive economic impact the decision has had on the local community and the state of Indiana. If Lilly had decided to close the site and outsource the work to other entities globally, the loss of jobs in an industry that is essential to the economic strategy of Indiana may have put into question the long-term viability of the strategy.  

To determine the economic impact of Lilly's decision to maintain a critical R&D capability in Indiana through a third party, a study was designed with Crowe Horwath, LLP to quantify and measure the direct, indirect, and induced effects at the Greenfield research site from October 1, 2008 to December 31, 2011 on the local and state economy (see table above). The study focused on key areas such as: employment levels, payroll (wages), and annual output from operational and capital expenditures from the date Covance acquired the site. The initial purchase of the site provided both local and statewide benefits since a majority of the approximate 250 Lilly employees who accepted positions with Covance in 2008 are still with the company today. In addition, from October 2008 to December 2011, Covance has hired more than 270 new employees at the site. At the time of the formation of this aspect of the partnership, Covance had been in Indiana for more than 20 years with a global facility in Indianapolis and a Phase I clinic in Evansville, with approximately 1,000 employees. Covance's own operations at the Greenfield site combined with the multiplied effects of those operations experienced by others are estimated to have added 564 jobs, $35.7 million in wages annually, and $102.4 million in annual output. As a result, Covance recently announced another expansion at the Greenfield site that includes new North American centers of excellence in genetic toxicology, sample storage and developmental and reproductive toxicology (DART).  

The pharmaceutical industry needs fresh ideas for reducing recurring expense, expanding learning and increasing the cost effectiveness of discovery and development. This article elaborated upon tactics employed to foster success for both companies, thus allowing for the application of similar tactics for other organizations wishing to effectively decrease fixed costs while increasing flexible capacity. From this partnership, Lilly gained more flexible capacity, access to new, non-proprietary processes and systems that have decreased fixed costs. Covance gained added capabilities in new business lines, an assortment of highly trained scientists, and increased integration across business lines, thus sparking further innovation. It is evident that the economic impact retained and scientific productivity gained demonstrates that divestiture of core R&D capabilities is feasible in today's tough business environment.  

Kathryn Torrey was a graduate student at the 

University of Illinois-Urbana Champaign. 

PhD, is Vice President both at Eli Lilly and Company. Dahlem can be reached at

 The authors would like thank Stephanie Gleissner, Adrienne Takacs, Vince Romano, Mike Masnyk from Lilly and Andrew Eibling, Brad Wynja, and Chris Melling from Covance for their assistance in preparing this article. The authors would also like to thank Crowe Horwath LLP for analyzing the economic impact of the partnership. 

Eli Lilly's pioneering pact with leading CRO Covance made big news when it happened. Four years later, both parties can point to metrics that suggest the benefit is mutual.

Transforming Drug Development: A Lilly–Covance Case Study

Closing in on its second decade as chief arbiter of approvals for the world's largest drugs market, the European Medicines Agency (EMA) is confronting that transitional stage of cranky adolescence, where the gap between expectations and performance is widest. The agency spent its first years treading carefully through the minefields of EU politics, establishing its institutional bona fides by compiling an enviable record of consistency in meeting legislated review deadlines (210 days) for new medicines. That early success produced a torrent of demands to take on new responsibilities, resulting in a mismatch between mandates and resources, followed—almost inevitably—by a perceived leadership vacuum, allegations of improprieties, and more outside scrutiny of how the agency conducts its business. Today, the EMA is scrambling to adapt to a growing tendency to micro-management by the European Parliament, not to mention the EU Commission and 27 EU member governments. Their instruction to the agency is simple but sweeping: talk straight, play for value, and keep it safe. 

Matching the jagged pieces of this bureaucratic puzzle requires keen-eyed, adult-level diplomacy and finesse, particularly in navigating a mandate that is unique among regulatory agencies. The EMA enables and coordinates, but does not control. It is—at least officially—politically autonomous, answering to a management board drawn from representatives of local registration authorities and the EU institutions. Day-to-day activities are driven by an extensive—and confusing—cross-subsidization of time, money, and effort among these diverse stakeholders.  

The man of the moment for this task is EMA Executive Director Guido Rasi, a physician and microbiologist who assumed the post in October 2011 after three years as head of the Italian drug approval agency, AIFA. One of Rasi's assets was that he was no stranger due to his role in representing Italy on the EMA Management Board. This was important given the surprise disclosures of ethical lapses surrounding the departure in December 2010 of the second EMA Director, Thomas Löngrenn. In addition, Rasi had shown a deft hand in similar circumstances, leveraging family connections to the Berlusconi government to restore public confidence in AIFA after a 2008 scandal involving "pay-to-play" allegations against the previous management.  

Criticism over Löngrenn's move as a well-paid consultant for companies with business before the agency delayed the selection process that led to Rasi's appointment. The timing could not have been worse, as the leadership gap occurred in the aftermath of two well-publicized public health emergencies: one involving the failure of French drug-maker Servier to disclose life-threatening heart valve injuries from a diabetes drug it marketed as an appetite suppressant, and the other over the sale of breast implants known to be defective.  

Although national authorities bore much of the blame for the toll in deaths and injuries, the two cases exposed serious gaps in the European legal armamentarium to protect the public health, especially once medical products are out on the market. A consensus quickly emerged that a broader regional approach was needed, and in due course the EMA found itself charged with oversight responsibility to coordinate and track the safety of all approved medicines and vaccines, including those secured via the decentralized procedure run by national agencies, through a European-wide strategy and program of pharmacovigilance.  

This task alone might rightly be seen as all-consuming, given that the safety net EMA must erect covers a target community of more than 500 million patients. But Rasi confronts a more fundamental short-term challenge, which many observers of the agency now call "the two t's:" transparency and trust. Predictably, both are seen as being in short supply. EMA's paymasters in Brussels are insisting that Rasi put these at the top of his priority list to ensure that confidence in the integrity of the drug supply is maintained. "Credibility is the working currency of regulation, and EMA is no exception," Rasi told a recent Prix Galien Forum panel moderated by 

Advocates for a clean slate at EMA have put their money on the table – literally, by scrutinizing every euro and withholding approval of the agency's €230 million annual budget. Under instruction from the European Parliament, the EU Court of Auditors last year initiated a review of the EMA's accounts for the 2010 financial year, with the aim of assessing the effectiveness of procedures to prevent outside interests from influencing critical decisions on market authorization. The Auditor report, released on October 11, exposed a number of gaps in the system, including the practice of not basing payments for services provided to the EMA by national registration authorities on their real cost, and the allowance for carryovers in spending from year to year, which makes it more difficult to trace where and how resources were actually deployed.  

The auditors ended up giving the agency passing marks for a good faith effort. Still, their carefully hedged conclusions failed to impress, particularly when no one at the court could explain why release of the report occurred nearly a year after the investigation was completed. Basically, what the report did was just pitch the issue back to the Parliament. In fact, the Parliament's Budget Committee didn't even wait for the auditor report, voting on October 2 to lift the parliamentary veto on the 2010 accounts after citing changes that Rasi had made shortly after taking office, the most important of which was to make public the declarations of interest of the 4,500 outside experts that the EMA relies on in conducting its evaluation work. In February, the EMA extended this open door policy by publishing declarations of interests provided by agency management and staff. The EMA also committed to periodically screen all declarations to keep compliance up to date; to obtain and cross-check declarations provided by experts working with national regulatory agencies; to conduct retroactive legal reviews of the work of employees who leave the agency for "resolving door" positions; and, perhaps most important, to publish on the EMA website by no later than the end of 2013 detailed minutes of meetings of its seven scientific expert committees (three—on pediatrics, orphan drugs, and pharmacovigilance risk assessment—have complied so far).  

While it commended these initiatives, the  committee instructed the EMA to do more, including drafting an action plan on additional steps to control and prevent non-compliance with the conflict of interest rules adopted by the management board in 2010; and to introduce a special section in its annual public activity report detailing work in this area. Significantly, the committee endorsed the EMA view that ultimate success in this area was a "two-way street" with the pharmaceutical industry, and that the commission and Parliament should consider legislation on disclosure of company funding of experts and research centers with whom they work.  

The full Parliament endorsed the committee report on October 24, formally releasing the EMA from its funding hold. The message to Executive Director Rasi and his team was clear: self-initiate changes to advance trust through transparency, or it will be imposed.  

In the drug industry, data is the tangible asset that drives approval and market uptake by clinicians and patients. Precisely because of its value, companies have contested demands for the release of information submitted to the EMA and its scientific committees in pursuit of that all important license to sell. Cracks are appearing in the façade, however, as major companies like GSK move to disclose more such data on their own. Last year, the European Ombudsman ruled that trial data held by drug regulatory agencies could not automatically be determined as commercially confidential. Rasi is now seeking to drop the bar further with a new signature initiative designed to make clinical trial data submitted to the agency more readily available to outside groups. Access to such data will be allowed immediately after a new drug is approved, but the process for obtaining it remains a subject of discussion—and it's not a question of whether to do so, but how.  

On November 22, an invitation-only workshop, chaired by Rasi, was held at EMA headquarters in London, to consider ways to channel that access appropriately. It was agreed to fix standards around five key process issues: patient confidentiality; data formatting; rules of engagement with requestors; analytical standards of good practice; and legal jurisdiction. Working groups involving stakeholders will be set up for each of the five; they are due to report in to EMA management with recommendations by April 2013, with the new system of "proactive release" set to start in January 2014. EFPIA Director-General Richard Bergström proclaimed the workshop a success, noting to 

 that "we have already agreed that almost all clinical data in files should be made public after approval." Trial activists, however, want it all.  

The flip side of transparency is risk: and all medicines can be dangerous. The consequences for public health of a product crisis are multiplied when information is inaccessible, hard to interpret, or missing entirely. Politicians and parliamentarians recognized this in approving in December 2010 EU Regulation 1235/2010, which put the EMA in charge of coordinating a new European-wide structure for monitoring the safety of medicines on the market in the 27 EU members and three affiliated EEA states (Iceland, Norway, and Lichtenstein). This has proved to be a huge assignment, extending the agency's purview to ensuring safe use of medicines authorized by some 40 different national authorities through the de-centralized procedure, in addition to drugs approved by the EMA.  

At the heart of the program is a new reporting network—EudraVigilance—designed to quickly detect side-effect/adverse reaction problems with marketed medicines, and to coordinate the execution of appropriate control measures to safeguard public health. Responsibility is a shared effort, with national regulatory authorities assigned by the EMA to monitor a list of specific active substances approved in more than one EU member country through the national, decentralized, or mutual recognition procedures. In essence, it means that national authorities will take on a broader leadership role in certifying drug safety for selected medicines outside their own jurisdictions. "Europe is moving toward a genuinely region-wide approach to the key growth area in drug regulation over the next decade—post-marketing surveillance," Ansis Helmanis, principal at the DC-based advisory firm RegLink Associates, told 

The reporting requirement is being implemented without any significant increase in funding. Much of the burden of compliance is placed on individual companies, who already provide approximately 80 percent of the EMA budget through fees paid to support evaluation of the initial registration dossier. A new data entry tool devised by the agency to facilitate reporting has received mixed reviews from companies.  

The EMA's diffuse mandate gives it more flexibility than its counterparts in considering how it should do business with industry. An interesting example is the proposal in its 2012 work plan to initiate a debate on alternatives to the standard "magic moment," where one decision to authorize lasts for the entire lifecycle of the product. The EMA calls the idea "staggered approval" or "adaptive licensing," in which an approved drug could be reevaluated and its license "adapted"—or perhaps revoked—to conform to new evidence, advances in science, or changes in clinical practice.  

In March the management board endorsed testing this approach through a pilot project for completion by year end, pursued in alignment with all stakeholders, including industry. However, no action has been taken to date. Nevertheless, EFPIA Director Bergstrom told 

he agrees with this and other efforts to make the regulatory system "more fit for purpose." "The ideas coming from EMA staff on adaptive licensing are very encouraging." 

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

Progress Report: Reflections on Rasi's First Year

 Editor-in-Chief William Looney met with Dr. Guido Rasi on October 16—exactly one year after the 58-year old physician researcher was handed the key to his sun filled Canary Wharf office as the agency's third Executive Director. In the following highlights from that interview, Rasi expounds on his efforts to build an internal culture of trust and transparency, while keeping pace with advances in scientific discovery and information technology as well as industry expectations for a seamless—and timely—approval process.  

The EMA is in many ways a fragile institution, with a broad remit to advance access to medicines but a high level of dependence on the cooperation of many constituencies. How important is trust to maintaining the external support that is so critical to the successful execution of the EMA's mission? Can recent revelations of conflict-of-interest problems in the agency be remedied by a quick fix of the rules or is a larger, long-term cultural change required?

: The EMA mandate is by law a decentralized one; we are not a "command and control" enterprise. Given the importance of the EMA's function to approve medicines, our actions are closely monitored. Credibility—the organizational equivalent of trust—is essential to our ability to function. If the medical community and our political institutions do not trust us, then our decisions are not credible and from there it is a slippery slope to losing public confidence in the integrity and safety of the medicines supply.  

A strong commitment to transparency and ethical behavior has been the central objective of my first year as Executive Director. Trust in the agency is not completely restored. But the progress we have made in opening up our procedures and raising the bar on conflicts of interest means that trust is no longer an obsession among our colleagues in Brussels. I detect a friendlier atmosphere at the European Parliament, where discussion is moving back toward the technical and scientific issues most appropriate to our role as regulators.  

The conflict of interest problems at the agency did not occur because we had no rules. The issue was one of perceptions, interpretation, and enforcement. So what we did was reinforce the rules by improving day-to-day scrutiny on compliance. The rules now cover not only contracted members of our expert committees, but all personnel, including the management board. This sent an important message: that no one is exempt. Everyone now understands that ethical standards of behavior are embedded in the work routine; it is part of the EMA culture.  

Greater transparency is another way of exposing conflicts of interests before they impair trust in the organization. What measures have you taken here?

: I have made a commitment to publish the minutes of all seven of our scientific committees by the end of 2013. It will be easier to do this in some committees than others; clearly, the Committee on Human Medicinal Products [CHMP] must be careful that what is disclosed will not confer a competitive advantage to companies active in the therapeutic areas under review. We are also examining procedures to enforce actions against conflicts of interest involving all the scientific experts who advise us on registration decisions. While it is true, as some critics contend, that we in management cannot take preemptive steps by removing an expert who is in breach of the conflict rules, we can prevent that person from participating in decisions, which solves 99 percent of the problem. This happens very rarely; our inability to fire at will actually provides a measure of independence for the committees. It is a problem that is more theoretical than real.  

Transparency is not simply a legal concept; it is a cultural mindset built on a willingness to communicate around things that are important—especially to others—and to build relationships that stretch beyond the sound bite. How well do you think the EMA is communicating its values and objectives?

: Communication starts with good institutional ties among our key stakeholders. The agency has built a very important coordination capability through the Heads of Medicines Agencies [HMA] group, which gives us a regular vehicle to promote our alignment goals with 44 national registration and review bodies throughout Europe. Earlier this year, I launched a new Scientific Coordination Board, composed of the seven heads of the committees and leads for a number of working parties, to develop a vision that integrates the expertise of all these groups. The board will not deal with issues of specific medicines but rather on identifying and resolving challenges to the overall drug evaluation process. Improving working contacts with patients is another priority, building on the working party we already have in place that gives patient organizations formal representation on our human medicines scientific committees, including pediatrics. And we are exploring ways to provide more support to help keep the patient groups independent and to allow them to invest in the greater expertise needed to contribute to the complex science our committees must deal with.  

I am most excited about the initiative on disclosure of data from clinical trial results. This is where the EMA is playing a global leadership role in making the regulatory process transparent and trustworthy. Our credibility rests on the ability to communicate why we take a decision on a particular medicine, and that depends in turn on displaying in public the data driving that decision. It is also valuable in that disclosure, by encouraging more debate on interpretation of trial evidence, will enhance the rigor, integrity, and ultimately the reliability of our evaluation procedures. This is an important objective, as changes in the way clinical trials are conducted—today, many trials are now global in scope, and beyond the reach of any one regulator—raise many questions about how to keep the current system effective, honest and useful to reviewers seeking the best outcomes for patients.  

Don't safeguards need to be built into the process for release of data? Will this yield something less than full disclosure? 

: Disclosure is easy in principle, but defining a process can get complicated. We are holding a stakeholder discussion on our initiative on November 22, which will seek to resolve four transactional issues. These are (1) procedures on how to classify and when, or if, to release such data; (2) ensuring that those who receive data have sufficient expertise to analyze and apply it without manipulating or misrepresenting the results; (3) creating specific ground rules to protect patient privacy, including whether to sanction the release of large patient data sets; and (4) commercial confidentiality considerations, including data scrubbing to prevent disclosures that create a competitive advantage or disadvantage. I am confident we can work these issues out, especially as I see many companies moving in this direction, on their own initiative.  

What is your assessment of the industry position? 

:It is positive and constructive overall. Industry engagement around disclosure makes our efforts easier to execute. Although the industry's stance is not homogenous, I think we all agree that the trend to greater transparency in accessing trial data is irreversible. The challenge lies in making it work at a time when the basic model of the clinical trial is splintering, in the face of advances like biomarkers and other tools of personalized medicine. Regulators have an obligation to clarify standards for trial design and evaluation where there may be two, three, or even more options that companies can follow for a single compound. It simply reflects reality; some tested compounds will benefit from the availability of biomarkers that can serve as surrogate clinical endpoints, while others may not. We must work together with industry to determine how seriously we should invest in validating results based on these new high-tech tools. I would add that predictability from the regulator—on what factors are needed to make a good evaluation—is vital to controlling the soaring cost of these trials.  

Are you coordinating your approach on trial data disclosure with the US FDA? 

: The FDA is aware and supports our activities. But the US environment is different than here in Europe, where there is strong institutional pressure to take this forward. We will act on this initiative, after November 22. It is my most important priority at the moment.  

Harmonization of approval standards is an important policy objective for the industry. Can you cite examples of cooperation with the FDA to ease conflicting decisions in the registration process? 

: We are pleased with progress of the Transatlantic Simplification Initiative, which serves as a clearing house for joint rule-making activities with FDA. There are regularly scheduled teleconferences to share insights and move projects forward. We just had a very good outcome from one such project, to harmonize the orphan drug designation process. Continued progress on harmonization is also politically astute. Regulators want to respond appropriately when patients ask awkward questions about why the same medicine is available and benefiting patients in the US, and not here.  

 The flip side of cooperation is duplication of effort. A pressing concern for industry in Europe is the erosion of the traditional "red line" between the basic market authorization decisions you make and access, pricing, and reimbursement activities at the national level. An example of this is overlapping—and often contradictory—information requests from the EMA and local agencies that conduct health technology assessment [HTA] studies on cost effectiveness. How is the EMA aligning its methods with the HTA community to reduce the burden on companies? 

: We offer companies a structured stakeholder consultation called parallel scientific advice. That advice is geared to helping companies identify, at an early stage in the drug development process, what information will facilitate prompt review by us as well as the national HTA authorities. What we offer, quite simply, is a roof under which all questions can be vetted in advance. Some 17 parallel advice sessions have been conducted with companies to date; in addition to the EMA, the participants include some of the key HTA authorities in the region, including NICE in the UK, Germany's IQWiG, HAS in France, AIFA in Italy, the Dutch  ZVZ, and the Swedish MPA.  

Is this "red line" going to disappear entirely at some point in the future? 

: Yes, I think the "red line" will become pink, at least as regards the basic decision on whether to reimburse a drug. We will be more involved in supporting that decision at the national level. Pricing is not as clear; it's another step after reimbursement, and here logic assumes the payer must be in the driver's seat.  

Europe's chief regulator charts a strategy from many moving parts. Dr Guido Rasi talks to Pharm Exec's William Looney.

The Puzzle Master: EMA's Guido Rasi

At the conclusion of the Cleveland Clinic's Medical Innovations Summit each year, 10 innovative technologies are unveiled before the audience, and designated as new and revolutionary tools for the treatment of disease and disability. Selections for the Top 10 are chosen by way of a process that includes personal interviews with over 100 senior Cleveland Clinic physicians. Here are a few of the technologies that made the cut for 2013. 

Ben Comer profiles 10 innovative technologies designated as new and revolutionary tools for the treatment of disease and disability.

Top Medical Innovations for 2013

Let's   face it and let's be brave about it: the balance of power has shifted   permanently from the marketers to the marketed.                          The budgets necessary for shout-and-be-heard   marketing are no longer feasible. Marketers no longer have the luxury of   captive                          audiences sitting in front of their TVs for   hours on end, hanging on every word of the advertising copy. To make   matters worse,                          technology continues to drive rapid   proliferation and fragmentation of channels and information sources,   resulting in a pool                          of resources, content, answers, and options for   HCPs and patients to pick and choose from. HCPs and patients have much   more                          control over what they see and where they see   it, and they confirm the validity and reliability of what they see and   hear                          through discussions with others like them,   before making a choice.

The   role of marketing must shift from attracting attention to delivering   value. We must embrace the belief that confident,                          empowered customers (both patients and   healthcare professionals) are the key to driving business success. We   must enable relevant,                          valuable, and meaningful customer experiences   that facilitate our customers' healthcare journeys—journeys that are no   longer                          linear and isolated by channels. Our customers   can touch our brands anywhere, at any time, and flow in and out of the   brand                          experience at will. Creativity in this consumer   controlled digital age goes beyond compelling creative design reproduced   in                          every channel. It demands orchestration of   multi-channel customer experiences and deserves ideas that are generous   and generative                          without arbitrary channel boundaries.

Today, more than ever, data gives us almost live intelligence about where people are, who they are, what they are doing and,                          most importantly, what they are looking for. From data-driven personalization engines fueling the 

 experience to   the reinvention of entire industries giving rise to the likes of   Netflix (and the demise of Blockbuster as                          we knew it), the power of the consumer, and the   data that helps marketers tap into this power, have forever transformed   marketing                          and the creative big idea.

And pharma is not   going to escape this shift unscathed. Deeper customer insight is   forcing pharma marketers to re-articulate                          marketing goals, re-consider crucial touch   points, channels, and connections, and most importantly redefine   customer experiences.                          While still not the norm, there are a few prime   examples of brave, data-driven ideas creating value and relevance for   both                          the customer and the brand. 

A recent example   is AstraZeneca's Customer Driven Initiative designed to supplement sales   force efforts to increase the quality                          and quantity of physician interactions. With   physician access becoming an industry-wide challenge, the goal was to   deliver                          on-demand, rep-like services through   physician-preferred touch points whenever and wherever they needed them. 

Digitas Health   explored physician needs and preferences through custom and syndicated   research; analyzed physician-rep interactions;                          evaluated search and online activity; and   identified content, tools, and resources that could be delivered to the   physicians                          in a non-personal setting. In-bound call centers   were supplemented with a centralized and shared suite of services and   technologies,                          including e-sampling, e-detailing, and custom   content—made possible through strategic partners like Medscape, MDLinx,   MedManage                          and Epocrates—to ensure a continuously evolving   and current value proposition. 

Creativity lay in   ensuring seamless connectivity between brand-specific content and the   centralized, shared content, providing                          an integrated, customer-centric experience   across multiple brands, audiences, and channels. The foundation of this   service                          is a technology infrastructure that is adaptable   and responsive to support changing physician and brand needs and   leverages                          data and analytics to drive optimization and   accountability. 

The result for AstraZeneca was a customer-driven initiative that continues to surpass industry norms for physician participation                          and engagement, while delivering centralized efficiencies and business impact. 

Another example   is where we put data at the heart of a very successful behavior   modification program for a smoking cessation                          therapy. The step-by-step approach started with a   questionnaire revealing the smoking habits that increase the urge to   smoke.                          This data allowed us to build a year of support   that delivered tips, tools, and a personalized "quit strategy" to combat   the                          desire to pick up that cigarette. 

This rich,   surround-sound program connects across multiple channels and uses data   to define the content of each communication;                          help progress trackers pin-point where each   patient is in their journey; and celebrate the successes along the way.   Along                          that journey, relevant content is delivered   every day for the first five weeks and then weekly for the rest of the   year to                          help patients alter behavior to achieve goals   that otherwise might be unattainable. 

The idea of using   data in this fluid, "live" way to create dynamic content changes the   creative process. It forces you to                          imagine beyond the 60-second commercial and into   the 52-week year; to stop thinking like traditional marketers and more   like                          publishers. 

When   you see data being employed like this, you realize that it is not a   big, ugly, scary monster out to undermine your every                          creative thought and idea. It is the knowledge,   insight, and wisdom marketers need to create relevance and be responsive   to                          the needs, challenges, motivations, and passions   of our audiences. Pharma's legacy systems, infrastructures, and   conceptions                          of marketing design and execution are struggling   to cope with this mass of data.

It's important to   align brands to the customer, not the other way around. The objective is   to facilitate the mutual exchange                       of value. But our customers are not in the business   of serving up their requirements to us on a silver platter. It's up to                       us to garner a deep understanding about the   category, the competition, our brand reality, our customers' cultural   biases,                       media consumption, and the human reality to uncover   the underlying customer needs, challenges, and motivations. 

Search engines,   social media, and other consumer-controlled engagements allow for deeper   insights into consumers' thoughts,                       motivations, and behaviors. Interactive touch   points like mobile devices, smartphones, and digital destinations give   consumers                       access to more on-demand information, offering   opportunities for marketers to track these interactions in real time,   enabling                       them to understand and influence their audiences at   a broader and deeper level than ever before. An enabling infrastructure                       and processes lets marketers capture, synthesize,   and disseminate customer interactions, pathways, and journeys, in   addition                       to analyzing synergies and alignment with brand   goals to inform the creative process.

It is not an alien   concept that structured thinking can fuel the creative process. The   biggest impediment to this mind-meld                       is conversion of dashboards and walls of numbers   into insights that create the "aha" moments and give fuel to ideas that   are                       generous and generative—enabled by a team structure   that encourages multi-disciplinary collaboration. 

And flow they must.   The days of replicating the same old message across every channel are   long gone. Today, creatives must                       think about context to keep their message relevant   and timely. We need to think about the customer first and ask ourselves                       the same question every time we create a touch   point: What is the human need that we are going to answer as a brand?   And the                       thing that helps us do this—keep our thinking and   our work fluid—is data. 

 is Executive Creative Director at Digitas Health. He can be reached at 

 is Senior Vice President Strategy at Digitas Health. He can be reached at 

How to stop worrying and learn to love the data.

Pharmaceutical Executive-12-01-2012