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Four commercial line executives serve as our jury of peers on what's in store for the future of pharma, and discuss the changing criteria for market success, from drugs to consumer products to vaccines.
A critical function of Pharm Exec's Editorial Advisory Board [EAB] is to provide us with a perspective on what really counts in the business of big Pharma today—at the front lines of the competitive war for market share, how do you differentiate, align strategy with capabilities, motivate winning teams, and deploy resources efficiently, all toward the ultimate objective of building sustainable sources of growth, for the long-term? To help answer this question, Pharm Exec convened on Jan. 30 a panel of four alumni from our EAB meeting host, St Joseph's University Business School Pharmaceutical and Healthcare Marketing Program, each representing the commercial operations side of the business, from drugs to consumer products to vaccines. The following contains highlights from the discussion, including input from other members of our EAB community. The big lowdown? Marketing today is so competitive, management only gets one shot to get it right—and if you are not listening to the patient first, you fail.
— William Looney, Editor-in-Chief
PE: Each of you has moved up the ranks on the commercial side of biopharmaceuticals, from serving on the field force to a management assignment with direct P&L responsibility. How has your work and the requirements for success changed over the course of your career? What are the key drivers of competitive differentiation today versus when you started in the industry?
Joe Truitt, Achillion Pharmaceuticals: I began my career in 1989, as a sales representative. At that time, the selling proposition in pharmaceuticals was relatively simple. Prescribing decisions were made at the physician level. Now the market has evolved into a much more complex environment, with many more stakeholders involved in the process. Prescribing decisions are impacted by payers, governments, physicians, specialty pharmacies, PBMs, and patients. Each of these segments requires a targeted commercial plan in order to succeed.
List of Participants
PE: Isn't it all still a question of how much scrip you can get physicians to write for the product? Has the situation really changed that significantly?
Truitt: Due to the complexities of access and reimbursement, physicians are no longer the only decision makers in prescribing. We have to understand the road map to access and reimbursement very early in the development of a compound to ensure the required data is available to support the launching of a new drug. If this planning is not executed during the clinical phase of drug development, there is a risk that physician uptake could be limited due to barriers to access. For example, health technology assessments conducted by governments now play a vital role in shaping everything from the design and location of clinical trials to the final go-to-market launch strategy. Six years ago, there was no IQWiG agency in Germany to influence the decision on a domestic reimbursement price for a new drug, the outcome of which guides actions by payers in many other countries.
PE: What other key drivers of change can you identify from the time you entered the industry?
Gerianne DiPiano, FemmePharma Health Care: My area, women's health, is a reflection of changes that have dramatically altered the position of patients in relations with providers. Social media platforms have empowered patients to make their own therapy choices. Nine out of 10 consumers access information on the web before they see a primary care practitioner. Buying decisions are made every time a patient looks his condition up on Wikipedia. Yet industry research indicates that half of the top 50 biopharmaceutical companies in the US lack a strategy to address this change, such as through active involvement in these online community networks.
John Furey, Baxter Health Care: Based on my 20 years in the biopharma and vaccines business, I can point to three transformative changes. The first is the shift in the science, from classic chemistry to biology. This has significant implications for the business, because when you are managing a biologics enterprise, how you manufacture and supply the product is as critical as marketing and market access. Securing the supply chain is a function that traditional managers did not need to focus on—you were just trained to sell doses. The product turned up. Today, a more holistic approach is required. Knowledge of the process is vital.
The second big change is the necessity to think beyond the home market, to emerging markets and the globalization of most functions in the biopharma enterprise. This change makes it all the more important to understand the patient, in all his/her diversity. In fact, patients in emerging countries have embraced social media more proactively than in the US, largely because there are few institutions to advance their view; many people feel disenfranchised from the health systems. New digital technologies provide an outlet.
Despite the high profile being given to the patient, our industry has far to go to before we are truly "patient centric." Market access is the hot field in big Pharma today because it reflects our adjustment to the ascendency of payers. Market access is designed to give payers a front row seat in the design of our R&D pipelines. But shouldn't we first be asking what is most important to patients? The huge financial bets on the next generation of biologics demand that we have a better understanding of just how the patient will use the product. This is not a question that can be answered with a reimbursement strategy. You have to dig deeper and determine the conditions under which a patient will use a drug: are there structural or institutional hurdles to integration of the new medicine in the patient's system of care?
The third transformation is around the talent needed to succeed in a very complex business environment, where there is no fixed blueprint for success. The road to the "c suite" is no longer one of starting out "carrying the bag" in sales, then advancing to commercial operations and eventually leading a business segment. Rather, it's all about earning multiple assignments in different aspects of the business, and in varied geographies. You want to be the person who can readily see how all these activities are interconnected. There is a war underway for talent that has a fuller understanding of the business and the capability to operate on the basis of a global point of view.
Each of these three drivers depends on the ability of the industry to stay innovative. Such an outcome is not guaranteed. In the average big Pharma R&D budget, a significant portion of funding can be devoted to fixed costs and life cycle management of existing products. It raises a serious issue of how much money is really available to fund the next wave of innovation. Everyone is looking for novel, low-risk vehicles to generate investable ideas, such as in-house VC operations.
Helen Bourret, Amarin Biopharmaceuticals: My career has been entirely in sales. When I joined the industry 15 years ago, it was the land of good and plenty. Products were approved, regularly and on time. The product was automatically covered and reimbursed; formulary listing was not an issue. It was an environment uniquely suited for the blockbuster phenomenon. Today, we face an entirely different situation. Generics are dominant in nearly every class, so by default we have had to become experts in formulary positioning and politics. Sales and commercial teams must be conversant in dozens of managed care plans, most of which operate on the basis of strict prescribing guidelines that accord generics status as first-line treatment. These plans define "new products" as anything up to 5 years old.
On the relationship side, which is critical to those engaged in selling anything, contacts with physicians and providers are controlled to the point where, assuming you get access, the conversation has to be treated like a script. And when you have the meeting, more than three quarters of all physicians will limit it to two or three minutes. What do you say in two minutes? You can count the words; each one had better carry value. The strategy must be to identify the physician's incentives under the benefit plans he or she works with. For example, if you can show how prescribing a therapy will raise the practice's patient satisfaction score within that plan, then the physician will listen. And you have to build other contacts—with the nurses, community health workers, and others who pull the patient's charts.
Basically, the sales professional today is seen as redundant. The challenge is to overcome that perception by showing physicians how you can help them meet their obligations to the PBMs and payers. Being able to differentiate your product in a world of "me too" medicines is equally vital.
PE: Given the consensus that the business climate today is markedly tougher, can we cite instances where a change proved disruptive to your commercial model? How did you respond and what was the outcome, in terms of shaping your own career?
Truitt: Prior to my current position, I was given responsibility to position an orphan drug for launch. What I quickly figured out was that, for this launch, engaging the patient was going to dramatically influence the success of the launch. This was a disruptive, eye-opening development, as it contrasted to my previous exposures on the commercial side. It took us awhile to figure how to move the focus to the patient, but we succeeded. We put a product manager in place whose sole assignment was to work with patient groups. We sought out patients in focus groups, listened how they wanted to receive therapy, and incorporated their ideas in the contracts we negotiated with our specialty distribution partners. We actually served as a concierge in a "high touch" approach to drug delivery.
I would summarize our learnings from the process as follows. Pay attention to the disease community. Show them that what you have is clinically distinctive, advances the standard of care in a way that is tangible to the patient experience, and is appropriately priced. Acting by example, prove that patient expectations identified through the trial phase will be incorporated post-launch.
PE: Will you leverage any of these learnings in your current role as a developer of new treatments in the very competitive field in HCV? Many of the emerging therapies promise to increase the cure rate for hepatitis C from drug interventions to upwards of 90%, from less than 50% today. The patient benefit is clear.
Truitt: The level of innovation in this disease area is astounding—drugs now coming on the market promise to take patients from an HCV infection to cure in only 12 weeks. As a smaller company, we think there is an opportunity to carve out some "blue ocean" space in this field by focusing on what the patients with this disease really want.
PE: Any other examples of addressing a disruptive change or transition in your career?
Furey: Prior to joining Baxter, I served as general manager for an MNC's vaccines business in China. I arrived there and promptly discovered that the conventional model for selling medicines in China—lots of "boots on the ground"— was not working as well for vaccines. Government played a dominant role as the lead purchaser of vaccines and controls on traditional marketing practices in this segment were growing, leading me to pose the question why we on the vaccines side needed to rely purely on the mass mobilization approach. Government influence was so strong it could determine if you even had a sales channel to work in at all. In that case, market access would be irrelevant.
Recognizing these distinctions, we reconstructed the sales force around a new "customer solutions team" concept to work with government procurement agencies on transparent targets supporting China's five-year health sector development plan. For example, we emphasized the ability of pneumococcal vaccines to reduce pneumonia among young children and the elderly. It was a closely coordinated, patient-centric approach that acknowledged the role centralized health planning plays in penetrating the Chinese market.
This is a model—non-traditional, built around a new generation of stakeholders—that is relevant not only to China but to most of the industrialized countries as well. Public-private partnerships centered on high-value, innovative vaccines and biologics is certainly the avenue we are taking at Baxter. Last year, we began a 20-year partnership with a Brazilian state-owned company, Hemobras, to produce our recombinant factor VIII therapy for hemophilia so the country can move away from reliance on older, blood-based treatments. This relationship will allow the Brazilian government to upgrade the standard of care for the country's 10,000 hemophiliacs while also supporting the Brazilian biotech industry to leverage its capabilities from this technical transfer to spawn newer technologies.
Bourret: The disruption that matters most to me—and which I might hesitate to describe as innovative—is the massive downsizing of the industry sales force over the past decade. The challenge to those of us in the sales function has been to minimize the damage from the loss of so much accumulated expertise, especially as the implementation of these reductions in force has often been delegated to third-party consultants. Important issues like customer impact, retention of long-standing client relationships, legal and regulatory compliance, internal organization alignment, and staff morale, don't get the proper attention from senior management. The disruption has led to the loss of many high quality contributors. Company reputation is damaged: to fill the gap, you have to go to a physician who had the same rep, often for a decade or more, and try to start over again. In a larger sense, the question is whether any of this advances the claim of so many companies that the patient is at the center of their business? As a manager, my response is to do all that I can to establish continuity and restore trust. I work consistently with my team to get everyone on the same page.
PE: Looking ahead, what can you identify as the most "mission critical" function that executives will need to successfully navigate this transition in the biopharma business model?
Truitt: The key mission critical function is the ability to digest and synthesize multiple streams of information. An important example would be the ability to manage the increasingly complex process of completing clinical trials, on a global basis; and finding the best way to position a new product for maximum market access, in multiple countries worldwide. In the old era, structuring the trial, filing for registration, and securing market uptake could all be approached separately, in sequence. Looking ahead, we have to anticipate during the proof-of-concept stage what our trial design will look like, what comparators we will select, and what evidence is needed to position the product for reimbursement. The other step is to establish our launch order in a way that reinforces— not dilutes—our market access priorities as we roll the product out.
Di Piano: There is a great deal of innovation locked up in smaller companies. The problem is the lack of resources to fund it. There will be a premium on people who have the financial, operational, and communication skills to either create partnerships or take a company public. Making a case for the start-up is not easy, so the ability to do that is going to be a prized attribute for anyone in this business. Confidence and assurance is also needed to confront the negative headwinds from the VC community, whose engagement once gave small companies a runway to the future. Now the VC players want all their risks guaranteed—not only does a company like my own have to show it can generate revenue on a consistent basis, it has to shine on key profitability performance metrics like EBITDA. The ripple effect here is that big Pharma wants highly structured transactions, with milestones that shift more of the risk to the smaller partner. In summary, people with the smarts to overcome these institutional deficits and secure the capital to grow an asset internally are going to be in high demand.
Furey: No one skill or attribute is going to dominate as "mission critical." That said, process capabilities—getting all the functions in an enterprise to work together—will be very important to achieving business targets. It used to be that a good clinical profile coupled with commercial and promotional muscle was sufficient to move the markets. Today, many additional factors must apply to a seamless launch; there are more moving parts. But getting large organizations aligned behind the strategy and to identify and then execute around the right tactical measures is not as easy as it sounds. It may seem trite to state it, but we need to ensure the entire organization is working toward the right end point. It is surprising how often companies miss the mark by presuming that if you tick a box, results will follow.
Another factor that underscores the importance of process is the externalization of big Pharma R&D pipelines. This requires a high level of "street smarts" and sensitivity among managers in building successful partnerships. Big Pharma must strive for balance: expectations based on internal markers must not be so rigid as to starve a small and medium-sized partner of the oxygen—from know-how to capital—it needs to thrive and realize the potential of the partnership. Finding mutual benefit from the connection between big Pharma and the smaller biotechs is critical to the future of innovation, particularly in generating the resources to ensure the best new science is funded.
Bourret: Selling will remain the principal way this industry competes for profits. The sales rep is not going away; there will still be boots on the ground. What is changing is the role of the rep, who is going to be positioned as a knowledge asset and a service provider beyond the pill itself. The value of the relationship between the rep and the customer is going to be quantified. A few pharma companies are trying to make loyalty a metric of performance. Educating sales professionals to conform to this new model is not going to happen overnight; for some the transition will be painful. And there is a question whether this criteria is sufficiently objective to serve as the basis for compensation involving large numbers of professionals. Asking a physician to assess what amounts to a sales rep's personal and emotive skills is subjective. It might help determine what value the rep brought to the relationship, but it's worth emphasizing here that a sales professional is ultimately hired to sell. Going that extra mile, doing the right thing beyond the transaction itself, may—or may not—make a difference in generating prescriptions.
PE: What does the group feel about the pace of this change? Will the next five years bring still more rapid transitions or are these transitions likely to occur at a slower rate?
Truitt: Achillion is active in the HCV space. I can say I have never worked in a segment that has innovated at such a furious pace. Three years ago, the science to treat this condition had given us a single direct acting antiviral, pegylated interferon, and ribavirin that provided cure rates of approximately 70%. Today, we have combination therapies for hepatitis C that have demonstrated cure rates near 100%, at a high level of safety and tolerability.
Progress in the science has been rapid and we anticipate continued change and improvement. What counts is building a nimble organization that can move quickly to seize opportunities as the science evolves.
PE: The implication of these new therapies is you may be obliterating a chronic disease in the course of a single 12-week course of treatment. The traditional paradigm of financial success in biopharma is selling a drug that patients must take as maintenance therapy, for years or even a lifetime. As you cure these patients, won't the financial opportunity go away?
Truitt: My experience is that with every new treatment that advances the standard of care, we underestimate the prevalence of the condition. We think hepatitis C is under-diagnosed. And you also have to factor in the time it takes to get all those patients into treatment. Our forecast models at Achillion project a multi-billion dollar market for this next generation of hepatitis C products extending well into the next decade, in the US alone. This doesn't include additional markets with large patient populations like China, Japan, and other parts of Asia.
PE: Will the business model of the future move us further toward the "virtual company" concept in which efficiency depends on outsourcing many key activities and functions to a third party?
DiPiano: The virtual or extensively outsourced company model has great appeal among investors and shareholders, and I don't see that changing, particularly in small companies like my own. Infrastructure is expensive. Investors like the idea of being flexible and to cut SG&A expenses when things don't work out. Pivot is the word that comes to mind: it's easier for a CEO to shift course if you don't have 5,000 people working for you.
PE: Another benefit of being virtual is the ability to access a huge talent pool of people who have left industry jobs, for one reason or another. Consultancies filled with ex-industry people can be retained on a project basis, avoiding the high fixed costs of employment. It's a great model, as the client also benefits from the varied background of these people rather than keeping people who might only know how to do one thing.
Bourret: At many small companies, major internal functions are outsourced, such as sampling, benefits, payroll, etc. In addition, sales representatives and managed care managers can work on a contract basis. The focus is on building a strong in-house management team with the mindset and flexibility to multi-task. People have to be prepared to rise to the occasion. The largest companies are often preoccupied by strategic issues at the top of the decision chain and thus can devote less attention to the troops on the ground—the field force. This is an omission that small players make at their peril.
PE: A larger question shaping the future is the origin of those new drug pipelines that promise so many breakthrough products. Licensed-in products seem to be in the ascendant. Can licensing replace the productivity flaws that seem to inhibit traditional in-house R&D?
Truitt: It makes sense to spread your opportunities—you can't invent everything in-house. The key is deciding when and how to transition assets into your portfolio. It's a decision that must be taken on a case-by-case basis.
DiPiano: A good licensing program requires management to root out "the not-invented-here" syndrome. The big multinational company I worked for prior to launching my current business had a reputation as a bad partner. It needed to own every part of the deal, which was always scrutinized first for its tax implications. Such ground rules made it very difficult for any smaller partner to ink a transaction that is remunerative and sustainable.
Furey: Companies able to build "win-win" partnerships will secure a competitive advantage against those that choose to stay solo. The issue is managing the adjacencies: a licensing deal has to make sense to your core market mission or there is the danger the business will get too broad too quickly so that you lose focus. It's worth recalling the aim of any deal must be to do something good for patients. That's the ultimate test of market relevance and it usually takes five or six years for the partners to confirm that their joint efforts paid off.
PE: Your emphasis on the business being centered on the patient has been very consistent today. Is the industry taking heed, in your view?
Furey: Progress has been made, but there is much still to be done. One example is market access, which has emerged as a new, high-profile function in big Pharma organizations. In many cases, this integrative, more holistic approach to addressing the customer has not worked out well. Why? I believe it's because the overall mindset in marketing and commercial operations continues to neglect the patient—market access is not designed to be patient centric. Such programs were created in reaction to the rise of the payer. It is a company centric response. We don't think consistently and strategically about where the patient fits in this equation – what does he or she get, beyond our own specific needs?
DiPiano: I agree, but there are other factors at work, beyond this rigid commercial mindset. We are afraid to speak to the end-user of our products – the patient – because the law says our main interlocutor has to be the regulatory agencies. Yet consider the fact that all the top leadership of the FDA is active on Twitter. It is ironic that the regulators can interact directly with patients but we – the regulated – cannot. When real dialogue depends on the intervention of a third party, it's harder to put the patient in the center.
William Looney is Pharmaceutical Executive's Editor-in-Chief. He can be reached at firstname.lastname@example.org.