Policy and Medicine

The Difficulty and High Costs in Creating New Medications

Over the past several years, there has been significant discussion about the difficulty pharmaceutical and medical device manufacturers face bringing a product to market.  As a recent article from David Shaywtiz noted, “the difficulty of creating new and better medicines has been the subject of extensive – at times excessive – soul searching, a process that’s intensified as high-profile patents expire, along with their associated revenue streams, traditionally relied upon to support future R&D.” 

Much of the focus has centered on the ability of the Food and Drug Administration (FDA) to have the resources and capabilities to handle the number of applications for new drugs or devices.  There has also been concern about the lack of transparency and consistency in FDA decisions.  Whether the difficult regulatory pathway company’s face is caused by FDA or not, “both biopharma companies and patients awaiting new treatments find themselves struggling for viable solutions.” 

This is particularly problematic because as a recent Forbes article noted, “The average drug developed by a major pharmaceutical company costs at least $4 billion, and it can be as much as $11 billion.” 

Consumers argue that regulation is necessary to ensure safety and efficacy of products, creating a balance to the debate.  This balance however, has caused the public to become willfully blind and unable “to recognize the extent to which a deliberate and very conscious regulatory policy is putting a damper on what has traditionally been the world’s most vibrant drug development ecosystem.” 

Because developing new drugs is challenging, so inherently difficult, Shaywitz asserted that it is “crucial to do everything within our control to work together and create an environment, an ecosystem that stimulates and enables meaningful innovation.”  What is standing in the way however is that regulators have misapplied the “precautionary principle,” colloquially understood as “first, do no harm.”  He noted that, “the problem isn’t so much the sentiment as the way it’s reduced to practice.” 

The practice today is that no regulator wants to face a Congressional committee who demands to know how an approved drug was ultimately discovered to cause unexpected problems.   To avoid this, regulatory agencies raise the bar for approval high enough to reduce the likelihood of this occurring.  The problem with this however is that far “less attention is paid to the reverse – to the very real patients who never receive a new medication because excessive regulation resulted in prohibitively high hurdles, effectively dampening work, disincentiving investment, and stifling progress." 

While in general, we want to ensure high standards for our products to be approved, particularly those with significant implications for our health, what many regulators appear to be doing is attempting to “protect doctors from themselves.”  In other words, regulators are worried that by approving a drug with “risks,” doctors will not be able to evaluate the individual risks patients will face taking them.  As a result, “patients are systematically denied access to medicines that might be useful, and for whom the risk/reward, when fully understood and discussed with their physician, would be worth it.” 

Shaywitz noted this “a critical point: not everyone has the same view of risk/reward, and by positioning themselves on the far, far end of this spectrum, regulators effectively substitute their often extreme value judgements for the considered views of others who might thoughtfully come to a different decision.” 

The problem is, “regulators don’t trust patients and doctors to make these judgments, and take these decisions into their own hands; the result has been bad for the entire biopharmaceutical ecosystem, and most unfortunately of all, absolutely disastrous for patients — of course the very people who regulators are ostensibly trying to protect.” 

Shaywitz noted that people should listen to one of the most compelling talks of TEDMED2011, presented by Juan Enriquez, and available here.  Enriquez presents an accessible and sensible discussion of the problem of the uncaptured costs of failing to innovate. 

Cost of New Drugs 

The drug industry has been tossing around the $1 billion figure to create a drug for a number of years, supported by a study by Joseph DiMasi of Tufts University.

 study creates additional concerns.  However, as Bernard Munos of the InnoThink Center for Research In Biomedical Innovation has noted, just adjusting that estimate for current failure rates results in an estimate of $4 billion in research dollars spent for every drug that is approved.  Munos showed divided each drug company’s R&D budget by the average number of drugs approved. This was far more dramatic. 

Wanting to make this even more rigorous, Forbes took Munos’ count of drug approvals for the major pharmas and combined it with their research and development spending as reported in annual earnings filings going back fifteen years, pulled from a Thomson Reuters database using FactSet.  They adjusted all the figures for inflation.  Using both drug approvals and research budgets since 1997 keeps the estimates being skewed by short-term periods when R&D budgets or drug approvals changed dramatically.  The range of money spent is stunning. 

• AstraZeneca has spent $12 billion in research money for every new drug approved, as much as the top-selling medicine ever generated in annual sales;
• Amgen spent just $3.7 billion. 

Why is it so expensive?  A single clinical trial can cost $100 million at the high end, and the combined cost of manufacturing and clinical testing for some drugs has added up to $1 billion. But the main expense is failure. AstraZeneca does badly by this measure because it has had so few new drugs hit the market. Eli Lilly spent roughly the same amount on R&D, but got twice as many new medicines approved over that 15 year period, and so spent just $4.5 billion per drug.

Why include failure in the cost? Right now, fewer than 1 in 10 medicines that start being tested in human clinical trials succeed.  Some biotechnology companies do manage to make it to market without having to spend money on failed medicines – but only because other startups went bust trying to test other ideas. 

Although drugs only account for 10 cents out of every dollar spent on healthcare, medicines are the easiest products to scapegoat for high costs in our health care system because their prices are easier to track.  However, “the reality is that the pharmaceutical business is in the grip of rising failure rates and rising costs.” 

The high costs of making drugs, coupled with the regulatory problems Shaywitz pointed out, is troubling for patients and health care professionals trying to improve patient outcomes.  “We can all only hope that new technologies and a better understanding of biology will turn things around.”

Hospitals Hire Sales Reps to Recruit Referrals

Typically, when we think of sales representatives, we see the image of a man or woman dressed in a suit, entering a doctor’s office to promote the latest new drug or device.  These sales representatives usually work for major pharmaceutical and medical device manufacturers and go around the country educating and making physicians aware of the latest clinical research and breakthroughs on a particular company’s drug. 

Interestingly, the use of sales representatives has now grown beyond just manufacturers.  A recent article from USA Today article described a new practice whereby hospitals hire sales reps, often formerly employed as pharma reps, to increase referrals to their hospital.  If a hospital does not operate at optimal capacity due to an incomplete understanding of its services and resources by referring physicians, hiring sales reps may give hospitals an efficient and valuable way to increase capacity, instead of the typical in-flight magazine ads that also increase awareness. 

In northwest Indiana, Carrie Sota visits five or six doctors' offices every workday as part of her new sales job.  But Sota isn't selling the physicians on a prescription drug or a medical device. She's promoting her hospital — the University of Chicago Medical Center.  Sota, 30, is one of four employees the academic medical center has hired in recent months to make "sales calls" on physicians in the hope that they will send more patients to the hospital. "We are trying to build meaningful relationships," said Sota, who was previously a saleswoman for a small medical device company. 

The University of Chicago Medical Center is one of a growing number of hospitals nationwide hiring former drug and device sales reps to visit doctors' offices to persuade them to use their services over competing facilities.  

Rather than handing out samples of prescription drugs, the sales reps call on doctors armed with the latest information on how their facility is reducing hospital-acquired infections and improving patient-satisfaction scores.  These reps probably know how many Nobel laureates are on staff, service volumes, Joint Commission reports and other quality indicators that might increase confidence by referring physicians.  

In visits that can last five to 20 minutes, reps try to win doctors' loyalty by helping them get better times on operating room schedules or easier patient referrals to hospital-based specialists. The sales reps can also carry messages back to the hospital, such as a doctor's request for a new medical device to be available in surgery. 

While hospitals have always tried to woo doctors to refer patients to them, the institutions are growing more direct in their efforts. The hospitals mine data to see which doctors have the most profitable, well-insured patients, and then they assign those doctors to a sales rep. 

'Physician liaisons' on the rise 

Convinced the sales-call strategy is fueling higher admissions, Tenet Healthcare, the nation's third-largest for-profit hospital chain, has doubled its sales force in the past two years. It now has 152 "physician liaisons" at its 49 hospitals, most of which are in California, Texas and Florida. 

About two-thirds of Tenet's liaisons are former drug and device sales reps, and they can make tens of thousands of dollars in bonuses if doctors increase their referrals to the hospitals. "These people are really good and really assertive and very sophisticated," said Stephen Newman, Tenet's chief operating officer.  And the jobs are there considering the major cutbacks pharmaceutical and medical-device companies have made in the past decade.  However, one downside to hiring former drug and device sales reps is that their medical knowledge usually focuses on a single specialty, such as diabetes treatment or orthopedics, whereas pitching a hospital to a doctor requires sales reps to be familiar with a wider range of hospital services. 

Some criticize the use of hospital sales reps as “a waste of resources.” Paul Ginsburg, president of the non-partisan Center for Studying Health System Change, said, “The net results of changing physician-referral patterns is that one hospital gains at a cost of others, and all the hospitals burn resources to pay (sales)people who take up the doctor's time.” 

While federal law prohibits hospitals from paying doctors to admit patients, hospitals paying salespeople to influence doctors can get the same results, he said.

Newman said Tenet's liaisons have strict guidelines so they can't "game the system" to reach financial bonuses. For example, their bonuses can't be tied to just one doctor's referrals. 

Newman said the company is focused on increasing referrals from doctors who split their patient referrals among multiple hospitals, as well as from physicians who don't yet refer to Tenet facilities. Since 2007, the company credits its physician liaisons with helping to boost the numbers of doctors who actively refer patients to its hospitals by 39%, or more than 4,500 doctors. 

Hospitals say their new sales approach is part of a broader strategy to develop closer ties to physicians, who largely determine where patients go for care. Hospitals also are buying doctors' practices or forming closer partnerships with physicians to improve care and drive admissions. 

"I think everyone wants to grow their market, and lots of hospitals see that the No. 1 way to get referrals is physician-to-physician interaction, and the second-best way is physician-to-physician-liaison interaction," said Christine Perry, who manages the physician liaison program at Duke University Health System. Unlike most hospitals that have hired marketing people for the positions, Duke hires nurses as its liaisons. 

Specialists are profitable 

Many of the physician liaisons focus on specialists, who bring in patients for services with the highest profit margins, including orthopedics, cardiac care and cancer care, Perry said. But the sales calls also extend to internists and family doctors.  In fact, she said, a big factor behind the trend is that many primary care physicians no longer visit their patients in the hospital, because most hospitals have full-time physicians called hospitalists who care for patients in the facility. As a result, hospitals have fewer opportunities to interact with doctors in the community to tell them about a new CT scanner or new specialist. 

Dr. Kaveh Safavi, the lead health industry consultant for Accenture, said hospitals are seeking ways to keep beds filled in the face of efforts by government and private insurers to reduce hospitalizations by eliminating pay for unnecessary admissions. "Hospitals know they have to create a larger funnel for a bigger population of patients to make their way to them," he said. 

Kathy DeVries, vice president of marketing at University of Chicago Medical Center, said the former drug sales reps understand how to work with doctors. "They speak their language," she said. The hospital is now trying to hire a sales rep focused solely on pediatricians. In its help-wanted ad, the hospital said the liaison will have a goal of making 160 contacts a month with physician offices, including "25 meaningful face-to-face contacts with physicians." 

HCA, the nation's largest for-profit hospital chain, has at least 150 employees who make physician visits — or about one per hospital, said spokesman Ed Fishbough. He said about 90% of them visit doctors who already send some of their patients to HCA hospitals. "It's to give our physicians and their patients a voice and to listen to any concerns the doctors may have and to address those," he said. 

Michelle Osipowicz, who spent five years as a sales representative for at Takeda Pharmaceuticals, is enjoying that aspect of her new role as a liaison for The Hospital of Central Connecticut.  "I act as a conduit between the hospital and the doctors in the community," said Osipowicz, who visits up to eight offices a day, sometimes dropping in unannounced to chat with office staff about the hospital's services or its latest medical specialists. "I bring more value to the physician office. I feel more respected in this role," she said. 

Ultimately, while some may believe this kind of marketing is a waste of resources, there is good reason to believe that this practice may also improve hospital utilization and health outcomes.  The pronouncement by Paul Ginsburg, criticizing the model as zero sum, is false.  Different hospitals have different strengths and capabilities.  As long as excess capacity exists, matching patients to the highest value (quality) hospital makes the system more efficient and probably saves money.  

Nevertheless, as this practice continues to grow, hospitals and their sales reps must be vigiliant about any potential for fraud and abuse and the anti-kickback law.  Seeing how this practice appears to be new, it may be some time before Congress or States pick up on any of the potential compliance implications hospital reps may have due to their influencing in referral.  In the meantime, it is in hospitals best interests to begin training their reps now on compliance with state and federal anti-kickback laws, the false claim act, and Stark.

Critical Issues Affecting the Pharmaceutical Industry in 2012

Recently, the consulting firm Booz Allen reflected on the critical issues that the pharmaceutical industry will face in 2012 and how life sciences companies can position themselves to benefit.

Lipitor's recent loss of patent exclusivity was a sharp reminder of the patent expiration wave making its way through the industry, increasing pressure to cut costs and improve productivity and innovation. As The Wall Street Journal said on June 15, 2011, "white-knuckled investors have been hoping that drug makers would have found replacement products by now or adequately diversified themselves to withstand the impact."

Pharmaceutical companies confront these patent challenges at a time when growth in the overall industry is slowing and demand is shifting to generic segments and emerging markets. The firm expects these trends to continue in 2012, along with 

• Persistent regulatory hurdles;
• Increasingly demanding stakeholders: payors, providers, pharmacies, etc.; and
• Challenges: value chain-from slumping R&D productivity to supply shortages. 

While the industry faces serious problems, the report noted that companies can survive and thrive if they adopt highly differentiated strategies.  Differentiation goes beyond a shift from "me too" products to novel breakthroughs. True differentiation stems from the presence of carefully nurtured distinctive capabilities throughout an organization that endure and are tough to copy.

As pharmaceutical management teams turn the calendar to 2012, the report told companies to consider four critical and rapidly changing aspects of the industry—1) research, 2) commercial operations, 3) supply chains, and 4) networking—that require specific, highly developed capabilities. 

The Capable R&D Engine

Many R&D transformation programs do not meet their potential because they comprise a broad set of uncoordinated and overlapping initiatives that are not underpinned by an overarching strategy. A clear focus on a few specific differentiating capabilities can act as a "guiding star" for innovation. The firm’s research and experience with clients suggest five key capabilities to power a capable R&D engine:

1) Value-driven clinical program design with a focus on explicitly and transparently assessing trade-offs among development cost, risk, and revenue, based on an understanding of value in the eyes of all major stakeholders, and the design characteristics that drive cost, risk, and revenue.

2) Scientific and clinical leadership development that builds a highly effective cohort of discovery and development "managers in the middle" who have extensive external networks, broad disease and pathway understanding, and decision-making authority given established scientific and clinical targets, coupled with performance measures that encourage collaboration and overall portfolio optimization.

3) Disciplined portfolio management based on assessments against rigorous, forward-looking target product profiles that have been externally tested against market and competitive trends.

4) Targeted therapy development involving systematic and early identification of targeted therapy options, analysis of trade-offs, and selective design of tailored drug development programs to focus on patient subpopulations, including codevelopment of diagnostics as appropriate.

5) Scale-up of next-generation clinical development that focuses on rapid and broad rollout of new approaches such as building access to high-quality electronic medical record data for protocol modeling and patient recruitment, remote data collection, and novel approaches to data quality risk monitoring, as well as aligning the design of outsourcing partnerships with strategic development goals.

The report noted the need for companies to develop key capabilities at scale including, performance management systems for functional and therapeutic area teams, and partnership agreements with outsourcing firms.

The Commercially Capable Company

Over the past two decades, large pharmaceutical companies relied on a sales and marketing approach aimed at prescribers in the world's largest markets-the United States, Europe, and Japan. While the model spawned blockbusters such as Lipitor and created unprecedented value, now, however, it is no longer generating growth.  Going forward, four trends will require not just more significant cuts in traditional resources, but a focus on building distinctive new capabilities. 

• First, cost containment continues to create a more restrictive market access environment with greater pricing pressures, additional reimbursement restrictions, and new or altered drug procurement systems.
• Second, new product launches are increasingly focused on high-value specialty indications.
• Third, trade liberalization is opening new opportunities in distribution and trade channels.
• Finally, emerging markets-which have very different healthcare models for marketing authorization, pricing, reimbursement, and distribution-are forecast to make up 30 percent of the global pharmaceutical market by 2015, compared to 19 percent in 2010.  

The firm’s work with clients in the past year suggests that certain go-to-market capabilities will be critical in confronting these trends: 

• Payor engagement capabilities to address market access, pricing, and reimbursement (including innovative pricing agreements);
• Joint disease management programs; and
• The provision of additional patient services that enhance the value of the product.  

These services may include compliance management programs supported by nurses, or telephone hotline services, among others.  Companies of course need to know where value can really be attained rather than over-investing in marginal benefit.

Multi-stakeholder marketing capabilities that target all relevant players in the healthcare system including prescribers, nurses, pharmacists, formulary committees, and payors requires close coordination among medical, sales and marketing, market access, and pricing teams to secure pricing and utilization that reflect the value of each product. It calls for joint planning and decision-making processes, as well as coordinated execution.

Commercial trade channel (CTC) capabilities, to engage more closely with key stakeholders in the distribution chain, including wholesalers, pharmacists, and patients: 

• New distribution models, such as direct-to-pharmacy (DTP), in which manufacturers sell straight to pharmacies, enabling a direct trade relationship and paving the way for targeted loyalty programs.
• Patient loyalty card schemes, which are common in Mexico, Brazil, and many other large emerging markets.  

The success of these new CTC models depends on close collaboration among product supply, marketing, and commercial trade functions, as well as the management of new partnerships with specialist third-party service providers (for example, to provide logistics services for DTP or to operate loyalty card programs).

Tender and contract management capabilities to respond to this increasingly important method of pharmaceutical procurement, which now makes up 27 percent of the global market, which include: 

• New customer-facing roles to interact with buyers,
• Analytic capabilities to review tender opportunities, and
• New planning and tracking processes to manage the tender business. In particular, it requires close collaboration among commercial functions, pricing, and product supply.  

Top-tier pharmaceutical companies are leading the way: Four of the top five pharmaceutical firms have invested in developing tender and contract management capabilities in the past year.

The Capable Supply Chain

There are several industry dynamics that add to the urgency for more sophisticated supply chains than the pharmaceutical industry has relied on in the past: 

• Supply chains must be tailored, agile, and cost-efficient.  
• Rising complexity-the result of new SKUs being added to a portfolio of traditional ethical drugs and more and more generic "mature" products -is placing new stress on the supply chain. 
• New and more complex distribution channels, including online ordering and direct-to-consumer delivery, continue to evolve; and
• Pricing pressure-from generics companies gaining share in cost-conscious developed markets and financially strapped developing economies-continues to intensify.  

The report suggested four key capabilities for pharmaceutical companies to consider for added investment and development:

A set of tailored supply chains that addresses segment-specific needs.  Instead of, "one size fits all" supply chains, firms need to construct a series of individual supply chains tailored to products, markets, and customer segments. For example, high-volume products with steady demand-the old "blockbusters" that are coming under cost pressure from generics-could be manufactured in low-wage countries and with lean inventory management.  Meanwhile, pricing on patent-protected drugs for less common medical conditions could justify manufacturing in factories close to markets in sufficient volume to allow for short lead times and avoid expensive stockouts. The two types of supply chains may be utilized simultaneously at the same company.

Agility in the supply chain enables a pharmaceutical manufacturer to respond to variability in demand for a drug-for example, from one country or region to the next-and also to maintain less inventory (thus minimizing costly write-offs) while still meeting demand. Postponement, wherein drugs are packed to order, is one increasingly popular strategy that is supported by an agile supply chain.

Flexibility in product supply and manufacturing allows a company to better respond to volatile manufacturing capacity requirements, such as those associated with tenders, and to minimize underutilization of capacity. Building flexibility into supply chains requires the right product supply setup, the right production footprint, and management of strategic supply relationships with contractors.

Integrated planning capabilities increase alignment of key supply chain parameters, such as capacity, inventory levels, and lead times, with market demand.  For example, as generics enter the marketplace, company planners must correctly gauge their impact on individual branded drugs to guide the business side in managing inventory size, returns liabilities, and write-offs if sales drop. Pharmaceutical companies must deploy a disciplined business planning process that supports the company's portfolio management strategy and product transition plans.

One company's capable supply chain is likely to bear little resemblance to that of even its closest competitor. Big global pharmaceutical companies with their own production networks might rediscover manufacturing as a competitive advantage, while small firms or pure innovation players rely fully on outsourcing.   Several leading pharmaceutical companies starting to fundamentally rethink their supply chain strategies.

 
Enabling the "Networked Enterprise"

In the coming year pharmaceutical leaders will be focused on developing and stitching together this complex array of capabilities.  Certain capabilities, including major outsourcing arrangements, matrixed organizational models, and collaborative partnerships with stakeholders, point to the need to effectively manage a networked enterprise. Success in this area depends on putting in place the right combination of formal and informal mechanisms that define and influence networked organizations.  Formal mechanisms for enabling accountability include: 

• Clear decision making,
• organization design,
• compensation systems,
• compliance, and
• business planning 

In addition, informal enablers-such as norms, social networks, mentoring relationships, and mind-sets-have even more power to drive, or undermine, the enterprise's capabilities and results. Too often, these informal dynamics are thought to be uncontrollable. Capable management of a networked enterprise deliberately cultivates the right informal organization.

In the future, winning pharmaceutical companies will be those that pursue strategies based on developing and investing in targeted capabilities will successfully differentiate themselves in the marketplace.

State of the Union, Bio Pharmaceutical Jobs and Innovation

Tonight, President Obama is set to make his State of the Union Address.  Many have speculated that with the United States Supreme Court set to determine the constitutionality of the Patient Protection and Affordable Care Act (PPACA) in late March, Obama should use his Address to defend health care reform and to highlight some of the benefits that have already been achieved.  Consequently, a recent article from the National Journal discussed a few of the issues dealing with health care reform that President Obama should address. 

First, Doug Peddicord Executive Director of the Association of Clinical Research Organizations, noted that the President “should absolutely defend this accomplishment (health care reform) in his speech and use this chance to make a pitch in front of the SCOTUS.”  He said that the President should remind people that because of PPACA, “no one will be rejected for health insurance, even if they have, what the insurance industry liked to call ‘pre-existing conditions.’”   

He noted how health care reform is “making healthcare more accessible and affordable through insurance exchanges and accountable care organizations (ACOs) that ensure physicians are working together to provide patients quality care and not worrying about how many tests they should run.”  Peddicord also noted how PPACA closes the so-called ‘donut hole’ under Medicare Part D to lower the cost of prescriptions for seniors. 

Despite these important initiatives, Peddicord recognized that the ACA is not perfect.  Specfically, he asserted that, he would “work with anyone, Republican or Democrat, to make sure this landmark legislation doesn’t stifle job creation and innovation.”  In particular, he noted that Section 6002, better known as the Physician Payment Sunshine Act, deserves specific scrutiny.” 

He noted how the Sunshine Act was “not part of my original health care reform proposal and, ironically, it was slipped into the health reform bill without full and thoughtful consideration.”  He quoted the proposed regulations that were issued a few weeks ago to demonstrate the ridiculousness of the legislation:

“For example, if once during the calendar year, a sales representative from an applicable manufacturer brings $25 worth of bagels and coffee to a solo physician's office for a morning meeting, regardless of the number of individuals who partake, the per covered recipient cost is $25. Since this falls above the $10 minimum threshold for reporting a payment or other transfer of value…this meal must be reported. However, if the practice group includes five physicians, then the per-covered recipient cost is $5 (regardless of whether all five physicians actually consumed any of the food provided), so the payment would not need to be reported.” 

Based on this provision and his other analysis, Peddicord correctly recognized that the Sunshine Act “does nothing to increase access to care or improve outcomes – two things that inspired me to work so hard on health reform. Rather, it’s indicative of the government overreach that has left so many Americans frustrated. We should not – and, if I have anything to do with it, we will not – have government bureaucrats counting bagels!” 

In addition to Peddicord’s comments, John Castellani President and CEO of the Pharmaceutical Researchers and Manucatrers of America (PhRMA) offered his advice about what President Obama should speak about in his State of the Union Speech.  He maintained that Obama should talk about jobs and the economy. 

Castellani noted that, “the biopharmaceutical sector is particularly interested” in what Obama will propose to create more jobs and fix the economy, since innovative industries such as the life sciences industry are job-creators and tremendous contributors to our nation’s economic growth. 

He noted how, “innovation and economic growth go hand-in-hand.”  For this reason, it is his hope that the President also spends significant time talking about the value of innovation.  The PhRMA President said the companies “are very interested in hearing specific policy proposals on how we can ensure that America remains the world-leader in innovation, particularly medical innovation.”  

He asserted that, President Obama should use this “opportunity to propose ideas that will foster medical innovation in the long-term rather than focusing on short-term policies that do not encourage, and in some cases may detract from, future medical progress.”  Additionally, he maintained that , “at a time when our economy is still fragile, it is essential that government and industry work together to help create jobs and improve the economic outlook – and a sound innovation agenda is critical to meet these important goals.” 

Accordingly, he laid out “Four inter-connected policy pillars that he believes are important to sustain the economic and scientific eco-system, advance medical innovation and protect U.S.-based biopharmaceutical jobs are the following: 

1. A regulatory framework to spur innovation – meaning a predictable, consistent and robust regulatory system supported by the best, experienced regulators using the latest, best science;
2. A thriving public/private scientific ecosystem – meaning better collaboration and cooperation;
3. A business environment that embraces biomedical progress – meaning an understanding that the science, while potentially amazing, is difficult, the investment costs high and the rewards are uncertain;
4. A healthcare system that better recognizes the value of medicines – meaning innovative medicines contribute both to improving patient health and can help control short- and long-term healthcare costs. 

Ultimately, as we all watch the State of the Union speech tonight, hundreds of millions of Americans will begin to see and wonder how the President, almost two years later, will defend his health care reform bill and how he will ensure that Americans realize the goals and promises the landmark legislation hoped to achieve. 

Developing Fair Market Value for Physician Payments

Pharmaceutical companies have long relied on healthcare practitioners to provide perspective on developmental and marketed products. Physicians and clinical researchers who specialize in a product’s intended therapeutic area can offer their expertise on how to structure clinical trials and analyze results, assess the likelihood of product uptake and educate other physicians on the benefits of those products. 

The compensation physicians receive for their services must be at fair-market value, but determining FMV can prove difficult.  If a payment exceeds the fair-market value of the services, the pharmaceutical company risks regulatory reprimands, as well as various penalties and fines that can be enforced through the Department of Justice (DOJ) or the Office of the Inspector General (OIG) for the Department of Health and Human Services (HHS). 

No company wants to be seen as offering kickbacks to physicians, which can damage the reputation of both parties, but non-compliant FMV practices can easily put companies in such a position. On the other hand, when companies offer too little to physicians, they find it difficult to attract the thought leaders necessary to help them make tough product and brand development decisions. 

Because the life sciences industry has been hit hard with corporate integrity agreements, compliance audits and OIG fines, they are keeping a close eye on new expert compensation regulations cropping up worldwide. 

Companies are paying attention to how much they spend on individual experts, but when it comes to developing a global strategy for fair-market value compensation, it is rare to find a company that has established consistency across all of its affiliate markets. 

Consequently, a recent study from Cutting Edge Information focused on global expert management and the differences in expert compensa­tion levels between the United States and the European Union.  

Cutting Edge Information is a widely recognized leader in pro­viding fair-market value (FMV) consulting to help life sciences companies develop their physician fee schedules. CEI performs custom, client-driven studies using proprietary databases and research methodologies. Cutting Edge Information’s data found that only 9% of drug and device companies have global FMV fee schedules in place. 

Cutting Edge Report 

The report noted that, “part of the difficulty with proactively establishing a global FMV compensation strategy is that there are too many local regulations — not to mention local customs — to consider. For example, if company policy is to pay experts through flat fees in exchange for their services, companies may have trouble in countries where experts expect to be paid hourly.” 

The report also noted that global strategies for paying experts is a fairly new concept that was “brought about by the OIG’s Guidance for Pharmaceutical Manufacturers, published in 2003.” The OIG guidance called for drug and device companies to compensate consultants and advisors (in other words, experts) at a fair-market value.

With no additional guidance as to how to calculate FMV, drug companies have turned to benchmarking data, historical payments and other forms of aggregate spend tracking and documentation to determine fair-market value. 

Only recently has the FMV concept taken hold in Europe. The Association of the British Pharmaceutical Industry’s (ABPI) recent code of practice changes calls for physician fee schedules to be “reasonable and to reflect the fair-market value of the services rendered.”  With similar language appearing in more and more regulations, life sciences companies have started to turn their attention toward developing global FMV strategy. 

The report also acknowledged that establishing FMV for experts is important considering the Physician Payment Sunshine Act, which requires pharmaceutical companies to start tracking expert payments this January 2012 and to publicly disclose them in 2013. Accordingly, the report noted that, “In the wake of the requirements in the United States, the largest companies in the EU are instituting global disclosure policies.” 

FMV Compensation Lower in Europe than in US 

To provide a guidepost for European thought leader compensation, CEI analysts calculated average hourly rates for the US and for Europe. These averages were derived from 596 data points for the US and 245 data points for the European rate. 

Based on average hourly rates for every expertise level, company size, therapeutic area and type of activity, CEI analysts determined that the average US hourly rate is $306; the average European hourly rate is €183. Therefore, at the most general level, analysts can determine that a US rate is higher than a comparable European rate by close to 13% (exchange rate of 1.4814 on May 4, 2011). 

When taken as a case-by-case basis, this difference does not seem to amount to much, but when extrapolated to total yearly cost, it can easily represent tens or even hundreds of thousands of dollars and/or Euros. 

The number of different factors that influence compensation in the US and Europe makes a single, standard calculation model impossible. At many companies, compensation varies based on both the type of medical professional and the activity he or she performs. Considering just these two factors, there are up to 135 different combinations of qualifications and activities. Also expanding these possibilities are company size and therapeutic area. Finally, companies can elect to pay an hourly rate or a flat rate. 

Because any single formula used to calculate European compensation based on US values would not yield accurate, actionable figures, but instead indicate a trend, CEI analysts closely examined compensation differences to further identify the areas where these differences can be seen. The report noted that experts-in-field in the US have rates ($462) that are 23% higher than the hourly compensation for similar professionals in Europe ($376). For surgeons, the difference is not as pronounced, with a variation of 12% more in the United States ($353) than in Europe ($316). 

Annual Compensation Limits 

Although not yet a widespread practice in Europe, companies are beginning to set limits on how much is paid to thought leaders. Similar to the trend in rates for select thought leader types, companies in Europe are setting limits lower than the ones reported in United States. 

Though companies in the US average compensation limits of nearly US $64,000 per expert, European executives reported limits averaging close to US $50,000, or 22% lower than their US counterparts. CEI analysts believe that regional influences such as country-specific income levels, extent of activities performed by experts, and access to these experts impact the levels of compensation found in Cutting Edge Information’s research. 

Establishing Region or Country-Specific Fee Schedules 

Global FMV strategy has developed organically, emphasizing local market nuances and customs. Accordingly, the report recommended that, “without more formal regulation around expert compensation from governments in Europe or other parts of the world, companies should avoid establishing blanket policies or global fee schedules for” experts. 

Instead, the report recommended that companies “develop regional fee schedules that encompass two or three countries to better accommodate to  regional demand, influences and regulations.” 

Additionally, the report maintained that, “Companies must be careful not to allow these regional fee schedules to spill over into too many other markets. Otherwise, they may find themselves overpaying or underpaying [experts] and running afoul of any local regulations that may preclude physician compensation. 

Finally, the report recommended that companies “monitor individual governments’ policies for working directly with medical professionals prior to contracting these professionals as” experts.”

The Benefits of Universities and Biotech Working Together

Over the past century, we have seen drastic and positive changes in the way our health care system operates, largely because of the modern advances in science, medicine, technology and research.  Much of America’s progress has come from the laboratory of private industry as well as academic medical centers and research institutions.

However, over the past several years, there has been a constant strain on progress in the life sciences and medical industry.  Two separate, but related reasons have caused this.

First, the declining economy.  The recession and the huge hit the American economy took have affected all industries.  The effect is especially widespread in state budgets and at universities. As a recent article in Xconomy noted, “These are hard times at universities in America … [and] State support is dwindling, tuition is booming, and federal research dollars are in jeopardy.”

Second, is the increased scrutiny on academic-industry collaborations, coupled with overly strict and intrusive institutional policies that have prohibited and stigmatized the value of such relationships.

Yet, the article noted that, “U.S. academic research centers are still the driving force for some innovative new medicines, like always.” In fact, the article pointed to one university in particular, University of California at San Francisco, which is under the leadership of Chancellor Susan Desmond-Hellmann.

Desmond-Hellmann, a biotech industry star from her days running drug development at Genentech, “has her work cut out in her third year as UCSF’s chancellor.”

UCSF is a complex, 23,000-employee enterprise that does everything from studying the basic functions of stem cells to helping discover new drugs to treating patients. Starting in August 2009, she’s had the unpleasant job of overseeing furloughs, layoffs, and multi-million-dollar budget cuts. She’s said no, repeatedly, to promising new scientific initiatives.

But she hasn’t been stuck on the defensive the entire time. UCSF has struck a number of creative partnerships with companies like Pfizer, Sanofi, and Bayer, which are being closely followed at other universities. UCSF has also found a way, with the help of some big-time philanthropy, to break ground on two ambitious projects—a $1.5 billion hospital complex and a $200 million neurosciences research facility in the Mission Bay district. There in the same neighborhood, the university has also continued to support QB3, an incubator where academic scientists are starting companies that test whether their ideas just might have what it takes to become new drugs, devices, or diagnostics.

Xconomy times interviewed Desmond-Hellmann to learn about her plans and some of these themes. Desmond-Hellmann said she has a 3-year plan with measurable goals that she says will make her and her team clearly accountable for delivering what they promise.

She asserted that, “At a terrible time, with a rotten California economy, a rotten national economy, a rotten state of the world, people will see there was a medical center, an academic center in California, that positioned itself to have its best days.”

What was most important about Desmond-Hellmann’s interview was her recognition that, “Working in collaboration with pharmaceutical companies is definitely a part of the future of advancing health.” She maintained that, “financially, these deals are small potatoes, and aren’t going to close any budget gap.” For example, “even if UCSF researchers made a breakthrough cancer drug that generates billions of sales per year, it would likely only throw off a royalty stream to the university worth a few million a year—nice, but not exactly a big deal for a multi-billion-dollar institution.”

Nevertheless, Desmond-Hellman asserted that, “these collaborations are about improving the flow of basic research through development.”  And these collaborations are important because academic centers need to be able to prove that they have discovered a breakthrough drug that helps people live longer, better lives, instead of just publishing papers.

Unlike most university leaders, Desmond-Hellmann knows first-hand how much time, money, and risk is involved in creating something new to improve health. And she knows about the tensions between academia and industry. While some, in particular at UCSF, are against academic-industry collaboration, the nature of the economy and regulatory environment shows a tremendous need for these relationships.

Moreover, while industry research and development operations may be big, they are also feeling the same pressure to make cuts as universities. Accordingly, “What’s needed now are the creative partnerships, where someone knowledgeable about the whole process (like maybe a Desmond-Hellmann) steps in and finds a way to more seamlessly bring together industry and academia around what they have in common:” helping patients through new treatments.

The author noted that, “The old way of doing things doesn’t really work anymore. Often, some of the best research ideas would get handed off from academia to a company at a very raw stage of development. But few venture capitalists are funding startups at this early stage of development these days, and Big Pharma R&D has always tilted more heavily toward D than R. The economy has put more pressure on companies to tilt that balance even further away from research, and more toward late-stage development that has a chance to bear fruit in the near-term.”

As a result, the author asserted that, “Universities need to recognize this is how things are” and “if they want to truly translate their innovations into products that help patients, they will have to carry the research a little further downfield themselves.” Fortunately, “some Big Pharma companies have already shown they are willing to sponsor this kind of on campus work at UCSF and elsewhere.”

While “some academics sneer at this late-stage research/early-stage development work,” Desmond-Hellmann recognized that, “There’s a technical competence in taking a discovery from a lab and turning it into a medicine.” She added that, “It’s embarrassing that people don’t honor that technical competence.”

The author predicted that, “If Desmond-Hellmann can persuade her colleagues on campus to rally around this idea—that it’s about science that can impact health, not just science for the sake of more science and grants—then this initiative will be a huge success.”

Ultimately, it was “Academia that gave birth to the biotech industry in the first place, during another decade of recession and malaise: the 1970s.”

Now is the time to create “something equally as big,” despite all the economic challenges, but this can only happen if people in academia and industry can set aside some of their small differences and truly work together.

Dermatology Residents Believe Interactions with Industry are Ethical

According to a recent survey, “more than 70% of dermatology residents and program directors say they believe that it is ethical for residents to interact with the pharmaceutical industry.”  The results were presented during a resident forum during a meeting that was sponsored by Galderma.

The study, conducted by Dr. Erica Linnell, under the direction of Dr. Vincent DeLeo – both of the department of dermatology at St. Luke’s-Roosevelt Hospital Center in New York – assessed whether residents and program directions believe interactions with the pharmaceutical industry affect prescribing patterns among residents and whether they think such interactions are ethical. Dr. Linnell had no conflicts of interest.

The authors “found that most residents have significant interactions with pharmaceutical representatives and most believe that such activities are acceptable in certain circumstances, which is similar to survey results of other specialties, said Dr. Linnell.”

Of the 114 survey respondents from Accreditation Council for Graduate Medical Education (ACGME)-approved programs, 50% were chief residents, 37% were program directors, and 13% were first-, second-, or third-year dermatology residents or associate program directors.  The 17-question electronic survey found that:

-       73% of residency programs accept pharmaceutical support

-       68% accept educational materials

-       55% accept drug samples

-       55% accept funds for travel and registration at national meetings

-       27% accept private lunches or dinners

-       25% accept food for conferences and

-       5% accept pens, notepads, and other office supplies.

A total of 87% of survey respondents reported that the residency program at their university had guidelines for interacting with the pharmaceutical industry. When asked about the guidelines, 60% of respondents reported that interacting with pharma was "acceptable in certain circumstances," 25% reported that it was "never acceptable," 8% reported that is was "not acceptable but not discouraged," and 3% reported that it was "acceptable and encouraged."

When it came to respondents’ personal beliefs, 71% reported that interacting with pharma is "acceptable in certain circumstances," 13% reported that it is "acceptable and encouraged," and 9% reported that it is "never acceptable."

Of the respondents, 55% reported having on-site meetings with pharmaceutical representatives, and 57% reported that they believe that such meetings are appropriate. Off-site meetings were reported by 62% of respondents, with 63% believing that such meetings are appropriate. Most off-site meetings (91%) were reported to be dinner with a lecture.

Survey participants were divided on whether they thought interactions with pharma affect prescribing patterns; 54% said yes, while 46% said no.

A total of 71% of residents reported that it is ethical to interact with pharma and explained that they believe it is important for residents to learn about new medications.  The 29% who say they believe that it is not ethical to interact with pharma explained they believe it leads to biased prescribing, that residents are too easily influenced by pharma representatives, and that accepting gifts and food without educational value is wrong.

Despite this small minority, this kind of strong evidence clearly shows the important role that industry plays in all areas of medicine and healthcare, particularly specialty areas.

Thomas Stossel Addressed American College of Surgeons: Where Has All this Concern Led?

Thomas P. Stossel, MD, professor of medicine at Harvard Medical School, director of translational medicine at Brigham and Women’s Hospital, and co-founder of the Association of Clinical Researchers and Educators (ACRE), recently gave a keynote address at the industry breakfast for this year’s 97^th Annual Clinical Congress for the American College of Surgeons. 

ACRE is a not-for-profit, professional medical association which advocates the value of physician-industry collaboration.

During his keynote address, Dr. Stossel discussed the current environment in medical-industry relationships and noted how a small minority of voices is impeding medical and scientific progress with their concern about potential “conflicts of interest” by “decrying the beneficial relationships between industry and medicine.”  Dr. Stossel asked the audience, "Where has all this concern led?"

"We have gone from bad to worse," he said. "We have immense regulatory issues and massive confessions where we disclose our relationships to industry, and these are used to initiate a whole variety of inhibitions in freedom of speech, freedom of association and reward for excellence."

Dr. Stossel described the current environment physicians practice in today, in which, “All corporate payments to physicians now are disclosed. Peer-to-peer speaking has been curtailed, and physician-industry relationships preclude editorials, journal review articles or service on guideline or Food and Drug Administration (FDA) review panels.”

The reasons given for these restrictions are "that those in industry allegedly live in a separate moral universe than medicine," Dr. Stossel said. "The idea is that those who work for industry are obligated to lie, cheat, and steal for profit and for your investors."  He maintained that the individuals who make such assertions “have launched the conflict of interest (COI) mania.”  However, the evidence for these medical and lay media COI messages does not stack up to reality.

For example, Dr. Stossel pointed to research into the area of COI he conducted a few years ago.  The study looked at 101 papers in high-profile journals from the Journal of the American Medical Association to the New England Journal of Medical on physician-industry relationships.  While Ninety-six percent of the articles emphasized the risks of those relationships, less than half (44 percent) presented evidence to underpin those conclusions about risk, and less than half (43 percent) acknowledged an alternative viewpoint.

Accordingly, Dr. Stossel asserted that, "There is no evidence at all about the effect of physician-industry relations on patient outcomes, yet 76 percent of these papers claim patient harm."  Moreover, only a handful of papers emphasized benefits of medical-industry relationships based on evidence that did not draw inferences about patient care.

Dr. Stossel also dispelled the perception that physicians and the medical industry have a “cozy” relationship by pointing to the fact that “no evidence exists” for commercial bias in continuing medical education, as we have written numerous times.  Instead, as Dr. Stossel correctly pointed out, it is the lay and medical media that have helped perpetuate this COI mania, which is unfortunate because “Despite daunting obstacles, industry relationships have delivered huge value," Dr. Stossel said.

"Evidence that relationships compromise scientific integrity is weak or false, but legal administration and legal strangulation is harming innovation and education and bodes ill for better patient care," Dr. Stossel emphasized.

Prior to the keynote address, Amilu Stewart, MD, FACS, Chair of the Corporate and Foundation Relations Committee, American College of Surgeons (ACS) Foundation, presented results of the ACS Survey of Fellows Regarding Industry Relations. Invitations were sent to 27,021 individuals, resulting in a 9.6 percent (2,582) participation rate in responses to three survey questions.

From the survey, 13.3 percent (341) of respondents said they had developed a product in collaboration with medical industry that had benefitted patients.  Additionally, 9.7 percent (247) of respondents said that they had developed a surgical procedure in collaboration with medical industry that had benefitted patients.  Finally, 45.7 percent (1,172) respondents said that they had participated in a clinical trial in collaboration with medical industry that benefitted patients.

"This was an important survey for us to complete because we had no concept of how involved our Fellows were in collaboration with industry," Dr. Stewart said.

Thomas R. Russell, MD, FACS, Chair of the ACS Foundation Board of Directors, said the ACS Foundation is pleased to sponsor the Medical Industry Breakfast each year to promote discussions on issues of mutual interest to the medical profession and industry.

David B. Hoyt, MD, FACS, ACS Executive Director and ACS Foundation President, recognized that, ACS "cannot educate or innovate in what we do without our relationship with industry," and that the medical industry meeting "is an incredibly important relationship, and I want to do everything to foster and continue that."

Study Shows Adherence to FDA Advertising Guidelines Are in the Eye of the Beholder

 
Advertising is a crucial component of pharmaceutical industry marketing around the world and plays an important role in educating physicians and other prescribers about new drugs.  However, there is concern that physician exposure to advertisements increases prescribing of advertised drugs and critics have raised concerns about the quality of the information presented in these physician-directed advertisements, including a focus on relative, not absolute, benefit and poor referencing.

The Food and Drug Administration (FDA) through its Division of Drug Marketing, Advertising and Communications (DDMAC), regulates physician-directed pharmaceutical advertising in the United States.  However, ensuring advertisement adherence is challenging and FDA resources dedicated to this task are limited. DDMAC’s fiscal year 2008 budget of $9 million is dwarfed by the pharmaceutical industry’s $58 billion marketing budget.

"The limited resources of DDMAC are a major barrier to successful regulation of the pharmaceutical industry's multi-billion dollar marketing budget," said lead author Dr. Deborah Korenstein of Mount Sinai School of Medicine.

While the FDA can require that companies change or remove non-adherent advertisements, given DDMAC’s size and the volume of marketing materials it regulates, it would be unreasonable to expect each individual pharmaceutical advertisement to be reviewed.

Acknowledging this regulatory challenge, the FDA has recently asked physicians to report non-adherent or misleading advertisements through its ‘‘Bad Ad’’ program, explaining that ‘‘With your valuable assistance, FDA can be more effective in limiting the number of misleading promotional messages directed to health care professionals.”

Despite the recent efforts of this program to identify grossly misleading advertisements, there has been no systematic assessment of the adherence of physician-directed advertisements to FDA regulations in the last 20 years and none to current standards, which were last updated in 2001.

As a result, authors from a recent study published in PLoS sought to determine adherence rates to the 2001 FDA guidelines among current print advertisements directed at physicians within biomedical journals and to describe content important for safe prescribing.

The study found that from a small sample that “nearly half of physician-directed advertisements fail to adhere to at least one FDA guideline regulating content.”

Study Design and Methods

The authors performed a cross-sectional analysis of November 2008 advertisements for prescription pharmaceuticals in top biomedical journals published in issues over a single month and hypothesized that rates of non-adherence to FDA guidelines would be high and that many advertisements would not present complete information important for safe prescribing.  The authors excluded advertisements for devices, over the counter medications, and disease awareness.

The authors also evaluated advertisement content important for safe prescribing, including benefit quantification, risk information and verifiable references. The authors’ advertisement assessment tool included items based on FDA Prescription Drug Advertising Guidelines. FDA guidelines describe 21 unique items used to classify advertisements as ‘‘false, lacking in fair balance, or otherwise misleading.” The authors categorized advertisements as adherent to FDA guidelines, possibly non-adherent to at least 1 item, or non-adherent to at least 1 item. Advertisements were considered: 

• Adherent if they contained none of the 21 features used by FDA to classify advertisements as misleading,
• Non-adherent if they contained one or more of the features used by FDA to classify advertisements as misleading, and
• Possibly non-adherent if there were no features clearly defining a misleading ad but at least 1 of those items for which information was incomplete. 

Prior to initiating the reviews, the authors examined advertisements which had received FDA warning letters in 2008 (of which none was in our sample) to determine the approach of FDA to the regulations. All advertisements were reviewed between January and December of 2009. 

All advertisements were evaluated by 2 or more investigators, with differences resolved by discussion. Twelve journals met inclusion criteria. The final sample included 89 unique advertisements for 82 products.  Thirty-six manufacturers advertised products in our sample, with a median of 3 advertisements (range 1–21) and 2 unique advertisements (range 1–7) per company. 

Adherence to FDA guidelines 

Among the 83 unique full advertisements: 

• 15 (18.1%) were fully adherent to FDA guidelines,
• 41 (49.4%) were non-adherent to at least 1 FDA mandated item, and
• 27 (32.5%) were possibly nonadherent due to incomplete information

Content important for safe prescribing was often incomplete; 57.8% of advertisements did not quantify serious risks, 48.2% lacked verifiable references and 28.9% failed to present adequate efficacy quantification. 

There were statistically significant differences in non-adherence rates to FDA guidelines by item content. Nine (10.8%) advertisements were non-adherent to at least 1 FDA item focused on safety, whereas 18 (21.7%) advertisements were non-adherent to at least 1 FDA item focused on efficacy, 16 (19.3%) to at least 1 FDA item focused on references, and 23 (27.7%) to at least 1 FDA item focused on other issues. 

Safe Prescribing Content                                          

Many advertised drugs in the sample presented potential risks to patients, with 31 (37.3%) containing black box warnings and 33 (39.8%) placing patients at risk for death or serious morbidity. However, when evaluating advertisement content important for safe prescribing, the study found that many physician-directed advertisements lacked important information. The majority (57.8%) did not quantify serious risks and 24 (28.9%) failed to present appropriate numbers to quantify benefits. Thirty-six advertisements (43.4%) referenced ‘‘data on file’’ and 40 (48.2%) lacked verifiable references, due either to an absence of any references or to the presence of references only to ‘‘data on file’’ or the product’s package insert. 

Discussion 

Based on the above findings, the authors noted that, “physician-directed advertisements contained bias with regard to a wide variety of issues across content areas addressed by FDA guidance.”  The authors also asserted that, “advertisements do a poor job of conveying basic information necessary for safe prescribing, with the majority failing to quantify serious risks, more than one quarter failing to quantify benefits and nearly half providing no verifiable references.” Accordingly, the authors maintained that their study provides a context to inform the FDA’s new ‘‘bad ad’’ program. 

However, the authors recognized that, despite the high rates of FDA non-adherence, “the mean number of biased features in each advertisement was low and most advertisements we reviewed satisfied the majority of FDA guidelines despite a general absence of content important for safe prescribing.” 

Nevertheless, the authors noted that although FDA guidelines are detailed, they do not target many of the ad features most important for providing prescribers with useful information. For instance, FDA emphasizes avoiding frankly false information and balancing efficacy and safety information but does little to encourage the presentation of useful and accurate information. An advertisement containing no specific efficacy claim, no quantification of drug safety and no verifiable references would adhere fully to FDA guidelines, despite presenting no practical information for clinicians. 

Consequently, the authors maintained that, “physicians should ensure that their prescribing is informed by the clinical literature and not by marketing materials.”  This means more interaction and more CME.  They added that, if “FDA is truly committed to improving prescribing and protecting the health of the public it should demand that content important for safe and effective prescribing be consistently presented in physician-directed advertisements.” 

In addition, the authors recommended that FDA update and simplify its guidelines for physician advertisements to facilitate the review process. They noted that, updated FDA guidelines should be straightforward and objective, and should include requirements that physician advertisements present clear risk quantification, absolute benefit information, description of the appropriate population to receive the drug, and verifiable references, either to the peer-reviewed published literature or to studies registered within federally-sponsored internet sites such as ClinicalTrials.gov in the case of unpublished data. 

The authors noted that these new guidelines might be applicable only to physician-directed advertisements, with separate guidance for DTC material, with greater focus on safety issues. Additionally, they asserted that new objective requirements would serve to enhance prescribing and public health by improving the quality, accuracy and transparency of advertisements, simplify at least part of the FDA review process, and facilitate physician participation in reporting ‘‘bad’’ advertisements. 

Study Limitations 

The authors noted that a major challenge of the study was performing advertisement evaluations given the subjectivity of the current FDA guidelines. For instance, the FDA describes that advertisements are misleading if they use ‘‘a quote or paraphrase out of context to convey a false or misleading idea’’ or ‘‘headline, subheadline, or pictoral or other graphic matter in a way that is misleading’’, without providing explicit definitions. Another limitation was the subjectivity of determinations of adherence. 

The study was also limited because the sample of advertisements was from a single month in 2008, so they cannot comment on trends in advertisement characteristics over time. The authors also focused on high-impact biomedical journals publishing original research, excluding lower-impact and more narrowly focused publications and those publishing clinical reviews, which may also be frequently read among clinicians. 

Conclusion 

In the end, the authors noted that FDA could better protect public health by creating new more objective advertisement guidelines requiring transparent presentation of basic safety and efficacy information. This change is necessary according to the authors because current FDA guidelines are subjective and challenging to enforce and do not emphasize transparency and the inclusion of basic information relevant to prescribing. 

But as John Kamp, Executive Director of the Coalition for Healthcare Communication noted, no one knows for sure what's compliant until the FDA says so, most often in a FDA warning letter.  This serves no one including doctors, patients, FDA and industry.  Everyone loses under the current standards because the rules prevent good communication and subject the industry to unwarranted criticism from the press, politicians and medical professionals and uneven, unpredictable enforcement from FDA.  Accordingly, Kamp argued that, “better regulations would enable better informed patients and doctors, thus better patient care.”

 

Roche CEO Don’t Underestimate the Growing Understanding of Genetics and Molecular Biology

 
Severin Schwan, the CEO of Roche Holding AG—the world's seventh-largest drug firm by sales—noted that while some would argue that “all the low-hanging fruits have been harvested and that the pharmaceutical industry is at an end,” these skeptics “are wrong.”

According to a recent article in the Wall Street Journal, Schwan maintained that, “those who shun the pharmaceutical sector for its lack of prospects don't understand the potential created by a rapidly growing understanding of genetics and molecular biology, and the new drugs that will follow.”

Schwan told WSJ that he believes “there are enormous opportunities in this industry as we are only now beginning to understand how diseases are working.”

Eight months ago, the Swiss company embarked on a 2.7-billion-Swiss-franc ($3.4 billion) restructuring that is set to last two years. The revamp was needed in the wake of the failure of more than half a dozen drugs in development, including the shelving of diabetes compound taspoglutide, which had promised to become a blockbuster with more than $1 billion in annual peak sales.

The series of setbacks saw Roche's share price fall 20% in 2010. Investors feared that, coupled with the U.S. health-care reform, drug-price cuts in Europe and increased regulatory scrutiny of its cancer drug Avastin as a breast-cancer treatment and its eye medicine Lucentis, the Swiss giant's potential for growth had evaporated. Even the restructuring plan, announced in November, which involves shedding 4,800 jobs and aims to save around 2.4 billion Swiss francs in costs from 2012 onward, “left many investors unimpressed as growth concerns remained acute because of the growing insecurity about new drugs in its pipeline.”

The article noted that, “Roche's problems were typical of the sector as a whole, hampered as it is by competition from generics and price cuts, which have seen the industry's growth rate fall to around 4% in 2010, from annual growth rates of around 7% to 9% over the previous seven years, according to data from consultancy IMS Health.”

However, “Mr. Schwan is adamant about the sector's prospects and is full of confidence when he talks about his belief in scientific progress.” For example, this year, all of Roche's seven drug approval applications have been accepted by health authorities, including this month's U.S. approval of skin-cancer treatment Zelboraf, which analysts estimate could help Roche generate more than $1 billion in annual peak sales if it is also accepted to treat other cancer forms.

The nod from the U.S. Food and Drug Administration (FDA), which came two months earlier than expected as regulators were impressed with the medicine's effectiveness, is a major milestone for Roche as the drug belongs to the company's growing class of targeted therapies.

These treatments come together with diagnostic tests that can identify whether a patient can benefit from a drug that targets a specific, genetically mutated protein that is believed to be the root cause of a disease.

Schwan noted that Roche has “a huge potential with their targeted therapies and believes that this strategy is working.”  He added that, “more is expected to come when we consider that all of today's existing medicines address only some 150 different targets, whereas there are more than two million proteins in the human body, of which many potentially can cause diseases.”

Among Roche's most promising experimental compounds, Mr. Schwan says, are lung-cancer treatment Metmab, asthma compound lebrikizumab and breast-cancer treatment pertuzumab. "If approved, the drugs could be used to treat hundreds of thousands of patients and could have blockbuster potential," Mr. Schwan says. "But of course, these experimental compounds need to prove themselves first."

Roche plans to file pertuzumab in Europe and in the U.S. later this year and is in the process of entering late stage trials for Metmab and lebrikizumab.

WSJ noted that, “part of the problem faced by high-end pharma products is governments' increasing reluctance to pay for expensive medicines in a regulatory environment that prioritizes cost-cutting.” Schwan noted that, “pricing pressure, which is expected to cut our sales by 1% this year, is expected to continue.”  Nevertheless, he said that Roche is “confident that our strategic response with a clear focus on innovation will help us, going forward.”

In addition, Schwan noted that the company is “constantly working on productivity improvements across the entire organization,” which have helped put the company slightly ahead of schedule on its restructuring.

As for competition from generic-drug manufacturers—which analysts from brokerage Bernstein expect to lead to an annual sales loss of around 2% from 2014 to 2020 for Roche—Mr. Schwan thinks the likely impact has been exaggerated. “First, one has to be aware that in the medium term we will only lose the patents on two drugs in Europe, which are cancer drug Herceptin and rheumatoid arthritis and cancer medicine Rituxan," he says.

He noted that, “both are biological medicines where identical copies are not possible and therefore regulatory hurdles will be much higher. While it is true that generic competition on simple small molecules can lead to price cuts of 80%, no one yet knows how this will work out for complex biologics.” WSJ noted that, due to the complexity of these drugs, price reductions for Roche may be limited but could reach more than 30%. Ultimately, Mr. Schwan said the company is on track to reach its financial guidance for the full year.