Time to Give Pharma a Break?

The pharmaceutical industry has been under attack again this week. It’s not unusual for people to complain about the price of medicines and the fat profits of pharma, yet even when the industry tries to reduce the payment burden, or provide educational assistance, it is criticized.

First, there was a series of lawsuits filed by several union health plans against eight large drugmakers. They charge that, rather than save consumers money, prescription drug coupons illegally subsidize co-pays for brand-name meds and can actually increase health insurance premiums.

Then the US Department of Veteran Affairs issued a tough ruling on how sales reps can promote drugs to VA medical facilities in the future. One of the new restrictions concerns educational programs. Starting next month, reps will have to submit educational materials for VA review 60 days in advance of any scheduled meeting.  Additionally, materials will be approved only if industry sponsorship is adequately disclosed; if industry-sponsored data is adequately compared with non industry-sponsored data and if materials do not contain a company name or logo.

Both of these developments are worrying.  The pharmaceutical industry is already the most regulated business in the world. Further restrictions will result in fewer incentives to bring new drugs to market and will further stifle innovation.

Not convinced that it’s time to give pharma a break?  Then consider this:

During the Super Bowl, a representative of Eli Lilly posted the on the company’s corporate blog that the average cost of bringing a new drug to market is $1.3 billion. A price that would buy 371 Super Bowl ads, 16 million official NFL footballs, two pro football stadiums, pay almost all NFL football players, and every seat in every NFL stadium for six weeks in a row. This is, of course, is ludicrous.

Ludicrous and wrong!   In fact, the average drug developed by a major pharmaceutical company costs at least $4 billion, and it can be as much as close to $12 billion.

Company N° of approved drugs R&D Spending Per Drug ($Mil) Total R&D Spending 1997-2011 ($Mil)
AstraZeneca 5 11,790.93 58,955
GlaxoSmithKline 10 8,170.81 81,708
Sanofi 8 7,909.26 63,274
Roche 11 7,803.77 85,841
Pfizer 14 7,727.03 108,178
Johnson & Johnson 15 5,885.65 88,285
Eli Lilly & Co 11 4,577.04 50,347
Abbott Laboratories 8 4,496.21 56,202
Merck & Co Inc 16 4,209.99 67,360
Bristol-Myers Squibb Co. 11 4,152.26 45,675
Sources: InnoThink Center For Research In Biomedical Innovation; Thomson Reuters Fundamentals via FactSet Research Systems

However, in all fairness to our Lilly rep, the drug industry has been tossing around the $1 billion number for years. It is based largely on an industry sponsored study by Joseph DiMasi of Tufts University performed 12 years ago. It’s always been a nice number for the pharmaceutical industry because it seemed to justify the idea that medicines should be pricey without making it seem that inventing new medicines is so expensive an endeavor as to be ultimately futile.

But as can be seen from the table above, that figure is badly outdated.

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. Bristol-Meyers Squibb spent just $3.7 billion. At $12 billion per drug, inventing medicines is a pretty unsustainable business. At $3.7 billion, you might just be able to make money –assuming it can keep generating revenue for at least ten years.

So, why is the cost of drug development so high?  Well, a single clinical study can cost $100 million, at the high end. But the main expense, and the main reason for the differences noted above, is failure of potential new drugs during their development.

Has this blog helped to change your views on the industry? As always, SRxA’s Word on Health would love to hear from you.

Drug Reps Set to Become Slaves to Their iPads

In recent weeks SRxA’s Word on Health has run a number of stories about iPads.  For the record, we don’t have shares in Apple, nor do we even have iPads, though we’re keeping our fingers crossed that Father Christmas might bring us one this year.   This latest iPad related post is particularly interesting as it could potentially change the pharmaceutical industry forever.

Last week, GlaxoSmithKline (GSK) sales reps were handed a lesson in “be careful what you wish for.”  If they win their ongoing U.S. Supreme Court appeal over overtime pay, their employers may well make them slaves to their iPads by introducing factory worker style rules for clocking in and out.

For our readers unfamiliar with the case, hundreds of GSK ’s pharmaceutical sales reps signed on to a class action lawsuit demanding overtime pay. The suit  was filed in 2006 by lead plaintiff Anthony Coultrip, who worked for GSK between 2003 and 2005 and hinges on a counter-intuitive definition of what a sales rep actually is. Under federal labor law, salespersons who earn commissions are exempt from protections requiring overtime pay for extra hours worked. Drug reps, however, don’t actually “sell” drugs – they merely promote them and the sale occurs later at the pharmacy. The GSK reps argue that makes them “promotion workers” whose work is so routine that they ought to get overtime.

Anyway…back to the story. If the Supreme Court rules in favor of Mr Coultrip and his colleagues, and institutes overtime pay, life for the nation’s 90,000 drug reps could change dramatically.  Instead of the relative independence and limited accountability that they enjoy today, the life of a pharma sales rep could become a nightmare  of check-ins, surveillance, time-sheets and electronic monitoring.

Hardly surprising given that a huge sum of money is at stake here.  Since the litigation began, at least 19 pharmaceutical companies have been sued by sales reps demanding overtime pay.

To try to minimize overtime payment liability, industry analysts predict that clocking in and out of work via an iPad will soon become the most important act of a rep’s day. Failure to clock in and out may result in loss of pay for that period of time.  Repeatedly “forgetting to clock in or out” may result in disciplinary action including the possibility of termination.

Taking this to extremes, industry insiders predict a scenario in which:

  • Reps will be GPS tracked to verify time and location for all work related time during the work day.
  • The same tracking will also be used to verify mileage for business versus personal use of the company car.
  • Any rep planning to take more than two hours of personal time during a workday may have to get prior approval for a vacation day.
  • Drug reps work will not be allowed to work more than 8 hours per day or more than 40 hours per week without prior written approval from their manager.
  • If reps receive emergency customer calls, outside of their work day hours, they will have to adjust subsequent work time so as not to exceed the 40 hours per week maximum.
  • They will be required to clock out and back in for their mandatory 15 minute breaks, in the morning and afternoon.  They will not be allowed to skip breaks or to do work related activities during breaks.
  • Because all work related travel time will count against the 8 hour work day, most company meetings will be by tele- or video-conference to avoid travel.

However, not all  reps believe they deserve overtime. On cafepharma , the anonymous bulletin board for drug industry gossip, some have suggested that reps don’t work the hours they are meant to work, let alone qualify for overtime.

What’s better?  Is overtime pay worth the loss of freedom and Draconian restrictions?  As always, we’d love to hear from you.

Pharma Reps being replaced by iPads and Portals

As previously reported here, industry downsizing has resulted in the loss of over 30,000 sales positions over the past 5 years.   Now, according to a recent article in the Wall Street Journal, big pharma companies have found a way to replace many of the sales reps they’ve been laying off in recent years.  Apparently the void is being filled by digital sales tools such as websites and iPad apps. Doctors can use the tools to ask questions about drugs, order free samples and find out which insurers cover certain treatments. The changes are designed to cut costs and to reach doctors in ways other than the traditional office visit, which many busy physicians say they find intrusive and annoying. In 2009, one of every five doctors in the U.S. was what the industry calls a “no see,” meaning the doctor wouldn’t meet with reps. Just a year later that jumped to one in four.  Currently about three-quarters of industry visits to U.S. doctors’ offices fail to result in a face-to-face meeting. Throughout the 1990s and early 2000s, drug companies dramatically increased their U.S. sales forces, an escalation most companies came to regret as the economy took a downturn.  Many of those same companies are now involved in this digital shift including Sanofi-Aventis, Merck, Pfizer, GlaxoSmithKline, Novartis and Boehringer Ingelheim . Citing data from market-research firms, Eddie Williams, head of Novo Nordisk‘s biopharmaceutical business in the U.S., said 72% of U.S. doctors own a smartphone, and 95% of them use it to download medical applications. Novo Nordisk has several applications available on iTunes, including one that helps doctors calculate blood-sugar levels and another iPad/iPhone application which offers tools to help doctors diagnose bleeding disorders. Other companies such as Eli Lilly  are now considering “on-demand portals” that will allow doctors to access information instantly as they are treating patients. Although some companies have yet to be convinced of the benefits of e-marketing, most agree it is the way forward. Following the launch of Pradaxa in the U.S., Boehringer Ingelheim put together a digital-marketing package to target doctors, but found that sales calls to doctors’ offices were still the most powerful tool for driving new prescriptions, says. “No doubt digital marketing does have an impact…but I don’t believe, however, the shift happens overnight,” said Wa’el Hashad, the company’s VP of marketing. SRxA can help pharmaceutical clients with all of their digital marketing needs. Whether it’s interactive e-learning platforms, webinars, podcasts, e-newsletters, e-surveys or website design and development our fully customized, physician approved offerings will exceed your expectations. Contact us today to learn more.

Pharma Philanthropy

All too often the pharmaceutical industry is portrayed as evil and greedy. In an attempt to correct this misconception or at least redress the balance a little, SRxA’s Word on Health is pleased to bring you news of its more compassionate side.

According to figures just released by the Committee Encouraging Corporate Philanthropy poll, drug companies gave away more than $13 billion in cash and products last year.

More than half of the $2 billion increase in corporate philanthropy last year came from pharmaceutical companies donating medicine through their Patient Assistance Programs and investing in other initiatives.

While 40% of the 110 companies – polled annually for the past four years – boosted their giving last year by more than 10%, another 17% decreased their giving compared to 2009.

One of the reasons we have seen for increased giving across the board has been increased funding to serve basic needs in communities where companies are working, and pharmaceutical companies, in particular, are in a really important position to do so,” said Alison Rose, the committee’s manager of standards and measurement.

Companies in the consumer staples, financial, industrials and information technology sectors also contributed to the increase in 2010 corporate philanthropy.

So where is all this pharma money going?  According to the websites of the Top 5 global pharmaceutical companies examples of corporate giving included:

  • Johnson & Johnson contributed $588.1 million in cash and products towards 650 philanthropic programs in more than 50 countries
  • Pfizer contributed to numerous charitable projects worldwide including > $47 million for cancer and tobacco control and $7.5 million to HIV / AIDS prevention
  • Roche notes that as a result of some of their 2010 initiatives 47,000 patients received free medicines, 1,100,000 infants were tested for HIV, 11,000,000 doses of flu vaccine were donated and 2,000 orphaned children  were given primary healthcare and other services and assistance through support to the UNICEF & ECPP
  • GSK among their many programs around the world, donated more than 1.6 billion tablets of a drug used to combat intestinal worms.  In the US, GSK supported numerous cancer charities and  provided health education in non-traditional venues for African Americans, Latinos and other ethnic minority communities and set up programs across six states to help high-risk and homeless children receive the specialist medical care they need.
  • Novartis supports many programs both in the US and internationally. In the US alone, their patient assistance programs provided products worth $232 million to more than 100,000 patients in need. Additionally, they have provided free treatment for leprosy patients worldwide, leading to the cure of about 5 million patients since 2000 and has delivered more than 320 million treatments of its antimalarial drug without profit to several malaria-endemic countries

These are but a few examples of the type of corporate responsibility being shown by the pharmaceutical companies day-after-day.  Ladies and gentleman of the Industry we applaud you.

Broken promises & fresh starts

SRxA’s Word on Health can’t help but wonder how Abbott employees are feeling today after learning that 3,000 jobs are to be cut.  According to Bloomberg, the corporate axe will fall as part of the company’s restructuring plan following its acquisition of Solvay’s pharmaceuticals business.

How ironic and painful it must be each time they see their corporate mission statement:  “A Promise For Life.”

So who will stay and who will go?  According to the company, most of the positions to be eliminated will be in sales, corporate staff, manufacturing and research.  While we’re not quite sure who that leaves, we do know that there will soon be a lot more pharma people out there looking for jobs.

Though few Abbott workers will take comfort from the fact that the restructuring will result in savings of $810 to $970 million over the next two years, they are certainly not alone.

2010 has been a busy year for the pharma chopping block.  A Google search on “pharmaceutical sales job cuts + 2010” elicited 331,000 results.

In the last quarter alone, Astra Zeneca, Merck, GlaxoSmithKline, Pfizer, Roche, Takeda, and UCB have all announced significant reductions of their sales force.

It’s all a far, far cry from the pharmaceutical industry zenith of 2004 when roughly 105,000 sales reps were employed in the US.

These latest job cuts appear to support the notion that the pharmaceutical industry is moving away from transactional selling to more value-oriented or solution-oriented selling.  Without its traditional army of sales reps the pharmaceutical industry will need to come up with new and better ways of engaging the physicians.

SRxA is here to help.  Contact us today to learn how we can help you to create and deliver successful programs in these changing times.