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.

Treading Lightly – A New Approach for Pharma

Last week, the Wall Street Journal reported on a dramatic change occurring in the pharmaceutical industry. The on-line article explored how many of the big pharma companies are changing their commercial model in response to the current economic and regulatory conditions. Most notably, drug reps are being encouraged to soften their sales pitches and re-position themselves as a trusted resource for the doctors they call upon. British drug giant GlaxoSmithKline (GSK) for example, has stopped evaluating salespeople based on the number of prescriptions written  Instead, they look at how well physicians rate their representatives. GSK, Merck and Lilly are also asking their representatives to switch from making forceful, tightly scripted sales pitches to acting more like a resource supporting physicians’ treatment. Companies hope to get a foot in the door by providing practical help, such as assistance educating patients about their diseases or navigating reimbursement. Why now?  Clearly, prescribers, who are under increasing pressure from health plans to curb costs, have less time for, and patience with, persistent sales representatives. Plus, the government has been cracking down on aggressive, and off-label marketing. For some, myself included, this is nothing new. Almost 20 years ago when I worked in pharma, I rarely “detailed” my products. Instead, I helped “my doctors” build websites for their own practices, helped to organize, and on occasions even moderate, their clinical meetings and assisted them with….well just about anything they wanted assistance with, be it product related or not. The strategy worked, sales grew and my competitors, even those with better products or prices were neutralized. “Increasing physician satisfaction, it turns out, is a much better way to promote a pharmaceutical agent than simply telling them to write more prescriptions or what the benefits are,” says David Ricks, president of Lilly’s global business unit. Unfortunately, salespeople still can’t provide the one thing many doctors want above all – time!  Even though pharmaceutical companies are attempting to engage prescribers in a more pleasant way, they still don’t always get a positive reception because nothing is being done to solve the doctors’ time problem. The bottom line is that physicians need to fit more patients – not sales reps – into their workday. Although it’s estimated that pharma sales reps  pay 115 million visits to 340,000 doctors each year, 23% of doctors surveyed by market research firm SK&A in 2010 said they don’t see drug reps at all. Eli Lilly decided to adopt its new approach after watching launches of new drugs fail. One problem the company identified was a mismatch between what doctors expected based on sales pitches, and what the products delivered. Before the change in tactics, psychiatrist Carey Cottle, MD says he was more likely to write prescriptions for a competing antidepressant like Pfizer’s  Effexor over Cymbalta, because Lilly representatives had a “high-pressure, car sales-type approach, and it was just not appropriate.” Now, surveys of doctors show that 85% are satisfied with Lilly, up from the 60% before the company changed ways. And business is up too. Sales of Cymbalta were >$450 million higher during the first nine months of 2011, than during the same period in 2010. We’d love to hear what doctors and sales reps think about this.

FDA Gets Tough on Asthma Drugs

The U.S. Food and Drug Administration (FDA)  has ordered four drug manufacturers to conduct additional post-marketing clinical trials of their long-acting beta-agonists (LABAs).  LABAs to be studied are AstraZeneca’s Symbicort, GlaxoSmithKline’s Advair Diskus, Merck and Co.’s Dulera, and Novartis AG’s Foradil.

The clinical trials will examine the use of LABAs when used in combination with inhaled steroids. Each of the LABAs plus a corticosteroid will be compared with the steroid alone in patients 12 years of age and older. A total of 46,800 patients will be studied.  Another trial will include 6,200 younger patients, aged 4 to 11, using Advair Diskus.

Last June, the FDA issued warnings on LABAs, saying they should never be used on their own to treat asthma. Although LABAs relax the muscles of the airway to help patients breathe easier, they can cause an increased risk of asthma symptoms that can lead to hospitalizations and death.

The studies will begin later this year, but results are not expected until 2017.

The huge size of the studies signals that FDA wants to be completely sure about the safety profile of these drugs as they are used so widely.

Clearly however, such large study populations might pose financial challenges for the manufacturers.

As of now, Word on Health has heard that Glaxo plans to fully comply with the requirement and Astra Zeneca is finalizing their study protocol with the agency.

Novartis said it was still reviewing the post-marketing requirements issued by the FDA, while Merck said it would have a comment shortly.

We’ll of course bring you updates as they occur.

2010: Not such a good year for Politics , Physicians, Patients and Pharma

2010 may be one of those years that many of us in the US want to forget. Chief among those hoping for a better year ahead will be politicians, physicians and the Pharma industry.

In view of the festive season we’ve decided to leave the political review of the past 12 months to the excellent political satirists at JibJab.  They entitled their remorseless, but as usual, stunningly accurate review of the year Duet of Regret.  Word on Health is delighted to re-gift this to you. Enjoy!

It’s been an equally bad year for doctors.  In late November, physicians learned that the reimbursement they receive for Medicare patients would drop by 23%  in December and a further 2% in January. These cuts are the latest installment of the 1997 Balanced Budget Act and attempts to rein in spending on health care for the elderly.

This is not only bad news for doctors, many of whose practices are largely composed of Medicare patients but also for the baby-boomer patients just turning 65 who may find themselves without a doctor.  Critics predict, some physicians will see Medicare patients  less frequently, while others will stop seeing them altogether.  Cynics have gone so far as to call this “elder cleansing.”

Now, to top of the year, a report from Public Citizen found that pharmaceutical companies top the list when it comes to defrauding the government. In fact , over the past decade, the pharma  industry accounted for 25% of all federal fines charged under the False Claims Act.

According to the analysis, drug-makers were the focus of 165 major settlements and have paid $19.8 billion in fines and settlements since 1991.  Three-quarters of these charges occurring over the past five years. GlaxoSmithKline, Pfizer, Eli Lilly, and Schering-Plough accounted for $10.5 billion of all financial penalties imposed over that period.

Pfizer holds the record for the largest criminal fine in United States history, $1.3 billion, and the largest health care fraud case, $2.3 from a settlement last year involving its marketing of the painkiller Bextra and other drugs.
Another company joined the violators  list just last week. Irish drug maker Elan announced that it had agreed to pay $203.5 million, half in criminal penalties, half in a civil payment, to settle an investigation of its illegal off-label marketing of the antiseizure medicine Zonegran.

While Word on Health sadly can’t fix politics or physician payments, SRxA can certainly help pharmaceutical companies stay out of trouble.  To find out how, make it your New Year’s Resolution list to contact us.

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.