Hat-tip to Ross at the Bloviator for this one. I know I promised that I’d try to stop writing about pharma, but….. a synopsis of her thesis. Nothing here that you wouldn’t know if you’d been observing the industry for 20 years, but really interesting to see so may arguments put together in one place. Her main thrust is that:

Marcia Angell, former editor of NEJM has been working away on a damning book about big pharma. Her long article is presumably

a) Pharma is not innovative (mostly gets its products from NIH backed research, and from smaller biotech) b) The big money is spent on marketing not R&D c) They use monopoly protection to continually increase prices d) Pharma buys protection by huge contributions to politicians e) The major players are not trying to innovate their way out of the current situation

How is the pharmaceutical industry responding to its difficulties? One could hope drug companies would decide to make some changes—trim their prices, or at least make them more equitable, and put more of their money into trying to discover genuinely innovative drugs, instead of just talking about it. But that is not what is happening. Instead, drug companies are doing more of what got them into this situation. They are marketing their me-too drugs even more relentlessly. They are pushing even harder to extend their monopolies on top-selling drugs. And they are pouring more money into lobbying and political campaigns. As for innovation, they are still waiting for Godot.

Angell’s book is presumably going to be a hatchet job (albeit a justifiable hatchet job) on the industry. Her explicit intention is to make what insiders and observers know about the industry well understood amongst the public, hoping to get the political winds to change and reform the industry.

These are just two of many reforms I advocate in my book. Some of the others have to do with breaking the dependence of the medical profession on the industry and with the inappropriate control drug companies have over the evaluation of their own products. The sort of thoroughgoing changes required will take government action, which in turn will require strong public pressure. It will be tough. Drug companies have the largest lobby in Washington, and they give copiously to political campaigns. Legislators are now so beholden to the pharmaceutical industry that it will be exceedingly difficult to break its lock on them. But the one thing legislators need more than campaign contributions is votes. That is why citizens should know what is really going on. Contrary to the industry’s public relations, they don’t get what they pay for. The fact is that this industry is taking us for a ride, and there will be no real reform without an aroused and determined public to make it happen.

So what’s the likely impact of this book? There have been similar screeds about the pharma industry for over 20 years, many coming from academic docs like Angell. They’ve had zero impact on the industry or on its relationship with non-academic physicians. What may be different this time is that the polls are now showing the decline in the industry’s public image happening at a time when pipelines are drying up. Meanwhile the genomic and information revolutions are going to allow much better tracking and understanding of what drug works on whom. That in turn will begin to make more inevitable demands from payers for better understanding of what they are buying when they pay so much for drugs. So perhaps the pressure on pharma will finally be great enough that they’ll be forced into a change one way or another.   Some innovative people in pharma are planning for that day, trying to integrate the desire to intervene in care with the right cost-effective drug at the right time into their R&D activities. (On a personal note, I’m about to start working with a Foundation that is creating partnerships to promote that model). In the end, to paraphrase Craig Ventner, I believe the greatest days of the pill business are actually in front of us.  But they may not be quite so fantastically profitable, and they will probably not look like the business as usual approach that Angell excoriates.  However, this is an industry that is very conservative (big and small Cs). It’s primary need now is to ensure that it goes into the future on terms that are best for it and the system, rather than invite on itself the kind of dramatic regulation and intervention that Americans frankly do poorly.   Like their kissin’ cousins over at the AMA and their obsession with liability caps, PhRMA and its members need to start fighting the right fight, and their obsession with reimportation is not that.

So the Australian trade agreement passed the house and it includes the limits on reimporting drugs discussed in THCB earlier this week. Of course they passed it by swearing blind that it won’t impact the reimportation issue as apparently Australian drugs can’t be imported here anyway. Funnily enough the AARP is out with a new push poll survey that shows what Harris and others have been saying for a while now: 80% of seniors favor legalization of Rx re-importation. And for the gazillionth time; Florida, Pennsylvania — swing states, old populations.   Next week I’ll be ignoring pharma and trying to convert this from The Pharma Blog back to the THCB that you know and love (or at least some of you love).

Oh dear.  The Industry Veteran was not pleased about what he read from Brian Towell in THCB two days ago.  And he’s in a particularly feisty (not to mention rude) mood about it! So send the women and children outdoors before you read this:

The quality of THCB took a precipitous decline yesterday with your decision to print Brian Towell’s display of excrement.  The substantive content of his long, tedious wail consisted largely of his claim that he possesses wiser approaches to drug discovery than the clinicians and bench scientists now working for the pharmaceutical companies.  Maybe so, and maybe he also has a direct line to the Almighty, but somehow I doubt the likelihood that either condition obtains.  The drug discovery wisdom he chooses to impart in messianic tones consist of such claims as: organizing development by therapeutic category limits opportunities for serendipitous discoveries in basic science; blockbusters dontt necessarily come from targeting big patient populations; combinatorial chemistry isn’t the pat answer for drug discovery and; the one pill per genotype approach has major holes.  Well, a dog has four legs and if your parents don’t have any kids, there’s a good chance that you won’t either.  Simply put, anything of value that your countryman says about drug discovery is not new.  Pharma companies big and small are all trying the approaches he suggests to one degree or another.  All senior R&D managers know that we’re dealing with gambling probabilities here and they’re all smart enough to hedge their bets.  Anything that Brian says outside the common practice possesses the value of a three-dollar bill.    I find Brian’s evangelical tone especially annoying.  By turns he adopts postures that are prophetic, beleaguered, resentful and beatific.  It’s charming that you may want to buck up the prospects for a fellow Brit, but this guy reminds of the transplants satirized by Evelyn Waugh.  After leaving the motherland and landing in a country with a looser social structure, he thinks he has arrived over the rainbow.  Like Humbert Humbert at the end of Lolita, Brian probably figures he might as well drive on the wrong side of the road too.     What are you doing giving so much space anyway to a soothsayer on drug discovery?  Let him peddle his shopworn ideas over to DB Medical Rants or some other such site.  I thought THCB focuses on issues involving healthcare access, quality, cost, marketing and ethics.

When it’s a sample and a legitimate consulting contract, of course. So despite the fact that their employer had settled with the government to the tune of $875m back in 1991 on related charges, eight TAP pharma executives were today aquitted on charges that they bribed physicians. This is great news for those in the murkier end of marketing in the pharma business, as they can go back to business as usual knowing that prosecutors likely won’t bring charges against them personally.

It’s probably also good news for Fastow, Skilling, Lay et al as they try to convince their juries that so long as "that’s how business is done" it can’t be illegal or unethical. It’s probably even better news for Bush, Cheney, Rumsfeld, Wolfowitz et al (and maybe also Michael Moore, although he only created a movie not an occupation) in that lying, cheating, stealing and using selective evidence is now fine so long as you can convince enough people that that’s the way things are done.

I assume a few of my regulars who’ve posted about this case before will have something to say soon enough!

John McCain’s version of the reimportation bill is worrying the drug industry according to Forbes. I don’t think reimportation is the big problem for much the same reasons that an E&Y consultant quoted in the piece doesn’t:

Critics point out that it would be impossible to supply the huge American market from Canada. "The problem is, it’s not going to make a big difference," says Carolyn Buck-Luce, a consultant at Ernst & Young. There simply aren’t enough drugs in Canada, she argues, to significantly bring down prices in the United States: "You can’t force the manufacturers to sell ten times the number of drugs in Canada that they currently sell."

But that won’t help much to improve McCain’s tenuous relationship with PhRMA and the rest of the Republicans’ "haves and have mores" base. (BTW the "haves and have mores" comment was made by Bush in jest before the 2000 election. But many a true word spoken….)

Last week I published a piece on the future of pharma marketing that included a segment copied from another list-serv by Brian Towell from Doghouseonline that was critical of pharma’s reticence. Regular THCB contributor The Industry Veteran was critical of both the industry and Brian for going too far. With a bit of time to consider, here is Brian’s response (Unlike me, Brian’s an unreconstructed Brit–hence the dodgy spelling):

My points of view, although presented with a level of ‘passion’ that many in the big Pharma arena will be unfamiliar with (although I am surprised that one respondent appears ‘rudely offended’), requires some context to be fully understood. Much of the work that Doghouse does with its clients is aimed at unwrapping the conventions and strategy traps that are ‘heritage-based’ behaviours, and using our branding processes to realise a portfolio of marketing/business strategies that provide new opportunities and reveal new value and meaning for the brand. My ‘rant’ was directed specifically at the procurement practices of Big Pharma, but the frame for our work is far more profoundly connected to an industry that is clearly entering a period of crisis, where the big themes like ‘leadership’ and ‘direction’ are being challenged more than ever. And old-school thinking (like the Industry Veteran’s) will get the industry nowhere. So here is some context that should help old codgers reconsider their unpleasantness before they pass judgement.

A classic cue for being locked within a strategic box is the situation that Andy Grove of Intel characterises as a "strategic inflection-point", a "time in the life of a business when its fundamentals are about to change. That can mean an opportunity to rise to new heights". With the current paradox of increasing R&D budgets and inexorable decline in the number of launched New Chemical Entities, is it the case that the pharmaceutical industry is at such an inflection-point? An inflection-point where its greatest danger might be to become efficient at driving a strategy with noticeably decreasing returns at a time when we should respond to the productivity signals that require a move into more effective, alternative strategies? What kind of paradigm-trap may we be in, and how could we escape?

Let’s review some of our assumptions. Many of these assumptions are implicit within our strategic choices and need to be revisited regularly to prevent them becoming hidden strategy-traps that consume investment to little return. We need to actively consider our hidden, and often tacit agenda of assumptions and constraints. We need to articulate these assumptions and explore their current validity. How valid are some of these assumptions?

Assumption 1: It makes sense to organize our research by Therapeutic Areas.

Reality-Check 1: Knowledge networks within any Pharma company are more like a map of the London Underground than the straight, linear tramlines of TA portfolios. Alternative strategies can be found in the mechanism-based Discovery paradigm; elements of this mechanism-based approach can be found in Novartis’ new discovery strategy and Pharmacia’s approach to its COX2 franchise. Whilst an analysis of Paul Janssen’s strategy (the single most successful drug discover of all time) could lead one to adapt a chemo-centric evolutionary model of Discovery.

Assumption 2: Blockbuster drugs come from targeting big patient populations

Reality-Check 2: A significant number of New Medical Entities are aimed at orphan diseases. Many of these, ultimately turn out to be unanticipated blockbusters, (e.g. Glivec) whilst many drugs aimed at large GP markets fail to make ROI due to lack of differentiation in an already crowded marketplace. Interestingly it has not gone unnoticed that many innovative first-in-class drugs target orphan diseases, whilst it is not uncommon for the rate of innovation in many mature major disease markets to be as low as one new blockbuster class a decade. Could these orphan opportunities be reassessed relative to efficacy? A drug bringing a significant health benefit to a small patient population maybe have blockbuster potential as much as a drug delivering a differentiating, but small health difference, to big patient population.

Assumption 3: Marketing ability to know the value of drugs should guide our research.

Reality-Check 3.1: What objective research has compared historic, anticipated market assessment figures with actual returns gained? How much learning has been integrated into the models deployed, as a result of such research?Reality-Check 3.2: Is it fair to load Marketing with unrealistic expectations as to its ability to determine potential market value? Do we not need to at least understand the limitations of this gate-keeper role to market access by bearing in mind the famous examples of 3M’s Post-Its being deemed as having no definable customer, and Honda’s mistaken attempt to go head-to-head with Harley Davidson in the 70’s leading to the introduction of the moped as an unancticipated market leader? Reality-Check 3.3: Have we learnt all the lessons from Viagra? Innovation can lead to the creation of new, market value that redefines the existing market by a new standard or creates an entire new market. Shouldn’t we be both market creators as well as market followers?

Assumption 4: We can serve our TA strategy with oral drugs derived from combinatorial chemistry.

Reality-Check 4: Looking at the chemical structures of FDA approved drugs over the past few years, leads a chemist to realise how few of these drugs (some years as low as 25%), would fit within the industry’s current discovery paradigm of deriving drugs from diverse synthetic combinatorial chemistry. Many launched drugs appear to have been discovered from unfashionable approaches of modifying endogenous ligands or natural products, or derived from recombinant biologicals and antibodies. If delivering on a TA aligned strategy is our mission, this maybe hindered by a limited range of core technology competencies.Assumption 5: One gene to one pill for one disease.

Reality-Check 5: The complexities of biology counters the dogma that every disease may be attributed to a single gene defect. Advances in many fields of medicine, such as oncology and cardiology are as reliant on discovering new combinations of existing agents as well as new agents. Large scale, gene "knock-out" studies in mice reveal the scale of redundancy in biological pathways and the robust nature of phenotype. Polypharmacology has been a key feature of many successful drugs. Psychiatric drugs often work precisely because they target multiple receptors. In addition, new indications for existing drugs account for a significant fraction of the revenue of blockbuster drugs and provide as many new treatments per a year as the number of first-in-class New Chemical Entities.

Assumption 6: The wealth of drug targets from the Genome demands only large-scale research organisations will succeed.Reality-Check 6: The 25,000 genes in the human genome, is a significantly smaller number than was expected only a few years ago. Our increasing understanding of the psycho-chemical limits of drugs and drug targets and the redundancy in biological systems points towards there many only be a several hundred high quality targets tractable by means of traditional oral drugs — roughly equivalent to the number of projects in our Discovery portfolio. In addition the industry has launched on average one new blockbuster class per year yet 80% of our research portfolio is predicted to have a potential success rate as low as 1 in 51.

We are challenging ourselves to be more efficient in delivering on our strategy. However all strategies have a sell-by date. Effectiveness requires a portfolio of strategic choices. The trick is to recognise and anticipate the cues for strategic entry and exit: the moment that diminishing returns appear. It’s all about timing and choices. The traditional Knowledge Management approach is to manage knowledge around what we currently do, to make us more efficient, whereas we need to manage knowledge around what we are going to have to do in the future; to make us more effective. We need a new portfolio model that exploits our tendency to populate empty boxes and draws us into creating new capabilities and exploring real and imagined constraints, preparing us for radical shifts.

Branding (which we define as ‘managing for meaning’) helps to unlock new strategic options, within the holistic context of the capacity and capabilities of the business. It reverses the legacy-based, unsustainable paradigm by releasing new and valued ways of becoming more effective (returns/profits to the business) with radically rationalised efficiencies (less wasted effort and duplication, and greater connectivity). Our starting point is always solution neutral, as only when the brand has been formed into a ‘vehicle for meaning’ do the new, more valuable strategies reveal themselves. Part of that process involves changing the way the marketing culture thinks, and then encouraging overcommitment to the inevitable change and managed decision-framing and risk that new activities bring.

Unfortunately the industry is largely managed by individuals who do not have the capacity (or strength of will) to accept change, and are largely risk-averse. This is almost certainly why the general public’s view of Big Pharma tends to be suspicious and unresolved. Our experience tells us that Leadership and Direction are both ‘side effects’ of well managed branding activities.

Without meaning, you cannot have leadership or direction. As the Cheshire Cat famously advised Alice, "When you don’t know where you’re going, every path takes you there".