Digital Darwinism

Digital Darwinism is when technology and society evolve faster than an organization can adapt. Digital Darwinism is a fate that threatens most organizations in almost every industry, but particularly those in the pharmaceutical industry in India.

Evolution of technology will make it tougher for pharma companies to differentiate, engage customers and compete, unless they master digital evolution.

Digital Evolution

 

 

Donald J. Trump is POTUS

Initial reactions of the stock market to Donald Trump’s victory in the US Presidential Elections is one of joy as witnessed by the jump in share prices. This is obviously a very unmuted reaction to the settling down of the anti-pharma rhetoric offered by Hillary Clinton. While investor sentiment is obvious, what I find surprising is that the industry lobby bet more on Hillary going into the White House than Trump. Despite all the recent anti-pharma rhetoric from her, they still preferred the staid Democrat (by funding her campaign) over the wildly unpredictable Republican.

This might have been because in his manifesto, Trump spoke little of drug pricing but more about importing medicines to reduce their cost to American citizens (“Allowing consumers access to imported, safe and dependable drugs from overseas will bring more options to consumers”). How he intends to increase medicine imports while curtailing international trade will be interesting to watch. He also spoke of following free market principles to broaden healthcare access, make healthcare more affordable and improve the quality of the care available to all Americans.

So, does this mean that he will loosen up IP laws, make it easier for generic companies to manufacture on American soil (or encourage drug imports despite his claimed abhorrence for trade) and increase competition in the sector thereby bringing down prices of healthcare in general and medicines in particular? This seems plausible as a solution that he hasn’t yet explicitly offered, while promising to do away with the Affordable Care Act ‘on day one’. If he can pull that off, he just might go down in history as a great President.

If Trump really backs up his rhetoric with action then it indeed augurs well for the Indian pharma industry which stands to gain the most. Also, since Big Pharma has not exactly backed him so far, he might take a more serious look at easing up imports to tighten the screws on them.

The critical thing that I will look out for is 1) the stand he takes on IP laws and 2) easing up local manufacturing for pharma. On the first point, his view on IP will be particularly interesting since he vocally opposed the TPP and TTIP – two of President Obama’s biggest attempts to create a near universal acceptance of US IP law. On the second point, although quite unlikely, if he makes local manufacturing easy, Indian companies can make a windfall profit given that they are more comfortable with FDA procedures and requirements than they were a few years ago.

Overall it does seem net positive for Indian pharma unless Trump’s famous unpredictability comes in the way.

Current and Future Trends for Pharma

We live in exciting times. New technology and innovation that can change the way we live, is pouring out at unprecedented frequency. It is well known that although the pharmaceutical industry is considered to be very technologically advanced, it is also one that is quite inward focused and therefore stuck in the past. Therefore, it has been of great interest to me to understand how advances in technology and innovation are shaping trends and how ready the industry is for those trends.

From my viewpoint, in the last few years, the industry has defined its success on how it handles the following three trends:

  1. Increasing Role of Generics

A record number of patents expired in the last few years. As soon as a drug goes off patent, generics force drug prices to drop by almost 85 percent. Pharmaceutical companies have responded to the generic threat in several ways.

It was thought that the most promising approach is drug companies getting into “branded generics” themselves. The logic was that these branded versions of their original drugs sell for higher prices than unbranded generic equivalents but are less expensive than the true branded product. While this didn’t work for ‘innovator companies’, it did throw up a vast generic industry globally with companies such as Teva, Valeant and Mylan growing into industry dominating positions as governments around the world preferred cheaper generics.

  1. Emerging Markets

Rapid growth in emerging markets is a beacon of hope for the pharma industry. The Indian and Chinese drug markets could grow even more rapidly. However, drug firms’ traditional approach of creating drugs in the West and then pushing them in the East is not likely to work any longer for a several reasons.

First, there is a significant price pressure in these emerging markets, which argues for a stronger role for branded generics. Second, drugs developed in the West are not always relevant in emerging countries. Virally induced cancers, for example, are rare in Europe but common in China. Finally, the insurance and payment systems in many of these markets are quite different from those in the developed world.

  1. Outcomes – based medicine

Pressure on healthcare costs is rapidly pushing pharma to enter into outcomes-based pricing deals with payers. While there have been a few noteworthy ones so far, companies are likely to add more to that list soon. A majority of health plans want to ink outcomes-based contracts with companies, particularly in the high-end, niche and ultra premium priced therapies such as hepatitis C, oncology, multiple sclerosis and rheumatoid arthritis among others. Even drugs for widespread chronic conditions–such as cardiovascular medicines–are also on payers’ radar.

Unless the preference for outcome based drugs picks up faster, the industry is due to commoditize itself. As the blockbuster model becomes less dominant and the market becomes more competitive, commoditization has led to business models to become more customer-centric.

We have seen medical costs increase per capita even though the industry has commoditized. With costs increasing, and patients expected to pay for innovation on their own (as payers fail to keep up with technology and innovation), the following three trends are set to change the way health care will be consumed. How cognizant pharma is to these trends will probably decide how it moulds itself for the near and foreseeable future.

  1. Personalized Medicine and Empowered Patients

Personalized medicine and targeted therapies can significantly increase the effectiveness of new drugs in specific patient groups. Drugs that would be deemed ineffective in typical clinical trials now have a chance to show high degree of success among certain patients.

This changes the economic model of firms and calls for highly specialized marketing. Some experts argue that this specialization may force the industry to move away from its vertical structure and focus instead on a few core areas such as drug discovery or development. It also calls for drug firms to take a larger role in diagnostic procedures. This trend is very promising, and is fast expected to come of age.

Unless payers place a premium on outcomes-based, patients will have to self-finance this innovation. How will pharma react to it? When patients pay for innovation, they research it, gather information around it and update themselves regularly. Here lie opportunities for pharma to engage with empowered patients.

  1. 3-D printing of drugs

The first 3-D printed drug was approved by the US-FDA in 2015. If the trend catches on – and it surely will – patients can print their pills on their own and completely bypass pharma. All they need is to use the algorithm or procedure that will become available on the internet and use a 3-D printer at home.

Business savvy pharmacy chains may sell these procedures to patients instead of pills. In its current state the pharma industry has no control on 3-D printing and no coordinated action to counter it. Does it have a scenario with an action plan ready? And if you think it sounds like science-fiction, be aware that human organs that were made using 3-D printers have already been used for transplants.

  1. Supercomputers

Google announced recently that it launched a feature called symptom search which seeks to use its vast computational prowess to help patients self-diagnose their symptoms. In its current mode, this is unthinkable in pharma that always tells patients to consult their doctors.

Google’s use of combining big data to mine zillions of patient records and match symptoms search words to throw up the most relevant answers is a show of how artificial intelligence and big data can be harnessed through the power of supercomputers. Another example is IBM’s use of machine intelligence to scan through zillions of doctor notes and available medical literature to throw up diagnosis and treatment plans for treating diseases. Imagine the impact this can have on pharma which prides itself as the sole owner of information on disease and drugs. This, it considers, is its sole value proposition to its health care professional customers. With supercomputers, artificial intelligence and big data, pharma risks losing the very value that drives its customer interactions and therefore its business. Does pharma have a plan to counter or harness this development?

The challenges facing pharma due to developments in the outside world are not routine ones in the traditional sense. The solutions will revolve around ‘unlearning’ a lot. It will be very interesting to see how a traditionally technologically advanced sector surfs the wave unleashed by rapidly developing non-traditional technology.

 

“Challenge” – Pharma’s middle name

For the Indian pharmaceutical industry, ‘challenge’ has come to be its middle name. While for one part of the industry it is to create newer and better medicines for the diseases of tomorrow, for the rest of it; the challenge is simply to get to that tomorrow.

40 years after India aspired for self-sufficiency in medicines, the Indian pharma industry has emerged as a robust, globally-aligned industry that has witnessed substantial growth. Yet, challenges remain. We tend to think of these challenges as applicable to different sections of the industry i.e. MNCs and domestic companies. In my experience, they more often than not, apply to different parts of the same organization.

Domestic Giants:

  1. Abiding by the UCPMP code – the challenge is to continue growing at the same rate (13-15%) within a strictly ethical business framework. This is made worse by a total lack of co-ordination between the different lobbies representing the industry in India.
  1. Re-establishing credibility– Here the challenge plays out at multiple levels

(i) HCPs – resetting expectations within a new business model

(ii) MSMEs – gaining orders from govt tenders, Jan Aushadi and other public health initiatives.

(iii) Manufacturers looking to enter the lucrative US market after the slew of 483s issued by the FDA

(iv) General public – convincing them that the prices that they pay for medicines are the best possible ones

(v) Public health – convincing the govt and other activist groups that pharma cares enough about society to participate in neglected diseases (eg – Sun Pharma partnership with govt on malaria eradication)

  1. Non-evolving business models – This challenge is common to both domestic and MNC companies albeit in different contexts. For domestic giants, this would involve issues like inability to transcend a transactional model with all stakeholders (docs, pharmacies and patients). This involves incentives to HCPs and rebates to pharmacies and patients. While money is definitely a decision driver, it precludes the opportunity to create meaningful value which is often more appreciated by receivers.

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Multi-National Corporations:

  1. Growth through fewer new product introductions – This challenge has recently become applicable to domestic giants as well after the govt action against fixed dose combination products. However, I do not consider this a rate limiting step for companies since they have the option of launching free-dose combinations or the single drugs on their own. Specifically for MNCs, a dry pipeline followed by uncertainty of monopoly in the Indian market (Sec 3(d)) and a threat of capped pricing is a far bigger needle mover in my opinion since MNC business models are copied from the western parent orgs and rarely if ever localized in the true sense. This brings me to the next challenge.
  1. Operating in a Gx market like an IP firm – Following western business models may add to novelty for a while but are rarely sustainable on scale. Dabbling in ‘new financing methods’ or other such may reflect the temporary genius of the MNC marketer but hardly does much for long standing issues of creating true access to innovative medicines or penetrating beyond Tier-3,4 markets. Again, opportunities to create meaningful legacy in a foreign land is all but lost.
  1. Non-evolving business models

(i) In the context of MNCs, this challenge comes from the fact that the parent organizations do not consider the 4Ps very seriously when marketing an innovative product and very few MNCs market generics globally. Therefore, their prescribed business model remains very HCP focused and ignores opportunities to partner with other stakeholders. This despite the fact that there is enough literature to prove the considerable and certain shift in decision making from HCPs to HMOs/insurance payers, pharmacies, patient groups and caregivers.

(ii) MNCs also struggle with making sense of the digital space (one does not see this too much from domestic giants) and make their models very rep-centric. This allows a single channel to be maximized while all but ignoring multiple other channels of direct contact with HCPs and other stakeholders.

(iii) Utilizing alternative (non-rep) channels can be a good way to harness the increasing power of the patients and their caregivers while reducing the appalling asymmetry of information that plagues this industry.

(iv) Unfortunately, with the power of making conversations comes the great responsibility of owning up to mistakes. Not having to do so is a singular pleasure offered by monologues.

Of course, challenges are aplenty and hardly limited to the ones listed above. As the country moves ahead, these challenges, coupled with fierce competitive pressure, could further escalate, if not attended to with crafty strategies by companies keep up with the evolving business environment.

 

India Pharma – Of Markets and Morals

Of late, the pharmaceutical industry has been in the news for all the wrong reasons. First, the government intervened to bring in large groups of medicines under the price cap to make them more affordable to the sick. Even before that happened, companies were caught overcharging for some medicines in violation of the prices set by the national price regulator.  Recently fixed dose combinations (FDCs or products containing two or more medicines in a single dosage form) were banned en masse by the government. All these decisions caused observers to declare that the free market in pharma had all but failed.

Fixed Dose Combinations (FDCs) – convenient but deadly

Recently, an expert committee found about a 1000 of these products to be irrational in nature which means that they could potentially harm patients who consumed them. Commentators pegged FDCs to constitute nearly 50% of the $15 billion domestic Indian pharma market. It is impossible to believe that such a large market exists without consumer demand to match.

These medicines have been available for years – in some cases, over 30 years. To be sure, this doesn’t make it legitimate. If FDCs have been deemed to be unsafe for patients by experts, then we must accept the verdict. What is wrong is wrong and one should not defend it.

What one should definitely do though, is debate how to make things better. Why were irrational combinations approved? What systemic shortcomings should be plugged to ensure that this doesn’t happen again? What kind of punitive action should be forthcoming?

Rather than engage in such conversation, the discussion in the public domain has been completely a moralistic one. Pharmaceutical companies have been labeled greedy and corrupt. They have been accused of caring nothing for human lives and focusing only on making profits instead.

This is not to absolve companies at all, but what seems to irk some commentators more than anything else is that no laws were broken and so it is difficult to lay the blame squarely on one party. To confound matters, the courts immediately granted stay orders on the ban. This prompted commentators to wonder if companies bent the rules. Why else have state regulators – who approved most of these products – not stood up to defend their case, they ask?

Instead of such conjecture, would it not be more fruitful to understand why this was allowed to go on for so many decades?

Governance and Free Markets

If FDCs were irrational, why were they authorized in the first place? If the rules stipulated that licenses obtained from state regulators be validated by the central regulator, why were there no checks in the system to make sure that was done?

Obviously, there isn’t an appropriate approval system that seeks proper documentation. There is no proper adverse event reporting (AER) system in place that helps gather real-world evidence of the harm caused by such medicines. Absent all these systemic check-points, the government action seems ham-handed and open to moralistic judgment.

This is probably why an informal survey carried out by a leading business daily found that 40% of doctors disagreed with the ban on products they had routinely used in thousands of their patients over many years.

It is common knowledge that the governance system is severely underdeveloped in India. Yet, when a PIL was filed in the Supreme Court of India, the judges threw the case out saying something to the effect that they had bigger priorities to work on! An indifferent judiciary kills free markets.

In this backdrop, does a ban seem like the best solution to the problem? It seems more like a reaction by a hapless regulator to fill the void created by an inefficient judicial system. Yet, there is not a single voice appealing to reform this system. That would have been more logical than moralistic jingoism.

Aside from the lack of science to support the products, the ban is based on the fact that these FDCs aren’t approved by the US-FDA. This is simply because the single medicines used in creating the combinations are often under patent protection and belonged to different companies. It would take extraordinary effort for these companies to forge deals to create such combination products. India does not recognize these patents and therefore Indian companies can easily formulate combination products.

Voice of the patient

Sadly, what began as an exercise to help patients reduce pill burden and increase compliance to therapy ended up in an overambitious industry effort to create products, not all of which were supported by science.

But, has anyone bothered to ask what the patient wants? It would be interesting to examine if patients complained about problems with these products. What happens to people for who a particular combination that worked to relieve cold and fever for years is suddenly pulled off the market? Shouldn’t consumers have a way of lending their voice too?

Despite being morally correct to do so, no commentators called for the formalization of patient bodies that can have a place at the table during such decisions. No one asked if it was right for government to decide what’s right for people. No one asked about personal choice.

On one hand, it is common knowledge that goods with great demand that are banned by governments, find their way to consumers through a parallel marketplace that we commonly call the ‘black market’. The government knows this through its strict regulation on alcohol, narcotics, gold and other such goods. Sadly, it learns nothing. Is it morally right to allow patients to buy low grade medicines off the black market? If the government cannot tell people about legitimate medicines, can we expect them to “protect” citizens from spurious and counterfeit ones?

Corporatization of Free Markets

On the other hand, it goes without saying that exploiting loopholes in the law is definitely not a smart business decision. History has taught us that such seemingly short-term benefits can turn out to be disasters in the medium to long term. Companies considered market leaders and ‘too-big-to-fail’ have disappeared after doing so in the past. Why do executives not learn from history then? Are they evil, scheming Scrooges as they are made out to be?

Perhaps, corporate incentives are completely misaligned. They are too skewed towards profit. While this in itself is not bad, it can encourage risk, recklessness and avarice especially in a system with a grossly underdeveloped governance structure.

What about internal ethics and governance policies of companies? Even if local laws are not stringent about submitting scientific evidence to back up the therapeutic benefit of these products, shouldn’t drug-makers have gathered evidence anyway? It is no excuse at all as observers claim,  and rightly so.

Morals and Markets

At the end of the day, whether for moral reasons or economic ones, companies should know that irresponsible behavior undermines the very nature of the free markets that they advocate for. Popular moralistic sentiment mistakes corporate behavior as the epitome of the evils of privatization and the subsequent failure of free markets. The irony is that bans, punitive government action and continued interference prove time and time again that markets are NOT free at all.

Much reform in the space is required to set markets free in the true sense. To argue against free markets by pointing out recent failures is to not understand what free markets truly mean.

Not much can be said if the government is forced to intervene because of reckless corporate behavior. The key question is who will stand up and take the responsibility of breaking this vicious cycle?

Until then, we will misguidedly worry about markets becoming detached from morals instead of using the opportunity to push for reforms that will truly benefit patients. And that is through a free and fair market.

Will pharma forsake emerging markets?

The post-9/11 world was a difficult place for both political and business leaders to adjust to. As power structures in the world shifted, the developed world struggled to retain political and economic control in a scenario sometimes described as the ‘decline of the West’. Capital fled these risky markets in search of those that were relatively safe and presented opportunities to grow. The influx of capital from the West into markets around the world caused ‘the rise of the rest’. These markets in the developing world quickly adopted open-door policies and welcomed large western corporations to their humungous customer bases.

This context is important to understand how the pharmaceutical industry viewed the developing world and how they leveraged opportunities that it offered. It is also important to understand how governments and policy makers in the developing world responded to the influence that western businesses wielded in their jurisdiction.

While growth strategies in the pharmaceutical industry had become dependent on expansion into emerging markets, they did not seem to consider a growing middle class in these areas as an opportunity to improve the quality of life there. Instead companies treated these populations just like their customers in the western world. Almost identical business strategies were deployed in geographies that were – in reality – culturally, socially and economically very different.

What caused markets to ’emerge’?
What the industry failed to acknowledge was the ‘DNA of the emerging markets’: the failure of state-led economic development and the need for capital investment. First, state-led economic development failed to produce sustainable growth in the traditional developing countries. This failure and its tremendous negative impact pushed those countries to adopt open door policies, and to change from the state’s being in charge of the economy to facilitating economic growth along market-oriented lines. Second, developing counties desperately needed capital to finance their development, but traditional government borrowing failed to fuel the development process.

In light of the unsatisfactory results of government borrowing, developing countries began to rely on equity investment as a means of financing economic growth. They sought to attract equity investment from private investors who they hoped would become their partners in development. In the past, the pharmaceutical industry failed to grasp this.

As governments saw industry practices that seemed more exploitative than collaborative, the enthusiasm for foreign equity seemed to disappear. Emerging markets became keen to ensure that medicines were more accessible and affordable to their population, while also ensuring that healthcare bills remained within control. So, in parallel to rolling out health cover, China for example has also introduced several cost containment initiatives that are expected to keep costs under check.

Similarly, other markets increased their market access barriers. Turkey — which possesses a generous public health insurance system — recently increased its social security discount rates on reimbursed drugs. This, along with changes to the reference pricing system, saw the pharma industry lose billions of dollars in that country. Russia and India also took steps towards controlling prices of their respective essential drugs. Brazil has adopted several protectionist policies that seek to assist its domestic industry. The bad news is that matters like these that were of utmost importance to local governments; lay at loggerheads with business plans of the pharmaceutical industry.

What should pharma do in Emerging Markets?
The initial enthusiasm that erupted when emerging markets first demonstrated their potential has often given way to disappointment, as early—and possibly exaggerated—expectations remain largely unfulfilled. Since go-to-market models typical of mature economies have often failed to adequately tap the huge potential attributed to emerging markets, pharmaceutical industry leaders are rethinking and, in many cases, transforming their operating models to better address what they have learned about these markets. This is the good news.

Traditional operating models have for decades been largely defined by fully integrated operations, which included significant investments in R&D hubs and selected manufacturing sites. Emerging markets, on the other hand, have usually been regarded as places only for selling medicines, but very rarely as potential locations for developing or manufacturing them. This view is now being challenged.

The pharmaceutical industry is now trying to balance the drive to build a sustainable business through increased market share, volume, and profits with a global commitment to work with governments and other stakeholders to support efforts to deliver medicines to as many people as possible. Localization is important as Brazil and Turkey have shown. Investments in local research, development and manufacturing will be effective levers to succeed in this geography. The industry does not want to be seen as hesitant to commit itself to long-term investments in the region. To paraphrase a well-known cliché, the industry well realizes that winners will be those who understand how to balance their global competencies with tailored approaches for the local environment. And it is rapidly preparing itself to do so. The industry is actively seeking to avoid an influx of western business practices resulting in a mirror image of western markets, but with a lower price structure.

Are Emerging Markets still important?

By various estimates, the global pharmaceutical industry is expected to derive 30-40% of its total sales in emerging markets. Companies are now actively considering customer clusters, finding cross-border similarities, establishing global reach with local relevance, and creating effective and rapid execution capabilities to be better able to gain the foothold in emerging markets they’ve long been trying to achieve.

As the pharmaceutical industry readies itself for its next wave of growth, are the highly attractive emerging markets occupying an expanding share of its geographical portfolio? The question is more relevant now as US stocks have rallied impressively over the past several months while emerging markets stocks are essentially unchanged since the beginning of 2010 and currencies have been volatile. Even though these have been lagging for several years, investors should not be surprised if that trend reverses in 2014 as the Federal Reserve winds down quantitative easing and moves toward a more hawkish monetary policy. The impact has been visible now for a few weeks as bourses across emerging markets rallied.
The term “emerging” hints at a process that will in all likelihood unfold over a period of time. It is estimated that it will take a minimum of a decade to build the necessary delivery infrastructure and create the ability to pay for sophisticated pharmaceuticals in the emerging world before the pharmaceutical markets there begin to reach the value and volume of those that currently exist in the developed world. Therein lays the great opportunity.

As the pharma industry grabs the chance to channelize its global focus into the developed world for the good of the people there, its business practices will evolve to embrace and not forsake markets that emerge to support it.

Published earlier at www.pharmaphorum.com. Link here.

A pinch of creativity and a fist full of commercial effectiveness

Rapid change across the pharmaceutical industry in India is causing many companies to re-evaluate their sales and marketing strategies. The rampant generic nature of the market leaves it commoditized with little to no leg-room for branding and differentiation. The threat of price control and loose IP laws discourage the launch of innovative products leaving little hope of adding freshness to the portfolio. In such a scenario companies must focus on maximizing returns on revenues that accrue from existing products. Doing more with less, in an increasingly competitive market, inevitably puts pressure on the sales force.

Today, sales forces have to prepare themselves to deal with two significant shifts in disease and healthcare management that can change the way they work in the future.

As a response to disease patterns moving from acute to chronic, the first is a fundamental and significant shift in healthcare philosophy and medical research – from a world in which we “react” to disease and illness after it has happened, to one in which we will be doing far more in advance to “prevent” specific health care problems. The driver for this massive change is the emergence of extremely specialized and highly personalized medical treatments based upon one’s own particular DNA.

The second shift (which is because of the first) is that healthcare is now becoming:

a. Predictive – forewarn people of susceptibility to diseases.

b. Preventative – empower them with information and resources to take preventive measures and to keep themselves healthy.

c. Personalized – provide information that is most relevant to them and what they want to know instead of generic and unimaginative information (n=1, R=G).

d. Participative – make people a part of decisions made about their health. After all, it’s their lives. Enable them and trust them to hold themselves accountable.

The common underlying cause for these two shifts is the advent of technology.

Are the industry’s sales forces, with their current structure and training, capable of leveraging to their advantage the impact that the advent of technology has on the way patients seek treatment and on the way doctors treat them? The recipe for success is probably a pinch of creativity and a fist full of effectiveness.

Pharmaceutical companies have managed their business in much the same way for decades. But significant changes in government regulations, market conditions, and technology will force the industry to look for new business models and practices. With a little bit of creativity, companies can achieve a lot more and adapt quicker to the changes. Sales teams must evolve to adapt to the impact that technology will have on the pharma business model. Consider a few changes in the buyer-seller dynamic that is expected to emerge in the pharmaceutical industry causing a deep seated transformation in its fundamentals.

1. In 1–2 years we will see a hybrid salesperson emerge, and they will be technically, culturally, socially, and skillfully diverse and astute.

2. In the Western world today about 85% of buyer-seller interactions happen online through social media and video. Customers will not need a field salesperson to come on-site as regularly as they do today.

3. With the amount of information available through technology, the internet, social media, smart phones, tablets etc, the customer won’t need to engage early in the sales cycle. A total of 60% of the buying process will already be completed before connecting with a salesperson.

4. Virtual interactions will replace face-to-face field visits. Right now, Skype, web conferencing, and video are quickly catching on over face-to-face visits and traditional meetings in other industries. Tele-consulting or tele-medicine is common. If doctors prefer to see patients online, what are the chances he / she will want to see a sales rep in person?

5. With India moving towards Universal Health Coverage, doctors will no longer be the decision-makers. We will be up against non-medical decision-makers who may be tele-commuters or technologically savvy people.

6. It is only a matter of time before healthcare providers would start prescribing mHealth apps as soon as they prove to be as or more effective than prescription drugs.

So if your most important customers today (doctors) are not going to be the most important customers tomorrow, how well are we prepared to deal with non-medical people who are more clued on to technology and seek information from the internet, intranets, online groups, social media, patient activist groups etc? If doctors choose to decrease personal interaction and seek information, diagnosis and treatment remotely, what impact will that have on the current model?

Maintaining ongoing commercial operations, as it has been managed over the last decades, is economically unsustainable. Pharmaceutical companies must adapt to a new environment, which is more demanding than ever before. They must adopt lower cost models across the whole value chain and improve productivity and efficiency in their commercial approaches. Dispassionately analyzed, almost every “innovation” that we hear about in the industry is merely a tweak of the existing business and / or model. For an industry that has made colossal investment into research, pharma is uncharacteristically risk-averse when it comes to the changes coming in health technology.

None of the changes mentioned above essentially threaten the fundamentals of the current model. The pharmaceutical business, in India, will continue to be a B-2-B model for the foreseeable future. However, customer needs and wants will evolve as technology adoption spreads. Patients who have more access to trustworthy information will seek to participate in decisions pertaining to their health while health providers will work to predict and prevent illness to contain costs. These developments create exciting opportunities for pharma marketers to differentiate and deliver value. The more creatively and effectively they do it, the better.

This article was previously published at http://www.pharmaphorum.com

Sealed Doors of Bomb Shelters

When discussing why the pharmaceutical industry does not use social media, Andrew Spong (@andrewspong), one of the best known names on the health care social media circuit once tweeted,

 

“Without the change in mindset, for pharma SM can be akin to trying to hold a conversation through the sealed doors of a blast shelter”

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This clever sentence captures the somber mood of social media evangelists who have often bashed the industry for not adapting to the new world of communication that social media has opened up. Mr. Spong implies here that by not adapting to the changes that are exploding in the new world, the pharmaceutical industry has locked itself into a bomb shelter to protect itself. And, it is trying to communicate through the sealed doors of that bomb shelter with its stakeholders. In short, trying to communicate without using social media tools is as ineffective as trying to talk to someone through the sealed doors of a bomb shelter.

Why then is the pharmaceutical industry not attracted to this promising new world? Are pharmaceutical marketers stupid? Are they risk averse? Are they so ‘unplugged’ from the world that they do not understand paradigm shifts in their sectors? That probably explains it. Unlike in most industries, social media has hardly changed any paradigms in the pharmaceutical industry.

But, the question still has me flummoxed. We (pharma people) operate in an industry that’s all about information and knowledge. We position ourselves as information providers to all the health care professionals, be they doctors, nurses, pharmacists or in some cases, even to patients and their families. If that’s what we really do, then why would we not naturally adapt to new and exciting media that allow us to engage with all these people more closely? Let us examine a few facts.

Corporate brands

Essentially 2006 was the turning point in social media for most businesses. Pharmaceutical companies (mostly outside India) at this point began to slowly join the social media milieu, but in limited capacity. This is because Twitter accounts and Facebook pages were often for the corporate brand, not the individual drug brands or care areas, and Facebook page comments were disabled almost across the board.

 Concerns about AER (Adverse Event Reporting)

This limitation of conversation on social media is logical given the concerns about AER (Adverse Event Reporting) requirements and the lack of relevant FDA guidelines. But its not like the industry gave up totally on social media. It tried, but minimally, with measured and unsure steps, as if walking on thin ice. And, minimal effort led to minimal results.

Uni-directional engagement

Pfizer (@pfizer_news) the largest pharmaceutical company in the world, attracted about 30,600 followers on Twitter (as of Aug 1st, 2012). Fantastic? Not really. Coca Cola (@CocaCola) has 586,000 followers and Nike (@Nike) has 561,000. Pfizer’s followers were largely made up of the Health 2.0 community rather than patients. Fewer people engage with Pfizer because of a strict regulatory environment that holds the industry back from being able to provide real value to the patient. Therefore, only being able to leverage social media as a traditional one directional media channel, very much like the traditional detailing to the physician, no significant relationship between brand and patient can be formed.

 Real time communication and engagement

The nature of current social media approaches and tools demands real-time interactive response and dialogue. The pharmaceutical industry does not and cannot communicate that way.

Image1)      Facebook demands interactivity and informal two-way communication. Companies evolve convoluted versions of it just to be present, killing the fun and the interactivity that makes Facebook so enjoyable.

2)      Twitter demands 140 characters to communicate. Pharmaceutical communications (prescription brands) demand fair balance, context, long explanation, disclaimers, and all kinds of fine-print.

3)      LinkedIn is all about the individual professional. It’s a great platform for recruiting, even in the pharmaceutical industry. The problem on LinkedIn is that interactivity is almost nil. Pharmaceutical companies hardly create meaningful interactions and networking on this medium.

4)      YouTube is one place where pharmaceutical companies can participate on a social platform, as long as it is one-way broadcasting and storytelling. That is only media. Not social.

Social media is about on-demand mobile communications (user generated content, location data, commerce etc.) that is real-time and fragmented. The pharmaceutical industry is all about centralized, one-way, controlled communications.

Discontinuous engagement

As a result of these challenges, patients quickly realized that pharmaceutical social media channels do not offer any venue for real communication (and are, in fact, anti-social media) and began to choose other social venues to discuss their medication and conditions. This then created opportunities for other interested parties to establish engaging social destinations for patients that focus on specific brands and conditions. As a result, pharmaceutical companies have slowly but surely been losing control over the discussions regarding their brands and allowing other parties to “hijack” the mindshare of their clients. 

Uncontrollable online activism

The industry is unsure of how to handle customer problems via social media. Last year, a pharmaceutical company planned to launch a medicine in the US in a newly approved indication for $1,500 per dose. Unfortunately that medicine had a generic version for just $10-$20. Activists led a social media campaign in protest. Despite quickly lowering the cost of the drug to around $20 or less per dose, the damage was done. The online campaign created a widespread backlash and ultimately damaged the company’s image. This sort of social media crisis is a clear demonstration of what can happen if such a volatile medium is not handled properly with expertise.

 Unclear regulatory framework

Even as pharmaceutical companies have increasingly struggled with their online presence, the US-FDA has repeatedly failed to deliver promised guidance, even while issuing warning letters for egregious web sites. Meanwhile, Facebook recently decided that it will no longer allow drugmakers to disable comments posted on newly created pages, prompting some to consider walking away from the site.

Despite the fact that there are minimal regulations currently in place for social media, the industry is struggling with the medium. Can it afford to leave its social media initiatives in the hands of others much like its R&D and manufacturing processes? Perhaps, the answer to the industry’s social media problem lies in the creation of private and branded communities with the ability for Facebook integration. In private communities, control can be established through various modes including strong moderation policies or by further controlling the discussions using innovative approaches. Within private networks, pharmaceutical companies have the ability to create guided experiences, increase patient engagement, adherence and education, listen to patient comments while simultaneously promoting their brand.

 Yet, with all these limitations, the pharmaceutical industry will, in the truest sense of the word, betray the essence of social media. The intersection of the pharmaceutical industry with social media presents a major cultural collision – they type when a regulated, top-down, one-way, controlled communication corporate culture meets the free-wheeling, bottom-up, conversational, unpredictably evolving world of digital networks. Even as digital network communications are rapidly becoming “the new normal”, the pharmaceutical industry with its old economy mindset driven by environmental challenges continues to shout itself hoarse through the sealed doors of bomb shelters.

 

Impact of declining R&D on innovation

Successful innovation is seen as one of the most important means through which the global pharmaceutical industry competes and grows, especially in the current era of the knowledge economy. Since its inception, the industry has always aimed to achieve innovation led growth. This is because a direct causal link is often assumed between innovation and economic growth. Investors thus inherently attach great importance to innovation activities such as R&D and patent protection. It is in this context that the impact of declining R&D in the industry must be viewed.

The perceived lack of R&D productivity is not new. The industry has focused on closing the innovation gap for more than two decades through business and operating model shifts and restructuring initiatives. While the past 60 years have seen huge advances in many of the factors that should tend to raise the efficiency of R&D, the number of new drugs approved per billion US dollars spent on R&D has halved roughly every 9 years since 1950. There have been many proposed solutions to the problem of declining R&D efficiency, some of which include relying on external molecules from smaller biotech companies as sources of new products, exploring targeted therapies and patient sub-segmentation to support predictive efficacy, better attrition rates and potentially attractive pricing. However, the contrast between improving input and declining output makes one wonder about the impact of the proposed solutions and has led the industry to consider a few path-breaking initiatives.

Research through partnerships

Many senior industry executives also seem to have recognized the apparent futility of these proposed solutions, and may have resorted to balancing their time between seeking to unlock R&D productivity and focusing on operational efficiencies to retain market share and share-holders’ interests. It is now the ‘new normal’ to consider externalizing R&D activity to suitable partners, thus reducing both the internal resource crunch as well as the associated risk. Big Pharma’s evolution from a highly self-innovative business into a more pragmatic and tactical one, has created important new partnering opportunities for a wide range of small biotech start-up companies. Rather than being limited by Big Pharma’s commercial interest, these start-ups are beginning to find Big Pharma more flexible and pragmatic enough to carefully consider their product candidates if the data look promising. Around $25 billion was spent in licensing deals and other R&D alliances in 2010. This is set to continue growing over the long term as collaborations span every area of development as Big Pharma realizes that more exciting science happens outside its walls.

 Research through collaboration

The time it takes for an experiment in pharmaceutical R&D labs to proceed from hypothesis to results is simply too long making the process expensive and fraught with risk. To address this, in 2008 Pfizer, Merck and Eli Lilly collaborated to invest in technology that focused on connecting preclinical research, clinical development, and medical practice. This venture initiated programs in the areas of molecular imaging, biologics, and drug delivery to increase the ultimate likelihood of success of drugs that pass early development milestones and seem promising chemical and biological compounds better suited to human treatment. The use of technology to simulate drug discovery has reduced risk and cost by allowing tricky molecules to be abandoned early in the discovery cycle and not go the whole hog. This knowledge turn around also allows lessons from testing one hypothesis to quickly lead into other more efficient ones, thus improving the probability of success.

Research through open source initiatives

Pharmaceutical innovation is impeded by constrained communication and interaction between scientists. Applying knowledge gained from failure needs to be accelerated, and scientists in different labs need to share data and information as if working side-by-side. The need for such collaboration and the tremendous power of open innovation is being increasingly recognized, and discussed as a new way to help identify new uses for existing medications. Open source initiatives allow new indications to be developed, which are actually “discovered” by practicing clinicians who come up with their ideas on their own in order to solve a pressing clinical problem they had encountered. The success of the initiative lies in permitting those with the best understanding of the problem to actually solve the problem. Open innovation communities provide a mechanism to capture, amplify, and leverage such focused input. Big Pharma’s challenge now is to use those insights to change the world.

 The difficulty of drug development in conventional R&D lies in our inability to predict outcomes, because of both our limited understanding of disease and our imperfect understanding of the effect any new compound will have on the body. Fortunately for patients, hope may lie just round the corner. As pharma companies cut costs by outsourcing large parts of their operations, service providers have sprung up around the world to fulfil these functions. The next-generation pharma company will be a lean, agile organization able to capture, consider and rapidly develop the best scientific ideas in a wide range of disease areas and aggressively guide these towards the clinic. Small market size will not deter the pursuit of promising drugs with a comparatively inexpensive path to clinical development. The ideal portfolio will consist of an extensive collection of such molecules, cheap options that may offer unexpected benefit to patients and provide disproportionately large returns to investors. While the general perception is that the efficiency of pharmaceutical R&D has declined, it certainly has not affected the industry’s ability to innovate to save lives.

This post was originally published on Pharmaphorum

India – Established or Emerging Health care Market?

Republished with the kind permission of www.pharmaphorum.com – follow @pharmaphorum on Twitter for the latest articles

During his visit to India in late 2010, US President Barack Obama surprised many when he remarked to the Indian Parliament that he thought of India as not simply an emerging market but as one that has already emerged. In the days since then, the remark proved to be merely rhetorical.

India, like other emerging markets shows signs of advancement in its financial structures and a certain level of maturity in its economy but by frequent policy switches, its economy is subject to substantial volatility. Unlike people in mature markets, people in India devote most of their budgets to food and basic needs including healthcare.

This touches on an important diversity. While India’s economy grew second only to China’s over the last two decades, its health systems are not catching up with the healthcare needs of rapidly urbanizing cities. The utilization of public health services is low and limitations such as government interventions and financial constraints do not allow universal coverage of healthcare. Even the role of health insurance remains inconclusive. Overall, providing healthcare to its population presents a major challenge to the Indian government. This surely does not behoove of an established economy and a modern, developed nation but a barely emerging one that’s grappling to ensure the benefit of that growth percolates down to it most under-privileged.

65 years after its independence from British rule, India still cannot provide all its citizens with equitable, accessible and affordable health services. The changing demographic dynamics along with rapid urbanization are posing severe challenges to policymakers to catch up with the needs of public health and medical care. India’s diverse 1.2 billion population adds complications for Government to provide comprehensive health policy for its people.

But, the shortage of infrastructural facilities and human resources can be addressed through Public Private Partnerships (PPP) and this situation throws up many opportunities on possible interventions for the healthcare industry to work closely with the government to improve the delivery of health services. While most companies measure the market opportunity in terms of the share they can capture and target the population already receiving therapy, India offers the unique opportunity to develop its vast untapped potential. Companies consider emerging markets as their growth drivers but seldom think of ways in which that growth can emerge as perhaps their most strategic, sustainable and one that can turn in profits over the next few decades. Consider a few areas that India offers the industry a unique blend of non-product revenue, sustainable profits and most importantly the goodwill of its citizens and subsequently its government.

Health financing

India spends just 5% annual gross domestic product (GDP) on healthcare out of which about 80% expenditure is private and 70% of that is out-of-pocket. This catastrophic out of pocket expenditure has the potential to push families below the poverty line. Innovative health financing solutions are desperately required with demand side financing (DSF), which include output-based aid, conditional cash transfers, consumer-led financing (vouchers, tax rebates) and provider-led financing (capitation payment, referral vouchers).

While this is likely to continue under government control, the sector offers great potential for private sector participation. This is relevant especially since it is well established that increasing government intervention even in countries with a significantly larger public sector has not achieved fruitful improvements in health. It is estimated that India has to allocate between 3.5–6.1% of GDP to provide Universal Healthcare to its citizens and that seems impossible without private sector participation.

Health insurance

Insurance policies that rely on voluntary purchase of coverage to reduce the number of uninsured have seen modest success. The insured have shown willingness to participate actively in designing their health insurance packages. Such choices do not exist in government controlled schemes and consumers would gladly welcome private sector participation if endorsed by the government. It is difficult to create an environment for market oriented competition between insurers. The introduction of competition in the field has not provided evidence of effectiveness so far and the results remain inconclusive.

Developing resources and infrastructure through public-private partnership

Government estimates indicate that in urban areas 18% of primary health centers do not have a doctor, 38% are do not have a laboratory technician, and 16% have no pharmacist. Government hospitals estimate that untrained, unlicensed practitioners in the country outnumber qualified medical doctors by at least 10:1 with the number increasing. This skews choice towards private service providers. In 2004 the share of private sector in non-hospitalized and hospitalized treatment was estimated at 19% and 61.8% respectively in urban areas.

The shortage of nursing staff and doctors is due to their migration to other countries. In addition, medical and nursing schools have difficulty in filling vacancies for teaching-staff. There is a shortage of medical colleges to produce qualified doctors. Worse still, these colleges are unevenly distributed across the nation and the cost of education is prohibitive.

While it is true that the state of healthcare in India needs urgent repair, it is also true that India’s pharmaceutical industry continues to have enormous global impact in areas such as low-cost service delivery (Aravind Eye Hospital), low-cost medicines (generics) and vaccines and in the eradication of polio.

In conclusion, healthcare is one of the fastest growing sectors in India. Its citizens are increasingly becoming health conscious and are on the lookout for quality healthcare systems that would provide solutions in a holistic way. Ironically, in a country unable to provide to its own citizens, analysts predict that healthcare tourism will be one of the next big opportunities for India. Such predictions are on the grounds that India is one of the countries with highly skilled professionals and with advanced low-cost solutions. But unless these solutions become truly affordable to its citizens first, India will stay far from being an established market and its vast potential like Obama’s comments, will remain empty.