IN THIS ISSUE: REGULATORY ROUND UP

Special features Five Steps to Find your‘Beyond the Pill’ Strategy

Overcoming globalhealth inequalities

Risk adjusted monitoring

JOURNAL OF THE BRITISHASSOCIATION OFPHARMACEUTICALPHYSICIANS

PHARMACEUTICAL PHYSICIAN

MAY 2014 VOLUME 24 | NO

6

SPECIAL FEATURE: Five Steps to Find your ‘Beyond the Pill’ Strategy

By Aleksandar Ruzicic and Meike Wenzel, Partners, and Dr. Clifford Hall,MD/Subject Matter Expert, at Executive Insight AG – Healthcare Consultants

A SHORT WINDOW OF OPPORTUNITY

EXISTS FOR PHARMACEUTICAL

COMPANIES TO ESTABLISH

INDISPENSABLE BEYOND THE PILL

SERVICES, WHICH MAY EVEN HELP

THEM ‘OWN’ PARTICULAR DISEASE

AREAS

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OUTCOMES DATA ARE the holy grail ofdrug development and market access.Everyone involved in healthcare –physicians, patients, governments and inparticular payers – wants to seeincontestable proof that the introductionof a new drug will result in meaningfuland tangible ‘outcomes’. Of course, thatis entirely reasonable and not new –clinical trial results have been thecornerstone of drug approvals fordecades – but the nature, volume andlevel of scrutiny of outcome measuresfor reimbursement has changed andintensified in an environment wherethere are many more ‘me too’ drugs anda significantly more complex marketaccess environment.

Clinical drug development rates havefallen. In the US, a 2014 study revealedthat the success rate for bringing newmedicines to market is nearly one in 10– which is about half the previous rate.[1]

A similar trend in approvals may beoccurring in Europe - and that is beforewe even get to reimbursement. Newdrugs now need to demonstrateimprovement over existing “goldstandard” therapies that can varysignificantly from country to country forvarious reasons, such as costcontainment.

Many countries in Europe have set-upformal institutions to perform cost-benefit assessments, the most famousbeing NICE in the UK, established in1999, and IQWiG in Germany,established in 2004 and still focusingparticularly on incremental benefitsdespite the most recent legislativechanges in 2011. While these haveserved their purpose well, they canrepresent a formidable barrier to

national reimbursement, due to the veryexacting level of evidence requiredagainst existing therapies.

It is in this context that theopportunities presented by a ‘beyondthe pill’ strategy become apparent.Unless a new product is first-in-class orsignificantly differentiated in some way,pharmaceutical companies can nolonger rely on the product alone todemonstrate its own value forreimbursement. Rather, the productmust now form one part of acompelling package of services whichare proven to make a positive impacton healthcare systems – in other words,it is the services created to support andcomplement a new drug that can nowprovide the ‘holy grail’ of outcomes datarequired for reimbursement. Manywithin pharmaceutical organizationshave a vital role to play to make thishappen – not least the in-house medics/ physicians, who must assist in thedesign, verification and communicationof many of the services and tools socentral to this strategy.

But how should we go about choosinga “beyond the pill” strategy?

1) Start with the pill

We are talking about going beyond thepill but that does not depreciate thefundamental value of the therapy itself.The core product will always remain themost important factor, and you shouldstart with the pill when thinking abouthow to go beyond it into mutuallybeneficial service provision.

The first consideration must be whereyour drug fits within the current therapyenvironment to understand the potential

Aleksandar Ruzicic Meike Wenzel

Clifford Hall

of the drug to compete on outcomesand/or have a unique sellingproposition against competitiveproducts.

This assessment should encompass 1)the nature of the disease – for example,any existing challenges around diagnosisof the condition, 2) stakeholder needsalong the patient journey - for example,the role of parents / carers for pediatricindications, 3) the competition, such ascompetitive pharmaceutical brands ordevices and 4) any specific requirementsfor the brand itself – e.g. IV infusions orfirst dose observations.

This initial drug assessment can start tolead you towards the kind of beyond

the pill strategy you will likely need.For example, does your drug havesuperior clinical outcomes for specificpatient populations? In that case, aconscious selection of servicesaddressing specific steps in the patientjourney is probably sufficient. Is yourdrug used to treat a complex chronicdisease? Then you probably will need aplatform for a wide range of solutionsand services to improve outcomes.

On the other hand, if your drug hasvery little differentiation on clinicaloutcomes, or is reaching the end of itslife cycle, then you can employ beyondthe pill services to increase loyalty withyour stakeholders and maintain apremium over alternatives.

One thing is for sure - if your product isnot significantly differentiated or willlose its unique selling proposition dueto competitive brands to be launched inthe near future, then there arecompelling reasons to act. Drugs thatare not differentiated on outcomes noroffer a unique selling proposition willlikely see prices erode to generics levelsdue to pressures from healthcare payers.Reference pricing systems, such as theone in Germany, allow for a commonreimbursement level or reference pricefor a group of medicines if they areconsidered “interchangeable.”[2] Ineffect, reference pricing allows payers toimpose generic prices on drugs stillunder patent protection. Pfizer learnedexactly that in Germany in 2005 withLipitor, and Lipitor’s share of theGerman market subsequently collapsedby 75%.[2]

2) Find a Service Model Archetype

After considering where serviceopportunities will broadly fit with youproduct and likely resonate with yourtarget customers, a decision on theservice model archetype is necessary(see image). For each brand a decisionneeds to be made based on two keyfactors - firstly the optimal breadth of

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| FIGURE 1: Service Model Archetypes

Leve

l of C

usto

miz

atio

n

High

Low

Breadth of Offering Few Many

FOCUSED OFFERING

Highly customized services targeting one or few steps in the patient pathway Example: Patient monitoring demonstrating treatment success

RELATIONSHIP OFFERING

Complete solutions that are highly customized and cover the entire patient pathway

Example: Patient management services for (high-price) products

LIMITED OFFERING

Generic services targeting two or fewer steps in the patient pathway in line with stakeholders expectations

Example: Companion diagnostics for patient stratification

BROAD OFFERING

Bundle of generic services targeting most steps of the patient pathway to maintain high profile

Example: Blockbuster offerings for competitive indications involving GPs

…THE SERVICES CREATED TO SUPPORT AND COMPLEMENT A NEW DRUG

THAT CAN NOW PROVIDE THE ‘HOLY GRAIL’ OF OUTCOMES DATA REQUIRED FOR

REIMBURSEMENT…

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the services offered and secondly thelevel of customization.

Given the high cost of services andthreat of margin dilution, a limitedoffering in line with stakeholderexpectations can be a safe choice,particularly if sufficient to achieve acompetitive advantage for a company’sdrug, such as companion diagnostics forpatient stratification, for example KRASmutations for colorectal cancer or non-small lung cancer. Despite being a‘limited’ offering, the outcomeimprovements can be significant due tothe improved efficacy of focusing onresponders (and excluding non-responders).

Highly customized services targetingone or few steps in the patient pathwayrepresent a focused offering, such aspatient monitoring demonstratingtreatment success, e.g. complete andmajor molecular response based onBCR-ABL transcripts for patients withchronic myelogenous leukemia (CML).Good monitoring represents a veryeffective use of healthcare funds,

particularly if novel generation drugscan lead to permanent cure, eliminatinglife-long chronic treatment costsaltogether.

A broad offering can bundle genericservices targeting most steps of thepatient pathway to maintain high profile- a prerequisite for success ofblockbuster drugs. For example,comprehensive patient compliance toolsfor payers and patients have beenoffered for oral bisphosphonateosteoporosis drugs before theavailability of quarterly or annualinfusions. Yearly expenditures for theconsequences of patient non-adherencehave been estimated to be hundreds ofbillions of US dollars, providing ampleroom for creating value from beyondthe pill services.

Complete solutions that are highlycustomized and cover the entire patientpathway lead to relationship offeringsfor complex to manage diseases, oftencoming at a significant cost to build andtherefore being amortized across arange of (high-price) biologics products,

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| TABLE 1: “Own a disease” strategy – comparing selected pharma andmedtech examples

Company Sanofi Diabetes Fresenius Medical Care

Indication Diabetes End-stage renal disease

Primary revenues Drugs (>85% Lantus) Dialysis services (>75%)

Pharma products Lantus, Apidra and others (richR&D portfolio with partners)

Renal Pharma (own productsand JVs, e.g. Vifor Pharma)

Medtech products BGStar and iBGStar bloodglucose monitoring (withAgaMatrix)

Comprehensive dialysistreatment modalities, e.g.hemodialysis

Healthcare services Patient programs and other(free) services

More than 3,200 dialysiscenters globally

Outcomes management Diabetes Manager with(iPhone) interface (for patientsand HCPs)

Continuous qualitymonitoring and improvement(EuCliD)

Perceived competitors Novo Nordisk, Eli Lilly DaVita, Baxter/Gambro,Amgen

such as BioAdvance developed byJanssen to provide a comprehensive andvery personalized approach to patientswith various types of severeinflammatory disorders being treated byRemicade, Simponi or Stelara.

Developing economies can leveragepersonalized and scalable patientservices relying on modern technology,such as smart phones, as the majoralternative to traditional healthcare,thereby increasing access to a muchlarger part of the population whilereducing overall healthcare costssignificantly, opening-up opportunitiesto “own” a therapy area for drugcompanies.

3) Consider if “owning” a therapy

area is a possibility

A complete solution strategy can enablepharmaceutical companies to potentially‘own a disease’ through beyond the pillservices. It is not an entirely newconcept - Novo Nordisk, for example,‘owns’ diabetes care from thepharmaceutical company perspective formany decades, with an impressiveportfolio of pharmaceutical andcomplementary drug delivery devicessupported by an extensive corporateprogram delivering high quality servicesto the diabetes community. Meanwhileone of its competitors in diabetes –Sanofi Aventis –contested themarketplace with assertivecommunications around its products,particularly its flagship insulin Lantus.Sanofi Aventis has since widened itsremit to occupy similar ground to NovoNordisk in terms of disease ownership,

forming a dedicated diabetes businessunit in 2010 to become a 360 degreesolutions provider.

Very few pharmaceutical companieshave started to integrate products andservices holistically for a specific diseasein the way that Novo Nordisk, Lilly andSanofi Aventis have done for diabetes,but medtech companies – inherentlymore integrated into the workflows oftheir clients – have been able to pushthe envelope further than most.Fresenius Medical Care, for example,has now completed a transformation toa fully integrated dialysis services andproducts supplier.

The window of opportunity forhealthcare products companies is stillopen in most diseases, despite anacceleration of the rapid growth ofspecialized healthcare service providerchains. It is important that companiestake advantage of the window ofopportunity soon.

4) Decide how far beyond the pill to

go

‘Owning’ a therapy area through serviceprovision is about as far beyond the pillas it is possible to go – and thisobviously won’t be the right strategy formany situations. Deciding just howmuch to wrap around the product is acentral consideration when determininga beyond the pill strategy.

Product-centric strategies have servicesat their core which address drug ordevice-specific issues along the patientjourney that improve outcomes or

increase the loyalty of stakeholders tothat particular product. They are almostentirely reliant on drug (and/or device)revenue streams and usually demand avery apparent return on investment.

On the other hand, forward integrationinto services and solutions can open upnovel revenue streams. FreseniusMedical Care, for example, hassuccessfully implemented a variety ofrevenue mechanisms across countries,such as “razor-and-blades” pricing fordialysis equipment and consumablescharged to centers, “fee-for-service”pricing per dialysis with payers, andlong-term government contracts withnegotiated quality and service levels andprices. Such business models maybecome the template for pharmaceuticalcompanies in the future, particularlywhen a set of key success factors aremet.

Companies should thoroughly map outa “holistic value chain” which deliversall steps of the services strategy – but itis important to note that stakeholdersother than the pharmaceutical companyitself – for example, home care servicesor medical call centers – will likely bebest placed to implement some of the

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…DEVELOPING ECONOMIES CAN LEVERAGE PERSONALIZED AND

SCALABLE PATIENT SERVICES RELYING ON MODERN TECHNOLOGY, SUCH AS SMART

PHONES, AS THE MAJOR ALTERNATIVE TO TRADITIONAL HEALTHCARE…

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steps along the way. Independent ofwho provides the services, physiciansworking in drug development,regulatory affairs, medical affairs, drugsafety or other departments will have animportant role to play. They will haveto extend their capabilities inobservational research, safetymonitoring, patient reported outcomesand other areas to cover all the aspectstheir pharmaceutical employers areultimately responsible for along thehealthcare value chain.

5) Act now, while a window of

opportunity still exists

“Beyond the pill” is an umbrella termfor a wide range of services from thesimple, tactical necessities, to the all-encompassing strategy of ‘owning’ adisease. While the types of servicesdiffer enormously in scope and aim,one thing unites them all – they arehere to stay.

In an ever-increasingly competitive andovercrowded marketplace, it is vital tohave services in place which supportyour audiences in meaningful waysalong the patient pathway and provide

vital sources of differentiation for yourproducts. Being able to generatesuperior outcomes through services islikely to have a positive impact onreimbursement and longevity of success,and ward off threats such as referencepricing systems.

Certainly, pharmaceutical companieswill need to leverage healthcare servicesto demonstrate outcomes improvementsin the real-world setting in the future,particularly for complex, chronicdiseases with limited patient adherence,such as COPD and diabetes.Meanwhile, global medical devicecompanies may currently be bestpositioned to exploit the strategicopportunity of integrating a variety ofhealthcare products and services to offerholistic healthcare solutions.

But it is important to act now –although “beyond the pill” is a realityalready, many opportunities still existwithin this space, particularly in termsof ownership of a disease area, orelements within it. Once theseopportunities are snapped up, it ismuch harder to challenge within the

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| TABLE 2: When to forward integrate into healthcare services/solutions?

Key success factors The insights from Fresenius Medical Care

Holistic integrated

healthcare budgets

Integrated healthcare budgets for dialysis related healthcareservices, including required infrastructure, personnel,equipment, products/disposables (except some higher-priceddrugs in most countries, e.g. EPO)

Fixed fee reimbursement Pricing set/negotiated typically at country level leading toannual fixed fee treatment costs per patient (often different bymodality, with lower rates for peritoneal dialysis)

Limited breakthrough

innovation threat

Continuing shortage in kidneys continuing to limit the volumeof transplantations, FDA actively pursues long-term artificialkidney projects under Innovation Pathway 2.0

Company/brand credibility

in disease

Strong reputation in dialysis products as equipment/ disposableproducer since 1980s and services (after M&A with US-basedNational Medical Care in 1996)

Ability to demonstrate

quality/outcome

Adherence to national guidelines/ protocols, also monitoringoutcomes, e.g. mortality of patients (per 100 patient years),implemented EuCliD (European Clinical Database) as part ofcontinuous quality improvement

same space. Of course, finding the rightstrategy is just one part of the battle –you then need to implement it, whichinvolves a wide range of considerations,from who within your organization –including in-house medics / physicians– should be responsible for

implementation, to which stakeholdersand partners you need to involve alongthe way.[3] But with the right beyondthe pill strategy in place, the holy grailof superior outcomes – for yourstakeholders and your product alike –can be achieved.

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| REFERENCES1. Hay M, Thomas D, Craighead J. Clinical development success rates for investigational

drugs. Nature Biotechnology 32, 40–51 (2014) doi:10.1038/nbt.2786 Published online 09 January 2014 http://www.nature.com/nbt/journal/v32/n1/full/nbt.2786.html

2. Dylst P, Vulto A, Simoens S. Reference pricing systems in Europe: characteristics andconsequences. Generics and Biosimilars Initiative Journal (GaBI Journal). 2012;1(3-4):127-31.http://gabi-journal.net/reference-pricing-systems-in-europe-characteristics-and-consequences.html

3. Ruzicic A et al. Beyond the pill. Pharmaceutical Marketing Europe. November 2013, p. 26-28

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