Frustrations are great as the right hand of the U.S. federal government (DEA) either doesn’t know — or care, or approve — of the actions, research and recommendations of its own left hand (NIH among others). Also, it’s interesting that some of the same Big Pharma industry players that fund crackdowns on marijuana-related crimes (according to current laws) may well be seeking ways to cash-in on the eventuality of legal cannabis commerce. Currently, money crossing state lines can lead to issues with money laundering, since the lowly weed is still an illegal Schedule 1 substance.
A tenuous relationship exists between Big pharma, the supplement market and dispensaries with regard to cannabis’ legality. (Photo: Cannabis Science)
Changes are coming from a few corners of the medical cannabis world — as my investigations, only some of which are published, attest. Eventually at the state and federal levels, the day will come when cannabis is as broadly accepted, profitable and legal as any FDA-approved supplement, OTC drug or prescription remedy. Ongoing research, advocacy and public support make it seem inevitable if not imminent.
The story linked here includes interviews surrounding pharmaceutical business-related developments. But the medicinal/health benefits-related aspect of this plant don’t end with conventional drug development, owing much to proponents of the whole-plant entourage effect. There’s more to the story than this relatively 101-level view written for mainstream, non-cannabis-versed executives.
How’s the FDA’s new food safety rule affecting how food gets packaged?
One of the hats I’ve worn of late is that of Editor of Packaging World‘s 2014 Food Safety Playbook for 2014 (as well as the preceding, inaugural edition).
Among the updates packed into the 101-page e-book were the results of a brief survey of U.S. food and beverage product packagers done in Q1, gauging industry readiness for the U.S. Food and Drug Administration’s Food Safety Modernization Act (FSMA) now being implemented in rolling deadlines.
The results were optimistic; a large and in some aspects overwhelming majority reported that they have already completed the law’s key requirements into their food safety plans, or will in the coming year.
Since this blog is open to all who click, I’ll say that there’s a LOT to the law, the industry’s reaction, overall compliance and issues that’d have lay-people wondering: “What does it all mean?”
In general, I think the law’s a good thing. If you want to discuss in depth, I’ll invite you to read the whole playbook, or be smart enough not to have to — in which case I’ll refer you to someone with first-hand knowledge of the law, and of food safety. I was once certified to be a food safety guy in the dairy industry, but really, was no expert. Ever.
Be forewarned; I don’t divulge all of the results in this story, but there is a link to the full playbook at that link. If you’re in the industry, I hope you won’t mind having to register to get the playbook for free.
Ever see one of those red boxes with blinking LEDs offering cents-off coupons for Oreos in the cookie aisle, or Tide in the detergent aisle? Ever see a video display that springs to life when you pass by?
In the prescription drug business, where drug-makers are looking to compete with OTC (over-the-counter) remedies that treat similar ailments, the same kind of promotional gizmos are NOT coming to a retail pharmacy aisle near you. Why not?
Because they’re already here.
A brand selling prescription Restasis eye drops can now buy promo space and locate one of the point-of-sale (POS) boxes next to OTC Visene, in the process, lifting branded prescription sales an average 10-percent for mature products (vs. much higher for new-drug launches), with ROI of $6 for each dollar spent.
These kinds of promos are common across consumer goods, with companies like Valassis and News Corp’s News America Marketing going head to head hawking soap, cookies and in cases, OTC remedies. Another firm, Rx Edge Pharmacy Networks, East Dundee, Ill., specializes in the prescription stuff, which is “much, much more complicated” to promote in terms of regulatory due diligence, Jim O’Dea, CEO, told me, adding that the need for black-box warnings, patient information and other requirements appears to be on a trajectory to keep ballooning as leaflects (shown here) turn into whole booklets.
On its own, the animal-health business, growing at roughly 5% annually for the past several years, would not be considered a hot investment opportunity. But by comparison with the human-health pharma business—which actually went negative in the US in 2012, according IMS Health—5% growth in a stable, essential business is attractive. Thus, when Pfizer spun out part of its animal health business, now branded as Zoetis, raising $2.2 billion for 20% public ownership (Pfizer retains the rest), Wall Street voiced its approval. Zoetis’ stock continued to rise through early March, and Zoetis is now “the largest standalone company fully devoted to animal health medicines and vaccines,” as Pfizer CEO Ian Read noted.
Other ownership reshufflings have proceeded apace. Bayer put down $145 million ($60 million up front) for Teva Animal Health in January, thereby getting a stronger presence in generics for both the pet (companion) and livestock (production) animal markets. This deal follows Bayer’s 2012 acquisition of KMG Chemicals’ animal health business.
Also in January, Neogen (Lansing, MI) announced the purchase of genotyping pioneer Scidera Genomics (formerly MetaMorphix/MMI Genomics), for an undisclosed sum. Neogen, itself a leader in diagnostic products, pharmaceuticals, veterinary instruments and vaccines, also acquired animal health firm, Macleod Pharmaceuticals (Fort Collins, CO) last October.
One animal-health player that won’t be making any divestiture moves is Eli Lilly, with its Elanco division, which saw 18% growth for the quarter and has been a profitable unit in the face of human-pharma generic competition: “We have no intentions of divesting that business through a sale or public offering,” Derica Rice, Lilly CFO, told Wall Street analysts recently, adding that plans call for doubling company revenue in coming years.
Industry overview
With revenues from the top 20 manufacturers generating by some accounts about 85% industry sales, and generics flattening revenues for once-protected proprietary blockbusters, the current business environment is stable but slow-moving.
Worldwide animal health sales grew roughly 5% in 2012 to top $22.5 billion (excluding nutritional feed additives). North America led with a 38% share, followed by Europe (34%) and Latin America (12%), according to animal-health management consultant Ron Brakke, of Brakke Consulting, Inc. (Dallas).
“For the past five to seven years, almost all the growth in the US market has been in companion animals,” Brakke says, noting small single-digit gains in the pet sector over this period. Today, the US pet and production animal health sectors are tied with a 45% share of market sales, with equine sales accounting for the remaining 10%. The same is likely true of the worldwide market, where the pet/production market share split is 43%–57%, but includes equine business in the latter. Generally speaking, the production-animal-health market, at least in the developed world, cycles up and down based on food-industry trends and animal growing conditions. Companion-animal markets have been rising steadily for years.
In keeping with the creeping gains on the companion side of the market, Americans spent an estimated $12.6 billion on pet supplies and OTC medicines combined, up 6.7% from 2011, per the American Pet Products Assn. (Greenwich, CT; www.americanpetproducts.org). APPA’s growth numbers for veterinary care products including prescription drugs, have remained flat in recent years; growth was 2.9% in 2011 and 1.3% in 2012, ending 2012 with revenues of $13.6 billion. Among the factors contributing to the malaise, live-animal sales went flat in the recession and remain so. On the upside, food sales and pet supplies are both “trending up nicely,” and supplements and alternative health products and services “are going through the roof,” says APPA president Bob Vetere.
2012 was mixed for the US livestock market. Dairy cow and pig inventories rise and fall somewhat erratically. Bovine numbers continue a years-long decline. However the “other white meats” are up with swine numbers on the rise, and poultry broilers continuing a decades-long upswing. A hopeful Brakke believes 2013 “should be an excellent year” if drought ends and grain prices fall in livestock producers’ favor.
Parasiticides, antimicrobials and vaccines are among the top-selling animal health product categories for both companion and production sectors, with the pet space driving analgesic sales and livestock needs driving production enhancing products.
Ticked-off vets
Online retailers, big box retailers and a sluggish economy also hurt revenues for vets and their suppliers. Additionally, traditional mom-and-pop practitioners are facing tough competition with large veterinary chains such as Banfield Pet Hospital with more than 800 locations, and VCA Animal Hospitals with more than 540 locations. Much as Home Depot and Lowe’s put local hardware stores out of business, the rise of these chains “changed the ballgame significantly with their economies of scale,” says Jennifer Landini, practice manager for Heal Veterinary Clinic (Chicago).
As vets face stiff competition from each other, they also face the challenge of a sustained decline in pet owner visits through the latter half of the 2000s. The latest (2011) research finding by Bayer’s Animal Health Division found that 56% of pet owners believe that their vets don’t clearly explain when they should bring their pets in for procedures or tests.
Another threat comes from market dynamics that directly affect manufacturers and their own marketing efforts. Flea and tick treatments are the prime example, led by products including Bayer’s Advantage and K9 Advantix that remain in heated competition with Frontline and a plethora of additional generic-based competitors.
Where there are heated market battles, there are also legal
battles and their consequences. For example, a 2011 recall and production stoppage by Sergeant’s Pet Care Products led to shortages of Frontline Plus-type fipronil-methoprene products in the marketplace. (Fipronil kills adult pests; methoprene kills eggs and larva.) Complicated patent infringement litigation ensued between Sergeant’s and Sanofi’s Merial, the latter marketing Frontline Plus through contract manufacturers including Velcera, whose subsidiary FidoPharm produces PetArmor Plus.
Sergeant’s won in its efforts, but by October 2012, OTC drug-maker Perrigo Co. (Allegan, MI), acquired the company for $285 million. Within four months, Perrigo also announced an agreement to acquire Velcera for $160 million cash.
Joining the fight over intellectual property and generics, product diversion is also hotly debated as flea and tick treatments and other hot-selling pet products intended only for sale to veterinarians often find their way to unauthorized online retailers.
When FDA actions caused Novartis to suspend production in December, 2011 at a key OTC facility in Lincoln, NE, it caused nationwide stock-outs for leading animal health brands including Interceptor (milbemycin oxime), Sentinel (milbemycin oxime/lufenuron) and Deramaxx (deracoxib). Despite months of lost production, products seemed nonetheless abundant for Sentinel, Interceptor and perhaps other drugs through non-authorized retailers including Doctors Foster & Smith.
Novartis insisted it did not sell these products to the unauthorized outlets, which would be in violation of its policy to sell them only through the “ethical veterinary channel.” This channel refers to barring sales of specified nonprescription—OTC—drugs to sources other than veterinarians. Similarly, a Merial customer support representative told Pharmaceutical Commerce that while the company won’t knowingly sell Frontline products to the likes of Walmart and Target online or otherwise, “I’ve seen invoices for Frontline products from those retailers,” despite Merial’s policy to the contrary. So where do these retailers get non-authorized products—gray-market product diversions involving veterinarians supplying aggressive brokers or distributors? Manufacturer or distributor personnel who are ignorant of, or in violation of guidelines? The answer is unclear.
In any case, it would seem that “ethical” agreements could become vestigial reminders of a time before the explosion of retail supply channels. For these OTC drugs, the main ethical breech is contractual, since it is not in violation of legal standards for a broader swath of retailers to sell OTC drugs.
A somewhat related issue regarding prescription pet meds is that of prescription portability, which if legislated would require veterinarians to provide prescriptions as well as written disclosure to let pet owners know that the prescription can be filled anywhere, not just the vet’s dispensary. Congress has considered H.R. 1406, the Fairness to Pet Owners Act introduced in April of 2011, and the FTC held a public workshop to address the issue, but neither seems to be producing any imminent action.
Manufacturers would seem to be on the sidelines in the portability fight, evidenced by a lack of advocacy on the issue. APPA has been neutral because its manufacturer members “haven’t expressed a cohesive message,” Vetere says.
The American Veterinary Medical Assn. (Schaumburg, IL; www.avma.org) “actively opposes” any federal portability law, which would be ”unnecessary and redundant,” says Dr. Lynne White-Shim, assistant director for the AVMA’s scientific affairs division. “I have no knowledge of this being a problem,” she adds, indicating that veterinarians already practice portability as a de facto standard in keeping with AVMA’s longstanding guidelines.
AVMA is more eager to see FDA move forward with its Unapproved Drugs Initiative, specifically by approving and making more pet medications available for the animal health market as opposed to allowing extra-label and off-label uses of useful, appropriate human drugs. “Having legal homes for these drugs within FDA could potentially encourage the industry,” White-Shim says, “to spur more manufacturing and marketing of animal health innovations.”
Tighter supply chain integration
In addition to treatments, animal health distributors also offer diagnostics, including reference labs, instruments, consumables and test kits. This category grew 6% last year to top $1.8 billion, up more than 250% since 2005. That 6% was driven by Idexx Laboratories (Westbrook, ME), the largest player by orders of magnitude with 2012 revenues of $1.3 billion, offering Wall Street guidance of 8.5% or more growth for 2013.
Brakke says diagnostic areas to watch include investments in IT (from communications to mobile) as well as supply chain alliances with distributors such as MWI (Boise, ID), with 2012 revenues of $2.1 billion, up 32.6% from 2011, partly owing to the pursuit of formal, sometimes exclusive, partnerships with diagnostic suppliers as well as drug-makers.
To avoid product diversions, at least coming form the source, manufacturers police their ethical veterinary channels by integrating their ERP-level customer lists and requirements with distributors using do-not-sell lists. These designate which SKUs can be sold to which customers. Such considerations as well as electronic ordering, inventory and logistics management, and lot/batch tracking follow standards such as XML schemas and EDI standards managed and updated by the ANSI/ASC X12 committee (www.x12.org).
Beyond unit-level serialization coming to human pharma, more drugs in the animal health supply chain will see serial numbers at the vial and retail-pack level. While serialization isn’t on the regulatory radar screen for animal health, neither will it be a technical hurdle if that day comes.
“There are no substantial differences between supply chain processes for animal health and human health,” says Steve Epner, founder of Brown Smith Wallace Consulting (St. Louis; www.bswllc.com), which researches and offers software selection consulting to distributors.
Squeezed between Big Pharma manufacturers and retailers that now include animal pharmacy programs by big box stores such as Walmart and Target, and online retailers such as www.1800petmeds.com, Doctors Foster & Smith and many more, Epner says “distributors have very little power; they have to do whatever their trading partners tell them to,” and therefore seek to gain competitive advantage “with any services they can to make them easier to deal with.”
To that end, distributors are offering online ordering systems, regulatory compliance and other services. Leaders have implemented electronic ordering and inventory control systems. Animal Health International (Greeley, CO; www.animalhealthinternational.com), sells automated micro-ingredient machines for livestock feed additives to its production-animal customers.
A broader industry response is underway to create an industry standard repository for all pet industry product data uploaded by manufacturers and shared across 6,000-plus pet industry retailers and distributors. Put forth by the Pet Industry Distributors Association (www.pida.org), this Pet Industry Database (PIDB) venture would replace the need for manufacturers to transmit data to each individual customer with a single upload to the system, which would integrate ERP, inventory and promotional systems from factory to store shelf.
PIDA says the database so far includes 190,000 products, and will lead to higher fill rates, reduced ordering errors, greater customer satisfaction, increased sales “and a much more effective way for consumers to find and consider your products online,” according to a joint letter from Steve King, PIDA president and APPA’s Vetere.
Future PIDB plans call for retailer point-of-sale system interfacing for electronic ordering, and development of a store-locator portal for consumers to find manufacturers’ products. PIDA promotes the system and www.PIDB.com to manufacturers as “a single distribution point for all product information, review, pictures, marketing materials, and offers.”
Spurring product development
“Ten or 15 years ago it wasn’t uncommon for major pharma companies to bring out three or more new products a year. Today, you might be lucky to get one every year or every other year,” says Kevin Pohlman, president of sales and marketing at Animal Health International (formerly Lextron Animal Health). But he still sees “tons of opportunities… Technology changes every day, and I’m sure things will emerge in the next five to 10 years that we haven’t even begun to think about.”
R&D has dipped and remained flat perhaps due to consolidation: “It can be a challenge for companies dealing with consolidation to stay focused on the marketplace as they work to get their organizational ducks in a row,” Pohlman says. “It’s not necessarily a bad thing, though,” he adds. His own employer, Lextron Animal Health, acquired and took the name of Animal Health International last year, which he says has been “a good thing” for the greater resources it brought.
Between the last two industry surveys in 2008 and 2011 by market research firm Packaged Facts (New Orleans, LA; www.packagedfacts.com), results showed a paucity of exciting announcements “beyond a couple of new cancer drugs,” says David Lummis, senior pet market analyst. “I haven’t seen a lot of horn blowing about new drugs in the pet space, including the area of lifestyle drugs pharmaceutical manufacturers pinned their hopes on a few years back.” Big brands in recent years failed to capitalize on consumers’ bond with their dogs with products like Pfizer’s Slentrol (weight management) and Cerenia (motion sickness), and Eli Lilly’s Reconcile (fluoxetine/Prozac) for separation anxiety.
Research shows no concrete reason for the failures, but experts don’t deny that despite the brands’ considerable online promotions and consumer education campaigns—including videos moderated by veterinarians—the decline in vet visits and the proliferation of market channels may be factors in a disconnect between pharma brands and consumers. If so, the solutions may come with both tighter partnerships between supply chain partners as well as a more holistic go-to-market strategy.
Charting a path for growth
Leveraging human drugs for the animal market remains a mainstay of opportunity and the “greatest pipeline for innovation,” according to Stephen Rothenberg, consultant with Numerof & Associates, (St. Louis; www.nai-consulting.com). He reasons that while animal health is a much smaller market, “most R&D has already been done,” he says. “So if your market size is a couple hundred million and you’ve spent $20 million to develop a product, it can go a long way. From an investment standpoint, it’s still a profitable route for pharma companies seeking new product opportunities.” This is especially true in light of Brakke’s estimate that FDA approval for a food animal pharmaceutical can take 10 to 12 years and cost $100 million vs. the typical companion animal drug’s under-six years and $6 million.
More broadly, Brown Smith Wallace’s Epner sees opportunity in serving a fuller continuum of care and market needs “to address therapeutic categories and not just single, discrete interventions.” He points to the bundling of products and services in the livestock market, similar to the market-driven model in human pharma: “Companies can offer a broader portfolio of products, which may include everything from vaccines to solutions for disease-resistant conditions and the ineffectiveness of antibiotics.”
Implementation of the Physicians Sunshine Act may require you to begin data gathering by Feb. 25, but questions remain over the law’s details, from data to dollars
The reelection of Pres. Barack Obama assured that the Patient Protection and Affordable Care Act (PPACA or ACA), signed into law on March 23, 2010, will move forward, and with it, the Physician Payment Sunshine Act provisions.
It goes by lots of names. Officially named the Transparency Reports and Reporting of Physician Ownership or Investment Interests section, it also goes by the “Sunshine Act,” aggregate spend law or simply “agg spend.” By any name, it will require pharma, device and medical supply manufacturers to submit reports of spending on physicians and teaching hospitals to a database maintained by the Centers for Medicare and Medicaid Services (CMS). Reports must include “payment or other transfers of value” (POTVs) exceeding $10 for everything from small meals to consulting fees, to speaking and research fees, to stock ownership.
Manufacturers can’t begin collecting data for strict compliance until the final rule is published. The latest news at presstime is that CMS completed the final rule, and on Nov. 27, sent it to the White House Office of Management and Budget for review. Expectations are that within 90 days of OMB’s receipt, CMS rule will be issued as final. If so, manufacturers could be required to begin data gathering on Monday, Feb. 25, 2013, for their 2014 agg spend report submissions.
Will you be ready when(ever) the law comes? Penalties as proposed range from $1,000 for an unreported item to a maximum $1,000,000 for knowingly failing to submit an annual report. Considering that the price of instituting compliance processes and IT solutions can reach into the hundreds of millions, might some companies find deliberate noncompliance an option? “It sure as heck would be cheaper,” one Big Pharma manager told Pharmaceutical Commerce, “but that’s not the approach we believe in.”
Most manufacturers already have some program in place to meet the reporting requirements of several US states—Minnesota, Colorado and several New England states, among others. Comparable reporting requirements are coming into force in the European Union, and some companies are attempting to build a global reporting database to meet current or future requirements worldwide.
Fear and uncertainty
Not knowing exactly how CMS will incorporate industry comments into the final rule, companies remain fearful over the many yet-unknowns, from dates to data points.
One big issue: “context.” Under the proposed law, when a manufacturer reports a research grant to a teaching hospital, it includes total dollar amount and other identifiers, including the identity of the principal investigator. Of course, the investigator doesn’t get the money, the institution does, “and that institution has to pay 50 people, run a laboratory, do patient testing, and all kinds of other things with that money to conduct that clinical trial,” says Marjorie Powell, senior assistant and general counsel with the Pharmaceutical Research and Manufacturers of America (PhRMA), which has lobbied to add clear, nontechnical explanations to public spend reports.
Asked whether they favor a public, searchable database of all physician-industry relationships, a 2012 survey of 110 US-based physicians and 223 executives from life sciences companies, conducted for Deloitte by Forbes Insights, found that 68% were, most of them agreeing “as long as patients understand how to interpret the data” (Fig. 1). The last point speaks directly to the issue of context.
State regulations add further complexity. The federal law will set the baseline, but states are free to enact further restrictions. Massachusetts and Vermont ban spending on gifts; Vermont bans meals and requires reporting on clinical transactions and disclosure of all free product samples that do not apply under Section 6004 of the ACA. Minnesota maintains spending limits, which the federal proposal does not.
Massachusetts, Washington, D.C., West Virginia and Colorado also have state agg spend laws. There are signs that some of these and perhaps the rest of the states are looking forward to letting Uncle Sam do the bulk of the heavy lifting. Maine had a law, but repealed it on June 29. Massachusetts eased restrictions a month later and partially repealed its 2008 Pharmaceutical and Medical Device Manufacturer Code of Conduct, then in September, issued an “emergency regulation” to address a legislative change “to allow companies to provide ‘modest meals’ to physicians outside of their offices as part of an educational event, such as a speaker program or conference seminar,” says PhRMA’s Powell.
Other states, though, backed off on laws that would exceed the proposed federal law, which will preempt state laws only to the extent of “setting the floor,” says Natasha Thoren, attorney with Epstein Becker Green (New York). “States may choose to enact statutes or regulations that require reporting and disclosure of additional information and/or information from individuals or institutions not covered under the federal law,” she adds. “It will be interesting to see what states will do after the ACA regulations are finalized.”
Another area of ambiguity is the very fundamental identification of physicians. CMS expects healthcare providers (HCPs) to be identified by their National Provider Identification (NPI) number, but not all doctors have one because it’s limited to physicians serving federally funded insurance programs. “So, a plastic surgeon doing cosmetic surgery, for instance, wouldn’t be in the Medicare or Medicaid system,” says Bill Buzzeo, GM of global compliance solutions at Cegedim Relationship Management (Bedminster, NJ).
Speculative solutions include expanding the NPI to all physicians, or perhaps expanding the DEA ID, which authorizes the prescribing and dispensing of controlled drugs, but the agency has in the past nixed the idea. “Am I 100% confident that there still won’t be gray areas in the final rule? No,” says Buzzeo. But he says regulators have been in contact with industry stakeholders, and that “CMS is listening.”
It’s about process, not technology
For Bristol-Myers Squibb (BMS), the key to a successful compliance solution is “thinking of the project as a business problem in terms of process and not necessarily as an IT or system solution first,” Antionette Brock, director of business projects & planning, told attendees at a June user conference held by IT vendor Pegasystems (Cambridge, MA). The company’s system establishes a single set of processes, common roles/rights workflows and procedures that will ultimately roll out across global operations.
The company shared its challenges: underestimation of time and cost; the need to navigate competing priorities; team member “swapping”; training and the sheer number of integration points. These included 11 internal systems (e.g., master database of item costs, global product master data, geographic data), as well as five, which were external vendor systems (e.g., the logistics, T&E and other vendors).
The transparency preparedness efforts to date for Sanoti US have focused on a combination of existing state requirements, as well as the statute and federal proposed rule and PhRMA comments. “Every organization will have its own strategy,” says Gus Papandrikos, director, transparency operations, US medical affairs (Bridgewater, NJ), “but we all have a common theme: We all use multiple source systems that host data, such as enterprise resource planning, financial, sales, procurement, research and others.”
Regardless of the IT architecture, “all companies will need to capture data out of these systems and ultimately aggregate it into one reporting solution,” he adds. For its system, Sanofi chose a major vendor to remotely host and maintain data and the application. Users access it through secure Internet connections.
There are many paths to compliance. The most common method, IT-wise, is to minimize the investment with a manual spreadsheet-based system, followed by in-house applications, third-party solutions, and then sheet avoidance or noncompliance, Cegedim research indicates (Fig. 2). Many companies often start with HCP lists from one or more vendors (e.g., Cegedim, MedPro, Health Market Science) to complete their existing databases; 47% of company data come from third parties per Cegedim research. Many such vendors also partner with other firms to offer full compliance reporting, validation and software solutions. For instance, MedPro has partnered with Porzio Life Sciences Services and an allied law firm to offer a full software-and-regulatory solution. In terms of third-party offerings, these can be based in-house or outsourced via SaaS to a provider who will keep data and systems up-to-date as regulations evolve. R-Squared (Princeton, NJ) is an example of a vendor that offers systems both in-house and remote.
AdvantageMS (Fort Washington, PA) combines its verified HCP databases with a partnership with Concur Technologies (Redmond, WA), whose travel and expense-management solutions are widely used by sales organizations. Compliance Implementation Services (Media, PA) provides consulting on setting up and administering agg spend systems.
No matter the IT strategy, companies need to follow the same fundamentals—collect, standardize, cleanse and validate data to ensure accurate reporting of the following: physician name, address, specialty, NPI, or perhaps an improved identification scheme, as well as the value, form, date, and name of the drug. “Form” refers to the correct entry of the transaction across 18 categories:
1. Gift
2. Food
3. Entertainment
4. Travel
5. Honoraria
6. Research funding
7. Education
8. Research
9. Profit distribution
According to Acquis Consulting Group (New York), roughly 80% of HCP transactions are recorded in the expense system, but these comprise only 20% of the total HCP spend. This underscores the need to integrate many systems from many departments, including finance, compliance, legal, IT, sales and marketing meetings and events, and travel departments. Not only do systems from these departments need to be integrated into a single reporting database, companies need to have a clear road map for doing so, from the top down. A steering committee must identify a project leader, who must assemble a cross-functional team, which must develop clear departmental business processes, all the while working with IT to ensure that standard terminology, codes and other details are used. The right data from the right systems in the right departments must be mapped into a unified whole.
Companies, department by department, may need to budget more time and resources than initially expected for data cleansing, augmentation and validation processes. “Because the more they start getting into data cleansing, as they ‘overturn more stones,’ companies often find that not all of the data is being collected, or being collected properly,” says David Kaufman, managing partner at Acquis. “In some cases, they’ve been aware that there were some inconsistencies, but now that they will be reporting under a federal law, the effort takes on a new urgency.”
Once a system is in place, a system should let users link a transaction directly to one or more physician records by selecting the appropriate attendees when planning an event, for instance, as well as inputting details needed to list expenses and exporting the relevant data to a unified agg spend data warehouse.
The business case for compliance
Besides giving manufacturers a better view of their own spending limits, public reporting of data will allow them to track others’ spend data. In fact, they should do this, “because that’s exactly what journalists are going to be doing, and the government’s going to be doing,” says Mandy Klosterman, COO for Regulatory Clinical Research Inc. (Minneapolis), a clinical research organization (CRO) that also provides agg-spend consulting for medical device development.
If, for example, Big Pharma Company A is spending $5,000 a year per physician, Company B is spending $50,000, and Company C is spending $500,000—and you’re with Company C—you can expect to get some attention in the media and by the government, and not the kind you want.
Such benchmarking will take time to become entrenched. In the Deloitte-Forbes Insights survey, 49% of respondents said they were considering or planning to use public data from other companies for strategic purposes, while only 13% had developed significant plans to do so, and 25% “didn’t know.”
Aside from sizing up the competition, there are additional areas where the cost of compliance can be at least partially mitigated, however, there are limits to expense-targeting.
“In general, people have thought about ways to use their information in addition to reporting,” says Sanofi’s Papandrikos, himself having started in sales and marketing. “But in terms of making allocation decisions based on their business impact? That’s something we steer very, very clear of, as does every other pharmaceutical company.” Rather, agg spend compliance systems are for compliance and “to limit overspending on any one individual based on a set of rules that you establish within your organization, sometimes based on limitations set by statute or state regulation, such as in Minnesota.”
Still, the data can be used elsewhere for predictive analytics, promotional analysis, marketing analysis, strategic planning—and to provide “great ROI down the road,” says Eric Newmark, program director of IDC Health Insights’ Life Sciences practice. So far, discovery and due diligence efforts have “led to many companies uncovering huge inefficiencies in their organizations that they didn’t even know about.” He cites one that uncovered nearly 40 different third-party speakers bureaus across divisions, “then consolidated to roughly five and instantly saved millions.”
Physician relations
“Physicians need to know what’s coming at them…like a freight train,” says Klosterman of RCRI. Without the chance to review spend data before it goes public, she adds, “You can imagine what kind of impact that’s going to have on the manufacturer’s relationship with physicians, if you don’t prepare them for the public reporting.”
Physician Ford Vox, MD, called the agg spend proposal “good legislation overall,” in a recent column for The Atlantic (“The Devil’s in the Details used for Doctor Transparency”), but still admits he backed out of tentative plans to attend a manufacturer’s educational event, “when I realized my attendance would be reported as a gift from the company.” His prescription to docs and hospitals is to create their own websites to “proactively tell the world…before ProPublica starts calling you.”
The American Medical Assn. voiced concerns at and since a Sept. 12, 2012, Senate roundtable discussion, chiefly that the public will mistake the agg spend law for a regulation on ethical conduct rather than simply an accounting of industry practices, and also that the proposed rule “would deny physicians due process to review, dispute and correct inaccurate reporting,” wrote James Madara, AMA CEO, to CMS Administrator Marilyn Tavenner on Oct. 10.
As it stands, manufacturers have a 45-day window to make corrections after submitting reports. CMS suggests—but doesn’t require—that they allow physicians access during this period or perhaps earlier in a “pre-submission review.” But how? The options generally focus on some type of secure Web portal that lets physicians log in to verify what goes into reports. A single portal would be ideal for the manufacturer.
BMS designed such a portal into its system as early as 2010, when one source at a company presentation noted how the effort “takes a lot of manpower,” including setting up a call center, a mechanism for sending letters inviting the doctor to come online and review reports, and hiring a staff of case managers.
If companies face challenges with single-country databases and systems, that’s not stopping leading companies planning regional solutions for the Americas, EMEA (Europe, Middle East and Africa) and Asia-Pacific. A “few true, groundbreaking leaders,” Cegedim’s Buzzeo says, have committed to global transparency projects. Cegedim’s 2012 industry survey on agg spend found that 87% consider global capabilities when choosing an aggregate spend solution. Success will hinge on a single global, corporate instance for systems, such as enterprise resource planning, travel and entertainment, customer master, and disclosure.
Beyond corporate global standards, some hope for globalization of transparency standards. In turn, the European Federation of Pharmaceutical Industries and Associations has begun a multinational initiative that targets spend reporting as early as 2016. If it succeeds, it could pave the way for global standards harmonization, which “may prove more elusive than the lost city of Atlantis,” says IDC’s Newmark.
Such utopian standards are worthy of support; however, for the time being, the US industry is still preoccupied with investing in systems to comply with a law that has yet to be published.
While sampling has been the traditional method of getting patients to try new therapies, the use of coupons or vouchers—often targeted directly to consumers rather than physicians—are on the increase. ” target=”_blank”>In these difficult economic times, such financial incentives are attracting more consumer interest, and the availability of these consumer discounts is being magnified by Web-based promotions in addition to conventional print media. In parallel, coupons and vouchers are demonstrating value in raising or maintaining patient adherence to therapy—a good thing from most healthcare payers’ perspective—but are attracting more criticism from them when the incentives are plainly directly at countering higher-co-pay, higher-cost second- or third-tier formulary positions. The contention is that pharma marketers are circumventing the plans’ goals in steering patients to lower-cost drugs.
IMS Health told the New York Times, in an article published at the beginning of this year, that use of coupon programs has tripled since 2006. Coupon programs are even figuring in pharma companies’ Wall Street presentations: during J&J’s quarterly conference call in October, CFO Dominic Caruso told analysts that, in order to recover lost market share from its recent product recalls and competition from private-label OTC products, “our marketers are very good at knowing what they need to do to attract consumers [with] a mix of brand marketing and expenses, couponing, innovation, etc.—a surround-sound impact to get consumers back,” according to Bloomberg News.
Paul Kandle, VP and GM of Opus Health, a division of Cegedim Relationship Management (Bedminster, NJ). Opus was one of the first companies to capitalize on the “secondary adjudication” steps that were put into claims-processing systems at pharmacies, once a copay had to be linked not only with a specific health plan, but also with the identity of the drug being prescribed. Since then, it has run over 1,000 programs for manufacturers, and says that it has 250 programs currently. “These claims-processing systems allow manufacturers to overcome two obstacles to patient assistance: the complexity and difficulty of getting samples into the hands of patients after a prescription has been written, and the ability to provide a refund at the point of sale, rather than taking actions like mailing a coupon and receipt into a fulfillment center.” Vouchers (which figure primarily in getting free samples dispensed) enable the prescription to be filled at the pharmacy—and to be documented in the claims processing system—as opposed to being handed out by the physician; however, Kandle notes that there is still a perceived value by physicians in being able to hand out a sample directly.
On the copay side, the original need was to ensure that the pharmacist “would be made whole” financially if a discount on a copay were transacted; the secondary adjudication ensures that that happens. As these details were worked out, the overall economics of running coupon and voucher programs became more positive.
“Manufacturers always had pressure to reduce costs overall, but the pressure’s much greater today,” says David Merkel, senior vice president of business solutions for J. Knipper and Co. (www.knipper.com), Lakewood, NJ-based multi-channel marketing services firm. “Rightly or wrongly, pharmaceutical companies have been painted as the bad guys…and are being expected to absorb much of the costs.”
Beyond sampling
Free-trial vouchers, started as an alternative sampling vehicle to help contain those costs, says Merkel, “but have led to other components from direct mail to longer-term vehicles to promote patient persistency with other forms of patient co-pay assistance.”
And yet physician sampling programs are still a starting point for patient outreach, with 85% of manufacturers distributing trial samples directly to physicians through their sales reps or via direct-to-practitioner (DTP), according to a survey report presented in September by TGaS Advisors (www.tgas.com), and the PDMA Alliance (www.pdmaalliance.org) at September’s PDMA Sharing Conference in San Antonio. Kevin Sharp, director with TGaS, says trial vouchers are “generally utilized to address ‘white space’ concerns and facilities that do not receive physical samples. These particular channels have seen growth as pharmaceutical companies have changed the structure and size of their sales forces.”
Still, with the downturn in the economy and years of pharmaceutical mergers, prescription drug manufacturers are “looking for ways to do more with less. And because there are fewer reps out there, there’s less sampling going on than in the past,” says John Khantzian, senior principal, LifeLink Solutions, IMS Health (www.imshealth.com), Danbury, CT. “And where that sampling that does still exist, it’s being done based on priorities developed through physician and patient segmentation analyses.” So, for example, if there’s a managed care influence in a certain area, the manufacturer may modify their sampling tactics based on its formulary status. This helps to ensure that the physician will have its drugs on hand in the sample closet to provide until the patient fills an initial prescription.
While hand-delivered samples still dominate according to the TGaS study, those sampled – primarily drug-makers sample-accountability and PDMA compliance professionals – are also exploring other options at high levels: 90% of respondents use coupons; 76% use vouchers; 24% use a pre-paid card; and 17% offer co-pay assistance.
The most confusing aspect of analyzing these results is trying to discern the definitions of these vehicles – something that won’t soon be answered.
“There aren’t any consistent definitions across the board for coupons, vouchers, pre-paid cards and co-pay cards,” Sharp concedes. As a result, the survey listed those promotional options and asked respondents to check which method they used. On on end of the spectrum are one-time free trials; on the other are longer-term co-pay-assist card programs that foster loyalty. Given these parameters, it may be possible to discern what promotional vehicle works best for the drug maker-marketer.
IMS studied the success of three kinds of patient card programs for one branded pharma company’s (unnamed) chronic therapy (Fig. 1) for which there were a mix of branded and generic alternatives, with generics representing a significant percentage of market TRx (prescriptions written) volume:
• A multi-use co-pay card for use with multiple prescription fills per year, with a guaranteed maximum level of co-pay or patient out of pocket expense;
• A limited-use savings card program that guaranteed lower patient out of pocket costs to a fixed dollar amount and
• A free-trial voucher program for one free prescription fill.
The objectives of the three programs were to increase the flow of new-to-brand patients and drive brand loyalty. Patients selected were new to the brand, either newly diagnosed or switched from other medications) The result? Multi-use program patients purchased 61% more pills over a six month observation period, while limited-use savings card program patients purchased 28% more pills than the control group.
Interestingly, the free-trial voucher program resulted in lower sales than the control program. The drug may have carried unwanted side effects, but such speculation fell outside of the research, says Greg Mastrogiovanni, engagement manager, Commercial Services, IMS Health. He avoids such speculation, offering that this isn’t an uncommon occurrence, and that “a good percentage of patients try the product once because its free but never convert to paid therapy.” Beyond that, he didn’t speculate on why those who tried the free trial didn’t continue on the drug as often as the control group.
Such studies provide very useful data through the identification number printed on each voucher or card, which upon redemption is run through an anonymized, HIPAA-compliant patient-level database, explains Khantzian, providing data on “patient XYZ123… which tells us they used a coupon, voucher or co-pay card. That’s what allows us to create test groups and control groups to the measure adherence, compliance etc., of patients who get the card versus those who don’t. This way, a pharma company can evaluate the results of two different promotions for effectiveness and ROI.”
While pharma companies factor in costs, and ROI in promotional vehicles remain confidential to the brand, “The measurements around them – how they’re distributed and the ancillary materials – can be so remarkably, incredibly different,” says Tom Foley, director of business development for RxHope, one of the integrated multi-channel sampling and marketing companies of Triplefin (www.wearetriplefin.com), Cincinnati, OH. He says no “one size fits all” strategy can be applied to define a media mix or ROI; an osteoporosis drug for elderly women won’t use the same mix of tools and media as an erectile dysfunction drug; likewise, how a co-pay card or free trial will work depends on the drug, the patient population and when and how it’s deployed in the lifecycle.
Ned Finn, VP pharmacy at Inmar Corp. (www.inmar.com, Winston-Salem, NC), notes that coupon programs vary not only by therapeutic area, but also by the healthcare objective. “To drive better patient adherence, it may make sense to provide coupons to reduce copay for patients that have proven adherent to therapy. This can have a huge impact on patient clinical outcomes. If the goal is to cross-promote, there are opportunities to use coupons to promote OTC therapies or foods that address the side effects experienced by patients taking prescription drugs for specific health conditions. For example, an online coupon for moisturizers could be offered to someone searching for information on ways to manage side effects of chemotherapy; an online coupon could be offered for foods that address specific health conditions or lifestyle products such as smoking cessation products.” The company, which handles the equivalent of over $6 billion in coupons annually from a wide variety of consumer-goods companies, prints, distributes and then reimburses for coupons used in print media and online.
Tech serves brand experience
Opus Health, Knipper, Triplefin, Inmar and companies like PSK&W (www.pskw.com, Bedminster, NJ), Trialcard (www.trialcard.com, Cary, NC), Group DCA (www.groupdca.com, Parsippany, NJ) offer a variety of platforms and programs directed at consumers. Programs have evolved from distributing paper coupons to online, print-on-demand coupons, or loyalty cards that are used at the retail pharmacy to obtain an on-the-spot discount for copays. PSK&W has built out a system that integrates coupon distribution with relationship management tools (the DIVO platform) that it says provides a more complete interaction with patients. Most recently, the company linked up with HealthPrize, which is applying gaming technology to the patient adherence problem (Pharmaceutical Commerce, July/Aug 2010, p. 8) to power up its adherence offering.
Group DCA, for one, connects with the order-entry and reimbursement systems run by McKesson’s Relay Health unit to effect that on-the-spot discount with minimum workflow issues for pharmacists. Catalina Marketing (www.catalinahealthresources.com) says that it has 18,000 pharmacies, within a network of 50,000 retail outlets overall, through which it can manage copay assistance and adherence programs. (The company also runs CouponNetwork.com, said to be the largest print-on-demand coupon system in the world.)
Meanwhile, the growth of electronic health record (EHR) and e-prescribing systems at doctors’ offices and pharmacies is creating a new channel for electronic couponing. OptimizeRx Corp. (www.optimizerxcorp.com; Rochester, MI), now about a year old, is hoping to ride the EHR wave by integrating sampling and coupon programs with these e-prescribing systems, and has a partnership with Allscripts (Chicago) to bring pharma manufacturers’ programs into that channel. The company says that it has processed almost 70,000 coupons in the past year.
Medicare and other government-funded programs are ineligible for coupon programs, but Medicare Part D, and its infamous “doughnut hole” that requires patient payment up to a set level annually, has created an opportunity for patients. In helping to subsidize prescription drug costs by mandating a secondary payer field in the electronic claims process, the theory goes, Part D “gave manufacturers greater ability to offer financial assistance with new immediacy,” says Rick Randell, president of Triplefin’s National Patient Services (NPS). Because in contrast to old-fashioned snail-mail vouchers and the like, “the immediacy of on-the-spot secondary payer discounts at the pharmacy, and access to current multi-channel technology services, gave manufacturers the ability to finally make offers they needed to offset the expenses of being a non-formulary product, right at the point of sale.” While vouchers, coupons, co-pay cards and the like were already gaining popularity, the secondary payer field could be used not just for Medicare but for all transactions (Fig. 2).
It’s part of a tech explosion, he contends, that has brands more interested in tying and tracking promotional activities to Internet and mobile communication technologies. With consumer electronics and the Web now mainstream communication channels, and with patients actively managing their own Health Savings Accounts, more patients are taking to the Web where, says Randell: “A coupon isn’t just a coupon anymore. It’s an opportunity to communicate and work with the patient.”
Likewise, a website isn’t a website anymore. Beyond static display of information or perhaps printable coupons, brand sites can serving much of the informational role today as family doctors and neighborhood pharmacists did in days of yore. For example, Eli Lilly and Co.’s site for Effient (http://www.effient.com), for instance, offers a plain-English Esstential Habits program to help patients with stents adjust their diets and lifestyles in addition to offering a card that covers the portion of a patient’s co-pay over $25 up to a maximum of $20 each for the next 11 refills.
And Bristol-Myers Squibb’s website for Abilify (www.abilify.com), a treatment for depression, bipolar disorder and schizophrenia, guides visitors to identify the disorder for which they’re interested, state their informational needs as a patient, caregiver or information-seeker, and invites them to join its “ABILIFYAssist” (www.abilifyassistprogram.com) program for a free trial and “continued savings” with promotions for the healthcare provider, pharmacist, insured patient and uninsured patient (Fig. 3). Also, there’s a cost-and-coverage calculator, refill reminders and prior authorization assistance where the brand collaborates to help complete documentation and facilitate authorization.
“You can go on any brand’s website today and there will likely be a link to some sort of card program,” says IMS’ Mastrogiovanni, adding the prevalence of “relationship management programs” of the type illustrated above, where, beyond financial promotions, “there are patient education fulfillment materials and ongoing contact or touch-points via phone, e-mail, direct mail, et cetera – and we definitely see an increased trend in the industry toward these programs.”
In fact, any Internet, communication or media channel can be part of the mix, from TV commercial “ask your doctor” prompts and website “click here to print-out our coupon” features to opt-in email and text messaging elements, even mobile apps, which are emerging. (In September, Triplefin launched a new Innovations Mobile business to fill that need.) For some, this will beat the frustration calling a plan’s phone tree, although even that’s changing as new-generation IVR (interactive voice response) systems offer 24/7 services offering assistance with similar granularity to websites.
Given all these content-rich and personally tailored services, patients are much more likely to consider a brand’s value beyond the co-pay to build loyalty, or in the case of free trials, increase the value of the offer due to the trust the marketer builds using all of these technology-assisted services.
PBMs temper pharma zeal
It’s hard to manage a prescription drug promotional campaign when success when putting the brakes on a promotion can be as important as being proactive to patients’ needs. Viewed from one angle, that’s what happens when a pharma company offers too heavy a discount without offering also-deep discounts to the plans that would rather sell generics. But this is a simplistic view of a much more complicated set of considerations that make promoting prescription drugs a complicated affair.
Before the drug-maker can promote its drug, it has to establish its a preferred position in a drug plan by offering a sufficiently large rebate – in plain talk, discount – to pharmacy benefit managers (PBMs). PBMs administer prescription drug plans for patients through the group health plans to which they subscribe through self-funded employer or labor union plans, health insurance plans, and Medicare Part D.
Those rebates act as a discount that’s factored into the formulary process to offset the cost of the drug, and they go “directly to the ultimate payer, such as the employer group, to offset their plan cost,” says Brent Eberle, VP of clinical services for Navitus Health Solutions (www.navitus.com), a PBM based in Madison, WI.
Once a manufacturer secures pricing and a preferred (or any) position, it then can turn to promotions such as patient co-pay assistance programs. Unlike samples and free-trial offers that don’t incur costs to anyone but the manufacturer, co-pay discounts are generally disliked by PBMs. The reason simple: A more expensive Tier 3 drug can appear to the patient to cost the same as a preferred Tier 2 drug when in fact its cost to the plan is almost always higher. Eberle says situations like this – aggressive marketing that crosses the formulary line – is “something we factor that into formulary decision making.
“If we feel a manufacturer’s marketing practices are too aggressive, that’s a manufacturer we typically going to be manufacturers we won’t partner with for that drug,” says Eberle. “There have been situations where we’ve been unhappy with a product’s marketing, and that has resulted in putting it in a non-preferred position with fairly aggressive ‘prior auth’ restrictions – even while we have other products of theirs that are in preferred positions.”
Integrating coupon/voucher/adherence programs with electronic medical records (EMR) systems will be the next frontier for these programs, says Opus Health’s Kandle. Currently, a contest is being waged between the EMR vendors and the patient-assistance providers over the cost of allowing a presence in the EMR network. At the same time, the EMR vendors are competing for share of mind with physicians and healthcare networks, so there’s going to be some equilibrium to be reached between the cost of having a presence in the network and the value to the EMR vendor for customer acceptance.
