Outlook 2008: Electile Dysfunction
Throw in some gloomy global market trends, and 2008 promises to be a tough one for a pharmaceutical industry trying to dig its way out from under a mountain of looming patent expirations on key products. If 2007 was a year of disappointment—with hotly anticipated products like torcetrapib, rimonabant and Galvus failing to make it to market and safety jitters hitting others, like Avandia, Zelnorm and Exubera— 2008 looks like more of the same. For all the talk about acquisitions, big pharma firms sitting on large cash piles might look to Pfizer's inability to translate scale into lasting dominance and think twice—if there were even anything attractive left to buy. And the trickle of really innovative new products coming down the pipe will have to vault high hurdles to make the grade at the FDA, with Rep. Henry Waxman breathing down Andrew von Eschenbach's neck.
As a result, pharmaceutical marketers will have fewer new products and big mass-market brands to work with, while the shift toward specialty therapies portends an increased emphasis on more targeted and patient-specific programs. DTC may have ducked a bullet with the passage of the FDA Amendments Act, but the future is largely online. It remains to be seen whether the future is here yet.
Global pharmaceutical sales will slow in 2008, growing 5-6% compared to 6-7% in 2007, as the recent wave of patent expirations continues, according to IMS Health's 2008 Global Pharmaceutical Market and Therapy Forecast.
Slow growth for primary care, US
“In terms of market dynamics, you have another wave of genericization, with many large blockbusters coming off patent, and that does take a toll,” says Diana Conmy, corporate director, market insights at IMS Health. “We've actually seen a trend toward reduction in health expenses.”
Drugs with approximately $20 billion in annual sales face patent expiration in 2008, including Risperdal, Foxamax, Topomax, Lamictal and Depakote, driving the growth of generics by 14-15% to more than $70 billion. Generic prescriptions will account for more than two-thirds of prescriptions written in the US, while government initiatives and the introduction of biogenerics will fuel a decline in market growth among the top European markets.
As a result, the growth contribution from the US and the top five European markets will slow to 4-5%—a historic low for the US—while the Japanese market will grow only 1-2%. In addition to genericization, a leveling off of growth due to the Medicare prescription drug benefit and increased pressure from payors will drive the decline in the US, the report said. In addition, IMS forecasts erosion of the $370-$380 billion audited market for primary care-driven drugs—the first ever. Drug treatment costs will decline in categories slated for patent expirations on big products, including lipid regulators, calcium channel blockers, SSRIs, osteoporosis therapies and proton pump inhibitors. The decline will be particularly sharp in the US, where treatment costs per day have already declined 20-40% this year in therapeutic categories impacted by the loss of exclusivity for Norvasc, Zoloft and Zocor. Generic competitors to Fosamax and Protonix coming online in 2008 will prompt 10-25% reductions in treatment costs for osteoporosis and PPI therapies.
While growth among primary care products and in the largest markets sputters, the report predicts strong growth among specialty products and in seven countries IMS has dubbed “pharmerging markets.” China, Brazil, Mexico, South Korea, India, Turkey and Russia will grow 12-13% next year, to $85-$95 billion, as primary care improves and expands into rural areas and private insurance becomes more widely held, shifting the focus of treatment away from infectious diseases and towards cardiovascular disease, diabetes and other chronic illnesses. Meanwhile, up to 29 innovative new therapies will be launched—80% of which will be primarily prescribed by specialists.
Oncology, in particular, will see a bonanza, with four new drugs for treating melanoma, prostate cancer and acute myeloid leukemia. The category's value is projected to exceed $45 billion, contributing nearly 17% of audited market growth, according to the report. Other categories rife with potential include diabetes, CNS generally and, in particular, therapies for Alzheimer's, said Conmy.
On the media front, the biggest story of 2007 was the long-anticipated thaw in the sales force cold war. With Pfizer having opened the flood gates, other big players, including GSK, AstraZeneca, Amgen, Novartis, J&J, Abbott, Sepracor and King, followed suit in shedding reps. “Generally, we see continued reevaluation of the sales model by major pharmas and much more of a focus on ROI or productivity than simply trying to match numbers,” said Conmy.
Mix in flux
The downsizing is likely to taper off, says C. Marshall Paul, president, ACNielsen HCI, but the correction has a ways to play out. “It's going to be gradual, because the industry is sales-driven, and it's so engrained to hold on to reps, but at some point the industry has got to become more marketing-oriented.”
Journal advertising continued to slide in 2007, with medical/surgical journal ad pages down 5% for the first half of the year, and the erosion shows no sign of abating. Meanwhile, medical education providers were thrown into turmoil by recent ACCME policy updates that redefined what constitutes a commercial interest.
The directives could force providers to undertake onerous and costly restructurings to assure the body that they are clean of the taint of commercial influence, and the uncertainty has spooked already antsy sponsors. “If the commercial interest definition stands as published, it will raise the costs incurred by many medical education and communication companies, because they're going to have the expense of restructuring and maintaining separate management and payrolls,” says Marty Cearnal, EVP and chief strategic officer at Jobson Medical Information, LLC. “At the same time, we're seeing some things that are going to make commercial supporters more reticent to fund CME, because they're being asked to accept more risk.”
Consumer ad spending trended perceptibly toward media better-suited to specialty products requiring a more long-form, informational approach. “This year, we saw a strengthening of spending on magazines and print in general,” says David Kweskin, SVP and practice leader at TNS's brand communication division. “That seems to have been the growth area. TV is still dominant, and we have not seen any real surge in online.”
That's somewhat surprising, given the buzz around the potential applications of social media for pharmas seeking to reach both patient and professional audiences. “It's still a relatively small portion of budgets, given the consumer demand for online health and that the vast majority of health professionals use the Internet daily in their practice,” says Jack Barrette, CEO of WEGO Health. “We are seeing some experimentation, and marketers are beginning to grasp just how important the Health 2.0 movement is.”
Concern about regulatory pitfalls—whether real or imagined—have held up investment in online media, Barrette said, as have engrained habits. But the success of physician online community Sermo and GlaxoSmithKline's hosting of an online community for patients on Alli suggest that the industry may be ready to take the plunge. “Working with patient communities is the most prominent opportunity,” says Barrette.
Online media holds great promise for reaching healthcare professionals, as well. “You can get 17 minutes with a physician [through e-detailing],” says Paul of ACNielsen HCI, noting that only 25% of physicians have been e-detailed. “That's extraordinary.”
That's not to say that spending on good old mass advertising is likely to take a big hit, but with few mass-market products coming online, it's unlikely to grow. “I think the pendulum will continue to swing away from mass DTC as the percentage of total ad budgets,” says Tom Lom, EVP and senior director at BBDO New York. “It used to be 80% or 90%, and now it's going down and targeted DTC is becoming a bigger part of messaging, whether that's relationship marketing or Web-based. Clients are trying to make sure a higher percentage of their spend goes to a very defined target, and education is taking on a more significant role. The reason print has picked up is because people want to communicate more in-depth than can be done in a 60-second ad.”
Other factors hemming in DTC TV include increasingly crowded mass-market categories, making it tougher to differentiate a product with a TV ad, and tougher scrutiny from regulators, ensuring that much of any TV ad is eaten up by risk information. “It used to be 20 seconds, and now increasingly 30 seconds or more is the fair balance,” says Lom.
Having successfully lobbied for the exclusion of draconian impingements on advertising and promotion from the FDA Amendments Act, advertisers are probably on solid ground for awhile, legislation-wise. But in a presidential election year, with healthcare costs weighing on the minds of voters, pharmas, biotechs and device manufacturers are sure to present tempting targets for pols. Expect plenty of pronouncements from presidential candidates excoriating pharmas and more committee hearings along the lines of Rep. Waxman's Oversight and Government Reform inquest into the handling of Avandia safety.
Rocky times in Rockville
“There will be a lot of noise and it will be hard to separate smoke from fire, especially on the Hill,” says John Kamp, executive director of the Coalition for Healthcare Communication. But the real action is shifting from the capitol to the statehouses, with many states seeking to bar commercial use of physician data and state inspectors general taking a more aggressive stance than their federal counterparts.
At press time, FDA had approved only 15 new molecular entities. There's still time for a New Year's Eve rush like last year's, but 2007 is shaping up to be an especially lean one for new drugs. Whole classes of drugs are under review—glitazones, ADHD drugs, PPIs and bisphosphonates for cardiovascular issues, ADHD and other CNS drugs for adverse psychiatric events, OTC cough and cold medicines for safety and efficacy in children. Besieged by pols and consumer groups over drug safety concerns, FDA seems to be applying more scrutiny than ever in reviewing NDAs. The slightest hint of a safety signal can set even the most promising developmental prospect back several years, as the agency asks for more costly, time-consuming clinical trials.
“Is this hysteria about drug safety going to be reduced? My guess is no,” says Kamp. “We're getting a new warning a day on existing drugs. We're getting more approvable letters and fewer approvals, and I don't think FDA staff are going to feel any more of a need to approve new drugs. It's the inverse of the situation in the late '90s, where, in the face of AIDS, drug approvals were a wonderful thing. Now they seem like a threat to society, and I don't see any confluence of events that's going to start moving things in the other direction.”
At least one FDA watcher is more sanguine. “In a political year, the FDA is going to understand that it needs to be apolitical,” says Peter Pitts, director of the Center for Medicine in the Public Interest. “FDA is in the business of protecting and advancing public health. It's not an agency that wants to deal with politics at all, but it's been buffeted by very potent political winds from the outside.”
The Reagan-Udall Foundation established by the FDA Amendments Act will, together with the FDA's Critical Path Initiative, revolutionize drug development, says Pitts. “By streamlining and improving the science of drug regulation, we can bring drugs to market more rapidly and safely by helping companies fail faster, so that they can reinvest those resources in more successful propositions,” says Pitts. “Ultimately, Critical Path is like a game of Chutes and Ladders, helping companies avoid the chutes and scale the ladders.”