July 14, 2008
SUVs, CEOs and WCs
The initials CEO, CFO and COO have become so ubiquitous that it's no longer necessary to spell out what they stand for. (I hope.) But I've never heard of a company that has a VP for WCs—and I don't mean sanitary facilities. I'm referring to a corporate officer for wake-up calls.
Think how much better off General Motors would be if someone in authority had said 10 years ago: “Have you seen the projections that we may start running short of oil and the price will go sky high? Let's plan for that.” If that exec had enough clout not to be scoffed at, management might possibly have developed a strategy for the tipping point when SUVs and pickups stopped being the auto industry's cash cows.
If a pharma company offered me the job of VP for WC, I would recommend that they plan to cope with a train wreck that can be summed up in two words: targeted biologics. It takes no inside knowledge or abstruse analytic skills to realize how this new chapter in drug development will radically change the marketing landscape. For documentation, consider this interview with Lee Newcomer, an oncologist who is now a senior exec at UnitedHealthcare. Published online in the web edition of Health Affairs, the discussion started with agreement that new biologic agents are entering the market at a steady pace. Here are a few examples of the way this trend is bound to change just about every aspect of the traditional way pharma does business.
Prescribing information: The initial clinical data on Herceptin made the product look like a failure. Only later, when a diagnostic test revealed that it works only in women whose tumors have a gene called HER2, did it turn out to be marketable.
Pricing: In the 1950s pharma revolution, the blockbusters were followed by me-too competitors, whereupon the market determined price. Now, when new therapeutic advances help a select population, manufacturers, as Newcomer puts it, “can price whatever they want if the drug is good enough and there is no competition. If a manufacturer discovered a drug that extends lung cancer life for a year and chose to charge $150,000 a year, I don't know that anybody could stop them.”
FDA regs: “If…we're not going to stop off-label usage, let's at least harvest the information that comes from it, so we can make better decisions going forward,” says Newcomer. An estimated 12%-20% of patients receiving Herceptin had not been tested to see whether it would work. Should such tests be required prior to use? Before you answer, consider the potential effects of treatment. A patient was given Herceptin and Avastin though there is no proof that they work together. A year's treatment came to $160,000. That boosted her employer's insurance so high the company gave up coverage, leaving staff uninsured. It doesn't take a crystal ball to realize the status quo is unsustainable.
When pharma finishes planning for the new therapeutic era of targeted biologics, they might also attend to another growing crisis: the industry's fraying reputation. But all this doesn't necessarily mean that we should be pessimistic about pharma's future—not if the decision-makers start to make some forward-looking decisions. It's time to look for new business models and bold new thinking. Time for a wake-up call.
Warren Ross is editor at large of MM&M