How to Make Rx-Dx Alliances Work

Partnerships between pharmaceutical (Rx) and diagnostic (Dx) companies are difficult to achieve because most managers don't understand what it takes to make them work.

Some pharma executives see diagnostic tests as a double-edged sword. On the one hand, tests can diagnose patients who should take a particular medication, thereby expanding market share. Yet, diagnostics threaten to limit market share by inhibiting doctors from prescribing a medication without a confirmed diagnosis. (See "Double-Edged Sword," page 50.)

And when a pharma company does decide to partner with a diagnostics company, it often has completely unrealistic expectations about how long it takes to develop and launch a product. The pharma partner typically wants a market-ready test in six months, but even when that is possible the diagnostic partner knows that the situation is no better from the diagnostic angle. With increasing regulatory demands, more sophisticated technology, and low profit margins, Dx companies do not have the marketing, sales, or development resources they need to make a new test commercially successful in a short time. Typical diagnostic test development and market acceptance time lines range from two to ten or more years, and most new diagnostic tests take at least three to five years to become established and used regularly by physicians. Even large integrated companies with both Dx and Rx divisions, such as Roche, Abbott, and Bayer, have been unable to find the ideal synergy between their diagnostic tests and their drugs. But there is still hope for bringing the two sides together.

The good news for partnerships is that the very factors that make Dx companies hesitant to form pharma alliances also represent significant opportunities for both parties. When the might of a pharma marketing and sales force is combined with the technology of a strong diagnostic test, the potential to increase market share is significant.

Consider what the cholesterol test did for Mevacor (lovastatin). (See "Slow Road to Acceptance," page 52.) Merck spent millions on a "know your number" campaign to make HDL and LDL household words. In return, the diagnostic tests helped Mevacor achieve blockbuster status in a relatively short time.

Changing dynamics in both the therapeutic and diagnostic industries will make partnerships an even more important strategic move in the future. As disease awareness expands and therapeutic interventions become more specific and customized to individual patients, the need for diagnostic tests that help a physician select specific drugs will also expand.

Successful partnerships can bring significant rewards to both parties, so it pays to invest the time and effort needed to get them right. (See "It Takes Two to Tango.") This article discusses the steps necessary to make that happen.

Know Your Partner

Pharma companies must understand and respect that Dx development and marketing time lines and activities-although they are more similar to pharma now than they were during the past decade-still take a different approach to gaining physicians' acceptance and use. Partners must begin working together as early as possible in the development process-even during the pre-clinical stage.

Small and large diagnostic companies and large reference labs bring different attributes to the table. Large, integrated Dx companies have sales forces and marketing budgets large enough to promote their tests and educate physicians. They also tend to have greater flexibility in developing tests for a variety of therapeutic areas. However, because of the need to run such new tests on instruments previously placed with their customers, large Dx companies ultimately limit their degree of flexibility. Thus, a pharma company may need a diagnostic test to identify patients allergic to dust mites, but such a test may not be adapted to run on the established test platforms of the large diagnostic companies, thereby limiting the use of such a test.

Conversely, because they have fewer resources and don't want to spread themselves too thin, small diagnostic companies tend to specialize in fewer therapeutic areas. Yet they can develop tests to fit specific treatment outcomes and are thus more technologically flexible. Because of their size, however, they may lack the marketing power and direct sales force support required to drive a new product to commercial acceptance. (See "No Promo, No Uptake," page 56.)

Failure of pharma companies to appreciate those differences could lead to mismanagement of expectations in a partnership and, ultimately, to disappointment. Research shows that, to ensure a productive relationship, pharma companies with successful Dx alliances look for a few critical attributes in potential partners:

• strong scientific and technical capability

• good reputation and track record for developing tests (See "By Reputation Only," page 56.)

• manufacturing capability needed to meet market demands

• an established distribution network.

Products in Sync

The choice of test type-laboratory versus point-of-care-also plays a key role in the success of an Rx Dx alliance. By its nature, the lab test may not be the best diagnostic to build a partnership on. Lab-based tests in which samples must be sent out for analysis often require several days' wait for results. That time lag could cause a physician to delay prescribing a drug, much to the dismay of a pharma marketer.

Large central labs, such as Quest and LabCorp, resist doctors' attempts to specify a particular test because such requests impinge on the lab's flexibility. Yet, allowing unrestricted substitution of tests in the diagnostic environment is the equivalent of pharmacists switching a brand-name drug for a generic one without the physician's prior knowledge. FDA "approves for market" a test for a specific indication, but it does not impose restrictions on which test brand should be run if there is more than one test available for that indication.

In the pharma realm, physicians decide what drug to select. When it comes to using diagnostic tests in conjunction with a given product, it is equally important for doctors to have the authority to select the brand used. Point-of-care tests give them that control. Physicians prefer rapid tests they can administer in their office rather than those they must send to an independent lab. With such tests there is little risk of delaying a patient's treatment while waiting for results, or worse, having the patient simply not return for treatment. In some disease areas, patients not returning for the results of a test can be as high as 40 percent. Therefore, the greatest opportunity for an integrated Rx Dx promotion lies in brand-name point-of-care tests that yield rapid results marketed with a related therapy.

Time to Market

To successfully develop and market a new diagnostic test, both Rx and Dx companies must lay the foundation for the partnership as early in development as possible, preferably at the drug discovery or preclinical stages. (See "Time to Develop," page 54.) However, alliances formed three to four years before the launch of a new drug can sometimes succeed if the test is not too complicated to produce and administer and it gains regulatory approval quickly. However, with such a short timeline, it will still demand considerable sales and marketing effort from both parties.

The use of a diagnostic test during a drug's clinical trials can help validate the test and provide sufficient usage data to support FDA approval. Furthermore, test information is often included in the submission of a new drug application (NDA), giving further credence to the diagnostic's utility.

It generally takes at least two to three years to develop a test and get it to market and considerably more time to prepare the market to accept it. The timeline will be shorter if the new test shows an advantage over others on the market.

Consider a new cholesterol diagnostic test in which benefits might include more accurate results in minutes rather than hours or days. Yet, if the new test offers no significant advantages over others already available, it will typically take at least five to six years from FDA approval to gain market approval.

Rx Dx alliances, by definition, seek to identify new patients for a drug through the use of new diagnostic technologies. Thus, it is important that the partners come up with diagnostic guidelines and standards that will support the new technology. Although pharma companies can and should expect diagnostic partners to lead those efforts, it is important for both companies to work out shared costs in advance of product development.

Make It Mutual

Of course, each side must have something the other side needs. (See "Pharma's Stake.") A good relationship between scientists on both sides of a partnership is key to success. "They must be closely aligned and always talking to one another," says one Dx company's director of marketing. Before scientists can work well together, they must have mutual trust in each other's scientific credibility.

Also important is an open dialogue about the need for both parties to look out for their own interests. Failure to recognize that can lead to unfulfilled expectations and, ultimately, disappointment when one partner pulls out of an agreement.

At the outset of a new alliance, companies should ask several additional questions:

• What attributes does each company offer that will make the partnership a sound fit?

• How long will the partnership last?

• Which regulatory pathway must the companies follow to bring the new products to market?

• Does the pharma company have a clear vision of the disease states with a well defined need for a drug?

• At what development stage is the drug company's product?

• Is the patient population clearly defined for clinical trials?

• Do both the Rx and Dx companies have a good relationship with FDA?

• What will the price of the test be relative to the price of the drug?

• Is there already a similar test on the market? If so, will the new test be more effective or more accurate? How will it improve treatment options?

• Does the Dx partner have strong scientific and developmental abilities with a good reputation and track record for developing tests?

• Can the Dx company produce the number of tests needed to support the market?

Promoting the Mix

A push pull model of diagnostic commercialization illustrates the impact of various forces on market uptake and the overall commercial success of a new diagnostic test. The model includes four potential scenarios:

Dx-only push. Products that receive marketing push from diagnostic companies alone typically take the longest time to achieve a high level of market acceptance-even when there is an added push from large diagnostic companies' sales forces. Market research and benchmark interviews indicate that tests in this category can take up to ten or more years from regulatory approval to reach acceptance in the market. Dx company marketing budgets and sales forces are not large enough to generate the necessary impact on key opinion leaders, clinicians, advocacy groups, managed care organizations, and other payer groups to make new tests widely available and used in a short time-particularly for a new disease marker.

Dx and Rx push. If the marketing and sales push comes from a Dx and Rx co-promotion, but demand from key opinion leaders and advocacy groups is lacking, a new test can often take five to ten years after FDA approval to achieve market acceptance. Without pull from the medical community and consumers, rapid market uptake can require tre-mendous promotional resources from both partners.

Dx-only push/medical community pull. The third scenario involves creating a strong demand in the medical community from key opinion leaders, clinicians, and patient advocacy groups. If the Dx company is solely responsible for promotional efforts with little or no marketing and sales support from the Rx company, the test may take three to five years from regulatory approval to achieve market acceptance. This scenario tends to play out in cases in which a test is developed to fulfill an unmet medical need or when it is designed to diagnose a disease or monitor treatment efficacy of a relatively new drug. (See "Getting Everyone on Board," page 58.)

Rx and Dx push/medical community pull. The ideal scenario for achieving rapid market uptake of a new diagnostic is to combine Rx and Dx push with medical community pull. Under those conditions, a new test could be accepted within two to three years after regulatory approval. However, such a scenario requires near-perfect planning by the two companies.

It also means Rx and Dx teams must begin to work closely together as early as the pre-clinical stage of development and throughout the alliance's course-whether it is a loose agreement or a formal contractual one. (See "Working Hand in Glove," page 58.)

To create the ideal scenario, pharma companies must be prepared to promote new diagnostic concepts and their accompanying usage guidelines. Diagnostic companies recognize that most pharma sales and marketing executives hesitate to shift any portion of their product selling time with physicians to educate them about a diagnostic test. However, when the use of a diagnostic test can affect the acceptance and use of a drug, it is beneficial to co-promote both the test and drug and to educate physicians about both. In fact, pharma sales reps can often lengthen their visits with physicians by introducing and educating them on the test's uses and the diagnostic's ability to guide a specific treatment.

The use of pharma industry resources-including their comparatively large promotional budgets and large direct sales forces-to market a new diagnostic test can dramatically increase the speed with which that test is accepted in the market. But because that is not always feasible, pharma executives may consider selecting diagnostic partners who are prepared to invest in a direct sales force to take the lead in promoting their own product. In that case, the Dx company relies on the Rx sales force only to help create awareness of the test. To date, however, only a handful of point-of-care diagnostic companies in the United States have been willing to bear that responsibility.

Impact Predictors

A simple technique developed by Diagnology can help measure the potential success of partnerships between diagnostic and pharmaceutical companies. A patient flow schematic can help assess the value of working together and selling the Rx Dx partnership notion to senior management. (See "Proving the Case," page 60.)

Take, for example, a currently preferred office-based diagnostic test used by a primary care physician that yields 40 50 percent accuracy in diagnosing all patients (Segment C). If a new diagnostic test eliminates significant levels of misdiagnosis or identifies patients with atypical symptoms that were previously missed, it may increase diagnostic accuracy to 80 percent. The improved test will diagnose almost twice as many people as the current technology, resulting in twice as many patients getting treatment (Segment D). If the pharma partner has a 50 percent share of the market for that disease's treatment, it can expect to gain prescriptions for at least half of the patients in Segment D.

Another way to look at the partnership's value is to demonstrate the impact a new diagnostic might have on improving patients' awareness of a disease. Studies show that patients frequently seek diagnostic information before exploring treatment options. If they could be encouraged to request a specific diagnostic test from their doctor through awareness and education programs in disease areas in which there is significant under-diagnosis, or misdiagnosis, then more patients would eventually seek treatment. That is a win win situation for both partners. (See"Humor+Celebrity=Awareness.")

Finally, it is essential to consider a partnership's value with regard to customer retention. A point-of-care diagnostic test, when supported by new standards of accuracy and effectiveness, is likely to become embedded as a "test of choice" for office-based physicians. Evidence from point-of-care marketing campaigns directed at physicians demonstrate that doctors tend to support well endorsed brand-name tests and are therefore unlikely to switch to alternatives without similar support. A joint campaign, coupling the diagnostic with a given medication, may create a halo effect that makes the physician more committed to the pharma product. That creates a significant increase in customer retention or brand loyalty, which in turn generates a measurable sales impact for the Rx partner that the company can track as a benefit of the alliance.

Prescription for Success

To recap, the groundwork necessary to create successful alliances is as follows:

• Companies that have both Rx and Dx divisions must create the specific skills required to conduct joint campaigns. Companies that are already integrated have the opportunity to lead the industry, mapping the way for joint partnerships elsewhere.

• Pharma CEOs seeking to grow market acceptance for existing treatments should examine market share from both diagnosed and undiagnosed patients and access the untapped market not just through better treatments but by putting appropriate tests into physicians' hands.

• Pharma companies should hire executives with experience in both the Rx and Dx fields so they can plan and implement timely joint campaigns to support new and existing therapies.

• Both Rx and Dx companies must gain a better overall understanding of each other's industries and development time lines. The alliance must begin early and the partners must work closely together throughout the development and marketing process.

• Pharma product teams must agree to synchronize Rx and Dx standards.

• Diagnostic partners must be willing to invest more to support direct sales forces and product branding.

It is no longer credible to separate diagnosis and treatment merely because they are historically different industries. Physicians and patients alike regard diagnosis and treatment as part of the health management continuum. Companies that understand that and take an integrated Dx-Rx approach will see a significant increase in their products' market share.