The Long Swim—Upstream

2013 MAY BE A NUMBER associated with the fate of the luckless, but our annual review of the business and policy environment for Big Pharma suggests otherwise—as we near the midway point in the "tween" decade, there is good fortune in store for those with the perspective that comes with the long view. The patent cliff has peaked, technology is registering unheard of gains in operational efficiency, and progress in basic science is slowly yielding a bankable account of compounds that promise to transform medical practice—and perhaps the mind of payers too.

William Looney

Of course, what the industry needs most this year—but will not get—is a revival of broad-based economic growth, especially in the mainstay markets of North America, Japan, and Europe. A five percent real rise in GDP might make all those new drugs affordable to payers again, not to mention relieve the pressure from Wall Street to drill down the SG&A-to-revenues ratio as compensation for the lack of organic growth. The way governments regulate this industry helps explain why the subtle, intricate links in the chain that drives an expanding economy are broken. Business uncertainty in the United States caused by endless fine-tuning of a vast health reform plan riddled with contradictions is just one example, as is the refusal of Europeans to make the connection between disinvestment in innovation and national pricing systems that rigidly fix the determination of a medicine's "value" against the lowest generic in its class. Government intervention in healthcare matters supremely, since in nearly all the mature markets today the sector consumes a double-digit portion of national income.

The other features this month address issues beyond economics, where the common thread is industry reputation. In "Compliance in the C Suite," we examine how companies are striving to build an internal culture that makes observance of legal strictures against off-label promotion, discriminatory pricing, and bribery an instinctive, ingrained part of every employee's skill set. Senior editor Ben Comer details improvements in direct management oversight by company boards of directors as well as a big shift toward engagement in compliance advocacy and prevention by human resources departments—a part of the Big Pharma organization that frankly could use a new raison d'etre. The point is that the position of chief compliance officer (CCO) cannot be effective if it remains an isolated C Suite offshoot, a post-it and send-it note to the US Justice Department, whose only internal ally is the Legal division.

Next, we provide some useful perspective on the incidence and underlying causes of a reputational red flag for the entire industry: drug shortages. Ken Getz and Mary Jo Lamberti of the Tufts Center for the Study of Drug Development (TCSDD) detail the results of a new survey report, which concludes that a combination of economic and internal company operational factors are shaping the drug supply in random, unpredictable ways that are often beyond the capacity of regulators to anticipate and control. Shortages are more than short-term, with real consequences for patients; the average shortage among those documented in the survey is 19 months. Unfortunately, the authors conclude that shortages are here to stay, and their incidence and impact is likely to increase as a new generation of complex biological drugs enters the market and puts more pressure on a manufacturing function that is often the first target when companies seek to cut costs.

The lesson is clear: for companies that have failed to shift their thinking about manufacturing from a support activity to a strategic priority, the time to do so is now. "The name of the enemy here is gradualism," Bob Rhoades, Quintiles VP for manufacturing quality and compliance, tells Pharm Exec. "Budget cuts, plant consolidation, mega-mergers, and conflict and overlap in regulatory guidelines together are making it harder for companies to make the necessary adjustments to manufacturing assurance within a timely, globally consistent framework."

Our last feature is an interview with professor Adrian Towse of the Office of Health Economics (OHE), a UK-based think tank supported by the local trade association, ABPI. Towse looks back on the OHE's 50 years in the business of the ideas that shape the business of Big Pharma. The OHE is proof that good, evidence-based policy is the essential foundation for any good message—in fact, an enduring trait of this industry is how frequently it stumbles in relying on the latter to drive the former. Usually when the industry has a messaging problem it's because it has failed to work out the policy challenges first.