Pharma 2016: Hot Topics, Burning Questions

Pharm Exec Editorial Advisory Board member Cliff Kalb poses some of the pertinent questions he expects the pharma industry will be asking this year.

Cliff Kalb

• Volume to Value Transition. All the moving parts in the US Healthcare system have begun facing the dramatic systemic shift from a volume based fee for service mindset to a value based outcomes and performance oriented system. Will this transition face fits and starts and occur gradually, or can one foresee a tipping point where "conversion" will occur in a seismic fashion? 
   

• Healthcare Convergence. Largely driven by rapidly changing technology, all health care system stakeholders are converging. Previously separate segments like drugs, devices, diagnostics, IT, patients ,payers, providers and regulators are connecting and overlapping at  a rapid pace. Will pharma choose to remain isolated and "stare at their belly-buttons?”  Or perhaps will they redefine their competitor and collaborator landscape to welcome and actively participate in the change? Studies of companies as diverse at J&J , GE. Google and Novartis could be instructive as to the scope of real opportunities and threat by viewing the health care world from their perspective.
   

• Disease Conditions Requiring Solutions. Traditional high unmet medical need targets of Alzheimer's, diabetes, hepatitis C, and the many forms of cancer have garnered pharma's intense interest and R&D spend for many years. Results have ranged from continuing frustration to actual cures. However global health organizations like the WHO have been begging pharma to recognize growing bacterial resistance to antibiotics, and the long term risk presented by a world where the bugs have rapidly begun to outsmart the drugs. Pharma has been reluctant to invest for financial reasons, as the ROI falls short of other TA's. Merck took a bold step in 2015 by acquiring Cubist, an antibiotic specialty firm. Will this effort stimulate others to follow and re-engage in this field, or will this remain an isolated attempt to start a trend, only to ultimately serve as a public relations victory? 
   

• M&A as a Growth Strategy. The value of deals proposed or closed this past year in the health care ecosystem set records. Consolidation in large pharma, in health care provider systems, and in insurers peaked after several years of more modest activity. Perhaps opportunities for tax inversions, or the pending end of the "free money" Federal Reserve era were significant financial drivers of the urge to merge. The broader strategic issue for pharma  industry executives is whether a growth strategy facing the classic "build vs buy"  decision  which recently tilted towards the buy side  are prudent business judgements. Some believe mergers are a short term pipeline gap filling strategy, while others argue they serve as a source of durable competitive advantage. What are the key arguments supporting these divergent views and what examples can be offered to support them? Are alternatives like asset swaps a better way to grow and improve business performance?
   

• Pricing and Pharma's Reputation. Recent events started with Gilead's $1000 dollar per pill Hep C cures, and dramatically accelerated when Mr. Shkreli was eviscerated by the media for unapologetically raising the price on a very old drug used in AIDS patients some 5000%, and eventually wound up getting  indicted for prior alleged business  crimes. The politics of the election season has raised the issue again, and painted all of pharma with the same brush. What specific strategies can be employed by pharma in the short term (during the election season) and in the long term that can reverse this trend? What leaders should step up to defend the industry other than PhRMA? Can we offer new and innovative messaging to turn the tide with patients, providers and government that can convincingly communicate the value story?
   

• Orphan Drugs. FDA had a banner year in 2015 with 45 new molecules approved for commercial use. However, 20 of these molecules (43%) were orphan drugs which received accelerated review and patent privileges as they serve limited populations.  The increasing pattern of orphan approvals over the past several years may be a double edged sword for pharma. Often, the sponsors of these products will price these products at extreme levels, drawing public criticism that may counterbalance the importance of lives saved or extended for the few with these rare diseases.  Has the well intended  orphan drug strategy pendulum swung too far in the wrong direction?   How should the R&D and commercial leaders at pharma anticipate and sort out the  public policy risks and benefits of  adopting an orphan drug development and commercialization strategy ? How will proposed provisions of the proposed 21^st Century Cures Act impact rare disease research and funding if passed through Congress and signed into law?
   

• IOT or IOMT? We have all heard about the impending era of the internet of things (IOT) where smart devices will allow  our homes , our cars, our businesses and countless other attributes of daily living to be managed via a click of a mobile device.  But how much has been said about the coming world of the internet of medical things (IOMT)? A world where patient, pharmacy, doctor, hospital, insurance company, pharma company and government are all connected, sharing data and information in  real time and enabling  virtual coordination of care  regardless of physical location of the players?  Only a fantasy, you say? Perhaps it will arrive sooner than we think with the assistance of non-traditional players like IBM Watson’s Health Cloud and Xerox’s TMS Health and Healthspot services..  Is pharma prepared to be part of a virtually managed health care system?  What are the steps necessary to get ready and integrate with this future scenario?
   

• Geographic Opportunity. In the ‘90’s, 80% of  big pharma’s business was generated from the U.S., Strategic Europe, and Japan. In the early 2000’s , the focus of growth moved to the BRIC countries of Brazil, Russia, India and China. Adjustment to these country’s  local health systems, drug  approval, marketing and pricing requirement , intellectual property protection policies , and competition with traditional local medicines have been difficult obstacles to overcome. In the past few years, the acronym MENA has been used to identify the Middle East North Africa region which has been fraught with geo-political and religious instability.   So what’s the right course for pharma’s global growth? Is it the right time to double down on certain markets of Latin America or Eastern Europe? Should we re-deploy additional resources to India due to recent changes in the new government’s pro-business attitude, or perhaps  increase investment in China as they crack down on corruption? Or maybe it’s time to pull back from both emerging and frontier markets,  and re-assess our commitment to the top seven developed markets that built our business  foundation last century?

Cliff Kalb is President and Owner of C. Kalb & Associates, and a member of Pharm Exec's EAB.