Frank Celia, Contributing Editor

For the fourth year in a row, direct-to-consumer (DTC) advertising funded by the healthcare and pharmaceutical industries continued to grow, most likely surpassing 2015’s record-breaking media spend. Although the figures were not completely tallied at presstime, in 2016, consumer-marketing efforts probably cost about $6.4 billion, a 5% jump over the $6.1 billion spent in 2015, according to the market research firm Kantar Media.

Since 2012, DTC spending by pharmaceutical companies has increased 62%, with back-to-back 19% increases in 2014 and 2015, according to Kantar data. The previous high mark for consumer advertising, $5.4 billion, was set in 2006 (Fig. 1). As usual, television benefited the most from higher spending, capturing 83% of the increased cash flow since 2012. Television’s share of the DTC ad pie has grown 12% since that time, while magazine and other print media’s share has shrunk by 6%,  says Kantar.

Expenditures for digital marketing also grew in 2016, but at a slower pace than experts would have predicted a few years ago. Advertisers spent $2.02 billion on healthcare and pharma digital promotions last year, a 20% gain over 2015, but still only accounting for 2.8% of the total digital ad spend among all US industries. [1]

There is a widespread agreement among marketing experts that drugmakers should be making more inroads into digital. “We’re urging clients to shift more resources to digital media, because their customers are there, and even after a TV ad or a detail generates that initial awareness, they are making medical decisions based on the information they find online,” says Matthew Arnold, a principal analyst at the consulting firm Decision Resources Group. “But digital spending remains a pittance at most pharmaceutical companies.”

 Fig. 2. DTC spending overall has been on the rise since 2010, driven primarily by television spending. Credit: ZS Associates[/caption]

Part of the reason for the increased consumer marketing is a flood of new diabetes products, according to a report by market research company eMarketer. New diabetes entrants from Boehringer Ingelheim, Sanofi and Eli Lilly debuted in 2016, which in turn prompted defensive ad spending to protect established brands from AstraZeneca and Johnson & Johnson. Multiple sclerosis was another crowded marketplace that attracted copious ad dollars, according to the company.

“Pharma growth continues to be driven by well-funded marketing launches for new or recent drug approvals, plus existing therapies that have been approved for new indications and have increased their spending rates as a result,” explains Kantar Media CRO Jon Swallen.

“Some of the new product approvals are for conditions with relatively small patient populations but extremely high list prices for the drug—in some cases tens of thousands of dollars for a full course of treatment,” he continues. “Thus the sales revenue potential of the drug justifies spending $50 million plus on advertising.”

Indeed, the number of drug brands with marketing budgets of $50 million or more in yearly spending nearly doubled between 2012 and 2015, according to Kantar; and the number of budgets with $75 million  or more rose from 13 to 30 during that  time period.

Many of these dollars are going toward prime-time television media buys. According to Kantar data, total healthcare spending on prime-time TV in 2015 amounted to $963 million. In the first three quarters of 2015, that figured totaled $587 million. At presstime, Kantar only has figures for the first three quarters of 2016, but at $747 million, the prime-time television spend is well on its way to surpassing 2015.

Television remains popular because it has a track record. “Pharmas do rely heavily on this tried and true formula of sales reps and TV ads because it works,” says Arnold. “There is a real culture of ‘if it ain’t it broke, don’t fix it,’ among pharmaceutical marketers. They feel their jobs are already complicated enough. And to be fair, it is an incredibly complicated job.”

Furthermore, the average pharmaceutical drug patient, who tends to be older, still watches a great deal of prime-time television. “Overall, adults who suffer from chronic ailments are more likely to be heavier users of TV and print media,” says Swallen, adding, “Consumers who value TV and print as sources of healthcare information are highly valuable. They are more likely to be proactive about their health, trust pharmaceutical marketers more, pay more for branded medications and take action after seeing healthcare advertising.”

Among healthcare and drug manufacturers, spending on digital video and social media advertising, with a focus on mobile technologies, will continue to grow in the coming years, according to eMarketer. The company forecasts a 15% compound annual growth rate through 2020. “This is higher than the overall US industry average of 13.6%,” a company report states. But that level of growth does not amount to much if the pie itself is relatively small, the report notes: “Digital ad spending in the healthcare and pharma industry has historically been the lowest among the industries measured by eMarketer. That will remain the case throughout 2020.”

Digital media ranges from the ubiquitous banners that appear on popular websites, to mobile presentations, to advertisers’ own websites for both consumers and for physicians. In a perfect world, readers would gravitate to the latter; but that is only occasionally the case. FDA’s oversight of pharmaceutical promotion is something that most online advertisers don’t have to contend with.

One of the reasons often put forth for pharma’s tepid approach to digital and social media is the daunting challenge posed by regulatory compliance. And that is certainly true, especially on the consumer side. It is pretty much impossible to squeeze all the potential adverse side effects of a drug into a 140-character entry on a Twitter feed, for example.

But there are other factors at work as well. Healthcare exists in a different realm than most other industries. It is both more serious and more private. “There are sensitivity issues,” says Arnold. “Maybe consumers don’t want an ad popping up on their computer telling everyone they have X condition. People are understandably a little squeamish about that.”

Another factor is the inherent challenges associated with what is known as advanced programmatic advertising. This is essentially automated, real-time ad bidding, a robotic trading system that can get ad messages closer to a desired customer demographic than the hit-or-miss approach of traditional TV or print media, or even the more targeted strategies of display or search digital ads. This is the kind of personalized targeting advertisers dream about.

However, the tech giants that offer programmatic advertising—Facebook, Google, Apple, Twitter, etc.—tend to be less than forthcoming when it comes to revealing performance metrics and the behavior of their customers. They prefer to self-report such data rather than offer transparency to their advertisers. The reason most often given for keeping these ecosystems closed is to protect the privacy of their users, but large advertisers claim the tech giants are more interested in maintaining the financial value of this data by keeping it under lock and key. [2]

In some cases, big name advertisers are starting to push back. In 2015, Kellogg’s, after publicly tussling with Google over a lack of transparency with its data, ultimately pulled its business with the search engine giant. Kraft Foods soon did the same thing, in addition to halting business with other digital formats that refused to allow independent third-party assessment.

During a panel discussion at Ad:Tech London that same year, media power players from GlaxoSmithKline (GSK) and Nestlé voiced concerns that potential programmatic digital strategies lacked crucial data.

Global Head of Digital Media at GSK, Khurram Hamid, reportedly said: “The problem that we have in this industry at the moment is that large publishers—Facebook, Google, Apple, Alibaba and Amazon—all have data that’s much better than cookie data but behind walled gardens.”

He added: “If we don’t change as an industry in pushing publishers and agencies to start reducing these walled gardens down, then large advertisers will never move all their money into programmatic.” [3]

To some extent, drugmakers can target individual patient demographics using a few highly trusted online platforms such as WebMD, Medscape, Epocrates Online and Everyday Health, according to Arnold—but for the most part, programmatic ads are not yet a significant factor in the healthcare industry.

For the time being, pharma may find greater success targeting physicians directly through digital channels, he says: “There is increasing difficulty reaching physicians through sales reps. Partly, this is a result of the massive movement of doctors into large practices and hospitals over the last decade or so, particularly since the Affordable Care Act. And those doctors are increasingly tied to the EHR (electronic healthcare records), but they’re also spending a lot of time seeking digital information on websites aimed at healthcare practitioners, such as Medscape.”

An area where digital display and search ads seem to be making headway is in “customer experience,” which has been an industry catchphrase for several years. Providing an online experience aimed at educating or supporting patients is becoming a common strategy. For example, last year Boehringer Ingelheim announced plans to use gamification to provide support to patients taking its new diabetes drug Jardiance (empagliflozin), according to eMarketer.

The company used a similar campaign to educate patients about its asthma medication, Spiriva Respimat (tiotropium bromide). In addition to providing education, the gamification program awarded patients points for taking the medication, which could then be exchanged for rewards such as gift cards.

In an increasingly patient-centric world, digital channels can be an important tool in providing engagement and customer satisfaction. “Traditional media will remain the largest benefactor of pharma companies’ marketing budgets for some time to come,” according to the eMarketer report, “but brands are beginning to see the benefits of the shift to digital, especially when trying to reach and educate consumers about disease specific remedies.”

The US Healthcare and Pharma Industry H2 2016 Update: Digital Ad Spending Forecast and Trends. By Patricia Orsini. Published December 2016 by eMarketer.

 Can Advertisers Make the Walled Gardens Hand Over Their Keys? By Merrily McGugan, June 20, 2016. ClickZ magazine. Accessed Feb. 17, 2017: 

https://www.clickz.com/can-advertisers-make-the-walled-gardens-hand-over-their-keys/101762/

GSK and Nestle Want the Walled Gardens of the Tech Giants to Fall Before They Go Full Programmatic. By Seb Joseph, Oct. 15, 2015. The Drum magazine. Accessed Feb. 17, 2017: 

http://www.thedrum.com/news/2015/10/15/gsk-and-nestle-want-walled-gardens-tech-giants-fall-they-go-full-programmatic

Why are marketers spending more than ever before on DTC overall? The power of the consumer as a key decisionmaker is increasing, even in categories where the healthcare provider has traditionally been the key (or even the sole) influencer. With increased access to a multitude of information sources, consumers simply want to be a part of the discussion and are coming to their doctors equipped to participate.

Also, it makes economic sense for pharmaceutical companies to invest in DTC television advertising. Given the channels available, few allow for the frequency needed to significantly impact net sales or are large enough to scale with the population. For example, there are only so many times that a physician is going to attend a speaker program. This leaves personal promotion through the sales force and TV as the primary tactics for scaling promotion.

Even within DTC, non-TV channels are quickly saturated. Profitable digital opportunities become exhausted long before marketing budgets are fully spent, leaving TV as a logical place to continue to invest. Moreover, due to the high margins on pharmaceutical products, especially in the specialty space, there is greater flexibility to advertise broadly on television and to withstand a lower conversion rate. Given the potential to penetrate a market and continue to scale, marketers continue to allocate the majority of their DTC spend to television.

While some hypothesize that manufacturers’ declining ability to access HCPs is driving investment in consumer promotion, they’re actually acting very independently from each other. Our analysis reveals that the categories where we see the largest restrictions on access don’t necessarily correlate with the categories where we see increased DTC investment.

Marketers are leveraging analytics to help them evaluate marketing mix trade-offs. It’s important to note that what matters for these decisions isn’t ROI overall, but marginal ROI (mROI), which specifically measures the impact of an additional dollar spent against a specific activity. For most tactics, you see that mROI will eventually decrease as spending increases, in which case marketing mix decisions may change. For some, mROI can actually become negative: For example, with sampling, increasing spending begins to actively cannibalize product sales at some point.

Comparing the value of an incremental dollar spent on DTC versus additional sales reps versus non-personal promotion to HCPs can be done in a number of ways. Here are three:

 One of the most straightforward ways to evaluate the impact of investments in a specific channel is to conduct a test/control analysis. In the simplest terms, this approach looks at individuals (consumers or HCPs) exposed to a specific message or channel and compares this group to a “matched” group (based on segment, decile and other key characteristics). However, it may be difficult to get apples-to-apples comparisons of two or more channels across different test/control analyses, so while this is helpful for understanding the level of impact that a specific channel had, it’s less effective as a means of determining where to invest incremental spending.

 This is the most commonly used approach to determine which channels are contributing to overall sales and how they compare to each other. Also sometimes called attribution models, the output of these models tells us how much of the sales (or other dependent variable) is attributable to which channels. Most of these models are “direct” attribution models, in which all impact is distributed to individual channels and the sum of the impact adds up to 100% of the dependent variable. What this fails to capture is the relationship between channels.

 Pathway modeling is built around (or on top of) a marketing mix model, but instead of looking only at direct attribution, it looks at the interaction between channels, particularly consumer channels. The outputs of these models are “bundles” of tactics that drive specific impact. The advantage of this approach is that you can see which channels are dependent on others and realize that when increasing spending on one channel, you also may need to increase spending on others in order to see the full potential impact. Negative marginal ROIs can become positive if investment in other channels is optimized.

The answer to whether mROI is higher for DTC than for other channels obviously differs by brand and specific strategic circumstances, but we can take a look at some publicly observable data as well as some high-level benchmarks to give us some directional answers.

Even if you take a very “back of the envelope” approach to ROI, you can see why some of the specialty products may be investing in DTC even for very targeted patient populations. Let’s look first at a “blockbuster” DTC example: Lipitor in 1999. At that time, there were almost 90 million cases of high cholesterol in the US. That year, Lipitor spent approximately $100 million on DTC, or just more than $1.10 per potential patient. If we estimate the annual patient value for a Lipitor script at that time at about $1,000, that means you’d need to convert 100,000 new patients—or 1/10th of 1% of the total patient population—to break even on the investment.

Compare this to Opdivo, a therapy for patients with advanced non-small cell lung cancer (NSCLC). The total NSCLC patient population is about 342,000 in the US (and the subset of this group where Opdivo is indicated is even smaller), and the estimated DTC spending for the brand in 2015 was $50 million. That works out to more than $150 per potential patient. But with the treatment costing roughly $12,500 per month per patient, Opdivo would only need to convert a few hundred (instead of 100,000) incremental patients to break even on the DTC investment. We don’t know the specific ROI for the Opdivo campaign, but the continued support for DTC from Bristol-Myers Squibb’s senior leadership would suggest that it has been considered successful to date.

Within DTC channels, mROIs can also vary. Online promotion is generally considered profitable, however, there’s a limit to growth via search and digital ads. Consequently, DTC efforts on television are more likely for generating a positive mROI as the patient population scales.

Our own pathways analysis suggests that investing in DTC isn’t a zero sum game, either. For example, increasing DTC investment in TV and radio typically has a market-expanding effect and also increases the volume of other high-ROI channels like branded search. Similarly, we see that in many cases, consumer promotion complements, rather than offsets, HCP promotion.

Overall, there’s evidence that TV and other broadcast DTC channels continue to drive strong consumer response and sales impact. While there’s little doubt that some brands are making poor investment choices and spending more on DTC than they should, our work suggests that there is a strong return on many DTC investments, and that pharmaceutical marketers are increasingly scrutinizing their DTC investments to ensure a wise distribution of their limited marketing spend.

As a 15-year industry veteran, ZS Principal Hensley Evans leads the global sales and marketing firm’s consumer and patient marketing practice, and works with many of the world’s top healthcare, biopharmaceutical and consumer packaged goods brands. Hensley can be reached at hensley.evans@zsassociates.com.

Articles

Despite the buzz around digital media channels, pharma continues to pour marketing dollars into television

Pharma ups the ante on DTC advertising

The slim hope that the growing opioid addiction crisis could be controlled by restricting access to prescription opioids—the abuse of which has been the starting point for many addicts—is slipping away as illegally manufactured opioid pills (some of them counterfeit copies of legal pills) become more commonly available. The addition of fentanyl to these illegal pills—which attracts some addicts because of a “higher high”—has only compounded the problem, and is the main reason that opioid-related deaths (which include heroin) reached 33,091 in 2015, according to just-released CDC data. [1] The Drug Enforcement Administration (DEA) has not let up on policing of prescription drug abuse, but the crisis won’t be solved by that alone.

Two key changes have occurred in the drug-abuse recovery field over the past decade: federal law that mandates insurance coverage of addiction therapy; and a grudging acceptance by a larger part of the addiction therapy community that medication-assisted treatment (MAT) works.

Until very recently, most long-term addiction therapy was not funded through private health insurance carriers. Private plans were so reluctant to cover substance abuse therapy—an aversion that took the form of high deductibles, exclusions and severe limitations—that many treatment centers did not even bother accepting insurance at all. All of that changed with the passage of the Mental Health Parity and Addiction Equity Act (MHPAEA), often referred to simply as “the Parity Act,” which became law in 2008 but whose final rule did not go into effect until 2014. The Parity Act requires group health plans to cover mental health and substance abuse disorders on an “equal footing” with other medical and surgical benefits.

The Parity Act, in conjunction with several other government laws, programs and regulatory changes, not to mention evolving societal attitudes toward addiction in general, has had a sweeping impact on the substance abuse treatment industry, according to Kevin Taggart, a managing partner at Mertz Taggart, a healthcare M&A consulting firm based in Atlanta, GA.

“We’ve had several clients who were all private, out-of-pocket pay and had been in business for 10 or 15 years, and then the Parity Act came along and now they’re being funded mostly through out-of-network insurance reimbursement,” says Taggart. “It’s really driven their sales through the roof in a lot of cases.”

That this new reimbursement environment has emerged in the midst of a nationwide opioid addiction epidemic would seem to argue for a bullish position on pharmaceutical firms that manufacture drugs used in MAT. But getting such drugs to patients in need is proving more difficult than just funding them. Private practitioners have been slow to prescribe MAT therapies and the only other venues for receiving such treatment—methadone clinics—are few and far between in rural areas, or in inner-city neighborhoods, which present their own accessibility issues.

Fortunately, new drug distribution models are experimenting with ways to expand these proven treatment methodologies to those caught up in what is now being universally viewed as a national public health crisis.

Medications for the treatment of opioid use disorders include agonists like Dolophine and Methadose (methadone); partial agonists like Subutex, Suboxone and Zubsolv (all buprenorphine); and the antagonist Vivitrol (naltrexone). All of them pretty much have the same mechanism of action: they bind with opioid receptors in the same way as prescription painkillers and heroin but at a slower rate, while also leaving the body more gradually. This creates a “ceiling effect” on the highs and a “basement effect” on the lows.

Increasingly seen as an essential component of any opioid treatment plan, both for patients in withdrawal or to support long-term recovery, these drugs are gaining traction. “When administered in the context of an addiction treatment program, all effectively help maintain abstinence from other opioids, reduce use disorder related symptoms, and reduce the risk of infectious disease and crime,” Director of the National Institute on Drug Abuse (NIDA), Nora Volkow told a Congressional hearing in 2015. [2]

These medications can only be prescribed under highly regulated circumstances. By federal law, buprenorphine, which gained FDA approval in 2002, can be prescribed by private physicians only after completing an eight-hour training course and obtaining a waiver from DEA. At first, qualified doctors are limited to 30 patients. After a year, they may request federal permission to treat up to a maximum of 275 patients. As of June 2016, about 33,000 physicians have been approved to prescribe buprenorphine.

The other main venue for receiving MAT, methadone clinics, known in the business as opioid treatment providers (OTPs), are also highly regulated. There are approximately 14,000 OTPs operating in 48 states in the US, treating about 350,000 patients. Clinics tend to be concentrated in the country’s most heavily populated areas.

Few realize it but methadone clinics are not limited to dispensing methadone. They can dispense any of the various buprenorphine variations and furthermore are not subject to the patient caps that apply to private physician practices. Although OTPs seldom dispense buprenorphine, a few do. “We’ve got one client for sale that has 500 patients total and 450 are on Suboxone,” says Taggart. “We went in there earlier this year, and it really feels just like a doctor’s office. It’s in a medical building in a nice part of town.”

In addition to regulatory hurdles, MAT therapies also face lingering philosophical pushback from substance abuse programs opposed to any kind of chemical-based treatment whatsoever. Based on the 12-step program that serves as the foundation for Alcoholics Anonymous, the so-called Minnesota model embraced by some treatments requires absolute abstinence from any mood altering substances. Some residential facilities reportedly even deny patients fully caffeinated coffee. While almost no clinicians dispute that psychiatric counseling must be part of any treatment program, there is a growing awareness that patients with severe opioid addictions will benefit from MAT therapy. A widely cited 2015 study found that opioid agonist pharmacotherapy cut the risk of death by overdose among British patients by half when compared to psychological support alone. [3]

Vast, fragmented and lacking a single federal agency to oversee it, the substance abuse recovery industry is difficult to assess in terms of size. The National Assn. of Addiction Treatment Providers guesses there may be as many as 75,000 different treatment programs operating in the US. Of those, around 14,500 are brick-and-mortar behavioral health and substance abuse facilities, which generate an average of about $1 million annual revenue each. Among facilities, about 80% require patients to adhere to some form of the 12-step model that mandates a “spiritual” component to treatment. [4] However, more and more such programs are adding MAT to their therapies, as well. (For example, after years of opposition, the world famous Hazelden treatment system adopted MAT in 2012.)

About 81% of treatment facilities are outpatient, 26% are inpatient (“residential”), and 6% are hospital-based inpatient. Roughly 55% are structured as nonprofits and 32% are for-profit, with the remainder funded by state, federal, local or tribal entities. [5]

The reimbursement requirements mandated by the Parity Act have piqued the interest of for-profit and private equity concerns. Investment dollars are pouring in, M&As abound, and some are calling it a full-scale Wall Street “roll up play.” The Parity Act and its transformation of the industry will likely enhance quality, standardization and measurable outcomes, three characteristics significantly lacking in this unruly space, according to Mark Covall, president and CEO of the National Assn. of Psychiatric Health Systems, but it will take time: “In many ways what I’m describing is just starting to play itself out,” he notes. “It’s still in its early stages.”

Supporting the Parity Act are a slew of government sanctioned programs, initiatives, laws and regulations aimed at confronting the ongoing opioid epidemic. Congress, FDA and the Surgeon General all have pending efforts, adding to a climate which appears welcoming to the ongoing funding of MAT therapies.

The only possible exception here is the continued level of reimbursement for out-of-network residential treatment facilities. These tend to be high-end establishments located in warm weather states where patients can travel to escape the environments and people contributing to their substance abuse problems. The trouble is that they are expensive, sometimes charging double or triple what in-network facilities charge.

The payer backlash against such facilities is well under way and such programs cannot remain sustainable, according to a white paper published by the Braff Group, a Pittsburgh, PA-based consulting firm: “Despite the longevity it has enjoyed to date, the out-of-network model has always been perched precariously on the razor’s edge of sustainability,” the paper states. “If anything the added visibility of parity only raises awareness of this ‘only in America’ systematic disparity in payments.”[6]

The paper concludes that the gains of the Parity Act “will be disproportionally realized by the more mainstream (i.e., affordable) providers.”

But funding is the not the only issue at stake. Physicians appear to be reluctant to prescribe buprenorphine medications, perhaps feeling uneasy about the possibility of their waiting rooms filling up with drug addicts and the effect that might have on public perception of their practices.

Many critics blame the regulatory patient caps for unmet patient needs. But a recent NIDA study of physicians and addiction specialists certified to provide MAT therapies showed that many prescribers served only a small fraction of the maximum patients allowed by the law. More than 20% of DEA-approved doctors treated three or fewer patients; and fewer than 10% treated more than 75 patients, according to the study.

Many in the industry believe that new drug distribution models in which OTPs collaborate with buprenorphine prescribing practitioners to treat opioid-addicted patients could be feasible.

In a series of policy papers developed by the American Association for the Treatment of Opioid Dependence (AATOD) for the Substance Abuse and Mental Health Services Administration (SAMHSA), authors laid out a unique blueprint. [7] They describe how three states—Vermont, Rhode Island and Maryland— have implemented OTP Health Homes by taking advantage of the Affordable Care Act’s Medicaid Health Home option, which enables states to reimburse agencies for providing care coordination.

This model, called the “Hub and Spoke” model, capitalizes on the lack of patient caps confronting OTPs, and standardizes coordination with the patient’s physician. One author described Vermont’s program this way: “Specializing in the treatment of complex addiction, the regional centers (hubs) provide intensive treatment to patients and consultation support to medical providers (spokes) treating patients in the general practice community.” Such coordination would also provide opportunities to treat potential co-morbid psychiatric problems, the authors add.

However, the uncertain status of the ACA following the recent Presidential election casts a pall over enthusiasm for this model. Its reliance on the ACA’s expanded Medicaid provisions, which even before the election 16 states had already opted out of, would be particularly problematic for any nationwide effort.

There is no avoiding the fact that all currently approved MAT therapies contain opioid agents themselves. Although these drugs will not produce the same euphoria as heroin or painkillers, dependent users will take them over nothing. Despite precautions, buprenorphine medications rate among the nation’s most “diverted” prescription drugs (i.e., sold on the black market, boiled down and injected, exchanged for harder drugs, etc.).

Aware that four out of five opioid addicted patients acquired their habit after taking prescription painkillers, pharmaceutical manufacturers have in recent years developed a spate of abuse deterrent (AD) opioid painkillers, designed to be more difficult to crush, inject or take via intranasal ingestion. Six such AD painkillers have been approved by FDA, the latest being Pfizer’s Troxyca (oxycodone and naltrexone) approved in August 2016. Troxyca is an oxycodone pellet with a naltrexone core. If the medication is crushed, the naltrexone will counteract the opioid’s effect, according to the company.

However, the higher costs of AD painkillers have drawn protests from patients and payers. It is difficult to compete on price with traditional opioids, which have been generics for years.

Another possible way to prevent diversion is through drug secreting implants. In May 2016, FDA approved Probuphine, the first buprenorphine implant for the maintenance of opioid dependence. The implant is designed to provide a constant, low-level dose of buprenorphine for over a period of six months.

Of course, avoiding opioids in pain management altogether seems like a worthy clinical goal as well. Devices designed to treat pain without drugs continue to be an area of experimentation. For example, in October 2016, an observational study presented at the annual meeting of the International Society for Pharmacoeconomics and Outcomes Research (ISPOR) found that non-invasive vagus nerve stimulation effectively treated patients suffering from medically unexplained pain symptoms.

As it has for decades, the development of a non-opioid, synthetic painkiller remains a paramount goal of pain relief research. Boehringer Ingelheim sold off three experimental pain compounds to Baltimore, MD-based Centrexion Therapeutics last year. Centrexion then announced that it would continue clinical trials on an injectable form of synthetic capsaicin (the active ingredient in chili peppers) for the treatment of pain.

In the meantime, clinicians and healthcare policymakers will work with the best tools available, and MAT is increasingly seen as part of that mix. “I don’t know how all of this is going to evolve,” concludes NAPHS President and CEO Covall, “but I do think there needs to be mechanisms to create more availability for MAT therapies. Because they are effective and do very well and we could save a lot of lives.”

Rudd RA, Seth P, David F, Scholl L. Increases in Drug and Opioid-Involved Overdose Deaths — United States, 2010–2015. MMWR Morb Mortal Wkly Rep 2016;65:1445–1452. DOI: 

http://dx.doi.org/10.15585/mmwr.mm655051e1

Mattick RP, Breen C, Kimber J, Davoli M. Buprenorphine maintenance versus placebo or methadone maintenance for opioid dependence. Cochrane Database Syst. Rev. 2, CD002207 (2014).

Pierce M, et al. Impact of treatment for opioid dependence on fatal drug-related poisoning: a national cohort study in England. Addiction. 2015; 111:298-308

Substance Abuse and Mental Health Services Administration, Center for Behavioral Health Statistics and Quality. Treatment Episode Data Set (TEDS): 2004-2014. National Admissions to Substance Abuse Treatment Services. BHSIS Series S-84, HHS Publication No. (SMA) 16-4986. Rockville, MD: Substance Abuse and Mental Health Services Administration, 2016.

Integration of Behavioral Health with Traditional Care is Driving Consolidation within the Industry. Published by Duff & Phelps. Accessed at duffandphelps.com.

Medication Assisted Treatment Deals Signal a Shift in Addictions M&A. Published the Braff Group. Accessed at thebraffgroup.com

Casper KL, Storti S, Walters V. Models of Integrated Patient Care Through OTPs and DATA 2000 Practices. Submitted by the American Association for the Treatment of Opioid Dependence in partial fulfillment of contract #HHSP233201400268P. February 22, 2016.

New technology to address abuse and pain treatment

There’s no little irony in the fact that opioid abuse of prescription pills is creating a market for deterrents to that abuse, or treatments like naloxone to resuscitate overdosed opioid abusers. The situation is so fraught that the Abuse Deterrent Coalition (

), a group of pharma companies, drug delivery companies and drug abuse public-interest groups, has issued an “Abuse Deterrent Formulation: Myths and Facts” position paper that starts with the myth, “There is no evidence that abuse deterrent formulations have a real world impact.” (In fact, multiple studies have shown just such an impact; the problem is, as prescription opioids become less desirable among addicts, those addicts are turning to heroin and street-level fentanyl.) Without abuse deterrent formulations, patients suffering chronic pain would have little recourse to treatment.

Grünenthal, the Aachen, Germany company that developed multiple forms of extended-release opioids, is also the developer of Intac, its proprietary technology for tamper resistance, currently in use in multiple commercial opioid formulations. Other abuse-deterrence developers include Inspiron Delivery Services, Acura Pharmaceuticals and Intellipharmaceutics International.

Abuse deterrence is just one of multiple R&D efforts underway to combat opioid abuse. The commercialization of naloxone, a drug that counters the respiratory effects of opioid overdose, is now widespread; FDA is considering methods to enable the drug to be marketed as an OTC product, and multiple states have modified their prescription-dispensing rules to allow patients or their caregivers to obtain the drug.

Last year, FDA approved Probuphine, an implantable form of buprenorphine developed by Braeburn Pharmaceuticals and Titan Pharmaceuticals, using the latter’s ProNeura drug delivery platform. The drug is supposed to provide patients a steady, maintenance dosage for up to six months as part of a therapy program.

Research has been going on for decades to find pain-relieving drugs that lack opioids’ addictive properties, but the results have been thin so far. A recent trend is to combine an opioid substance with an antagonist (such as naltrexone), or with a bioactive neurotransmitter involved in pain perception in the brain. Most recently, Grünenthal, working with an Italian pharma company, Abiogen Pharma, was granted a Breakthrough Therapy Designation for neridronic acid, a potential treatment for a rare-disease condition known as complex regional pain syndrome.

A researcher at the Scripps Research Institute, Kim Janda, and others completed a 2012 study of a heroin vaccine, said to combat heroin’s addictive attributes while simultaneously not affecting opioid receptors in the brain (thus, presumably, enabling the pain-relief aspects of an opioid), but the research has not progressed beyond animal studies.

Drug-based therapies for opioid dependency gain acceptance and reimbursement

Healthcare confronts opioid addiction

Relative to other disease states, like cancer, diabetes or cardiovascular, ophthalmology is both smaller and less contentious. A relatively small number of pharma companies have significant franchises in it, namely, Allergan, Alcon (a subsidiary of Novartis) and Bausch + Lomb (a subsidiary of Valeant). With overall drug expenditures in the US of around $20 billion, the field doesn’t light up the radar screens of many payers looking for ways to clamp down spending.

Ophthalmologists admit few patients to hospitals, and their surgeries lack the high technical and facility fees hospital administrators seek in full-time employees. Nor has the specialty shown much interest in healthcare reform pursuits, such as transitioning to value-based reimbursement or joining accountable care organizations. The result is a workforce whose worldview remains pretty much unchanged since the 20th century: independent; prone to DIY clinical solutions; and, with less outside review, quick to embrace innovation.

However, the times are changing. A relative shortage of ophthalmologists (there are about 18,000) has led to “co-management” with optometry practices; optometrists (depending on state regulations) write nearly as many prescriptions as their physician colleagues. (1). Everyone is getting busier as the US population ages; eyecare expenditures for the over-65 demographic are nearly nine times as high for younger demographics. Meanwhile, a wider array of eyecare conditions—many of them qualifying as rare diseases—are now targets of drug development. One company—Shire Pharma—is gearing up to be a major player in the field; another is Akorn Pharma, which added three branded ophthalmic products from Merck to its portfolio in 2013. Growth rates of 5%/year are being predicted for the category.

Yet one more factor differentiates the field, and one that constrains some pharma industry growth: the widespread use of compounded pharmaceutical products. Ophthalmologists are, in fact, one of the leading medical professions supporting wider access to compounded products.

Enter newcomer Shire Pharmaceuticals (Dublin, Ireland), with bold plans to compete at almost every level of prescription ophthalmic drug therapy, and hopes to revitalize an entire industry. “There are really only a few companies that have a major presence in this space, so I think that has really, from a standpoint of Shire as a new entrant into the space, allowed us very quickly to build up our awareness and make some significant inroads,” Robert Dempsey, head of Shire’s Ophthalmic Products business unit, tells Pharmaceutical Commerce.

Shire’s portfolio consists of rare disease and specialty pharmaceuticals, mostly in gastrointestinal, internal medicine and neuroscience spaces—but until recently no eyecare drugs. When Flemming Ornskov became CEO in 2013, he knew from his years as an executive at Bausch + Lomb that the sector contained a great deal of patient need. He also knew much of that need took the form of rare diseases. For example, the retinal pigment epithelium alone can be the site of more than 200 rare maladies, most of them incurable. It seemed a perfect fit for Shire. Within a year, he had appointed Allergan veteran Robert Dempsey to head up the newly created Ophthalmic Business Unit.

Since then, the company has been laying groundwork, cooperating with professional organizations, sponsoring medical education and grants, working with key opinion leaders, and making a strong commitment to ophthalmic R&D. By the end of 2016, Dempsey estimates that Shire will have spent about $850 million on the ophthalmology move, even before launching a single drug.

This summer, the company received its first ophthalmic FDA approval, for Xiidra (lifitegrast), a dry eye drug. The launch of Xiidra will be closely watched, as it challenges Allergan’s dry eye blockbuster Restasis (cyclosporine), which generated $1.3 billion last year. There are an estimated 16 million dry eye patients in the US, many undiagnosed. The potential market might be big enough to allow Xiidra to achieve blockbuster status without encroaching much on Allergan’s market share, some forecasters believe.

In addition, Shire has investigational products for other conditions in various stages of development, including glaucoma, retinal disorders and infectious conjunctivitis (pink eye). Promotional materials indicate the company hopes to target “the anterior and posterior segments and rare ophthalmic diseases,” or, in other words, pretty much everything ocular.

Taking a page from Allergan’s Restasis launch strategy, Shire is planning a comprehensive direct-to-consumer advertising campaign. It recently signed Jennifer Aniston as a celebrity endorser. Few remember it now, but Restasis was not an instant success when it launched in 2002. Former Allergan employee Denise Sheehan, who now serves as the global marketing lead for retina at Santen, recalls that “it was not until after Allergan made some strategic investments in direct-to-consumer advertising, also with a celebrity endorser, that the brand really took off.”

The consumer choice element in dry eye is unusual for ophthalmology, which tends to be dominated by specialty drugs marketed to physicians. Currently, the most dynamic area here has been in the retinal field, driven by the success of anti-VEGF therapies. (Anti-vascular endothelial growth factor is a component of treating eye conditions as well as reducing tumor growth in cancer.) Anti-VEGF therapies effectively treat a number of serious, vision-threatening retinal conditions, including age-related macular degeneration (AMD), diabetic macular edema (DME), and central retinal vein occlusion (CRVO) among others.

Developed by Genentech (San Francisco, CA), the first highly successful agent, Lucentis (ranibizumab), arrived in 2006 (Fig. 1). Before that, however, ophthalmologists got wind of the promising trials and began using a similar Genentech product purchased through compounding pharmacies, Avastin (bevacizumab), off-label (Fig. 2). Avastin produced similarly positive outcomes and costs only $50 per dose, compared to more than $1,000 for Lucentis. When the company took steps to limit Avastin’s availability to compounding pharmacies, ophthalmologists cried foul. Eventually, the company backed down, but the lingering animus within the profession actually resulted in the heightened popularity of the off-label option, many observers say.

To this day, despite the addition of Eylea (aflibercept) by Regeneron Pharma in 2011, Avastin remains a staple among retinal surgeons, who may use it when other options fail or in cases of financial need. Occasionally an insurance plan will require Avastin as a first-line therapy, but for the most part, prescribing decisions have been left to clinicians. One reason is Avastin’s off-label status for eyecare. “While compounded Avastin is lower cost, it does require manipulation of an injectable product which will ultimately be injected into the patient’s eye,” explains Andy Behm, VP of clinical evaluation and policy at the pharmacy benefit manager Express Scripts. “It’s challenging to mandate if the prescribing physician is uncomfortable with the product or the dispensing pharmacist has little to no experience in compounding it.”

Even so, if the profession has a financial Achilles’ heel, injectable retina drugs are it. Experts believe some form of cost curtailment could emerge from CMS rather than private payers since Medicare covers most anti-VEGF patients. “Last year Medicare Part B spent $8.4 billion on claims by ophthalmologists,” notes Kevin Corcoran, COE, a consultant in San Bernardino, CA. “Of that amount, $2.7 billion was supplies, and almost all of that money was spent on just two items: Lucentis and Eylea. So in other words, 32% of all the money ophthalmology received from Medicare was for just two drugs. And that number keeps rising every year.” In the long run, he concludes, such numbers are unsustainable.

Economists blame a small market and increased competition for recent shortages and price hikes among generic drugs. A few examples: Acetazolamide, an oral glaucoma drug, which once sold for less than $50 for a bottle of 100 pills, now costs $350. Carbachol, a drop used for glaucoma and certain eye surgeries, is no longer available. Echothiophate powder, used to create glaucoma drops, is no longer available except at exorbitant prices. (2)

Clinicians express particular ire for what happened to phenylephrine hydrochloride, a topical pupil dilator used for many decades during cataract surgery. In 2013, because of a paperwork glitch (the 70-plus-year-old generic did not have a National Drug Code number), it gained approval from the FDA as a “new” drug. Within four months, all three other makers of phenylephrine withdrew from the market. Now Bausch + Lomb sells for $115 per bottle what once cost $15.

Another area of concern is the rising cost of branded antibiotic drops prescribed to cataract patients post-surgically to prevent infection. In a professional organization’s trade journal, prominent cataract surgeon Eric Donnenfeld, MD, wrote: “Today, my patients are outraged at the cost of cataract surgery medications, and my staff is considering mutiny after fielding dozens of calls a week to resolve medication cost and insurance approval issues.” (3)

Allergan, Alcon and Bausch + Lomb have introduced coupon systems that reduce copays, but this can also be a hassle, writes Donnenfeld: “This [coupon] system has to become more seamless as my staff and I want to do what is best for patients, but do not want to be handing out coupons all day.”

As a result, ophthalmologists are increasingly opting to inject the drugs during the surgery itself. Intracameral antibiotics have been around since the 1990s—about 20% of surgeons use them today—but when reports began to surface of patients avoiding cataract surgery for financial reasons, they gained popularity. Unfortunately, no FDA-approved products exist for this purpose. Thus some surgeons are turning to compounding pharmacies to create customized, off-label injectable products. For example, the compounding pharmacy Imprimis (San Diego, CA) offers an injectable agent called TriMoxi, which combines triamcinolone and moxifloxacin.

Because ophthalmologists rely heavily on products created by compounding pharmacies, keen interest surrounds the Drug Quality and Security Act of 2013, which re-regulated the industry after NECC compounding scandal, in which allegedly contaminated, compounded steroids caused dozens of deaths and injuries. FDA has released multiple guidance documents aimed at clarifying the law, but gray areas persist.

Over the summer, in Congressional testimony regarding the latest draft guidance document, Nancey McCann, director of government relations for the American Society of Cataract and Refractive Surgery, stressed that, in addition to Avastin, clinicians need compounding pharmacies to provide fortified antibiotics for patients presenting acute corneal ulcers.

“Physicians have reported varying difficulties in obtaining compounded drugs since recent guidance has created confusion in the market among state boards of pharmacy, providers and pharmacists,” she testified. “Because these drugs are not used in practices on a regular basis, physicians generally order them in smaller quantities, which makes it less cost-effective for the outsourcing facilities to produce.” Also at issue are the proposed beyond-use dates (BUDs), which, at only five days, remain too short to keep drugs in stock, critics say.

“The regulations and DQSA guidance has resulted in consolidation of compounding services, most notably, driving the differentiation between a 503A and 503B facility,” according to Eric Sredzinski, PharmD, EVP of clinical quality assurance for Avella Specialty Pharmacy, which also offers compounded pharmacy services. “From our perspective, determining products to compound is a balance between practitioner demand, feasibility, and the investment required to compound. Avella’s focus has always been on quality and patient safety and we welcome continued standards with compounding, such as those positioned in DQSA,” he says.

In addition, retina specialists risk being impacted by potential Medicare reforms of the Average Sales Price (ASP) metric used for reimbursing provider administered injectable drugs. Under the so-called “buy-and-bill” drug acquisition model, CMS pays practices 6% above the sales price for these drugs, but CMS is seeking to change that formula. In March, CMS proposed a test of lowering the ASP bonus to 2.5% plus a fixed $16.80 payment in some geographical areas, but it is unclear whether this pilot study will actually move forward.

Retinal surgeons could avoid buy-and-bill altogether by obtaining drugs through specialty pharmacies like Avella—and some do—but most practices opt for the greater inventory control and profitability offered by keeping drugs in stock. However, the challenge here is that it strains the profession’s limited knowledge of this drug channel.

“For retina, buy-and-bill is still relatively new,” says Jennifer Waters, VP of sales for ophthalmology for the drug wholesaler McKesson. “It’s only been around since 2006 [the launch of anti-VEGF agents] that they have been doing it.” Hence her company makes special efforts to help practices with inventory management, regulatory updates and administrative advice: “We have a consulting arm that will partner with the practice and look at their managed care agreements, maybe help them negotiate with private payers. We have a team that will go in and do an in-practice diagnostic around their revenue cycle—how quickly they can get bills out the door and get reimbursed better—things like that.”

Within the subtext of Shire’s marketing pitch lurks the message that ophthalmology has been ill served by its current drug manufacturers, Dempsey says, “Some of the other companies are going through some challenges in this space. We believe we are investing in research and development, while others are divesting.”

He has made similar comments in other venues, and they could be interpreted as a criticism of Bausch + Lomb, whose parent company Valeant (Laval, Canada) has a reputation for slashing R&D budgets and artificially driving growth through steep price hikes, a practice that made headlines last year. However, in the context of vision care, one Valeant endeavor does deserve scrutiny, and perhaps not in an entirely negative light.

In his final troubled days as CEO last year, Michael Pearson struck a deal with Walgreens Boots Alliance for the pharmacy chain to sell certain ophthalmic and dermatologic drugs directly from its 8,000 US locations on a consignment basis, skipping over wholesalers. Valeant paid the pharmacy a dispensing fee regardless of whether insurance covered the drug.

For Valeant, the arrangement proved disastrous. It footed the bill for the 25% of prescriptions that payers refused to cover and saw its eye-drug sales plunge 30% in the first quarter of this year. The company’s new CEO is trying to extract the drug maker from the deal.

But where some see this as a cautionary tale, others see a potentially successful new idea poorly executed. “It’s a shame to think of this as a failure, because I do think a model like this could work,” says Kathleen Iacocca, PhD, an assistant professor at Villanova University School of Business, who has studied drug supply chains. “The issue was the insured. The company took a leap of faith without checking to make sure if insurance would actually pay. But imagine if a manufacturer could partner with a third party where pre-authorization could take place. That model would be groundbreaking.”

Iacocca added that because of its high-profit margins and relative lack of generic competition, a small specialty like eyecare would be an ideal space to test such a model.

The bigger picture points to steady growth in eyecare, if only for demographic trends. “Almost everybody, if they have enough birthdays, is going to need to see an ophthalmologist,” notes consultant John B. Pinto, president of J. Pinto and Associates in San Diego, CA. “It’s not like an oncologist or a podiatrist where only a fraction of the nation has a relationship with you. Almost everybody gets to take a turn at the ophthalmology dial.”

Gonzales AL, et al. A survey of optometrists’ ophthalmic medication prescribing. Clinical Optometry. March 2014;Vol. 6:11-15. Retrieved: 

https://www.dovepress.com/a-survey-of-optometrists39-ophthalmic-medication-prescribing-peer-reviewed-fulltext-article-OPTO

Roach L. (January 2015) “The State of Generic Drugs,” EyeNet Magazine. Retrieved: 

http://www.aao.org/eyenet/article/state-of-generic-drugs

Donnenfeld E. (March 2016) “The Eye-Q Test,” EyeWorld Magazine. Retrieved: 

http://www.eyeworld.org/article-the-eye-q-test

New industry entrants aim at expanding patient volumes even while drug compounding limits some therapy classes