		Many government campaigns in China appear for a brief period and then disappear. President Xi Jinping's anti-corruption campaign, however, appears to have considerable staying power. Pres. Xi made it one of his cornerstone policies when he came to power, as corruption was viewed as a threat to the Communist Party's survival amid growing public dissatisfaction. According to the Party, 180,000 party officials were punished last year for abuse of power and corruption.

		However, the current sustained campaign is far more complex than just an attempt to rein in corruption. Pres. Xi is benefiting from a consolidation of power as many of his political rivals have been caught up in the campaign or are feeling the heat. Additionally, the National Development and Reform Commission became more active after Pres. Xi came to power, aggressively going after industries where it appeared that Chinese consumers were paying more for products than overseas consumers. It is in this last context that several pharmaceutical companies have found themselves caught up in the anti-corruption campaign, with authorities allegedly looking into the business practices of Novartis, AstraZeneca, Sanofi, Eli Lily, Bayer and Novo Nordisk.

		In the ongoing investigation of GlaxoSmithKline, there is a continuing emphasis in the Chinese media that some of GSK's drugs were many times more expensive in China than in international markets, in addition to the allegations of corruption. The government has been going after foreign companies in a number of industries, such as foreign dairy producers and automakers for anti-competitive behavior and price fixing, and Carrefour, KFC and McDonald’s for alleged food safety issues, in an apparent bid to protect domestic companies in those industries. It appears from statements in state media that this is an underlying theme to the current investigations of foreign pharmaceutical companies in China.  If a foreign company finds itself in an industry that becomes targeted in this manner, it is handing the government an easy avenue for attack if it doesn’t have a robust anti-corruption compliance program in place, especially if it is in a high risk industry such as the pharmaceutical industry.

		These processes need to be robust as corruption is so pervasive in everyday life, as it is in most other developing countries. The first step is training. Employees often don’t realize what they are doing is wrong, or have the perception that it is a common and accepted practice which is in the best interests of their employer. That attitude can be seen in GSK's situation where employee representatives have been very public in their demands for GSK to reimburse salesmen for bribes they have paid on behalf of the company, going so far as to unfurl a banner in front of GSK headquarters in Shanghai that said "Return my hard-earned money."

		Additionally, many employees may not know what is prohibited under their own anti-bribery laws, and in particular under foreign anti-bribery laws, such as the US Foreign Corrupt Practices Act or the UK Anti-Bribery Act. An ongoing training program is essential to educate employees as to what behavior is prohibited, along with how employees will be punished for engaging in such behavior. In order to be able to punish employees for violations, an employer needs to have an employee handbook in place which states the behavior that is prohibited under relevant anti-bribery laws, and that it has the right to terminate an employee if it discovers that he or she has violated the rule. Under Chinese law, a violation of China's anti-bribery law in and of itself will not be a legitimate ground for an employer to terminate an employee. The rule has to be clearly spelled out in the employee handbook or other internal policy document, along with a specific right of termination.

		However, a training program is ineffective in and of itself if a company does not have a good process in place for monitoring employee behavior. GSK apparently had a training program in place, but sales team leaders allegedly would encourage sales employees to violate company rules and even instructed them on how to offer kickbacks. Given the alleged scale of bribes being channeled to doctors and hospitals, a properly implemented compliance monitoring system should have thrown up red flags all over the place. It's widely known that if a company wants to sell products or services to doctors and hospitals, then it is difficult to do so if bribes are not paid. Many doctors do not make a living wage and need to supplement their income. It has been a longstanding practice of many companies in the pharmaceutical and healthcare industries to engage in such practices relatively unchallenged.

		My take on all this is that certain individuals within some pharmaceutical companies have taken a calculated risk that the rewards far outweighed the risks, particularly given that the practice has remained relatively unchallenged for so long. However, the tide has suddenly changed and these practices are now resulting in very serious consequences for both companies and individuals.

Kevin L. Jones is a partner with Faegre Baker Daniels. Based in Shanghai, he chairs the firm's labor and employment practice in China. Faegre Baker Daniels does not represent GlaxoSmithKline in China.  He can be reached at kevin.jones@FaegreBD.com.

Articles

Doing business in China is undergoing important changes

Pharma in China--calculated risk gone wrong

		The Transported Asset Protection Assn. (TAPA) is a voluntary trade association composed of members from industry (shippers), logistics services providers (LSPs), law enforcement agencies, standards auditors and others. It was formed in 1997, and now has regional groupings: TAPA Americas (

). TAPA Americas already has nearly 20 major pharma companies as members.

		TAPA’s mission is to minimize cargo losses from the supply chain. TAPA achieves this through the development and application of global security standards, recognized industry practices, technology, education, benchmarking, regulatory collaboration, and the proactive identification of crime trends and supply chain security threats. TAPA’s vision is an international supply chain where controlled and traceable product can be transported in a cost-efficient and secure environment.

		The TAPA standards provide a set of security requirements that are specific enough to be effective, yet appropriate for global use in a variety of risk environments. Having a common set of requirements allows Logistics Security Providers (LSPs) to focus on good security measures that protect a wide variety of high value cargo. A certifiable global standard increases efficiency, transparency, and provides a recognized level of security, both for the LSP and for the customers they serve. The key standards are:

			Warehousing/Distribution Centers: Facility Security Requirements (FSR)

			Trucking Fleets: Trucking Security Requirements (TSR)

			Airport Facilities: Transportation Air Cargo Security Standards (TACSS) (not certifiable at this time)

		LSPs achieving TAPA certification have demonstrated their commitment to security by complying with the TAPA standards, participating in independent certification audits, and conducting periodic self-audits. Certifications are granted for each individual warehouse or trucking fleet. In the future, TAPA expects additional focus on truck fleet certifications as cargo theft frequently involves theft of, or theft from a trailer.

		Before launching an initiative to implement TAPA standards, there are three key areas for decisionmaking and research:

			Scope — Will the TAPA standard be applied to all pharmaceutical products, such as active pharmaceutical ingredients (API), physician samples, clinical trial material, animal health products, and return goods, or will it only apply to commercial human finished products? Will it apply to bulk product or only product in final packaging? Will it apply to company owned facilities or only to third party sites or transporters?

			Relative Risk — Will every country or facility be required to perform at TAPA Level 1/Level A or is it acceptable for some lower risk areas to adopt TAPA Level B or C?

			Cost/Benefit/Return on Investment (ROI) — The most important reason for securing pharmaceutical products is to protect patients. However, it is very difficult to estimate the cost impact of an unfortunate event such as theft, tampering or diversion. Fortunately, in most cases, TAPA standards produce an attractive ROI, even without including the cost of patient impact.

		When determining ownership of implementing TAPA standards, pharma managers should determine which functions are most invested in cargo security. It could be logistics, security, quality, or procurement. In the most successful models, security partners with another key function (ex: logistics). Cross-functional ownership supports a balanced approach and can provide a broader range of skill sets over a single function trying to manage it alone. When identifying key stakeholders, consider which ones are active participants and which are passive supporters (i.e. need to be informed but not active participants). The core group should include at a minimum representatives from security, logistics, warehousing, and quality.

		Recently, the governing body of all TAPA regional associations has decided to develop a sub-group dedicated to the specific needs of the pharma industry. A particular concern will be integrating the methods and technologies associated with protecting temperature-controlled pharmaceuticals during storage and transit. This effort should enable pharma manufacturers and their LSPs to better coordinate industry best practices for both security and temperature control.

		Susan Griggs is advisor, global security, at Eli Lilly and Company, Inc. Rafik H. Bishara, retired, Director, Quality Knowledge Management and Technical Support, Eli Lilly.

Ultimately, supply chain integrity should include both temperature control and security against theft or diversion

Industry should reinforce cargo security practices with TAPA participation

		What are the elements of a strong regulatory compliance program? How can we be sure that we are taking all the proper steps to mitigate risk? How are evolving state and federal regulations further complicating an already complicated task? Where can we go to better understand how to determine what we absolutely need to do, instead of what would be nice to do if we only had the time and the resources?

		These are questions that pharmaceutical and medical-device compliance professionals consider every day, and the answers are getting more and complicated. When members of the PDMA Alliance first met in a forum of learning and sharing decades ago, compliance questions, along with a strong desire to get honest and useable answers, were the common bond that united us. We shared the challenge of addressing how the newly legislated Prescription Drug Marketing Act was impacting our individual workplaces. As we developed new policies and procedures to ensure compliance, we quickly realized there was much to be gained by the ongoing sharing of our individual situations and exchanging ideas about how we might resolve a variety of issues. We knew that we needed to discover more efficient methods of handling compliance throughout our individual companies. Even then it was clear that we could find solutions by connecting with industry colleagues, by listening to each other, and by learning from each other through the open and honest sharing of our triumphs as well as our shortcomings.

		Today, those same simple acts of connecting, listening, learning and sharing are as strong an impetus as what initially brought us together 24 years ago. And at the 2014 Sharing Conference this September, we will be meeting with a similar sense of the uncertainty and trepidation due to the ongoing impact of recent legislation, a tough economy and a challenging industry.

		Those who have attended previous Sharing Conferences are aware that the focus of our annual conference has expanded and broadened. While many conference participants have been singularly and successfully dealing with the challenges of PDMA legislation over the years, we know that pharmaceutical and medical device professionals involved in compliance at all levels will continue to need an in-depth understanding of the original Prescription Drug Marketing Act and its implications.

		Instinctively we have appreciated the importance of the PDMA law and particularly its sample accountability mandates, and we know it must always be at the heart of our annual conference agenda. But we also know that there are many other considerations ahead. New state and federal legislation have taken their toll on our preparedness, and more and more regulations are on the horizon. And so, in the past several years, we have extended our educational interests to the complexities of Fraud and Abuse issues. We also saw the need to learn more about Investigations, OIG, Anti-Kickback, Off-label Promotions, Corporate Integrity Agreement (CIAs), and Sunshine and Transparency Reporting. Now, with the enactment and implementation of The Patient Protection and Affordable Care Act (PPACA), new challenges are impacting pharmaceutical and medical device companies as well. A few years ago, anticipating that the medical device segment would also be impacted by PPACA, we began to reach out to medical device compliance professionals who are increasingly interested in the learning and sharing our annual conference provides.

		In many ways, the introduction of PPACA reminds us of the same heightened compliance challenges that were prevalent at the enactment of the PDMA. So we come together at the annual conference looking for clarity, searching for how to successfully address issues such as the Physician Payments Sunshine Act, an important part of the new healthcare legislation. Now that pharmaceutical and medical device companies are required to aggregate and report hundreds of thousands of records, the implementation of these processes is staggering. Even the smallest of errors and what may seem like the most inconsequential omission can distort the data that need reporting. The required time and effort appear to be insurmountable for many compliance professionals with shrinking staff and budgets. This transparency piece of the compliance puzzle is just one of the important issues that we plan to study and discuss among the pharmaceutical and medical device professionals and vendor partners who will gather together at our 2014 Sharing Conference this fall.

		In setting the 2014 Sharing Conference agenda, the Alliance Board is planning a strategy focused on general sessions and workshops that are pertinent to today’s expanded legislation. Our guest speakers include the return of Karen Rothschild, Regulatory Counsel, FDA, Center for Drug Evaluation & Research, Office of Drug Security, Integrity & Recalls. We anticipate that Ms. Rothschild’s insights will inspire learning in many areas, including the Drug Supply Chain Security Act that is causing so much new industry buzz.

Deb Segura is the Executive Director of The PDMA Alliance

		And because the Alliance Board is unanimously convinced that effective communications are essential in this challenging business environment we share, we will also hear from a communications expert—the well-known Dave Mitchell, founder of the Leadership Difference. In addition, our Town Hall event will zero in on transparency implementation, expanding on the challenges we have witnessed over the past year and what we have learned so far. Our workshop topics have also been chosen for their relevancy to new and existing challenges, including Mock Inspections, Internal Investigations, State Reporting Requirements, Governance, Oversight and Monitoring, Data Analytics and Technology, to name just a few. A visit to our website 

 will offer a complete listing and descriptions of the workshops being offered as well as an abundance of other conference information.

		It is never far from my mind that the goal of the PDMA Alliance is educating our members to help ensure a safe and secure drug supply chain and to strengthen regulatory compliance programs. I am hopeful that all our 2014 Sharing Conference participants will be reenergized as Alliance members and fortified by their participation in the only industry conference that offers the best opportunity to Connect, Listen, and Learn with others who Share that common goal.

		For more information about the 2014 Sharing Conference and to be added to our contact list, please send an email to 

Never a better time to connect, listen, learn and share

The 2014 Sharing Conference: PDMA, Sunshine Act, OIG and Beyond

	Evolving US and EU regulations for shipping pharma products now include controlled room temperature (CRT) products—those whose label specify storage between (generally) 15—30°C; and these constitute more than 90% of all pharma products. (The exceptions are those that require cold-chain&mdash;2–8°C&mdash;or frozen storage.) Many CRT products are shipped in bulk under controlled conditions, but down the supply chain, shipments start being broken into individual cartons, and many of these ship as general small-parcel freight. Thus, the question becomes, how to ensure that small-parcel shipments are sufficiently protected to ensure their quality when they reach the point of dispensing?

	A study presented by Michael English, associate director of engineering at Merck, and David Magargee, a senior project manager at Sensitech (Beverly, MA), provides some answers—and a methodology to address regulatory concerns. Merck did temperature profiles of two years’ worth of domestic (US and Puerto Rico) shipments of small parcels to customers, recording temperature profiles of each of the more than 9,000 trips. To crunch the data, Sensitech has developed (and applied a patent for) a method to calculate “heat exposure” (the duration and extent of temperature excursions outside the label specification of the product). To be precise, excursions themselves do not adulterate a product; stability testing is performed during a product’s approval process to determine how much temperature, and how long an exposure duration, affects the product quality.

	The end results: developing a shipping-lane profile in this manner may provide a cost-saving rationale for a thermal protection system (that is, the profile might show how little protection is actually necessary). The authors also recommend developing a “stability budget”—an evolving approach to measuring the resistance of a pharma product to heat-related damage. Another factor to consider is widening the CRT range (one common example is 5—30°C) that matches the ambient environment products will experience. One caution, as well: the study found that there can be significant instances of shipments occurring outside the “normal” profile of winter or summer temperature profiles; dividing a year’s shipments into these two ranges has been a conventional way to approach regulatory compliance.

	The study was presented at the PDA/FDA Supply Chain meeting (June 3—5, Washington, DC).

Closer tracking of small-parcel shipments helps meet regulatory requirements

Merck/Sensitech study highlights methods to analyze CRT parcel shipping

The British government’s WWII rallying cry, “Keep Calm and Carry On” is worth keeping in mind as the US biopharma industry (pharma and biotech) goes through its current wave of mergers, acquisitions and realignments. There will be layoffs (layoffs have been a constant for years now); there will be shutdowns of some facilities and consolidations of others. 

		Even as the proposed (but not accepted, as of early May) merger of Pfizer and AstraZeneca was announced, there were headlines about the employment impact: “In Drug Mergers, There’s One Sure Bet: The Layoffs,” ran the title of a Wall St. Journal 

). The article noted that Pfizer, having absorbed 134,000 jobs through acquiring Warner Lambert, Pharmacia and Wyeth during the 1999-2009 period, saw its overall employment grow by roughly 27,000 by the end of 2013—in effect, disappearing over 100,000 jobs between 1999 and 2013.

		The Pfizer-AZ plan was preceded, by a week, by the Valeant-Allergan bid (also not accepted by Allergan at presstime); Valeant has a track record of substantial layoffs after acquisitions, and the company told Wall Street that, in effect, it would remove over $2 billion in expenses within the first year after acquisition, and targeted “unproductive” Allergen early-stage research specifically. “A Drug Maker With Little Patience for Science” is how one of the WSJ 

 is not alone in focusing on layoffs; the industry website FiercePharma.com announces many of the layoffs it hears about, and runs a “Top 10 Pharma Layoffs of the Year” annually. “Merck, AstraZeneca, Pfizer top list of biggest pharma jobcutters” was the headline it ran last October about 

		The most grating perspective, arguably, came from Forbes.com back in 2011, when it ran a 

 titled “A Decade in Drug Industry Layoffs.” Drawing on the monthly report of the well-known outplacement firm, Challenger, Gray & Christmas, it found that between 2000 and the first few months of 2011, the US pharma industry had cut 297,650 jobs. That number actually exceeded total US employment in what the US Dept. of Census classifies as the “pharmaceutical and medicines manufacturing” group (NAICS 3254; it includes biotech-based drug manufacturing), which was about 270,000 in 2011 (it’s poised to exceed that in 2013; see Table 1). 

 reporter in that same 2011 period, going on to say “The implications for job seekers, both laid-off employees and new graduates, are dire.”

		To be fair, the Forbes writer noted in the article that overall employment hadn’t changed much over the decade (which is true in a narrow sense, but as we’ll see, underplays the dynamism of the industry). But with the headlines and tabulations of layoffs, the overall impression—reinforced each time a new major layoff is announced&mdash;is that the US pharma industry is contracting. There also seems to be an undertone of schadenfreude&mdash;a perverse enjoyment of the layoffs, an emotion caused by&mdash;what? High salaries for pharma execs? Unfair pricing for new drugs? Maybe it’s simply a reflection of the low regard for the industry by major sectors of US society.

		Special mention deserves to be made of one occupation within pharma: sales reps. For some reason, the word “dying” has been automatically added to the phrase “sales rep” for the better part of a decade now. Even this year, 

, “End of the Road for the American Rx Salesperson,” adding that 2014 may be the year the ‘pharma salesperson’ really begins his slow walk to extinction.” (That “really” really hurts!) 

		There aren’t reliable federal data on pharma sales reps, but the general sense, from companies that track the field such as ZS Associates and IMS Health, is that the profession topped out at around 110,000 in the mid-2000s and has been declining since. The current count is around 60,000, and there are 

 that it’s bottoming out around that figure. A 46% decline in employment is nothing to sneeze at, to be sure. But the flip side of this is that 60,000 (or 50,000 or 40,000, or wherever the true bottom is) represents a large, vital and powerful occupation in the industry. Many of the “dying sales rep” articles make the point that fewer reps are knocking on fewer physicians’ office doors. But that hardly translates into a cessation of sales activity. Rather, the occupation is moving to market access teams, key account managers, and newly invigorated sales efforts to organizations such as accountable care organizations and PBMs.

		The current industry tenor is that outcomes research and “real world evidence” is the coin of the realm in pharma marketing. Well, it’s not a 

 to understand that communicating those outcomes and evidence will be crucial to the industry going forward. Add in the still-common sales efforts in countries other than the US and parts of Europe; add in the products of the pharma industry not 100%-dependent on formularies (such as aesthetic medical products); add in first-of-its-kind products for which the medical community needs education; and you have a profession whose prospects are actually pretty good.

		Both PhRMA and BIO, the leading trade associations of the industry, depend on the Battelle Technology Practice Partnership (Columbus, OH) for analyses of the industry and employment trends. Although Battelle has been fairly prolific in this regard, generating biennial reports for BIO (the next one is due out at BIO’s international meeting in June; see the 2012 report 

), and PhRMA sponsored a similar study in 2013 (available 

), make no mistake: the reports analyze employment as a component of the overall economic impact of the industry, not as career-planning guidance for workers. 

		BIO’s reports provide a state-by-state comparison of employment in the “biosciences” industries (including parts of agriculture, all drug and medical device manufacturing, and selected pieces of R&D and wholesale distribution). PhRMA’s report, “The Economic Impact of the U.S. Biopharmaceutical Industry” was more narrowly focused on drugs and related economic activity, and includes direct, indirect and “induced” employment (i.e., employment in other sectors of the economy).

		In 2012, looking at the 2010 data for BIO, Battelle found that, between 2001 and 2010, there was a 6.4% increase in the “biosciences” employment—to 1.61 million. By comparison, the entire US private sector shed 2.9% of jobs over that span (recall that in 2010, the US economy was slowly emerging from the 2008-9 Great Recession). In 2013, looking at 2011 data for PhRMA, Battelle found 813,523 direct jobs in biopharmaceuticals, and by adding in the indirect and induced employment, a whopping 3.363 million jobs (there was no historical trend data).

		These data are great for policymaking in Washington and elsewhere, but don’t say enough about the career stability of those who work in the biopharma industry, from research to manufacturing to distribution. 

 has taken a closer look, drawing on some of the same US Bureau of Labor Statistics categories that Battelle does, but narrowing the focus to drug-related businesses primarily. Our data draws on three categories from the BLS Quarterly Census of Employment and Wages (QCEW):

			NAICS 3254: Pharmaceutical and biotech drug manufacturing, including medicinals and botanicals (325411); pharmaceutical preparations (325412); in-vitro diagnostic substance manufacturing (325413); and biological product (except diagnostic) manufacturing (325414)

			NAICS 541711, R&D in biotechnology (a series that BLS began tracking separately only in 2007)

			NAICS 424210, Druggists’ goods merchant wholesalers.

		Table 1 shows the year-by-year data, with results in 2013 estimated from nine-month data to the full year, and Fig. 1 shows the same graphically. The result: an amazing stability—even flatness&mdash;in the totals, with 2001 at 597,214, and 2013 at 607,130; a change of +1.7% over the span. (One important qualifier: to backfill the biotech R&D numbers to 2001, we used an average proportion&mdash;25%--of all “Physical, engineering and biological research”&mdash;NAICS 54171&mdash;for the years 2001 to 2006. The 25% proportion is roughly what the biotechnology R&D category has represented of the overall physical, engineering and biologic research category during 2007-2012. Battelle used a figure of 35% of the larger NAICS 5417 category, “Scientific R&D services” in its 2013 PhRMA report.)

		It’s worth noting what has occurred within the three categories:

			NAICS 3254, pharma manufacturing, peaked at 294,792 in 2007, dipped and began rising just recently; the estimated total for 2013 is 276,542; a decline of about 18,000, or 6%, from the peak. Surprise! The Challenger, Gray & Christmas layoffs were absorbed, and the industry moved on.

			NAICS 541711, biotech R&D, has been on a steady upward climb except for 2009 and 2010, whereupon it immediately began marching up again. From 2001 to 2013, the increase has been a solid 23.3% (mind you, both ends of this span are estimates).

			NAICS 424210, druggist wholesaling, peaked back in 2004 at 216,802, and has been declining ever since, losing 13% by 2013. Druggist wholesaling includes a lot of products (health and beauty, nutrition, etc.) besides drugs; on the other hand, the biggest drug wholesalers handle many of these products as well as drugs. Based on data derived from the HDMA 2013-4 Factbook, roughly one third of NAICS 424210 comprises HDMA member companies’ employees, which leaves a lot of non-HDMA and non-drug wholesalers in this category. Both the drug wholesaling and retail drug industries have seen considerable consolidation over the past decade; 90% of all US drugs are handled by the 32 HDMA members, and the biggest retail chains (pharmacies, supermarkets and mass merchants) handle about 83% of drug prescriptions. 

		Perhaps the most surprising factor to consider here is that although drug spending has increased by more than 63% over the period 2002-2012 , and prescriptions dispensed by 21% (from about 3.3 billion to 4 billion), employment was stagnant. Yes, drug prices from branded products escalate annually—but more of them became generic over the period, and more generics were prescribed in the overall mix (it’s currently running at 86% of prescriptions filled). And no one would argue that it has become easier to navigate the FDA drug-approval process, followed by the commercial contracting and selling process, for new drugs in the past decade. The pharmaceutical delivery system&mdash;from researcher to manufacturer to distributor&mdash;is running faster with roughly the same number of workers. 

		Another factor to be considered is the outsourcing trend that has been dominant in pharma for the past decade. The concept of a “virtual” company, perhaps doing its own R&D, but outsourcing manufacturing and sales to others, was a new idea for most in the early 2000s. Contract research organizations (CROs) that manage the clinical trials process have grown tremendously over the past decade. Some of this is captured in the BLS data—for example, CROs would fall in the NAICS 54171 category, and the pharma workers who would have been managing those trials fall out of NAICS 3254, but many aspects of the outsourcing shift would not be captured; an example might be outsourced IT services, which might have been done internally by pharma companies in the past. The upshot is that while there might be thousands more workers dependent on the actions of pharma companies, they are not themselves pharma employees. (These are mostly the “indirect” jobs counted by Battelle.) 

		What does all this mean for the working pharma mid-manager, or one who might be about to be laid off if the announced (and yet to come) mergers are completed? One definite conclusion is that while any laid-off employee is confronting a soft job market, the market is no worse and arguably significantly better for pharma executives. Experienced Big Pharma executives leaving and joining smaller or startup firms is a well-trodden path. The outsourcing trend has let up in some ways (in particular, the “offshoring” of outsourced jobs); but today’s experienced pharma executives can wind up in business consulting, in healthcare services directly, in regulatory compliance organizations, or in the growing field of nonprofits focused on healthcare, to name a few.

		Unquestionably, it is hard when a far-off executive at another company barges into an organization and begins handing out pink slips left and right. Lives can change almost overnight. But the case that the pharma industry is more prone to this, or that employment prospects are worse for those who have invested years in the industry, is belied by the facts.

		Of critical importance to pharma innovation in years to come, new college graduates and newly minted PhDs may turn away from the industry based on the steady drumbeat of dire headlines that the business press has a habit of generating. In January, PhRMA and US News and World Report sponsored a 

 with the theme “STEM Saves Lives” (referring to the educational grouping of Science, Technology, Engineering and Mathematics), and making the case, along the way, that PhRMA member companies have been avid supporters of STEM education. There and 

 blogger Beryl Lief Benderley asked, “Can industries that have laid off large numbers of scientists and other technically trained workers credibly claim to worry about an ‘increasing STEM … skills gap’ in the United States? Apparently they think so…” and went on to say, “When asked by this reporter to explain the relationship between the purported gap in available workers' STEM skills and the industry's enormous layoffs—which includes many scientists and other highly skilled technical workers&mdash;neither [John Castellani, CEO of PhRMA] nor John C. Lechleiter, chairman, president, and CEO of Eli Lilly and Company, provided a meaningful answer.”

The perverse fascination that the business press has with pharma layoffs masks the industry's underlying strength

US pharma layoffs do not reflect the industry's health

Rx-360, the industry consortium formed in the aftermath of the heparin scandal in 2008 (in which contaminated, raw heparin sourced from China entered finished products and caused multiple deaths in the US and Europe), chose the PDA/FDA Supply Chain Conference (Washington, DC; June 3—5) to celebrate its fifth birthday. While the organization’s original goal—to both accelerate the auditing of suppliers to pharma manufacturers and reduce audit cost and complexity by pooling audit results&mdash;remains a driving force, the organization has expanded its scope by generating recommended guidances on many aspects of the pharma supply chain, including quality management, cargo security and others.

) made a key announcement pertaining to its audit activities. It has chosen BSI Supply Chain Solutions (US HQ, Scottsdale, AZ), part of the larger BSI Group, a global auditing, training and certification company that operates across multiple industries, to manage its Joint Audit Program. BSI SCS will conduct audits, provide training and coordinate activities sponsored by Rx-360. BSI SCS has a proprietary auditing process, called VerifEye, that will be deployed on behalf of Rx-360.

	“Rx-360’s primary mission is to ensure patient safety by maintaining high standards of quality during the manufacturing process,” said Ben Mills, co-chair of Rx-360’s audit operations group, in a statement. “The Joint Audit Program will allow consortium members to pool resources and have third-party audits conducted simultaneously while protecting commercially-sensitive and proprietary information. The Joint Audit Program offers consortium members, suppliers and manufacturers alike the opportunity to reduce the audit burden while amplifying product confidence and safety.”

	Rx-360 has 28 manufacturers, 35 suppliers, 13 auditing organizations and 18 industry associations as members currently.

Organization hires BSI Supply Chain Solutions to lead international joint audit program

Happy fifth birthday for Rx-360

Volume shippers of pharmaceutical products have the option of pallet- (or multiple-pallet-) sized unit-load devices (ULDs) that go into aircraft; or to have a self-assembled box that contains the shipment, refrigerant packs, insulation and a protective cover. ULDs—many of which also contain a powered refrigeration system&mdash;are expensive and typically leased; the self-assembled shippers are generally single-use (although components, such as the refrigerant packs, can sometimes be reused). Now, Sonoco ThermoSafe (Arlington Heights, IL) has redesigned its assembled shippers, under the Certis brand name, to provide higher efficiencies in materials and operational steps to preparing a shipment.

		As explained by Ben VanderPlas, global product manager, the Certis shipper uses hollow tubes on the vertical sides of the container to enable natural convection to circulate air within it. That eliminates the need for packing refrigerant bricks on the sides of the container, which in turn reduces the overall volume and weight of the container. The refrigerant bricks themselves are specified according to the heat-transfer characteristics of the refrigerant; in a feature called “Zero Bench-Time,” the workers assembling the container can use bricks taken directly from a warehouse refrigeration system—there is no need to spend hours conditioning the container to meet temperature specifications (this conditioning can be important if sub-zero bricks are placed next to product that cannot be frozen).

		Finally, the entire container is rated to meet Sonoco’s ISCsilver temperature profile: For a specified shipping lane, the container can hold its temperature range for up to five days. VanderPlas says that the ISCsilver profile is based on existing ISTA standards, but tailored to Sonoco’s own experience in managing temperature-controlled packaging for clients. Non-standard profiles can be designed and tested for the shipper as well. Overall, the container is as much as 24% lighter and 17% smaller than competing designs, and customers can experience total cost-of-ownership savings in excess of 10%, he says.

Certis pallet shipper employs new convection features and simplified preparation steps

Sonoco targets temperature-controlled pallet shipping

Specialty pharmaceuticals, specialty distribution and specialty pharmacies are all the rage in the US biopharma industry today; the generally accepted notion is that specialties will represent half of industry revenue by the end of the decade, if not sooner. But in discussions with pharma clients and their distributors and service providers, a new twist to this is emerging, which might be called Alternative Specialty Lite or just Specialty Lite, according to Rob Brown, VP, business development at Omnicare Specialty Care Group (Cincinnati), which is one of the companies in the specialty-distribution and specialty pharmacy space.

	Speaking at the Customized Pharma Distribution Strategies conference (May 20—21; organized by CBI), Brown noted that specialty pharmaceuticals are themselves defined by a long (and growing) list of necessary delivery services: working through prior authorizations; coordinating injections with outpatient clinics; follow-up patient services; mandated outcomes reporting and more (Pharmaceutical Commerce, Mar/Apr, p. 3). Manufacturers with products in the same therapy class are now competing in arranging (or paying for) these services with the specialty distributors and pharmacies dispensers they work with. In broad economic terms, these ancillary services are most commonly utilized for products that cost more than $1,000 per month to the payer.

	But what about the under-$1,000 products that themselves have a complicated pathway from the manufacturer to the patient? Those are candidates for Specialty Lite: a limited set of services, such as clearing a prior-authorization requirement (which might pertain only selectively to patients in certain payer plans) or a patient welcome call at initiation of therapy. In conventional, “open” distribution (where the product is dispensed at a local retail pharmacy), even a small hitch like this can create significant problems in successfully starting a patient on therapy and getting a product to a patient. Result: lost sales. Another example is direct-to-patient distribution, which is difficult to handle in conventional wholesale channels.

	Manufacturers have known about these potential problems for a long time, but what is changing now is that the growth of specialty distribution and specialty pharmacy has created a methodology for handling the lower-cost, limited-services types of drugs. Increasingly, manufacturers will have the option of using conventional distribution and making arrangements with a third-party services provider, or building a Specialty Lite model to service the patient.

In the big swing to specialty pharmaceuticals and distribution, some manufacturers are looking for 'good enough' services

Is a new distribution channel--'specialty lite'--emerging?

		Telerx (Horsham, PA), which has been growing its voice and online capabilities for life sciences and consumer packaged goods (CPG) since the 1980s, will acquire C3i (Morristown, NJ) in a transaction expected to close by the end of this quarter. The combination can viewed in two ways: enabling Telerx to expand its range of customer interaction services to a global market through C3i’s global footprint; and as a way to add C3i services, such as training on hardware platforms, help-desk and similar support for pharma sales teams, to the Telerx customer base. C3i is, for example, one of the solution partners of Veeva, the Pleasanton, CA, CRM vendor (see next page).

		Linda Schellenger, Telerx president, tells 

 that the company’s core functions are providing healthcare professionals and patients reimbursement support, adherence programs, and drug safety (pharmacovigilance). Last year, it acquired Sentrx, one of the leading outsourced providers of adverse-event reporting (Pharmaceutical Commerce, Jan/Feb, 2013, p. 1). Most of Telerx’s business is with life sciences companies (it is a subsidiary of Merck), but has a substantial business in CPG as well. Through that CPG expertise, it expects to bring more sophisticated multichannel marketing capabilities to pharma. “CPG is ahead of life sciences in using the full range of multichannel tools, such as voice, text and social media,” she says, noting that regulatory constraints on pharma is keeping its involvement limited. “But it will be opening up as regulations become clear, and we’ll have a leg up when it does.”

Acquisition will add C3i's multilingual service-desk support to Telerx's call centers

Telerx to acquire C3i

At its annual user conference, Veeva (Pleasanton, CA) introduced a set of new tools meant to integrate closely with its flagship product, Veeva CRM, which is used by pharma reps and sales teams to coordinate face-to-face calls, communications and stored data with physicians and other clients. At the same time, a growing list of solution partners, ranging from global consulting firms like Deloitte or PwC, to specialized IT services providers in training like Eagle Productivity, were on hand to demonstrate their integration with Veeva.

			Veeva Align handles territory planning and resource allocations within sales teams, while helping to define multichannel plans of action in a single country or worldwide.

			Veeva CRM Meetings for the planning, management, and execution of group meetings with healthcare professionals (HCPs).

			Veeva CRM Engage, announced in April, is a digital platform for engaging with customers online, anytime, anywhere, through any device. Now HCPs can have self-service access to personalized information via the web with interactive content and services like ‘click-to-chat’ and ‘schedule a visit.’ Veeva Engage brings digital into a fully integrated multichannel mix and enables reuse of content from other channels including Veeva CLM.

			Veeva CRM CoBrowse is an online collaboration solution for real-time screen sharing with customers. Communications can be shared between physicians, reps, and other parts of a commercial team such as call centers or medical affairs.

		CRM Engage is available now; CRM CoBrowse is planned for general availability in Q4 2014; Align and CRM Meetings are planned for Q2 2015. Collectively, Veeva is branding its existing and new products as the Commercial Cloud (Veeva was one of the early proponents of cloud-based services for the pharma industry, and its products are enabled on both Apple iPad and Microsoft Surface platforms). Between the branded Veeva offerings and its solution partners, Veeva wants to establish an “ecosystem” for the sales process, says Matt Wallach, president and co-founder. And while some of its new products intrude on the application space of its solution partners, Veeva will keep an open API and allow clients to mix and match service offerings.

		The guiding principle of the Commercial Cloud, says Wallach, is “to put the pharma rep in the middle” of all the interactions and communications with healthcare providers. “Reps are important, and reps need to be able to make best use of their time in meaningful interactions with customers, and to minimize the time spent looking up contact data or retrieving multichannel interactions.” He also emphasizes that the company is moving toward global, single implementations of its products, so that IT departments at pharma companies can manage activities globally.

		The company user event also brought together an impressive list of solution partners—more than a few of which offer similar products to the new (and existing) Veeva products, such as Vault (for storing and retrieving approved promotional documentation; Network (for master data management of client attributes); and Approved Email (for communicating with healthcare providers). The Vault product is also being tailored to meet the needs of clinical trials data storage (trial master files). In this regard, Veeva is bidding to become an enterprise-level IT provider, competing with the likes of Oracle, IBM, Cegedim or IMS Health.

		Can it broaden its range of offerings while still attracting solution partners in individual services sectors? Some of its current partners think so: “We believe that our strategic partnership with Veeva has been highly and mutually beneficial, providing customers a significantly greater value proposition,” says Steve Gransden, SVP of marketing at J. Knipper and Co., a leading fulfillment and data-services provider to pharma. “We continue to work with Veeva on integrations across various product lines that will provide even greater levels of added value to our mutual customers.”

		“PDI has had a longstanding relationship with Veeva, and we were one of the first contract sales organizations to adapt the Veeva platform,” says Frank Saia, GM of Group DCA, an e-detailing and multichannel-marketing subsidiary of PDI. Saia says that the Group DCA unit works closely with Veeva to seamlessly integrate their capabilities in multiple ways to enhance PDI’s own service offerings. These include the recently announced PD One, a subscription-based communications platform between pharma sales organizations and HCPs, and The Medical Bag, a dynamic content-distribution system that attracts 60,000 physician visits monthly.

The Commercial Cloud integrates more pharma-rep activities into a common, cloud-based system

Veeva adds new e-detailing capabilities to its CRM platform

	Having earned its chops over the past decade with analyzing wholesaler trade information via electronic data interchange (EDI) data, ValueCentric (Orchard Park, NY) is now expanding into more precise retail-level activity with PharmacyView. According to Brian Wynne, director of data services, PharmacyView will enable at least two key marketing and distribution factors: inventory data at the pharmacy level, and prescribing trends at the therapy class level—including one’s own and competing drugs in that therapy class.

	The service arises from bringing together multiple purchased and self-generated data sets at ValueCentric and performing proprietary analytics and data-normalizing on them, according to Wynne. “Manufacturers want to know what stocking levels are at pharmacies generally, but they also want to know how fast that inventory is moving,” he says. One example would be to see the effects of a copay program, tracking both the volume of prescriptions filled and the usage of the copay program. “Too often, marketers and trade relations managers are flying blind” without this level of detail, he says.

	The service (which, like other ValueCentric products, is cloud-based) has been tested with selected clients, and is commercially available today.

Marketers will be able to track individual pharmacy inventories, dispensing trends

ValueCentric unveils PharmacyView, an IT service analyzing retail pharmacy activity

		As this issue was going to press, news was percolating about Valeant Pharma reformulating its bid for Allergan as a hostile takeover (since the Allergan management had refused to negotiate with the potential buyer); and Merck ponying up $3.8 billion to acquire Idenix Pharmaceuticals, doubling down on the hepatitis C market, where it has existing 

 can be added. Meanwhile, generics giant Teva made its own headlines with a planned shuttering of as many as three dozen plants—around half of its worldwide manufacturing base&mdash;in a cost-cutting move.

		Almost as a reflex, the sub-heading as announcements like these are made is that layoffs are coming, and callous or just clumsy industry managers are wreaking havoc with employees’ lives. And a subcontext to that is that the glory days of pharma are over and the “good old days” (whenever they might have been) are long gone. But, as our analysis on p. 20 demonstrates, employment in the industry, in the US, has been remarkably stable over the past 10+ years. Pharma manufacturing specifically has been nearly unchanged since 2001; employment declines in wholesaling and retailing have been offset by growth in biotechnology R&D. Given the growth in revenue and prescriptions dispensed over that period, our conclusion is: The pharmaceutical delivery system—from research to manufacturer to distributor&mdash;is running faster with roughly the same number of workers.

		Make no mistake—there have been titanic shifts in employment, employers and job categories over the past decade or so. And there are a large number of former employees, especially of the Big Pharma pedigree, pounding the pavement looking for jobs. (And I’ll make a special call-out here to sales reps, whose profession is “dead,” “dying,” or “nearly extinct” according to recent headlines; notwithstanding the fact that there are more than 60,000 of them currently at work in the US, and the decline in that profession appears to be bottoming out.) Generally speaking, though, while layoffs generate headlines, hiring rarely does. The bad rap that the industry has in employment circles is self-inflicted.

		Management consultants and other prognosticators relish the opportunity to promote themes like “industry evolution” and “turning points” at just about any given moment; we’ve just gone through the “patent cliff” phase and an “emerging markets” phase is still shaping up. I’ll leave it to those Big Thinkers to come up with the next catchphrase; but meanwhile, take heart that this industry is vibrant, has a bright future, and is amazingly durable.

Merger mania does not equal a downward spiral in pharma employment

In most disease categories, a near-total cure would be heralded as a major victory. But the recent introduction of Sovaldi (sofosbuvir) from Gilead Sciences (Foster City, CA) for the treatment of hepatitis C has been met with more criticism than celebration. Swift, organized pushback from the payer community has arisen in response to the drug’s price tag of $1,000 per pill, which translates to $84,000 for a 12-week regimen of treatment, not including adjunct medications that may be needed and additional costs if longer treatment is required.

		Already in its first quarter on the market (ending March 31), Sovaldi racked up $2.27 billion in sales, quickly displacing all earlier blockbuster drugs as the fastest-ever pharmaceutical launch. Datamonitor Healthcare’s (London) infectious disease analyst, Michael Haydock, predicts that Gilead will close out this year with Sovaldi sales of $6.8 billion worldwide.

		“Sovaldi’s profile has the potential to transform the treatment of hepatitis C, and the rapid uptake speaks to significant unmet medical need,” said Gilead CEO John Martin in an April 2014 call with analysts and investors. But praise for Sovaldi has been far from unanimous.

		“Never before has a drug been priced this high to treat a patient population this large, and the resulting costs will be unsustainable for our country,” says Steven Miller, MD, chief medical officer at Express Scripts. “The burden will fall upon individual patients, state and federal governments, and payers, who will have to balance access and affordability in a way they never had to before.”

		Even more galling to payers, many prescribers are using a combination of Sovaldi and Janssen Therapeutics’ Olysio (FDA-approved last November), which jumps the cost of treatment into the neighborhood of $170,000. An analysis performed by Decision Resources (Burlington, MA) in mid-May found that over half of hepatitis C patients among doctors surveyed were getting Sovaldi, and 20% were receiving Olysio, usually in combination with Sovaldi.

		In mid-April, the California Technology Assessment Forum, a program of the Institute for Clinical & Economic Review (Boston), issued a report comparing Sovaldi and Olysio. In factoring in the cost of the drugs, the improved cure rate, and the likelihood of a hepatitis C infection eventually leading to liver disease, CTAF concluded that the new regimens (Sovaldi, or Olysio, or both together) would have only 10—20% of their cost offset by improved outcomes at a five-year time horizon (after treatment), and about 75% at a 20-year horizon.

		Gilead has its patient-support defense mechanisms in place. “It is important to note that Gilead has established one of the most comprehensive patient assistance programs (PAPs) in the industry to ensure that cost is not a barrier to Sovaldi for patients in the US with high copays or those who lack adequate insurance,” says Michele Rest, Gilead’s public affairs director. The program can limit out-of-pocket costs to as little as $5/month for some low-income patients. Additionally, its Support Path PAP will provide Sovaldi free of charge for eligible patients who are uninsured, underinsured or who need financial assistance to pay for the medicine. The company is providing support to an independent, nonprofit organization that provides patient assistance for uninsured and underinsured patients, she adds.

		Over time, hepatitis C can destroy the patient’s liver (through the formation of scarring and tumors), and this disease is the main reason that nearly 17,000 Americans are currently waiting for a liver transplant. Today, the leading therapies for hepatitis C—Incivek (telaprevir) from Vertex Pharmaceuticals (Cambridge, MA), Victrelis (boceprevir) from Merck & Co. (Whitehouse Station, NJ), Olysio (simeprevir) from Janssen Therapeutics (Titusville, NJ) and now Sovaldi&mdash;are all in a class of therapies known as direct-acting antivirals (DAAs). The first three are protease inhibitors. By contrast Sovaldi is a polymerase inhibitor of the hepatitis C virus (HCV). At presstime, Merck had made a $3.8-billion bid to acquire Idenix Pharmaceuticals, another polymerase-inhibitor developer.

		Generally speaking, hepatitis C comes in three genotypes—GT1, 2 and 3&mdash;and variations are seen in the drugs’ efficacy across genotypes. GT1 is most common in the US, affecting roughly 60% of hepatitis C carriers. Sovaldi’s “cure rate” (meaning, HCV cannot be detected three months after treatment) is as high as 90%, and Gilead is testing a fixed-dose combination with another drug, ledipasvir, that raises that nearly to 100%. Under an FDA fast-track review currently, the combination drug could hit the market before the end of the year.

		Cure rates for the other products range up to about 70%, and don’t work well for GT2 and 3. Additionally, the older products are often prescribed with interferon alfa, which has undesirable side effects for some patients.

		Worldwide, an estimated 150 million people are infected with hepatitis C, according to the World Health Organization (WHO; Geneva, Switzerland). In the US, the Centers for Disease Control and Prevention (CDC; Atlanta) estimates that 3.2 million people have chronic hepatitis C infections, and most have not yet been diagnosed since the disease often has no symptoms until it progresses, leading to cirrhosis of the liver and liver cancer.

		By contrast, roughly 34 million people worldwide, and 1.1 million Americans, are infected with HIV, the virus that causes AIDS.

		According to the 2013 Express Scripts Drug Trend Report, the high incidence rate of hepatitis C, combined with the introduction of costly treatments (Sovaldi plus others that are currently in the drug pipeline) is expected to drive its spending on hepatitis C treatments up by 1,800% between 2014 and 2018, raising the spend on all specialty drugs by 63%. “No major therapy class has experienced this high a rate of increase in the 21 years that Express Scripts has recorded drug trend data,” says Miller.

		“We believe the price of Sovaldi reflects the value of the medicine,” says Rest of Gilead. “Sovaldi-containing regimens represent a cure, and they reduce the total costs for HCV, taking into account the cost of medications (including those for side effects or complications), healthcare visits and the costs of managing patients with subsequent advanced liver disease.”

		Today, Express Scripts—which represents 90 million US patients and their private and government payers&mdash;is working with a variety of other PBMs and insurers to evaluate options to increase access and affordability of Sovaldi, “up to and including moving Sovaldi market share to other competitors once they become available,” notes Miller.

		Specifically, the industry is eagerly awaiting the arrival of new oral hepatitis C therapies in the DAA category that are being developed by AbbVie, Merck and Bristol-Myers Squibb.

		“Clinical trial data on the Merck, AbbVie and Bristol-Myers products all look very encouraging, with cure rates in the 90+% mark, so FDA is also giving them fast-track designations,” says Miller of Express Scripts. “We are expecting that we will have a real horse race soon, and this will give physicians the necessary tools to find more cost-effective options with no clinical tradeoffs by 2015.”

Projected revenues in hepC treatments. Source: Datamonitor

		Datamonitor Healthcare’s Haydock notes that “warehoused” patients—those known to be infected, but who have been told to hold off treatment until Sovaldi was approved&mdash;“are an important driver in the current market.” His projections, based on epidemiological data and surveys of health specialists, are that Sovaldi sales (including the Sovaldi/ledipasvir combination) will peak in 2016, at around $12 billion, and then fall off thereafter, but still representing the biggest share of the market. (Figure)

		The CTAF analysis extended to recommendations on how payers should address the current treatment environment. Its key conclusion:

		Panel members and outside experts nearly all agreed that for both clinical and cost reasons, not every patient with hepatitis C needs to be immediately treated with the new drugs. Informed, shared decisionmaking about the timing of treatment should be encouraged. Given the circumstances, it is reasonable to consider prioritizing treatment with the new drugs for patients who need urgent treatment and have some evidence of liver fibrosis but do not have advanced liver disease.

		Which is exactly what Express Scripts is doing at the moment. “Short term, there are not many options—Sovaldi is a better drug and we appreciate that for our patients,” says Miller. “We are currently filling Sovaldi prescriptions for critical patients who are in Stage III and Stage IV [liver disease], but others can wait. Over the long term, when better, cheaper drugs arrive in the next 9—12 months, we will assist patients to explore all of their options.”

		“I do not believe it’s justified medically to prioritize and restrict the cure of hepatitis C. [But] it may be necessary economically,” conceded Norbert Bischofberger, Gilead’s head of research, during an April call with analysts and investors.

		However, widespread rationing or efforts to delay access to a therapy that has the potential to eradicate this contagious disease may yield another unintended consequence—namely, the ongoing risk of transmission to others, since hepatitis C is transmitted both sexually and through contact with the blood of an infected person. An estimated 3 to 4 million people are newly infected each year, according to the WHO.

		Whether the current level of rationing will be sustained is unclear: in May, Medicare gave in to patient complaints and allowed the combination Sovaldi/Olysio therapy for those with identified liver disease, even though the combination is not FDA-approved.

		Since so many hepatitis C patients are both asymptomatic and undiagnosed, Gilead has launched a direct-to-consumer (DTC) advertising campaign, to raise awareness of both the disease and Sovaldi. The print ads urge patients to get tested for the disease and to seek treatment, saying, “Don’t wait for your liver disease to progress. Talk to your physician today and visit www.sovaldi.com.” The hope is that the availability of a newer therapy that provides a cure with fewer side effects than traditional, interferon-based therapies will spur more patients to seek treatment earlier, before significant liver scarring has occurred, saving costs in the long-run.

		However, in light of the organized resistance from—and potential blockade by&mdash;a growing number of payers, Gilead’s efforts to move patients to seek diagnosis and immediate treatment are likely to put many patients at loggerheads with their physicians and payers. As many payers are advocating a more-conservative rationing approach for Sovaldi in the short term (limiting its use to just the sickest patients), many patients will likely be forced to wait for competitor therapies to hit the market in 2015. “We expect that the arrival of new therapies in hepatitis C will provide clinical and pricing options that will hopefully help to drive down the price of Sovaldi and others,” says Miller of Express Scripts.

		Given the size of the hepatitis C market outside the US, Gilead is working to develop programs that ensure deep discounts for Sovaldi in India, Pakistan, Egypt and China, and other countries where a significant number of hepatitis C patients live. And the company is also in talks with several Indian generic drugmakers to manufacture Sovaldi at lower costs so that it can be sold at a fraction of the US cost in numerous developing nations (something it also does with some of the drugs in its HIV portfolio). Similarly, Egypt has already negotiated a deal to get Sovaldi for $300 for a four week supply, compared to the $28,000 that it would cost in the US.

The eye-popping price tag on the hepatitis C drug, from Gilead Sciences, has prompted unprecedented pushback from payers

Sovaldi, the $1,000 pill

For the past several years, ProPublica’s “Dollars for Docs” database has compiled publicly available data from 15 pharmaceutical and medical device companies that disclose certain transfers of value to physicians and teaching hospitals. This database has allowed consumers to easily search for payments to individual doctors and to review total payment amounts from each included company. Media outlets have repeatedly drawn on this information to highlight physicians who have received, in some cases, hundreds of thousands of dollars per year from industry.

		Recent articles in the media have continued to call attention to financial relationships between industry and physicians at both the macro and individual levels. For example, NPR and ProPublica [1] recently examined speaker-program payments to physicians—declining partly due to changing business conditions, but likely also due to increased public scrutiny of speaker relationships. Similarly, The Boston Globe [2] identified individual physicians who had both commercial and clinical relationships with individual manufacturers and raised the issue of real or perceived conflicts of interest.

		Separately, The New York Times [3], The Washington Post [4], and other organizations have brought searchable Medicare payment data to the public’s attention, with relatively little context to guide their interpretation. These data have led to many analyses, some potentially misinformed or taken out of context, of physician compensation.

		The pharmaceutical and medical device industries can expect Open Payments data to be similarly scrutinized when it is made available later this year. Building on existing institutional access restrictions, state legislation, and public perception, this will continue to challenge the relationship between industry and physicians. This article will consider how to maintain positive relationships with physicians, how to utilize Open Payments data for business purposes, and how to use aggregated data to enhance compliance with government regulations, industry guidance, and internal policies.

		At press time, the Centers for Medicare and Medicaid Services (CMS) planned to make draft Open Payments data available to physicians and teaching hospitals beginning in July; recipients will then have 45 days to review this data and potentially dispute its accuracy. A recent Huron Life Sciences survey [5] indicated that 45% of companies are still establishing policies and procedures to manage these disputes, and nearly 90% of companies are still working to implement systems to manage these disputes.

		As incorrectly posted data and/or mishandled disputes may damage customer relationships, companies must consider how they can facilitate inquiries from covered recipients while maintaining the integrity of the review process. In particular, companies should consider addressing the following basic areas prior to the projected August 1 opening of the dispute window.

		First, companies must ensure that their sales representatives and other field employees are prepared to receive disputes or inquiries directly from healthcare professionals. In Huron’s recent disclosure survey, 3% of respondents planned to directly involve sales representatives in routine disputes; most respondents planned to rely on sales representatives only to provide supporting information when necessary, or occasionally to assist in more difficult disputes.

		Generally, companies are planning to equip field employees with tearsheets providing a brief background on that company’s Open Payments policy along with instructions on how data can be reviewed and an inquiry may be opened—whether through the CMS or through a company’s own portal.

		Many companies are discouraging sales representatives from directly accepting inquiries since reps may not be able to gather all necessary information from a physician and may not be familiar with Open Payments regulations in detail. Instead, physicians are typically redirected to a centralized dispute email/number/portal by information in the tearsheet outlined above. However, manufacturers that are allowing reps to receive inquiries should ensure that reps have: a form to capture all information necessary for the disclosure team to research the inquiry; a dedicated e-mail address or phone number for this information to be transferred to the disclosure team; and clear expectations around how and by whom the dispute will be resolved.

		In addition to field employees, companies must identify all other touch points for physicians and teaching hospitals—customer support, medical information, and adverse event reporting lines, among others&mdash;and ensure that all employees are trained on basic Open Payments policy information as well as the correct method for re-routing a dispute.

		Many company compliance and disclosure teams are also establishing standards for resolving difficult disputes—for example, how to manage a physician who disputes a quarter or more of all in-office meals, or a key opinion leader who disputes a transaction for which no backup information is available. Beginning these discussions now and establishing standards will help companies respond to disputes in a timely manner. Handling disputes in the allotted timeframe (45 days to initial inquiries, plus an additional 15 days to continue to resolve inquiries) will be important for companies since any updates made after that time may not be updated by CMS in a timely manner on their website.

		Aside from establishing standards with compliance, disclosure teams should consider developing standard, approved form letter responses to typical disputes; establish a system to track, manage, and respond to these disputes; and identify the location of supporting documentation like sign-in sheets, payment vouchers, and contracts.

Leveraging Open Payments data for business purposes

		A potential silver lining of Open Payments is the ability to capture all spend data in one operational data store for business and compliance purposes. For years, pharmaceutical companies have been trying to create a strong customer master and single view of the customer that often eluded IT teams because of the complexity, however due to the Open Payments regulations, a number of companies have developed extremely effective master data management (MDM) initiatives to be able to aggregate and accurately report data.

		One director of transparency reporting at a specialty pharmaceutical company believes that established transparency programs can begin to deliver value back to the business now that reporting has begun. Using only internal data compiled for reporting purposes, the company has begun to identify cost-saving measures.

		For example, before gathering all transaction data for Open Payments reporting, this company “never examined the amount that it was spending on lunch-and-learns, travel, and other activities across the entire enterprise” with certain vendors, according to this director. By reviewing the information that has already been gathered, the company has begun to negotiate preferred rates with certain vendors and expects to realize direct cost savings as a result.

		However, the ability to compare the company’s data against its peers—which will be possible once Open Payments data is made public by CMS&mdash;offers many greater possibilities. “We’ll be able to see what we’re spending on meals as a percentage of revenue compared to what our peers are spending,” said the transparency reporting director. Outside of promotional activities, the company plans to establish benchmarks in clinical spending such as combining Open Payments and clinicaltrails.gov data. The company will also be able to approximate ballpark per-center and per-subject spending for Phase III trials in relevant therapeutic areas.

		Companies should anticipate that Open Payments data will be analyzed in detail by not only the press but also by other companies. At the same time, companies should consider how they can conduct their own analyses to gain insight into benchmarks, physician engagement by peers, and other best practices. For example, by observing which physicians peer companies are engaging with, companies may be able to identify additional key opinion leaders who may bring fresh insight to their company.

Using Open Payments data to enhance compliance internally

		Another use of Open Payments data that many companies are now considering is how to use disclosure data to monitor compliance with internal policies, industry standards and government regulations. Pharmaceutical and medical device companies can be proactive when it comes to uncovering potential suspicious activity across departments and divisional areas utilizing the rich data set developed by the Open Payments requirements coupled with other internal data sets across the organization (prescription data, sales representative activity, managed care) as well as external data sets (clinicaltrials.gov, publications, social media). The traditional method in helping to ensure compliance has been a very manual process, but with a data-driven approach an organization can help ensure that integrity is upheld across the organization.

		Typically, a disclosure data store includes data from a company’s expense reporting system, accounts payable tool, sales force automation system, customer master, and other databases.

		Even without incorporating outside data, disclosure teams can quickly identify areas of risk like meals outside of established meal limits, out-of-office meals outside of established parameters, fee-for-service payments exceeding established caps, and field activity outside of typical ranges. But by incorporating additional company data sources, more powerful analyses can be completed to target areas of government scrutiny. By incorporating additional data, like medical information requests, prescription volume data, contracting information, and fair market value rates, companies may be able to identify areas of compliance risk. These risk areas can include off label promotion, anti-kickback risk, and the timely and complete posting of clinical trials data.

		For example, including data from your company’s contracting or engagement management system may allow you to identify cases where physicians did not go through the proper contracting process prior to performing and being paid for a given service. Comparing speaker program attendees included in your aggregate spend system against physician data from your customer master may allow you to identify inappropriate attendees at certain programs. Combining call plan and prescription information with data from a company’s disclosure system and medical information requests may help to identify off-label promotion risk.

		Like data from Corporate Integrity Agreement disclosures and Medicare payments, companies should expect Open Payments data to be analyzed in detail by the press and the government. By reviewing their own data proactively, companies may be able to mitigate potential future or existing compliance risks. Additionally, companies may be able to use this data to answer compliance questions that are commonly asked by the Board of Directors and other leadership regarding activities with physicians and teaching hospitals.

		Pharmaceutical and medical device companies should look to develop dashboard visualizations that draw off of disclosure and other internal data to highlight areas of compliance risk. Consider how your company can leverage the power of this enterprise-wide data to identify and address potential risk areas and increase senior management comfort with business operations.

		Companies are anticipating the potential reactions from the industry, physician, teaching hospitals, the press and the government to this data being publically disclosed. The many unknowns about this reaction have caused some companies to waver or wait on decisions regarding how to address their data collection, communication to physicians, or data analysis regarding Open Payments. However, with all of these unknowns, many companies are still preparing their next steps for reporting in 2014 and beyond.

		At this time, many companies are already beginning to consider next year’s disclosure report. After the current review and dispute period ends, many companies are planning to conduct a “pre-disclosure” of transparency data from the first half of 2014. Companies may choose to provide a preview of aggregate spend data either to a random sample of physicians, physicians with the highest transaction or dollar volume, or other recipients identified by the business. Additionally, some teaching hospitals are now mandating pre-disclosure of transactions to physicians associated with that teaching hospital.

		Pre-disclosure allows companies to resolve potential disputes prior to remediation via the CMS framework, and may help to preserve relationships with physicians. Companies are initiating the pre-disclosure process both via e-mail addresses purchased from master data vendors and via traditional mail. Many commercial aggregate spend systems now include a pre-disclosure functionality to facilitate this review period.

		Additionally, many companies are conducting internal reviews of initial 2014 aggregate spend data at this time—Huron’s recent disclosure survey indicated that 73% of respondents are conducting periodic formal internal data reviews with commercial and clinical functional areas in order to increase comfort with the accuracy of data submissions. Comparing internal data to peer benchmarking ranges can help increase executive comfort with the completeness of disclosure data.

		Manny Tzavlakis (left) is a managing director in Huron Life Sciences (Chicago). He has more than 18 years of life sciences (pharmaceutical, medical device, biotechnology and diagnostics) industry and management consulting experience, specializing in aggregate spend/compliance strategy and analysis, predictive modeling/advanced analytics, off-label detection, sales force/marketing effectiveness and information technology.

		Joe Morrell is a manager in Huron Life Sciences. He has more than 10 years of experience working with global life sciences companies.

		Marci Juneau is a director for Huron Consulting Group’s Life Sciences practice.  She has over ten years of experience assisting pharmaceutical, biologic and medical device companies.

http://www.npr.org/blogs/health/2014/03/04/285298999/drugmakers-slash-spending-on-doctors-sales-talks

http://www.bostonglobe.com/metro/2014/03/24/drug-companies-extra-payments-researchers-raise-conflict-interest-concerns/N2xZV00WnLGhaHGH3c07OK/story.html

http://www.nytimes.com/interactive/2014/04/09/health/medicare-doctor-database.html?_r=0

http://www.washingtonpost.com/wp-srv/special/national/medicare-doctors-database/

How to prepare for reporting and utilizing published data for business and compliance purposes

Getting ready for Sunshine Act public data

The term “Big Data” has exploded within the healthcare industry, and it’s unlikely that it will go away anytime soon. In fact, these large sets of information have the potential to impact almost every facet of the life sciences value chain, including research and development, finance and administration, manufacturing, supply chain, marketing and sales. There is, however, a disconnect between availability of data and the ability to translate the information into actionable insight.

Setting a foundation for long-term success: How the pharmaceutical industry can transform Big Data into actionable insight

Pharmaceutical Commerce - July/August 2014