Healthy Skepticism Library item: 728

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Publication type: news

Tsao A.
Big Changes for Big Pharma
Business Week 2005 Jan 3

Full text:

Fallout from Vioxx and Celebrex will create plenty of pain in the sector.
Here are six trends that will alter the industry in 2005

The fear factor surrounding some commonly used pain-relieving drugs is at
fever pitch. Merck (MRK ) pulled Vioxx from the market in October due to
strong evidence of an increased risk of cardiovascular problems. And
questions also have been raised about the safety of Celebrex, made by Pfizer
(PFE ), and about naproxen, which is sold without a prescription as Aleve by
German drug giant Bayer (BAY ).
The revelations of elevated risk for heart attack and stroke with long-term
use of these so-called Cox-2 inhibitors could result in billions of dollars
in potential liability and considerable damage to a hugely profitable drug
category. Beyond the immediate financial consequences, drug companies now
must take a hard look at how they do business, analysts say. And that could
mean quite a hangover for Big Pharma in 2005.
Everything from budgets for consumer advertising and physician marketing to
how drugmakers disclose study information and make decisions on research
projects are now under new scrutiny. The problems with the Cox-2 inhibitors
“will cause a shift in the internal review of pharmaceutical companies and
how they look at risk and reward,” says Weidong Huang, analyst at
TimesSquare Asset Management in New York City (see BW Online, 12/27/04,
“Candor Can Immunize Big Pharma”).
How will drug companies cope? Here are some of the likely changes coming in
the post-Cox-2 world:

More cautious regulation.
Over the last decade, the Food & Drug Administration has dramatically
shortened the time it takes to review new drug applications. But many
critics contend that the agency has been too hasty to issue approvals. “The
risk-benefit ratio had been balanced toward efficacy and away from risk,”
says Huang.
The FDA is now likely to strike a more conservative stance, particularly
with drugs apt to be taken by large populations, such as treatments for
inflammation and pain (including new Cox-2s in development) and neurological
diseases like Alzheimer’s and depression. In such drugs “even low incidence
of risk will be less tolerable to the FDA,” says Huang. Pharmas will likely
be asked to do more studies that assess safety and side effects as part of
the FDA’s review process.

Retooled new drug pipelines.
If the FDA does focus more on safety, drug companies could be deterred from
working on treatmenst for chronic conditions like high cholesterol. With the
increasing potential for litigation if something goes wrong and a more
costly process for proving the safety of big-selling medications in larger
patient populations, the prospect of “developing drugs for chronic diseases
becomes less attractive,” Huang says.
Some companies will shift their business models away from developing
blockbusters (drugs with revenues of $1 billion annually or more) toward
more specialized products that require less promotion.
Swiss drugmaker Roche could be one model to follow, because it has “fewer
mass-market products,” says Mehta Partners’ analyst Max Jacobs. It has
thrived by selling drugs for hepatitis, HIV, and cancer — all of which
require a smaller marketing budget since the patient populations are
generally smaller, and the specialist physicians who treat them are fewer.
Roche’s drugs are selling well because they address more serious medical
needs. Roche’s sales will grow by 6.2% annually over the next several years
on average vs. Pfizer’s 1.4%, figures Mehta Partners. “We hope companies
will be wise enough to change the business model,” says Jacobs.

New limits on consumer ads.
The financial impact to makers of Cox-2 inhibitors might have been less
pronounced if the drugs hadn’t been so heavily promoted to consumers. Ed
Saltzman, president of pharmaceutical consulting firm Defined Health in
Milburn, N.J., sees a cautionary tale in what has happened. He figures the
industry is headed toward a more rigorous system of policing its own
promotion and marketing.
“One of the goals of this advertising is to get [some drugs] used in many
more people than need it,” Saltzman says. “When the smoke clears on the
Cox-2 issue, more than anything else, fingers will be pointing at how
certain drugs are promoted.” When Celebrex was shown to have cardiovascular
risk at higher doses, Pfizer stopped running consumer ads for it. “I believe
Pfizer pulling Celebrex [ads] is the first step toward marketing
self-regulation,” says Saltzman.
However, direct-to-consumer advertising on TV and in magazines and
newspapers isn’t likely to stop. “Companies have to spend on [such] ads,
given how thin [in potentially lucrative new products] their pipelines are,”
figures Jacobs.

More disclosure about possible side effects.
In October, Merck yanked Vioxx from the market after learning about
increased cardiovascular problems in a study of the drug in colon-cancer
prevention. However, within days of the withdrawal, physicians and
researchers who worked on Vioxx trials claimed that Merck had been trying to
sweep cardiovascular risks under the rug for years.
Merck wasn’t alone, Huang says. Earlier in 2004, makers of antidepressants
also came under fire for their selective reporting of clinical trials that
showed increased risk of suicide in teenage patients. “There will be no more
selective disclosure,” says Huang. “That’s the main change that follows
these dramatic events. The cost of not disclosing data is higher now.”
Drugmakers are also likely to try to protect themselves from possible future
litigation by using more disclaimers in their ads.

More up-front patient testing for specific drugs.
Companies that produce targeted cancer drugs already make predictive testing
a part of their treatment routine. For example, doctors can determine which
women are more or less likely to benefit from Genentech’s (DNA )
breast-cancer treatment Herceptin by how they fare in a blood test for
certain gene mutations. But that kind of predictive testing is still rare.
Drugmakers haven’t embraced it, since it could reduce the patient
population.
Now a consensus is growing among analysts that such testing needs to be
incorporated into drug development whenever possible. “The knowledge and
science aren’t always there, but we do need to find ways to grapple with who
benefits from certain treatments and who doesn’t,” says Saltzman.

A more skeptical market.
Doctors and health insurers will likely put increased pressure on drug
companies to show that their products are worth the cost. “The health-care
system will be more rigorous in valuing the cost-effectiveness of drugs,”
says Daniel Hoffman, president of consulting firm Pharmaceutical Business
Research Associates in Glenmoore, Pa. Many cultural factors “will keep
consumers from changing their attitudes about medicine appreciably,” he
adds. But chastened by the revelations surrounding Cox-2 drugs, patients are
likely over the long run to use more scrutiny when considering treatments.

All in all, the controversy surrounding Cox-2 treatments has been a searing
experience for everyone, from Big Pharma to the corner drugstore. And the
impact will reverberate throughout the New Year.