Wednesday, September 18, 2013
The Centers for Disease Control and Large Pharma
So, what does the recent CDC report on antibiotic resistance have to do with big pharma? The optimistic response is that large companies will sit up and take notice. They will put this information together with all the other things going on including regulatory reform and discussions of value-based pricing and make the right decision – to get back in or to continue with antibiotic R&D programs. But the cynic in me sees a continued disconnect between the growing public health crisis noted by the CDC and the marketing groups of large pharmaceutical companies.
Marketers in large pharmaceutical companies are generally cautious types. They don’t like supporting efforts that might not actually make the return on investment that the marketers predict. The marketers are also caught in between the reality of a severe and growing medical need (antibiotic resistant infections) and the requirement of their bosses to provide $500 million in peak year sales or some minimum net present value for any product. The easiest way out, then, for both large pharma executives and for marketing folks is just to say no and blame everything and everyone but themselves for the fact that antibiotics are not good money-makers.
The problem with this thinking is that it is illusory. It has become just a poor excuse to say no. Marketers quote numbers showing the decreasing value of individual branded products over time – entirely due to generic intrusion. Surprise! But if you look either at individual products prior to generic intrusion or the dollar volume of the market for branded products, you will come to the opposite conclusion. A great example is Cubist’s Cubicin or daptomycin. Here is a product sailing along towards $1B is sales based 95% on US sales where the product seems poorly differentiated from its main generic competition, vancomycin. Why? How? If this product were presented today at an early stage of development to most large pharma marketing people – their response would clearly be no. How about Zyvox – a well differentiated product offering the only oral therapy for MRSA infections (or at least for the older hospital strains)? It garnered sales of $1.6 B at its peak based not on prescription volume, but based on a very high price – the highest of any antibiotic. Then there are the objections that new antibiotics are reserved to preserve their utility. Yes – carbapenems were the most reserved antibiotics in history (perhaps until Zyvox), but two of them sold between $500MM and $1B each in spite of their reserved status. OK – these products are not Lipitor that sold $15-20B at peak – but how many lipitors are there out there?
Focusing on the dollar volume market, I carried out a 25 year retrospective study when I was at Wyeth looking at the effect of generic antibiotic approvals on the dollar volume of the overall antibiotic market. Guess what! Essentially there was NO EFFECT! Why? Nobody promotes generics. And generics get overcome by new, branded and better-differentiated (or not) products like Cubicin and Zyvox. The global antibiotic market has actually been growing– which is amazing since there have been so few new market entries to compensate for ongoing generic intrusion. This is because of the growing middle class populations in countries like China, India, Russia, Chile and others that can suddenly afford to pay for high quality branded products. So – if we can get new, differentiated, branded products to the market, their market potential should be higher than ever IF we can figure out how to manage these emerging markets without going to jail.
The argument currently raging within large pharma marketing groups is, for a product designed to treat these life-threatening resistant infections where the patient numbers are very small – what price can they realistically charge? The CDC report points out that, in the US alone, there are over 2 million (as in million!) infections acquired by hospitalized patients every year during their hospital stay. Of these, at least 23,000 will die directly from their antibiotic resistant infection. An additional 250,000 patients will get infected by C. difficile and 14,000 of these will die. According to the CDC, the direct additional healthcare costs to the US due to these resistant infections could be as high as $20 billion and the additional costs of lost productivity could be as high as an additional $35 billion annually. So – marketers and payers – think value based pricing.
But really – what more can we do to convince the marketing groups in large companies that antibiotics make good business sense? Should we send them to large hospitals and let them see physicians struggling to save patients from resistant infections? Or should we just say no, fire them all, and start over?