Category Archives: Health Care

A new frontier for Pharmaceuticals

What key trends will affect pharmaceutical companies’ operations and business success in 2016?

As we have already seen over the past years, there are a lot of changes in the pharmaceutical industry environment. We have various transitions and a very dynamic process behind this area, and important points that certainly affect operations and business in the pharma market are, for example: a) less launching of “blockbusters”, which represents less big or explosive revenues, b) the risks and dangers of the ‘patent cliff’, c) much more controlling strategies through payers (for example: drugs and medicines should be not only clinically effective, but also economically successful), d) more strength reimbursement policies, and also e) the continuously and quickly growing generic market.

Which strategies are most effective in managing supply chain for new innovative pharma products?

To face the coming problems and challenges, one of the key points to keep the pharmaceutical industry and advances in healthcare viable is, for example, the increase in the number and quality of innovative (truly innovative and not only “slightly different” or reformulations), economic – that is, cost-effective – new products. For example, for niche areas (such as orphan drugs), for areas with really no alternative up to now, smaller but more frequent launches, and with as low as possible marketing costs, in order to be able to invest more in RD costs, as RD must be ideal and optimized for real innovations. Minimizing marketing costs should occur through solid and emotionally empathetic relationships with the payers, prescribers and consumers. If these 3 “actors” from the healthcare systems work together, it would be possible to achieve the ideal development strategies for the right products. For example through partnerships between pharma and health insurance services aiming to achieve bilateral education; partnerships and cooperation between health insurance services and physicians and clinics or healthcare organizations, also to promote education and clarification and the development of common projects, as well as innovative projects, which aren’t so economically heavy or marketing-focused in order to comply with codes of conduct and regulations in different countries nowadays. Another alternative is the development of common projects with patient organizations – perhaps, for example, through a group of different pharma companies – but with a similar pipeline in some areas – and this would demonstrate to the population the true aim of “helping” and not only “making money” – as many people currently perceive the pharmaceutical industry. However, these are often ignored by the “big Pharma”- instead of joining all powers together, each sees the other as the enemy! This is not constructive.

What impact is the Patent Cliff set to have on the pharmaceutical industry in coming years?

The expiration of many patents during recent decades, the higher hurdles of reimbursement, the greater difficulties for new drug approval and continuously growing generic market makes the impact of the patent cliff ever more noticeable, and this will last into the coming years. So, small companies will most likely be bought or will merge with bigger ones, and there will come a time to rethink what to produce, in order to overcome this situation. There are still alternatives and possible strategies, as previously described, for a better interrelationship between pharma, patients and healthcare organizations – such as insurance providers, for example. The development of truly innovative medicines cannot occur without the help and support of the customers. However, the traditional kind of feasibility work that has been performed in pharmaceutical companies is very often completely beyond reality or far removed from “real life”. Even the development of clinical study documents, such as protocols and IBs, are sometimes extremely customer unfriendly. This occurs because there are a lot of people in the pharmaceutical industry – especially physicians – that have never worked with a real patient in a real medical or clinical environment. Many of these employees are involved solely in the theoretical aspects, and this can lead to serious mistakes during planning and performance of the drug development programs. However these issues are also often simply disregarded.

According to Andrew Ward writing for the Financial Times, dozens of big investors have backed a campaign by British activists for more transparency in the pharmaceutical industry. Helena Viñes Fiestas, head of sustainability research at BNP Paribas, stated that “open access to clinical data was as important for investors as for doctors and patients, because trial results heavily influenced the way that drug companies were valued.”

How will rising pressures for transparency impact the pharmaceutical industry?

Is the automobile industry transparent to such an extent? Are any other innovative industries? No one shows their plans before going onto the market – and neither should the pharmaceutical industry. There is also the issue of data safety, because during studies we work with human beings – individual people whose privacy must be protected. The pharmaceutical industry, together with patient organizations and healthcare organizations, have to work in cooperation to face this issue and only accept a level of transparency that would not be dangerous for all. The pressure will rise but must not be accepted in this way.

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How will the health care supply chain be transformed in 2015?

Introduction

The healthcare system is transforming due to a myriad of internal and external factors.  The challenge common to Integrated Health Care Delivery Networks (IDNs), Accountable Care Organizations (ACOs) and others can be summed up in a single word – reimbursement.  A survey of thought leaders from these organizations found that over 70% expect their margins to decline 10-20% due to lower reimbursement.  Manufacturers see significant supply chain improvement opportunities through the adoption of new technologies such as cloud computing to reduce costs and increase revenue.  Quite clearly, healthcare in general and hospitals in particular need to rapidly change, adapt and embrace the benefits of supply chain management long employed by healthcare industry manufacturers and suppliers.

The Suppliers

Pharmaceutical, medical device and other suppliers have incorporated supply chain management systems into their companies.  A 2015 study found that supply chains are responsible for 25% of pharmaceutical costs and 40% of medical device costs.  Cleary, there is work to be done here given the annual spend of $230 billion on pharmaceuticals and $125 billion on medical devices. If the healthcare sector as a whole adopted the systems used in other fast moving industries such as consumer and technology, it is estimated that costs could fall for the above two mentioned segments by more than $130 billion.  The lead time from pharmaceutical plants to distribution centers is on average, 75 days.  Contrast this to approximately a week, from order to deliver, for a shipment of laptops from sources in the Far East.

Suppliers of healthcare will likely find 2015 supply chain solutions in cloud computing.  The Cloud offers a common supply chain platform that ameliorates many of the problems associated with implementing fully integrated, specialized supply chain systems and addresses the critical need for collaboration amongst all in the value chain, and yet, challenges remain.  Cloud computing is very dependent on legacy systems and although Information Technology (IT) departments are asked to do more, they only spend on average 10% of their budget on new applications.  As cloud computing becomes more widely adopted by large scale supply chains, they can look to enjoying the rewards of greater response speed, agility and resolving problems through greater collaboration between all stakeholders. These benefits can be expected to improve the bottom line, resulting in increased margins and revenue.

Hospitals

IDNs, ACOs and large hospital groups are faced with not only lower reimbursement, but the impact of legislation from the enactment of The Affordable Care Act (ACA), commonly known as Obamacare.  This alone has morphed the reimbursement focus from being volume based to incentive based. Instead of being paid on the number of procedures performed, hospitals must embrace end to end healthcare delivery supply chains to manage procurement costs, monitor cost per case, re-admissions and other factors that could jeopardize their continued operations.  It is a business tenant that you cannot manage what you do not monitor. Supply chain systems provide the data that can be turned into actionable management, system improvements and business critical cost savings.

Expect the distribution model to continue to change in response to market factors.  Many IDNs and ACOs are adopting Warehouse Management Systems (WMS) of their own, rather than ordering from large medical supply distributors such as McKesson, Cardinal and others.  Savings from these new procurement solutions is a significant opportunity for users.  Simply put, it immediately eliminates the distributor markup on products and does so in a very fast period of time. It is estimated that with self-distribution, where hospitals purchase directly from the manufacturer and assume the distribution responsibility by implementing WMS’s, the payback can be in as little as six months by moving just ten vendors from traditional to new self-distribution systems.

Summary

Healthcare is an extremely fragmented and non-standardized industry relying on traditional methods and systems to successfully overcome today’s rapidly changing challenges. Utilizing new technologies such as cloud computing, WMS and fully integrating and refining supply chain management systems will help both suppliers and users of healthcare products to deliver better quality of health care at a lower cost. Collaboration among all those involved in the value chain, IT software suppliers, manufacturers and end users, to name a few, is essential for the healthcare industry to profit, evolve and prepare for the business challenges of 2015 and beyond.

How will specialty drugs affect the global healthcare industry in 2015?

The recent price battle between competing Hepatitis C treatments from AbbVie (Viekira-PAK) and Gilead Bioscience (Harvoni/Sovaldi) for best placement on preferred drug coverage lists has revealed, once more, the complexity of commercializing innovative new drugs by pharma companies. Indeed, specialty drugs i.e. new generation therapies used to treat severe illnesses such as cancer, hepatitis C or autoimmune diseases (e.g. multiple sclerosis), are attracting increasing pharma/investor/government interest and are steadily replacing traditional drugs in the annual list of FDA-approved drugs (expected to account for >50% of all new approvals in the upcoming years1).

The implications of this rapid growth are currently changing the landscape in the global healthcare industry. Boosted by a significant number of life-changing specialty drugs recently approved for “tough-to-treat” indications (e.g. metastatic melanoma), current pipelines of pharma companies are increasingly geared towards new specialty drug development. As such, an unprecedented number of new specialty drugs are being brought into clinical trials; these target not only “traditional” indications such as cancer, diabetes, hepatitis C or cardiovascular diseases, but also a wide range of rare/orphan diseases. Combining this approach with “breakthrough” drug development approval opportunities recently employed to bring revolutionary new drugs rapidly into the market (e.g. anti-PD-1 antibodies) is further expected to benefit patients across several therapeutic categories in a highly significant manner. From a financing perspective, the growth of specialty drugs is also shaping the investment industry as venture capitalists are clearly favoring investments in this development area (and are therefore driving biotech companies towards relevant approaches). Increasingly manifested during the last years, these trends will continue to influence the healthcare industry in 2015. Overall, we predict increasing investments, development activity and specialty drug approvals in 2015 versus previous years.

However, new specialty drug development doesn’t come without drawbacks. Although pharma companies argue for long term benefits of these treatments (utilizing reasonable arguments to their favor), regulatory agencies and governments are unwillingly called to pay the soaring bills. With the spending on specialty drugs expected to increase by 361% by 20201, the overall burden to the healthcare systems will thus be tremendous. Our prediction for 2015 is that price competitions such as the one between Gilead and AbbVie will continue. Moreover, we predict increasing reactions from regulatory agencies known for their price-cutting concerns/policies (e.g. NICE, UK); these will build up the pressure to the industry.

Notwithstanding the above, and thinking solely from a patient’s perspective, the upcoming years will offer lots of hope and optimism as a significant number of really innovative therapeutic options tackling critical diseases will hit the market. The question is of course if all patients will have access and/or can afford to pay for those treatments…

1 PWC Health Research Institute, “The cost of innovation: A closer look at specialty drugs” 2014, http://www.pwc.com/en_US/us/health-industries/behind-the-numbers/assets/pwc-pharma-specialty-drug-infographic.pdf

Courts Impact on Clinical Diagnostic Companies

More than regulation and reimbursement, court decisions regarding key US patents are shaping the landscape for innovative molecular diagnostic tests and the fortunes of companies that develop them. The first case this year was decided in June by the Supreme Court of the United States. The decision of the Court invalidated some of Myriad Genetics’ patents covering its well-known BRAC ½ test that is used in determining a woman’s risk of developing breast and ovarian cancer based on their genetic profile. This opened Myriad’s virtual monopoly on BRAC ½ testing to new and some very adept competitors such as Ambry Genetics, GeneDx and the largest commercial reference lab in the world, Quest Diagnostics. Continue reading

Hospital Mergers Yield Many Benefits

The largest surge in hospital mergers over the past ten years is having an unexpected benefit. These new super-sized healthcare systems are gaining leverage over managed care systems as they negotiate new contracts. Two recent reports in the New York Times and by Pricewaterhouse Coopers cite that this round of hospital consolidation will give large regional hospitals systems the ability to not only negotiate more favorable terms with payers, but also to raise prices, even in face of lower reimbursement rates from payers such as Medicare and Medicaid. According to Booz Allen, up to 1,000 of the nation’s approximately 5,000 hospitals may merge over the next 5 years. Continue reading

Myriad Genetics Faces New Competitor

Myriad Genetics is known for its proprietary test for BRAC1/2 mutations that can predict a patient’s chances of developing breast and ovarian cancer. Actress Angelina Jolie brought a wave of publicity in May this year after having undergone a double mastectomy procedure following her BRAC1/2/ test results. According to leading breast cancer medical guidelines, approximately 2 million women should be screened for BRAC mutations, but just 10% of those are currently being tested for the mutations. This under penetrated market is an obviously attractive growth opportunity for commercial reference labs, both small and large. Continue reading

A Tale of Two Clinical Diagnostic Companies

Quest Diagnostics and LabCorp are the two largest commercial reference labs (CRLs) in the US. CRLs are an essential component in healthcare delivery, providing vital routine and esoteric clinical diagnostic test results to physicians, hospitals and numerous alternate site market segments. Since over 70% of all clinical decisions are made on the basis of a diagnostic test result, the value of clinical diagnostic testing in the healthcare continuum speaks for itself. Continue reading

Roche Seeks Sequencing Strategy

Roche’s failed 2012 attempt to acquire Illumina for $6.7 billion has not stopped the global leader in clinical diagnostics from its intent to be a player in the high growth “nex-gen” sequencing market. Several recent moves by this diagnostics leader provide insight into Roche’s sequencing strategy. Continue reading