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Daniel Hoffman

POSTED: Thursday, January 9, 2014, 6:00 AM
Filed Under: Daniel Hoffman

In the week before Christmas, Merck announced (see here) that it was starting a weight loss business as a self-supporting enterprise.  In the past, whenever pharmas launched businesses outside of prescription and non-prescription pharmaceuticals, they were typically "value-added" enterprises designed to promote one or more drug brands.  In a few cases, pharmas ventured outside of drugs into fields such as diagnostics/devices where they could leverage their close relationships with leading physicians and various competencies developed through the drug business.  But the more typical cases were those similar to the multi-billion dollar acquisitions of Pharmacy Benefit Managers (PBM) in the early '90s by Merck, SmithKline and Eli Lilly.  These were essentially defensive efforts to protect the pharma golden goose from potential moves by payers to reduce drug payments. 

Merck claims their current move into weight loss services is unlike these earlier ventures because it seeks to genuinely diversify.  If so, that's a good sign, but the effort faces many potential challenges.

As a bit of background, Merck has long maintained a venture fund that, up until the last few years, contained $100 million for new acquisitions.  Its long time director was a Swede, Per Lofberg, who has since moved on to positions in private equity, pharmacy-PBM and other enterprises.  The central problem of Merck's investment fund was that its primary criterion required potential acquirees to demonstrate a capability for supporting the core pharma business. 

POSTED: Tuesday, December 31, 2013, 6:00 AM
Filed Under: Daniel Hoffman

Anyone who's been awake the past five years knows that the U.S. experienced its worst economic recession since the 1930s as a result of fraudulent manipulations by investment banks and other financial institutions.  Equally galling has been the lack of criminal action against these Wall Street fraudsters by Barack Obama's Justice Department.  Recently U.S. District Court Judge Jed. S. Rakoff denounced the feds for this omission (see here).  While Judge Rakoff makes a worthwhile case with respect to the banks, his article also sheds light on public policy concerning pharma.

According to Judge Rakoff, the Department of Justice (DOJ) has periodically invoked three excuses for not criminally prosecuting banking executives.  The first two involve organizational matters peculiar to the DOJ such as the Bush administration advancing its plutocratic agenda for the country by literally decimating Justice's financial fraud staff, reducing it from 1,000 employees to 120.  That goal of catering to the corporate rich was also augmented by moving responsibility for financial fraud prosecutions out of Washington to regional offices that lacked adequate expertise in those complex matters.  Judge Rakoff does little to rebuke the Bush administration for its duplicity in these matters, perhaps because the Obama administration for the longest time did nothing to reverse its predecessor's policies.

Judge Rakoff then exposes the flimsiness of the Justice Department's third excuse for inaction and this one has direct application to pharma. 

POSTED: Thursday, December 26, 2013, 9:45 AM
Filed Under: Daniel Hoffman

Given pharma's way of doing business during the past decade, it’s become extremely difficult to identify emerging patterns that deserve an attaboy.  That’s all the more reason to commend GlaxoSmithKline’s management for two steps they took last week.

The company’s CEO, Andrew Witty, announced that henceforth they would no longer include the volume of prescriptions written by physicians in a rep’s territory when calculating his/her compensation.  That new policy started in GSK’s U.S. operation during 2011 and last week’s decision applies it worldwide.

At the same time, Mr. Witty announced that “the company will no longer pay health care professionals to speak on its behalf about its products or the diseases they treat [and] will also stop providing financial support directly to doctors to attend medical conferences.”  (See here.)

POSTED: Tuesday, December 17, 2013, 6:00 AM
Filed Under: Daniel Hoffman

Pharma is no longer the industry it once was.  R&D managers now dance to the tune of finance/accounting and lawyers on the industry’s most important function: developing new therapies.  More generally, although pharma is an industry whose goal consists of creating products to improve the length and quality of life, a review of its violations and dirty tricks over the past decade shows that it has lost its moral compass.

Parents used to encourage their sons and daughters to consider careers in pharma in the belief that it is a recession-proof industry.  Most people now know that is a myth.  In 2010 and 2011, pharma exceeded all commercial sectors of the U.S. economy in the number of employees laid off. 

But do not despair.  If a young person still wants to pursue a career in the pharmaceutical industry, there is one functional area that offers opportunity, remuneration, interesting work and a chance to do the right thing.  This remaining area of worthwhile endeavor involves becoming a whistleblower. 

POSTED: Monday, December 9, 2013, 10:04 AM
Filed Under: Daniel Hoffman

In 2009 pharma cut a deal with the Obama administration that called for the industry to refrain from opposing the Affordable Care Act (ACA) and subsidize the prescription drug coverage of seniors under Medicare Part D.  Prior to ACA, Medicare recipients faced the full "donut hole" burden that required each one to pay $3,000 per year for drug costs until catastrophic-coverage kicked in.  The quid that pharma agreed to give as its part of the deal included discounts covering 14% of the donut hole in 2012, escalating to 75% in 2020.

Pharma agreed to this not because of any heartfelt desire to help seniors, but because they knew that in return, the ACA would bring them windfall profits.  As analyst Brian Orelli puts it, "the drug industry is going to benefit substantially from Obamacare in the long run."  (See here)

According to Orelli, Obamacare will fatten pharma's profits as a result of "more patients, better diagnosis, no maximum payouts, and more spending on chronic diseases, which all lead to an increase in spending on drugs."

POSTED: Monday, December 2, 2013, 6:00 AM
Filed Under: Daniel Hoffman

Earlier this month the online pharmacy information company, PharmacyChecker.com, compared prices on fifteen of the top-selling brand name medications made in the U.S. (see here).  They found that U.S. consumers can save an average of 76% on these domestically produced products by buying them from verified international pharmacies rather than in this country.  Amazingly, three of these fifteen brands (Merck's Singulair, AstraZeneca's Pulmicort and Mission Pharmacal's Urocrit-K) are available here as generics, yet the brand prices abroad were still lower than those for the U.S. generics.

A spokesman for PharmacyChecker.com claims they looked strictly at medications made in the U.S., "because we found it so compelling that the same drugs made here are about 76% less expensive abroad."

According to a Commonwealth Fund study referenced by PharmacyChecker.com, these enormously higher U.S. prices take their toll because, in 2012, fifty million people here failed to fill their prescriptions due to costs.  That number included more than one in five of people with health insurance (see here).

POSTED: Thursday, November 21, 2013, 6:00 AM
Filed Under: Daniel Hoffman

Public attention for the last few weeks has rightly focused on the inexcusable mistakes that accompanied the Affordable Care Act's rollout.  While the pharmaceutical industry spent several years preparing for the ACA, managements at most of the companies remain flatfooted amidst a few other trends that will likely create more serious problems for them than Obamacare.

For example, the astute pharma journalist, Ed Silverman, recently listed (see here) some of the reasons why the Affordable Care Act might either boost revenues for branded pharma companies or create some hazards.  The potential benefits come from insuring more people, thereby putting them in a better position to buy pharma's products.  At the same time, Silverman notes that Obamacare's likely use of data analysis to better determine drug cost-effectiveness represents a distinct threat.  The use of Big Data analysis to determine which medications work best for which patients under what particular circumstances can powerfully obstruct pharma's efforts to differentiate its brands and justify their exorbitant costs.

Data analytics are likely to create a scenario of dueling databases.  Pharmas will have their data scientists make the case that patients will benefit from branded medications, after which payers will analyze the data and, most likely, reply that, “your brand is better than the generic in 4% of the candidate patient population, as long as conditions x, y and z apply.”  If it comes to that, such a scenario will doom the possibilities for future blockbusters to make billions of dollars by treating large populations.

POSTED: Thursday, November 14, 2013, 1:23 PM
Filed Under: Daniel Hoffman

A useful insight into pharma’s current status emerged this week when Goldman Sachs lowered its rating on Eli Lilly & Co. from Neutral to Sell.  Quite apart from Eli Lilly, that downgrade was interesting, if only for the fact that sell-side analysts rarely rate a Big Cap pharma as a Sell.  But it was analyst Jami Rubin’s explanation for the reason behind their Lilly cut that clearly shows pharma, like Dorothy and Toto, aren’t in Kansas anymore. 

In Rubin’s opinion Lilly’s “most important pipeline assets (diabetes and oncology) are undifferentiated or me-too.”  In particular, the company’s diabetes products are “likely to face further pricing pressure” because products in the various subclasses there, especially the DPP-IV’s, GLP-1’s, and SGLT-2’s constitute commodity categories.

Now while it is highly unusual for new classes these days to contain drugs with any clinically meaningful differences, the fact remains that pharma marketers have tried to retain oral antidiabetic brands as a throwback to previous decades when a company could come out with a fourth or fifth me-too and still make a boat load of money.

About this blog

Check Up covers major health events in our region and offers everything from personal health advice to an expert look at health reform. Read about some of our bloggers here.

For Inquirer.com. Portions of this blog may also be found in the Inquirer's Sunday Health Section

Michael Cohen id the president of the Institute for Safe Medication Practices in Horsham.

Daniel Hoffman is the president of Pharmaceutical Business Research Associates (PBRA) in Glenmoore, Pennsylvania, a healthcare research and consulting company specializing in key account positioning and messaging.

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