Pharmaceutical Industry - Introduction to Pharmacology - Lecture Slides, Slides of Pharmacy

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THE PHARMACEUTICAL INDUSTRY:

AN OVERVIEW Focus Areas

„ Brief historical review of the U.S. pharmaceutical

industry.

„ Societal benefits and challenges associated with

the pharmaceutical industry.

„ Overview of drug product marketing and sales

issues.

„ Interactions between health professionals and the

pharmaceutical industry.

Historical Development

„ 1700’s

„ Patent medicines and remedies

„ Apothecaries dispense pills and potions

„ 1800’s

„ Pharmaceutical manufacturers are established in

seaports (e.g., Philadelphia, New York)

„ Civil War increases demand for drugs

Historical Development

„ 1900 – 1940

„ 1910’s – Fat and water soluble vitamins

„ 1921 –^ Insulin extracted from the

pancreas

„ 1930’s – Sulfonamides

„ 1940’s – Penicillin (Initially isolated in

1928)

„ World War II begins era of research and

development; large scale production begins

Historical Development

„ 1950 – Present

„ Technological innovations lead to new expensive

products

„ The U.S. accounted for nearly 65% of the world

wide drug innovations

„ Antineoplastics, Cardiovascular agents, Diagnostic agents, Antiulcer drugs, Hormones, Ophthalmic agents, Antihistamines, Bronchodilators, Oral Contraceptives, Analgesics, Antidepressants, Antibiotics

Pharmaceutical Industry

„ PhRMA Companies

„ Pfizer, GlaxoSmithKline, Merck

„ Branded Products, Research Intensive

„ Biotechnology Companies

„ Amgen, Biogen, Immunex

„ Generic Drug Companies

„ Mylan, Teva, Watson

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Top 10 Pharmaceutical Manufacturers

(Source: www.imshealth.com)

10 Lilly 7.5 LLY Total 129.

9 Wyeth 7.6 WYE

8 Amgen 7.7 AMGN

7 Novartis 9.5 NVS

6 Bristol-Myers Squibb 9.6 BMY

5 AstraZeneca 10.4 AZN

4 Merck and Company 14.1 MRK

3 Johnson & Johnson 15.2 JNJ

2 GlaxoSmithKline 18.6 GSK

1 Pfizer 29.2 PFE

Ticker Symbol

2003 U.S. Sales in Billion $

Rank Company

Industry Trends

Mergers and

Acquisitions are

Strategies to

Enhance Research

Pipeline and

Shareholder Value

“In a surprise move today,

everything merged”

Value of Pharmaceuticals

„ Medical, Social and Economic

„ Decrease morbidity and mortality

„ Improve quality of life

„ Increase productivity of Americans

„ Assist in reducing overall health care

costs

Health Care Expenditures

$1.00 Spent in 2001

Dental 5%

Nursing Homes 7% Rx Drugs 10%

MD Services 22%

Hospital Care 31%

Other 25%

Source: www.cms.hhs.gov

Years 3.5 1 2 3 1. Test Subject

Laboratory and animal studies

1 approved

Additional post- approval trials

Review process / approval

1,000 - 3, Patient Volunteers

40 - 100 Healthy Volunteers

Purpose Safety PK PD

5,000 - 10, new compounds synthesized

Success Rate

Pharmacology Toxicology

Benefits vs. risk under typical clinical conditions

Efficacy ADRs Dose-response

6 - 9 enter trials

Non-clinical Testing

Phase I

Phase II

Phase III

FDA Phase IV

200 - 500 Patient Volunteers

DRUG DEVELOPMENT: OVERWHELMING ODDS

File IND with FDA

File NDA with FDA

Discovery (^) Development Registration Marketing

Drug Development Costs

138

318

802

0

100

200

300

400

500

600

700

800

900

1975 1987 2000

Expenditures per Drug in Millions $

Source: www.pharma.org

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Product Life Cycle

Introduction

Growth

Maturity

Saturation

Decline

Drug Patents

„ U.S. Patents protect property rights to

inventors of new products for 20 years from

the date of application filing

„ Pharmaceutical manufacturers typically apply

for a patent when a promising compound is

discovered

„ May take up to 3 years for a patent to be

issued

„ Considering another 10 or more years for

testing and review, patent protection lasts

about 7 years after FDA approval

Average Annual Profit Margins

18

3

17

20

18

13

20

24

16

0

5

10

15

20

25

1999 2000 2001

Pharma

Biotech

Generic

Percent Net Income Margin

Source: www.cms.hhs.gov Source: www.citizen.org

Average R&D as Percent of Revenues

0

5

10

15

20

25

30

35

40

1999 2000 2001 2002

Pharma Biotech Generic

R&D as Percent of Revenue

Source: www.cms.hhs.gov

DTC

Ads $ 2.64 billion

Samples $ 11.91 billion

Office Promotion $ 5.33 billion

Journal Ads $ 437 million

Hospital Promotion $ 873 million

Promotional Spending

$ 21.2 Billion in 2002

Source: www.imshealth.com

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Indirect Marketing Influence –

Direct-to-Consumer Advertising Direct-to-Consumer Advertising

Pro

„ Education of public about disease states and medications „ Some physicians report benefit since patients ask better questions „ Promote consumer involvement and empowerment „ Economic benefit to pharmaceutical industry and advertising industry

Con

„ Print, radio, television and internet advertising „ Focus on population that has less sophistication than traditional targets (i.e., those prescribing, dispensing and administering drugs) „ Use of athletes and celebrities „ Manipulation of prescriber „ Lack of reliable studies to demonstrate benefit

Average Out-of-Pocket Drug Expense

449

107

182

304

432

604

884

0

100

200

300

400

500

600

700

800

900

All <25 25-34 35-44 45-54 55-64 65+ Age in Years

Average Annual Amt ($) Spent on Rx Drugs

Source: www.cms.hhs.gov

Prescription Drugs via Internet

Lipitor 40mg Cost ($)

Costco.com 95. Drugstore.com $94. CVS.com 109.

Celebrex 200mg ($)

Costco.com 80. Drugstore.com 76. CVS.com 92.

Nexium 40mg ($)

Costco.com 122. Drugstore.com 120. CVS.com 147.

Source: Richmond Times-Dispatch April18, 2004

Drug Importation Controversy

Product Quality Concerns

„ Counterfeit Drugs – labeling or

adulteration issues

„ Wholesalers (Amerisource Bergen,

Cardinal Health McKesson) comprise

90% of the market

„ Use of barcodes and radio-frequency

identification

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Consumer Concerns

„ Increased number of new and expensive

drugs

„ Increased aging population on chronic

drug therapy without adequate insurance

coverage

„ Decreasing coverage by private insurers

with increasing co-payments for branded

drugs

Generic Drugs

„ A copy of the innovator drug with the same

active ingredients and comparable strength,

quality and therapeutic effectiveness

„ Average Prescription price for trade vs.

generic product was $76.29 vs. 22.

„ Hatch-Waxman Act of 1984 and drug

substitution laws at the state level supported

generic drug use

Generic Drug Industry

„ Companies

„ Barr, Bertek, ENDO, Eon Labs, Fougera, Geneva,

Global, IVAX, Teva, Watson

„ Patent Issues

„ a new generic alternative discounts the innovator

product by approximately 40% and captures

approximately 40% market share initially

„ a generic drug captures approximately 70%

market share after 3 years

Consumer Response -

Implications for Physicians

Source: www.ag.state.mn.us

Pharmaceutical Sales Representatives

„ 90,000 - 95,000 Employed in U.S.

„ Estimate Cost of $ 150,000 per

Representative per Year (salary, bonus,

incentives, training, automobile, other

expenses)

„ Approximately One Representative for every

Two General Practice Physicians

„ Promotional Messages Restricted to FDA

Labeling

Office of Inspector General Compliance

Guidance for Pharmaceutical Manufacturers

(June 2001)

PhRMA Code (July 1, 2002)

„ General Interaction with Healthcare

Professionals (Focus on information)

„ Entertainment (Avoid)

„ Continuing Education (Support conference, but not

individual participants)

„ Consultants (Avoid token arrangements)

„ Educational and Healthcare Practice-related

Items (For healthcare benefit of patients and value of $100 or

less)

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Drug Samples

„ Widespread industry practice

„ Distribution controlled by Prescription

Drug Marketing Act of 1987

„ Sale is forbidden

„ Drug use control issues

Housestaff Attitudes Toward Promotions

Percent Who Consider Appropriate

0

20

40

60

80

100

abx guide

conf. lunch

dinner lect.

article pen social text CME luggage

Very appropriate Somewhat appropriate

Am J Med 2001;110:

Residents and Brand Promotion

JAMA 2001; 286:

Frequency of items found in residents' white coats

58 28

41

95 93 98

51

14

85

31

55

90 79

45

0

20

40

60

80

100

CalculatorCalipers Reflex hammerStethoscope tagReference book

Pen Penlight

% of residents

% Carrying item % Carrying item with pharmaceutical brand

New Age Representatives

„ Specialist/Liaison Positions

„ Medical Science Liaison, Clinical Education

Specialist, Regional Scientific Manager

„ Pharmacists (Pharm.D.) or Physicians

„ Collaboration with Sales Force

„ Lack of Financial Incentives for Sales

„ Ability to discuss “off-label” indications

„ Primary Focus is on Thought Leaders

Thought Leaders

„ Other Nomenclature

„ Key Opinion Leader

„ Subject Matter Expert

„ Thought Leader

„ Influence Leader

„ Focus

„ Local

„ Regional

„ National

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Medical Science Liaison Reporting Structure

70% Medical

30% Sales and Marketing

15% Other

Source - Drug Information Journal, 2000;34:1049-

35 %

Sales and Marketing

50 %

Medical Affairs

Authors of Clinical Practice Guidelines and

Relationships with the Pharmaceutical Industry

JAMA 2002;287:

87

64 53 38

6 0

10

20

30

40

50

60

70

80

90

100

Any relationship Speaking Honorarium

Travel funding Employee/Consultant

Equity

% authors

Corporate Philantrophy

Other Common Oxymorons

„ Managed Care

„ Authentic Replica

„ Clearly Ambiguous

„ Plastic Silverware

„ Unbiased Opinion

Industry Challenges

„ Product Pipeline Issues

„ Expensive and Unpredictable Research

„ Negative Industry Publicity

„ Legislative Issues

„ Globalization of Marketplace

„ Current Marketing Practices

„ Mergers and Acquisitions

„ FDA Relationship

„ Projections for Increased Spending on Drugs

Pharma’s Political Influence

„ $ 29 Million in Contributions to National

Parties and Candidates in Last Election

(10 th^ Largest Amount of 80 Industries)

„ $94.1 Million Spent in 2003 for 675

Lobbyists in Washington

Challenge to All Health Professionals

„ Remember Covenantal Relationship

with Patients

„ Weight the Ethical Issues

„ Be Alert to Conflicts of Interest

„ Develop a Personal Code of Conduct

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