Transformation in the industry is everywhere, driven by healthcare reform, increased regulatory scrutiny, patent expiry cliffs, and thinning pipelines. The old ways of doing anything — drug development, drug research, sales, marketing, launch activities, market research — are no longer effective and need serious revamping. Enter the nichebuster model — a business paradigm that involves following the science of a disease to determine where a drug can intervene along its pathway to create a positive treatment outcome for a smaller population of patients. The model isn’t new; companies have been looking to smaller targeted indications, sometimes as added indications for their blockbuster drugs, for more than 10 years. What is new is the industry’s increased focus on reinventing its commercial strategies, and the nichebuster model has moved front and center of this focus. A recent IMS Health special report, Understanding New Commercial Models in the Pharmaceutical Industry, shows that the industry has been trying outmoded methods for building revenue over the past few years with no discernable positive outcome. According to Sydney Clark, VP, practice leader for commercial effectiveness at IMS Health, maximizing the efficiency of commercial operations is standard fare for companies operating in a difficult economy with budget constraints. Yet, because the biopharma world is being upended, creating commercial efficiencies is no longer simply about managing costs; it’s about devising a new commercial model that better leverages available or yet-to-be-discovered approaches to suit the new market reality. These attempts fail because they miss the fundamental issue, Mr. Clark says. “The landscape has changed and the tried-and-true methods do not work," he says. “Pharma companies need to operate in a more integrated fashion with more internal coordination instead of looking at their commercial model in isolation or making changes piecemeal." Developing a new commercial model is one component of what should be a very broad and coordinated response that includes R&D portfolio management, pharmerging market presence, and overreaching business models. The shift will not be made quickly, however, says Sushiel Keswani, executive director, advisory services, life sciences customer domain, for Ernst & Young Advisory Services. “Companies will have to maintain their current course for a while, because niche markets require new capabilities and new services and, most importantly, new ways to secure reimbursement," he says. “A major shift requires a long-term strategy and those companies that have the coffers will invest first, and once they realize the value, more will follow. But even then, the shift will not be from one model to another, but more of a hybrid of the two." According to Trevor Mundel, global head of development at Novartis, the nichebuster model has emerged, in some ways, unintentionally, stemming from researchers following disease pathways of established indications and discovering smaller indications that fulfill unmet needs of a smaller, targeted population. He cites, for example, Novartis’ Gleevec, which started out as a niche drug and then with further testing, was found to treat other indications both in and out of the leukemia family of diseases. Gleevec was first approved in 2001 for adult and pediatric chronic myelogenous leukemia (CML) and for the treatment of a rare form of cancer called gastrointestinal stromal tumor (GIST). “This was a niche population at the time," Mr. Mundel says. “When we started that program for CML there were only about 30,000 patients; this is a very targeted group. We discovered a number of indications for the treatment of other acute leukemias and other disorders — there have been four to five additional indications outside of the oncology area — and some of these turned out to be bigger than people expected. They are all considered niche indications but were sequentially built out of that one program." The Impact of the New Paradigm on Commercial Activity The industry is in the early stages of investigating new commercial models to meet the needs of the emerging nichebuster environment. With new market realities coming into play, changes will have to be made, and some of them may be drastic, our experts say. According to IMS Health, in less than five years, companies in the mature markets will be forced to evolve their commercial practices in fundamental ways. Our experts discuss how companies can be prepared for transformations in marketing and sales, market research, and the need to develop relationships with payers. Payers The single biggest change facing the industry is the shift of power to payers from physicians. As payers become the gatekeepers for determining which drugs reach patients, companies will need to target sales and marketing efforts accordingly. According to the Ernst & Young report, Progressions, Pharma 3.0, sales strategies will target payers rather than prescribing doctors and pharma companies will focus on comparative research to generate data specifically for that purpose. In the report, Ernst & Young refers to the emerging commercial model as the “healthy outcomes" model driven by healthcare reform, demographics, personalized medicine, health information technology, and the rise of the superconsumer. All these factors will radically change the playing field as the value proposition moves from developing drugs to delivering healthy outcomes. “Payers, with respect to reimbursements, will be in the driver seat, not physicians," says Mr. Keswani. “Reimbursement will become the key driver for success in the niche market." Companies that adopt a nichebuster model will have to prepare for a major paradigm shift that involves proving comparative effectiveness and healthy outcomes to payers and managed care organizations that their drugs should be the preferred therapies on formularies. Mr. Keswani says pharma companies will also need to build new capabilities and learn how to negotiate the reimbursement landscape. Another challenge to this new model will be the need to prove the value of one drug over its competition. “Proving comparative effectiveness requires having mechanisms and capabilities in place to measure outcomes, and that is a major challenge for pharma," Mr. Keswani says. As a result of comparative effectiveness, the niche model is going to require a focused effort not only on what population to target but what population not to target. “Companies will need more data to prove clinical and economic value of their drugs and the decision-making becomes more complicated," Mr. Clark of IMS Health says. “Pharma companies need to make these decisions early on in the process and they need to make sure they have the data to convince stakeholders that the drug will be differentiated in the marketplace." According to Bill Little, president of Delta Marketing Dynamics, federal and state legislators are going to shape what the industry is able to do in terms of sales and marketing, so as a result, companies will start moving toward a value-based comparative effectiveness model. “Drug companies are recognizing that the old model is changing and will change for good," Mr. Little says. “Companies will be moving from a blockbuster model into a nichebuster model, because it’s better to own a space with a smaller population of patients than to add one more product to a large mature market with many other brands." Marketing Marketing efforts will become more targeted and the focus will shift from the product to the overall health of the patient, our experts say. “There is a move toward personalized medicine, driven by payers’ unwillingness to fund branded pharmaceuticals uniformly across all patients," says Harris Kaplan, president and CEO of Healogix. “As a result, product marketers need to be prepared to narrow their focus, which means the old marketing model that served the industry so well for 20 years won’t work very well in the future, and new opportunities need to be evaluated in the context of a world where payers often hold the keys to the kingdom." Juliana Mastroserio, senior manager of marketing research at Johnson & Johnson, has only worked on products intended for large patient markets and a broad physician base of support, but she expects the industry to start moving toward niche marketing, as fewer drugs are likely to achieve the billion-dollar plus status. “Successful companies will learn how to become more nimble, make decisions faster, and adopt different marketing strategies and tactics," Ms. Mastroserio says. “Advertising agencies accustomed to producing ad/visual aid concepts, journal ads, sales messaging, and other traditional sales communication methods will likely need to evolve to be a more clinically oriented strategic partner." Gil Bashe, executive VP at Makovsky + Company, says such a model will require science and marketing to align. In the blockbuster model, science is very separate from the marketing side of the business, however, nichebusters require a different set of skills and a different type of organization where science, advocacy, policy, and reimbursement are more important than the physical aspects of traditional marketing, he says. “Consumers are very wired into patient and physician networks and have become very savvy, so patient-access programs become much more important from the moment the product is launched," Mr. Bashe says. There will be a need for stronger marketing staff on the reimbursement end to deal with both private and government payers. Advertising for these products may become less important in the marketing mix over the long term, but digital communications, education, ongoing science, and scientific exchange will become much more important. “Advocacy is also important and companies will have to make sure patients have a listening post," Mr. Bashe says. Other changes in marketing strategy will include a shift to providing services, such as compliance programs, as part of a holistic treatment program as opposed to just selling a bottle of pills, says Richard Vanderveer, Ph.D., CEO of GfK Healthcare. “Marketing will be less about Product A vs. Product B and become more about determining where a product fits in the overall therapeutic course and what else should be done in terms of patient compliance programs and to support the product," Dr. Vanderveer says. “There is a tremendous opportunity to expand beyond a bottle of pills into a complete treatment program and by using in-depth exploratory market research; the industry can create a very different business model." Marketers will have to identify where a product fits in an overall treatment program and what to offer physicians to show which patients are best suited for the product and how they will benefit. “Make my product the No. 1 selection for hypertension is old speak," Dr. Vanderveer says. “We are headed into an era of outcomes data that will identify the patients best suited for the treatment and how the treatment will make the overall therapy efficient and effective." Sales As the paradigm shift moves through the different sectors, traditional sales models will also be impacted. “In my opinion, salesforces will likely continue to be cut back," Ms. Mastroserio says. “Those sales reps who remain will need to become more specialized as their customers change. Whether a product is adopted is more likely to become the province of payers rather than physicians. Physicians may be required to seek product education through other means rather than through a traditional sales rep." The cutbacks in salesforces over the past few years are examples of the industry trying to adjust to a new paradigm without making fundamental changes, Dr. Vanderveer says. The role of the sales rep needs a major rethinking, not a modification. “Reducing salesforce numbers by 10% is tweaking the model, but that doesn’t get to the root issue," Dr. Vanderveer says. Changing the role of pharma sales reps would be what he calls disruptive change and most people are resistant to that much change. “When we talk about changing to a completely new paradigm, there is a tremendous temptation to cling to the here and now because it is the known," Dr. Vanderveer says. “However, disruptive change is what it will take to revamp the sales role of the future. The industry has reduced the numbers, but the reps are still doing the same thing. We have not spent any time thinking about what it is that the rep of 2011 and beyond should be doing." Mr. Kaplan from Healogix agrees. “The reason we are still seeing layoffs is because pharma companies, knowing the marketing model is broken, still have not found the right answers yet. So, by laying off noncritical personnel, they’re freeing up cash to fund whatever strategies they believe will drive their growth. The question in the back of my mind is, when are the leaders going to shift their mindsets so they truly become the ones driving vs. reacting to change?" To date, while companies talk about the new model, their actions, in terms of how they market products and even which products they choose to market, indicate they have taken few steps to address the new market environment, and Mr. Kaplan identifies this as a management challenge. “Managers who came into significant leadership roles under the old business model — spending lots of money to market a product — will need to rethink their strategies as that old model is being neutralized by strong payers that are going to make it increasingly difficult to operate under that model," he says. Mr. Kaplan predicts the new role of the sales rep under the nichebuster model will be a benefit for the industry. “Sales reps who have a more differentiated product with a more compelling story to tell physicians may be able to significantly reduce call frequency," he says. “But the length of time of the detail will increase because the rep will bring more value, and the physician is generally interested in understanding the benefits of that product." Product Launches Niche product launches are going to take more preparation and planning than blockbusters, and the industry needs to prepare for this new model, according to Mr. Clark. “Launching drugs is becoming harder; there’s more competition, fewer unmet needs, and the window of opportunity to launch effectively is really short," he says. “In this new market environment, marketers need to get the launch right in the first six months, and the preparations must begin three or four years in advance." Mr. Clark points out that organizational alignment is critical for launches in the new niche landscape, particularly between clinical and commercial, and global and affiliate. “There can be a lot of disconnect between these functions," he says. “It’s going to become critical for marketers to build what we call a five-step process to brand success, which includes building brand advocacy, obtaining brand regulatory approval, securing market access from the payer level, driving brand adoption, and ensuring correct adherence and compliance. Successfully working through these five steps is going to be increasingly critical." Market research The role of market researchers and the type of market research conducted are likely to change too, Ms. Mastroserio predicts. “There needs to be a considered approach to balancing the need for rigor vs. market research spending," she says. “Companies that conduct early-stage forecasting and pricing studies for niche brands may wish to employ greater rigor to inform go/no-go decisions and determine profitability. However, these studies have traditionally been expensive, large-scale, and extremely time-consuming. Market mix modeling is likely to be a greater determinant of resource allocation. And traditional prelaunch communications testing will need to evolve as companies move toward different types of communication vehicles. According to Dr. Vanderveer, market research has taken a step back to more qualitative research and smaller scale projects. “The practice of market research is getting more practical," he says. “Researchers are finding that they may need to talk to fewer doctors and they don’t need huge findings that will never get used." Market research will become more observational and will gravitate toward a different kind of forward thinking and creativity, Dr. Vanderveer says. “Ethnography will be able to determine needs better than data sets that can be measured to the 50th decimal point or the responses from a focus group of consumers who can only think in the present tense," he says. “Companies will rely on market researchers who can think things through and come up with creative ideas to solve a problem." F PharmaVOICE welcomes comments about this article. E-mail us at [email protected]. ovartis began turning its attention toward genetics and molecular pathways for finding new drugs and now with several successes under its belt, it has developed a new commercial model, says Trevor Mundel, global head of development at Novartis. “It became clear to us that we should take the spontaneous nichebuster model and turn it into a real paradigm shift that involves tracking the emergence of where the science is going." Novartis focuses on specifically targeting important pathway nodes along a disease area and once it can demonstrate a therapeutic advantage for one disease in the pathway family, it moves on to test if the treatment can be used for other diseases involving a similar underlying process. “The science allows us the ability, with a single therapeutic agent, to target other diseases in that pathway family and it happens very naturally," Mr. Mundel says. “Companies need to think about and try to follow the underlying biology toward disease where there are inadequate therapies. In some ways, our model is not purely a nichebuster model because we are not specifically looking to design drugs for only niche indications. We are looking to design drugs that address unmet medical needs for patients." Following a scientific need can lead to addressing a niche disease but it can also lead to much larger indications, which is a real upside to the strategy, Mr. Mundel says. For example, Ilaris, first approved for the treatment of children and adults with cryopyrin-associated periodic syndrome (CAPS), was later found effective for a very rare disease within the CAPS family called Muckle-Wells Syndrome. Further investigation discovered that patients with gout also have an analogous problem and Novartis is studying Ilaris in gout patients, which has a population of almost 800,000 in the United States alone. “We discovered Ilaris and that became the magic bullet for patients affected by Muckle-Wells Syndrome, which affects about 10,000 people worldwide," he says. “We then discovered the treatment worked well on gout, a similar but much more prevalent condition." Mr. Mundel says by following the science of the molecular pathway, new therapeutics should naturally emerge from the scientific understanding and that is exactly what Novartis has experienced. However, Mr. Mundel notes that the old blockbuster mindset is still prevalent. In many companies, discovery may be artificially constrained by marketing consideration. Companies are still choosing to invest only in the indications that will affect a blockbuster-sized population, Mr. Mundel says. “This is fundamentally the old model, which is still prevalent and does not lead to a successful business model," he says. The industry can no longer deny the science and make decisions on pursuing indications based on market reach. Sound clinical scientific judgment is the only reason to not pursue a certain pathway, he says, although Mr. Mundel concedes that it is a difficult decision to make in an industry that survives only by providing good returns to its investors. Targeting a drug just for blockbuster indications and a heterogeneous population, such as myocardial infraction or cardiopulmonary disease, is a risky proposition these days, Mr. Mundel says. “Yes, a company may get lucky and hit the jackpot, but when working with a targeted indication where there is a real understanding of how the drug works, the odds for success are greater," he says. “This is especially true from a productivity perspective in the industry, and that’s important." F Novartis Adopts a Nichebuster Model It became clear to us that we should take the spontaneous nichebuster model and turn it into a real paradigm shift that involves tracking the ­emergence of where the science is going. TREVOR MUNDEL Novartis Steve Davis is VP and ­General Manager, Life ­Sciences, at Humedica, a next-generation clinical informatics company. For more information, visit humedica.com. “One of the most significant challenges to the nichebuster strategy is the current lack of transparency into the clinical presentation, identification, treatment, and associated ­outcomes of niche patient segments. This lack of detailed clinical understanding will hinder commercial efforts across a product’s ­lifecycle. In order for the nichebuster strategy to be successful, brand teams must be able to leverage real-world, longitudinal data to ­profile patient populations with detailed ­clinical specificity (e.g., patients with specific co-morbidities, severity of disease, and ­underlying complications based on lab results, patient history, physician assessment, etc). This increased understanding will inform and ensure the success of market sizing, product positioning, targeting, messaging, and reimbursement efforts." Robert Dickinson is Client Service Officer, ­Life-Sciences Practice, of Grail Research, a global strategic research and decision-support firm and subsidiary of Integreon Inc. For more ­information, visit grailresearch.com. “The greatest challenge pharmaceutical companies will face with the rise of a niche-oriented approach will be encountered in sales and marketing. The blockbuster model and the high margins associated with ­multi-billion-dollar-a-year drugs made it ­feasible to deploy thousands of reps to detail physicians and to support broad direct-to-consumer marketing campaigns. The economies of this approach don’t apply for niche drugs. By their nature niche drugs are indicated for fewer patients and are ­prescribed less frequently by physicians. ­Pharmaceutical companies will need to be more targeted in their marketing and sales efforts, even as the increased focus on ­comparative effectiveness promises to demand even greater precision. More ­sophisticated patient and physician ­segmentation and specialized salesforces will be big drivers of success." Jim Mercante is Partner of TGaS Advisors, which ­provides benchmarking and advisory services to pharmaceutical ­commercial operations. For more information, visit tgas.com or e-mail [email protected]. “The most significant challenge is changing the mass-market commercial mindset. ­Defining the roadmap down to a granular level, while remaining flexible and adaptable to rapid recalibration, is crucial. Cross-functional internal and external changes will require simultaneous, not linear, ­execution. Companies will want to focus on ­recalibrating operations to support smaller ­salesforces, variable resourcing, strategic ­regionalization, and rigorous performance-based analytics around marketing campaigns and ­channels. Companies are revisiting roles and ­responsibilities across all functions and redefining the customer. Critical to success will be fluid, ­flexible information-sharing channels and ­processes, advanced planning, analysis and ­project management skills, a ­collaborative ­­ ego-less culture, and ­performance-based, ­objective measurement of all functions, most notably promotional campaigns, tactics, and channels." Sound Bites From The Field PharmaVOICE asked experts in the field to identify some of the challenges of moving to a nichebuster model. As the industry moves toward a more niche-based business model under new healthcare reform, pricing will become an increasing concern. Pricing will have an impact on the development pipelines, as well as on marketing strategy. According to Thomas E. Getzen, Ph.D., executive director, International Health Economics Association, Temple University, pricing is a central issue in this policy environment of healthcare reform where people are concerned with controlling costs. “Healthcare reform is going to have a giant influence on the pharmaceutical model," Dr. Getzen says. “We’ve made a deal with the devil. In the past, the private payer market would determine the price bases of drugs, and the government payers would follow their lead. However, with Medicare and Medicaid projected to pay the majority of healthcare costs, it will have more input on pricing and potentially become the price setter. When that happens, it will be a whole new ball game. We will have to wait and see to what extent other payers take the lead from Medicare." There are two widely divergent schools of thought on drug pricing. One camp believes that drugs should be priced at what the market will bear, while the other group believes drugs should be compensated at a reference price basis, which would put most drugs at a much lower reimbursement level. “This is the fundamental philosophical divide that is exacerbated by the shift in postmarketing in certain orphan drugs," Dr. Getzen says. “In other words, something originally approved for orphan use, such as infliximab (Remicade), was later put into fairly widespread use, but the pricing and innovation incentives that were granted for the niche or orphan-type drug stays the same." Or the opposite case could happen, as in the case of thalidomide, a 50-year-old drug with a new indication for use in chemotherapy. “Thalidomide had been very inexpensive, but 50 years later it is being sold as if it were a niche drug with a fairly high price," Dr. Getzen says. Under healthcare reform, this type of pricing will have to be justified and that may be problematic for older drugs with new indications, such as thalidomide, that do not require any research and development to justify the high-end pricing. Pricing will also affect commercial strategy and innovation, Dr. Getzen says. Pricing is very much a factor in determining whether a company will bring a drug to market. If the price of a drug is only going to be $2,000 a year instead of $200,000, a company is not going to push it or even put it in a trial, according to Dr. Getzen. “Pricing is also related to innovation," he says. “If there is money to be made, companies will create products. But if there’s no money to be made in malaria, then chances are companies are not going to investigate malaria drugs." As companies anticipate more government intervention in terms of pricing, they are struggling to make sure in the short run that they can maintain profit margins. “Companies are aware of the pricing structure overseas where there is heavier government regulation and they know they are not getting anything near the prices they are getting here in the United States for these drugs," he says. “This should serve as a warning to the industry as to where pricing may be headed under healthcare reform." The pricing issue will not be settled for years to come, and although healthcare reform will start to affect change in the next year or two, Dr. Getzen expects the issue to still be playing out over the next 10 years. “Nobody in the White House knows what’s going to happen, so how are we supposed to know what will happen 10 years from now?" he asks. “In the meantime, the pharma industry should be on alert, because one sentence in the Federal Register can move a company from billions to bankruptcy." F Healthcare Reform and Pricing in the Nichebuster Model “One sentence in the Federal ­Register can move a company from billions to bankruptcy." Dr. Thomas Getzen Temple University “It’s not that the blockbuster is gone ­forever, but the ­opportunities that lie ahead are much more ­challenging." Sushiel Keswani Ernst & Young ­ Advisory Services “The old model that served the industry so well for 20 years isn’t ­working today and new opportunities need to be evaluated." Harris Kaplan Healogix “The industry is struggling with the hurdles of the ­harmonious marriage of science and money." Trevor Mundel Novartis “There will need to be a very considered approach to balancing the need for rigor vs. market research spend." Juliana Mastroserio Johnson & Johnson ­“Physicians are losing their power, and payers are gaining power, which is ­creating a more competitive landscape with tighter ­regulations and a tougher launch environment." Sydney Clark IMS Health “The ­­niche-buster commercial model will require both science and marketing to align." Gil Bashe Makovsky + Company “Drug companies are recognizing that the old model is changing and the change will be for the good." Bill Little Delta Marketing Dynamics ­“Marketing will be less about Product A vs. Product B and more about where does the product fit into the overall therapeutic course." Dr. Richard Vanderveer GfK

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