Dr. Bates’ Talkback: The impact of a ‘virtual’ structure on market access

Dr. Andree K. Bates considers the implications of a ‘virtual’ pharma structure of key aspects of market access



‘Virtual pharma’ is not a new idea, but it is a valid one that has yet to be properly exploited to full advantage. The increasingly competitive environment, along with the new commercial options made available by the Internet, suggests that there is significant potential for virtual pharma. Many companies already apply elements of the virtual model to some extent in their operations. By adopting models from other industries, pharma could improve efficiency and performance. Adopting a model that embraces e-business could be particularly beneficial—if specific market access challenges are addressed.

Many companies have already made discovery activities more virtual. As therapeutic targets become either too specific (requiring top level scientific expertise) or numerically too broad (where companies cannot employ sufficiently large numbers of experts in each field), pharma has had to explore alternatives to home-grown development programs. Big pharma companies—such as GSK, J&J and Pfizer—have invested heavily in developing programs with leading academic centers, emerging biotechs, venture funds, and highly focused specialty pharma companies to increase the chances of identifying a promising candidate early in its development. (For more on these types of programs, see New models for drug discovery and marketing and Will big pharma become a collection of marketing and distribution firms?)

For companies with compounds further along in development, equally attractive opportunities exist in virtual operations by optimizing spending and conserving cash that would otherwise go to overhead. This is especially important for companies whose portfolio is not yet sufficiently large or advanced to justify an internal infrastructure to support its commercialization in a specific or multiple markets.

There are clear and immediate advantages to a virtual structure, which might include faster commercialization of assets (drug is brought to market faster), less exposure to responsibilities of employing in-house staff (labor laws in Europe can be rigorous and heavily favor the employee), lower cost of operations in early stages of company’s growth (most costs are variable and negotiable), and greater flexibility. A virtual pharma model, therefore, may offer an extremely flexible and responsive low-cost option with very few fixed costs and few long-term employer liabilities.

The downsides of going virtual

On the other hand, many executives feel more comfortable when they are in complete control, so it is important to consider this aspect when negotiating with suppliers of outsourced services. Control can be retained if suitable IT platforms are utilized to link the different suppliers. Some of the main questions that need to be asked include:

•What are the organizational requirements? Which functions are needed and which are not?

•Would product performance sustain the organization?

•What might the possible impact be on the financial performance? (Sales and revenues would need to be sufficiently high to offset the increased cost of outsourcing.)

•How easily could the functions covered in a virtual structure be converted in future if the company’s business justified a more traditional structure?

Depending upon how ‘virtual’ the model becomes, the company may retain some functions, such as marketing, legal, procurement, regulatory, finance and administration, and human resources. Other activities, including clinical and process development (such as project planning and management), commercial manufacture and supply, and sales, may be outsourced.

Strategic and legal considerations

To determine which functions to fully virtualize and which to keep in-house, there are some strategic and legal considerations: optimal structure, for example. The key of the entire process is to ascertain the most cost-effective and functional structure for a company. For example, if you are considering launch in a new country with no other products in the market from your company, you could consider an almost entirely virtual operation.

Over the past few years, an increasing number of alternatives have emerged for the implementation of launch planning and execution that can allow for this approach. Price, volume and forecasted revenues of the drug will determine the available resources and scope required to launch and sustain the product successfully. Where a fully-integrated structure provides the greatest control, an almost total outsourcing provides flexibility and limited exposure to risk, such as heavy infrastructure, employee contracts, office space, and capital commitments.

Implications for market access

Another critical consideration would be market access, a key driver of commercial strategy. The value perception must be created and supported. Groups like NICE in UK are powerful and are being replicated across Europe. It is likely that similar requirements will be imposed and that new drugs will be subject to more stringent pricing. Without a convincing body of evidence, new drugs will struggle to get to market.

Leading companies are now consulting independent health economists, reimbursement agencies, NICE, and others well in advance of beginning Phase III. Many companies are no longer designing their own health economic studies because of the risk in reaching market with inadequate or incomplete data. Depending on the nature of the disease area, the complexity of the product, and its intended regulatory status, these timelines could be shortened.

Consultation with experts is worthwhile and feasible even though Phase III trials are already under way. Velcade (bortexomib) from Janssen-Cilag is a good case study. It is approved for multiple myeloma and has a growing body of data. UK NICE declined to reimburse it because of what it believed was an excessively high and under-justified price. Following a campaign by patients, NICE agreed to a compromise. The scheme applies to patients with multiple myeloma who have had one prior therapy and for whom blood marrow transplantation has failed or is unsuitable. At first relapse, eligible patients can be given Velcade. If they show a full or partial response, they will be allowed to continue with the treatment, funded by the NHS. If the patient fails to respond after four treatment cycles, treatment will stop and Janssen-Cilag will refund the NHS the cost of the drug.

Local expertise

A second factor to be considered in planning market access is to understand fully the socio-political situation in each target market. This calls for an expert well-versed in each country’s market situation. For example, in Italy, the government has devolved healthcare spending decisions to each of its 23 different regions. Each one can require specific data, information, prices, study results, and so on, and this local know-how can be extremely difficult to provide from outside the country.

A third example of the need for local knowledge and contacts is France, where marketing of a medicinal product can be done only by the following the Marketing Authorization Holder (MAH) or another company duly authorized and acting on behalf of the MAH. Alternatively, this can be handled by both companies, each of them being in charge of one or more activities related to the marketing of the medicinal product.

The marketing and distribution of medicinal products on the French market encompasses the following mandatory activities: advertising and validation of promotional materials, medical information, pharmacovigilance, and tracking of batches marketed (if needed, recall of batches as well as corresponding storage activities, if applicable).

The impact of such diverse decision-making strongly suggests that a local expert is necessary to help navigate and negotiate market complexities. In any virtual model, such expertise will exist within the individual country operations. In a fully virtual model, it could be provided without extra charge by the CSO or by the licensing partner, if that is the preferred route.

These are only the beginning of issues to consider. A full potential commercialization profile must also examine areas such as indication, treatment and unmet needs, competitors, marketing authorization requirements in the countries planned for a virtual presence, regulatory and pharmacovigilance, packaging and distribution, to name just a few. Companies looking to control costs should examine the functions essential to the structures under consideration, and then quantify the additional elements that may be added through employed staff or outsourced supply.

Dr. Andree K. Bates, a regular contributor to eyeforpharma, is CEO of Eularis, which applies analytics to determine the sales impact of marketing programs.

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