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Oct 2008Vol. 7, No. 8 Published byVirSci erence HighlightGlobal Pharma Competitive IntelligenceA Necessity in Times of Economic UncertaintyAuthor: Neil GrayManaging Partner, Healthcare Trends & Strategies, LLCPMN78-03Submit comments to the editor online php?t 6075This article is part of the October 2008 issue of Pharma Marketing News.For other articles in this issue, 8archive.htmPublished by:VirSci CorporationPO Box 760Newtown, PA [email protected]

Pharma Marketing NewsVol. 7, No. 8This year is proving to be a critical one formany industries, including the pharmaceutical industry. The results of the 2008presidential election, the economy, and sweepingchanges in the global market place all factor intohow leaders in the industry will either falter orthrive. Actionable, evidence-based and globalpharmaceutical competitive intelligence (CI) andgeneral business intelligence (BI) will play animportant role in the drama about to unfold.The pressing issues facing pharma CI wereaddressed in-depth at the 2008 PharmaceuticalCompetitive Intelligence Conference whereapproximately 240 attendees got to hear excellentinformation on the state of CI within the lifesciences, and interesting suggestions as to wherethe discipline is headed. Some common themesacross the two days were that the environments forthe pharmaceutical and device industries werechanging dramatically with implications for CI goingforward, the importance of keeping an eye onChina, and whether CI is a strategic or tacticaldiscipline.Innovation Proven by ValueAttendees heard two opening keynotepresentations, the first of which, “New Realities forDrug/Device Development and Commercialization”by Wayne Rosenkrans, Distinguished Fellow, MITCenter for Biomedical Innovation, as well asChairman and President, Personalized MedicineCoalition and Chief Applications Officer, SciTechStrategies, examined how we should be thinkingabout what now constitutes “value” within healthcare, and the importance that evidence plays (andwill continue to play) within the life sciences. (Seealso “Value-based Pricing,” PMN Reprint #76-04;http://tinyurl.com/4chyy2).Rosenkrans noted that an expanded ability todemonstrate evidence will have significant repercussions for product developers as “the oldhurdles of efficacy, safety, and productionassurance of quality are no longer sufficient.”Rosenkrans argued that new hurdles exist, namelydemonstrating a product’s clinical effectiveness, aswell as its coverage and reimbursement byinsurers.To that end, Rosenkrans observed that innovationcan no longer be tacitly accepted by stakeholders,it will increasingly need to be demonstrated. “Innovation will need to be proven in the clinic, with realpatients and providers, in a cost effective mannerto demonstrate what works best, for whom, andunder what circumstances,” said Rosenkrans. 2008 VirSci Corporation (www.virsci.com). All rights reserved.Pharma Marketing Newsp. 2Evidence, Effectiveness, EndpointsRosenkrans sees the industry moving definitivelytoward studies that confirm real-world, head-tohead clinical effectiveness, as well as the emergingimportance of segmenting patient populations byvarious means including genomic, imaging, andinformatics in order to increase the benefit oftherapy. Additionally, he shared a new model ofdrug development that involves payers andregulators (early) in a trial’s design, and encompasses trial simulations, surrogate endpoints thatdelineate benefit and risk, and continuous ratherthan episodic data capture with no step-functionincrease in patient exposure at launchHis concluding message was a call to reshape thehealthcare system into one that is driven more bylearning than production. “We need a learninghealthcare system in which evidence emerges as anatural by-product of the care delivered [and]substantially enhanced capacity for the development of evidence and guidance for clinical decisionmaking, stronger incentives and tools for theapplication of proven services, and effectivecommunication for and between patients andproviders about the nature of evidence and what itsuggests.”Softening of Medical Device PipelineJoseph DeVivo, Global President, ReconstructiveOrthopaedics, Smith & Nephew, delivered thesecond keynote, “A Medical Device Perspective:Healthcare in the Digital Age.”DeVivo shared with the attendees how the medicaldevice industry was softening somewhat, with 20initial public offerings (IPOs) withdrawn or postponed since July 2007. However, the industry stillhas a robust pipeline, with some 3,000 productsawaiting approval and introduction to the market.The market itself, DeVivo commented, has a 62%concentration in in vitro diagnostics, cardiovascularand orthopedic products.DeVivo pointed out that the industry needs trainedprofessionals. He described a new biomedicalMBA academic program that is a partnershipbetween industry and the University of Memphis,with a curriculum concentration focusing on:1. Global healthcare economics2. Design and management of the supply chainwithin the biomedical industry3. Healthcare administration4. Medical device new product developmentContinues PMN78-03

Pharma Marketing NewsVol. 7, No. 8p. 3This unique program, unlike typical consumerproducts-based MBA curriculums, focuses onindustry skills and knowledge for biomedicalprofessionals, offers hands-on industry trainingwith internships throughout the 21-month MBAprogram, is a company-sponsored program withseveral top Medical-Device companies, offers100% tuition-paid for students, as well asguaranteed employment upon graduation forstudents.Meissner was, however, quick to add that there areseveral significant challenges and potentialdownsides that face those organizations seeking toexpand into emerging markets (see Table 1). And,while China seems to be the current focal point forsignificant R&D investment according to Meissner,he tempered that comment with 2007 data from DrLifeng Geng that pointed to “the very high failurerate of joint ventures currently in theneighborhood of 30%-60%.”DeVivo also pointed out how medical devicetechnologies are converging within severaltreatment areas to bring more data into theoperating room, as well as improving physicians’dexterity and visualization.Global CI RoleToday’s role of global CI seems focused on bothbusiness and competitive intelligence, with majorprojects encompassing:Keeping China in SightTwo talks with a focus on the role of China in theevolving life sciences marketplace were given byHolger Meissner, Co-Founder and President ofAdler Life Sciences and Sean Freston, ManagingDirector of Asia/Pacific for Proactive Worldwide.Meissner spoke of emerging markets (CentralEastern Europe, Brazil, Russia, India, China, andMexico) and the rationale for their entry, whichusually encompasses top line revenue growth,access to broader populations of patients forclinical trials, and the outsourcing of a variety ofbusiness functions to protect margins.1. Strategic, tactical, or operational issues2. Global, regional, and local aspects ofconducting business3. Services provided within the country4. Resources and budgeting5. Communications platforms6. Defining competitors7. Training8. Gap-fill analysesContinues MarketCountryLess transparent dataCultural business environment, eg, top down vsconsensus drivenNew local competitorsLanguage barriersDifferent regulationsGeographical scope, eg, China, movement withincountry, Russia’s size of 6,591,027 square milesDifferent legal frameworks and views of intellectualproperty (IP)Perceived local values, eg, quality ofimplementationDifferent distribution dynamics among hospitals,clinics, retail, and domestic customersFinancesWork force qualifications and labor unionsLittle historical network or infrastructure for yourcorporationTable 1: Challenges and Downsides of Emerging Markets and Countries 2008 VirSci Corporation (www.virsci.com). All rights reserved.Pharma Marketing NewsPMN78-03

Pharma Marketing NewsVol. 7, No. 8p. 4Big Pharma Ranks China as Number One Destination in Asia forPharmaceutical OutsourcingSource: PriceWaterhouseCoopers; Full report at http://www.pwc.com/pharmaBig pharmaceutical companies now rank China as the best location for outsourcing in Asia, followedby India, Korea and Taiwan, respectively, according to a newly released PricewaterhouseCoopersindex. The index evaluates Asian countries according to cost, risk and market opportunity for thepharmaceutical industry.The index was published in a new PricewaterhouseCoopers report entitled "The Changing Dynamicsof Pharma Outsourcing in Asia: Are You Readjusting Your Sights?" which found that Asia is emergingnot just as a drug manufacturing powerhouse but a rival to the United States as a leading source ofdrug discovery and high-end innovation. Both clinical trial activity and investments bypharmaceutical companies to expand presence in Asia are accelerating, and the report suggests Asiaoutsourcing is moving up the value chain, as low-cost production is eclipsed by a broad range offactors, including market potential and R&D capacity as the drivers of growth."Within five to ten years, we will be moving from 'made in China' to 'discovered in China'" said onepharmaceutical industry executive interviewed for the report. "Pharmaceutical companies need tomake sure they are refining their strategies to make the most of the opportunities presented in Asiancountries," said Michael Keech, director, PricewaterhouseCoopers global pharmaceutical and lifesciences industry group. "China and India will continue to spearhead growth in the Asianpharmaceutical sector, but, alongside those countries, Singapore will maintain its position as a centerfor research and innovation. While the trio of India, China and Singapore are proving to be the'hotspots' of the Asian pharmaceutical sector, other countries, notably Korea and Taiwan, are alsogoing to be increasingly significant. The companies that will be most successful at making pharmaoutsourcing and location decisions will be those that are most adept at managing and mixing a rangeof contractual relationships and partnerships across a number of different locations."The report highlights three significant developments that are shaping Asian pharmaceuticaloutsourcing:1.The trend towards high-end innovation -- intellectual property (IP) concerns have previouslyinhibited this trend in pharma but, increasingly, such concerns are being overcome and majormoves are being made by big pharmaceutical companies to increase their drug discoveryinvestment in Asia.2. Rapid expansion of clinical trials in Asia -- the volume of clinical trials being conducted incountries outside of Europe, North America and Japan has been growing rapidly in recent yearswith Asian countries leading much of the growth. China has overtaken India as one of thefastest-growing locations. By June 2008, China had 428 clinical trials registered on the websiteClinicaltrials.gov as under way and a cumulative total of 870 completed or ongoing trialscompared with 737 in India. Cost has been a critical factor in this expansion. For example,clinical trials are estimated to be up to 50 percent cheaper in India compared to the U.S.3. A scaling up of pharma manufacturing in Asia -- with an increased commitment to internationalstandards, Asian contract manufacturing organizations (CMOs) are securing more outsourcingorders from big pharmaceutical companies. In India, for example, there are more than 100FDA-approved pharmaceutical facilities -- the largest number in any country outside the U.S.The report shows that China and India, followed by Korea and Taiwan, are now delivering a numberof benefits for the pharmaceutical industry including a pool of educated and qualified scientists,intellectual property (IP) law reform and market growth. These trends are outweighing factors thathad previously inhibited development, principally uncertain regulatory frameworks and enforcement.Significant risks remain, but the report observes a growing convergence with international regulatorystandards. However, the report's authors point out that such convergence is also being felt in labormarkets, with the result that traditionally wide wage differentials, compared to developed countrylocations, are narrowing. Such convergence will continue to shrink the cost gap, prompted in part bythe need for Asian countries to compete for 'high-end' skills in an international labor market. India,for example, is already finding it difficult to recruit in certain areas such as clinical researchpersonnel. 2008 VirSci Corporation (www.virsci.com). All rights reserved.Pharma Marketing NewsPMN78-03

Pharma Marketing NewsVol. 7, No. 8“It proves to be a solid investment in emergingmarkets when applied to solving problems relatedto head starts in new countries (when transferringteams), establishing ‘early warning’ rapport,avoiding duplication of efforts and determining thebest use of limited resources and expertise,ensuring global compliance, and alerting newteams of potential speed bumps and pitfalls,” saidMeissner.Currently within China, BI/CI serves multipleinternal customers, including:Internal customerR&DImportance 25%PlanningMarketing10% - 25%HeadquartersOthers 10%Meissner predicts that there is a high likelihoodthat Chinese companies will intensify and expandtheir global BI/CI capabilities and work in theimmediate future, and become significantpurchasers of both BI and CI services.China’s Strengths and WeaknessesSean Freston echoed similar themes, especiallythat China was the “biology place to go,” althoughhe pointed out that there is ongoing and rabidcompetition for talent.“Today,” said Freston, “fluent bilingual (English/Chinese) scientists are making only 13,000 to15,000 RMB [Renminbi or people's money; oneRMB 0.146; 15,000 RMB 2,193.33] permonth.” With R&D costs approximating only 2%5% of what it costs to do R&D in the US, one cansee the high appeal of beginning researchcommitments within China.But with those seemingly modest costs, comesome significant operational headaches includinginfrastructure and legal barriers, as well as highemployee turnover.However Freston is fairly well sold on China from adata capture standpoint and believes it will be thelocation of choice for future clinical trials. The USFDA seems to be leaning that way as well,according to the agency, with a new office to besituated within the US Embassy in Beijing beforeyear end 2008, predominantly driven by inspectionissues. 2008 VirSci Corporation (www.virsci.com). All rights reserved.Pharma Marketing Newsp. 5“There’s high quality data there, with a very lowerror rate,” Freston commented, “But time can bean issue. For example, India allows simultaneoussubmissions of data in IND preparation, whereasChina requires back-to-back (sequential)submissions, which can add 9-12 months to theprocess.” There is also growing concern thatportions of patient populations within Chinese trialsutilize traditional Chinese medicine (TCM) withoutdisclosing that use and thereby (potentially)threatening data integrity.As more companies begin operations within China,Freston predicts that cost advantages will diminishas the bid for talent and operational costs escalate.“China can represent terrific new strengths forR&D, including patient recruitment, quality, andcost. But with that comes some clear currentweaknesses, including lack of experience, regulatory uncertainties, and inconsistent compliancecoupled with ethic concerns,” warns Freston.Freston closed with an important reminder for allthose who seek to open offices in China, and thatis that relationships (both public and private) arekey to doing business successfully in China.“Networks (guanxi) and their growth andmaintenance are crucial.” Some things areuniversal after all.Is There a Balance between Strategic CI andTactical CI?One of the more interesting panel discussions atthe meeting was held among JJ Owen, AssociateDirector, Scientific & Competitive Analysis,Millennium Pharmaceuticals, Monika Giese, Headof Global CI, Novartis Pharma AG, and DeborahDauber, Associate Director, CompetitiveIntelligence, Genentech. The panel examined howtheir respective organizations define and look atthe competitive intelligence function, anddistinctions each one makes between strategic andtactical CI.The three agreed that the key distinction thatexisted between strategic and tactical CI was atime horizon, with, according to Giese, “strategic CIlooking at issues 5 years downstream that aremeshed with corporate or R&D strategy.”Dauber commented that at Genentech, CI usuallyexamines both strategic and tactical activities, andthat tactical CI usually incorporates observationsand recommendations that can be incorporatedwithin a year.Continues PMN78-03

Pharma Marketing NewsVol. 7, No. 8Owen reflected that most of the CI his organizationundertakes is tactical, and that the key to measuring its effectiveness is whether or not a brand plansucceeds. He also cited listening and recommunication skills (the ability to reclarify and recommunicate project objectives) as key CI skills.Giese also urged the attendees to be sure toreflect upon the following four questions whenconsidering CI:p. 6Pharma Marketing NewsPharma Marketing News is an independent, free monthlyelectronic newsletter focused on issues of importance topharmaceutical marketing executives. It is a service ofthe Pharma Marketing Network, which brings nufacturers,communicationscompanies,andmarketing service providers for wide ranging discussions and education on a multitude of current topics.1. What do your clients or stakeholders know?2. What don’t they know?3. What do they think?4. Who influences your internal customers?Subscribe Online Download Media Kit Request a Rate CardThese starting points can help stakeholders frameand provide context for their CI activities, whetherstrategic or tactical.Reach the author at [email protected] Marketing News 2008 VirSci Corporation (www.virsci.com). All rights reserved.Pharma Marketing NewsPMN78-03

outsourcing and location decisions will be those that are most adept at managing and mixing a range of contractual relationships and partnerships across a number of different locations." The report highlights three significant developments that are shap