February / March 2017 by Healthcare Sales and Marketing Magazine

™ FEBRUARY/MARCH 2017

the publication for healthcare sales & marketing leaders™

OUR ANNUAL SALES & MARKETING SALARY SURVEY IN THIS ISSUE Results of our Annual Compensation Survey Roundtable: Regulatory and Revenue? Where Medtech is Headed Why Doctors are Consulting Wikpedia Benchmarking Patient Centricity A $637B Annual Loss or Opportunity?

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the publication for healthcare sales & marketing leaders™

TABLE OF CONTENTS

Publisher’s Letter..............................................................................................................................................4 Editor’s Letter.....................................................................................................................................................5 Editorial Board....................................................................................................................................................7

ARTICLES Executive Spotlight: Terry Bromley tells Crawford Healthcare’s David and Goliath Story..................................................................................................................................9 Roundtable: Regulatory and Revenue?.................................................................................................... 15 Annual Sales & Marketing Compensation Survey Results............................................................... 25 Where the Medtech Sector is Headed..................................................................................................... 33 Why Doctors are Consulting Wikipedia: Pfizer, GSK and Others Make Access Easier...........41 By The Numbers.............................................................................................................................................. 45 Benchmarking Patient Centricity.............................................................................................................. 47 Motivideos........................................................................................................................................................ 53 A $637B Annual Loss or Opportunity?................................................................................................... 57

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Publisher’s Letter

Celebrating On All Fronts As we say in the introduction to our annual compensation survey, “Growth continues, even in these uncertain times.” The reference there is to growth in salary and bonus statistics, across all sectors of the industry. Sales and marketing teams are increasing across all sectors. Reps, marketers, managers and others continue to be well-paid. And, your positions are vital and you are hard to replace. Some notable statistics: CARI KRAFT

• Sales turnover is high, especially in the healthcare vendor space, with a 25% turnover rate. • Biotech sales reps out-earn medical device reps for the second year with a total compensation of over $278K vs. $260K. • Poor hiring decisions remain expensive—85K for sales and 78K for marketing. • The highest growth areas are medical device marketing at 9%, followed by biotech sales at 5.5%.

In a broader sense, the industry is also expanding in other ways. In this issue, we bring you the report on the Medtech sector which is expected to grow at 5.2% a year. The recent IMS/Quintiles report has the Drug market growing between 4 and 7% a year. And, despite the recent downtrend in NDAs, US R&D spending continues to be positive, signaling new therapies on the horizon, especially within biopharmaceuticals. There are good signs in other areas. Personalized medicine research is increasing. The number of physicians with EMR/EHR continues to improve. As indicated by the Aurora and Align projects described in this issue, our industry is moving forward with efforts to bring better information to physicians more efficiently, to enhance the physician/patient interaction, and especially to make patient centricity a more vibrant and meaningful part of healthcare. We tend to get a little anxious about change, especially in times when policy initiatives are in flux. But this is an industry that is vital to our economy, our future, and our personal lives as well. So welcome to the continuing chaos that is always with us. And welcome to the happy surprises that come with it. We will continue to cover all of it, and expect that it will be an exciting journey. And always, please keep the feedback coming. It all goes to making the magazine better for all of us.

Cari Kraft, Publisher

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HS&M FEBRUARY/MARCH 2017 | 4

Letter from the Editor

Both Sides Now Recently, a friend of mine visited Kenya, where she has been helping to support a school for Maasai girls – who don’t normally get what we would consider even an elementary education. Alhough she has been involved with the school for several years, and has sponsored several girls, my friend’s trip was a revelation to her. She was greeted with great celebration, songs and gifts (the Maasai make fabulous beaded jewelry). Most poignant of all, she got a sense of how meaningful an education was to girls who otherwise might have led very marginal lives, and been marNEIL GREENBERG ried off to men they hardly knew. Now horizons have expanded immensely for these young women, who can imagine a future they never knew about before. Entering a common profession – becoming a teacher or an office worker – is a major leap upward for them, an opportunity to help others, and live a previously unimaginable lifestyle. It reminded me of our industry. Many of you work tirelessly to make sure doctors get the information they need to improve treatment options, to see that patients learn how to manage their conditions wisely and efficiently. But how much do you know about the lives of these patients? How often do you get to experience their joy at conquering a disease, or improving their quality of life? You may not be the scientists who developed the drugs or the devices, nor the physicians who have direct contact with the patients. But, somewhere in there, you deserve a share of the thanks and laughter that comes with the results of your products. I’ve seen many videos of patients explaining the benefits they’ve received. I’ve been to meetings where some of these patients address the people who work on the products. And I know that they’re just as excited and grateful as those Maasai girls who greeted my friend. Their horizons have been expanded. Their bucket lists are more attainable. As an industry, we spend a lot of time discussing patient-centricity (see The Aurora Project’s report in this issue). We tend to see it as an activity in which we continually make the patient’s life experience better. But there’s another side to patient-centricity. It’s appreciating the results of your hard work in the burgeoning joy of people who now have more hope, and bigger dreams. As always, we continue to look for the value of your contributions. Let us know if you have an idea for an article—the people we write for are the people who write for us.

Neil Greenberg, Editor To become an HS&M contributing author or provide feedback, please email me at ngreenberg@hsandm.com.

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THERE ARE SOME THINGS PEOPLE JUST WON’T TELL YOU BUT THEY’LL TELL US IN CONFIDENCE. AND WE’LL TELL YOU. There are a lot of opinions people never offer you about your company. What the pain is. What you could be doing better. What they think of your competition. How to talk to them effectively. Big corporations get these answers through expensive research. Small to medium-sized companies don’t have that luxury. That’s why we created the Private Process . It’s a quick, cost-effective way of compiling information that people will offer us in complete confidence. Then we assess the results and give you the insight you need to adapt your sales and marketing messages accordingly. ©

For details on how the Private Process works, and the kinds of answers you can get, contact us now at ngreenberg@hsandm.com.

™

Editorial Board

the publication for healthcare sales & marketing leaders™

Publisher Cari Kraft Editor Neil Greenberg Creative Director Hedy Sirico Digital News Rick Cataldo Digital News Chris Manning Sales Director Andrew McSherry EDITORIAL BOARD: Kristen Sharron-Albright Head of Marketing at Noven Pharmaceuticals Chris Bergstrom Associate Director, Digital Health Expert at Boston Consulting Group Sebastian “Sebby” Borriello Vice President, Chief Commercial Officer SK Life Science Lewis Chapman Vice President, Global Commercial Operations AllCells, LLC Maria Finlay, MBA Associate Director of Oncology Marketing, Teva Oncology Nick Gurreri Vice President New Products at Alexion Pharmaceuticals, Inc. Bob Roda VP and General Manager at BD © 2017 CL Media Inc., Philadelphia, PA CL Media is not responsible for any unsolicited contributions of any type. Unless otherwise agreed in writing, CL Media retains all rights on material published in HS&M for a period of one year after publication and reprint rights after that period expires. Email ckraft@hsandm.com.

To advertise in HS&M, please contact Andrew McSherry at amcsherry@hsandm.com

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Chris Bergstrom Associate Director, Digital Health Expert at Boston Consulting Group Chris brings almost two decades of commercial expertise as an entrepreneurial executive at large medical device and high-growth digital health companies, and he provides “on the ground” advice for implementing digital health solutions. He currently serves as the expert on digital health at The Boston Consulting Group (BCG). Before joining BCG, Chris was the chief commercial officer (CCO) at WellDoc, a pioneer in digital health. He also held progressive roles at P&G, Roche, and Becton Dickinson. Chris was a senior advisor to several digital health innovators, including MyOwnMed, LiftOff Health, HelpAround, Heart Beam, iSageRx, and Alere Home Monitoring. He also advised the Leona Helmsley Charitable Trust and the Saatchi & Saatchi Wellness Board. Chris holds two digital health patents and has won multiple awards.. Chris holds a Bachelor of Science degree from the Kelley School of Business at Indiana University and earned his MBA from Columbia University.

Sebastian “Sebby” Borriello Vice President, Chief Commercial Officer SK Life Science Sebby is currently service as the Vice President, Chief Commercial Officer at SK Life Science. Sebby’s career has included executive sales and marketing positions at Cempra, Mentor Worldwide LLC, Johnson & Johnson Healthcare Systems Inc., Ethicon, Inc. and OrthoMcNeil Pharmaceuticals, Inc. Sebby received his B.A. in Public Administration from St. John’s University in ‘81, and received his M.S. in Organizational Dynamics from the University of Pennsylvania in 2001.

Maria Finlay, MBA Associate Director of Oncology Marketing, Teva Oncology Maria has over 20 years of commercial marketing, sales leadership and operations experience. She has led multiple sales, women’s leadership, and cross-functional teams at Johnson and Johnson, AstraZeneca, and Teva Oncology. Maria has experience collaborating to launch and grow small and large molecule products across seven different specialty therapeutic areas.

Bob Roda

Editorial Board

VP and General Manager at BD Bob Roda is a Senior Commercial executive with extensive experience in delivering business growth and profit in the Medical Tech and Diagnostics Industries. He currently serves as VP and General Manager at Becton Dickinson where he is responsible for the global infusion therapy business. Prior to his role at BD, Bob held a variety of roles of increasing commercial responsibility within the MD&D sector at Johnson & Johnson. His diverse background included positions in Sales and Marketing at Johnson & Johnson Medical, Inc, Ethicon, Inc and Ortho-Clinical Diagnostics. While at J&J, Bob also served as the Executive Sponsor of the Commercial Leadership Development Program as well as the Chair of the VP Marketing Council for all of MD&D. He has a proven track record of delivering results and leading teams in competitive and diverse business environments. Bob is a highly respected and successful global leader. Bob holds a Bachelor of Arts degree in Economics from the University of Rhode Island.

Lewis Chapman Vice President, Global Commercial Operations, AllCells, LLC Lewis Chapman is currently the Vice President, Global Operations at AllCells, LLC.Â He has spent over thirty years in health care management. He served as VP of Global Strategic Marketing at BioMarin Pharmaceutical from 2007 to 2012, where he was responsible for strategic marketing and product portfolio analyses, and implemented medical education, brand enhancement and sales support programs on a worldwide basis. He oversaw the global launch of Kuvan, which in the U.S. was 112% to budget in 2008, the first year on the market.Â Previously, he worked with Alpha Inntech Corporation as Vice President Global Sales and Marketing, where global sales grew 26% in 2004 and 22% in 2005 under his leadership. Lewis started his career with Eli Lilly & Company, with roles at Syntex and Genentech, where he was responsible for the global commercial launch of Activase (t-PA), the largest biopharm product launch in the history of the industry up to that time (first year sales $187 million).

Nick Gurreri Vice President New Products, Alexion Pharmaceuticals, Inc. Nick Gurreri is a business leader and General Manager with over 25 years of consistently achievinghigh performance and profitability through strong leadership and cohesive team building in the biopharmaceutical and medical device industries. Nick has held executive positions at Medgenics, Insmed, Pfizer, Pharmacia and Bristol-Myers Squibb. Nick received a BS in Mechanical Engineeringfrom the University of Delaware, and also acquired a Master of Science in Information Assurance at Carnegie Mellon University.

Kristen Sharron-Albright Head of Marketing, Noven Pharmaceuticals Kristen Sharron-Albright, the current Head of Marketing at Noven Pharmaceuticals, was until recently VP Sales and Marketing, Anti-Infective Marketing and Institutional Sales Specialty Care Business Unit at Pfizer. She is an experienced business leader with 20 years of experience in the pharmaceutical and biotechnology industries. She has a strong track record of delivering results in highly competitive and complex markets. Starting her career in sales at Eli Lilly, she then held positions of increasing responsibility at Lilly, Neurogen, and Pfizer, where she was responsible for sales and marketing in a franchise business model. In her spare time she volunteers, serves on the leadership committee for her church, and enjoys hiking.

HS&M FEBRUARY/MARCH 2017 | 8

EXECUTIVE SPOTLIGHT

A David and Goliath Story: Succeeding as a New Entrant in the Established U.S. Advanced Wound Care Market An interview with Terry Bromley, Senior VP and GM, Crawford Healthcare U.S.

When UK-based Crawford Healthcare made the decision in 2013 to enter the highly competitive U.S. advanced wound care market, it faced the daunting task of developing and executing a winning strategy. Although highly fragmented, the U.S. market is dominated by a small handful of players, including Smith & Nephew, Acelity, Molnlycke, and ConvaTec. Together, these four companies compose over 70% of the ~$2.5 billion U.S. advanced wound care technology market.1 These well-established companies, with their solid platform of product awareness and network of relationships, presented much the same to Crawford as Goliath did to David, when he turned to face off with his giant competitor. Analysis of the Advanced US Wound Care Technologies Market; Emerging Technologies Expand Wound Applications. Frost & Sullivan, June 2015 (note: base year of figures is 2014).

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EXECUTIVE SPOTLIGHT

A Targeted, MarketFocused Strategy The Right “Tools” and a Courageous Vision

When I spoke with Terry Bromley, Senior VP and GM, about how he spearheaded the U.S. launch of Crawford, he did not choose to face this challenge without significant forethought around the plan of execution. One of his first considerations was how to address the dynamics of the U.S. wound care arena, which could be classified as simultaneously encouraging and challenging. The introduction of the Affordable Care Act (ACA) has prompted significant changes that align and incent hospitals to offer and increase quality of care, while reducing cost. These changes have paved the way for the introduction of new and improved technologies that demonstrate proven clinical benefits, with additional opportunities to be incorporated into facility protocols for the prevention and management of wounds. However, 11 | HS&M FEBRUARY/MARCH 2017

Expert Skill in Delivery

the introduction of the Affordable Care Act has applied downward pressure on costs that have eroded manufacturer margins, making it a challenge for smaller players like Crawford to compete due in large part to a lack of economies of scale in production, distribution, and sales. Although these are barriers to entry, Terry did not view them as insurmountable, instead focusing on the opportunities that he could exploit. Overall, the U.S advanced wound care market is compelling, with strong clinician and patient awareness of wound technologies that serves to generate demand and volume growth. In addition, the regulatory pathway for the introduction of a new medical device is relatively straightforward, provided there is a predicate product available that has already been cleared by the FDA.

Winning Results

However, lower barriers to entry alone could not lead Crawford to success. Simply stepping into the fight does not guarantee victory, especially when facing such fierce and entrenched competition. The Crawford team possessed the key attributes necessary to succeed as an underdog: the right “tools” supported by a courageous vision; a targeted market-focused strategy; and expert skill in the delivery of their strategy. Together, these elements can, and do, produce winning results, and during our conversation, Terry shared the thinking that went into the successful development and execution of Crawford’s U.S. launch plan. THE RIGHT “TOOLS” AND A COURAGEOUS VISION Just as when David spotted the rock he would use in battle, Terry felt confident he had the right portfolio of products needed to

battle his marketplace “Goliaths.” The UK-based Crawford team had thoughtfully developed and acquired a portfolio of advanced wound care technologies that Terry knew would be well-received by the U.S. wound care market, if he could support them with compelling, benefits-based messages and effectively deliver them to the highest-interest audiences. From his years of experience in the U.S. medical device field, he was convinced that these dressings possessed both the clinical and value propositions that would be compelling to U.S. wound care clinicians, as well as resonate with healthcare administrators and payers aligned with pay-for-performance and quality-of-care based payment models. He says that having a solid belief in the products of your company makes the opportunity to sell them a personally fulfilling undertaking in the quest to improve patient quality of life. Building on this confidence in the product portfolio, Terry envisioned the establishment of Crawford U.S. as a top-selling advanced wound care dressings provider that is used in the hospital setting, following patients across various venues of care. However, with limited resources, and the incumbent “Goliaths” to contend with….how would he build toward this vision? A TARGETED, MARKETFOCUSED STRATEGY When David selected the rock to use against Goliath, he knew that he had selected the right “tool” to deliver on his goal (the “what” he would use to try to win). However, he also had to think through the “how” and “where” aspects in order to implement his strategy to ultimately defeat Goliath.

Terry discussed the investment he and his team made upfront to similarly address the “how” and “where” for their launch. They invested time to segment the market and analyze the attractiveness and Crawford’s ability to win in each segment. This helped them pinpoint their initial and secondary targets, as well as quantify various selling and distribution models in order to budget for and allocate resources. THE “HOW” Just prior to Terry’s joining the company, Crawford had licensed a silver-based wound dressing already being sold in the U.S. market, and additionally acquired its associated field sales force. “This was our initial platform to build upon as we launched the UK product portfolio into the U.S. market,” Terry says. “Although the licensed silver technology provided us with a great starting place, it did not come with widespread product awareness, existing contracts, or strong distribution channels. Therefore, we knew we had to identify a segment of the market where decision-making is more heavily dependent upon clinicians, and where this technology would be recognized for its high potential to deliver desired clinical outcomes.”

THE “WHERE” “We considered a variety of initial segments for our U.S. launch, such as post-surgical wounds. Physicians treating these are faced with helping to limit the number of hospital acquired infections (HAIs), a metric rising in importance across acute care facilities due to underperformance resulting in significant reimbursement holdbacks.” Ultimately, they targeted the burn market for several reasons. This is a well-established and easily-identifiable community of clinicians, with patients who have a high level of immediate need. Product decisions are normally controlled by clinical decision makers, who can appreciate the differentiation that their product offers. And finally, the sales team they had acquired through the license was seasoned in the field of burn care and had deeply established burn care clinician relationships. Advanced burns provided the perfect gateway for Crawford’s market entry and ability to add significant value alongside its silver technology product and greater wound care product portfolio. He continued “With our initial point of entry selected for our platform product, we then focused on developing and executing the rollout strategy to bring in and succeed with the larger Crawford product portfolio. We did this by adopting an approach that is marketing-led and sales-driven. Our goal was to enable the sales team to expand into new areas and venues where the products could be successful by providing high customer value.” Positioning this growth strategy within the context of the market drivers, which include the ACA’s mission HS&M FEBRUARY/MARCH 2017 | 12

EXECUTIVE SPOTLIGHT to drive better care by implementing quality indicators to measure clinician performance, meant they had to focus on the clinician need to perform against these quality indicators. The Crawford portfolio includes a range of products that decrease wound occurrence as well as help promote wound healing. So their strategy included the development of messages that clearly articulated and quantified these product benefits. They supported their claims with researchedbacked data.

“With this relevant positioning of both prevention and treatment, our sales organization has been able to explain how our products can positively impact quality indicators, such as the prevention of hospital-acquired pressure ulcers, or a decrease in the number of HAIs. Once the decision has been made to utilize Crawford products, our team can then work with the clinicians and administrators to incorporate our products into a facility’s protocol of care.”

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This approach continues to guide their focus on additional venues where they can be successful by reliably supporting standards of care. “It has also helped drive our resource allocation decisions, such as the choice not to directly focus on the long-term care (LTC) market. There are about 14,000 LTC facilities across the U.S., and we would not be able to provide this level of customer experience if we were stretched that far. However, beyond burn care centers and wound clinics, which we can attend to as we grow our direct sales force, we needed to decide how to access the 5,000+ U.S. hospitals.” The analyses they performed in building out their 5-year strategic plan determined that acquiring this broad base of customers was going to be critical to success. “To attempt this on a direct basis is nearly impossible, and also unaligned with hospital goals such as decreasing multiple invoices from multiple vendors. In these largervolume institutions, key players are group-purchasing organization (GPOs), most of which designate a prime vendor distributor. Therefore, we have built a strategy that incorporates elements of organic growth in the post-acute environment, and strategic partnerships in the acute environment.” EXPERT SKILL IN DELIVERY Having a solid plan, great products, and a delivery system in place will only lead to success—especially if facing fierce competition—when driven by deep sales and marketing expertise. Although

he was the underdog, David was able to swing and release his rock with such force and pinpoint accuracy that he prevailed. Similarly, the Crawford team possesses the intelligence, skill and enthusiasm to successfully execute the U.S. strategy. “We set out to hire on experience and a will to win.” Terry says. “We wanted people who could deliver on the plan. We wanted Crawford sales and marketing personnel to have the maturity to anticipate the challenges within their personal domains as well as within the greater healthcare marketplace, with its rapidly-evolving changes in metrics, payment models, and product-approval processes. Many startups bring in academia-based people. However, we built an organization with experienced professionals who understand the business drivers and are able to drive action plans in ways that greatly facilitate our sales processes. “Anyone on our team—in marketing, sales, R&D—can lead and effectively interact with customers. We all possess a depth of understanding in our target therapeutic areas that is rare in our industry. Further, our insights deepen with our commitment to having twoway conversations where we truly listen to and learn from our customers, gaining insight to strengthen our offerings. Having a team where everyone has these skills has really set us apart from the competition, and is the key reason we have developed strong, trust-based, customer relationships.”

In addition to really having that outward, customerfocused view, as well as a seamless, mutually-reinforcing sales and marketing team, Terry reports that they have an insatiable drive. “Enthusiasm is not only a pre-qualified characteristic of our hires, but also something that is further cultivated internally with mentoring, support, and recognition. I recently rode with a rep in Chicago who entered his territory 18 months ago with no pre-existing Crawford product sales or brand awareness. Now he is well on his way to being totally self-sustaining. When I asked him what he believed were the key drivers of his success, he attributed it to the confluence of comprehensive product training and marketing support; our high-quality, data-supported portfolio of products; a smart and focused selling strategy; and a passionate attitude that permeated the entire organization. In short, he felt prepared and supported by Crawford to successfully take on his Goliath.” WINNING RESULTS With their skilled team, streamlined distribution, and deeply established customer relationships, they have been able to double the business of Crawford U.S. for three consecutive years. They have built a profitable business and captured market share. “With our product messages that offer solutions to address specific clinical needs, we have recently been awarded a multi-year contract position with one of the largest GPOs in the US. This position now allows us access to over 3,500 hospitals and 130,000 associated member facilities where the Crawford team can spread a winning customer experience. “It has not been easy to succeed in this competitive industry, but it has been an exciting and enjoyable ride, and one that we plan to take to the next level by incorporating our learnings and building on all of the great relationships we have established.”

Terry Bromley Sr. Vice President and General Manager Crawford Healthcare Terry is an entrepreneurial executive skilled in setting strategies, leading teams, and commercializing technologies. He has broad experience in general management, marketing, strategic planning, and sales management, and is adept at optimizing resources in both large corporate and start-up environments. Crawford Healthcare is a supplier of advanced wound care products covering a broad range of skin conditions. It is a rapidly growing international company dedicated to developing innovative treatments and effective dermatological, wound care and diagnostic products for the care and repair of skin. Its international head office is in Knutsford, Cheshire, UK, where it is the country’s fastestgrowing skin care company. From early 2013, Crawford Healthcare Inc. began operations out of the US, through its office in Doylestown, PA.

COMMENT

For Terry and the Crawford U.S. team, these wins have not derived from matching the size of Goliath. Instead as David, they are succeeding by leveraging their agility, skills, and ability to execute with courage and enthusiasm, in this highly dynamic and continually evolving U.S. advanced wound care marketplace. •

HS&M FEBRUARY/MARCH 2017 | 14

ROUNDTABLE

Regulatory and Revenue? How commercial and regulatory can achieve synergies.

With moderator NEIL GREENBERG Editor, Healthcare Sales & Marketing

Our panel of experts: GARY BARRETT

ROBERT GUZMAN

Vice President, Regulatory Affairs and Quality Angiodynamics

Senior Director, Regulatory Affairs CR Bard

LISA GRANEY, RAC

ANDREW STOREY

Vice President, Global Regulatory & Clinical Affairs LifeNet Health

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Vice President, Global Regulatory Strategy AbbVie

April 24-26, 2017 / Argonaut Hotel / San Francisco, CA

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Communicate Value in an Era of Better Educated Consumers, More Influential Payers and Increasingly Unreachable HCPs

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Key topics at the 6th Digital Marketing for Medical Devices West include: ✓ Understanding how to demonstrate value to payers

Melissa Armstrong, Associate Director of Global Marketing Communications, BAYER HEALTHCARE

Jeff Rummer, Director of Global Marketing Operations, MEDTRONIC

Israel Madera, Vice President of Clinical and Marketing, SANARUS TECHNOLOGIES, INC.

Jeff Sullivan, Director of Marketing, Patient and Healthcare Professional, Diabetes Care, ROCHE DIAGNOSTICS CORP.

✓ Communicating the unique strengths of digital channels to gain internal acceptance and approval ✓ Collaborating with sales team members to move customers along their paths to purchase ✓ Leveraging social media and videos to create impactful marketing campaigns

Prepare for the Future of Digital Marketing

✓ Developing a keen understanding of customer needs, goals, and fears to develop content that addresses them Chiranjiv Singh, Global Marketing Director — Diagnostic Cardiology, GE HEALTHCARE

David Salmon, Global Director, Digital Center of Excellence, ABBOTT VASCULAR

Dmitriy Kuzin, Director, Integrated Brand Marketing, Breast and Skeletal Health Division, HOLOGIC

Heather Simonsen, Vice President of Global Marketing, PQ BYPASS, INC.

✓ Analyzing the changing medical device industry as it relates to you, the marketer

Continue the conversation by joining us on LinkedIn: Digital Marketing for Medical Devices

Make Digital Channels Work for You

Twitter: @ExLMedDevices, #DigDevices

Debbie Donovan, Director, Communications and Corporate Identity, ENDOGASTRIC SOLUTIONS, INC.

Vasey Hargreaves, Senior Marketing Manager, INTERSECT ENT

Jamie Murdock, Vice President of Global Marketing, Spine, RTI SURGICAL, INC.

Sheila Raja, Global Digital Strategy Manager, STRYKER, INC.

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ROUNDTABLE Let’s have a little sympathy for regulatory team, who get it from both sides. They’re charged with protecting the interests of life sciences companies by making sure you adhere to the laws and guidelines in place. At the same time, they are seen as a speed bump by those in commercial who want to get the product out the door with the best face possible.

As our panel explains below, the regulatory departments think of themselves as your advocates. They, too, want to help marketing and sales promote products and make profits…without incurring lawsuits. So this article is our attempt to help commercial and regulatory understand each other’s point of view, and work together more efficiently. Pricewaterhousecoopers (PWC) believes the global pharmaceutical industry will be worth nearly $1.6 trillion by 2020, and that the U.S. will experience 33% growth in the same period, due in part to the Affordable Care Act. China and Brazil are not far behind. At the same time, Deloitte estimates the counterfeit drug market at $75 billion to $200 billion, and the World Health Organization (WHO) says that over 25% of medicines available in developing countries are counterfeit, resulting in 100,000 annual deaths in Africa alone. Good reasons why pharmaceutical regulations are increasing. We have to help rein in the problem by being as compliant as possible. That’s why we need to partner with regulatory, and recognize that they are doing their best to help the companies we work for. See below for some useful advice. 17 | HS&M FEBRUARY/MARCH 2017

In your experience, how do marketing and sales view regulatory affairs? ANDREW STOREY: It takes a lot of effort from the Regulatory Affairs (RA) team to earn the respect of the commercial team. In the past, RA was viewed as a barrier to sales and was often used as a scapegoat when numbers weren’t met. This has evolved significantly, with RA in most companies becoming regarded as a full-on value-added partner in ensuring company targets are met. At Abbvie, there are extremely strong linkages between Commercial and RA, both on a regional and global basis. GARY BARRETT: Marketing generally considers regulatory affairs as an obstacle to be avoided or ignored. This is due to a direct dichotomy in the philosophy behind each discipline. Marketing’s aim is to display an outcome, to sell an idea rather than a specific product. This is directly at odds with the “no marketing puffery” dictate from the FDA. RA is also intrinsically risk-averse and absolute in specifying a “thou shalt not” perspective. The reality is somewhere between these two perspectives. Recent legal cases where the FDA off-label decisions have been challenged under first amendment

issues are likely to heavily influence long-term perspectives for both disciplines. ROBERT GUZMAN: The marketing of regulated drugs, biologics and medical devices has evolved in recent years. Although these changes have been influenced by the introduction of social media and other electronic means of communication, the regulatory landscape has been a major contributor to these changes as well. The FDA, international regulatory bodies, and Ministries of Health are synchronizing their efforts in order to protect patient safety, promote ethical behavior, and better patient/HCP informed decisions when choosing a treatment. Recent court cases, such as US vs Caronia, have also changed the US FDA perspective on how products must be marketed in light of the constitutional free speech as it applies to commercial transactions related to health products. All these changes directly affect the regulatory requirements for approved/cleared products and those seeking the same by FDA. Simply, if the labeling and claims in a product are not supported by scientific and clinical data they will not be approved. Many ideas on what is next in a company’s pipeline come from what marketing observes in the field. What is the trend in healthcare? What isn’t done by the competition that I can do? These questions will always need to be benchmarked with what is possible from a regulatory perspective. Because of this, marketing must see regulatory as the partnering function to bring early in the product lifecycle. By know-

BARRIER OBSTACLE RISK-AVERSE

RED FLAGS ing the regulatory agency’s thinking, which is something RA brings to table, marketing will be able to develop the most efficient strategy that considers every regulation hurdle early in the process. The approach is key to the management of expectations and the achievement of realistic results. LISA GRANEY: It is a love/hate relationship! Marketing tends to view RA as an obstacle in being able to speak freely and creatively, especially regarding competitors and their claims. At other times, they like when regulatory can help craft claims and statements that can be a competitive advantage. They also appreciate it when RA can inform regulators about competitors’ claims

What improvements could be made in communications between regulatory and marketing that would help in more effective marketing and raise fewer red flags with the FDA? GARY BARRETT: Both sides need to understand the others’ perspectives. Discussions and dispassionate argument significantly before deadlines is essential. ROBERT GUZMAN: In a phrase, “bring them early in the process.” My experience and that of many of my peers is that the regulatory function is not brought into the picture early enough. Sometimes when we are called in, many executive decisions, financial projections and even executive commitments have been made. Then the company faces an unexpected surprise when regulatory issues surface. We end up adjusting the

landscape to the project, instead of the project to the landscape with an adequate strategy. The RA function should not be seeing as another functional step to achieve a regulatory approval. It is a complete strategy by itself and must be taken into account as part of the major product strategy. Sometimes the strategy is laid focusing on what is necessary for testing, clinical, and other approval activities. But the strategy must also include other marketing areas, such as how off-labeling issues will be managed, speaker engagements, and claims substantiation, and where there has been a lot of governmental interest lately. LISA GRANEY: I agree. Early planning. At the beginning of new product development projects, sales and marketing know what they want to say about the product – what they want to be able to say HS&M FEBRUARY/MARCH 2017 | 18

ROUNDTABLE it does for the end user. That’s the time to craft the product statements and claims. That’s also when regulatory can tell them what evidence is needed to support those claims. Then, as part of the development project, R&D or product development can conduct the studies to generate that evidence. ANDREW STOREY: Raising red flags is not an option and all of our collaborations are designed with compliance in mind first. It is important that commercial comes forward with good market research at an early enough time when it can be incorporated into the development program, labeling and advertising and promotional materials. This means formal governance meetings at different levels of the organization with ultimate review by senior leadership. How can regulatory foster better two-way communication with sales? ANDREW STOREY: Interact, attend staff meetings and sales meetings. Educate commercial teams on the regulatory process and challenges and what they can do to enhance chances for success. Bring value to the process by understanding the commercial drivers and bring forth original ideas for program optimization. LISA GRANEY: Number 1: Have a detailed SOP for sales and marketing to review while creating materials. The SOP needs to discuss dos and don’ts (e.g., citations, quoting HCP’s or articles, rules on 510(k) statements). It should not be a policy that is vague. Rather, it should be in addition to the policy – perhaps a working instruction 19 | HS&M FEBRUARY/MARCH 2017

with examples. Training sessions are also valuable. Regulatory affairs can inform sales and marketing early and often about the FDA’s current thinking in areas of interest. Regulatory should also explain why they may say no to a particular topic, claim, or program. Our job is to make sure we are comfortable defending our advertising and promotional materials, based on our existing evidence and regulations. We should have a logical argument if the answer must be no. Usually there is a compromise that can be achieved if both sides understand the objective of the material. ROBERT GUZMAN: True. It has to be an interactive approach. Traditionally, regulatory is a function to get answers when there is a regulatory question. I would say the approach by the RA function has to be proactive. By interacting with regulatory bodies, and benchmarking with regulatory affairs groups, and other sources, RA learns what the regulatory trends are, the agency’s thinking, and the enacted new guidance and regulations all over the world. RA must share that knowledge with sales and marketing to provide a vision of what is coming their way. RA should not wait for marketing to ask, but offer the information instead. There are many ways to do it. Regulatory updates can be disseminated by means of inter-office memos/emails, training, and internal panel discussions to provide an opportunity to discuss the impact of a determined regulatory change. By the same token, marketing and sales get a lot of field input. Sometimes, we learn of an off-labeling use because of an HCP practice that the manufacturer is unaware of. In these instances, marketing

and sales must bring the information home to evaluate how this could affect the business from a regulatory compliance perspective. The RA-to-marketing/sales, or the marketing/sales-to-RA communication, must become a habit in order to be effective, and a project approach is suggested to ensure the issues are evaluated, documented and made actionable. GARY BARRETT: I would sum up this way. We need discussion and an understanding of perspectives. Too often each discipline is demonized by the other, and RA becomes an impediment to sales and sales becomes a danger to compliance. Rational discussion and education on each other’s roles is a good start. How can you improve sales reps’ understanding and communication of regulations? GARY BARRETT: Training on the regulations and implications. Make the sales groups intrinsic to the regulatory process. ROBERT GUZMAN: Yes. The best approach is training and active interaction. We cannot leave training alone, as it can easily become a paper exercise. To create a culture around the intended result, we need to have an interaction with all the individuals that we want to influence. Equally important, we need a steward who is savvy in the subject or an expert. Someone who understands and rationalizes the sentiment behind every regulation related to marketingapproved products. Sales personnel have in their DNA to ask relevant questions and volumes of it. If the trainer is not able to answer these concerns we will end up with bad practices in the field that can get the organization in trouble. We

need to spend the time to improve the overall understanding of the subject by all functions. Only this way can we improve the culture to one of compliance and excellence. LISA GRANEY: I think it is a matter of keeping the message clear. Sales reps have such a different job to do that trying to explain every detail would be confusing. Attending sales meetings, getting to know the reps, and providing key talking points will help them engage and remember. ANDREW STOREY: It really needs to be through a thorough and standardized program that is highly efficient in delivery and effective in outcomes. E-learning is great for the large numbers but personal delivery of training information is highly valuable, due to its interactive nature. How have you measured regulatory success in your company?

ANDREW STOREY: We have an extensive goal-setting process and results are measured by a multifunctional group of senior leaders. GARY BARRETT: Approvals linked to specifically associated sales. Compliance goals. ROBERT GUZMAN: There are tangible and intangible ways that reflect regulatory mindset evolution in a company. Those that are tangible rely on metrics presented in management meetings, where days to approval or clearance are discussed. These discussions look for the material factors that delay each individual approval and how they can be reduced or eliminate risk the next time a product application is submitted. We show the charts based on historical data through years and within the current year. Regulatory work directed to sustaining engineering projects is also tracked for improvement. This is the business

aspect of regulatory. However, the best measure is the intangible one. When regulatory has been a regular contributor to each strategic and key tactical meeting, or included by other function management in relevant communications, that is a sign positive cultural change where regulatory is considered a part of the process and not a constraint. I have also experienced increase in participation by other functions when they are made part of the regulatory discussion. Some good examples have been the function request to be part of an FDA inspection as main support, when invited to Type B meetings at the FDA office, or Type B meetings on-site debriefs after meeting with the agency. LISA GRANEY: I have not formally defined what regulatory success is and measured it. What I have observed is reduction in review time due to fewer regulatory er-

Moving Forward

TRAINING

INTERACTION

EARLY PLANNING

CLAIM SUPPORT PROCESS

HS&M FEBRUARY/MARCH 2017 | 20

ROUNDTABLE rors, early and often engagement of my regulatory staff occurring with great frequency, and project plan line items for claim support discussions. How early should regulatory be involved in the marketing/sales process, and to what extent? LISA GRANEY: Again early in the process, when messages are being crafted, will help a great deal to improve the efficiency of reviews of collateral. Understanding the entire campaign and the key messages is critical. Even if this is so early that the key messages haven’t been defined fully, regulatory might be able to suggest that a particular message is easier to support than another, or evidence exists for one but not for another. It’s informal at this point, and regulatory must have an open mind and listen. ANDREW STOREY: Absolutely. Right from the beginning. The real question should be “How soon should commercial get involved in the drug development process?” And the answer to that question varies from company to company and product to product, but in general, the earlier the better. Commercial input into Phase II study designs are critical for obtaining the most valuable commercial asset upon approval. ROBERT GUZMAN: Yes. The earlier the better, because only RA will know when their expertise must be required. We cannot leave this decision to executives that presumably have never worked in RA, as only the expert knows when their expertise is necessary. However, a safe approach may be 21 | HS&M FEBRUARY/MARCH 2017

to bring in RA as soon as we start discussing claims and the indication for the product. It is in this phase where we know what testing is required by regulation and the required regulatory submission (e.g. NDA, BLA, PMA, 510k, Orphan Status, HDE). Also, the development of claims presents its own challenges, as a simple deletion or addition of a word may have a serious impact on the regulatory submission or prescription for the product. These changes could represent millions of dollars in product launch strategy due to additional clinical trials or testing if not carefully evaluated.

a company-wide effort to ensure that launches occur with success. It requires full brand team support with strong project leadership. Regulatory needs to ensure that they have the right people with the right talent on the program.

GARY BARRETT: Cost is indeed a major factor. Regulatory submissions are dictated by what sales and marketing wish to sell. The process of feasibility should include a consideration or market potential in direct comparison to the costs of registration. For instance, a simple registration of a device changes significantly depending on the desired claims. If sales/marketing wishes to aim for a pediatric market, the difficulty of registration changes dramatically. It is important that all groups involved are aware of the implications of the claims matrix.

ROBERT GUZMAN: Most regulatory submission processes have a statutory cycle or impose a response time by the regulatory agency to the applicant. For example, a 510k for medical devices has a 90-day period for the FDA to provide clearance. However, the cycle may be interrupted when the agency comes with questions regarding the submission. When there is not an established cycle, the regulatory agency may be able to provide an answer on how long some processes may typically take. The RA function may be able to provide time input to the project by communicating to the agency continuously. We have what is called pre-meetings. These are meetings with FDA before the submission of an IND, BLA, PMA, and/or 510k to understand the expectations and what would be necessary for the future filing. These meetings may not be limited to RA, and other key functions could be invited. Certainly, these meetings are a forum to discuss approval timeliness and the minutes can be shared with management once back in the office. The timelines discussed with FDA

How can regulatory help ensure that launches are planned and timed to allow for proper regulatory review, so that changes can be made in sufficient time? GARY BARRETT: The design process needs to include a consideration of all aspects of product development. Regulatory is only a part of the process, research and development, sales and marketing, quality, etc. should all be considered and factored in to the process. ANDREW STOREY: Right. It is

LISA GRANEY: One: setting up a claim support process with sales and marketing; Two: being highly engaged in the early planning process, Three: knowing when major product launches, academy meetings, and other critical opportunities to the business are occurring, so that they can block and prioritize time for reviews in the weeks leading up to the meetings.

must be incorporated into the project management plan. What does regulatory want sales to know with respect to product information that may not be offlabel and how that can be communicated? LISA GRANEY: When in doubt, call RA before communicating to any external party. GARY BARRETT: Regulatory wants sales and marketing to know that we are on their side! We are just providing a feedback service on the regulations that, if broken, have huge penalties. Ultimately we are on the same side and want to get product out in the market in the best way possible. ROBERT GUZMAN: It must be on the label in order to be compliant. There is no way around that. Arguably, some school of thought may support that so long you have clinical or scientific data to support the claim it is reasonable. But the strict meaning for off-labeling is that it has not been approved/cleared by the FDA for the subject use. Having some scientific or clinical data does not satisfy the agency’s standard for safety and effectiveness, as it will be necessary to have valid statistical studies to meet this standard. This sometimes involves hundreds of individuals and not a handful of results collected in a white paper or article, which on some occasions is the proof obtained to support the off-labeling. Also, it is important for sales to not be involved in an HCP decision regarding off-labeling. If aware of this activity, you must notify your organization’s compliance officer to ensure this is handled properly. Since off-labeling directly affects Medicare and Medicaid, the DOJ and its states’ counterparts have

been involved in the investigation of off-labeling issues. Cases like US vs Caronia may present an alternative to off-labeling, but this is considered a very high-risk practice by any company and are by no means recommended. The DOJ has changed its approach since US vs Caronia to one of where the necessary evidence to build a case has been significantly increased. This in turn ensures the effective prosecution of off-labeling practices in any court of law. Can you relate any incidents in which coordination between marketing/sales and regulatory were well-handled? ANDREW STOREY: Examples of successful coordination at AbbVie include strong asset teams, labeling review committees and submission planning. It is important to identify all the key items required for a successful launch and to rank them in terms of priority and probability of success so all groups are working from the same playbook. We have had some great success of late in working together to come up with very creative and intelligent labeling material that meets the needs of the healthcare professional, the health authority and the commercial drivers. GARY BARRETT: This is always a challenge and is the responsibility of all parties to try and understand the others’ perspective. Off-label protection is the responsibility of all groups and can only be achieved when there is mutual cooperation. I have seen it work well and go terribly wrong. When it works it is a seamless early discussion with clear guidelines and mutual, if grudging, agreements. When it goes badly, it can always be traced to poor communication and/or intransigence.

LISA GRANEY: An orthopedic device was being overhauled in a two-year project to regain the market leadership in that category. The “new and improved” device had all the bells and whistles. Regulatory Affairs fully participated in the development project, all team meetings, and, as part of the project, the marketing team met with the regulatory representative regularly to discuss the product launch messaging. As a result, the product claims were documented, along with the evidence to support. At the time of launch, this reduced collateral review time by more than 50%, since review consisted of verifying that the collateral used the verbiage was documented. ROBERT GUZMAN: Many times, the exercise of adding a claim or to clear a new 510k device becomes a direct interaction between marketing and RA for new claims in the indication. Once agreed, then R&D testing follows in the strategy. I have had the opportunity of working on many of these scenarios in my career. They are very dynamic. Basically, we hear from the market what they want. Then, we look into our portfolio for what products could satisfy that demand if improved. The improvement could be the addition of a coating to protect against certain disease, or a lubricant to ease insertion, or any other physical characteristic that would improve HCP dexterousness, or reduce patient pain. Since the subject device has a previous clearance, the marketing/ RA discussion is centered on how the new clearance must be in light of the added attribute requested by marketing. The discussion is around clinical and testing data necessary to support a specific claim. •

HS&M FEBRUARY/MARCH 2017 | 22

ROUNDTABLE

MEET OUR PANEL OF EXPERTS

LISA GRANEY, RAC

GARY BARRETT Vice President, Regulatory Affairs and Quality Angiodynamics

Gary completed his PhD at Cranfield University in Biotechnology prior to working in several start-up companies in a research perspective. A gradual transition to regulatory and quality was finalized by a position within a leading notified body as an auditor and reviewer. He returned to Industry in regulatory leadership roles culminating in his position as a Sr. VP Regulatory and Quality for Angiodynamics. gmabarrett@hotmail.com AngioDynamics is a leading provider of innovative medical devices used by interventional radiologists, nephrologists and surgeons for the minimally invasive treatment of cancer and peripheral vascular disease. Its diverse product line includes market-leading radiofrequency ablation and NanoKnife® systems, vascular access products, angiographic products and accessories, dialysis products, angioplasty products, drainage products, thrombolytic products, embolization products and venous products. AngioDynamics has distinguished itself through the company’s consistent ability to successfully develop and bring to market new technologies and products. 23 | HS&M FEBRUARY/MARCH 2017

Vice President, Global Regulatory & Clinical Affairs LifeNet Health

Lisa has over 25 years’ experience in regulatory, clinical affairs and quality assurance in medical devices, in vitro diagnostics, and biologics. Prior to joining LifeNet Health, she was Vice President of Regulatory Affairs for Johnson and Johnson’s DePuy Synthes Trauma/CMF division, where she led the upgrade of the advertising and promotion program in 2011 and trained many in the art of finessing the message into compliance. Prior to this she developed the claims support process at Bausch & Lomb, and has worked in large and small companies serving diverse customers from anesthesiologists to MRI technicians to consumers. She has taught advertising and promotion best practices in the US and EU, and is a member of the Regulatory Affairs Professional Society and the Society of Women Engineers. lcgraney@gmail.com LifeNet Health is a non-profit global leader in regenerative medicine and the world’s largest provider of allograft bio-implants and organs for transplantation. Its mission is Saving Lives. Restoring Health. Giving Hope. It is the world’s most trusted provider of transplant solutions, from organ procurement to new innovations to bio-implant technologies and cellular therapies - a leader in the field of regenerative medicine, while always honoring the donors and healthcare professionals that affect the healing process.

ROBERT GUZMAN

ANDREW STOREY

Principal Consultant GxP Compass LLC

Vice President, Global Regulatory Strategy AbbVie

Robert has over 22 years’ experience in FDA, ISO, EMA and ICH regulated industries in corporate compliance, regulatory affairs, Six Sigma, quality assurance and process engineering within the domestic and international markets of Asia, Europe and North America. His educational background is a Juris Doctor from the Pontifical Catholic University of Puerto Rico, an MBA from the University of Massachusetts-Lowell and a Master in Chemical and Life Sciences from the University of Maryland-College Park. He was admitted to practice law in the District of Columbia and is a registered professional engineer in North Carolina. An ASQ fellow, he possesses five different ASQ certifications and is a US RAC by RAPS. rguzmanjd@gmail.com GxP Compass is an international organization focused in regulatory affairs, quality assurance, commercial compliance and performance excellence within the pharmaceutical, biologics and medical device industries. GxPC services are designed to assist clients in all stages of product lifecycle from design concept to launch and commercialization. That includes GLP, GCP and GMP systems implementation based on the discipline of Six Sigma and global regulatory compliance with US FDA, notified bodies, and ministries of health across the globe.

Andrew has 30 years in the pharmaceutical industry, providing leadership for regulatory affairs. He previously was a senior executive with global responsibilities for 14 years at Cangene (Toronto) and CBL (Baltimore). Prior to that he held several regulatory positions in small biotech companies. He has led the development of many innovative products and therapies and also successfully licensed a biosimilar product in the US in 2008. Post 9/11, he spent 11 years working on the development of medical countermeasures to bioterrorism and worked with CDC, NIH and BARDA to install multiple biodefense products into the US Strategic National Stockpile (SNS) as well as in other global stockpiles . He is presently working on exciting challenges related to the Humira, and Viekira Pak franchises, as well as a comprehensive pipeline of Oncology products at AbbVie. andrew.storey@abbvie.com AbbVie’s 28,000 employees are scientists, researchers, communicators, manufacturing specialists and regulatory experts located around the globe. They come up with new approaches to addressing today’s health issues—from life-threatening illness to chronic conditions. AbbVie targets specific difficult-to-cure diseases where they can leverage their core R&D expertise to advance science, creating solutions that go beyond treating the illness to have a positive impact on patients’ lives, on societies and on science itself. They focus on discovering, developing and delivering drugs in therapeutic areas where they have proven expertise, including immunology, oncology, neuroscience, virology and general medicine.

COMMENT

HS&M FEBRUARY/MARCH 2017 | 24

COMPENSATION AND HIRING

HOW AM I DOING? Annual Compensation Survey

The Jacobs Management Group Salary Survey Growth continues, even in these uncertain times. With key indicators in our industry suggesting change, our compensation and hiring statistics indicate a high degree of growth. Despite the ongoing mergers and acquisitions, regulatory impacts and a dramatic upheaval in the political climate, their impact on hiring seems to be minimal and optimism remains high. Our industry stands strong and we are happy to present these statistics, gathered from over 425 people and over 100 companies. Here is the current snapshot of how your colleagues are doing in terms of compensation: the 2016 Jacobs Management Salary Survey results. From Jacobs Management Group CEO and HS&M Publisher Cari Kraft: The 2016 results show continued growth in these uncertain times. Here’s are a few of the highlights into which sectors are moving, how compensation is affected, and where to expect growth: • Sales turnover soared, especially in the healthcare vendor space, with a 25% turnover rate, followed by medical device at 16%, pharmaceutical at 14% and biotech at 11%. Marketing team turnover remained under 7% across all sectors 25 | HS&M FEBRUARY/MARCH 2017

• Biotech sales compensation leads the way with top biotech sales reps earning a total compensation of over $278K. This is the second year biotech top sales reps have outearned medical device top sales reps, who come close at $260K • There is a high cost of poor hiring decisions, and the cost of vacant positions remains high. The cost of a mis-hire in sales is approximately $85K and in marketing it’s $78K. The monthly cost for each open sales position is on average $45K, while the cost of an open marketing position is $39K • The highest growth is coming from medical device marketing at 9%, followed by biotech sales at 5.5%

SURVEY POPULATION This report summarizes the results from the Jacobs Management Group, Inc. Compensation Survey conducted in 2016. The target audience was key leaders in the medical device, pharmaceutical and biotechnology industries with a focus in the marketing and sales arena. Results were compiled from over 425 individual responses, representing over 100 companies. Companies ranged in size from over $100B to under $10M and were categorized into four main sectors: pharmaceutical, biotechnology, medical device, and healthcare vendor. Over 80% of respondents had titles of manager or above.

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COMPENSATION AND HIRING GROWTH CONTINUES BUT CHANGES ITS MIX! The continued good news is that both sales and marketing teams are forecast to grow across all sectors. Sales force growth averaged 4% across all sectors, with pharmaceutical leading the way. The survey results didnâ&#x20AC;&#x2122;t distinguish between big pharma and specialty pharmaceutical but we expect that the larger portion was from the specialty world. Pharmaceutical companies still have, on average, COMPANY SIZE the largest number of reps per company, at an average of 1,050 reps, as compared with the average across all the healthcare sectors of 670. The training period for new sales reps increased up from a little over 3 months to a little over 4 months. However, timeframes for sales promotions remained the same at approximately four and a half years.

The fastest growing segment is biotech, which grew by 5.5%, followed by pharmaceutical, with a steady growth of 5%.

AVERAGE SALES FORCE SIZE

27 | HS&M FEBRUARY/MARCH 2017

% SALES FORCE GROWTH

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COMPENSATION AND HIRING BREAKDOWN OF MARKETING TEAM SIZES

MARKETING TEAM GROWTH INCREASES TO 8% Marketing teams continued to grow, increasing from a pace of 7% to 8%. The average marketing department now has a team of 180. The average training period for a marketing team member is close to three months. The typical marketing professional remains in their position for a little over 3.75 years before being promoted. Marketing professional travel has remained very static with 28% travel as compared with prior 27%.

MEDICAL DEVICE MARKETING TEAMS ARE EXPERIENCING THE FASTEST GROWTH Medical device marketing teams are growing the fastest, at a rate of just under 9%. Biotech growth has slowed from 8% to 3%. Healthcare vendor growth has almost stopped as it slowed from a rate of 4% to 1%. Pharmaceutical companiesâ&#x20AC;&#x2122; marketing team growth has increased from 5% to 6%.

% MARKETING TEAM GROWTH

29 | HS&M FEBRUARY/MARCH 2017

MARKETING DIRECTORS CONTINUE TO EARN OVER 60% MORE THAN PRODUCT MANAGERS MARKETING TEAM COMPENSATION COMPARISON

Marketing directors earn, on average, 63% more than product managers. More than 66% of that comes from an increase in base salary, with the remainder in increased bonus potential. Product managers’ bonuses are, on average, 19%, marketing managers 21%, and marketing directors 25%. Product managers on average have a total compensation of $136K, marketing managers $154K, and marketing directors $218K.

TOP BIOTECH SALES REPS OUT-EARN MEDICAL DEVICE REPS AGAIN Biotech sales compensation for top reps remains high with top sales rep compensation growing from $259K to $278K. Medical device compensation remains a close second, up to $259K from the prior $251K. Top sales reps drove their earnings up on average $30k while first year rep total compensation remained fairly flat at $120K vs. $119K. Across the board, top sales reps earn an average of $232K, with first year reps earning an average total of $120K. Top sales reps’ and first year reps’ base salaries differ only by an average of $25k. 41% of sales rep commissions are paid monthly, 50% are paid quarterly. .

FIRST YEAR/TOP REP EARNING COMPARISON

HS&M FEBRUARY/MARCH 2017 | 30

COMPENSATION AND HIRING MONTHLY COST OF AN OPEN SALES POSITION

IT’S EVEN MORE EXPENSIVE TO LEAVE POSITIONS OPEN Each month a sales position remains open costs the company $53,305, up from $45,300. The average cost of hiring the wrong sales person is $85,606.

MONTHLY COST OF AN OPEN MARKETING POSITION

Each month a marketing position remains open costs the company $37,900. The cost of hiring the wrong person is almost double, costing a little over $78,000. first year reps’ base salaries differ only by an average of $25k. 41% of sales rep commissions are paid monthly, 50% are paid quarterly. .

31 | HS&M FEBRUARY/MARCH 2017

AVERAGE TIME TO FILL A SALES POSITION

IT COSTS COMPANIES ROUGHLY $200,000 PER VACANT POSITION IN LOST REVENUE

Sales rep positions fill the fastest and take just under 4 months, a month longer than last year. National accounts and sales director positions take longer at closer to 5 months. Product management positions take 4 months and marketing director positions take over 5 months.

AVERAGE TIME TO FILL A MARKETING POSITION

Product Manager and Marketing Manager positions take an average of 4 months to fill with Marketing Director positions taking over 5 months.

CLICK HERE FOR FULL SURVEY RESULTS

Jacobs Management Group, Inc., a leading healthcare industry search firm, undertook this 2015 Compensation Survey specifically for the medical device, pharmaceutical, biotechnology, and healthcare vendor sectors to provide our clients with specific quantifiable compensation

data. This article presents the highlights of that survey. Please click below to get the full survey report, or email Cari Kraft for further details, or to provide input for what you would like to see in the 2016 Survey. We would appreciate knowing if this has been helpful to you.

HS&M FEBRUARY/MARCH 2017 | 32

MEDICAL DEVICE

Where the Medtech Sector is Headed Excerpted from the EvaluateMedTech® World Preview 2016, Outlook to 2022

The fifth annual EvaluateMedTech® World Preview brings together many analyses to provide a top level insight into the expected performance of the medtech industry between now and 2022.

Based on their coverage of the world’s leading medical device and diagnostic companies, the World Preview highlights trends in medtech including: consensus sales forecasts of leading industry analysts by device area to2022; the top 20 companies in 2022; R&D spend current and future; FDA approvals; M&A; venture financing and IPOs. The world preview suggests that the global medtech industry is expected to grow at 5.2% per year (CAGR) between 2015 and 2022, culminating in 2022 global sales of $529.8B. The analysis is based on in-depth forecast models for the top 300 global medtech companies. SUMMARY Diagnostics are big, but neurology is fast IVDs may be the largest sector but it is not the fastest-growing. The greatest expansion of a top-15 device area will be seen in neurology, which has a forecast CAGR of 7.6% between 2015 and 2022. IVD sales will only grow at around 5.6% during this period.

33 | HS&M FEBRUARY/MARCH 2017

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@pharmaconf

www.pharmacommercialconference.com

MEDICAL DEVICE In vitro diagnostics will remain the number one device area in 2022, with sales of $70.8B – more than 13% of the industry’s total sales. Roche is the leading company in this segment, with its 2022 test sales forecast to reach $12.8B. Merger mania leaves Medtronic in charge Consolidation within the medtech industry is winding down, with M&A activity in the first half of 2016 having slumped 79% from the same period in 2015 to just $17B. Now that the dust has settled, Medtronic has emerged as the largest company by sales of medical devices: its 2015 revenues came to $28.8B. Remarkably, its 4.7% annual growth rate puts it even further ahead in 2022, when its medtech revenues are forecast to reach $39.9B. There are still a few sector-changing deals in the pipeline. Most notable is Abbott’s pending purchase of St. Jude Medical for $25B which could help bump Abbott up the company rankings from seventh position overall to third. Ten-year approvals high On the regulatory front, the FDA has had an outstanding year, increasing the number of first-time PMAs and HDEs by 55% over 2014’s total to a ten-year high of 51 in 2015. 35 | HS&M FEBRUARY/MARCH 2017

That said, the pace seems to have slowed slightly since. The preview found that up to the end of August 2016, the FDA had issued 27 firsttime PMAs, slightly down on the 2015 figure of 30 at this time point. As if to compensate, over the same period there were 15 de novo 510(k)clearances, a 50% increase over the same point last year.

Overall the device industry is growing reasonably rapidly, and the calming of the M&A scene is no bad thing. Already the sector is seeing a resurgence of smaller tuck-in deals on which start-ups, a significant source of disruptive new technologies, depend.

with sales of $70.8B; Roche continues domination of sector with 2022 sales forecast to reach $12.8B • Medtronic continues to dominate the cardiology market; sales forecast to reach $14.1B in 2022 • Medtech R&D spend forecast to grow by 4.3% per annum to $34.0B in 2022 • Medtronic tops table of R&D spenders in 2022 with $2.8B forecast • Number of first-time PMAs and HDEs hits a ten year high in 2015; 510(k) clearances decrease 6% to 3,064 • Number of venture financing deals slumps 39% to 138 in H1 2016; value of venture financing only falls 6% to $2.4B • Medtech IPO deal values fall significantly in H1 2016 to $164m

• Worldwide medtech sales forecast to reach $529.8B by 2022

Worldwide Medtech Sales Forecast to Reach $529.8B by 2022; IVD Remains Number One in 2022.

• Worldwide medtech market forecast to grow more slowly than prescription drug market, with a CAGR of 5.2% between 2015 and 2022 versus 6.1% for pharma

The report’s consensus forecasts find that the medtech market will achieve sales of $530B in 2022, growing by 5.2% per year (CAGR) between 2015 and 2022.

• M&A activity in H1 2016 slumps 79% to $17B following 2015’s flurry of mega mergers

In vitro diagnostics (IVD) will be the largest device area in 2022, with sales forecast to reach $70.8B, representing 13.4% of the industry’s total sales. Cardiology takes the second spot, with annual sales increasing to $62.3B in 2022 from $42.1B in 2015.

ANALYSIS HIGHLIGHTS

• Medtronic becomes the leading medtech company in 2015 following the $50B acquisition of Covidien…and Medtronic remains top in 2022; sales forecast to reach $39.9B • Johnson & Johnson retains leading position in the orthopedics market in 2022 with 24.1% market share; but Zimmer Biomet forecast to be a close 2nd with 20.6% market share • In vitro diagnostics remains number one device area in 2022

Neurology is forecast to be the fastest-growing device area, with a CAGR of 7.6% between 2015 and 2022. See figures 1 & 2, page 36.

In vitro diagnostics (IVD) will be the largest device area in 2022, with sales forecast to reach $70.8bn, representing 13.4% of the industry’s

Figure 1

Analysis on Top 10 Device Areas in 2022, Market Share & Sales Growth (2015-22) 18%

Source: EvaluateMedTech® September 2016

In Vitro Diagnostics (IVD)

16%

WW Market Share % in 2022

14%

Diagnostic Imaging

Cardiology

12% 10% General & Plastic Surgery

Ophthalmics 6% Drug Delivery

Orthopedics 4% 2%

Endoscopy Dental

Wound Management

0% +3.0%

+3.5%

+4.0%

+4.5%

+5.0%

+5.5%

+6.0%

+6.5%

+7.0%

+7.5%

% Sales Growth: CAGR 2015-22

Worldwide Medtech Sales by Device Area in 2022

Note: Size of Bubble = WW Sales in 2022

part 2 of 2

Figure 2

WW Medtech Sales by EvaluateMedTech® Device Area: Top 15 Categories & Total Market (2015/22)

Source: EvaluateMedTech® September 2016

WW Sales ($bn) Rank

Device Area

CAGR

WW Market Share

Rank

2015

2022

% Growth

2015

2022

Chg. (+/-)

In Vitro Diagnostics (IVD)

48.4

70.8

+5.6%

13.1%

13.4%

+0.3pp

Cardiology

42.1

62.3

+5.7%

11.4%

11.8%

+0.4pp

Diagnostic Imaging

38.9

50.3

+3.7%

10.5%

9.5%

-1.0pp

Orthopedics

34.0

44.1

+3.8%

9.2%

8.3%

-0.8pp

Ophthalmics

24.9

37.1

+5.8%

6.7%

7.0%

+0.3pp

General & Plastic Surgery

20.2

28.1

+4.8%

5.5%

5.3%

-0.2pp

Endoscopy

16.4

26.0

+6.8%

4.4%

4.9%

+0.5pp

Drug Delivery

17.6

24.5

+4.8%

4.8%

4.6%

-0.1pp

-1

Dental

12.4

18.3

+5.7%

3.3%

3.4%

+0.1pp

® 8 10. EvaluateMedTech World Preview 2016 Wound Management

12.4

17.0

+4.7%

3.3%

3.2%

-0.1pp

11.

Diabetic Care

11.0

16.2

+5.7%

3.0%

3.1%

+0.1pp

12.

Nephrology

10.6

15.4

+5.5%

2.8%

2.9%

+0.1pp

13.

General Hospital & Healthcare Supply

10.3

14.4

+5.0%

2.8%

2.7%

-0.0pp

14.

Healthcare IT

7.8

11.3

+5.5%

2.1%

+0.0pp

15.

Neurology

6.7

11.1

+7.6%

1.8%

2.1%

+0.3pp

Top 15

313.7

446.8

+5.2%

84.5%

84.3%

-0.2pp

Other

57.3

83.0

+5.4%

15.5%

15.7%

+0.2pp

371.0

529.8

+5.2%

100.0%

Total WW Medtech Sales

Note: Analysis is based on the top 300 medtech companies. Sales in 2015 based on company reported data. Sales forecasts to 2022 based on a consensus of leading equity analysts’ estimates for segmental sales.

HS&M FEBRUARY/MARCH 2017 | 36

MEDICAL DEVICE WORLDWIDE MEDTECH SALES forecast to achieve sales of $39.9B, ness to Johnson & Johnson. Followof 2 deals ing the completionpart of1 these representing 7.5% share of the IN 2022: TOP 20 COMPANIES Worldwide Medtech Sales in a2022: medical device market. the company ought to jump from Medtronic Top Medtech Top 20Remains Companies 7th in 2015 to 3rd place in 2022 in Company in 2022; Sales Forecast Abbott Laboratories has announced the company rankings, with potenM&A deals Abbott this year. It is has announced Laboratories several M&A deals this year. Medtronic Top Medtech Company in several 2022; Sales to Reach Remains $39.9B. tial sales of around $22B in 2022. It is currently in the process of acquiring both St. Jude Medical and Forecast to Reach $39.9bn. currently in the process of acquirThe report forecasts find that See figurebusiness 3, pageto37 and figure 4, Alere and is also selling its eyecare Johnson & Johnson. ing forecasts both St.find Jude Medical and Alere EvaluateMedTech® and EvaluatePharma® consensus Medtronic will remain the world’s completionpage of these 38.deals the company ought to jump that Medtronic will remain the world’s leading company 2022. and is inalso selling itsFollowing eyecarethebusifrom 7th in 2015 to 3rd place in 2022 in the company rankings, with leading company insales 2022. It is representing a 7.5% It is forecast to achieve of $39.9bn, potential sales of around $22bn in 2022.

share of the medical device market.

Figure 3

WW Medtech Sales: Top 10 Companies (2022)

Source: EvaluateMedTech® September 2016

WW Medtech Sales ($bn) in 2022

40 39.9

Sales ($bn) CAGR 2015-22 (%) Ranking Change 2015-22

+4.7%

30.6

+2.9%

20 15

17.6 +2.5%

16.0

15.8

+7.0%

+3.1%

14.8

14.7

+4.0%

+7.0%

12.7

11.9

+4.1%

11.3

+3.3%

+6.1%

(-)

-1

(-)

Medtronic

Johnson & Johnson

Siemens

Stryker

Philips

Roche

Becton Dickinson

Abbott Laboratories

General Electric

Boston Scientific

WW Medtech Sales: Top 20 Companies & Total Market (2015/22) WW Medtech Sales ($bn) Rank

Company

Country

Medtronic

2. 3.

Source: EvaluateMedTech® September 2016

WW Market Share

Rank

2015

2022

% CAGR 15-22

2015

2022

Chg. (+/-)

USA

28.8

39.9

+4.7%

7.8%

7.5%

-0.2pp

Johnson & Johnson

USA

25.1

30.6

+2.9%

6.8%

5.8%

-1.0pp

Siemens

Germany

14.8

17.6

+2.5%

4.0%

3.3%

-0.7pp

Stryker

USA

9.9

16.0

+7.0%

2.7%

3.0%

+0.3pp

Philips

The Netherlands

12.7

15.8

+3.1%

3.4%

3.0%

-0.4pp

-1

Roche

Switzerland

11.2

14.8

+4.0%

3.0%

2.8%

-0.2pp

-1

Becton Dickinson

USA

9.2

14.7

+7.0%

2.5%

2.8%

+0.3pp

Abbott Laboratories

USA

9.6

12.7

+4.1%

2.6%

2.4%

-0.2pp

-1

General Electric

USA

9.5

11.9

+3.3%

2.6%

2.3%

-0.3pp

-1

10.

Boston Scientific

USA

7.5

11.3

+6.1%

2.0%

2.1%

+0.1pp

11.

Essilor International

France

6.5

10.2

+6.7%

1.7%

1.9%

+0.2pp

12.

Zimmer Biomet

USA

6.0

9.6

+7.0%

1.6%

1.8%

+0.2pp

13.

Danaher

USA

7.4

9.1

+3.0%

2.0%

1.7%

-0.3pp

-2

14.

B. Braun Melsungen

Germany

6.8

8.8

+3.8%

1.8%

1.7%

-0.2pp

-2

15.

Baxter International

USA

6.6

8.7

+4.0%

1.8%

1.6%

-0.1pp

-2

Top 1 6-20 continued over…

37 | HS&M FEBRUARY/MARCH 2017

Worldwide Medtech Sales in 2022: Top 20 Companies

part 2 of 2

Figure 4

Source: EvaluateMedTech® September 2016

WW Medtech Sales ($bn) Rank

Company

Country

16.

Olympus

17.

Novartis

WW Market Share

Rank

2015

2022

% CAGR 15-22

2015

2022

Chg. (+/-)

Japan

5.1

8.2

+7.1%

1.4%

1.6%

+0.2pp

Switzerland

6.0

7.9

+4.0%

1.6%

1.5%

-0.1pp

-2

18.

St. Jude Medical

USA

5.5

7.7

+4.8%

1.5%

-0.0pp

-1

19.

USA

5.1

6.8

+4.2%

1.4%

1.3%

-0.1pp

-1

20.

Smith & Nephew

United Kingdom

4.6

6.1

+4.1%

1.2%

-0.1pp

Total Top 20

198.0

268.5

+4.4%

53.4%

50.7%

-2.7pp

Other

173.0

261.3

+6.1%

46.6%

49.3%

+2.7pp

Total

371.0

529.8

+5.2%

100.0%

Percentage Composition of WW Medtech Market in 2022

$211bn

$185bn

40%

35%

Source: EvaluateMedTech® September 2016

Top 10 Companies 1 1-30 Companies Rest of Market

$133bn 25%

WORLDWIDE MEDTECH VS. PRESCRIPTION DRUG SALES (2009-22) Worldwide Prescription Drug Market Continues to Outperform the Medtech Market. As noted above, the report’s forecasts find that the medtech market is forecast to grow at 5.2% per annum (CAGR) to reach $530B by 2022. By comparison, the worldwide prescription drug market is forecast to grow by 6.1% per year from2015, reaching $1,121B by 2022. Both industries are expected to experience steady upward growth ® 13 World Preview 2016 EvaluateMedTech over the coming seven years.

This slower growth in medical device sales means the value of the medtech market will be around 47.3% of that of the prescription drug market in 2022. The medtech sector was half the size of the prescription drug market in 2015.

The first half of 2016 saw a dramatic drop in the amount of funding raised through initial public offerings. In the first half of 2015, $853m was raised, compared with a meager $164m in the first half of 2016.

Both industries contracted in dollar terms in 2015 as a result of the weakness in the Euro, as US companies recognized fewer dollars for sales in the Eurozone. See figure 5, page 39 and figure 6, page 40.

The number of IPOs has also continued to decline, with only ten IPOs in the first half of 2016, as opposed to 25 in H1 2014 and 17 in H1 2015. The biggest IPO in H1 2016 is the $45m NYSE listing of Senseonics, developer of the Eversense™ Continuous Glucose Monitoring System. See figure 7, page 40. Copyright © 2016 Evaluate Ltd. All rights reserved.

IPO ANALYSIS: 2014 TO H1 2016 MedTech IPO Deal Values Fall Significantly in H1 2016 to $164m.

HS&M FEBRUARY/MARCH 2017 | 38

Worldwide Prescription Drug Market Continues to Outperform the Medtech Market.

EvaluateMedTech® and EvaluatePharma® consensus forecasts find that the medtech market is forecast to grow at 5.2% per annum (CAGR) to reach $530bn by 2022. By comparison, the worldwide prescription drug market is forecast to grow by 6.1% per year from 2015, reaching $1,121bn by 2022. Both industries are expected to Figure 5 experience steady upward growth over the coming seven years.

MEDICAL DEVICE

Both industries contracted in dollar terms in 2015 as a result of the weakness in the Euro, as US companies recognised fewer dollars for sales in the Eurozone.

WW Medtech vs Prescription Drug Sales (2009-22)

Source: EvaluateMedTech® & EvaluatePharma® September 2016

1,121

1,200 1,060 996 931

WW Medtech & Rx Sales ($bn)

1,000

800 663

687

729

724

717

749

822

778

742

873

600

400

200

309

326

2009

2010

353

362

369

379

371

392

2011

2012

2013

2014

2015

2016

414

436

459

2017

2018

2019

483

506

530

2020

2021

2022

WW Prescription Sales: +6.1% CAGR 2015-22

WW Medtech Sales: +5.2% CAGR 2015-22

WW Growth Rate: Medtech vs. Prescription Drug Sales (2010-22)

Source: EvaluateMedTech® & EvaluatePharma® September 2016

15%

2012 and 2015: WW Sales Growth %

10%

Euro crisis impacts Euro sales converted to dollars.

-5% 2010

2011

2012

2013

2014

2015

Medtech Growth per Year

2016

2017

2018

2019

2020

2021

2022

Prescription (Rx) Growth per Year

Evaluate is the trusted provider of commercial intelligence including product sales and consensus ® forecasts to 2022 for commercial science industry. It EvaluateMedTech 14 World Preview 2016 teams and their advisors within the global life Copyright © 2016 Evaluate Ltd. All rights reserved. helps clients make high value decisions through superior quality, timely, must-have data and insights, combined with personalized, expert client support. Evaluate comprises EvaluatePharma®, EvaluateMedTech®, EvaluateClinical Trials®, EP Vantage and Evaluate Custom Services. For the full report, click here.

39 | HS&M FEBRUARY/MARCH 2017

Worldwide Medtech vs. Prescription Drug Sales (2009-22)

part 2 of 2

Figure 6

WW Medtech vs. Prescription Drug Sales (2009-22)

Source: EvaluateMedTech® & EvaluatePharma® September 2016

WW Sales ($bn) Year WW Medtech Sales

2009

2010

2011

2012

2013

2014

2015

2016

2017

2018

2019

2020

2021

2022

309

326

353

362

369

379

371

392

414

436

459

483

506

530

+5.7%

+8.0%

+2.6%

+2.0%

+2.7%

-2.0%

+5.7%

+5.4%

+5.5%

+5.3%

+5.1%

+4.9%

+4.7%

47.5%

48.4%

50.4%

51.0%

50.6%

50.0%

50.4%

50.3%

49.9%

49.3%

48.5%

47.7%

47.3%

Growth per Year Medtech as % of Rx

46.5% 663

WW Prescription (Rx) Growth per Year

687

729

717

724

749

742

778

822

873

931

996

1,060

1,121

+3.5%

+6.1%

-1.6%

+0.9%

+3.5%

-1.0%

+4.8%

+5.7%

+6.2%

+6.6%

+7.0%

+6.5%

+5.7%

IPO Analysis: 2014 to H1 2016

part 1 of 2

CAGR 2015-22 WW Medtech Sales +5.2% WW Prescription Drug Sales +6.1% The number of IPOs has also continued to decline, with only ten IPOs MedTech IPO Deal Values Fall Significantly in H1 2016 to $164m. Note: Prescription drug sales based on top 500 pharmaceutical and biotech companies from EvaluatePharma . Sales to 2015 based on company reported sales data. Sales forecasts to 2022 based on a in the first half of 2016, as opposed to 25 in H1 2014 and 17 in H1 2015. consensus of leading equity analysts’ estimates for segmental sales. The first half of 2016 has seen a dramatic drop in the amount of funding ®

raised through initial public offerings. In the first half of 2015, $853m was raised, compared with a meagre $164m in the first half of 2016.

The biggest IPO in H1 2016 is the $45m NYSE listing of Senseonics, developer of the Eversense™ Continuous Glucose Monitoring System.

Figure 7

Quarterly Count of IPO Deals vs. Total IPO Value (Q1 2014 - Q2 2016) 700

Source: EvaluateMedTech® September 2016

13 12

600

12 10 10 10

8 400

8 8

7 6

300

200

Deal Count

Deal Value ($m)

500

3 2

100

2 $684m

$677m

$401m

$332m

$308m

$545m

$592m

$332m

Q1 2014

Q2 2014

Q3 2014

Q4 2014

Q1 2015

Q2 2015

Q3 2015

Q4 2015

$48m

Deal Value ($m)

Deal Count

Q2 2014

Q3 2014

Q4 2014

Q1 2015

Q2 2015

Q3 2015

Q4 2015

Q1 2016

Q2 2016

-38%

25%

-30%

43%

-40%

-50%

-33%

300%

684

677

401

332

308

545

592

332

116

-1%

-41%

-17%

-7%

77%

-44%

-85%

141%

% Chg. from previous quarter

COMMENT EvaluateMedTech World Preview 2016 ®

Source: EvaluateMedTech® September 2016

Q1 2014

Deal Count

Deal Value ($m)

0 Q2 2016

Q1 2016

Count of Medtech IPO Deals vs. Total IPO Value (Q1 2014 - Q2 2016) Quarter

$116m

HS&M FEBRUARY/MARCH 2017 | 40

INDUSTRY INITIATIVES

Why Doctors Are Consulting Wikipedia And how Allergan, Pfizer, GSK and others are changing this By Patrick Retif, VP of IT, Global Commercial, Allergan and Paul Shawah, VP Commercial Cloud Strategy, Veeva Systems, President, Align Biopharma

Did you know more healthcare professionals (HCPs) get drug and treatment information from Google, Wikipedia, and other second-hand online sources than from life sciences companies? Today’s dramatic increase of new and more complex drugs has created a greater need for HCPs to receive more timely, tailored, concise information to treat patients. Yet it’s not easy for doctors to get what they need, because each life sciences company provides information digitally in a different way. Busy doctors are forced to spend an exorbitant amount of time logging in to various web sites and managing dozens of user names and passcodes. In today’s digital world where the expectation is for information to be at our fingertips, HCPs don’t have the time or inclination to wade through this sea of roadblocks in order to get critical information to help their patients. On the other hand, the source of such crucial information must be reliable.

41 | HS&M FEBRUARY/MARCH 2017

“I had to create a spreadsheet of 60 IDs.” A physician on Veeva’s HCP panel As the number of new drugs increases, so does the amount of information healthcare professionals require to facilitate patient engagement. There is significant potential for biopharmaceutical companies to use digital technology to inform HCPs on new or more complex treatments. But, until now, that hasn’t happened with the ease it requires. WHAT’S THE ANSWER? The answer—something you would think an IT genius should have created years ago—is to make it easier for doctors to get through

a streamlined vetting process so they can access data quickly. Finally, this is happening. A new initiative, Align Biopharma, has been founded by six of the largest global life sciences companies: Allergan, AstraZeneca, Biogen, GlaxoSmithKline, Novartis, and Pfizer, in cooperation with Veeva. Align Biopharma is a new industry standards initiative. For the first time, we are coming together to make it easier and faster for healthcare professionals to connect with the companies that provide the products and services. Align Biopharma is defining an identification and authentication standard to enable single sign-on for HCPs to access online content—including websites, portals, virtual events, or webinars—across all companies. Once the group

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For information on how to be in front of our vast audience, contact Andrew McSherry: amcsherry@hsandm.com or 339-225-5315 (cell) or 215-383-2990 (office)

INDUSTRY INITIATIVES develops and publishes its standards, they will be made available to other technology vendors to use in building their products. Veeva will lead the industry standards group and be responsible for group management, operations, and communications. Doctors treat patients with multiple disease states and conditions, and use drugs from many companies. Because we are a highly regulated and very technologically-inclined industry, this leads to a rigorous registration process. A physician may need ten or 15 registration IDs at a single company. The number of branded, unbranded, and collaborative sites is exploding. When you add in the portals, webinars, CME sites and more, it can be overwhelming.

“Common industry standards can make it more effective and efficient for life sciences companies and healthcare professionals to connect. Working together can help harmonize digital engagement and information access across the industry and create a better experience for our shared customers.” Patrick Retif, VP IT, Global Commercial at Allergan 43 | HS&M FEBRUARY/MARCH 2017

Companies expend a lot of energy and effort to drive traffic to a digital site. So it becomes important not to frustrate HCPs once they’re there. You want them to get info ASAP. Yet that’s not happening. And because doctors are already pulled in numerous directions in the midst of an over-scheduled day, they often choose to find their information elsewhere.

Align Biopharma was founded on the idea that, for everyone’s sake— HCPs, companies, and especially patients—there has to be a better way. Obviously this is a complex equation. What is the easy way? What questions do you ask, how do you register and verify them under one sign-on? How do you satisfy the protocols each company wants in place? That’s why it took the efforts of many industry leaders to arrive at a set of standards. THE PROTOCOLS ARE COMING TOGETHER Align Biopharma will enable a single sign on, in one place. Standards will be published in 1Q 2017. This initiative involved the cooperation and wisdom of people from all disciplines in the industry, including IT, security and brand people. Once the first set of standards is published, the group will solicit industry feedback, then update and revise. Initially, we were concerned about being able to get agreement quickly from so many participants, but we are moving fast, and are

productively engaged on all issues. Each company is getting the protocols approved.

“With the proliferation of advanced treatments and digital channels, adhering to industry standards will simplify the challenges doctors face in getting the right information quickly.” Paul Shawah, VP of Commercial Cloud Strategy at Veeva This not only serves the companies and the doctors, but it ultimately drives better patient outcomes. We expect life sciences companies, vendors, and consultants to sign on. In the case of a precommercial company, sign-on can be immediate, allowing them to start from day one with improved standards. Initially, Align Biopharma will focus on developing two new standards to facilitate seamless digital engagement and simplify the HCP experience: · Identity management—definition of an identification and authentication standard to enable a single sign-on for HCPs to access online content—including websites, portals, virtual events, or webinars—across all companies · Consent and communication preferences—definition of

standards for consent and preference management so that there is consistency in how HCPs specify communication preferences with each company. Align Biopharma plans to publish the Identity Management standard early this year. It will continue to evolve over time as we solicit feedback and companies adopt it over time. This opens up incredible opportunities for companies to gain insight on HCPs that will allow the industry to further personalize their interactions and create a seamless digital engagement experience, ultimately benefitting patients with much-needed products much faster. The ultimate goal is to streamline communication between the industry and its customers, the physicians, removing barriers and creating a more fluid conversation. This will improve messaging and marketing efforts, and increase trust and reliance on your company’s outreach to its most vital audience. • FOR MORE INFORMATION ON ALIGN BIOPHARMA, VISIT ALIGNBIOPHARMA.ORG TO LEARN ABOUT ITS MISSION AND CURRENT STANDARDS IN DEVELOPMENT.

Patrick Retif VP of IT, Global Commercial, Allergan Patrick has enhanced customer engagement by deploying Veeva to 8,000 reps in 52 countries in 52 weeks. He has also innovated in social media technologies that yielded revenue in just a few months. Patrick has also unleashed digital capabilities at Allergan by implementing a digital factory platform supporting over 450 websites. He has successfully supported over 15 product launches in two years, plus completed the largest 2015 M&A integration of Allergan Commercial IT in just 3 months. He has also led over a dozen integrations and divestitures that included redesigning IT organizations, harmonizing hundreds of systems, establishing news trusted relationships with new Allergan executives, and maintaining business as usual through responsiveness and innovations. Paul Shawah VP Commercial Cloud Strategy, Veeva Systems; President, Align Biopharma Paul Shawah is shaping advances in cloud-based software to enable modern multichannel communications between life sciences companies and healthcare providers. He has been driving digital innovation in the life sciences industry for decades, and was named one of PharmaVOICE’s Top 100 Industry Innovators in 2012. Shawah is also published in dozens of respected life sciences trade publications and journals and is a regular speaker at industry conferences. At Siebel, Shawah pushed the envelope to incorporate mobile technology in the company’s CRM product that would enable feedback directly from the field during a physician call. He quickly became an evangelist for what is today known as closed loop marketing or CLM, igniting a movement in the life sciences industry as he set out to change the mindset of pharmaceutical marketers and sales operations. Now, he’s leading another transformative initiative as president of Align Biopharma. paul.shawah@veeva.com Align Biopharma Align Biopharma is an industry standards group comprised of leading pharmaceutical companies dedicated to making it faster and easier for healthcare professionals to connect with the life sciences industry and get the drug and treatment information they need to deliver improved care to patients. For more information, visit AlignBiopharma.org.

COMMENT HS&M FEBRUARY/MARCH 2017 | 44

BY THE NUMBERS

$73.9B

Compiled by Cari Kraft, Jacobs Management Group, Inc.

Implantable medical devices market size in 2018 In a new report, Transparency Market Research has predicted that the implantable medical devices market will reach $73.9B by 2018, a CAGR expansion of 8.0% from 2012-2018. The market was $43.1B in 2011. Source: Transparency Market Research, “Implantable Medical Devices Market - U.S. Industry Analysis, Size, Share, Trends, Growth And Forecast 2012-2018”

1,826

Fewer pain med doses prescribed in states with medical marijuana laws Prescriptions of pain, anxiety, nausea and other medications have declined significantly in states where medical marijuana is legal. In a three year period, in the 17 states with a medical-marijuana law, prescriptions for painkillers fell by 1,826 doses, for anxiety by 562 doses, for nausea 541 doses, and declined for psychosis, seizures, sleep disorders and depression as well. Source: Bradford and Bradford, reported in Health Affairs, July 2016

COMMENT

45 | HS&M FEBRUARY/MARCH 2017

39% Share that brand manufacturers realize from gross drug expenditures Berkeley Research Group estimates that brand manufacturers get 39% of the money made on sales of their drugs. Of the rest, 42 percent goes to non-manufacturer entities such as supply chain companies, and others who realize rebates, discounts and fees. Source: Berkeley Research Group, “The Pharmaceutical Supply Chain: Gross Drug Expenditures Realized by Stakeholders,” 2017

36%

Percent of global clinical trials conducted in U.S. As of January 2017, over 85,000 clinical trials were being conducted in the U.S., about 36% of the world total of more than 235,000. Source: ClinicalTrials.gov, a service of the National Institutes of Health

23 MILLION

Number of new cancer cases anticipated by 2037 While cancer is the focus of much research and many therapies, with over 70 new drugs launched in the last five years, itâ&#x20AC;&#x2122;s not expected to slow down in the near future. Currently cancer is among the leading killers worldwide, with over 14 million cases in 2012 (the latest year for which statistics are available). But the World Health Organization predicts that this will rise about 70% over the next two decades. Source: World Health Organization, 2016

12 YEARS

Time to get a drug from lab to market Ephicacy Lifescience Analytics says that it takes an average of 12 years and $350M to get a drug from patent filing to sales. This includes an average of 3.5 years of initial tests before the FDA will allow testing on humans. Patents are granted for 20 years, starting at the time of filing. That means companies typically have just eight years left to realize the major return on investment. Only one in 1000 of the compounds that start in the lab will ever be tested on humans. Source:â&#x20AC;ŻEphicacy Lifescience Analytics, in BioSpectrum, January 2017

Monthly cost of an open sales position Leaving an open sales position costs the average company over $53,000. The cost of an open marketing position is a $37,900. For other industry salary statistics, see our Salary Survey in this issue. Source: Jacobs Management Group Compensation and Hiring Survey 2016

HS&M FEBRUARY/MARCH 2017 | 46

PATIENT CENTRICITY

Benchmarking Patient Centricity Moving toward a clearer global view of what “patient centricity” means By Jill Donahue, Principal, EngageRx

47 | HS&M FEBRUARY/MARCH 2017

2017 HBA Woman of the Year event

Woman of the Year Bahija Jallal, PhD executive vice president, AstraZeneca and head of MedImmune

Honorable Mentor Joaquin Duato worldwide chairman, pharmaceuticals, Johnson & Johnson

STAR Ceci Zak chief operating officer, DAS Healthcare (a division of Omnicom Group)

Join over 2,000 attendees 11 May 2017 | NYC Hilton Midtown

PATIENT CENTRICITY

It’s encouraging that patient centricity has become a major focus for most companies. The next step, however, is defining exactly what this means, what it entails, and what the processes are that will make it effective. Beliefs and intentions are empty without the knowledge and skill to move them to actions and measurable outcomes. What if we were trusted, valued partners in healthcare? Of the many hurdles this industry faces, perhaps the most important is regaining the public’s faith in us. This is vital to achieving the engagement we need to advance better outcomes. Being patient focused is the essential component necessary to achieve this goal.

As we started gaining input on this idea, more and more people became excited about it. In the end, a panel of 70 highly qualified and experienced advisors was consulted on the content and design of the survey, and an additional 800 advisors offered to help with dissemination and interpretation of findings.

That’s why The Aurora Project was established: to illuminate the path to patient centricity.

Thus we had the first ever global large-scale survey of its kind, to benchmark patient-focused intentions, actions and outcomes based on verifiable, comprehensive and global survey responses.

ORIGINS At the largest global conference for pharma, eyeforpharma Barcelona 2016, I conducted video interviews with thought leaders. One of the questions I asked was “Thinking of the aphorism ‘We can’t manage what we can’t measure,’ how are you measuring your efforts to be patient-centric?” The answers simply weren’t that impressive. And that’s when Paul Simms, chairman of eyeforpharma, and I hatched the idea to try to globally benchmark our progress with patient-focused missions. 49 | HS&M FEBRUARY/MARCH 2017

Invited survey participants were drawn from a global cross-section of industry professionals in pharma and health care provision, as well as from patients and patient groups. Care was taken to ensure a range in seniority, roles, geography and company size among respondents. In total, 2346 responses, spread across 84 countries, were received from the 80,000 invitees. For a summary of the survey, click here.

The survey was aimed at identifying not just the barriers but what people are doing right, how the “wisdom of crowds” sees the way forward and what exactly patientcentricity means to people. WHO PARTICIPATED > 70 advisors in design > 800 advisors in interpretation, dissemination 2346 participants • Patient/groups (61) • Bio/pharma/med device (1150) • Solution providers (797) • Other (338) 84 countries Data collection completed March, 2016 WHAT DID WE LEARN? The data from the survey is rich. Below are the top five insights. Spoiler alert. The number one insight is that pharma really does believe patient centricity is the answer. See Figure 1 on page 50. What is perhaps the most optimistic finding is that companies with senior leaders who walk their talk by transforming their cultural mindset with all departments appear to be in the lead when it comes to patient-focused profitability. See Figure 2 on page 51. HOW ORGANIZATIONS SEE THEMSELVES The survey measured respondents’ perceptions of how well they think they are doing—and what they think patient centricity means. Jens Lipinski, Head Patient Relations, Bayer Vitals, says, “Amazing-

Figure 1

HS&M FEBRUARY/MARCH 2017 | 50

PATIENT CENTRICITY Figure 2

ly, most participants in the survey describe their organizations as slightly or far ahead of other companies. The majority of organizations position themselves ahead of the average. I am convinced that this result is based on the presence of different definitions or perceptions of patient centricity. Some of us in pharma still tend to reduce patient centricity to the development and provision of safe and beneficial products and services. The survey clearly demonstrates that we have many more options to demonstrate close proximity to patients’ needs.” Not surprisingly, 86% of the respondents believe it is very important for pharma to deliver on

51 | HS&M FEBRUARY/MARCH 2017

patient-focused missions. Their confidence in the “how,” however, lags behind. Confidence that pharma can implement their patient-focused ideologies showed who is least confident—patients at 11.48%—and who is most confident—CEO’s at 36% (still not an inspiring number). This allows us to pinpoint barriers to patientfocused actions, as well as areas of concern. This is essential if barriers are to be overcome and effective solutions found. ESTABLISHING WAYS FORWARD While it is easy to pay lip service to a patient-centric model, it is far more difficult for large corpora-

tions to implement new ways of working. Companies can now see where they are in relation to other companies when it comes to patient-focused intentions, actions, and outcomes, as well as where they might better place their efforts. Often, when you are too close to something it is difficult to see the bigger picture. The Aurora Project is both a lens to view the global picture of pharma’s patientfocused efforts and some patientfocused catalysts that can help us craft the future. We want to help companies and individuals re-set their direction and define their strategies going

forward. This is best achieved by effective collaboration and networking, as best practice examples shared within the survey show. WHERE TO NEXT? The global survey has drawn a line in the sand. We know where we are now and we can measure progress against this. Even better, we have identified people throughout the world who are passionately working on the same goal—to grow their businesses in patientfocused ways. The survey brought us together and through that community, we can accelerate progress on our mutual goals.

“Some of us in pharma still tend to reduce patient centricity to the development and provision of safe and beneficial products and services.The survey clearly demonstrates that we have many more options to demonstrate close proximity to patients’ needs.” Jens Lipinski, Head Patient Relations, Bayer Vitals We want to repeat the survey each year and envision seeing great progress in efforts and outcomes. To help ensure that progress, the group has crowd sourced ideas and strategies beyond the survey. So far, we have five projects underway, including: 1. Defining Patient Centricity 2. Publishing deep dives from survey results 3. The Practical Guide for each department 4. The Treaty 5. #PharmaPride social media campaign

faster together than any individual or company can alone. As the saying goes, a rising tide lifts all ships. We need to take the wave of innovators and spread their experiences so that others are inspired not only to recreate but to improve on those examples. By far the most common answer to the question regarding training is that people are actively looking for what and how to train people to make patient centricity work. We need to make the benchmarks in this survey public so that we can stop merely talking about patient centricity and start actually making it work! We need this, health care professionals need this, our organizations need this and most importantly, patients need this. •

Jill Donahue Principal, EngageRx, HBa, MAdEd Jill is on a mission to lift our industry, building purposedriven, influential people. Through her keynote talks, workshops and award-winning mobilelearning programs, she is helping teams build trust, open doors and make a bigger impact. As the co-founder of the nonprofit group The Aurora Project, she is helping to illuminate our path to patient centricity.

COMMENT

We believe first and foremost that being patient focused results in better outcomes for all; patients, society, health-care professionals and our organizations. And secondly that we can achieve those outcomes

HS&M FEBRUARY/MARCH 2017 | 52

MOTIVATION

MOTIVIDEOS By Cari Kraft, Jacobs Management Group Here’s another serving of our Morning Magic—videos to start your team meeting on a thoughtful note, with some inspiration, some humor and some helpful advice. Enjoy!

Seeing the World in a New Way:

Harvard Business Review on Failure:

People with color blindness are suddenly introduced to a fresh view of their surroundings. How can you see the world differently?

Really? We can learn from failing? So says HBR, one of our leading business schools.

The Meaning of Life:

Bob Miglani, author of “Embrace the Chaos,” talks about how not to get too worked up over change.

We’ve run a number of these, but who can resist the wisdom and orotund tones of Morgan Freeman, delivering a viewpoint about how to inspire yourself?

Change is Your Friend:

Submissions are welcome. If you have one you like, email a link to me at ckraft@jacobsmgt.com.

Cari Kraft leads a team of master level recruiters at Jacobs Management Group, celebrating 20+ years of executive recruiting in the healthcare (pharmaceutical, medical device, biotechnology) and high-tech industries, nationally. Prior to joining Jacobs Management Group, Ms. Kraft has held positions as a Senior Sales Executive, Director of Business Development and Director of Marketing. She also has deep knowledge of the technology/startup fields, having been in the industry through the rise of the Internet. Ms. Kraft is a University of Pennsylvania/Wharton alumnus holding a degree in economics and decision sciences. Cari can be reached at ckraft@jacobsmgt.com.

COMMENT 53 | HS&M FEBRUARY/MARCH 2017

TOP LISTS the publication for healthcare sales & marketing leaders™ HS&M’s series of Top Company lists is increasingly one of our most awaited and valued features. The Top 50 Pharmaceutical, Medical Device and Biotech Companies are followed by the Top 100 Healthcare Companies of the year. Because of the demand, here are our previous lists.

BIOTECH COMPANIES CLICK HERE TO RECEIVE YOUR COPY OF THE TOP 50 BIOTECH COMPANIES

PHARMA COMPANIES

MEDICAL DEVICE COMPANIES

CLICK HERE TO RECEIVE YOUR COPY OF THE TOP 50 PHARMA COMPANIES

CLICK HERE TO RECEIVE YOUR COPY OF THE TOP 50 MEDICAL DEVICE COMPANIES

Seeing the World in a New Way

The Meaning of Life

55 | HS&M FEBRUARY/MARCH 2017

Harvard Business Review on Failure

Change is Your Friend

HS&M FEBRUARY/MARCH 2017 | 56

PHARMACEUTICAL

A $637B Annual Loss or Opportunity? Nonadherence presents the industry with a big challenge Based on Capgemini Consulting and HealthPrize Technologies’ Research Paper

Estimates are that in 2015, global pharmaceutical revenue lost $637 billion due to nonadherence to medications for chronic conditions. This has increased from $564 billion in 2012, with US-based revenue losses increasing from $188 billion in 2012 to $250 billion in 2015. “Medication nonadherence is a serious global health issue,” said Tom Kottler, CEO of HealthPrize Technologies. “It also happens to be a critical business issue for pharmaceutical companies and represents the ‘final frontier’ for them—the only area of their business where they can generate significant topand bottom-line growth, improve outcomes, and create substantial savings for the healthcare system— all at the same time.” By focusing on and boosting adherence across their portfolios, pharmaceutical companies can provide unparalleled benefits to both patients and shareholders. Pharmaceutical companies have historically focused on the physician as their “customer” and bringing products to market to treat more complicated chronic conditions with smaller patient populations, often neglecting 57 | HS&M FEBRUARY/MARCH 2017

strategies that involve patients and their behaviors that could improve outcomes and reduce healthcare expenses.

“This is the only area where [companies] can generate significant top- and bottom-line growth, improve outcomes, and create substantial savings for the healthcare system—all at the same time.” Tom Kottler, CEO, HealthPrize “The tremendous human toll that results from nonadherence has been known for some time, but until we released our report with

Capgemini, the business cost to the life science industry was not,” Kottler said. “With our updated analysis, we have shown that this business challenge continues to grow for pharmaceutical companies, while at the same time presenting them with their most significant opportunity to simultaneously support patients and shareholders.” When the 2012 report was published, the pharmaceutical industry took notice. Luckily, at that time, industry trends already favored a stronger focus on the adherence problem than in years past because of the critical role adherence plays in drug efficacy, clinical outcomes, and healthcare costs. This growing recognition within the industry of its importance led to an expansion of adherencerelated services, the initiation of commercial pilots to test novel

strategies, and the creation of dedicated adherence teams to function across brands. According to recent IMS figures1, total US pharma revenues on an invoice basis were $425 billion in 2015. Compared with the $320 billion figure used in the analysis for the 2012 report, this represents a revenue increase of 33%. Assuming that medication adherence rates have remained relatively unchanged since 2012, this means that pharma revenue losses attributed to nonadherence have also increased by the same percentage, from an estimated $188 billion to $250 billion forfeited in the US alone.

The healthcare industry as a whole—and most importantly, patients—would benefit from pharma shifting away from raising drug prices as a revenueenhancing strategy and instead toward boosting adherence interventions to accomplish the same goal. Globally, according to CMR International2, pharma revenues hit $1.1 trillion in 2015, which is a 13% increase from the $956 billion figure used for the 2012 report. This means that estimated revenue losses globally due to nonadherence are now $637 billion, a steep increase. Although much new adherence research has been published since the 2012 report, the authors have not detected any measurable trend toward increas-

ing adherence rates—at least not yet. There has been, however, recent adherence work worth highlighting that allows for a more nuanced understanding of typical pharmacy claims–based adherence data. INTRODUCTION Medication nonadherence is one of the most serious problems in healthcare, posing a heavy financial impact on all constituencies. For insurers, employers, and patients, nonadherence significantly increases healthcare costs as a result of disease-related complications. For pharmaceutical companies, pharmacies, and pharmacy benefits managers, nonadherence significantly erodes profit due to prescriptions not being refilled and medications not taken often enough. Nonadherence is also to blame for immense personal and societal costs beyond the financial, in the form of poor health outcomes, untimely death, lost productivity, and compromised quality of life. These downstream effects are particularly tragic given their preventability. Given the growing interest among pharmaceutical companies in exerting a greater influence in promoting better outcomes—and in selling wellness in addition to medication—a focus on medication adherence is a natural fit. In this setting, a more accurate estimate of the impact of nonadherence on profit can serve as further motivation to allocate resources accordingly and perhaps as stimulus for a greater sense of urgency. ESTIMATE OF REVENUE LOSS BY INDUSTRY EXECUTIVES Below are the highlights from surveying a number of pharmaceutical executives across divisions and companies regarding their thoughts on several issues:

• Regarding the priority level given to nonadherence initiatives, 60% felt that adherence was a “high” priority for their company, whereas 20% responded “highest” priority and another 20% respondents felt the priority level was “medium.” None felt that it was “low” priority. • As for whether or not the industry bears some responsibility to intervene to improve adherence, all responded “yes.” One respondent stated, “I believe the pharma industry, healthcare professionals, and payers all bear an equal responsibility for promoting improved adherence to medication.” • Twenty percent remain “slightly skeptical” that nonadherence can be significantly improved, and 40% were “not sure,” whereas 40% were either “confident” or “very confident.” Regardless, one respondent stated, “It is the biggest issue affecting positive treatment outcomes for most chronic therapies.” Most interestingly, the range of estimates of revenue loss by the pharmaceutical industry due to nonadherence was very broad, from “many millions” to $100 billion. In specific therapeutic classes, such as respiratory agents and antidepressants, more than 200% of total current revenues are lost due to nonadherence. How can that be? To understand this seeming paradox, it is important to consider this: The calculation of losses due to nonadherence are based on revenues that could have been earned, not actually earned. As a simple illustration, consider a fictional medication with an adherence rate of 50%, and consider that the brand earns $100 million per year on that medication. If all patients were, instead, fully adherent (if adherence was 100% rather than 50%), revenue would double, HS&M FEBRUARY/MARCH 2017 | 58

PHARMACEUTICAL to $200 million. However, as actual adherence is only 50%, the brand earns only half of its potential. Another way to express the same thought is this: When adherence equals 50%, the ratio of revenue earned to revenue lost is 1:1. If adherence is lower than 50%, the brand actually loses out on more than it earns. In diabetes, total US pharmaceutical revenues totaled $19.6 billion and chronic use approximately $17.6 billion. Considering an estimated mean adherence rate of 60.7% across medications, the estimate of revenue lost in this therapeutic area alone is $11.4 billion, or 58% of total revenue. There are four main factors that make the report’s estimate of revenue loss conservative. One, it focused only on chronic conditions. Two, the way it estimated revenue loss due to primary nonadherence (initial prescriptions never filled) was extremely conservative. Three, most secondary adherence studies include only patients who have filled a prescription at least twice (the initial fill, with at least one refill). And four, it did not account for the fact that in any given year, there are patients who were prescribed a medication the prior year and dropped off, but who should have remained on that medication through years two, three, and beyond. See figure 1. IMPLICATIONS Although a number of pharmaceutical companies have established adherence teams, they are often underfunded, slow moving, and prone to recommending traditional tactics, such as reminder programs, cost reductions, and isolated educational campaigns. These strategies are insufficient 59 | HS&M FEBRUARY/MARCH 2017

and often do not address the root of the problem. Interestingly, regardless of condition, cost of therapy, or demographic, a common shortcoming of human psychology is the difficulty in following through with taking a medication (or with any healthy behavior) in the present for a health-related payoff in the distant future. This is a psychological reality that tends to resist simple reminders, cost reductions, and even educational efforts. However, even the most innovative and effective solution will not “cure” the problem. The goal is to raise adherence rates compared with baseline, not to perfect adherence, which is impossible. Given this reality, how much of the $564 billion ($188 billion US) lost each year can pharma reasonably expect to recoup in the best-case scenario? This remains unknown. However, if pharma were able to reduce the adherence gap by a tenth across the board, it would net an additional $41 billion in revenue to the US pharmaceutical industry each year. And, with this lift in adherence and revenues, a corresponding boost in clinical outcomes and decline in healthcare spending would be realized, benefiting patients and the healthcare industry as a whole.

A common shortcoming of human psychology is the difficulty in following through with taking a medication (or with any healthy behavior) in the present for a health-related payoff in the distant future.

Future efforts, based on better data, will offer the industry even more accurate insights into the nature of the problem, its magnitude, and the efficacy of new interventions. WHAT TO DO ABOUT NONADHERENCE Because there are numerous causes of nonadherence, there is no silver bullet solution. Pharmaceutical organizations should seek flexible, multidimensional approaches to the complex challenge of motivating patients to fill their prescriptions and stay on their medications. Three guiding principles are offered for pharmaceutical organizations seeking to improve the performance of their adherence initiatives. Make adherence a strategic priority for your organization. Adherence interventions to date have predominantly been implemented at the brand level. This cautious approach allows for the piloting of new and innovative programs, but offers only shortterm improvements that are inherently limited in scope. Pharmaceutical organizations that elevate the issue of adherence to the executive level are able to implement solutions that leverage resources and align priorities across departments and brands, affecting diverse patient populations beyond the limited reach of any single brand. Focus on enrollment strategy early. “If you build it, they will come” isn’t true. No adherence intervention will work unless it is marketed successfully and made easy for patients to enroll. Start thinking about enrollment plans well before the official program start date. De-

Figure 1. Calculation of US pharmaceutical revenue loss due to non-adherence

57%

59%

183

188

94 22

508 27

414

320 226

Actual Total

Actual Non- Actual chronic Chronic

204

Actual Chronic Split

Primary Potential Secondary NonChronic w/o Nonadherence Primary Non- adherence adherence Total

% Primary Adherence

Static

Dynamic

Potential Chronic

Delta –

Actual Nonchronic

Potential Total

Revenue Loss Due to Nonadherence

Delta +

% Secondary Adherence

##%

% of Actual Total

medications on occasion, this is Pharmaceutical organizations velop strategies to promote adherence programs directly to healthprobably the least clinically signifishould seek solutions that work at care providers and make it easy cant of adherence problems. Many scale and provide multiple apFigure 2. Current revenue loss estimate compared with previous market assumption for them to promote enrollment proaches to motivate patients to patients never fill their prescripamong their eligible patient popution in the first place or stop taking adhere to their medications. • Due to lations. Additionally, seek Annual ways to Pharmaceutical it altogether within a Revenue few months.4Loss 1 IMS Institute for Healthcare Informatics. integrate adherence programs with AdherenceNon-adherence solutions need to tackle Medicines Use and Spending in the U.S.: A Medication (billions) Review of 2015 and Outlook to 2020. Parsippany, other marketing initiatives, includboth the easy and the hard adherNJ: IMS Institute for Healthcare Informatics; ing direct-to-consumer advertiseence challenges to make a cliniApril 2016. http://www.imshealth.com/en_IE/ thought-leadership/quintilesims-institute/recally and economically meaningful ments and copay programs. Link $ 564 ports/medicines-use-and-spending-in-the-us-adifference. to a program’s enrollment page review-of-2015-and-outlook-to-2020. Accessed November 8, 2016. from digital advertisements and HealthPrize has enjoyed success 2 Thomson Reuters. CMR International Pharintegrate it with existing copay and across multiple chronic condimaceutical R&D Factbook Executive Summary. other program online enrollment London, UK: Thomson Reuters; August 2016. tions by employing a multifaceted $ 188 cmr.thomsonreuters.com/pdf/2016_CMR_Exec$ 14 forms. Many otherwise effective $ 30 Various forms of reapproach. utive_Summary.pdf. Accessed November 8, 2016. programs have failed due to poor minders are incorporated within a 3 (https://www.ncbi.nlm.nih.gov/ enrollment efforts. pubmed/16973166) robust platform based the under-

4 (http://www.ajpb.com/journals/ajpb/2016/ standing that motivation is often Patients have diverse reasons ajpb_marchapril2016/outcomes-associated2004 Market Assumption for not taking their medications; the deficient element in the adherGlobal US with-primary-and-secondary-nonadherence-tocholesterol-medications) interventions should be just as ence equation. Current Disease-specific Market Estimate diverse. education, combined with shortterm rewards and gamification, There is no single cause of nonadCOMMENT make for a compelling program 3 herence. Although some patients across diverse patient populations. do simply forget to take their

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February / March 2017

Articles inside

Why Doctors are Consulting Wikipedia: Pfizer, GSK and Others Make Access Easier

Editor’s Letter

By The Numbers

Executive Spotlight: Terry Bromley tells Crawford Healthcare’s David and Goliath Story

Benchmarking Patient Centricity