The Chasmic Shift in Disruptive Business Climates

The Chasmic Shift in Disruptive Business Climates

The Chasmic Shift in Disruptive Business Climates

It has been a few months since I have had an opportunity to write for pleasure. After completing my doctoral work on August 25th, working on a major global submission, and teaching 2 sections of Healthcare Marketing and Communications at West Virginia University, I needed some time off to focus on other initiatives. But, there is nothing like a break from the absence of grading 20 papers and discussion boards weekly to rekindle interest and chime in on the debates.

On Tuesday, September 15th, I was session leader (Combination Products in Asia – Regulatory Challenges and Successful Development and Approval Strategies) at the Regulatory Affairs Professional Society Annual Conference and it was noticeably smaller as compared with the Boston conferences of 2007 and 2008.  Yes companies reduced the numbers of attendee, but there were less companies overall. This year has seen victims of shrinking capital markets, disappointing FDA feedback and company decisions to forgo developmental targets and potential indications owing to funding priorities.

Traditionally, FDA approval of new drugs used to be based upon sponsors’ demonstration of safety and effectiveness via a Biologics License Application (BLA), New Drug Application (NDA), Premarket Notification (510k) or Premarket Application (PMA), and on the basis of information submitted in support of the marketing application. Based on bureaucratic learning, past FDA errors and resulting criticisms, FDA divisions have added clinical relevance and utility as benchmarks for approval and standard setting.

Gone are the days of business models where companies created entire business structures that revolved around one or two developmental compounds in clinical trials. The industry has moved from a history of exuberant excesses to lean manufacturing, better evidence for reimbursements and business practices for long term profitability.  Now we are in the era of “healthcare reform” where the current healthcare crisis has been characterized as a demonization of the insurance industry, similar to the “evil pharma” campaign that characterized the prescription drug debates.

Though the “reform friendly” medical products industry is distinguishable from other health care services because it provides tangible products, the industry remains vulnerable. Current indicators suggest that government and legislative policy has resulted in negative confidence of future growth. The Obama Administration’s ambitious foray into “health reform” amounts to a de facto restructuring of one-sixth of the ~$15 trillion US economy and ushers the question: How will this shape business models and more importantly, how will medical products and healthcare companies do business in a post-reform environment?

Following are a few obvious guidelines for evaluating the “post reform” healthcare paradigm.

Universal Coverage = More Governmental Control

Common sense dictates that universal coverage will lead to a fully funded government mandate and obligation. This will ultimately result in cost containment and thus limit access and choice.

More Healthcare Demand without Increasingly Supply = Higher Than Projected “True Economic Costs”

Economic fundamentals dictates that increasing demand for healthcare consumption by extending coverage to the uninsured without concomitant policies aimed an incentivising facility construction  or adding more physicians, will increase healthcare costs on an individual and governmental level. The unanswered question is which of the stakeholders (employers, industry, government, patients or providers) will end up covering the bill.

Reform = Different or Disproportionate Impacts on Primary and Specialty Medical Products

Expanding access to healthcare for the uninsured will increase demand for primary care medical products used to treat and prevent chronic conditions. This will have a disproportionate impact on the higher priced specialty medical products used to treat and manage diseases targeted to smaller patient groups and which are marked by higher co-pays and limited or no reimbursements.

Disconnected Expert Panels = Potential for Danger

Attempts to shield the government from the appearance of political involvement by relying on expert panels to decide on coverage and reimbursements can be open to “stakeholder pressure.” These elites who are not necessarily vested and politically insulated in an ivory tower can be a recipe for danger. Outside US, the experience with these types of panel suggest that they encourage companies to utilize patient groups and other strategies to influence coverage and access.

Piecemeal Approaches = Similar Outcomes

The theory of structuration as proffered by Anthony Giddens (1986) emphasizes “a differentiation between the concepts of ‘structure’ and ‘system’” (Giddens, 1986, p. 17). Giddens points out that “structure is a set of rules, systems ….comprise… human agents” and structuration “is….. the duality of structure” (Ibid., p. 25). In examining congress, the underlying construct is in seeking a balance or duality between the risks of nothing doing anything versus the risks of doing to much. Regardless of whether full reform is achieved or negotiated piecemeal stop gap measures, pressures will continue to have an effect on the structure and we are likely to revisit again in 10-20 years.

Conclusion

A fundamental tenet of healthcare economics is premised on the idea that we are all born with a stock of good health and our lifestyle choices and access to healthcare determines appreciation or depreciation. The fundamental question has been muddled and is simply whether we as Americans support a “floor” not a “ceiling” to cover those less fortunate.

Sources:

Giddens, A. (1986). The Constitution of Society: Outline of the Theory of Structuration. University of California Press.