[Business Insider, Max Nison] Swiss drugmaker Novartis recently lost patent protection on its best selling product, Diovan. They don’t have anything coming soon which looks like it could replace it. It’s a problem throughout the industry. Breakthroughs in huge markets, like that for Alzheimer’s treatment, haven’t materialized, despite billions in spending.
That might be why Novartis picked an outsider, Joseph Jimenez, to lead it through this difficult time. Jimenez had previously worked in consumer goods.
He discusses how he’s attempting to change the company in a Q&A with the Wall Street Journal. Some of it’s your standard material about writing fewer power points and spending more time with customers, but he also gives an interesting example of how the industry can and must change in an age of budget crises:
I also started to shift our business away from a transactional model that was focused on physically selling the drugs to delivering an outcome-based approach to add value beyond just the pill. I really believe that in the future, companies like Novartis are going to be paid on patient outcomes as opposed to selling the pill.
And as an example:
…Let’s take a patient who suffered a hip fracture after having been treated with Aclasta—we would reimburse this patient for related expenses. It’s not quite a guarantee that you’re not going to have a [health issue] if you are infused with Aclasta but it is a move down that path of being paid for the positive outcome as opposed to just the individual transaction.
Europe will be slashing budgets for years to come, so to make sure those governments continue to buy their drugs, companies have to take the next step to prove their value.
The United States just made its first effort, with the Affordable Care Act, to tie healthcare payments to quality and cost-effectiveness, rather than quantity. Medicare and Medicaid in particular will push to reduce unnecessary tests, treatments, and prescriptions, making measuring health outcomes more important than ever.
When you add recent high-profile lawsuits regarding off-label marketing and other dubious practices by pharmaceutical companies, the case for change is pretty strong.
This would be a massive shift by the pharmaceutical industry, which has long depended on sales forces and advertising to deliver.
If a shift in the model means more money goes to research and development, that could positive. Though universities and hospitals may make initial discoveries, it’s only pharmaceutical companies that are able to complete the incredibly complex, costly, and time consuming process of bringing a drug to market.