50 J u l y 20 03 PharmaVOICE PHARMA TRAX SALES, MARKETING, AND R&D TRENDS AFFECTING THE HEALTHCARE INDUSTRY Study Suggests Physicians Want to Hear from REPSWITH OBJECTIVE INFORMATION A study from J. Scott International Inc. suggests that doctors are more likely to write prescriptions if they are persuaded they are using the best product — and that objective information about the product is the most persuasive tool a sales rep can offer. A survey of almost 2,000 physicians con ducted during the first quarter of 2003 for J. Scott International’s Qualitative Detailing Analysis shows that physicians actually look forward to seeing reps who have extensive knowledge of the disease state treated by the drug they are detailing; who know the complexities of the use of the drug, espe cially for patients being treated for multiple conditions; who not only answer but also ask knowledgeable questions about doctors’ experi ence with the drug, including questions about alter native dosing and minimizing side effects; and who can give concise accounts of the drug,backed up by objective studies and with journal reprints, especially for new drugs or new indications. “ Too often, the pharmaceutical industry is accused of trying to buy physicians’ prescriptions in one way or another,”says Joy Scott, founder and CEO of J. Scott International.“But physicians are seldom taken in by hype.Our results show that knowledge is the best way to influence physicians.” Pharmaceutical, Healthcare Products, and Services Industries Need to IMPROVE ONLINE CUSTOMER SERVICE The Customer Respect Group’s Spring 2003 Online Customer Respect Study has revealed that more than onehalf of pharmaceutical, healthcare, and healthcare wholesale companies don’t respond to Website inquiries, but, 80% of medical product and equipment companies do. The two highest scorers in overall customer respect among all surveyed companies were Dade Behring Holdings and St. Jude Medical.The highest scoring firm in the pharmaceutical sector was Wyeth; the healthcare leader was Express Scripts; and the top scoring healthcare wholesaler was Henry Schein. Nearly 64% of pharma companies were found to not respond to online inquiries. Of the 36% that do respond, 80% respond within 48 hours, and 20% respond within 72 hours. Only 36% of these pharmaceutical companies use Autoresponder technology,in which emails are automatically sent back to confirm the receipt of the inquiry and let them know when they should expect a response. Of these, 20% did not followup with a full response. About 53% of pharmaceutical companies sur veyed provide email forms for online inquiries and 26% provide email addresses.The survey also found that 21% only provide offline contact information. And 68% of pharmaceutical companies in this study provide a keyword search function on their site. Pharmaceutical sector firms received the best overall rating, 7.5, for privacy and the worst, 3.7, for responsiveness. About 89% of sector firms have pri vacy policies on their sites explaining how cus tomers’personal data are used. “It’s difficult to conceive why, outside of medi cal products and equipment, more than half of surveyed pharmaceutical and healthcarerelated firms don’t respond to online inquiries put to them,” says Donal Daly, CEO of The Customer Respect Group. The Customer Respect Index is a qualitative and quantitative indepth analysis and independent measure of a customer’s online experience when interacting with companies via the Internet. By look ing at more than 1,000 Websites across a spectrum of industries in detail, The Customer Respect Group has determined 25 different attributes that combine to create the entire online customer experience. These attributes have been grouped together and measured as indicators of privacy (respects cus tomer privacy),principles (values and respects cus tomer data), attitude (customer focus of a site),trans parency (open and honest policies),simplicity (ease of navigation), and responsiveness (quick and thor ough responses to inquiries). Combined, they mea sure a company’s overall customer respect. ClinicalTrial Cost Estimates Indicate RAPIDLY RISING R&D EXPENSES The fully capitalized cost to develop a new drug, including studies conducted after receiving regula tory approval,averages $897 million, according to an analysis by the Tufts Center for the Study of Drug Development. “Drug development remains a timeconsuming, risky, and expensive process,”says Tufts Center Direc tor Kenneth I. Kaitin. “To mitigate rapidly rising R&D Donal Daly: Given the myriad controversial issues they face, one would think that pharma firms would be quick to answer questions and improve their overall communications with the public, potential customers, and suppliers as well as business partners. Joy Scott says the sales rep helps physicians under stand the differences between products and provides them information on disease states. THE PHARMACEUTICAL SECTOR’S SPRING 2003 RANKING Company Overall Name Ranking Wyeth 8.1 Forest Laboratories Inc. 7.9 Abbott Laboratories 7.5 Allergan Inc. 6.8 Merck & Co. 6.8 Amgen 6.6 Barr Laboratories 6.5 Biogen Inc. 6.4 Johnson & Johnson 6.1 ScheringPlough Corp. 6.0 GenzymeCorp. 5.6 BristolMyers Squibb Co. 5.5 WatsonPharmaceuticals Inc. 5.4 King Pharmaceuticals Inc. 5.3 Chiron Corp 5.1 Pfizer Inc. 4.2 Eli Lilly &Co. 4.1 Ivax Corp. 2.7 Industry Average 5.9 Note:Due to its recent acquisition by Pfizer, Pharmacia was not included in this study. Source:The Customer Respect Group,Bellevue,Wash. For more information,visit customerrespect.com. 51 PharmaVOICE J u l y 2 00 3 PHARMA trax costs, pharmaceutical firms, over the past decade, have aggressively sought to identify likely drug fail ures earlier in the development process. These efforts appear to be paying off, as the rate of late phase terminations in the 1990s declined,compared with the 1980s.” In 1991, the Tufts Center estimated that the aver age cost to develop a new drug was $231 million (in 1987 dollars), equivalent to $318 million in year 2000 dollars. During the 1990s, clinical development times were a major source of the growth in drugdevelop ment costs.From the 1980s to the 1990s,clinical peri od outofpocket costs grew five times as fast as pre clinical period costs, according to the Tufts Center study. The Tufts Center study was based on an analysis of data covering 68 drugs from 10 multinational, for eign and U.S.owned pharmaceutical firms during the 1990s. Included were products that won or failed to win marketing approval,as well as products still in devel opment. Pharmaceutical Companies’ IT Spending To Shift to Support INTEGRATION OF ENTERPRISEWIDE BUSINESS PROCESSES Executives at Intrasphere Technologies Inc. say pharmaceutical companieswill increasingly shift their IT spending from systems that support a single func tion or department to systems that will help them integrate business processes and share data across the enterprise. The new focus is expected to help companies better control global expens es, manage all dimensions of their clinical trials, track perfor mance,and create a truly glob al supply chain. “During the next few years, we will see more global phar maceutical companies lever age the significant invest ments they’vealready madein ERP and other financial sys tems,clinicaldata systems,and other operational systems by integrating these systems and the data that resides in them,” says Bill Karl, CEO of Intras phere. “There’s no shortage of information, but the information assets are all too often hidden in data silos specific to a department or function. The legacy of distinct silos of information within the organization doesnot support information integration and analysis at a strategic level.The ability to analyze data across departments, functions, busi ness units, and international operations will be the next strategic imperative for many companies.” Intrasphere predicts that pharma companies will focus on data warehousing,data marts,business intel ligence, and any other technologies that allow com panies to stretch their data beyond the typical opera tional use. More companies are expected to invest in technologies that allow senior management to view summary level information across the organization, and to analyze performance trends and identify opportunities for improvement. With the emergence of standards such as XML, SOAP,andWSDL,Web servicesare predicted to begin to offer a new level of interoperability and collaboration between businesses.This will challenge the application developers, since they will be required to evolve from developing application silos to a collaborative pro gramming model. Intrasphere researchers say the shift to a more unified corporate structure will result in the creation of global sup plychain organizations, glob al sourcing organizations, and the integration of the manu facturing sites with the rest of the operational systems. The next big integration hurdle is projected to be consolidating the commercial and R&D organizations. Companies also are expected to explore ways to facilitate the transfer and integration of data that resides in laboratory informa tion systems and clinical data management systems. “Connectors” may prove to be the answer to providinga secure andconsistent means of transferring and updating data across various devel opment phases and clinical programs, thus improving the overall efficiency of the research process. MOREGLOBALPHARMACEUTICAL COMPANIESWILL LEVERAGETHE SIGNIFICANT INVESTMENTS THEY’VEALREADY MADE IN ERP ANDOTHER FINANCIAL SYSTEMS, CLINICALDATA SYSTEMS, ANDOTHEROPERATIONAL SYSTEMS BY INTEGRATING THESESYSTEMSANDTHE DATATHAT RESIDE INTHEM. Bill Karl CEO, Intrasphere “Many factors are driving up clinicalperiod related costs. Among them are a greater emphasis on developing treatments for conditions associated with chronic and degenerative diseases, increasing clinicaltrial sizes, rising subject recruitment costs, and more procedures performed per subject,” says the study’s senior author, Dr. Joseph A. DiMasi. THECUSTOMERRESPECT GROUP, Bellevue,Wash., is an international research and consulting firm that uses its Customer Respect Index methodology to help companies improve how they treat their customers online. For more information, visit customerrespect.com. INTRASPHERETECHNOLOGIES INC., NewYork, is a leading technology consulting and systems integration firm, providing a broad range of services to help its Fortune 100 clients build powerful knowledgedriven enterprises.For more information, visit intrasphere.com. Follow up J.SCOTT INTERNATIONAL INC.,Newtown, Pa.,provides a broad range of syndicated and custom research services for pharmaceutical companies around the world.For more information, visit jscottintl.com. TUFTS CENTER FORTHE STUDYOF DRUGDEVELOPMENT,Boston, is affiliated withTufts University and provides strategic information to help drug developers, regulators, and policy makers improve the quality and efficiency of pharmaceutical development, review,and use. For more information,visit csdd.tufts.edu. Average outofpocket cost per approved drug for postapproval research anddevelop ment is $140 MILLION,but when capitalized to the point of marketing approval, using a discount rate of 11%, discounted outof pocket research and development costs are $95 MILLION. Average capitalized cost for postapproval R&D was10.6% of the total capitalized cost. While total average (preclinical plus clinical) costs increased 5.8 TIMES in constant dollars between the 1970s and 1990s, clinical costs increased 8.6 TIMES. Only 21.5% of drugs that begin Phase I human trials are eventually approved for marketing. Source:TuftsCenter for the Study of Drug Development,Boston.. For more information,visit csdd.tufts.edu. FINDINGS FROMTHE TUFTS CENTER ANALYSIS

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