Drug companies, including Pfizer, are wooing insured consumers by offering copay coupons, which reduce the amount of money that the latter must spend for a branded drug. These coupons are intended to discourage a patient from switching to a generic therapy. To redeem the coupons, consumers often must submit personal information that allows the firms to promote products to individual patients.

The coupons may help consumers, but they oblige plan sponsors, such as employers or state governments, to pay high prices for branded drugs when generic alternatives are available. Drug companies can prevent plan sponsors from knowing when enrollees have redeemed the coupons by processing them through a “shadow claims system,” according to a statement from the Pharmaceutical Care Management Association. Copay coupons will increase costs for these sponsors by $32 billion over the next decade, according to research from Visante.

At a time when state governments and private companies are pinching pennies, it’s hard to believe that they will allow drug companies to use these tactics for very long. Arrangements such as Pfizer’s agreement to manufacture generic Lipitor for Watson, in exchange for a share of net sales, seem comparatively more benign. Deals like this don’t appear to constrain patients’ choice or force payors to spend more than necessary for a given drug. They might be the “least bad” option for drugmakers without new blockbusters on the horizon.

After reviewing its documentation, the company concluded that routine preventive maintenance and requalification of manufacturing equipment at the site was overdue. Ben Venue suspended manufacturing so that it could assess the entire site and take appropriate corrective actions to ensure the safety of its products. The suspension will affect Johnson & Johnson, which markets Doxil, as well as Pfizer, Hospira, and Teva.

Last month, President Obama ordered FDA to take various steps intended to prevent and reduce drug shortages. The agency will require advance notice from manufacturers likely to face manufacturing disruptions, and it will expedite reviews of new drug suppliers, production sites, and manufacturing changes.

These steps, while helpful, do not address an important factor that contributes to drug shortages: manufacturing deficiencies. Even before Ben Venue conducted its own review, FDA found 48 quality concerns during an inspection of the Bedford site in May 2011. FDA likely needs a larger pool of inspectors to oversee drug manufacturing sites more thoroughly. But the government’s current desire for austerity will probably preclude the budget increase that would make hiring possible.

Maybe FDA should prioritize manufacturing sites for inspection if they are among a few that produce a medically necessary drug such as Doxil. Greater attention to crucial sites could identify problems earlier and, ideally, resolve them without disrupting drug supply.

One technique was accelerated approval for drugs to treat serious diseases. This authority allows the agency to approve a drug based on clinical data showing that it is reasonably likely to have a clinical benefit, even if data do not demonstrate that the drug has this benefit. Almost half of the newly approved drugs received Priority Review because they had the potential to offer major advances in treatment, or because no adequate therapy existed. FDA sets a six-month target date to review such drugs.

Although these changes in procedure are well-intentioned, we may legitimately ask how they will affect patients’ safety. After all, GSK’s diabetes drug Avandia received fast-track approval, but an article published in The New England Journal of Medicine later linked the drug to an increased risk of heart attacks. The Wall Street Journal notes that a Senate Finance Committee report last year accused the company of hiding data showing Avandia’s cardiovascular risks, and GSK has just agreed to pay the US government $3 billion to settle this and other claims.

Creating a short timeline for drug approval could hurt the agency’s reviews of clinical data. FDA approved Pfizer’s smoking-cessation drug Chantix after an accelerated priority-review process. The agency concluded that the drug did not increase the risk of psychiatric problems such as depression. But researchers from Wake Forest Baptist Medical Center found that Chantix was eight times more likely to result in suicidal behavior or depression than nicotine-replacement products. One reason for the discrepancy could be that, unlike FDA, the researchers performed disproportionality analysis on the data—a technique that is increasingly being used to find links in side-effect data that normally escape detection in clinical trials.

FDA’s staff includes well-vetted and experienced scientists, but they need sufficient time to work thoughtfully and thoroughly. Even though the agency’s initiative has increased the number of new-drug approvals, it may also be increasing the risk that a company can hide negative data from regulators, or that the agency’s own analyses will not be as complete as they could be. In light of the problems with Avandia and the conflicting studies about Chantix, I think FDA should review its efforts to promote innovation to be sure that the agency maintains high standards for drug safety.

EvaluatePharma expects Pfizer’s prescription and over-the-counter (OTC) sales to drop to $49.8 billion in 2012, mainly due to the patent expiry on Lipitor, the blockbuster cholesterol-lowering statin that holds the record for the world’s biggest selling medicine. Meanwhile, Sanofi’s sales will grow from $47.9 billion in 2011 (which ranked it as third in terms of the world’s top pharmaceutical companies) to $51.6 billion in 2012. The French company has been moving up the rankings for some time, boosted by a decade of mergers, which began in 1990 with the deal between Sanofi and Synthelabo and culminated with the $20 billion acquisition of Genzyme in February this year.

“The takeover of Genzyme this year was an aggressive cross-border move that revealed just how much the culture of Sanofi has changed in the last few years,” explains the EvaluatePharma analysis. “The traditionally inward looking French drug maker has, like many of its peers, taken big strides to acquire and license innovation from beyond its own labs in an attempt to revive flagging R&D productivity.”

The analysis adds that sales of Genzyme’s enzyme replacement therapies should be enough to keep the crown on Sanofi’s head until at least 2016, with the blockbuster products of Cerezyme and Myozyme helping to offset revenue of Plavix, which will lose US patent protection next year, as well as the ongoing generic erosion of Lovenox and Taxotere.

Pfizer, on the other hand, will fall further behind in terms of sales. By 2016, Sanofi is expected to have sales of $58.4 billion while Pfizer will scrape $51.9 billion, representing a minute 1% compound annual growth rate (CAGR) over 2011–2016. Sanofi, on the other hand, will have a CAGR of 4%. Pfizer will also face competition from GlaxoSmithKline and Roche. By 2016, GlaxoSmithKline is expected to rank fourth with sales of $50.9 billion (compared with ranking fifth in 2011 with sales of $39.3 billion) while Roche will come in fifth with $49 billion (up from sixth in 2011 with $39.1 billion).

As for Novartis, the company will see strong growth from Gilenya and Tasigna over the next few years and will also be bolstered by its $48-billion acquisition of eyecare company Alcon, which will boost sales in areas outside of prescription and OTC drugs. Novartis was ranked second in 2011 with sales of $49.5 billion and is predicted to maintain this ranking at least until 2016, when it is expected to have sales of $54.8 billion.

Meanwhile, there will also be some shuffling in the league table among the other drugmakers too. Merck, currently ranked fourth, will drop to sixth place by 2016, and Eli Lilly, tenth, will fall to fifteenth. The analysis also highlights generics giant Teva, which is expected to rise from twelfth position in 2011 to ninth in 2016 as it grows at a CAGR of 7%. Novo Nordisk will also experience a high growth rate—currently ranked in seventeenth place, the Danish diabetes specialist will climb up to fourteenth place by 2016 with a CAGR of 9%.

Last week, the World Intellectual Property Organization (WIPO), an agency of the United Nations, founded WIPO Re:Search, a forum for public and private organizations to share intellectual property (IP) and expertise with global-health researchers. By establishing a public database of IP, WIPO Re:Search aims to help develop new drugs and vaccines to treat neglected tropical diseases, malaria, and tuberculosis. The National Institutes of Health and companies such as AstraZeneca, Eisai, GlaxoSmithKline, Novartis, Pfizer, and Sanofi have agreed to work with the group.

To join WIPO Re:Search, member organizations agree to let the group license their IP to researchers on a royalty-free basis in many cases. But some observers say that these terms will not make information accessible enough. “Instead of allowing all countries where neglected diseases are prevalent to access the products, the initiative restricts royalty-free licenses to least-developed countries only, with access for other developing countries negotiable,” said Doctors without Borders in a press statement. Many patients that suffer from neglected tropical diseases do not live in least-developed countries. “In the Americas, for example, Chagas disease affects 21 countries, but the consortium will only provide royalty-free licenses for Haiti, where Chagas is not endemic,” according to the statement.

I think that WIPO’s initiative has great potential to help ease suffering and save lives. It’s encouraging to see the pharmaceutical industry dedicate resources to treating diseases that do not necessarily represent lucrative markets. And, by pooling a large amount of expertise, collaborations such as this one promise to solve stubborn problems more quickly than might otherwise be the case. But Doctors without Borders seems to be raising legitimate concerns. Considering its overall profitability, does the pharmaceutical industry have an obligation to help countries in need?

The Senate’s Foreign Earnings Reinvestment Act, like a related bill in the House of Representatives, would reduce tax rates for CROs and biopharmaceutical firms that repatriated money earned overseas. With the money they saved, companies could hire staff and invest in research, ACRO argues.

WinAmerica, an interest group supported by various firms, says that the bill would repeat the success of a 2004 repatriation tax break. Citing information from the Bureau of Labor Statistics, the group observes that average annual private-sector employment increased by 4,385,000 jobs from 2000 through 2007, and that 98% of the increase occurred during the years when the tax break was in effect (2004 through 2006).

The tax break did not benefit the entire private sector, however. It primarily helped pharmaceutical and technology companies, according to a report by Senator Carl Levin (D-MI). Bristol-Myers Squibb, Eli Lilly, Johnson & Johnson, Merck, and Pfizer were among the top 15 repatriators that time around. After bringing $155 billion in overseas earnings back into the country, these 15 firms reduced their overall US workforce by about 21,000 jobs and spent slightly less on R&D. Instead of creating jobs, the companies used the extra money to repurchase stock and raise their top executives’ pay by about 28%—despite express prohibitions against using the money for these purposes.

The increase in employment that WinAmerica cites seems to have occurred in industries other than those that benefited from the tax break—and for other reasons. The law that granted the previous tax break did not include a means of monitoring compliance. Unless the Foreign Earnings Reinvestment Act can do this, and can impose penalties for noncompliance, it will not create jobs for those who need them. I hope Congress takes heed of Senator Levin’s report as it considers the new bills.

Understanding critical quality attributes will help Pfizer develop robust design spaces and, ultimately, achieve real-time release, said Gerry Migliaccio, senior vice-president of network performance for Pfizer Global Supply, according to In-Pharma Technologist. Migliaccio made his remarks at a meeting of FDA’s Advisory Committee for Pharmaceutical Science and Clinical Pharmacology. Using QbD as a basis, and process analytical technology to establish manufacturing controls, Pfizer believes it will be able to reduce quality-control costs, achieve real-time release, and quickly get a return on its investment.

But not all companies are rushing to adopt QbD. Manufacturers of small-molecule generic drugs fear that spending the extra initial time and effort to adopt QbD could prevent them from being the first to file an application for their products. “If you’re not first to file, you may as well be last,” said Yatindra Joshi, vice-president of generics R&D for Teva, at the same FDA meeting. Consequently, some generic-drug manufacturers aren’t willing to gamble that the benefits of QbD will outweigh the profits lost by not being first to file.

If Pfizer and other heavyweights adopt QbD, it could boost patients’ confidence in the safety and efficacy of marketed drugs. But patients would benefit even more if generic-drug manufacturers felt freer to pursue this initiative. By making some elements of QbD mandatory in filings, FDA could “level the playing field,” said Joshi. This idea seems like one plausible solution that could be of advantage to the industry and consumers alike.

For FDA’s evaluation of the QbD program so far, please watch for Pharmaceutical Technology’s September issue, in which CDER’s Helen Winkle and Moheb Nasr analyze the initiative’s present and future.

Many drugmakers have taken their investors’ advice to heart. One salient example is Pfizer, whose CEO Ian Read plans to slash R&D budgets by about 25% over the next two years. Chris Viehbacher, CEO of Sanofi, told Reuters that R&D cost cutting would increase throughout the industry this year and next. Companies are likely to focus their discovery efforts on the most lucrative areas in an attempt to get more bang for their R&D buck.

But, profitable or not, don’t patients need new and better drugs? Where will they come from? Drugmakers may well outsource innovation by partnering with entities such as universities and contract research organizations, Tim van Biesen, head of Bain and Company’s healthcare practice, told Reuters. They’d be following Hollywood’s strategy of sourcing “movies and scripts from all over the place,” he said. Shire already seems to have started along this path.

Big Pharma also might take advantage of its scientific expertise and marketing muscle by creating follow-on biologics. Cheaper versions of biopharmaceutical treatments for rheumatoid arthritis and cancer are in big demand, said David Snow, CEO of Medco Health Solutions, to Reuters. Making follow-on biologics could be a way for Big Pharma to boost sales. In addition, the discount for these medicines likely will be less than that for small-molecule drugs because they’re tougher to copy—and fewer competitors will manufacture them.

While these strategies might eventually improve Big Pharma’s bottom line, they also represent a shift away from the traditional model of what a drug company is. And even if it helps the drug industry, will the emerging model serve patients’ interests?

New Jersey’s pharmaceutical workforce has shrunk as a result of mergers and flagging sales, and observers are searching for a tonic to give the industry new life. One necessary strategy is to form partnerships with international investors or other drugmakers, said David Finegold, dean of Rutgers University’s school of management and labor relations, at the EU–NJ Business Forum. Investors in South Korea, India, and China are putting a lot of money into the industry, but they don’t have people with experience in gaining FDA approval for their products, Finegold said, according to The Record.

Finegold’s model of choice is the partnership between Merck & Co. and the Wellcome Trust medical charity, which is based in the United Kingdom. The partnership aims to prevent diseases that affect poor countries by developing new vaccines and optimizing existing vaccines. Merck and the Wellcome Trust invest equally in the partnership and share decision-making responsibilities.

The partners run the venture like a business, but according to a not-for-profit model, which is a foreign concept to most drugmakers. Yet the pharmaceutical industry will have to get used to this idea. To survive, firms will have to abandon their high profit-margin business models, Finegold said.

Give him credit for trying to get risk-averse drug companies to adopt new and creative ways of thinking and operating. Although Finegold’s recommendations could help stimulate the industry, I wonder whether they would increase domestic employment. The Merck–Wellcome Trust partnership, Finegold’s template, is based in India. An ideal business model would foster international cooperation, create domestic jobs, and encourage the development of needed therapies. If nothing else, Finegold’s remarks will help start discussions that could lead the industry toward this ideal.

Definitely, says the Hay Group, a management-consulting firm. Big Pharma’s executive-compensation plans reward compliance and short-term financial gains when they should be encouraging risk-taking, according to the firm’s research. About 80% of criteria that determine incentives are financial, and only 12% relate to drug development and commercialization. Although short-term incentives are common, they’re inappropriate for the pharmaceutical industry because of its long product-development processes, according to Hay Group.

In light of Hay Group’s research, the compensation package for former Pfizer CEO Jeffrey Kindler makes no sense at all. The company was facing distinct problems when its board gave Kindler the boot in December 2010. Not only had Pfizer’s share prices languished for four years, several promising drugs had failed in late testing, including a potential replacement for Lipitor. Despite these problems, Kindler got a 60% raise over his 2009 compensation. A performance-related bonus brought his compensation to $4.9 million. Kindler seems to have been rewarded for failure, which, to my mind, is even worse than being rewarded for short-term gains.

To overcome its current challenges, Big Pharma will have to change how it defines, measures, and rewards performance, according to Hay Group’s research. Fortunately, Big Pharma can use mid-sized drugmakers and biopharmaceutical firms as models. These companies “have been much more creative in weaving pipeline and R&D measurements into their incentive strategies,” said Hay Group in a press release. By learning from these firms’ compensation strategies, Big Pharma might match their level of innovation.

It’s easy to blame circumstances for our failings, and harder to admit our own missteps. If it took Hay Group’s recommendations seriously, Big Pharma might reclaim its reputation for innovation. And achieving this goal naturally would be good for the world’s patients as well as for industry.