Global Issues Bua. Corporate citizenship in the global society will face increasing pressure to provide innovative pharmaceutical products to third-world countries at a discount and to provide products that have no IP protection in the interest of public health. This will create opportunity losses for pharma, instead of the opportunity gains that could result from focusing manufacturing capabilities in more profitable areas. In addition, increased globalization and improved communication will create pressure to equalize pricing across countries. This, in turn, could remove incentives for R&D innovation. Barrett. Recent health issues, such as SARS, have demonstrated that disease doesn’t respect national borders. Neither can companies running clinical trials. With patient recruitment becoming more difficult and clinical trials requiring more specialized populations, the healthcare industry needs to find easier and better ways to globalize its efforts. Of course, with globalization compliance issues explode. Companies need to ensure they are meeting all the regulations worldwide, pointing to standardization and automation. Bonney. Infection does not have boundaries, and there is a need for new therapies in many countries. We must deal with multiple regulatory regimes around the world. The payers are very different in each region/country and that can add complexity and challenge the profitability of the company. And, of course, the largest issue is the disparate contribution to R&D made by the various developed countries of the world. Overall, the cost and efficiencies of healthcare delivery in the United States compared with other developed countries are challenges. Xanthopoulos. Infectious diseases continue to present a growing healthcare problem on a global basis, especially as more and more patients develop resistance to available treatments. For example, hepatitis B affects about 350 million people worldwide. For hepatitis C, the CDC estimates that by 2010, the number of deaths attributed annually to the virus could surpass HIV/AIDS. As these viruses develop resistance to existing treatments such as lamivudine, Anadys is focusing on the development of novel, high-potency, low-toxicity treatment alternatives that either show activity against resistant strains or use a novel, immune-stimulating mechanism of action that is less likely to result in resistance. Cauwenbergh. With the price gap getting bigger, it is likely that developing countries will follow the lead of South Africa and decide that on an “as-needed” basis for diseases that become a national threat, they will not respect patents anymore. Parallel import and protectionism will become global issues, as will acceleration of infectious diseases in developing regions of the world in the presence of a lackluster interest in pharmaceutical companies to seek solutions. Turett. The lines between the developed and developing world are blurring with the entry of Eastern European countries into the EU, the development explosion in China, and the realization that Americans need not look beyond their own inner cities and rural areas to find the underserved and needy. Companies will need to take an integrated approach to bring marketing and corporate social responsibility operationally closer than they have ever been. Savello. The global AIDS and the HIV epidemic will continue to dominate global healthcare. How Western and global pharmaceutical companies deal with patent issues, pricing, distribution, and so on, in developing nations most in need of anti-HIV medications likely will heat up and continue to be the dominant issue. Wilhelm. Emerging infectious diseases that can lead to pandemics will necessitate greater coordination between multiple health agencies, regulatory agencies, and industry, if they are to be prevented, contained, or treated effectively. Hamelin. Importation is a serious industry issue that has global ramifications. In Europe, for example, governments control the price charged for a product and in many countries the price is less than in the United States. Unfortunately this means that the U.S. consumer is paying a higher price because elsewhere in the world prices are being kept down through governmental price controls. The industry needs a more standardized system across the globe for pricing so that no continent is subsidizing another through higher pharmaceutical pricing. This also has potential social implications. For example, if some countries in Europe won’t allow the same prices as in the United States because a government does not want to relinquish control on pricing, it could create access issues. Companies may determine that they do not want to provide the product at the lower price. Erickson. The real issue is that the U.S. consumer pays for the world’s healthcare R&D, and consumers in price-regulated markets get a “free ride.” Politicians in this country have not been willing to acknowledge and address this issue directly. If these issues are not addressed and margins for high value-added proprietary products come under pressure, the medical-products industry, particularly pharmaceutical and biotechnology companies, will be forced to cut R&D dramatically and venture capital and other long-term investment in new healthcare technologies will drop. Wicks. One main challenge for the pharmaceutical industry is the rising cost of healthcare. Americans are wary of the continued increase in healthcare insurance costs and the corresponding increase in copayment for pharmaceutical products. People in other countries, regardless of whether they have a private or public healthcare system, share similar concerns. Many countries have responded by putting a cap on pharmaceutical prices, and groups in the United States are calling for similar measures. While price regulations may help to ensure that all patients can afford treatment in the short term with current or older products, there will be a distinct effect on the pharmaceutical industry. Pharmaceutical companies may not be able to recoup the costs for developing and marketing a drug. This will limit the industry’s ability to reinvest in R&D efforts. In turn, pharmaceutical innovations will be stalled as many companies will be deterred by the high financial risk of unsuccessful product trials and the length of time needed to bring a novel product to the market. The industry must address how to continue treatment innovation while limiting costs. One solution to the situation is increased collaboration among international companies. By sharing the responsibilities and investments required for new drug development, companies can limit their liabilities, while positioning themselves to receive financial rewards. McNamara. There are a number of global healthcare issues that will affect the industry in 2005, from how we can better address issues of access — to physicians, medications, and quality care — in developing countries to how we can better combat bioterrorism. But one of the most significant issues we face in the coming year is how we can build better clinical-development programs. The need for good medications and new therapies for diseases is universal, yet there is a lack of international standards of care and clinical development. Setting these standards and making it easier for pharmaceutical companies to operate clinical programs more seamlessly around the world will benefit all. Of course, part of the process of setting international standards and including more nations in clinical development involves the pharmaceutical industry working more diligently to explore opportunities in countries such as China, India, and Russia and finding ways to work effectively in those markets. Zeldis. The European medical research regulations have changed dramatically and will require effective implementation at the local level. Japan’s practices for obtaining regulatory approvals are in evolution. Price differentials may result in single pricing structures for drugs internationally. The industry will have to work with the World Health Organization (WHO) and other organizations to deal with patent issues, as well as the cost of drugs in countries that cannot afford the price of meaningful therapeutics. Hurley. Because of its excellent enrollment and retention rates, Latin America is growing in popularity as a region of choice for clinical trials to supplement the United States and Western Europe. With a patient population of more than 500 million people across a broad spectrum of disease areas, Latin America offers valuable alternatives that help expedite clinical-development timelines through seasonal advantages and fewer competing studies. Other advantages to conducting clinical trials in Latin America include: quality per FDA inspection results on par with Western Europe; excellent enrollment rates per site averaging two to four times that of the United States and Western Europe; established regulatory systems that reflect ICH-GCP standards with competitive timelines for approvals; and significant patient populations for type 2 diabetes and oncology trials. In addition, according to a recent study cited in The Wall Street Journal and conducted by Chicago-based Jones Lang LaSalle Inc., Latin America comes out ahead of other areas around the globe as an offshore market when factors such as labor quality, labor supply, and time-zone differences are taken into account. Latin America will only continue to grow in importance as a key region for the development of new medicines as biopharmaceutical companies continue to discover and experience these significant advantages. What’s Your Opinion? 2005 — A look ahead What are the most significant business challenges you believe the industry will face in 2005? Drug safety The major business challenge facing the pharmaceutical industry will be drug safety. Proving drug safety, and then monitoring it more transparently, will cost pharma companies. Sarbanes-Oxley is an apt simile for what pharma companies may face. Dodge Bingham VP, Strategy and Development Thomson Healthcare — PDR Multiple challenges In 2005, the pharmaceutical industry will need to contend with several challenges: drug-safety issues, poor management, pricing issues/government control, innovation, and the emergence and impact of consumer-directed healthcare. Dr. Stephen Schectman Clinical-trial barriers We see clinical-trial process barriers — both internal (pharma decision models, timetables, and expertise) and external (media coverage, site resource challenges, competitive trials, and narrow subject population targets) — as continuing to adversely impact study-completion timelines in 2005. Frank S. Kilpatrick President Healthcare Communications Group $28 Billion In vitro diagnostic Industry Comes Alive with Innovations and New Markets The worldwide market for in vitro diagnostic (IVD) tests was about $28 billion in 2003, according to a study from Kalorama Information. Spurred on by innovations in several segments and by an increasing demand from the developing world, the market will approach $40 billion. The new study, The Worldwide Market for In Vitro Diagnostic Tests, 4th Edition, predicts modest growth across most diagnostic segments in the developed world, but that growth as high as 20% or more can be expected in parts of Asia and Latin America. In addition, several segments of the IVD market are displaying rapid growth. Molecular testing, particularly in genetic diseases, oncology, and infectious disease, will display growth in the 20% to 30% range over the next five years. “Since the mid-1990s, in vitro diagnostics had been lumbering along at a 3% to 5% annual growth rate and major segments such as clinical chemistry, immunoassays, and hematology had actually stalled,” says Shara Rosen, the author of the report. “Over the next five years the situation will change. In addition to molecular assays, the over-the-counter (OTC) diagnostic sector, flow cytometry, and some immunoassay segments have come alive.” Source: Kalorama Information, New York. For more information, visit kaloramainformation.com. Molecular testing, particularly in genetic diseases, oncology, and infectious disease, will display growth in the 20% to 30% range over the next five years. What’s Your Opinion? 2005 — A look ahead What are the most significant business challenges you believe the industry will face in 2005? Service-provider relationships Within the life-sciences industry, the pharmaceutical-services sector faces a unique set of challenging market dynamics. Much of big pharma has indicated a desire to greatly reduce the number of vendors used for outsourced services, which will drive service providers to consolidate to gain global scale and/or one-stop-shop service offerings. Technology remains a challenge as the FDA is prodding the industry toward electronic data standardization (i.e., CDISC), and pharma finally appears to be taking the value proposition of technology seriously. But standardization and adoption rates still remain a large unknown. Finally, the IND and NDA walls, which historically have separated different types of service providers, continue to erode (i.e., Charles River’s acquisition of Inveresk). So even entrenched companies must watch their backs for competitors suddenly entering the market. For mid-tier service providers, such factors make it challenging to strategically position themselves. Conversely, such a market is rich in opportunities for niche providers, particularly those with high, sustainable profit margins. Shane C. Senior, CFA Managing Director Crosstree Capital Partners Inc. Paul Freiman Neurobiological Technologies Inc. The United States is a microcosm of the global healthcare problem — prices are viewed as being too high and resources are too scarce with regard to government funding. The biopharmaceutical industry should be leading the debate on the hard choices needed to ensure access to medicines in the developed and developing world markets. Dr. Mark Ahn Hana Biosciences Inc. Dr. Ted Love Nuvelo Inc. Without a doubt there will continue to be intense healthcare system cost pressures in Europe, Japan, and the United States. Brent Saunders Schering-Plough Corp. I’m one of two or three global compliance officers in the pharmaceutical industry that has a broad and global mandate for the scope of the compliance efforts. Many big pharmaceutical companies are looking at globalizing their programs and expanding the scope to include areas beyond health care compliance. Right now, many programs are fractionalized. Because of its excellent enrollment and retention rates, Latin America is growing in popularity as a region of choice for clinical trials to supplement the United States and Western Europe. Dennis Hurley Kendle International Inc. Dr. Kleanthis Xanthopoulos Anadys Pharmaceuticals Inc. There is a lot of pressure from investors to deliver approvable products as quickly as possible. Many investors don’t want to wait the 10 years to 14 years it takes to develop a drug from scratch.

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