VOI News

Webinar on Probabilistic Modeling in Pharmaceutical Development

VOI Consulting is a big proponent of applying probabilistic forecasting techniques such as Monte Carlo analysis (MCA) to pharmaceutical industry decision making. In the last year alone we’ve used MCA to evaluate pipeline opportunities, find an optimal price for a new drug with multiple segments and price sensitivities, develop a wholesale bidding strategy for a generic manufacturer, establish the likelihood of competitors reaching market by certain dates, select clinical trial sites, and determine distributions of Medicare DRG payments based on hospital and patient characteristics.

Unfortunately, probabilistic forecasting is not nearly as widely known (or used) as it should be. Most likely the name implies a headache-inducing level math that most busy pharmaceutical executives simply don’t want to tackle. It’s actually much easier than that mainly because we are only asking clients to be intelligent consumers of the analytical results and this requires little more than the ability to understand a probability distribution chart or statements like “there’s an 85% chance of generating positive ROI on this marketing initiative.” It’s so much easier than people expect and so much more powerful than standard spreadsheet modeling that after reviewing the results of a Monte Carlo analysis on a recent pipeline licensing opportunity, one of our C-level clients stated, “I wish someone had explained this approach to me 20 years ago.”

With this in mind, we’re always glad to see Monte Carlo analysis promoted for pharmaceutical industry applications. One such instance is a webinar from Palisade Software, the makers of the @Risk suite of probabilistic modeling tools who recently hosted “Using @RISK in Evaluating Full (late stage) Compound Development in the Pharmaceutical Industry” by Venkat Raman of VR Advisors LLC. An archived version is available here.

Adweek on “the New Face of Big Pharma”

Adweek has an in-depth article on the evolution of consumer-oriented pharmaceutical marketing. Given that measured DTC spending declined from a peak of $5.4 billion in 2006 to $3.5 billion in 2012, the industry has already been moving away from mass market product-oriented advertising towards value-added, relationship-oriented marketing. Big Data will enable this next wave but, as usual, regulations regarding industry promotional activity lag the technology.

One of the major thrusts of the new approach is an increased focus on patient adherence programs. As we discussed in our recent white paper on the “utilization plateau,” adherence is one of the two most promising strategic options for ensuring continued sales growth in an increasingly challenging U.S. pharmaceutical market.

PRESS RELEASE: Prescription Drug Utilization among Elderly Americans has Reached Plateau, Growth will Slow to 1/40th Rate of Preceding 20 Years.



Prescription Drug Utilization among Elderly Americans has Reached Plateau, Growth will Slow to 1/40th Rate of Preceding 20 Years.

FORT LAUDERDALE, FL, Sep. 30, 2013 – A new white paper from life-sciences advisory firm, VOI Consulting (VOI), shows that a confluence of technical, medical and social factors led to dramatic growth in per capita prescription drug consumption in the United States over the past 20 years. However, VOI’s long-range forecasts suggest that consumption levels have reached a saturation point with the result that the U.S. pharmaceutical market will not experience a similar wave of sustained, industry-wide growth in the foreseeable future. These findings support other recent research indicating that U.S. health spending will be less burdensome than previously expected but they are troubling from the perspective of the pharmaceutical industry. Although the impact of declining utilization growth is already being felt, the slowdown has generally been attributed to generic competition, cost containment, or a stricter regulatory environment. VOI’s analysis shows that declining utilization growth is, in fact, the most important structural challenge facing the industry.

The white paper finds, for example, that average consumption of prescription drugs among Americans over 65 went from 2.3 per month in 1990 to 4.1 per month in 2010, an increase of nearly 80% on a per-person basis. By comparison, VOI’s projections reveal that, through 2030, average monthly consumption in this population will increase by less than 2% over current levels. Expressed differently, growth in average consumption among elderly Americans was more than 40 times higher during the 1990 to 2010 period than will be the case over the 2011 to 2030 timeframe. Patients will continue to switch between different therapies but the average number of prescription drugs consumed per person has essentially stabilized.

This phenomenon, which VOI has dubbed “the utilization plateau,” means that changes in consumption will contribute very little to industry growth over the next two decades. As the white paper demonstrates, rising per capita utilization was responsible for a 39% increase in prescription drug volume in the 1990s and a further 16% during the first ten years of the 2000s. Due to the utilization plateau, however, per capita consumption will add only 3.1% to industry volume in the current decade and a meager 1.8% in the 2021 to 2030 period.

The other major contributors to prescription volume growth are a larger population and demographic changes, of which the most notable is the aging baby boomer generation. There is a widespread belief that the latter factor will provide a substantial boost to the pharmaceutical industry over the next 20 years but, according to VOI’s analysis, the aging population will lead to a 7% increase in volume during the current decade and 5% thereafter, far too low to offset the slowdown in utilization growth. 

Todd Clark, VOI Consulting’s President and author of the report, sums up the situation, “in contrast to the environment most industry managers are accustomed to, there will be no rising tide to lift all boats. To survive and prosper, companies will need to maximize and maintain their share of a relatively stable market via smarter strategic decisions and more effective execution.” Aggressive pipeline management with an emphasis on speed-to-market and better adherence programs are seen as the most promising avenues to maintain vigorous sales growth.

These and other findings are explored in detail in the white paper, “The Utilization Plateau: Understanding Why the U.S. Pharmaceutical Market has Stagnated and What You Can Do to Avoid the Slow-Growth Trap,” which is available for free download at  http://voiconsulting.com/pages/u-s-drug-utilization-plateau.



Since 1998, Value of Insight Consulting, Inc. (VOI Consulting) has worked with pharmaceutical, biopharmaceutical and industry-affiliated firms to provide clients with fact-based analysis and business intelligence to meet challenges in a highly competitive global environment. Through innovative research techniques and advanced analytical tools, VOI’s services help clients maximize commercial opportunities. In addition to tailored advisory services, VOI produces several industry-leading reference publications including pharmahandbook: A Guide to the International Pharmaceutical Industry® and generichandbook: A Guide to the U.S. Generic Drug Industry™. For more information, visit: www.voiconsulting.com.



Shannon Torley, Media Relations 954.302.8852 x 704 shannon.torley@voiconsulting.com





FDA Advisory Committee Recommends First Rx-to-OTC Steroid in Nearly 60 Years

On July 29, 2013 the FDA’s Nonprescription Drugs Advisory Committee (NDAC) recommended that Sanofi-Aventis’ Nasacort AQ be approved for over-the-counter sale. If the FDA endorses the NDAC decision, as it usually does, it will represent something of a regulatory milestone due to the fact that Nasacort’s active ingredient, triamcinolone acetonide, is a corticosteroid and the agency has been very reluctant to allow consumers direct access to products in this class.

To date, the only steroid to undergo an Rx-to-OTC switch in the U.S. is low strength topical hydrocortisone which was reclassified in 1956. In 2005, an agency advisory committee evaluated the possibility of allowing OTC sale of additional topical steroids and rejected the option due primarily to concerns over suppression of the hypothalamic-pituitary-adrenal (HPA) axis and growth suppression. A majority of panelists voted that they would recommend against OTC status unless trials showed zero observed events per 1,000 patients. Of note, HPA suppression is much higher in topical steroids than when the drug is administered nasally, as would be the case for Nasacort: 30-80% of topical patients show some degree of HPA suppression whereas the connection is largely hypothetical with inhaled steroid use.

Despite suggestions that inhaled steroids may have a lower side-effect burden, other recent Rx-to-OTC switch efforts have failed before the final regulatory stage: in 1997, GlaxoWellcome (as the company was then known) voluntarily withdrew a request for review of Beconase (beclomethasone) after two longitudinal studies which showed a previously unseen growth suppression effect. (The same studies led to labeling about growth suppression for all orally and nasally inhaled corticosteroids.) GSK also considered an Rx-to-OTC switch for Flonase as early as 2003 but halted development after concluding that the FDA would reject an application.

Dementia Population Projections Revised in Light of New Evidence

Two large-scale epidemiological studies published this month in The Lancet suggest that dementia rates may be declining as a result of healthier and more educated populations. The Danish study compared two groups: the first born in 1905 and assessed at age 93 and the second born in 1915 and assessed at age 95. Despite the fact that they were two years older at the time of assessment, 23% of the 1915 cohort obtained maximum scores on the mini-mental state exam as opposed to 13% in the 1905 cohort.

In the U.K., an update of the Cognitive Function and Ageing Study (CFAS-2) found that the current prevalence of dementia in the 65 and older population was 6.5% or 1.8% lower than the 8.3% found when the study was last fielded in the early 1990s. Notably, both rates are substantially lower than the 13% over 65 prevalence rate reported by the U.S. Alzheimer’s Association (a figure that excludes non-Alzheimer’s types of dementia).

Both studies are great news for patients and health systems but, as is well-known, the populations of developed countries are aging rapidly: between 2010 and 2030, for example, the over 65 group will increase from 13.1% to 20.1% of the population in the U.S. and from 16.3% to 22.4% in Europe. In other words, dementia prevalence rate might be falling (or at least lower than previously thought) but the absolute number of people over 65 is growing.

To estimate the future burden of care (as well as the potential patient base for Alzheimer’s therapies), following are 20-year projections that account for both prevalence rates and the number of elderly persons in the U.S., Europe, and other developed countries. Population data is from the United Nations and prevalence rates are based on three scenarios. Note that these projections assume that the rate of dementia is the same across all developed countries and we are ignoring the distinction between Alzheimer’s and other forms of dementia (but since Alzheimer’s makes up the vast majority of age-related dementia, the figures below are sufficient for current purposes).

The three scenarios are as follows:

  1. The U.S. Alzheimer’s Association prevalence rates are correct and stable: i.e. the prevalence of dementia among people over 65 is 13.1% and will remain steady through 2030.
  2. The CFAS-2 prevalence rates are correct and stable: i.e. the dementia rate in this age group is actually 6.5% and this will be unchanged through 2030.
  3. The U.S. Alzheimer’s Association rates are correct but, as suggested by comparison of CFAS-1 and CFAS-2, prevalence is declining at 0.1% annually.

Dementia Population Projections: U.S., Europe, Other Developed Countries (2010 to 2030; in 000)








Scenario 1

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Other Developed













Scenario 2

United States














Other Developed













Scenario 3

United States














Other Developed














A RAND Corporation study published in the April 4, 2013 issue of the New England Journal of Medicine found that the excess cost of care for U.S. dementia patients averages $33,329 annually, so if there are fewer dementia patients, or if rates are declining, it will certainly bring relief to health budgets already strained by other diseases of aging.

PhRMA reports that, as of 2012, there were approximately 80 drugs in the pipeline for Alzheimer’s and 20 for other forms of dementia (the number may have declined somewhat due to some high profile failures). In any case, when we consider that the Alzheimer’s global disease burden increased by 99% between 1990 and 2010 and that only a handful of marginally effective therapies have been approved for the disease, the potential market for medicines to address this unmet need is huge even though the patient base may be smaller than previously thought.

SCOTUS Reverse Payment Decision - a lot to be Decided

After a decade of legal, regulatory, and political back and forth, the U.S. Supreme Court has weighed in on the reverse payment issue. As background, reverse payments or “pay-for-delay” agreements are a type of out-of-court settlement that occurs when a brand company pays a generic company to drop litigation, to delay launch or otherwise act in a way that preserves the branded company’s monopoly on a drug. While both parties to the reverse payment are better off economically (they avoid the cost and risk of litigation, the brand preserves its monopoly and the generic gets a guaranteed payment), consumers continue paying higher prices than would likely be the case if litigation or other forms of settlement were pursued. The Federal Trade Commission has filed several antitrust suits to end pay-for-delay deals and several anti-reverse payment bills have been introduced in Congress; however, neither approach was successful in banning the practice.

To give an idea of the scope of the issue, the FTC reports that brand and generic companies entered into 40 such agreements in the 12 months ending September 2012. This represented a sharp increase from 28 in FY 2011 and was the highest number of annual agreement since the FTC began collecting data in 2003. The 40 pay-for-delay deals involved 31 different branded products that collectively represent annual U.S. sales of over $8.3 billion. Nineteen of the 40 agreements featured commitments by the brand firm not to develop or market an authorized generic for some period of time following launch of the independent generic.

In December 2012, the U.S. Supreme Court agreed to review a lower court decision in FTC v. Actavis which involved a settlement for the testosterone drug, AndroGel. On June 17, 2013, in a 5-to-3 decision, the Court ruled that the antitrust status of reverse payments would be subject to a rule of reason analysis with relevant factors including (1) the size of the patent holder’s payment; (2) its scale in relation to the payer’s anticipated future litigation costs; (3) its independence from other services for which it represents payment; and (4) the lack of any other convincing justification.

This represents a rejection of all approaches previously suggested by Circuit Courts and fails to provide the unambiguous guidance that both sides were expecting; instead of a clear cut ruling on the legality of reverse payments, the FTC will have to prove antitrust violations on a case-by-case basis. As a result, it’s difficult to predict how the future will play out.

Regardless of the legal issues, reverse payments may fade in importance, at least temporarily, because, in the wake of the generic wave, there simply aren’t as many blockbuster chemical drugs with outstanding patent protection. It could heat up again, however, when biosimilars finally make it to the U.S. market in a meaningful way.

More detailed analysis on the ruling is available here and here.


Drug Development: First-to-market or best-in-class? Which would you rather be?

First mover advantage is a key success factor in many industries and this is certainly true of pharmaceuticals. VOI Consulting research has shown that, in cases where independent generics have a 6-month exclusivity period in which to establish first-mover advantage, the initial product will capture between one-third (with a concurrently-launched authorized generic) and one-half (with no authorized generic) of overall sales value for the molecule 30 months after other generics enter the market. In contrast, later-to-market independent generics capture only 15 to 25% and this is usually divided among multiple entrants.

But these are commodity markets. What about innovative pharmaceuticals? Surely, quality counts for more than timing when it comes to well-differentiated therapies with extensive clinical data. Research from Boston Consulting Group, reported in the June 2013 issue of Nature Reviews Drug Discovery finds that, despite high profile exceptions like Lipitor, this isn’t necessarily the case.

As would be expected, being first and best is the ideal position. The next most favorable position was first-to-market but clinically second best; sales for these drugs average 92% of the first and best product whereas sales of second-to-market but therapeutically superior competitors averaged 88%. Being first isn’t a guarantee of success, however: sales of products that were first-to-market but clinically third-in-class averaged only 40% of the first-and-best product’s while those that were third-to-market but therapeutically best captured 50%.

If you’re late and not-so-great, don’t bother showing up – products that were fourth-to-market and clinically inferior to competitors captured only 2% of the first-and-best drug’s sales.