Primary Care Rx Market Offers Second-Rate Return On Investment – Bristol

Pharmaceutical companies marketing primary care products are unlikely to see a significant return on their investment, Bristol-Myers Squibb CFO Andrew Bonfield declared June 10.

"Over the next couple of years, looking in the primary care space, I'm pleased that we don't have any major new products to launch in that area," Bonfield told Goldman Sachs' health care conference in Laguna Niguel, Calif.

"From a CFO perspective, and looking at it from a return-on-investment perspective, it is very hard to see how you are going to generate good returns on your investment in that area."

The Bristol exec pointed to the increasing investment in sales and marketing required by drug companies to compete in primary care.

"The reality is, there are far too many sales reps out there, and if you're fighting in the primary care market, we all know...that you have to scale up if you ever compete with people like Pfizer."

Bonfield's comments dovetail with Bristol's recent decision to focus on the specialty care arena due to the makeup of its future product line and limited available resources for sales and marketing.

As a result, Bristol is refocusing its sales team on specialists and high-volume primary care physicians to detail recent launches, such as the antipsychotic Abilify , oncologic Erbitux and protease inhibitor Reyataz (¹ (Also see "Bristol Rethinking Sales Model, May Try New Approach To Sampling" - Pink Sheet, 17 Nov, 2003.), p. 33).

Bristol's re-examination of the cost of marketing and sales is part of an overall strategy to find efficiencies and transfer funding to better support research and development efforts.

Bristol's shift away from primary care parallels steps taken by Roche to weight its product portfolio more heavily toward specialty care products while still remaining open to partnerships for its primary care pipeline (² (Also see "Roche Pipeline Potency Validates No-Merger Stance, Company Says" - Pink Sheet, 10 May, 2004.), p. 35).

Bristol, however, appears to be taking the next step by suggesting that the high cost of primary care sales means that no drug company can perform well by remaining in that arena.

To maintain a presence in primary care, Bristol will increasingly turn to development partners - even those within its known areas of expertise, such as diabetes and oncology.

For example, Bristol chose to partner with Merck to develop the dual PPAR agonist muraglitazar despite its long-standing leadership in the diabetes category with the Glucophage franchise (³ (Also see "Merck Gets Second Chance On Dual PPAR: Will Develop Bristol’s Muraglitazar" - Pink Sheet, 3 May, 2004.), p. 15).

Bonfield explained that decision to investors. "When you look at an opportunity such as in the type 2 diabetes area, you need to expand beyond just the high prescribers into the broader primary care population."

"Obviously, the ability for us to maximize that without scaling up the sales force was significantly reduced. So therefore, we took the decision to look for a partner who would help us...to maximize the potential."

The cost of complying with HHS marketing guidelines is another factor behind Bristol's belief that drug companies cannot receive a significant return on investment by competing in the primary care market.

Such a case can be made "particularly in light of the fact...that not only are we dealing with the competitive pressures, but also you have to deal with the OIG guidelines, and compliance risk as well," Bonfield told investors.

"For most companies in the industry now, the whole area around the OIG guidelines, off-label promotion, and the risks that are associated with that, are not risks that you really want to get into."

HHS released the voluntary "Compliance Guidance for Pharmaceutical Manufacturers" in April 2003 as a guideline for industry to consider when marketing pharmaceutical products (⁴ (Also see "Drug Manufacturer Education Grants To Purchasers May Be Kickback, IG Says" - Pink Sheet, 5 May, 2003.), p. 3).

The guidance identifies three potential "risk areas" for pharmaceutical companies to consider: the integrity of pricing data used to establish Medicare and Medicaid payments; compliance with laws regulating drug samples; and kickbacks.