"It is the end game that counts."
gg, that's an admirable sentiment. Pennsaid is a great product, and initial sales figures (in Canada anyway) were quite strong.
Marketing efforts (including articles by physicians) were deeper and better-funded than anywhere else in the world - including a sales force dedicated to Pennsaid sales alone.
But Pennsaid isn't Viagra, and we shouldn't expect the stratospheric sales growth to continue. Pennsaid is relatively expensive compared to other OA alternatives, and it isn't being subsidized by public health plans - not in the UK, and not in Canada. So unless the buyer has a private plan that covers the cost, then the user is spending discretionary funds for Pennsaid - the same as they would for Viagra. The problem is that the need for Pennsaid is much less obvious than the need for sex - and correspondingly less likely to attract spending.
So we should expect Pennsaid sales growth to level off to a reasonable, but not exciting rate.
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Indeed, we already have some evidence that this is happening. CaptainKlutz posted the following on SH:
"Well it looks like Pennsaid is going to fail in Canada. Script growth has been stalled since October. And I'm not sure Solvay can change it. I thought they might eke out a little niche with $20 or $30 million in sales after a few years. But I doubt they will get anywhere near that. They will be lucky to get to $10 million Cdn. Since one 40 person sales force costs ~ $8 million I doubt there will be enough for both companies to break even.
Unfortunately, I and more importantly DMX badly underestimated the impact the lack of public coverage would have on sales. In retrospect the importance of the public plans should have been fairly obvious judging from how hard Pfizer, Merck and Boeringher pushed to get their resepective cox-II's listed. Boeringher for instance priced Mobicox at a substantial discount to the other cox-II's -- about 60% or 70% of the price -- just to get a fast listing. Pennsaid certainly isn't priced to offer any cost savings to the drug budgets. Quite the opposite.
Personally I got suckered in because the initial uptake was quite strong. It suggested there was a larger sized private and cash market for the drug. What I should have realized at the time is that pre-NOC marketing always has a significant effect on physician uptake. (BTW those of you who say that DMX made a mistake hiring a sales force pre-NOC etc..., etc... are wrong. It has been repeatedly proven that pre-NOC marketing accelerates uptake. That in turn delivers a net benefit over the entire life cycle for the product. It worked quite well in this case, convincing me that the product actually had a chance in Canada. The screw-up here is in the area of market access; the marketing to docs and the PR campaign have been great.)
What I should have recognized last year as well is that the marketing strategy is almost entirely dependent on public coverage. As DMX has stated repeatedly the target market for Pennsaid is the 10% of patients who cannot take an oral NSAID. Well it doesn't require a degree in medicine to learn that those 10% are almost overwhelmingly in the over 65 category, usually with co-morbidities, taking other medications etc... . In fact it says quite clearly in the warnings section of the product monograph under the heading "use in the elderly" that patients over 65 are most susceptible to adverse GI reactions. They are patients covered under the public plans -- not under private insurance. And few of them are willing cash paying customers.
I also should have known that if a drug doesn't have broad coverage it has a real negative effect on prescribing behaviour even for patients covered by private insurance. For one there are a number of private plans that simply track the public formularies, providing no additional coverage. Most of the programs in the Maritimes are like this, some in the West as well. But more importantly is the impact on the docs of phone calls from the pharmacists saying "This drug isn't covered. Can you prescribe something else?" It only takes one for a doc to stop writing scripts altogether. It's particularly bad among physicians in Alberta and Quebec. If you aren't covered under public insurance in those provinces you simply don't have a market (unless the drug is Viagra, which doesn't count in any event because its a voluntary expenditure -- people want to take it).
So what we have here is a marketing strategy that is completely unsupported by any discernable reimbursement strategy. The actual market for Pennsaid is a microscopic fraction of the total market of OA sufferrers. It isn't even close to the "10% who can't take an oral NSAID". While a shareholder can be excused for missing this, the people running DMX can't. Clearly they do not understand the importance of having a reimbursement strategy that supports the marketing effort. They also seem to have little understanding of the resources necessary to acheive listings in the various provinces. They don't even have a market access group as far as I can tell.
Of course in defense of the company one could argue that it is acting like most pharam cos in Canada do: taking reimbursement for granted, assuming it will be successful, allocating insufficient resources to the job, having an incoherent strategy that is incompatible with the marketing approach etc... . This is actually common practice among almost all of them, except for the biggest. Few companies have a sufficient understanding of the effort and expertise it requires to get someone to pay for a drug in Canada. Ten years ago it was easy. The provinces paid for everything. Now its the opposite. They willingly pay for nothing. You need a coherent and comprehensive strategy backed up by solid evidence to make it happen.
Alternatively one could argue that DMX understands the situation, but that they just don't care, recognizing that the Canadian market is simply irrelevant. Relative to the U.S. market the Canadian market is irrelevant. But if that is the conventional wisdom at DMX HQ the question is: why are resources being wasted in Canada? If you are not going to allocate sufficient resources to making it a success why allocate them at all?
What I find most disturbing is that this strategy has been pursued in preference to further development of WF-10, a drug that no insurer will have any difficulty paying for should it prove successful. As DMX should know, time-to-market is everything in the pharma game. Most pharma companies are set up to avoid unnecessary delays because the costs associated with delayed market entry can be truly staggering. It isn't simply a loss of the first few years of sales. It's the difference between what sales are in any given year and what they would have been for that year assuming an earlier launch. The loss is cumulative and compounded over the life cycle of the product. Mathematially it's actually equivalent to the revenue that would have been earned with an extra 2 or 3 years (however long the delay) of patent life. If the drug is a blockbuster you're talking billions in lost revenue. It's a substantial loss even if the drug is an average seller. (Personally I've always thought this delay was the most monumentally stupid decision I have seen in drug development in a long time. It is costing the company and its shareholders far more than they can imagine. Dilution, high interest rates, payments to Provalis -- are chickenfeed compared to what the company has left on the table if WF-10 proves successful.)
While I disagree with just about every reason you people seeking to oust management have put forward I think the conclusion is right. Changes are needed. This company seems to have the wrong strategy, insufficient resources and a lack of expertise in critical areas. Not the best recipe for success in this business.
Of course, much of this is speculation premised on Pennsaid not obtaining any formulary listings. Hope I'm wrong on that, but I think its unlikely. Here's a link to the rejection by Saskatchewan (see p. 2 under Products Reviewed and Not Recommended for Listing.):
formulary.drugplan.health.gov.sk.ca
captainklutz."
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