The pharmaceutical industry arose from science – and so did Italy’s knowledge based economy. Building on a reputation for innovation carved in the 15th century, when Leonardo Da Vinci, Michelangelo, Galileo and other icons of the Italian Renaissance helped shape the modern world, the country’s life science industry is now shifting into high gear.
Acclaimed researchers, an expanded manufacturing base and growing investment from abroad are spurring world-class innovation and contributing to build a strong, mature and highly non-cyclical sector- which continued to develop even when growth in the Italian GDP slowed down. And such performance is usually the best guarantee of quality.
Indeed, between 1995 and 2007, production witnessed growth more than double that of the Italian economy, to reach a value of Euros 22,6 million which makes the Peninsula’s market the fourth largest in Europe- representing around 13% of the regional total. An occupational growth now on the rise for 10 years shows that the Italian pharmaceutical industry is in good health- even though a slight slowdown was noticed in 2007. A dozen of large companies and hordes of small and medium-sized businesses are ready to make the great leap to the top league of major international companies. And the future looks even rosier, given their capacity to survive on the market and anticipate it, by creating research projects with promising development potential.
Enrica Giorgetti, General Director of the industry’s main trade association Farmindustria, points out the main positive signals. Firstly, “the number of exports that has experienced a 200% growth in the last 10 years and is now reaches 53% of production. In the same way, investments in production as well as R&D together reached Euros 2,2 billion in 2007- and looking at the next there years, an “Accordi di programma” (program agreement) plans over 1 billion Euros budget to be invested. Moreover, R&D personnel have increased by about 17% in the last five years and the sector now employs 1000 more people than in 2002. Looking at the companies, Italians account for 1/3 of the Italian pharmaceutical sector, 1/3 being American companies and 1/3 European. Many of them are small and medium sized companies, but they are all working together as a network, which is another positive characteristic of the industry.”
Every year confirms the sector’s ability to innovate as a result both of a highly competitive market and of the continuous arrival of new diseases that require the rapid development of new active principles, or chemical substances with a therapeutic effect.
“In fact”, Giorgetti adds, “the Italian system is also characterized by the ageing of its population, which is now the oldest in Europe”. This trend results in a continuously increasing demand for pharmaceuticals that has put pressure on the Government’s overall funding of healthcare, which stands at around 9% of Gross Domestic Product (GDP). As has been observed in many other countries, the growth in pharmaceutical spending has begun to outstrip the growth in total healthcare spending, and demographic factors will have a major impact on the make-up of the Italian pharmaceutical market in the future.
It is the changing nature of the demand for healthcare that has prompted the Italian authorities to develop a more proactive approach to their policies. The recent Italian Sanitary Program (Piano Sanitario Nazionale) for the period 2005-2008 has placed a greater emphasis on preventive medicine. This involves educating people so that they understand how changes in their lifestyle can help them avoid serious medical conditions in the future. Following the successful results of this main first step, Ferrucio Fazio, Vice Minister of Labour Health and Welfare in charge of Health, highlights that “the current Government intends to confirm and implement the necessary initiatives to ensure the maintenance of the National Healthcare System’s (NHS) characteristics: quality, appropriateness, safety and effectiveness of care, definition of the Minimal assistance Levels (LEA), evaluation of healthcare technologies and efficiency in directing healthcare companies”.
However, the success of such initiatives depends on the Government’s ability to communicate well with the public as well as to involve those who provide their healthcare. As pointed out by Daniel Lapeyre, President and CEO of the country’s leading multinational corporation (MNC), Sanofi-Aventis, “the pharmaceutical industry is still striving to enhance its image in the country. Indeed, the main stakeholders at the central and regional level used to have a prejudice towards pharmaceutical companies, considering them as costly commercial activities.”
The Italian Pharmceutical Empire: From Decadence To Rise
When analysing the fall of the Roman Empire, most historians recall its long path towards decadence- a lack of awareness and responsiveness, combined with a tendency to rest on Caesar’s laurels, which prevented political strategists from seeing the threat of the northern European tribes.
Italy has long been re-built on the heritage of the deprived Empire but, at present, many are the industry insiders who fear a similar fate for the pharmaceutical sector- which has to some extent remained one step behind some European neighbours, despite its general appearance of being immune to crisis.
A giant with dragging feet
Sergio Liberatore, who developed an in-depth knowledge of the industry through a 24 year-long career in multinational corporations (MNCs) before taking the reins of IMS Health Italy in 2008, unveils a disquieting reality: “The domestic industry developed during the last 20 years through co-marketing activities mainly applied to primary care blockbusters, like anti-hypertensive and anti-cholesterol drugs. Over this period, most of the local companies adopted co-marketing as a new business model, reducing research investment to focus on marketing processes”. Despite having been a very profitable strategy for years, the model now seems to be over as most of the blockbusters’ patents are expiring.
Patenting pharmaceutical products was prohibited in the country until 1978 which led to a lack of in-house research capabilities developed by the first generation of Italian pharmaceutical players. As a result, the most important local laboratories were swallowed by multinational counterparts. One example: Carlo Erba, created in 1853, became part of Farmitalia in 1978, which in turn was purchased by Swedish laboratory Pharmacia in 1994, itself absorbed by Pfizer in 2002. “The only survivors are the ones which developed international activities and, at the same time, bet on their own research capability”, states Liberatore.
But patent regulation did not only affect innovation. Indeed, 13 years after Italians were allowed for the first time to protect the results of their research, the Parliament extended the effective duration of the patent for up to 18 years. According to Giorgio Foresti, General Manager of Assogenerici (the Italian association of generics players) as well as Ratiopharm Italy, such an Italian exception that was aimed at “guaranteeing longer patent protections for the major blockbusters” has generated “a misalignment between Italy and the rest of Europe in terms of generics penetration. Most doctors probably forgot the active pharmaceutical ingredient’s name and, from the beginning, physicians have been reluctant to prescribe generics, even spreading false rumours about their quality, which created dramatic barriers to entry”. And here again Italy has been a latecomer; the will to protect the local pharmaceutical industry relying on licensing agreements resulted in generics being recognized by the Government as an opportunity no earlier than in 2004, when the 04-05 law introduced the possibility for pharmacists to substitute generics to brands.
However, “the Italian situation is changing a lot, yet at a different speed than in other countries”, assesses Liberatore. “For years, Italians had the feeling that no changes could be successfully implemented in their country.”
Indeed, regulatory changes do not always convert into immediate results, and the impact of specific legislations can still be hardly perceivable decades after they were implemented- an issue of which local Contract Research Organizations (CROs) are well aware of.
Oriana Zerbini, founder and Managing Director of CROM, relied on her will of iron to start up a CRO in 1997, at a time when the Italian legislation did not clearly enable to conduct research in Italy. “For this reason, CROM started developing its activities abroad- mainly in Eastern Europe-coordinating everything from the Italian headquarters.” However, one year later, the 1998 Ministerial Decree drastically changed the regulatory environment for conducting clinical research in the country, by setting the bases for the establishment and operations of ethical committees. But CROM’s research remained essentially based overseas, as Zerbini highlights that “overall, even after such a significant evolution of the legal framework, Italy remained one step behind in terms of regulatory delays and recruitment processes”. Indeed, Italian clinical research has been –and is still to a certain extent- hardly reaching its targets on time, which is “a main obstacle when it comes to be involved in international trials. Thus, in order to remain competitive and deliver results at the same pace than other European participants involved in these kinds of trials, organizations like CROM need to involve other countries”. The company established structures in Russia, Ukraine, Poland, Czech Republic, Bulgaria and Hungary, then expanded to Western Europe with more recent offices in Spain and the UK, and now has German and French affiliates in the pipeline. A strategy that has so far paid off, as it generated 30% growth in 2008.
Old habits die hard
Influencing behaviours is often more challenging than implementing new regulations. Enrico Allievi, Director of ANIFA, the national association of over the counter (OTC) medicines producers, is currently confronted with this issue. Indeed, despite the recent liberalization of OTC drugs by the Bersani law of 2006 which enabled to open more than 2200 new OTC sales in para-pharmacies and supermarkets, “the expected boom in OTC sales did not happen. The increasing number of sales points did not have any strong impact in terms of consumption, as patients obviously don’t buy drugs if they don’t have health problems”.
One cannot change an Italian’s habit overnight, and in this regard, the numbers speak from themselves: 95% of OTC consumers still purchase their treatments in pharmacies, 3% in para-pharamacies and 2% in supermarkets. There is obviously “still a clear preference for pharmacies, since most patients are used to his environment and like to follow the advice of their traditional pharmacist,” he says.
Delayed introduction of patent regulation and liberalization of the OTC segment, and a general inertia of the system did not prevent Italy from being a most strategic destination for MNCs. German based biotech Biotest never questioned the country’s attractiveness, and chose it to establish its first foreign expansion in 1968.In the words of Giuliano Tagliabue, Biotest Italy’s CEO, many were the opportunities to be caught at the time, as “before 1992, Italy was surely a most attractive country for pharmaceutical players, enjoying the highest price level in Europe.” It was especially true for the diagnostics market, which was the group’s first core focus. Even “a few years later, when the group’s strategic interest shifted from Diagnostics to Plasma proteins, there was still more unexploited potential in Italy than in other European countries. At the time, the only well-established Italian player in the field of plasma derivatives was not developing the same protectionist approach that its French, Spanish, or British counterparts adopted in their respective domestic markets”. Such a strong historical positioning within Biotest group is expected to ensure the Italian subsidiary unconditional support from headquarters. Indeed, even though the acquisition of US-based Nabi Therapeutics has now expanded the group’s ambitions from Europe to America, Tagliabue is confident that Italy will remain a main priority.
Time For More Neorealism
As Italy remained throughout the years a welcoming land for pharma and biopharmaceutical players, most of them agree with Tagliabue’s perception that the early 1990s were a major turning point for the industry.
Indeed, from 1992 onwards, the political system which had dominated Italy since World War II collapsed in a wave of corruption scandals known as “Tangentopoli” (Italian for bribeville) eventually blown out by the Mani Pulite (clean hands) investigation. While the First Republic was agonizing, the police once broke into the house of Duilio Poggiolini, head of the National Committee for Drug Registration, and discovered gold bullion under his floorboards. For many Italians, the image of that gleaming bullion still resonates – an enduring symbol of a time when government officials, up to and including the Health Minister, routinely took bribes from the pharmaceutical industry to approve drugs and fix their prices. Whether things have really changed since then, or whether only the names of those involved have, is still a matter of debate- but the impact of Italy’s political turmoil on the pharmaceutical market’s dynamics is undeniable. From then on, the industry had to regain credibility and improve its image as public opinion favoured radical changes for Italy’s pharmaceutical policy, starting with the enforcement of Law 537/1993 of January 1st 1994.
From pricing revolution to industry disillusion
Pricing and reimbursement guidelines are now defined by the AIFA, the dedicated regulatory agency created in 2004, under control of the Ministry of Health and Welfare. In principle it is all pretty clear and cut, but not everyone agrees.
The Italian National Healthcare System (NHS) classifies drugs in two main categories: A-band medicines targeting chronic diseases as well as H-band for hospital use are fully reimbursed, whereas the C category includes minor treatments chargeable to the patients. AIFA also defined a positive list of Class-A products in the national Pharmaceutical Handbook (PFN), updated on a one year or six months base in accordance with the evolutions of expenses ceilings set at the central level. Off-patent drugs are reimbursed by the NHS following the reference price system implemented in 2001.
Since 2004, the price of reimbursement items is no longer following the average European price, and it is determined centrally through a negotiation process involving both AIFA and the representatives of the major pharmaceutical companies. In the case of C-Class non-reimbursed drugs, or when no agreement is reached between the two parts, prices are freely determined by the pharmacists.
AIFA is also responsible for controlling healthcare expenses. The Agency’s first Director, Nello Martini, carried out a mandate to limit spiralling drug expenditure to 13% of the total health budget- incurring in the wrath of industry.
In theory, each company investing in research in Italy and developing an innovative drug should be able to enjoy a premium price, but for some industry players mechanisms are still not totally clear, as the prices still have to negotiated with AIFA at the end of the registration processes, and are not always in line with the costs and the intensity of the R&D efforts. In addition, even a laboratory enjoying a premium price on one of its products could be at risk of having to pay back part of its margins if the compound surpasses the average Cap Ex per year set by the Ministry of Health and Welfare for each specific therapeutic area.
For Vice Minister Fazio, balancing costs in times of economic slowdown and increasing demand for medicines is a priority on a global scale; “These recent political actions keep ensuring a continuous increase of the NHS’s funding, therefore paying particular attention to healthcare in a context of ever-declining resources for public expenditure.”
Yet if laboratories have always been conscious of such necessities and were welcoming to the very first reforms, little did they know about the impact repeated price cuts and ever-changing regulations would have on their activities’ sustainability throughout the following years.
“The restrictive policy towards the pharmaceutical industry implemented between 2001 and 2006- with 13 successive price cuts during these six years, resulted for instance in a total price reduction of 11% in 2006”, points Massimo Di Martino, President and Managing Director of Abiogen. He is personally persuaded that the Italian industry is victim of a prejudice: “the Government is convinced that pharmaceutical companies are more focused on commercial aspect than on research, and that their profitability has to be limited by institutional tools”, Di Martino explains. After his family company Istituto Gentili was bought by MSD, he founded Abiogen in 1997. Despite complaining that governmental interventions make it difficult to stick to long-term plans, as forecasts and amortization plans can suddenly become irrelevant overnight, Di Martino has managed to keep adding value to Abiogen’s R&D investments, relying on strong out-licensing agreements such as the one with BMS -to whom the exploitation of an oral anti-diabetic agent was entitled in 2000. Focusing on his late great grandfather Commendatore Alfredo Gentil’s legacy and Istituto Gentili’s traditional assets -R&D know-how, and a strong portfolio in the osteoarticular, diabetes and respiratory areas- the company quickly became the first player in the world to present three biosphosphonates on the market, with a fourth still under development.
New leader, new rules, more reforms
Since August 2008, when Government prosecutors in Turin charged Martini with “causing unintentional disaster” by creating bureaucratic delays in updating the packaging information on the side effects of a few drugs – although none required more than minor rewording of existing text- all eyes are now turned to microbiologist Guido Rasi, the new General Director of AIFA.
“Upon my arrival”, Rasi says “I found a two-speed AIFA- with peaks of excellence but also many failures”. A few months later, the regulatory area has already been completely re-designed, specific task forces have been put in place and the organizational chart’s enlargement to 450 units has been approved, which will enable to catch up on the other European agencies’ headcount.
But the path is still long. “So far” Rasi explains “the main obstacle to industrial investments in Italy has been a strong lack of certainty- not only in terms of drug’s registration timeframes but also regarding the conduction of the adequate inspections for the productive sector. Both these areas are involved in quality audits and enhancing their efficiency will achieve a double result: to better ensure drug’s quality and safety on one hand, while at the same time supporting the industry and &attracting investment in the country.” For this reason, the fields that have been suffering until now will be the first to benefit from the integration of new staff resources. Indeed, improving the efficiency of regulatory inspections will enable to provide the companies with precise timelines to plan the activities, as well as to issue promptly the Commercialization Certificates allowing exports and thus providing an important contribution to industry’s development.
“Beyond these initiatives”, he adds “AIFA will also foster the implementation of the Accordi di Programma aiming at promoting research and development investments in Italy, and will work towards the establishment of specific agreements with biotech companies”.
Leonardo Vingiani, Director of the biotech companies’ association Assobiotec believes “the Government is currently creating the right environment and the good climate that can attract people willing to look at Italy and improve the conditions for doing business in the country.”“An important initiative has been the recent adoption of new measures such as tax credits for R&D activities (10% of investment), and for R&D investment in partnership with Universities (increased from 15% to 40%). Another important step forward has been taken with the 2008 Financial Law that introduced new tax incentives especially directed to young innovative companies.” However, there seems to be a long way between planning and execution, and “a decree from the Ministry of Industry is expected in order to set how these tax incentives will be realized,” Vingiani adds.
Giorgetti, on her part, explains how pharmaceutical companies have found ways to increase their industrial commitment despite the cost-containment context: “Most of them managed to be very flexible and adapt to this situation, for example by balancing the effects of the price cuts by increased exports.”
Francesco de Santis’ experience proves her point. As President of Italfarmaco Holding, he is at the head of one of the few players who really sustained the growth of the Italian pharmaceutical sector in the past 10 years by expanding overseas. “Whereas Italfarmaco’s main driver is research”, he states “the second one is surely international expansion. A consistent share of the revenues generated is reinvested to fulfil global ambitions and conquer new markets.” Having first targeted Southern European countries as a priority, the group developed in Greece, France, Portugal, Spain and Switzerland- and then established subsidiaries in Russia and Chile, as gateways to other regions. “Italfarmaco always considers each domestic market as an integrated reality made of different segments- from generics to high-tech biotech drugs. Therefore, specific strategies have been developed for each business line, and it is generally easier to grow in new markets, by focusing on a few segments”. Looking at the future, “international sales shall grow faster than domestic ones, therefore taking the company towards more international exposure”. Indeed, even if the Italian market remained stable in the past five years, Italfarmaco has been able to increase its market share in the country- mainly relying on its gynaecologic products, anti-thrombosis compounds and growing CNS portfolio- and now wants to strengthen its position overseas, both by reinforcing existing affiliates and growing organically in new markets. Amongst the opportunities recently identified, the Turkish and Russian markets come as priorities. “But overall”, explains De Santis, “international expansion will follow an opportunistic approach without pre-set rules. Organic growth shall account for an increase of 7 to 9% of the existing business over the next five years; but in addition, Italfarmaco will keep looking for in-licensing opportunities in order to complement its strong in-house portfolio and increase its volume by 3 to 4%”.
An Industry Makeover: Different Families, Different Approaches
Italians are often praised for being resourceful and flexible by nature, used to navigating the country’s troubled waters with a fair amount of individual creativity. Both MNCs and local players are conscious of the urge to ride a new wave and the need to adapt their business model to deal with new stakeholders and a challenging environment.
Whereas there was still enough room for all the players 10 years ago, competition is now increasingly tough and Eugenio Aringhieri, CEO of Dompé Holding remarks that “in these times of great difficulties, finding certainties is a matter of survival”. Being himself convinced that survivors are never the strongest ones but the most responsive to change, he has been applying this very Darwinian motto to Dompé’s activities since 1995- building on the history of an Italian family company whose roots go back to the 19th century, to become the architect of what has now converted into an international group of five different entities.
“The company’s restructuration came as a necessity”, he says. “Generics and bio-similars are trying to deliver results at convenient prices; innovators are on the other hand willing to offer premium products at premium prices. Therefore, “instead of trying to act as a middle-player in front of these two trends, Dompé chose to fully bet on innovative products- considering the premium price they can offer, though not forgetting to focus on cost-effectiveness”. Aringhieri also reminds that “this innovative focus is linked to its long track record in research and biotechnology together with the personal story of Dompé’s current President –Sergio Dompé [great grandson of founder Gian Antonio Dompé] – an entrepreneur closely connected with R&D and innovation”.
In order to face the fierce competition from other innovators, the group chose to concentrate on competitive niches, and develop strategic alliances. “Following careful analysis”, says Aringhieri “joint-ventures have been engaged with Biogen Idec and Amgen, two important players in the biotech field, aiming at providing advanced novel bioterapethics for unmet medical needs. Both understood the advantages Dompé could offer in terms of cost, quality and time-saving.”
These recent partnerships aim to create adequate complementarities to significantly increase Dompe’s hospital sales and widen its product pipeline. Then, a longer-term goal will be to “to internationally promote such a success story, showcasing to potential foreign partners Dompé’s unique combination of experience and entrepreneurship with strong focuses on quality and cost-competitiveness”. The group’s primary care products are already distributed in more than 60 countries and international sales currently generate 10% of the company’s turnover- but the next five years should see this ratio evolving to 50%, as Aringhieri is confident that “promoting [Dompé’s] image and unique business model will soon enable to reproduce this local success story at an international level”.
Restyling sales forces
For General Manager of Roche Italy Maurizio De Cicco, internal re-organization is an everyday work. The group used to lead the retail market relying on a few blockbuster compounds, and De Cicco was appointed General Manager of the Italian subsidiary as Roche’s portfolio was going through significant changes to face the expiration of its main patents. “There was a strong need to switch from a local to a global strategy for the marketing of our products, and as a result, the company’s organization had to be reshuffled again.” After having built for years a successful regional approach, devolving high level of responsibility to local managements, Roche embarked on a change of philosophy. The company “changed its focus and successfully managed the cultural change, also recruiting people from different environments, who completed their international path with regional experiences.”
For the first time in its history, Roche Italy had to restructure its workforce. “I personally got extremely involved in the process”, explains De Cicco. “While the company initially announced the layoff of 220 people in primary care, this number eventually got extremely reduced and most of them are re-oriented internally”, he adds.
Looking at how this processes converted into numbers, De Cicco can now claim to be at the head of the number 1 player in the Italian Hospital market. “In 2008, relying on excellent products in its focus areas -oncology, hepatitis and anaemia- Roche grew twice as much as the market and consolidated its leadership position in the hospital field, containing the decline of primary care. In the coming years, the company will have to face increasing competition from new players entering oncology, and aims at maintaining the growth at a stable level, above the market. Double-digit growth such as the +11% achieved in 2007 is not realistic anymore- but as the performance for 2008 stands around +6%, we expect a similar growth for 2009”.
Whilst facing the Italian market’s revolution, the need for change also became obvious to Japanese laboratory Daiichi Sankyo. Nevertheless, President of the Italian branch Antonino Reale does not believe in the agony of primary care. Going against the flow, the organization recently took a step forward by upsizing its sales force by about 50%, reaching a headcount of “190 Medical Representatives (MReps) split into two teams: one made of 140 MReps dedicated to primary care- despite the current trend of companies believing that primary care business is reaching its end- and the other of 40MReps focused on Secondary Care”
However, Reale soon noticed that “the sales and marketing departments were sometimes fighting each other rather than cooperating to efficiently fulfil the needs of our customers”. For this reason, these two main pillars of the company have been merged into one single department of “Product Planning and Customer Care Management”. President since 2003, Reale believes its mission accomplished: “Daichii Sankyo was ranked number 123 for retail sales in 2003. It now occupies the 73d position and it aims to become number 50 in2009.” The share of hospital sales is not significant yet, “but the company is paying more and more attention to this sector as it could impact the retail sector in the future”.
Niche markets for smaller players
Some local players have opted for re-focusing their portfolios in their path to success.
When Federico Seghi Recli came back to his family’s Florentian business, Molteni Farmaceutici, after a long working experience in a MNC, he was determined to base decisions on in-depth analysis more than feelings or instincts. Aware that “Molteni developed a strong experience and know-how in the field of opioids, from the manufacturing to the marketing of innovative pharmaceutical products and more traditional compounds”, he saw an opportunity in fully concentrating on such products as a core business at the beginning of 2000. “This is a truly complex field with a lot of different country specific regulations” he explains “and our long term experience provides us with a unique competence in this market segment.”
As a result, all the acquisitions and licensing agreements concluded in the past years, as well as most of the R&D expenses, have been targeting the narcotic analgesics and addiction areas. Molteni invested in its comprehensive portfolio of narcotic pharmaceuticals for the treatment of pain management and drug addiction and, at the same time, up scaled its activities at an international level with the aim of becoming a pan-European leader in this market. “Besides long term presence in Italy and Poland (Molteni Polska Sp.zo.o. is operating in Poland with head-office in Cracow since 1994), the appeal of Molteni as a European partner lies on our unique competence in dealing with complex therapeutic areas such as narcotic analgesics and drug addiction.”
In a similar fashion, father and son Lino and Marco Cartolari identified a niche opportunity when acquiring Scharper Spa from HMR in 1997, at the beginning of the industry’s consolidation trend. Marco points out that “as more and more players increased their growth targets, most of them had to focus exclusively on blockbusters and could not afford to invest in niche products that carried too a low potential turnover for companies of their size. This process left room for smaller laboratories, willing to invest in specific niche segments of the market.” Scharper chose the gynaecologic field as a licensing partner of choice for MNCs for such products.
They also identified a second opportunity in the so-called “tonics” category, products that typically complement the main therapies and support energy levels in patients under specific treatment. “The needs for such support therapy remained unchanged,” Cartolari explains. Thus, Scharper launched food supplements, nutraceuticals, drugs developed through classic chemical synthesis, herbal drugs, medical devices and cosmeceuticals, focusing on innovative, highly scientific compounds mainly through the application of new technologies to natural substances that aimed at maintaining their safety profile, and effectiveness.
The laboratory positioned itself as “able to provide different types of pharmaceutical solutions, without direct promotion to pharmacists or advertising campaigns in the press, clearly differentiating itself from OTC companies”, Cartolari sums up.
SPA (Società Prodotti Antibiotici), a laboratory created by Rodolfo Ferrari and Carlo Callerio in 1947, decided to shift away from antibiotics development when the market for these products started to shrink.
Maria Giovanna Caccia, who took over the activities in 2002, perceived these troubled times as full of “extremely good opportunities to further develop the company, mainly in the cardiologic area, since one of the products that were already under study at the time re-entered the reimbursement schemes in 2002, and could therefore be re-launched”. She built a completely new SPA and put the company on the right tracks thanks to an extraordinary product—a high concentration of Omega 3 with a specific composition, which delivered excellent clinical results as it proved to reduce mortality after myocardial infections, and was licensed to two important laboratories.
SPA’s competitive edge also relies on its choice not to focus on reimbursed products only, as reimbursement lists keep shrinking.
“SPA has probably been a pioneer in developing the first non-reimbursed osteoarticular drug,” explains Caccia. “And in this regards the performance is extremely satisfying.” SPA, she says, keeps looking for more development in other therapeutic areas as Italy’s blockbuster era reaches its end.
Actors Hand In Hand For Pharma ‘Commedia’s’ Next Act
Such levels of responsiveness from the industry show that, far from a tragic fi nale, the future will be bright for Italian pharmaceutical stakeholders. Indeed, after years of misunderstanding between both parties—government and industry cost-containment is now seen as a necessity more than a burden, and most laboratories are finding ways to become actors of the rationalization trend in order to secure a sustainable system for the years to come.
For ANIFA’s director Enrico Allievi, OTC’s contribution is a crucial tool: “Even if it is very hard to estimate exactly, several analyses showed that the NHS could save money by promoting the use of OTC drugs, which are not reimbursed to patients. These savings could be obtained by more appropriate prescriptions of reimbursed drugs but also through social costs such as less visits to the doctor, less diagnostic test, less days spent at home, less working absence.” Italians’ changing attitudes towards self-medication are to have an impact in the future OTC market. For many years, most were just waiting for the system to pay for their cures, or even waiting for the symptoms to fade by themselves. According to a recent survey, over the past 10 years Italians have shown an increasing will to improve their health faster; a trend especially remarked among patients aged 18 to 40.
Lifting The Curtain On Market Access
However, when it comes to prescription drugs, market access is not always equally ensured throughout the territory.
This is a main concern for Astra Zeneca, whose President Hans Sijbesma admits that, “the primary care environment has become more and more challenging over the past few years. Astra Zeneca has been suffering from the several price cuts implemented both at the national and regional level, which led to enormous reductions in sales.” However, the company managed to maintain its competitive performance—which makes Italy the fourth market for the group and a strategic destination for headquarters’ investment—as well as enhancing the patient’s access to key medicines. “In fact,” Sijbesma adds, “as each drug is addressed to different groups of patients, products such as Nexium and Crestor that are targeting advanced stages of illness should be accessible for the most affected patients, who have the right to get the best treatments.”
Indeed, AstraZeneca has a very diverse pipeline—both in specialty care where the two main areas of focus are CNS and oncology, and in primary care with new anti-thrombosis and anti-diabetic soon to be launched. In order to enhance market access for all these categories of compounds, it has to get involved in the management of pharmaceutical expenditure. “Each company together with Farmindustria has to make sure that the industry will get the right support.
Financial resources are crucial to enhance drug development and the patient’s quality of life, but also to help maintaining a quality healthcare system in Italy, contributing to the reduction of healthcare spending,” Sijbesma says.
Conciliating quality with cost containment policies is also part of Solvay’s mission. Conscious that better services can be offered at a lower cost, the company came up with a customer-friendly scheme for some specific products such as Duodopa: teams of specialized nurses available 24 hours a day, free of charge, to support the patients during the first weeks of treatment.
In addition, as Solvays’ portfolio is reaching its mature phase and therefore increasingly vulnerable to erosion by generic equivalents, General Director of the Italian branch Leo Van der Geer estimates that “further growth could be fuelled by some recently introduced products—for instance an orphan drug able to change radically the lives of patients suffering from late stage Parkinson disease.” But the growth opportunities offered by this new product will be limited by external factors related to the lack of appropriate financing by regional and local authorities. And dealing with bureaucrats who might play a crucial role in getting a treatment ultimately reimbursed is even more challenging when it comes to orphan drugs, due to the high amounts involved. “The cost can seem expensive—35,000 Euros per year for each patient—but untreated patients need to be completely nursed for all their daily activities, which involves even higher costs than the treatment itself. It is not easy to explain this to authorities who are mostly looking at the Health budget, instead of considering the total cost of a patient for the whole community,” der Geer says.
Having An Attitude Can Save Your Life …
Clearly, curing diseases is more expensive than preventing them.
Niche players such as Novo Nordisk are more than aware of this issue. Being one of the very few pharmaceutical MNCs with such a strong focus on the diabetes therapeutic area—besides growth and replacement hormones—not only is the company’s daily work concentrated on product portfolio and the development of modern analogue insulins, it is also partly dedicated to raise the awareness of its leading cause.
As explained by Lorenzo Mastromonaco, whose invincible enthusiasm leads Novo Nordisk Italy since 1995, and is also responsible for Greece, Cyprus and Malta, “at least 40% of the people suffering from diabetes (mostly Type II) do not know it.” This trend is not specifically Italian, and a similar amount of CEO of Novo Nordisk Lorenzo Mastromonaco un-diagnosed type II diabetes cases can be noticed all over Europe—but “Italians tend to communicate strongly about problems compared to their European counterparts.” In the country, “2.5 million people are currently being treated but another million is probably still undiagnosed. This will affect the public health expenditure in the coming years, with increasing amounts dedicated to solving all diseases related to diabetes affecting heart, eye, kidney and foot. For this reason, the current approach has to be reversed, and much more has to be done in terms of prevention, in order to be able to diagnose the disease before curing it.”
Novo Nordisk has always been very active in launching and sustaining awareness-raising campaigns, involving all the players: government, pharmaceutical companies, medical and patient associations, and citizens. In 2006, it signed a historical agreement, the first such public-private partnership in the world, with the Italian government on the DAWN program (Diabetes Attitudes Wishes and Needs- a global Novo Nordisk initiative in collaboration with the International Diabetes Federation and an international expert advisory board).
Maurizio De Cicco admits it: “Italians are renowned for their creativity, but we lack rigor”. For this reason, Roche recently started enriching its teams with “non-Italian expatriates, who not only brought best practices from Roche around the world, but also different perspectives on how to approach issues and problem-solving.”
An obvious strategy in appearance, which is actually not that usual in a context when very few talents from overseas are part of the Italian pharmaceutical Gotha- a relatively small and definitely Italian world, where lack of language skills can be a main hindrance.
Albeit few in numbers, foreign CEOs are nevertheless occupying key positions in the Italian pharmaceutical world. And most of them – including Cees Heiman of Pfizer, Angelos Papadimitriou of GSK, José Luis Roman Pumar of MSD, Hans Sijbesma of AstraZeneca, and Leo Van der Geer of Solvay- are blending well with the locals, proving their credibility and leadership.
For Hans Sijbesma, Italy combines a challenging but very rewarding working climate with a high quality of life- a mix that eludes many countries. “People are extremely engaged in their company and committed to their work, but manage to always keep an enjoyable working environment” he adds. “Working in Italy taught me how to keep looking at each opportunity. In this country, it seems that every challenge can be turned into a way to grow stronger”. Going back to his home country- the Netherlands- after a few years at the head of Astra Zeneca Italy, he looks back at his experience with anticipated nostalgia, finding it hard to “leave a country where people are able to deliver quality work with a professional mentality as well as a good sense of humour.”
Fellow Dutchman Leo Van der Geer is as enthusiastic about the Italian mentality. “Even in cases when it seems impossible to find solutions, Italians are flexible enough to find a way out of difficult situations.” This is not only the case in the management of most companies, but also at Ministerial level; as “when Italian institutions are really aware of a problem we get to discuss it with them-for instance the supply issue for influenza vaccine in period of pandemic. They develop a constructive thinking of the ways to solve it and the exchange of information always leads to positive results”.
Leading a team of Italians also requires similar levels of flexibility. The first thing Van der Geer had to learn in Italy was “not to be too direct when discussing with partners, and really take the time to think before making comments and drawing conclusions.”
“When working with pharmaceutical companies,” comments Mastromonaco, “the government usually expects to be asked for more money, better pricings, or a new registration frame. Therefore, the Italian government was surprised when Novo Nordisk explained that the DAWN program is only aimed at helping citizens to understand diabetes and showed all the programs that are being put together by the company, like the Changing Diabetes worldwide campaign—that included the organization of the Italian Changing Diabetes Barometer Forum in Roma in April 2009.” The company had to show that it was asking for public commitment more than funding, to better communicate about the importance of early diagnosis.
“It was not easy at the beginning, but the synergies with the government are now extremely successful, with meetings on a regular basis and presentations overseas in order to illustrate the Italian case as a prime example of Public- Private partnership in the Health sector,” proudly boasts Mastromonaco.
But prevention campaigns are not a prerogative of a few highly focused laboratories. Takeda’s portfolio ranges from lifestyle-related diseases, to oncology and urology, central nervous system and gastroenterological pathologies; and the company is nonetheless as committed to the future of the country and the health of its citizens in the long term.
Having reached the 20th position in the Italian rankings after 25 years of presence in the country, Takeda relies on the strength of its Italian industrial activities in the Cerano plant- one of the group’s major production sites and a manufacturing hub for all the European markets. But according to its President Sebastiano Maurizio Castorina, a second success factor is imported from the group’s Japanese culture.
“The “Don’t Kill the Future” motto, he explains, which is against the idea of getting short term profits by cutting costs and reducing the workforce without considering the most strategic actions to be taken in order to achieve sustainable growth in the future”. Securing the future concretizes into a number of actions: from promoting team work spirit and establishing good relationships with workers unions, to working on a sustainable product portfolio. But as explained by Castorina, pharmaceutical companies also have to put efforts in building strong brand equity; “A number of initiatives have been launched in public places such as airports and train stations to raise the awareness of the metabolic syndrome and launch educative messages about the importance to have a better life management, and the actions that people can take in their daily life to improve cardio-metabolic drugs’ efficiency”.
For Castorina, success will depend on the ability to be recognized not only by doctors and specialists but also by the local population, “and getting such recognition requires to be specialized in a number of fields like research, development, risk management, quality and pharmaco-vigilance, well above manufacturing activities themselves which are the core business of generics companies.”
Italy: Towards Pharmaceutical Renaissance
Clearly, innovation in Italy did not die with Da Vinci. Today, the Italian pharmaceutical industry may lack the large multinationals of the past – Carlo Erba and Lepetit – but it can still play a significant role in the more innovation-driven markets.
Numbers speak for themselves. 260 biotech companies generating a turnover of Euros 5,4 million in 2008, accounting for more than 0,6% of the Italian turnover, and a 24% year-on year growth rate with respect to 2007. A pipeline of 258 products in development, of which 136 have already reached the clinical phase. Italy’s first competitive advantage –extensive tradition of research excellence- is solid enough to navigate the sea change generated by the current economic turmoil.
Going back in time, the National Research Centre (CNR) has been the main breeding ground of Italian scientific discoveries since its creation in 1982- an “originator of innovations”, in the words of current president Prof. Luciano Maiani. The last restructuring carried out in 2003 gave birth to “a network of 108 connected institutes spread over the territory, and organized in 11 departments”. CNR currently has 38 spin-offs, three of which in the pharmaceutical sector. Its role “is to act as a facilitator, connecting public and private and creating bridges between the main stakeholders”, he says, offering a gateway to Italian brains for local and international laboratories.
Multinational corporations (MNCs) themselves are well aware of the opportunities arising from the country’s research. French laboratory Servier did not casually choose Rome as home to one of the group’s 19 International Centres for Therapeutic Research (ICTR), instrumental in performing clinical research. General Manager Frederic Fasano backs up this choice: not only does the country offer considerable market opportunities, but in addition “the weight of the Italian scientific community is growing, in terms of research activities, as well as in scientific and political influence”, he explains. “In some specific fields, the network’s organization and the high frequency of territorial structures enable to perform highly specialized and sometimes lives-saving procedures”. Such a concentration of centres of excellence is a main asset for this medium-size player that proved its ability to compete with giants thanks to a steady and consistent focus on a few therapeutic areas- mostly cardiology, diabetes, hypertension and osteoporosis- and strong partnerships with the scientific community.
On the other hand, Fasano deplores the insignificance of government incentives to companies promoting and financing research. “As public projects are strongly based on cost-containment approaches and poorly considering innovation, the industry really has to perform research on its own”. For this reason, even though “the attractiveness of Italy is made of its well-trained researchers”, most of them tend to expatriate to more rewarding countries.
Theoretical physicist Prof. Luciano Maiani agrees, and points out a challenging recruitment situation. Most Italians are lured by more attractive conditions offered in other countries- including less mature markets such as Eastern Europe- and those who come back often do so only for personal reasons. Combined with declining investment in research, such deficiency could compromise the future of Italian innovation. “However”, Maiani notes, “efforts are being made from the government’s side: the budget dedicated to research increased to 2,5% in 2008, following years of steady decline. Therefore, CNR is able to start new recruitment processes and wishes to offer interesting perspectives to young Italians willing to invest in Italy”.
Looking at governmental efforts to conciliate cost-containment and innovation, Director of Farmindustria Enrica Giorgetti identifies three main measures. “First of all, the implementation of a tax credit for research that can go up to 40% for partnerships, with a sealed amount of Euros 50 million”. In addition, the “Accordi di programma” Plan “with 61 innovative projects in the pipeline for a total amount of over Euros 1 billion”.
And the last measure, raising expectations of the whole industry ,is the Industria 2015 initiative, which plans the allocation of Euros 150 million. Claudio Cavazza, founder and President of Italian laboratory Sigma Tau, has been appointed General Manager of Industria 2015’s dedicated life-sciences program “New Technologies for Life” (“Nuove Tecnologie per la Vita”), and recently declared that the only option to cope with the current healthcare crisis would be to bet on genomics and personalized medicines. However, due to the costs involved by such products “developing innovative medicines now requires pan-European research collaboration of public-private interaction”.
Not only is Italy in constant need for young talent and government incentives, it is also craving to attract more business angels and venture capital, especially to support translational research in the biotech field. Leonardo Vingiani, Director of the biotech companies’ association Assobiotec estimates that “Italy’s financial schemes include some really good investors for traditional technologies, but regarding innovative technologies there has not been an efficient strategy to foster innovation and get financial capital”. Thus, many are the opportunities for specialized investors in well-established markets – namely USA, Canada, UK, Germany and France – currently lacking good projects to finance. “The Italian environment offers a very good cost-effectiveness ratio”, reminds Vingiani. “Italian researchers earn less than in Northern Europe and USA”, which makes Italy a safe, profitable bet.
Overall, be it because the Italian bio-tech segment is still young, with more than 50% of companies created in the last ten years, or because of brain drain and weak state support, Italian entrepreneurs still find it hard to translate knowledge into business, and convert excellent research into sustainable companies. But even though public-private partnerships (PPPs) are not yet widely recognized as a best practice by Italian healthcare operators in order to open a way forward for Italian research, Giorgetti sees encouraging signs. She has already noticed that “more and more agreements are passed between small companies (mainly specialized in Biotech) and public institutions like Universities, Public Research Centres, the Superior Institute for Health (ISS) and the CNR”.
CNR is indeed supporting the creation of business projects at
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