Marketing in the biotechnology industry is critically important. The basic path to market involves receiving regulatory approval for products. From there, marketing is conducted to physicians directly, necessitating a relatively large sales force. The presence of competing treatments necessitates significant investment marketing, compounded by the impact of the need to recoup the sunk costs associated with product development. In addition, marketing in the biotechnology industry is strictly regulated by the Food and Drug Administration. The FDA exerts tight control over marketing -- a firm is only allowed to promote products for approved uses. Off-label marketing -- defined as marketing a product for uses not approved by the FDA -- is prohibited and firms found guilty can be subject to significant fines.
An example, of the strong regulatory influence on marketing can be found in the approval that United received in July for Tyvaso. The product, already delayed multiple times by the FDA, was finally granted approval. With this approval came requirements known as post-marketing commitments. These included long-term studies on specific uses, usability analysis and the collection of pharmacokinetic data (United Therapeutics, 2009).
Operating within the FDA's constraints, United has developed marketing strategies that it feels will increase the total market size for its products. The marketing plan for Remodulin is built around building awareness of PAH, and simultaneously building awareness for United's PAH products. The marketing team for this product is growing, from 65 employees in 2007 to 80 in 2008. The sales teams are split into two groups -- inside and outside sales. The former focuses on accounts that have prescribed Remodulin in the past while the latter is focused on practices that are not yet accounts (2008 United Therapeutics Form 10-K, 8).
United also utilizes marketing partnerships to help bring its products to market. Specialty pharmaceutical dealers have competencies in a wide range of areas that pertain to marketing issues in the industry. These include patient care, administration of therapies, distribution and obtaining reimbursement from insurance companies. In Canada, distribution is conducted through a wholly-owned subsidiary. Internationally, United utilizes exclusive distribution agreements and has a wide range of geographic distribution (2008 United Therapeutics Form 10-K).
United Therapeutics has steadily increased its marketing capabilities over the past few years. This has come in response to having an increasing number of products on the market. The firm's use of strategic partners and specialist distributors helps to broaden the scope of the market for its products. It also flattens the learning curve for the young company with respect to the full range of marketing and regulatory issues to which United is subject. Furthermore, such alliances help the firm to focus its internal marketing capabilities on the domestic market.
As with other biotechnology firms, United Therapeutics is subject to ethical scrutiny on two main fronts. One is with respect to the marketing of its products and the other is with respect to its corporate governance practices.
There are several ethical considerations with respect to marketing of pharmaceuticals. The marketing of such products is strictly controlled by the Food and Drug Administration. When the FDA approves a product, it does so only in the context of specific uses and scenarios. One of the most important areas of marketing ethics in biotech is with respect to the so-called "off-label" uses. Firms are not allowed to promote products for purposes not approved by the FDA. However, there are instances when such uses may be beneficial to a patient. It is at the physician's discretion that such uses are prescribed. United has policies in place (Policy XII) to eliminate marketing of its products that contravene FDA regulations. United also has a Compliance Committee and Compliance Officer to enforce its house policies and provide guidance to marketing staff on ethical issues (United Therapeutics, 2009). The company also adheres to the guidelines set forth by the American Medical Association (AMA), the California Compliance Law (CCP), the Office of the Inspector General (OIG) and the Pharmaceutical Research and Manufacturers Association (PhRMA) (Ibid).
Another area of ethical consideration is with respect to clinical trials. There are several ethical issues in randomized clinical trials (RCTs). One is the use of placebo control subjects. These subjects may enroll in a trial in part because they wish to receive new therapy that can help them with their condition. If these subjects then receive a placebo...
While some do so for the treatment they may receive, or to help advance the cause of research, others may join a trial for less altruistic reasons. The benefits of the trial should be weighed against the costs and risks, in particular with respect to patients that are not joining the trial for altruistic reasons (Ibid).
Lastly, some investigators may be subject to incentive-based motivation programs to enroll patients in clinical trials. This can cause these investigators to use unethical methods to recruit patients. Incentives, either cash or authorship, should not be based on the number of patients the investigator enrolls (Ibid).
As yet, United's compliance program has insulated it from scandal involving unethical marketing. The firm may suffer from questionable practices in the course of its clinical trials, however, and should keep on guard for ethical dilemmas during this part of its product development process.
With respect to corporate governance, there are several potential issues. Financial impropriety, failure to release pertinent information, fraud and insider trading are all potential scandals that can impact the firm's stock price, reputation and operations. The company has an extensive corporate governance code of conduct for its directors. The group has only two employee directors, something considered to be correlated with ethical issues. Thus far, United Therapeutics has not been subject to corporate governance scandal.
The biotechnology industry is heavily regulated. The primary regulator for the industry is the Food and Drug Administration. Firms within the industry are subject to FDA regulations. The agency has the power to sanction firms that commit transgressions of its regulations. Moreover, because the FDA controls market access for pharmaceutical products, it is critical that firms in the industry develop strong relationships with the agency.
For example, one industry observer has illustrated the impacts that the FDA can have over a firm such as United Therapeutics. United is highly dependent at present on Remodulin, which accounted for 95% of revenue during the first half of 2008. With generics of a competing drug now approval for PAH, Remodulin is now subject to increased competition. This in turn reduces United's pricing power, despite the retention of intellectual property rights for Remodulin (Phillips a, 2008). The same observer noted later that the FDA has rejected a late-stage trial for an oral treatment for PAH. This setback illustrated the dependency that biotechnology firms have on the FDA, in particular firms such as United that have limited product diversification (Phillips b, 2008).
It can be difficult for a firm to cultivate a strong relationship with the FDA. The agency acts as industry watchdog and supervisor, and its mandate can sometimes run counter to the interests of firms within the biotechnology industry. Effective working of the FDA system depends as much on experience with that system as anything else. United Therapeutics has not built up a sufficient body of work regarding it ability to deal with the FDA and obtain favorable results. The oral FAH treatment and the delays in getting Tyvaso to market were discouraging signs, but not unreasonable ones.
In addition, pharmaceuticals are subject to unique regulatory regimes in every jurisdiction in the world. To bring a drug to a global market, therefore, requires the company to gain regulatory approval from a multitude of agencies. The only exception is the European Union, where parts of the approval process may be undertaken on a multi-country basis (2008 United Therapeutics Form 10-K).
Another major regulatory consideration, which is tied heavily into the marketing component of the business, is with respect to Medicare payments. Businesses such as cardiac monitoring are heavily regulated by Medicare. The total demand for a product or service in the industry is subject to the availability of Medicare reimbursement for the treatment. If the firm cannot meet Medicare guidelines, it is ineligible for reimbursement and the potential market size for that treatment is reduced. Additionally, Medicare regulations can also impact the amount of reimbursement from the program, impacting firm revenues.
In the biotechnology industry, legal issues are typically tied to ethical and regulatory issues. For example, laws regarding the use of kickbacks are included in the federal health care program. The tight control of the industry, however, makes the incidence of legal issues beyond those included in the regulatory environment minimal. Some of the non-FDA-related statutes that can impact United Therapeutics include…
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