Pharma Integrates 2018: Interview with Erik Nordkamp

Well first of all, great to be here. My background is, as my mother keeps reminding me, I'm from the Netherlands, the Dutch passport. These days that's quite important, although my wife is from the UK and my two children have a British passport, so I am in a very conflicted situation. I've been away from my country for the last 20 years, starting in management consulting, starting in the pharmaceutical industry after my MBA in 1999. I started here in the UK with a company called Eli Lilly and was with them for about ten or eleven years, doing a variety of roles both here in the UK, where I led the inequality business, and then in Germany, where I led a large part of the business in Germany, and then more regional roles in strategy, Lean Six Sigma transformation. Then I moved over to Pfizer, where I was head of strategy for Europe and Canada, and then more recently I was country manager, managing director for Greece, Cyprus, and Malta during the austerity years 2012 to 2015, which was an interesting experience. I thought I got away from a Grexit. Then I moved into this role as the UK managing director in February 2015 and have been in that role since then, and more recently took over the presidency of the ABPI, and before that I was the chair of the American pharmaceutical group for two years, and I was also a non-executive director on an NHS trust.

Well, as you say, I think we're in the final stages. Everybody knows what the timelines are. I think we're in the final stages of discussions with the government on the PPRS, and I have to say that what we're trying to do within that is to make that as broad-ranging an agreement as we can. But obviously there are negotiations, so we never know at the very end where things might be going. But I think one of the important things we're trying to do in the ABPI is to say that actually there is a new wind blowing in the sector and in the industry that wants to approach things in a different way. You saw that already with the Life Sciences Industrial Strategy, where I think we are in a much better position. We've been working collaboratively on putting that strategy together. It has everything in there that as an industry we wanted to have in there. We are specifically for an implementation body, which is there with the implementation board, where we can say, listen, this should not only be a document that lies on the shelf but actually gets implemented. I would say that same sort of spirit has continued in the discussions we've had on the PPRS. So they were collaborative, they were wide-ranging, so hopefully that will conclude in something similarly positive. But I think what it indicates, and that's important for us as an industry, is that it lays the foundations for the way that we need to work with each other in the future. It's more collaborative, ideally going towards a situation where we can co-create rather than give our opinion after something gets concocted behind closed doors and comes back and we have a 12-month consultation. That's not the way to get ready for a post-Brexit world. So hopefully it will be more dynamic, more on a basis of trust. If you look at the Life Sciences Industrial Strategy in the way that was created and the sector deals that came out of that, and you look at the way that we have been conducting the PPRS discussions, hopefully that bodes well for the future.

Yeah, I mean, if you look at it, I have not been privy to the consultation responses that went into the government, but I'm sure that that has been expressed in the consultations to the government and that they're now considering that. That is even more reason to make sure that we have a good voluntary agreement that can address that. I do think there are still serious discussions with the government to say, is there actually a relationship between the fact that you want to have a thriving life science sector with lots of investment ideally coming into the country, which is represented in the Life Sciences Industrial Strategy, and at the same time you want to also value that innovation that comes out of it? I think the connection between the two – we had a study that we did with PwC on that, a publication where we said there is actually a relationship. The government in the statutory consultation showed very clearly that they believe there isn't one. They put it black on white. I think what that shows is that despite the fact that there is actually quite good evidence, there's also contrary evidence that says that individual companies behave in their own interests. There is a whole spectrum of companies in the way that they deal with this. Some companies say for me there is no relationship whatsoever, and some companies say for me there is an absolute link. If the commercial environment is really bad, that will also weigh negatively on the sentiment. I've always said in my discussions with the government that what is important is that you watch your brand as a country in this new post-Brexit world. If you have a positive brand for the life science sector that also values innovation, you're more likely to increase your global market share. Doesn't it mean that if you keep them completely separately and you try from a procurement perspective to get as much out of us as you can on the procurement side, and then you take your chances with individual companies, you pick us off and say I'm going to get some deals? Is that possible? Yes, but it's a different strategy that you need to pursue as a government. As an industry, clearly you can see that we still have some way to go to convince the government to go with a more universal approach. I think that is unfortunate, but it also shows us as an industry that we really need to show the value of our products to the NHS.

Yes, we are. I mean, first to say is, listen, I think the margins in our sector – this is one of the things that journalists are always asking us. If you look at our profitability, I think we're in the middle of the pack when you look at other industries. We're not actually as profitable as people and journalists are making us out to be. So that's the first thing to say. But what we haven't done a good enough job of is to actually show the value of that. Where we've gone so far is that we get past the regulatory hurdles, we show the value to NICE in terms of health economics and cost-effectiveness analyses, and then we sort of stop. Yet the NHS, and frankly many countries around the world, are now asking us to say, 'Yeah, but show us you can actually deliver the value that you say you are going to deliver. Help us extract that value.' So what we're trying to do as a company, and I think AstraZeneca is one example of that, is to say, 'Is there a way in which we can use all these adjacent technologies that are now emerging, like data management and digital, to use that in addition to what we're already doing from a product perspective to either show that the value is really there, which is closer to home, or that we can completely transform the way that we treat certain diseases and go beyond that?' That's where some of the concepts are that you're managing. Yes, there are some partnerships that we have developed that are based in that direction. I think that is probably the future. How fast we will go remains to be seen. It probably depends a little bit on how successful we can be in making sure the current business model is still delivering for us.

Well, one of the things that we've been discussing actually with NICE and with different parts of the government is that if you want to on the one hand have an innovation-ready NHS that can actually absorb these technologies and benefit from them, and at the same time you want to make sure that industry starts or continues to produce some of these transformative technologies, you have to find a better way of creating this runway to get them into the health system and get them taken up. That will, as you rightly say, depend to a great extent on what type of technology there is. For some of these technologies, if they are very high-priced and provide a cure, like for example gene therapy, you will need to come to a very different type of arrangement. The price for that – we have a product in our pipeline for hemophilia gene therapy. That means that you won't need these products anymore for the rest of your lifetime. They're expensive, and the problem is additionally that the next election is right there, and healthcare players have to get through that. So what we need to do is create a system where for categories of treatments you start to have discussions early on where you say, 'Okay, for these types of treatments – I'm just giving an example of a high-cost potentially curative treatment – are you willing to come up with a different reimbursement model because that may be required?' If you have a disease area like Alzheimer's or pain, for example, other areas that have a big societal payoff and value, but that value doesn't necessarily get integrated into the evaluation of the medicine. If you look at the health and social care system, the way it gets paid for is not from one bucket. How do you deal with those? Then you need to have early discussions to say, 'Okay, if those are the types of transformative technologies that are coming forward – and I'm only talking about medicine now, but you can extrapolate to other technologies beyond medicine where they haven't even figured out yet how they're going to pay for that – how are we going to solve those problems?' The only way to solve them is to have earlier engagement, to be more open-minded as to what the type of solutions need to be. Just to give an example, for a one-year payment, there are some accounting rules around that right now that restrict the NHS from going beyond one-year payments. If that is not tackled and opened up, that means you've effectively closed off a potential solution.

Yeah, no, I listen. I mean, we have had discussions about that with the government, but I think there's only so much that we can do on our end, pushing them to solve their own problems. I think there is more to say about that. For example, I've had these discussions when I was on a trust board. Do all the trusts in this country receive the money for the clinical trials that they attract in their trust? The answer is no. Actually, the gain share, if you want, for what they get, differs from trust to trust. So we haven't even got those incentives lined up in the right way to make sure that behavior-wise, the right people get rewarded for the right type of behavior. How can you encourage trusts to behave in the right way and to attract those types of investments? Similarly, if you think about uptake, this is a discussion that we did have. The reason we want those payments transparent is because we want the incentives to be aligned in the right way. But then you're getting into almost doing the job for the NHS, which is not really possible. What you can do is talk about the issues that that creates: the fact that if locally they don't see that there is a deal at a national level and they still have a 10 or 15 percent growth and they don't get any of that rebate, that leads to a certain type of behavior. How do we address that? We have had very open discussions about it. Part of this is we cannot create these solutions overnight. That's one thing I've learned operating in the UK: it takes a while to get to those solutions. But the one thing that is really positive is that I think we're in a different position in terms of our relationship with NHS England than we were even a year ago, where we can have those types of discussions. Are they going to be easy? Are they going to give immediate solutions? No. But everything starts with building an open dialogue where you understand each other's viewpoints and then you say, 'Okay, what could potential solutions look like?' For these types of areas, how do you align the right behavior so that uptake – and in their eyes, uptake of the right medicines – happens? They will probably still say, 'Well, yes, but we don't want to have uptake for every single medicine; we want to have it for the ones where we see real value.' Yet the drugs bill is such a small percentage of overall spend. It's not the major spend in the NHS.

Well, I personally feel that we are shifting in our industry, and this is different company by company. But if you look at the issues of corporate social responsibility, they're becoming more important. I think we would be unwise as an industry not to take that on board. Issues of corporate social responsibility go beyond just picking medicines that are needed. As you saw, gender pay gap reporting, what we do from the environment, plastics – there's a whole range of issues. Are we paying on time? The next topic that I hear the civil service is going to focus on is the 180-day delay on invoices. Yes, exactly. So there is a whole range of issues, big or small, that I think will go up on the political agenda. Now, when it comes to unmet need, I do think as an industry we are moving in the right direction. I'll give you an example: antimicrobial resistance. I can tell you at the ABPI we have had, and I have personally had, discussions with Jim O'Neill on this as well, who led the group that looked into this for the United Nations report. We are discussing alternative ways in which a reimbursement model could work, because clearly they want to have antibiotics kept on the shelf. Well, that's not the way our business model works. That's a societal value. How do you value a societal value and put that into a model that still gives us the returns over time so that we want to actually invest in those types of medicines? But we're getting pretty close to a potential solution for that with the government. If we actually put that in place as a pilot, that would be the first country in the world to do that. So in many ways, we're leading the way in that regard. I think as an industry we are starting to really look at those things more seriously. Sometimes a select number of companies come together and say, 'Okay, what would a solution look like operating in that area?' As an industry association, we prioritize this as well. One of my colleagues, a professor at King's College, has said that it's only when boards and investors demand reports on social impact that it will become a priority for companies. So I think there may well be a responsibility of boards to consider that in their report back.

Well, I think personally this is a topic that's big at Pfizer. We try, like many companies, to focus on putting the patient first in everything that we do, whether it's in clinical trial design, whether it's in whatever we develop for packaging, etc. Many companies are now doing that. But what we notice is that there is an increased desire for patient groups to actually engage with the industry and to be engaging in discussions that matter to them. So getting inserted into discussions where the government makes a decision, for example. One of the things that we've been discussing as an ABPI is that the code needs to be adapted and we need to go with the times. If you look at how the code was originally developed, it was developed for a certain purpose: to sort of safeguard reputation as an industry and to keep certain practices in check. But if you look now at where we are as an industry, with the emergence of all the digital technologies, with the empowerment of the patient to want to speak up and have a voice and be inserted in decision-making processes, we have to find different ways of evolving the code so that this is really the case. That is what we're looking at right now. It probably needs to move more towards a principle-based code rather than specific rules. This is obviously not easy to do, but this is where we need to go, because otherwise everybody gets stifled in a lot of rules that probably don't provide solutions for increased patient engagement or increased digital engagement. There will be a session tomorrow in this important area. But I've always found it difficult to know who is the representative of the patient, because if you take pain, that's a huge spectrum of activity. What is for one person manageable with fairly straightforward analgesia is not for another. Then if that's the patient's voice in the room, or is it the patient representatives who are not really the patient? They don't experience all those areas. So this is... I personally have a strong belief that it should be really the patient's voice. Sitting on a board of an NHS trust, I can tell you that every board meeting we used to have a patient story: a patient coming into the board telling their story as to what their experience was with the treatment they received. Sometimes it was a very positive story, sometimes it was a really bad story. In both cases, you learn so much from just listening to that experience. I think it's something that we as an industry probably need to do much more of, and not doing it just as a tick-box exercise, but actually genuinely listening to patients and bringing them in, not just to showcase them in front of a sales audience, but to genuinely listen to what they have to say, the problems that they're dealing with. If you look at where we're going with convergence of technologies, with the empowerment of the patient, all the digital channels, if we don't do that and still try to control too much what we do, I think we won't be successful. So we'll need to engage in different ways.

Well, it's just very dangerous, isn't it? Where's the exit? Well, I mean, listen, this is a very personal view. I think I wrote an article with Andrew Carnegie in Pharmaceutical Marketing Europe comparing it to my own country, although I haven't worked there for a while. I personally think that sometimes your strength is also your weakness. The fact that we built the healthcare system here in a very decentralized way, where clearly you have some fantastic trusts doing some fantastic things, but that doesn't get copied, and you have a huge variation in performance, is now really becoming an issue for the health system. If you want to first of all save money by doing things more efficiently, you need to get rid of that variation. Secondly, if you need to transform your organization, because organizing decentrally is going to be very difficult, you might have one trust that is operating fantastically well and nine others that are not getting there. I think this is probably the fundamental problem that Simon Stevens and others are struggling with, and that's why they're doing it on a regional basis, trying to create these integrated health systems. I think the governance part is too much. Having operated on a hospital board, we had an executive and a non-executive board, and you have governance for it sitting around representing all these patients. You have NHS Improvement sitting there, also looking in on your performance. You wouldn't manage your company like that. It's too much tilted towards the performance angle. What I've always said is you need to allow these boards to focus, let's say, 60-70% of their time on performance – absolutely right, because you're dealing with patients – but you need to have 20-30% of your time to really prepare for the future and to strategically change things. The health system at the moment just doesn't have that capacity. So I think they need to find some sort of happy compromise between local and regional competition and some central element of making sure that the transformation of the whole system can take place. Somehow they need to find a way of giving boards and health organizations locally and regionally different mandates that allow them to do the strategic and transformational part on top of what they're doing right now. Otherwise it's a vicious circle and you won't get out of it. That's my view. As I say, I see that in Wales with seven independent health authorities all following some perverse targets of budgets rather than the reality of managing it. But that's not the story.