BioPharm 2011: Finding the healthcare value in pharmaceutical development

by Nurjana Bachman on September 15, 2011

(David Sky, Creative Commons License 2004-2011)

“Value is more important than innovation,” declared Angus Russell, CEO of Shire Pharmaceuticals, in his opening keynote address at Biopharm America last week. At a drug development conference, where attendees typically focus on interesting new ways to address therapeutic problems, that sounded a bit heretical.

But it was a telling example of how cost pressures are now manifesting in pharma. Some complex treatments can be new and innovative, but not provide measurable improvement in patient outcomes. Can we conclude that they have no value? This has been one of the central questions fueling the debate over U.S. healthcare reform, and will influence development of medicines into the future.

Hospitals and others have been asked for some time to show that they can provide the same level of care for lower cost. Now, it’s pharma’s turn.

Russell clarified his provocative statement, saying that innovation “for its own sake” does not guarantee value for the healthcare system. Rather, innovation can lead to value, but only with foresight and planning.

On a practical level, Russell’s comments addressed how to successfully develop medicines in the current environment. He noted the need to work with payors like the U.S. government’s Centers for Medicare and Medicaid Services (CMS) early in the drug development process, since it’s payors who decide whether and at what level they will reimburse treatments.

Currently, drug developers tend to go to these agencies as an afterthought, having already spent hundreds of millions of dollars on clinical trials, and perhaps even having won a hard-fought FDA approval. Organizations like England’s National Institute for Health and Clinical Excellence (NICE), which decides whether the country’s central National Health Service will provide and pay for a given therapy, have declined to pay new approved treatments, stating, “we have to be confident that the benefits justify the cost of the drugs.” A somewhat stunning example (by U.S. standards) was NICE’s recommendation this month against the use of three new drugs for metastatic colorectal cancer, compounding previous refusals to cover Avastin.

The new emphasis on value appropriately places a greater burden on industry to show that their new treatments are worth taking and worth paying for. These pressures are leading to another kind of innovation, perhaps strategic over technical.

Pharma is looking towards niche markets that currently have no good treatments, where its medicines make a major difference in patients’ lives — the definition of providing value. Shire has always had this approach, developing drugs for specialty markets, particularly rare genetic disorders in children. Its drugs are expensive but highly reimbursed, and Shire is one of the few companies that is successfully growing while others are shrinking.

While cost containment and business-model innovation are important, we shouldn’t discount the importance of dramatic, breakthrough technical innovation. The future value of these innovations cannot be overstated, because today’s earth-shattering innovation is tomorrow’s money-saving standard of care. Some of the inventions we work with in the Technology and Innovation Development Office at Children’s may someday dramatically change the way medicine is practiced (stem cell therapy and harnessing the body’s immune system to modulate disease, for example).

Clearly, there must be a balance between innovation and increases in cost. But taken to an extreme, aspects of the cost/innovation debate can miss the point — akin to arguing over the price of the iron lung to treat polio instead of investing in developing the polio vaccine.

Right now, in the face of these new pressures, we are shaping the way people worldwide will manage their health in the foreseeable future. In five years, the list of successful biotech and pharma companies that are available for partnering our innovative technologies could be dramatically different. Who’s on that list will depend on how companies approach the interplay of cost and innovation today.

Nurjana Bachman, PhD, is Business Development Manager in the Technology & Innovation Development Office (TIDO) at Children’s Hospital Boston.

Read more BioPharm 2011 coverage here and here.

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