Beyond borders: biotechnology industry report 2013
Different paths to value
Different paths to value, by Richard Pops, CEO, Alkermes
Across drug development companies of all sizes, the simple question, “What is our most exciting new drug idea?” has been supplemented by a more nuanced one: “How can we focus on the new drug ideas that will create the most value — for patients, their families and society?” Today, the way we prioritize R&D programs, the criteria we set for selecting new product candidates and the trade-offs we make in determining their development strategies are all informed by a clear recognition of the stark realities of the reimbursement environment.
When Alkermes was getting started in the early 1990s, the situation was different. Back then, as we considered developing new drugs and dosage forms based on our innovative science, we assumed that if we could successfully complete pivotal studies, we would gain FDA approval and reimbursement. Period. The conventional wisdom was that doctors could easily use our new medicines, patients would benefit from them, and the world was as excited as we were to advance medical science in the midst of the biotechnology revolution.
The new standard: economics and efficacy
Today, a drug developer needs to look beyond the standard efficacy measures required for a new drug approval. Post-approval factors, most notably the reimbursement perspective, are growing in importance and are being considered up front in the drug development process. In this environment, the ideal new drugs are those for which the medical need for innovation is well aligned with the economic rationale for use.
This is not to say that an essential criterion for a new medicine should be that it saves money. Far from it — many new medicines will cost, in dollar terms, more money than the historic alternatives. But those committed to developing innovative medicines now have to expand beyond safety and efficacy measures. We have to start conceptualizing the economic rationale for our products at the earliest stages of development and then collect supporting data throughout the product development program and beyond.
Different paths to value
Biopharmaceutical companies have adapted to this profound change in the health care environment in different ways. Some companies, including many of the smaller biotechnology companies, have focused their scientific resources on brand new treatments for diseases that have few, if any, adequate current therapies. These diseases include orphan and ultra-orphan diseases, which affect only a small number of patients around the world.
In addition, new personalized medicine approaches have enabled disease populations to be segmented by genetic mechanism, creating new orphan indications. In most cases, new drugs for these conditions have the potential to gain favorable reimbursement status and relatively high pricing as first-in-class medicines. Big pharma has paid attention and is responding by aggressive moves into this category of medicines.
Other companies, ours included, are choosing a different path by seeking to make significant advances in treating major chronic diseases. Despite the availability of multiple medicines, huge opportunities remain to create value by addressing critical unmet medical and economic needs for patients suffering from major chronic diseases. The appetite for such solutions is great because the economic cost of these diseases, affecting millions of people for many years, is breaking the back of our health care systems. In the US alone, chronic diseases are the leading causes of disability and account for 70% of all deaths, according to the Centers for Disease Control and Prevention.
Creating value in this chronic disease space requires an exquisite sensitivity to the advantages and limitations of current therapies — what they do for patients and what they cost — since new medicines may be competing against deeply entrenched treatment practices and, in some cases, inexpensive generic medicines. While this approach may sound daunting at the outset, it is an exciting place to focus the powerful science residing in biotechnology companies.
In our case, we see major opportunities to make real advances in the treatment of important chronic diseases such as schizophrenia, addiction, depression and diabetes.
Multiple strategies, one goal
Across the full spectrum of disease — from ultra orphan to chronic — there are many places for us to apply the power of scientific innovation to create valuable new medicines. While the business of developing drugs has certainly become harder and more complex, the potential value of our innovations, for patients and for society, has never been greater.
At Alkermes, we count ourselves among the biopharmaceutical companies motivated to have a profound, positive impact on the lives of large numbers of patients suffering from chronic diseases while, at the same time, taking into account the potential benefits to the health care system as a whole.
Opportunities remain in chronic diseases while pharma expands into diseases with fewer treatments×
Source: Alkermes, EY. Positions of data points are approximate and intended to be suggestive of relative mangitudes.