Boston, MA – July 12, 2022: Research associate Johanna Wilson works in the biology lab at Servier … [+]
There are two sides to every coin. This expression holds as true for currency as it does for a pharmaceutical industry that’s in transition. In my previous article, I discussed how changes in healthcare market dynamics, coupled with Covid-19 restrictions, have forced pharmaceutical companies to fundamentally rethink their commercial model, from one that traditionally relied on in-person access to physicians to a more focused and disciplined approach. But adopting new sales and market access strategies is just one piece of the transformation puzzle necessary for pharma to successfully operate in a new paradigm. Pharma also has to seriously rethink another critical piece: their research and development (R&D) approach.
For years, evidentiary standards required to bring a drug or medical device to market have become more stringent. Using medical device companies as one example, I’ve argued long ago that government efforts to rein in healthcare costs through lower prices meant that demonstrating the economic and clinical value of a product, and tying both to improved patient outcomes, had to be factored into a product’s design and development lifecycle long before it came to market. As cost-conscious payers are increasingly making pricing and reimbursement determinations in relation to existing therapies, their role as a customer only grows in power and influence.
The same holds true for drug companies. Today, these same financial, legislative and regulatory pressures are only tightening, and the impacts are already being acutely felt both in the U.S. and globally. But lowering drug prices through measures like price controls and comparative pricing is sending other reverberations throughout the drug market. These measures also threaten the viability and success of bringing to market drugs designed to treat serious, life-threatening illnesses, especially cancer.
The lens through which many of these life-saving drugs are now being examined and judged is their ability to improve overall survival (OS). Improving OS has always been the clinical endpoint “gold standard” in oncology, but progression-free survival (PFS), which has also become an important benchmark in determining patient outcomes, is no longer sufficient. So, as the data package required at the time of submission to regulators becomes more robust, pharma companies will be forced to make harder decisions about the kinds of drugs they invest in. They will also have to make a clear case for why a new drug is significantly better in a clinically material way than existing alternatives.
What’s at stake here isn’t just corporate profitability, but access to trials to improve the quality and duration of life for patients desperately in search of new cures.
Call it part science, part art, but getting any drug to market today is incredibly time consuming, risky and expensive. According to the industry trade group PhRMA, it takes between 10-15 years and costs $2.6 billion to develop and bring to market one new medicine. Only 5% of the roughly 7,000 rare diseases that exist today currently have an available treatment, even though, according to the Congressional Budget Office (CBO), R&D spending for pharmaceuticals was more than $80 billion in 2019 alone – about ten times more than was spent annually on R&D during the 1980’s.
In terms of oncology specifically, it costs almost $650 million to develop a single cancer drug. In addition, a University of Chicago study found that cancer treatments account for almost half of the FDA pipeline today, with “27% of new drug and biologics approvals [being] for cancer.” Certainly, these statistics speak to the gargantuan task of developing new medicines, and the industry has made tremendous progress. Looking ahead we need to build on this progress with breakthroughs in the field of cancer treatments, and other difficult to treat conditions like Alzheimer’s and ALS. However, these advancements are being threatened by regulation as governments continue to try and contain the overall rising cost of healthcare and lower prescription drug prices.
The recently enacted Inflation Reduction Act of 2022 (IRA) was the latest effort to achieve these ends in the U.S., as it allows Medicare to negotiate some prescription drug prices and caps insulin costs at $35 per month for senior citizens with Medicare, among other measures. While this makes for feel-good headlines during tough economic times, and undoubtedly some will benefit from these changes, I’ve explained that the act is a death by a thousand cuts for big pharma because it will result in fewer drugs being developed and lower profits. The CBO has even found that existing drug sales as well as returns on R&D for new drugs will be impacted by drug pricing regulations more broadly. And, “changes to regulation of clinical trials would also affect the supply of new drugs.”
Other countries are following a similar trajectory. Germany, one of the largest drug markets outside the U.S., passed the country’s Pharmaceutical Market Reform Act (AMNOG) law in 2011. The law further raised the bar on the clinical data standards required for new drugs coming to market and stipulates that a new drug be evaluated against an existing treatment on its ability to improve OS – the length of time a patient lives once they begin treatment – as opposed to PFS “surrogate endpoints,” in which the patient might not yet be in remission but the disease isn’t getting worse.
AMNOG’s comparative effectiveness requirements have been used to determine whether or not drugs should be approved and at what price. So, if a manufacturer wants to bring a product to market and doesn’t show OS, then the reimbursement structure is set up so that they get the reimbursement for whatever the standard of care is today. Since it can take years to obtain OS data, this further compounds pharma companies’ barrier to entry challenges.
The pricing and regulatory fallout continues to be felt both at home and abroad. This was predictable.
Last year, bluebird bio pulled its gene therapy, Zynteglo, from the German market over a pricing dispute. In the U.S., a Food and Drug Administration (FDA) committee just unanimously voted down Y-mAbs Therapeutics’ Omburtamab to treat rare pediatric cancer due to a lack of sufficient OS-supporting data. With other unintended consequences still on the horizon, this is just the tip of the iceberg.
While we are not there quite yet, in the not-too-distant future we can expect pharma companies to cut back on their phase III clinical trials. Additionally, they will likely also cut back on their phase IV post-approval research, where a drug already in market to treat one type of cancer, for example, is further studied for potential expanded applications. If this happens, it will be very hard for patients with special types of cancer, and who are not responding to the current standard of care, to engage in clinical trials where they might be a good candidate.
Unfortunately, these types of cutbacks are already happening. Alnylam Pharmaceuticals just announced they will not initiate a Phase III trial of vutrisiran in Stargardt (Eye) Disease in late 2022, as the company “continues to evaluate the impact of the Inflation Reduction Act.”
So, what is required today in R&D to operate successfully in this new regulatory atmosphere?
As I mentioned above, the new approach must be squarely centered on ensuring that early in the product development process, the clinical and economic value a drug holds for all stakeholders -payers, insurers and patients – is considered. They must also answer critical questions out of the gate: Where will we launch our products? How are these drugs going to be reimbursed?
It makes no economic sense today for a manufacturer to risk their money and time to bring a product to market only to accept reimbursement at a lower price point than a similar product that is already on the market. To think otherwise is foolish, given the time it takes to demonstrate OS in a new drug. To add to the complexity, manufacturers must keep a careful watch on their competitors as well. The race to the finish line is not only complicated by the uncertainty of the scientific outcomes their asset will achieve, but by the actions of regulatory bodies and the relative performance of competitors’ assets.
In addition, R&D and commercialization cannot be divorced from each other. With a new R&D model, companies will also have to use strategic market insights to determine therapeutic focus. This will drive disciplined portfolio investment decisions that reflect a more holistic view of product life cycle value across the continuum of care.
Big pharma, once the crown jewel of American business, is facing fierce economic and regulatory headwinds like never before. While some of these winds are out of their control, others were of their own making. Many executives thought the passage of the IRA would never come to pass – at least not yet. They played block and tackle on Capitol Hill for years, but when decision day finally came, they were dealt a serious blow. That said, the pharma industry’s global reach and scale is unparalleled. No one else can deliver on the innovations we are seeing today that are saving so many lives. To this point, if the goal of the Administration’s Cancer Moon Shot is to reduce cancer rates by 50% over the next 25 years, only thoughtful policies that encourage more innovation will ensure liftoff.
Thankfully, more manufacturers are realizing their commercial model needs to change. But they must also address the other side of the coin — the critical changes that need to be made to their R&D approach. Most importantly, they must demonstrate outcomes that matter to all stakeholders. If they don’t, cancer patients and those with other rare and sometimes irreversible illnesses, may be the first ones to suffer the consequences of inaction.
In an industry that is becoming more patient-centric and focused on the continuum of care and meaningful patient outcomes, failure to overhaul the old R&D playbook would be negligent – and catastrophic – for patients in need of lifesaving drugs.
