Surviving the Big Squeeze in Biopharma Development

The biopharma industry finds itself in a squeeze that rivals the drama of the garbage-compactor scene in Star Wars. On one side, operational inefficiency keeps closing in. Outlook 2013 from the Tufts Center for the Study of Drug Development reminds us that new business models haven’t solved the industry’s efficiency problems. Another recent Tufts CSDD report attributes high study costs to operational issues such as excessive numbers of procedures in clinical trials. Closing in from the other side is reimbursement risk, as noted by Tufts and described in other recent reports, including one from PwC. A PwC survey shows industry executives worry more about reimbursement risk than regulatory approval.

When the market refuses to pay a healthy margin above development costs for each new product, the industry has to reconsider its optimism based on an increase in approved products in 2012. The real measure of R&D productivity is no longer the number of products approved, as we’ve come to believe. Without the ability to sell new products profitably, the industry will lose the ability to continue funding development. Productivity will fall in absolute terms – the industry will produce fewer new products because funding will dry up.

Companies can try to convince payers that their products offer benefits that justify high prices, but the payer ultimately decides whether extending progression-free survival or improving QoL for a few months justifies a price higher than a PhD biochemist’s annual salary.

If the market refuses to pay prices required by high development costs, the industry has two paths to a profitable future:

  • Discover molecules that justify the high prices required by current clinical development costs
  • Get more efficient at development.

Our mastery of drug discovery isn’t so great that biopharma executives can tell discovery researchers, “Get back in that lab and don’t come out until you’ve discovered a molecule that absolutely, positively justifies a six-figure price per patient per year!”

So it’s up to those of us who run studies to provide marked reductions in clinical development costs. We can’t do it through incremental changes in traditional methods. Adaptive monitoring, adaptive enrollment and adaptive operations across the board are already delivering substantial reductions in timelines and cost for some studies. I’m convinced they will provide the cost reductions required for profitable development of personalized medicines. The big squeeze between operational costs and reimbursement risk demands rapid industry-wide adoption of these operational advances.


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