If you're in product development at a biotech, pharma, or med device company - big or small - you're not sleeping much these days.
Rising product development costs, stingier public and private reimbursements, and increasing regulatory hurdles mean that companies are struggling harder than ever to bring new products to market at prices that sustain ongoing investments in innovation.
And it's not going to get any easier. It's going to get harder. Facing unsustainable health care costs, payers are going to demand more health outcomes and cost effectiveness data before agreeing to reimbursement at premium, or even par levels. (Take Germany, for instance.)
But I still think innovative companies that demonstrate the value of their products in this environment will flourish. Successful players will work to incorporate the needs of all stakeholders (payers, patients, physicians) into the product development process and generate new medicines and medical devices that meet unmet needs and provide real value.
Those products, by definition, won't face generic competition and will command top tier prices.
The near term pain comes from shifting from an old paradigm, to the new paradigm. The old business rules - at FDA and industry - focused on "blockbuster products" approved through large one-size-fits all clinical trials need to change.
Some patients benefit more from specific products than others, some patients don't benefit at all, and some are even seriously harmed. Usually this last group is such a small number that in randomized clinical trials, it's considered noise. Given the enormous patient groups treated, on net the benefits of blockbuster drugs far outweighed their costs.
But recent and ongoing waves of blockbuster drug patent expirations are offering insurers cheap and very effective products. Rare side effects trumpeted in the media (like Vioxx) have eroded regulators willingness to approve drugs for primary care indications without prohibitively large and expensive clinical trials.
The blockbuster model that made billions for industry is putting itself out of business.
Instead of thinking big, innovators need to think small. If you shrink the denominator to just the segment of the market that genuinely benefits, then the value prospect for those small groups of targeted patients goes way up.
This approach builds on small tranches or niches of patients. "Nichebusters" like Gleevec offer incredible outcomes to patients and profits to innovators. Taking a personalized medicine approach will allow companies to move from a "product driven" model to one that is truly "market driven."
The trick is getting from here to there. Companies need to adapt. The FDA and EMA need to adapt. And policymakers must shift from viewing new technologies as part of the health care problem, to part of the health care solution.
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