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Derek Lowe The 2002 Model

Dbl%20new%20portrait%20B%26W.png After 10 years of blogging. . .

Derek Lowe, an Arkansan by birth, got his BA from Hendrix College and his PhD in organic chemistry from Duke before spending time in Germany on a Humboldt Fellowship on his post-doc. He's worked for several major pharmaceutical companies since 1989 on drug discovery projects against schizophrenia, Alzheimer's, diabetes, osteoporosis and other diseases. To contact Derek email him directly: Twitter: Dereklowe

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September 13, 2013

Value For the Money

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Posted by Derek

BioCentury always does a big issue for the fall, entitled "Back to School". They often use this as a state-of-biopharma platform, going into depth on what they see as the biggest issues that need to be addressed. This year, the September 2 issue, they're telling people (and not for the first time!) to get braced for higher standards for what health insurance is going to pay for:

Drug companies must start creating the case for value differentiation in discovery and then steadily build a body of evidence throughout the product development process.

Some drug developers have figured this out and have reshaped both their pipelines and development practices accordingly. But the number of me-too and purportedly me-better products still in the pipeline — coupled with the fact that drugs are still getting to Phase III and beyond without comparisons to relevant SOC (standard of care) or data on quality of life and other metrics that patients value — shows efforts in this department are still wanting.

For example, BioCentury’s BCIQ online database shows 54 compounds in active development that target VEGF or its receptors, not counting line extensions of approved VEGF and VEGF receptor inhibitors.

Even accounting for different variants of the receptor and its ligand and differences in delivery, formulation and dosing, it is highly unlikely that so many compounds could be differentiated sufficiently that physicians and patients would strongly prefer them to marketed alternatives — or that payers would be willing to reimburse them without restrictions.

. . .Back to School argues bio-industry must abandon efforts to block third-party assessments of value, and instead ramp up nascent efforts to be at the table where technology assessment takes place in the U.S., Europe and the rest of the world. Comparative effectiveness and cost effectiveness assessments will not be stopped. Industry can either contribute its expertise to improve the quality of the results, or stand by while others who may know less about both the drugs and the best ways to study them do the work based on their own priorities. Right now that priority is finding ways to avoid paying for new drugs.

Well put. But doing so is not going to be easy, or cheap. Differentiating new drug candidates in the clinic has often been left for later on in Phase III, and smaller companies often don't do much of it at all, figuring that'll be a job for their bigger partners when the time comes. The FDA "Breakthrough" designations can help here, because they explicitly encourage companies to show, as early as possible, why their compound stands out from the others. But as the Biocentury piece goes on to say, even then companies are going to have to be get ready to collect even more data on real-world outcomes, after the drug is approved, if they want to be able to persuade the various payers out there.

There's another issue here, too. Incremental innovation is just as much a part of the business (and the science) as are sudden leaps forward. There's room to wonder if the frequency of those sudden leaps (and the distance they cover) will go down if we don't get to take as many steps in the run-up to them. This is one of those issues that moves slowly enough to be effectively unprovable on any sort of reasonable financial or political time scale, but there are a lot of very real things out there that don't fit themselves to our calendars.

BioCentury recommends that (1) companies should work with regulatory agencies, insurance (both public and private), and patient groups to define just what constitutes real value for a given disease area, (2) they should immediately get to work with those payers who are already mandated to show improvements in their quality of care, (3) as mentioned above, whenever some government or international agency starts rating health care and medical technology advances, the industry had better be there, and (4) the drug industry had better change some of its traditional attitudes, and fast, because its pricing power is clearly diminishing.

As a drug-discovery guy, I don't spend as much time thinking about these issues as I do scientific ones. But if I'm discovering new things that no one wants, because no one needs them, that no one will then feel like paying for, all my work (and that of my colleagues) will be in vain. None of us can afford to keep our heads down these days.

Comments (20) + TrackBacks (0) | Category: Business and Markets | Drug Prices | Regulatory Affairs


1. Electrochemist on September 13, 2013 7:49 AM writes...

A critical aspect of differentiation will be the greater availability of and uses for companion diagnostics. Some drugs may look like "incremental innovation" when in fact, they represent life-changing advances for certain sub-populations. These advances get diluted when the clinical data include large numbers of patients from the general population who would be adequately treated by the current SoC. Using more sophisticated diagnostic tools to identify the appropriate patients for an experimental medicine at the time of enrollment will help differentiate the new treatments. Easier said than done, obviously, because a lot more needs to be known during the clinical phase about population heterogeneity and the relevant biomarkers to measure to identify subpopulations....

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2. anonandon on September 13, 2013 8:26 AM writes...

New medicines are eye-wateringly expensive already. Are costs going to go up or down if companies are encouraged to target only subpopulations of patients of a particular disease? One of the drivers of whether a target is prosecuted before the clinic is even thought of is size of end-market.

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3. Helical Investor on September 13, 2013 9:23 AM writes...

So in other words, marketing does indeed need to be involved early in the process.

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4. zorkbirder on September 13, 2013 10:26 AM writes...

Industry must clearly show the value of each new compound, benchmarked against the SOC and any other compounds in the same class. If one can not clearly elucidate the advantages, then there is little reason to bring that drug forward.
When the first DPPIV inhibitor was approved, there were 21 other DPPIV compounds in clinical development, none of which were differentiated on efficacy, safety, formulation or dosing. Of course until a compound is approved one can never be sure a safety issue might derail it, but trying to bring forward 21 undifferentiated compounds was a waste of industry effort and scarce R&D dollars.

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5. CMCguy on September 13, 2013 10:46 AM writes...

I spend time around people whose function is to care about such issues. Perhaps its changing at FDA but in most cases attempting to gain approval on QOL and other beneficial aspects that patients may really care about had little value in conducting Phase 3 Trials. As such responses or outcomes are often harder to define and measure such assessments can be even more complex than more established criteria which is rarely straightforward in any drug development. FDA is in place where can not be seen as "loosening standards" even if the aim would be targeted to gain improvements for patient that are not meeting strict definition for efficacy. Reg Agencies do need to be more flexible but that is almost an oxymoron.

As far as SOC this is not always well defined either and can have many variables, particularly on a global perspective, and can be a moving target. There is a real challenge in designing Clinical Trials that balance out how would wish to best conduct verses the practical factors of what can actually do. Again cooperation and flexibility would help but still a difficult task.

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6. Anonymous on September 13, 2013 11:51 AM writes...

Who is going to pay for all this additional comparative testing? How much more time will these new activities eat away at the patent shields that protects our inventions from the generic leaches? We already have drugs that are way too expensive, and now this plan is going to pile on even more high-priced development activities. How long before we have multimillion dollar therapies? Also as we working in drug invention all know, the failure-risk for developing truly innovative drugs is astronomical. This is why everyone does me-too work where the risks are somewhat manageable. What investors are going to take this type of risk without a promise of very significant returns on their capital? That of course means zillion dollar drug prices will be the only way to justify the risk-capital for innovative drugs especially for small patient populations.

Maybe someone out there can tell me how this will all make economic sense? Will we just end up rationing drugs by not inventing them?

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7. Anonymous on September 13, 2013 1:04 PM writes...

#6 this is what we already do according to the conspiracy theorists!

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8. Anonymous on September 13, 2013 2:31 PM writes...

A naive question: Why is there such a regulatory pushback against "me too" drugs? Doesn't competition in the marketplace benefit consumers by driving down prices? What if Coke got to the marketplace first? Would there be no Pepsi?

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9. newnickname on September 13, 2013 3:01 PM writes...

@8 Anon: "Coke [1886] ... no Pepsi [1898]?" I'm satisfied with Cheap-o Cola, myself. But choice of expensive Rx is not simply a matter of consumer preference. It is something that SHOULD be measurable by the difference in clinical outcomes. Surely, when the first-choice drug doesn't work well in some sub-population, the me-too drug might be preferred and more valuable to them. But that decision should be data-driven, not driven by advertisements or mere perception.

I think the issue is proof of efficacy relative to the other treatment options. Make all the Pepsis you want: just show that work they better than the competition, not that you can market them better than the competition.

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10. Confused Capitalist Ayatollah on September 13, 2013 9:35 PM writes...

Wouldn't me-too similar drugs actually help lower costs? Good ol principles of competition, etc. why does the health care industry want to prevent choice and make it harder to get multiple drugs with similar effects? Could someone pls. explain

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11. none on September 13, 2013 9:37 PM writes...

@8 Anon: This is because drug companies have agreed not to compete on price. When I was onboarding a few years back we had an exercise where we were given the scenario that we had a drug that had benefit, but NICE wouldn't agree to reimburse for it because the benefit wasn't justified by the price. We were supposed to brainstorm ways in which we could get NICE to change their mind. I naively suggested we could lower the price, but apparently that isn't done...

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12. Partially enlightened ayatollah on September 13, 2013 10:34 PM writes...

I get it. It's ok to have competition and low prices for sugared water, cupcakes, greasy burgers etc. which will drive you to need drugs. But no competition for the drugs themselves. Won't the FTC find what @11 points out as collusion and therefore illegal

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13. anonoid on September 14, 2013 6:27 AM writes...

#10: the real world doesn't actually work like the econ101 world model, econ101 should only be viewed as the economics equivalent as high school chemistry.

#12: google regulatory capture.

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14. samadamsthedog on September 14, 2013 7:19 AM writes...

@1. Electrochemist: I do believe that identifying subpopulations susceptible to drug effects is the right way to go scientifically, but whether it is viable commercially depends strongly upon (1) cost of identifying the subpopulations and (2) how big the subpopulations are. And marketing departments have a way of pushing drugs to the broader population, even when the appropriate subpopulation is known and easily identified; for instance, pushing COX2-specific NSAIDs to the majority of patients who require a pain killer but don't require COX2 specificity.

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15. Cellbio on September 14, 2013 9:44 AM writes...

Regarding subpopulations and prognostic markers, or personalized medicine, one of the biggest limitations is that there needs to be a clearly defined subpopulation that displays a truly different response in than the rest of the population. The predictive biomarker challenge is further complicated by many measures of efficacy that are employed. For instance, in using a "Disease Index" score that aggregates disease phenotypes into one number, response is expressed as percent of patients that cross a threshold, like a drop of 100 points. This creates a false sense of two populations by converting a continuous variable to a category (thanks Molecular Crapshoot!). However, with the imprecision of the measure, is a 99 point drop different than 101? No. In one trial, a close examination of a trial population with 15% response over placebo showed no outlier population with a unique response, just a shift in the whole population response.

Re the Biospace recommendations, is this new news? I don't think I do anything special, nor the companies I have worked for, and these ideas of understanding the customer base (patients, payors and regulatory agencies) and requirements for a meaningful drug have been table stakes for decades.

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16. Petros on September 15, 2013 4:24 AM writes...

While there is some mileage in arguing against too many companies pursuing the same targets, witness Chas Bountra's example of the TRPV1 disaster zone (e.g., sometimes the nth in class is markedly better. Lipitor was the 6th statin to reach the market but is clinically superior to all the earlier ones

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17. 1 on September 15, 2013 6:56 AM writes...

I wonder if some one could up with such a 'back to school list' for 'researchers' in all the branches of science so that the important tasks are pursued and not waste the limited resources on something unimportant just to fill the journals with junk.

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18. Anonymous BMS Researcher on September 15, 2013 7:20 PM writes...

Put more sucinctly: stop resisting head-to-head trials, or we'll get hit over the heads.

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19. Emeritus Executive on September 16, 2013 4:11 AM writes...

In many ways, some parts of health care reform are going to make the industry's job a little easier. The provider side of health care is busy "getting wired" with electronic medical records,information exchange, and (coming soon) "big data." Since what payers really want is "real world" data, this health care information technology revolution will eventually be the vehicle the industry will use to help document value--and to negotiate risk-bearing contracts with the new emerging payer/provider entities that will control much of US health care delivery.

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20. ex analyst on September 17, 2013 3:46 AM writes...

@8 & 10: I know European health systems better than the US, but in Europe, the resistance of payers to "me too" medicines is partly a consequence of culture/history and partly a consequence of drug pricing and reimbursement processes that are hard to change.

Most European health systems, and all the European drug pricing mechanisms that I know, have a very high degree of top-down central planning and management. They are not "markets" in any normal sense. National monopsonies, not consumers, are making the choices. Therefore, choice per-se (as we see with Coke vs. Pepsi, or brands of breakfast cereal) does not matter much.

Second, most health systems have had inflexible pricing models where branded drugs are allocated a generally high price and generics are allocated a lower price. Again, this is not a market in most cases. The price is based on some kind of calculus that, for branded drugs, has generally ignored the other similar branded drugs that are available.

Although things are changing, many European health systems have not had particularly effective mechanisms to shift patients off branded drugs and onto similar but non-identical generics (what is sometimes called Therapeutic substitution). This means that the health systems regard "me too" drugs as a way that the industry keeps patients on higher priced brands when perfectly good generics are available. The US payers, and one or two European countries (the UK, Germany) are good at shifting patients here, but most European systems are not.

The obvious solution - change the way countries buy and price drugs - is practically very difficult to implement. This is because if you mess with the drug pricing and reimbursement model, then you have to change the way lots of players in the health system are paid (hospitals, pharmacists, etc.).

There are a few examples where systems seem to have understood the benefits of "me too" drugs; bio-similar EPO and GCSF are good examples. Here, in some countries, the payment has moved to an auction model which has been very effective at driving down prices.

More countries are now trying to take account of the "competitive set" of molecules within a class or therapy area. The Germans, for example, seem to be implementing a system that bases price on incremental benefit vs. a set of broadly comparable products but which also - for reasons I entirely fail to understand - is strongly averse to me-too drugs. Don't bother trying to launch the 3rd of 4th DPP-IV in Germany.

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