Reuters, in a December 20th Insight piece, examines Big Pharma’s move to collaborate with the major healthcare payors far earlier in the development process of experimental medicines.
Pharma’s traditional model for decades has looked like this:
1) Spend years and potentially hundreds of millions of dollars researching & developing a drug;
2) Prove it works;
3) Prove it works safely;
4) Get it approved by health-regulating government agencies; and only then,
5) Offer the proven, approved drug to healthcare payors, through whom the lion’s share of revenues will come.
Key to this model has been the substantial subsidizing through government funding.
The increasing problem with this model is two-fold. First, U.S. and European government support has been slashed in the last few years because of debt crises. Second, pharmaceutical firms can discover at the end of the long, increasingly expensive process that their product receives a cool reception, or even a complete cold shoulder, from the payors.
Enter a new drug-development model that is being adopted by Big Pharma and even smaller pharmaceutical firms:
1) Identify a promising drug;
2) Initiative research & development;
3) At mid-stage development, meet with health insurers for informal input about the marketing possibilties of such a new product; and then,
4) Decide on the prudence of moving forward with the steps of development, drug efficacy, drug safety and regulator approvals based on the marketing input.
The Reuters articles discusses how major pharma players, including GlaxoSmithKline, Pfizer, AstraZeneca, Sanofi and Shire, as well as smaller firms such as Acorda Therapeutics, are adopting the new strategy. On the other side of the equation, the article mentions insurers such as Humana and WellPoint and PBMs such as Medco.
This increasingly popular approach has some people worried. The article notes, “As drug manufacturers invite marketing input earlier than before, some fear they risk the very innovation that leads to landmark new medicines. Industry experts point to advances that took time to prove their worth or worry that drugmakers may abandon categories where ‘good enough’ medicines already exist, like depression, partly because it’s not worth the economic risk.”
Reuters quotes Dr. Alan Schatzberg, former president of the American Psychiatric Association: “There is a concern that in five, 10 years we won’t have anything really new for patients with major mental illnesses, and that would be absolutely a tragedy.”
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Rob Lazzaro is BeechTree Partners’ Senior Vice President & Life Sciences Practice Leader. He can be contacted at RLazzaro@beechtreepartners.com.
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