The price of innovation
pharmafile | January 16, 2013 | Feature | Manufacturing and Production, Medical Communications, Research and Development, Sales and Marketing | ABPI, NHS, NICE, Rose, VBP
One of the strange paradoxes of our industry is that we have a very large number of new medicines in development, a lot of them quite novel, while over the last 15 years or so there has been a dearth of genuinely innovative drugs reaching the market. What has happened to boldness and blue sky thinking in drug development?
A risky business
It’s widely thought that the companies have become far more risk-averse, and that’s to be understood in the light of increasingly tough regulation. Whether that regulation is going in the right direction is another matter.
Indeed, various commentators highlight that the current R&D model is not delivering the level of patient benefit that society has come to expect. Here in the UK, this has been recognised in the form of a new way for drug companies to be paid by the NHS.
Value-Based Pricing will apparently replace the Pharmaceutical Price Regulation Scheme in 2014.
What is value?
Value-Based Pricing is not at all a new idea, or specific to pharma. Indeed it is not even universally supported or applied in other market sectors. Obviously, it is underpinned by the consumer’s perception of value, something about which we can expect vigorous debate. If the proposals go through, we should expect a shift in the focus of clinical research, the stage at which the effectiveness of a medicine is established.
But is effectiveness all we have to measure? Of course not. Value will mean different things to different constituencies. A drug which prolongs life into the 90s without reducing the care burden will not be good for the community which pays for the care, although the individual 95-year-old might see that differently.
They could be happy sitting in a chair watching daytime TV, with all their needs provided, and I write this as someone slightly nearer to that situation than most of my readers.
A measure of misunderstanding
There is a substantial literature on what constitutes value in healthcare. Writing in the New England Journal of Medicine in 2010, Dr Michael Porter says that “value in healthcare remains largely unmeasured and misunderstood”.
Yet value is what drives system progress. Can it be surprising that healthcare systems are so vulnerable to political whim, when there is so little agreement about how to make progress? The extent to which politicians do misunderstand value can be assessed by recent events in the UK.
For example, the fiercely debated Health and Social Care Act, driven through Parliament in the face of vehement opposition from almost all informed bodies in healthcare, does not mention evidence-based clinical practice anywhere.
Similarly, a government consultation document on an outcomes-based National Health Service totally ignored the need for evidence-based medicine. So did the consultation on the NHS Mandate. Surely the very bedrock of successfully delivering better health outcomes must be an armamentarium of treatments that work?
It depends on who you talk to
Porter says that value must be defined around the customer. Herein lies the dilemma I highlighted above – it depends on who you think the customer is. If the patient were the only arbiter of what is effective treatment, we would not bother with clinical trials which use sophisticated methods to minimise bias.
The inescapable fact is that the patient’s subjective impressions are not sufficient, so giving the patient more authority over clinical decisions has its problems. In any event, the patient is not in a good position to assess value, because value is an outcome relative to the cost of achieving it.
Here we enter the realm of the health economist. There have been huge arguments about decisions made by NICE, which have been based on pharmaco-economic assessments.
Commonly, patient interest groups have challenged a negative decision by NICE, most often for anti-cancer drugs, because they didn’t agree with the cost effectiveness assessment. The bottom line here is that society doesn’t think the drug has sufficient value, and the individual patients think it does. Can this be resolved?
A large part of the problem is that health outcomes are composites. A care package will comprise many services and products, sometimes hard to separate. Too few data are captured on the contributions made by these components, to identify the value of each.
To get some of them into proportion, consider that in the UK prescription drugs account for about 10% of public health spending. That figure has remained about the same for 40 years to my knowledge.
So we have other healthcare components that are together costing nine-times as much (ignoring overheads – but should I?), and which may have big influences on outcomes.
Value bit by bit
I’ll come back to costs in a while, but I haven’t left value behind yet. There is clearly a place for incremental value, where clinicians will settle for only a small therapeutic advance. Such small advances will not command high prices, but it has been traditionally accepted that a choice of similar medicines can be useful. In this scenario, individualisation of treatment is on a trial and error basis.
Can this approach continue? I don’t think so, if personalised medicine really takes off, and treatment can be individualised to genetic markers. We mostly think of small therapeutic advances in relation to ‘me too’ drugs, but they also may apply to advanced therapies, especially in cancer. Is survival of an additional three months a major advance?
Again, it may be to the patient and it may not be to the payer. Yet those are the drugs which seem to be costing the most.
Costs in perspective
So we are back at the cost part of the equation. Before I get into R&D per se, what is the whole cost to get a new drug delivered to patients? About twice as much money is spent on persuading doctors to use it (and their organisations to buy it) than is spent on discovering and developing it.
It is always going to be hard for the industry to argue for higher prices while this situation prevails. But all products have to be marketed and sold, and those costs are not going to diminish overnight. My brief is R&D so I will leave others to ruminate on how much they spend on selling.
Making risk acceptable
Innovation involves more risk, and the industry has been risk-averse for some time. What development models might reverse this trend? Despite an era of intensive focus on operational efficiency, drugs are no quicker to market than they were 15 years ago. Regulators and industry are locked into an inefficient model that costs too much and discourages risk-taking. Allow me to summarise the key points.
The blanket approach to quality control does not give good results, and clinical trial management in particular needs to target areas of high risk. Before a new drug even gets into development, its expected value needs better definition. This will need collaboration with clinicians, payers, and patients.
For publicly funded healthcare systems, politicians will be part of the mix – and probably the most difficult part as they mostly do not understand science and the need for evidence. I envisage a formula which includes an agreed understanding of value, based on health outcomes (balanced between individual and societal needs), and R&D cost containment resulting from a more rational and risk-based approach to management.
The value of individual medicines will feed into an enhanced perceived value of the industry as a whole, which might make it easier to justify a pricing structure more able to fund high-risk highly innovative drugs.
Benefit-orientated projects
The argument fits well with my other personal theme, project management. In that field, there has been a cross-industry growth in so-called benefits management.
Traditionally, project plans have been built on deliverables, defined as concrete and identifiable results of tasks. That practice may not be quite adequate. The business case for the project stands or falls on the benefits that can be delivered to stakeholders.
A deliverable may have high or low benefits – if low, why are we producing it? Maybe the application of project management best practice to clinical research, which I have been striving to embed in the industry for over 20 years, has not impacted enough on operational efficiency because we lacked focus on benefits?
But benefits to whom?
Project managers have been inward-looking, seeking to meet the expectations of their companies rather than those of consumers with unmet medical needs. Perhaps health outcomes need to be at the front of project managers’ thinking, which has hitherto been largely dominated by the classic triumvirate of time, cost and scope. This may well imply that project managers will have to challenge their internal clients more strongly, in order to tease out the value that underpins the project.
It is entirely possible (although rare) to run a clinical programme with 100% regulatory compliance, on time, on budget, and on target for quality. None of that dictates that it must have delivered an important therapeutic advance to patients, and I make no apology for taking every opportunity to make that point.
Les Rose is a freelance clinical scientist, specialising in project management consulting.
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