Value-Driven Drug Development: Unlocking the Value of Your Pipeline
1McKinsey & Company, Zurich, Switzerland
2McKinsey & Company, Hamburg, Germany
Pharmaceutical companies hardly need reminding that drug development has become more difficult: even safe and effective drugs struggle to gain regulatory approval and market access. To transform the situation, R&D and commercial teams should adopt a new paradigm: collaborating at the beginning of Phase 2 to keep a laser-like focus on stakeholder value.
In the 1990s, pharmaceutical companies could bank on a successful drug launch if they could prove that their drug was safe and effective. Since then the goalposts have shifted. Regulators want proof that new drugs are safer and more effective than those already on the market [1], and even regulatory approval is no guarantee of success. Health-care providers the world over are struggling with rocketing costs, making them reluctant to pay for drugs that do not deliver significant incremental benefits to patients—particularly if they come with a high price tag.
The result is that many drugs fail to secure broad market access or to earn the developers an acceptable rate of return. Between 1998 and 2008, for example, the UK’s National Institute for Health and Care Excellence (NICE) granted restricted or no market access to almost 60% of drugs from the top 10 pharmaceutical companies. Meanwhile, since its inception in 2004, Germany’s Institute for Quality and Efficiency in Healthcare has classified 70% of the drugs it has reviewed as “benefit not proven.”
The market-access challenge is likely to increase as payors demand ever more value for their money to contain health-care costs, which have risen twice as fast as gross domestic product since 1970. Accordingly, pharmaceutical companies have experimented with new approaches to try to improve their odds of success. Some, like GSK and Novartis, have worked closely with payors in late-stage development; others, like Pfizer and Janssen, have done so after launch, through risk-sharing agreements, for example. In our opinion, however, the only way pharmaceutical companies can consistently launch successful drugs is by working to meet the market’s needs much earlier in the development process.
This requires a new paradigm. R&D and commercial teams need to start working together when planning for proof of concept (PoC) in Phase 2. And instead of searching for a gap in the market for the compounds they develop, these cross-functional teams need to design a compound to fill a market gap. That gap will be defined not just by the needs of patients but also by the needs of regulators, health technology assessment bodies (HTAs), and payors.
The drugs that prove successful will be those that demonstrate their value to all these stakeholders, and do so early in development. We call this new paradigm “value-driven drug development.” It seeks to maximize the value of a company’s current pipeline and to replenish it with new and valuable compounds by steering research in the right direction. In so doing, it helps mitigate three of the main risks in drug development: discontinuation in Phase 3 due to lack of efficacy; commercial disappointment (often because of lack of differentiation); and failure to gain regulatory approval because the compound’s risks are deemed to outweigh its benefits (Figure 14.1).
The Four Imperatives of Value-Driven Drug Development
Value-driven drug development has four essential components, discussed in detail below:
- understand what outcomes matter to patients and other stakeholders at least five years before launch
- sharpen the focus of Phase 2 to define value as well as dose
- upgrade team and leadership capabilities, and
- instill a performance culture that encourages innovation and maximizes value.
1. Understand Which Outcomes Matter to Patients and Other Stakeholders at Least Five Years before Launch
Even as early as 5 years before launch, the patient should be the focus. At this stage, the task is to identify, using real-world evidence, patient needs not yet met by competitors for specific indications, and to understand what profile a new compound should have to satisfy those needs. The next step is to identify a subset of patients who might benefit most from the compound, perhaps because certain genetic variations respond well to it. Admittedly, segmentation in this manner restricts the size of the market for the proposed drug, but it also accentuates the potential differentiation from competitors’ compounds.
One example of a successful drug that has been narrowly targeted in this manner is Roche’s Herceptin. This drug specifically targets the 25% of breast-cancer patients whose cancer is related to an overexpression of the gene factor HER2. Oncology is the area in which most personalized medicine research has been conducted to date, but we believe other therapeutic areas are suitable too.
Efforts to differentiate a compound and so demonstrate its value can go further still by clearly defining different components of the overall outcome that the subgroup of patients would most value. For example, beyond its efficacy, a compound might also improve a dialysis patient’s quality of life by reducing the number of hospital visits required. After patients, the focus turns to other health-care stakeholders that influence registration and reimbursement decisions: governments, regulators, HTAs, and payors. Stakeholders’ assessments of a new drug’s value will differ, as will the data they require to demonstrate that value.
Regulators are mainly concerned about the risks and benefits compared with the standard of care, and mostly require randomized control trials and “hard” clinical end points directly related to the progression of the disease. Payors care about the total cost impact on their patient population. HTAs want to know whether the incremental benefits of a new drug can justify its cost. They may require observational and experimental studies demonstrating a more subjective assessment by physicians or patients of the drug’s impact on symptoms or quality of life. Regulators and payors are aware that their different demands can be hard for pharmaceutical companies to accommodate, and some have started to collaborate to try to reach common ground (see sidebar, “Increasing collaboration”).
The development team will need to understand each stakeholder’s relative influence. It used to be physicians who decided whether or not a drug was prescribed; now payors and HTAs increasingly hold sway. That said, stakeholders’ influence varies by country. For instance, HTAs have little influence over reimbursement decisions in the United States—that is, the remit of insurance companies. In Europe, by contrast, HTAs influence important pricing and reimbursement decisions. For example, NICE rejected the use of Genentech’s cancer drug Avastin in two cancer indications (metastatic colorectal cancer and first-line treatment for metastatic renal cell carcinoma) on cost grounds, resulting in sales worth just €10 million in the United Kingdom in 2008. That compared with sales of €300 million in France, where no HTA assessment was made.
Development teams will also need to find an approach that satisfies the main regulatory agencies in the United States and Europe. It is becoming increasingly difficult to submit one registration package that works for both. For example, the European Medicines Agency (EMA, http://www.ema.euroa.eu) always requires a pediatric plan, while the U.S. FDA does not. The EMA always requires a comparator for oncology drugs, while the Food and Drug Administration (FDA) does not. Their assessments differ too. The FDA approved Wyeth’s antidepressant drug Pristiq, while the European regulator had concerns about differentiation, prompting Wyeth to withdraw its submission. See Box 14.1 for more details.
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