Would future be always a replica of the past?
If the response is yes, the efforts of many global pharma players to replicate the successful Research and Development (R&D) models of long gone by days, would continue to be a grand success. The new drug pipeline would remain rich and sustainable. R&D costs would be increasingly more productive, with the rapid and more frequent churning out of blockbuster drugs, in various therapy areas.
However, an affirmative response to this question, if any, has to be necessarily supported by relevant credible data from independent sources.
Additionally, yet another equally critical query would surface. Why then the prices of newer innovative drugs have started going through the roof, with the rapid escalation of R&D expenses?
Thus, there is a need to ponder whether the continued hard effort by many large innovator companies in this direction is yielding the desired results or not.
In this article, I shall try to dwell on this issue with the most recent data available with us.
A new research report:
A new research report of the Deloitte Center for Health Solutions titled, “Measuring the return from pharmaceutical innovation 2015: Transforming R&D returns in uncertain times” states that the R&D returns of major life sciences industry groups have fallen to their lowest point in 2015, since 2010. The report tracked and reviewed the estimated returns of 12 leading global life sciences companies.
Some of the data presented in this report would give an idea about the magnitude of current challenges in this space. Nevertheless, there could be a few rare and sporadic green shoots, which can also be cited to claim a revival in this area.
I am quoting below some key pharma R&D trends, for the period starting from 2010 to 2015, as illustrated in the Deloitte report:
A. Declining R&D productivity:
| Year | R&D return (%) |
| 2010 | 10.1 |
| 2011 | 7.6 |
| 2012 | 7.3 |
| 2013 | 4.8 |
| 2014 | 5.5 |
| 2015 | 4.2 |
B. Increasing drug development cost with decreasing estimated sales:
During 2010 to 2015 period, the average peak sales estimate per drug has fallen by 50 percent from US$ 816 million to US$416 million per year, while the development costs per drug, during the same period increased by 33 percent, from US$ 1.188 billion to US$ 1.576 billion.
C. Smaller Companies showing better R&D productivity:
Between 2013-2015, relatively smaller companies showed better R&D productivity as follows:
- Big companies: 5 percent
- Mid to large cap companies: 17 percent
D. External innovation becoming increasingly more important:
Again, mid to large cap companies opting for more external innovation are showing a higher proportion of late stage pipeline value, as below:
- Big companies: 54 percent
- Mid to large cap companies: 79 percent
A fear of failure?
The Deloitte report throws some light on the general stakeholders’ concerns about the exorbitantly high price fixation for innovative new drugs by the concerned companies, together with consequential macroeconomic pressures.
One of the key suggestions made in this report, is to increase the focus on reduction of R&D costs, while accelerating the new drug development timelines. I shall broach upon this point briefly just in a short while.
However, the stark reality today, the hard efforts still being made by many large global drug companies to almost replicate the old paradigm of highly productive pharma R&D, though with some tweaking here or there, are not yielding expected results. The return on R&D investments is sharply going south, as the new drug prices rocketing towards north.
Is it happening due to a paralyzing fear of failure, that moving out of the known and the traditional sphere of the new drug discovery models could impact the stock markets adversely, making the concerned CEOs operational environment too hot to bear?
Be that as it may, without venturing into the uncharted frontiers of the new drug discovery models, would it at all be possible to bring out such drugs at a reasonable affordable price to the patients, ever?
I have deliberated before, in this blog, some of the possible eclectic ways in this area, including in one of my very recent articles on January 4, 2016 titled, “2015: Pharma Industry Achieved Some, Could Achieve Some More”.
New innovative drugs evaluated over priced:
Here, I would not quote the prices of Sovaldi and its ilk, which are known to many. I intend to give examples of just two other new drugs that have triggered significant interest as potential advances for the care of patients in two common disease areas, namely, asthma and diabetes. These two drugs are GlaxoSmithKline’s Nucala® (Mepolizumab) for Asthma and Novo Nordisk’s Tresiba® (Insulin Degludec) for Diabetes.
According a December 21, 2015 report of the ‘Institute for Clinical and Economic Review (ICER)’ of the United States:
“The annual price of mepolizumab would need to be discounted 63-76% to be better aligned with value to patients and the health system, while insulin degludec would need to be discounted less than 10% to do so.”
Thus, there has been a growing mismatch between the value that new innovative drugs, in general, offers to the patients and the price that the innovator companies fix for such drugs. This trend, if continues, would significantly limit patients’ access to new drugs, as the pharma players keep chasing disproportionately high profitability to increase their shareholder value.
External sourcing of R&D may not make new drugs affordable:
Taking a cue from the highly successful strategy of Gilead, especially what it has done with Sovaldi and Harvoni, if other major global pharma players’ also try to enrich their late stage new drug molecule pipeline from external sources, would that effectively resolve the core issue?
In my view, this could possibly be one of the ways to contain R&D expenses and with much lesser risk, as suggested in the Deloitte report. However, I doubt, whether the same would effectively help bringing down the prices of newer innovative drugs, in tandem.
This is primarily because of the following contemporary example, that we now have with us.
Although the active compound that is used to manufacture Sovaldi, or for that matter even Harvoni, is not Gilead’s in-house discovery, the prices of these drugs have already gone through the roof.
It is altogether a different matter that robust patent laws along with the Government vigilance on obnoxious drug pricing is gradually increasing in various countries. Some developed and developing markets of the world, including the Unites States and the United Kingdom, either already have or are now mulling for an effective counter check to irresponsible drug pricing, primarily by putting the ‘innovation’ bogey right at the very front.
In India, prompted by its robust patent law and to avoid any possibility of Compulsory Licensing (CL), Gilead ultimately decided to give Voluntary Licenses (CL) for Sovaldi to several Indian drug companies. These pharma players will manufacture the drug in India and market it in the country at a much lesser price.
A new cooperative effort for cancer drugs:
On January 11 2016, ‘The New York Times’ reported the formation of ‘National Immunotherapy Coalition (NIC)’. This is a cooperative effort by some leading global pharma companies to speed up the testing of new types of cancer drugs that harness the body’s immune system to battle tumors. The NIC will try to rapidly test various combinations of such drugs.
This is important, as many researchers believe that combinations of two or more drugs that engage different parts of the immune system might be effective for more patients than a single drug.
On the face of it, this initiative appears to be a step in the right direction and could make the cancer drugs more affordable to patients. However, only future will tell us whether it happens that way or not.
Conclusion:
Nevertheless, the bottom line is, to make the new innovative drugs available at an affordable price to patients, along with strict vigilance by the government bodies, the old and a traditional ball game of drug discovery has to change.
This would necessarily require fresh eyes, inquiring minds and high IQ brains that can bring forth at least significant eclectic changes, if not a disruptive innovation, in the new drug discovery and development process, across the world.
Otherwise, and especially when the low-hanging fruits of drug discovery have already been plucked, if the major global pharma players continue striving to replicate the grand old path of new drug discovery, the efforts could very likely be, and quite akin to, chasing a rainbow.
By: Tapan J. Ray
Disclaimer: The views/opinions expressed in this article are entirely my own, written in my individual and personal capacity. I do not represent any other person or organization for this opinion.