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Cost Saving: The trade-off that bites back

Posted on April 3rd, 2017 by in Pharma R&D


Making a trade-off between competing activities or priorities is a critical skill involved in developing a new medicine. This approach helps balance the risk of technical failure and investment to develop innovative products, an important consideration with such high failure rates in pharma R&D. There is a continuum where projects can be placed. At one extreme is the approach in which risks can be discharged sequentially—this minimizes investment and loss if the project is not able to progress. The other extreme is to plan for success and run activities in parallel, saving time and losing money when the project fails. This approach brings products to the market quickly, and, in the days of plenty within the pharma industry, was often the default approach for larger companies. Those days are past now and customers who pay for our medicines are also having to make difficult trade-offs at all stages of the life-cycle. Trade-offs aimed at saving money focus on the more immediate short-term gains as compared to potential longer-term wins.

This was apparent with the U.S. administration outlining significant cuts to the NIH budget and plans to double the fees to the FDA (1). When setting budgets with an aim to save money, the critical trade-offs that are made can really bite hard. With less investment in U.S. biomedical research, it will be more difficult for new innovations to materialize through their academia. There has certainly been a very vocal response highlighting the pain that researchers are feeling (1). The increased cost of application may not become a significant additional barrier, given the significant costs involved in bringing an innovative product to this stage. However, it does add to the risk profile for innovators and, once approved, there is no guarantee that medicines will be taken into the market. This is certainly the case in the U.K., where the NHS is currently undertaking a range of cost-saving plans that might delay access to medicines. There will be an immediate impact to patients and companies that have spent significant funds in developing safe, effective medicines that provide value for money (2).

The longer-term impact is difficult to predict within the political and social context. Significant frustration and even anger with the voting population is something politicians will consider. Future commercial investments are also likely to be made with different perspectives, even within R&D (2). In my experience, these considerations are not key drivers when we need to save money today.

Perhaps it is time to try and have a different discussion. We often think of R&D being a technical process where scientific risks are managed appropriately through an evidence-based approach. These recent events highlight that R&D does not live in isolation and may even be more sensitive to social policy changes. The industry needs to respond proactively to this challenge. Policy makers are faced with a no-win situation, the trade-off made will always impact some more negatively than others. Perhaps this dilemma could be approached from an ethical consideration?

Ethics describe a set of principles which guide our behavior and could be a framework by which key trade-offs could be described. This will allow greater transparency and clarity of short- and long-term impacts from the decisions made. It would provide an opportunity to challenge and share different perspectives and potential scenarios and develop a system thinking approach to medicines development and their use. This approach could give rise to some of the undesirable impacts of the decisions made for a range of stakeholders in the system. From here, it is possible to start to develop some fundamental solutions across the system. Using an agreed set of principles may just be a way to guide agreement on finding the appropriate balance of reducing costs of medicines while adding or maintaining value for the innovators.

Of course, this is difficult with so many stakeholders and competing priorities, but unless we find a way to develop a different discussion, the situation is unlikely to change.



All opinions shared in this post are the author’s own.

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