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Could a Change in R&D Focus Lead to a Reinvented Pharma?
Posted on January 8th, 2016 by Christy J. Wilson in Pharma R&D
In early December, the New York Pharma Forum held its 26th Annual General Assembly, focusing on the theme “The Reinvention of Pharma,” and featuring executive-level speakers from Pfizer, Sunovion, Takeda, The Japan Pharmaceutical Manufacturers Association and the consulting company Defined Health to expound upon this theme.
“Reinvention” is a strategic focal point for just about any mature industry, and, if you’re at all attuned, it’s common to hear the usual industry-specific themes repeated again and again. So I attended the Forum with a healthy mix of both skepticism and optimism: skeptical that I would hear anything truly new and thought-provoking, yet optimistic that I might (and that would make attending the Forum all the more worthwhile).
In the end, my sense of optimism was rewarded by Ed Saltzman of Defined Health and his presentation entitled, “The Future is Now: Dealing in a Transformed Healthcare Environment.” Mr. Saltzman’s presentation began by articulating reasons why industry should feel buoyed:
- A recent reduction in late stage (Phase III) failures; albeit this is still a significant industry challenge
- Industry R&D productivity showing signs of improvement as evidenced by an increase in the number of new products being launched
- Shrinking timelines from discovery to translation; referencing, for example, CRISPR as an enabling technology
However, good news aside, Mr. Saltzman went on to say that that Turing’s recent price-gouging incident should wake pharma up to a much larger problem: specifically, just as hurdles to biologic challenges are on the decline, hurdles to business model challenges are on the rise.
In a nutshell: pharma is an innovative industry that has traded volume for price as a means of driving growth and rewarding shareholders. The industry has, by and large, moved its R&D focus – and therefore its treatment focus – from large, heterogeneous populations and chronic primary care-managed diseases, to smaller, more homogenous populations with specialty-treated diseases, with even more individualized therapies waiting on the horizon.
Concerns around this trajectory are that higher-priced therapies present a persistent PR risk and that ultra-expensive therapies are untenable across an entire industry – especially against a backdrop of increasingly consolidated and powerful payers in the developed markets.
Further complicating this picture are historic industry-business model dynamics that may no longer be relevant. For instance, pharma has traditionally brought to biotech the benefits of global scale – and cash. With smaller patient populations and more individualized therapies, biotech firms may seek alternate, and perhaps more specialized, capabilities from their pool of prospective partners, leading pharma to be possibly perceived (as Mr. Salzman put it) as an “unnecessary middleman.” Additionally, cash is available to biotech firms from a variety of prospective investors, not just large pharma. Pharma not only faces increased competition as it courts biotech, but with more competition from others who wish to make biotech investments, pharma now also runs the risk that its biotech-fueled innovation comes at an increased expense.
So as pharma thinks about reinventing itself, Mr. Saltzman offered that “pharma’s global scale capabilities could remain relevant despite the tilt toward personalization.” He went on to say that re-focusing on diseases with the greatest global economic impact is one way for pharma to leverage its global scale, and where price can best be connected to value. In other words, pharma should consider a return to developing therapies for those large heterogeneous populations with chronic, primary-care-managed diseases. This is an especially apt thought in light of an aging baby-boomer population that will place increasing demands on the healthcare system.
Like many things in life, pharma’s ability to reinvent itself comes down to making smart choices. In the Forum’s question and answer session, one of the speakers remarked that the pharma industry is like a bunch of six-year-olds on the soccer field – they all tend to run in one direction, as a group, not always realizing what else might be happening on the field or setting up for the next play. Perhaps it’s time for some of them to break from the pack in pursuit of reinvention.
I wish to extend a personal note of thanks to the New York Pharma Forum for the opportunity to attend its Annual General Assembly and to the entire speaker panel, all of whom shared considerable insight into ways the industry and in some cases, their companies, are reinventing themselves; a special note of thanks and credit to Mr. Saltzman of Defined Health for his presentation.
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Christy J. Wilson
Sr. Director, Pharma and Biotech Segment
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