This report was originally written for Clinical Research Focus magazine, but remained unpublished so I’ve rescued it from the archives…
People like us, who work in clinical development, are used to being buffeted by changes in regulation, health service R&D policy and company tactics. But, above all that, pharmaceutical companies and healthcare payers/providers are pursuing long-term strategies that will have an impact on how we work. For over a decade, the FT Global Pharmaceutical and Biotechnology Conference has been a key event in sharing and shaping pharma companies’ strategies, with industry leaders at the very highest level coming together with investors and policymakers to discuss the topics that will shape our entire sector for the next few years.
This year, the title of the event was “Value at Risk?” This reflected the general challenge facing the sector to improve productivity and value creation as the global economy recovers: the current 5-7% return on R&D investment may be acceptable during a recession, but as the economy recovers investors may look to other sectors for returns above 10%. However, the title also reflects a more specific challenge around the move towards value-based pricing in the UK and other countries. With a more direct link between price and patient value, companies will need to find new ways to demonstrate value, and the standards by which value will be measured may also change. These were the sorts of topics that drew around 150 delegates, from pharma company Presidents and CEOs down to lowly journalists! I was pleased to represent ICR at this meeting, and present this brief report of some of the highlights of the conference.
In a change from the traditional format, much of this conference took the form of conversations or panel discussions, with very few structured presentations. Although some long-standing delegates were less comfortable with this format, it did enable the speakers to be more flexible and base their comments on the directions taken by other speakers. The first day was chaired by Andrew Jack, Pharmaceutical Correspondent for the Financial Times, while the second day was chaired by Reynold Mooney, Global Leader in Life Sciences and Healthcare at event sponsor Deloitte Touche Tohmatsu.
The first session of the meeting looked specifically at value-based pricing. Giles Denham of the Department of Health explained that VBP will come into force in some form in 2014. The details of the arrangement are still being negotiated between DH and the ABPI, but many drugs that are already on the market will be unaffected, continuing to be sold under the next ‘generation’ of the Pharmaceutical Pricing Regulation Scheme (PPRS). This has delivered stable pricing since 2010, when the Labour government changed it unilaterally to reduce NHS drug spending. Giles confirmed that NICE would continue to have a role in assessing the value of medicines, with VBP operating in a framework around NICE activities. From April 2013, NICE will also be able to include social value in its assessments, enabling consideration of a wider range of indirect costs and benefits, such as returning to work earlier or requiring less long-term care by treating symptoms more quickly. Precisely how the resulting value will be transformed into a price to be paid by the NHS is still being negotiated, but Giles stated that the intention was to use the evidence available and not require any new types of data from industry.
Giving a different perspective, the next speaker was Niklas Hedberg, Department Head for New Submissions at the TLV, the Swedish body closest to NICE in its remit. He explained that Sweden has had VBP for around 10 years. While their evaluation model was based on the early activities of NICE, but they also have the scope to use societal value, and to set the end price for medicines. Having made over 500 pricing decisions over the past decade, the TLV is generally considered to be a success. Niklas highlighted that the TLV is looking to learn more about how to value innovation (as distinct from simple improvements in treatment effect). Another area that is currently being debated is the potential for the same drug to be used in different indications. As these indications might have different impacts on wellbeing, and the drug might have different treatment effects for different indications, would it be reasonable to pay a different price to use the drug in each indication? And, if so, how would this be measured and enforced? Niklas also raised the area of orphan drugs, where the rarity of conditions means that conventional VBP models break down. The TLV is still developing its evaluation models, and is currently running a public consultation on the issue of periodic reviews to consider adjusting pricing as data evolves post-launch.
Ismail Kola, President of New Medicines at UCB, pointed out that his company had a unusually positive view of value-based pricing, because of their corporate focus on first-in-class molecules and a high ‘bar’ when looking to demonstrate superiority over existing comparators. He raised the interesting issue of societal vs personal/family value and gave the example of cancer survival. On purely economic measures, adding another 3 months to the survival of a patient with terminal cancer may be hard to justify, it is extremely important to the patients and their families, leading to political pressure to pay for treatment that might be absent for less emotive or chronic treatment.
The other speaker in this session was Corinne Savill, Global Head of Pricing and Market Access at Novartis. She acknowledged the complexity around recognising value, and especially how this differs between countries. She stressed that the evaluation process shouldn’t require more time to demonstrate value, and that the current lag from listing to NICE assessment results in a delay to actual sales. Giles Denham responded that this time is currently only 4 months, and that developing better ‘teeth’ to implement NICE guidance was on their ‘to-do list’.
Coming back to Niklas Hedberg’s point about differential pricing, Corinne Savill gave the example of France, where price is calculated based on estimates of expected usage in different indications, and adjusted after follow-up. Ismail Kola said that this issue will be exacerbated as we move towards molecular diagnosis: if a general condition such as diabetes is subdivided into multiple diagnosable variants (the ‘mini-buster’ model) then it will be even harder for VBP to operate. Giles Denham responded that this might not be such a problem if the smaller subgroups responded better to treatment, with greater value per patient in the responding groups offsetting the lower value to non-responders.
Andrew Jack moved the discussion on by asking whether VBP is just a ‘cover’ for governments to enforce lower pricing. He asked whether TLV benchmark pricing against their neighbours who don’t operate VBP. Niklas Hedberg confirmed this, stating that at present pricing shortly after launch is broadly equal to neighbouring countries, but that a gap develops after a few years, as deals are done to reduce the price in other countries, while in Sweden they are fixed. To address this is the purpose of the consultation he mentioned earlier. He also challenged the ‘innovation premium’ proposed by Corinne Savill, asking whether it is worth paying more for a marginal improvement in treatment simply because it was achieved by a new mechanism.
Before this session was brought to a close, Ismail Kola again raised the issue of value to whom, highlighting the importance of patients in determining how the balance of efficacy and side effects would impact on the assessment of value. From the payers’ perspective, he stated that the timescale for realising patient value is also important. While less of an issue in the UK, health insurers in the USA (ie, the largest single group of payers) have a very short horizon in which they want to see an outcome: if it takes 2 years to deliver patient value, the patient could well be with another insurer!
The other highlight of this conference came on the second day, when the Chairmen of five major life science companies came together to discuss governance, culture and diversity:
- Joaquin Duato, Worldwide Chairman of Pharmaceuticals at Johnson & Johnson
- Jorge Gallardo, Chairman of Almirall
- Franz Humer, Chairman of the Board at Roche
- Israel Makoc, Chairman of SUN Pharmaceutical Industries
- Martin Valesco, Chairman of AC Immune
The session opened with some words from Franz Humer, who asked whether policymakers actually want innovative medicines, given their pressure to impose a step-change reduction in price. In contrast, the public demand for innovative drugs is enormous, and he felt that taking a patient-centric approach will deliver more value.
He called for companies to adapt now: “wait and see won’t work!” Productivity and cost-efficiency are no longer “nice to have” and must be integral to innovation. He urged companies to take a different perspective on their operating costs, from head-office down. The structure of global organisations must be simplified, and local affiliates trusted more to run their own operations with less direct linkage to HQ. Development operations need to deliver a reduction of 30-50% in per-product costs over the next 5 years. When asked how this could be achieved, he called for greater innovation in the conduct of clinical trials, and particularly in their design and their use of technology.
In order to deliver these improvements, Humer highlighted the importance of company culture in recruiting and retaining top talent. This must include giving people space to experiment and learn in all aspects of the R&D process, and even extend to allowing them to fail sometimes! He closed with an upbeat thought: that innovative pharma is not at the end of its life, it’s only at the beginning!
Joaquin Duato of J&J reflected that the modern pharmaceutical industry is barely 100 years old; and the dramatic increase in lifespan throughout the 20th century should be seen as one of its major achievements. He reiterated the importance of collaboration between organisations of every sort, highlighting that shared investment in pre-competitive research and infrastructure enables companies to diversify their activities, which is vital when operating in such a high-risk sector.
Israel Makov of SUN commented that pharma is very knowledge-rich, but this knowledge is kept in multiple silos within each organisation. It is these silo structures that are preventing the decline in R&D productivity from being addressed. He also mentioned the increasing complexity of operating in this sector, from the scientific complexity of understanding the genetics of population subgroups through the regulatory and commercial complexity of operating across new global markets, to the managerial complexity of dealing with networks of suppliers, alliance partners and other stakeholders. He called for companies to refresh and expand their management capacity to deal with this increasing complexity.
Martin Valesco of AC Immune picked up on a theme that come up several times during the conference: the trend towards integrating medicines with treatment and other care services to provide a single package that would retain the interest of payers. This could be something as simple as developing strategies to improve patient adherence, or as elaborate as developing a suite of diagnostics and therapeutics to cover entire treatment pathways. Joaquin Duato echoed this, saying that pharma companies need to become better thought leaders on the role of medicines in improving healthcare, not just reducing prices.
Franz Humer then made what was possibly the most significant statement of the conference. In his opinion, “apart from the UK, western governments are generally uninterested in the health and viability of the pharmaceutical industry. Emerging economies are keener.” He proposed that the savings made by moving patients to generic treatments as patents expire should be recycled to better fund innovation (presumably through universities and start-ups) rather than purely cutting costs.
There were many other interesting points raised throughout the meeting that would take too long to report in full. In closing this report, I’d like to give a few of those final thoughts…
- Peter Harpum of the University of Manchester suggested that we should compare ourselves with the oil/gas and military aviation industries, which have very similar cycle times, development costs and emphasis on regulation.
- He also suggested that we look at the food industry, which deals with new product failure rates of up to 97%.
- Moncef Slaoui, Chairman of R&D at GlaxoSmithKline called on the pharmaceutical industry to repair its entire development model, likening the current activity to “pumping air into a flat tyre”.
- He also called for novel kinds of pre-competitive collaboration, even going so far as to suggest sharing infrastructure and validation of investigational sites.
- Prof. Sir John Bell of Oxford University and spoke about the volume, variety and velocity of ‘big data’, calling for better incentives for NHS Trusts to code data better into electronic patient records to enable better data sharing for research.
- Greg Rossi of AstraZeneca highlighted the potential for ‘real-world’ studies to provide insights that enable us to design better RCTs.
- Ken Jones, President and CEO of Astellas contrasted the pharmaceutical industry’s poor reputation in Europe and North America with Japan, where it is still highly regarded.
- Ulf Wiinberg, CEO of Lundbeck told us that depression and other mental health problems represent nearly 25% of the total disease burden in the EU and will result in $6b in lost productivity over the next 20 years. However, many major players are choosing to leave the area.
- David-Alexandre Gros, Chief Strategy Officer at Sanofi, came out strongly in favour of transparency on clinical trial results and data.
- Prof. Sir Michael Rawlins, who gave the closing address, said that NICE should look more closely at comorbidities, which are common in elderly populations, in addition to considering single diseases.