Biopharmaceutical companies are increasingly partnering with other health care stakeholders to address scientific and technological challenges, create greater efficiencies in research and development (R&D), and accelerate the development and delivery of new treatments for patients.
In fact, approximately 9,000 new biopharma R&D partnerships were formed between 2005 and 2014 at an annual growth rate of four percent during that ten-year period.1 Many of these partnerships have been focused on fueling scientific discovery. Now, many biopharma companies must expand the mandate of this ecosystem to help ensure products meet the needs of an evolving health care delivery and payment system. Earlier and more robust collaboration with key stakeholders is likely required to sustain returns on innovation.
Every year since 2010, Deloitte has tracked 12 leading biopharma companies to estimate the return on investment they might expect to achieve from their late stage pipeline. And every year, their R&D returns continue to decline – the latest analysis indicating returns have dropped from 10.1 percent in 2010 down to 3.7 percent in 2016.
The analysis indicates that R&D costs and sales have become unbalanced, producing an equation that is no longer set to deliver sustainable returns on investment. Moreover, biopharma companies face an extremely challenging external environment. Pricing is a very publicized issue, as political and public scrutiny has intensified.
In 2015, we began tracking R&D returns of four additional mid-to-large cap biopharma companies. For this extension cohort, the analysis found that 2016 was a strong commercialization year, as the four companies combined successfully launched nine assets with total forecast sales of $187 billion. But, we see signs that this cohort may be starting to experience similar issues as the larger companies.
Collaboration has gained speed in the health care industry. From value-based care arrangements to greater transparency and a focus on patient-centered care, biopharma organizations cannot afford to stay behind. Companies should recognize that they need to balance the changing demands of many stakeholders – including health plans, patients, providers, and regulators.
So as we enter the New Year, what changes can companies make to deliver new drugs at a cost that is acceptable for these stakeholders, and also generates a sufficient return?
Interviews with leading biopharma organizations found that they have made several critical decisions that led to the successful commercialization of products, balancing these demands. The common thread among all of them is collaboration. Key insights are:
Develop an explicit therapeutic area (TA) focus: Having an explicit TA focus allows companies to develop deep TA expertise and understand target populations and increase value for these patients. Moreover, a greater TA focus can allow organizations to leverage relationships they have developed with key stakeholders such as academic researchers, clinical investigators, key opinion leaders, and patient advocacy groups. Manufacturers can tap these relationships early and often to provide input to refine development programs and increase the value of assets.
Position products for success: A key theme from leading organizations is to define a specific and differentiated treatment approach for products against the standard of care. Some have found a biomarker strategy to be effective for a targeted product. One important consideration that came to light was that biomarker strategies can impact stakeholders downstream. For example, companies may consider working with provider partners to understand how diagnostics may impact physician workflow. Working with providers to understand how existing treatments operate may also help companies differentiate their products from others – both current and future treatment products. In turn, a more differentiated product is more likely to receive favorable reimbursement.
Create a thoughtful program design: A robust R&D program design can bring each external stakeholder into the fold in a way that may help biopharma companies get faster regulatory approval and demonstrate value to payers, providers, and patients. For example, a recurring theme among the interviewees was that success depends on an early start to discussions with regulators and aiming to submit data to different regulators at the same time. Some even said that regulators make good partners and that early and regular conversations helped the speed to market.
Another strategy is to move reimbursement discussions beyond price to focus on value. Manufacturers increasingly should understand how payers define value and then design their drug development programs to demonstrate this value. Some interviewees also acknowledged that payers have grown skeptical of the ability for randomized controlled trials to translate to the real world. As such, some have begun to focus on the potential for data from digital strategies and real-world evidence. These new sources of data might help to advance the field of health economic and outcomes research and translate benefits to all stakeholders, including the patient.
As biopharma companies face a most uncertain market and regulatory outlook, collaboration may be the key to success. Companies that understand that their future success partly lies in the hands of their allies and partners may be more prepared to face these future challenges head on.
1 EvaluatePharma, Consortapedia, Deloitte Analysis, 2016.