Written by Mark Osterman, Senior Vice President, Kineticos
A few weeks ago, I wrote about the decline of innovation within large pharmaceutical companies primarily due to consolidation through M&A. The recent announcement from Novartis regarding the “re-integration” of its Cell and Gene Therapy Unit into the main part of their R&D division supports the trend of outsourcing innovation. Relatedly, and also important to note is the fact that Novartis stated that they would not change their cellular therapy agreement with the University of Pennsylvania.
This outsourcing of discovery and innovation will continue to be the model of choice for pharma, as their focus remains on clinical development and commercialization, which includes the daunting task of navigating today’s pricing and reimbursement landscape. In addition to the typical market access issues, companies must develop pricing models that demonstrate value for curative therapies. Adding further complexity will be the cost of manufacturing therapies and distributing them, which itself will be a unique challenge. If standard pharmaceutical margins are applied to manufacturing and delivery costs associated with these therapies, it will undoubtedly be reflected in the pricing models.
Not that anyone doubted that these potential life-saving therapies would be premium-priced; however, the number of therapies that could make it to market is significant and poses a challenge to payers. This will require payers to conduct rigorous analysis on benefits to patients and the healthcare system as a whole. The long-term savings are extremely important, as evidenced by the Hepatitis C therapies, which will have dramatic benefits over time. However, the current healthcare system is not designed to focus on the distant horizon. The initial cost of these breakthrough therapies will most certainly be the primary discussion. So how can we balance potential life saving therapies with significant upfront costs?
The evolution of life saving, curative therapies has slowly developed over the last 30 years. If we want to continue to dramatically improve the lives of patients, reduce the burden on the healthcare system, and invest in the long term, high-risk science and innovation must be rewarded. To achieve these rewards and also balance societal concerns, there will need to be in-depth and honest evaluations regarding the benefits that these innovative therapies can provide. It is clear that a higher price is warranted, but there is still much to debate on pricing and to which therapies we assign the benefit to.
As more breakthrough therapies enter the market over the next 5-10 years, pricing and reimbursement will become much more important, and perhaps outsourced innovation will allow pharma to utilize internal resources to focus on demonstrating the benefits and value of new medicines.
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Mark Osterman, Senior Vice President of Kineticos’ Biopharmaceutical Practice, brings 25 years of experience in the biopharmaceutical industry to the team. His team is focused on helping growth-oriented biopharma companies realize their commercial potential at the corporate, portfolio and product levels. Mark’s therapeutic expertise includes cardiovascular, pulmonary, metabolics and cell/gene therapy.