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Single drugs for single indications are hard to find. Here's how to get around that.
The blockbuster is dead. Long live the blockbuster! The industry is experiencing cognitive dissonance. Many of today's leading pharma and biotech companies reached their positions by discovering or acquiring drugs with the ability to generate multibillion-dollar sales in a single indication. But the new consensus seems to be that although single-indication blockbusters may still occur, the single-minded pursuit of them is a bust as a strategy. So the question is: How to replace the revenues generated by the big drugs of yesteryear?
The answer is that it is still possible to generate blockbusterlike revenues. But doing so requires a different approach. Future moneymakers will be built from the ground up, using one of the three strategies that combine scientific and market perspectives to identify untapped opportunities. Their successful implementation will require steadfast stewardship and purposeful coordination between R&D and commercial operations. Like any significant change, at times it may make pharma companies uncomfortable, but in the long run it will also be rewarding.
Although they lack the simple elegance and ease of implementation of the traditional blockbuster model, the new strategies address the issues of today's multifaceted healthcare environment. They are complementary, and companies with the where-withal should pursue all three in parallel:
The diagnostic-led strategy is based on the observation that even when there are well-established treatments for a condition, significant numbers of patients are either not diagnosed in a timely manner or not diagnosed at all. The single-pill strategy combines (into a single administration) multiple therapies for a single indication or for multiple co-morbid conditions. The treatment-platform strategy entails developing therapeutics or therapeutic approaches that affect multiple medical conditions, possibly in different therapeutic areas, based on a shared mechanism of action.
The Single Pill-Solution
These approaches represent different levels of investment, risks, and potential rewards. Each also raises its own organizational issues. What they have in common is the potential to reduce the industry's dependence on fickle, single-indication blockbusters. The single pill represents the lowest risk and is closest to the industry's traditional paradigm; the treatment platform is the highest risk—and has the highest potential reward.
The promise of genomics has raised expectations for the ability to detect, diagnose, and ultimately cure disease. Yet many common medical conditions continue to go undiagnosed, resulting in serious health issues for individuals and significant loss of revenue for the industry. It is estimated that 40 percent of those with mental illnesses and one-third of those with high blood pressure go undiagnosed and untreated.
The ease and reliability of diagnosis varies by disease, but overall, the number of people getting diagnosed could be significantly improved with better diagnostics and physician education. The effort can be quite simple. For instance, questionnaires completed by primary-care physicians during regular patient exams and analyzed by sophisticated algorithms have proven to be highly accurate in diagnosing mental illnesses. Their adoption, however, has been stymied by the refusal of health insurers to reimburse these services. Pharma companies, which would benefit financially from the additional prescriptions generated, have also been tepid in their support. As a rising tide will lift all boats, this strategy probably makes the most sense for market leaders who can expect to gain the bulk of the scripts.
Selecting a Platform
Pharma companies that adopt diagnostics-led strategies need to address three issues. First, they need to shift marketing resources from promoting specific products to promoting diagnostic testing. Second, they must time the development of the diagnostic to coincide optimally with the development of the therapeutic. And third, they must develop business models that will motivate physicians and diagnostics providers to participate. Of these three, shifting promotional resources should be the easiest, because it is fully within the company's control.
Timing the diagnostic investment is slightly more complicated. Companies can delay developing the diagnostic until the therapeutic is approved, or close to being approved, or they can choose to develop the diagnostic in parallel with the therapeutics. The decision about when to begin diagnostic work requires weighing its risks, rewards, and complexity. A decision to delay development of the diagnostic can reduce the risk that the diagnostic will have to be abandoned because of failure of the therapeutic. But it increases the risk that the diagnostic will not be available during product launch, which would have a negative effect on the drug's revenues. Developing a diagnostic to be launched in parallel with a drug therapy requires R&D and commercial units to come together at an early stage to formulate and execute a dual development strategy.
Reimbursement is the trickiest issue. Ideally, the public-health benefits of additional testing will be so readily apparent that private and government payers will find it difficult to refuse reimbursement. Absent such a compelling argument, the industry will need to find alternative funding mechanisms without running afoul of fraud and antikickback statutes. The disease-management efforts some companies are exploring may be useful in this regard. Cost reductions resulting from new "lab on a chip" technologies may also aid this effort.
Who Calls the Shots
To date, the industry has been amply rewarded for dispensing therapies and has not needed to devote much effort to developing and promoting diagnostics as a way of promoting therapeutics. But as blockbusters become harder to find, undiagnosed populations represent significant untapped revenues. A subset of them may never become an attractive market, but many are good potential customers. The industry can no longer afford to ignore them.
The single-pill strategy seeks to simplify the lives of those who are already taking multiple medications. Specifically, it seeks to address the needs of millions of patients who have been diagnosed with multiple concurrent conditions and take multiple drug therapies, as well as the needs of those who take multiple drugs for a single condition. Today, physicians mix and match products from different companies to arrive at "combination" therapies, one patient at a time. Although the benefit of such an approach is that it results in therapies tailored to the needs of individuals, the downside is that it requires thousands of physicians to experiment with their patients to determine which combination of drugs delivers the best results. It also requires patients to take several drugs, possibly at different times during the day, which reduces patient compliance.
The solution is a single-pill therapy in which several drugs, previously independently marketed, are combined into one. This approach may not be economical for all possible combinations of diseases, but many diseases coexist frequently enough to make it worthwhile. Areas that may be worth investing in include high blood pressure and high LDL (low density lipoproteins) or high blood pressure and low HDL (high density lipoproteins) or dyslipidemia, which is also characterized by elevated glucose and triglycerides. A systematic review of co-morbidities, patient demographics, the preferences of prescribing physicians, and other related data, within and across therapeutic areas, will reveal many interesting and attractive patient segments for the single-pill approach. (See "The Single-Pill Solution,")
The single-pill strategy raises many interesting possibilities and a whole raft of questions for marketers: Could a company increase revenues by combining a second-tier product with a market leader? Would two market leaders completely knock out the competition if combined in a single pill? What about a combination of two strong number-two or -three products in their respective indications? How can market leaders and underdogs, respectively, exploit this strategy, and whom will it favor?
The concept of a single pill is not new. FDA recently approved Vytorin, a cardiovascular therapy composed of Schering-Plough's Zetia (ezetimibe) and Merck's Zocor (simvastatin), which reduce cholesterol in different ways. In the HIV area, in which combination therapies are prevalent, single-pill efforts are now under way, including Gilead's recently approved Truvada, which combines Emtriva (emtricitabine) and Viread (tenofovir). Gilead is also working with Bristol-Myers Squibb/Merck to combine Sustiva/Stocrin (efavirenz) with Viread into a single once-daily, fixed-dose HIV pill. Undoubtedly, there is more to come as companies start to explore the potential of the single-pill approach to both expand and defend their franchises.
Of the three new strategies, the treatment platform is the most demanding. It is based on the assumption that various medical conditions share common denominators and can be treated using the same therapeutic approach. It requires extensive effort to identify—or at least establish credible, testable hypotheses about—similarities in mechanisms of action that cause different medical conditions. In the oncology area, for example, it is anticipated that specific platform technologies will be able to treat many types of cancers. And Allergan's Botox (botulinum toxin), which has shown potential to treat everything from excessive perspiration to migraines, has been approved for four indications. The scientific challenges to successfully develop new treatment platforms are significant, but the potential rewards are equally tantalizing. (See "Selecting a Platform.")
The treatment-platform strategy raises its own set of issues. In the past, most companies preferred to test therapeutics one indication at a time. Such an approach makes sense from the point of view of risk mitigation, but companies that develop treatment platforms will need to quickly investigate their drug in multiple indications to maximize financial potential. They may need to investigate several indications in parallel, thus increasing both financial investment and risk.
Second, a robust platform technology that stretches across therapeutic areas could challenge a company's ability to commercialize it, especially if the platform shows promise in areas in which the company has a weak franchise or none at all. This is a good problem to have, but to reap the greatest economic benefits, such companies must be willing to license out the indication that they are unprepared to bring to market. That may be easier said than done.
Until now, the pharmaceutical industry has been largely technology driven—decisions about which R&D efforts to pursue were based primarily on scientific considerations. Mar-keting has frequently been an afterthought, once there was a product to sell. The strategies suggested here require a shift to an exploration of medical needs and a greater voice for commercial input earlier in the R&D process.
All three strategies require greater interaction between R&D and sales/marketing, but the nature and extent of these interactions differ significantly. The diagnostic-led, market-expansion strategy requires the least interaction. In the extreme, if a product is already on the market, the commercial team could hire an external diagnostics lab to develop the appropriate diagnostic test and physician training materials. Preferably, however, the diagnostic development would occur before the product is launched, which requires sales/marketing and R&D to communicate regarding progress and launch dates.
On the other hand, the single-pill strategy is driven by an assessment of market needs and opportunities. It requires commercial and R&D units to reach agreement regarding the priority of these projects relative to other opportunities and to allocate resources accordingly. The therapeutic-platform strategy is the most difficult to conceive and execute, because it requires full integration of R&D and commercial perspectives at the levels of strategy planning and portfolio management.
An important issue for companies is how to make new product development strategies fit within existing organizational structures. In most companies, both R&D and sales/marketing are organized along therapeutic area (TA) lines. Many commercial organizations also have strong product teams that manage products with significant independence. Single-pill and multi-indication blockbusters don't easily fit within these structures, because they cross indication and TA lines.
The pursuit of both single-pill products and multi-indication blockbusters can therefore easily cause confusion and conflicts about who is in charge. Manage-ment has to establish clear lines of responsibility and conflict-resolution mechanisms to avoid prolonged disagreements and ensuing product development delays. The most effective way to resolve issues may be to require single-pill and multi-indication efforts to report outside of the established TA hierarchy, with access to TA experts as needed.
R&D and commercial organizations don't have a history of successful collaboration. For these long-standing differences not to derail the pursuit of new strategies requires senior-management involvement to ensure effective information sharing and coordination. In doing so, executives need to acknowledge that the two units need to focus on different issues and that the number of meaningful interface points between the two is limited. Management's task is therefore to keep both organizations headed in the same direction on parallel tracks rather than striving to make them work hand-in-hand on a daily basis. (See "Who Calls the Shots?")
Pharmaceutical companies will have to create mechanisms through which commercial and R&D groups can share information, engage in a dialog, and make joint decisions. They must develop coordinating mechanisms that enable the new projects to benefit from existing TAs' expertise without being delayed, or worse still, derailed by potential conflicts for control. But the effort will pay off. The new strategies, although more complex and more effort intensive than the old blockbuster approach, point to the future. And companies that want to be successful need to aggressively embrace them and make them work.