The Permanent Campaign

January 1, 2013

Pharmaceutical Executive

Pharmaceutical Executive, Pharmaceutical Executive-01-01-2013, Volume 0, Issue 0

Promoting the merits of private-sector drug innovation is no easy task-just ask the UK's Office of Health Economics, with a record 50 years of engagement around the hard policy questions that ultimately drive success in the pharmaceutical marketplace.

Life-saving medicines carry a big social footprint, yet filling the shoes of advocacy in support of the industry that produces them can be a surprisingly solitary pursuit. Surveys reveal that the policy critics of Big Pharma are actually more numerous, highly visible—and often better financed—than institutions with a more balanced view. What the industry does have in its favor is the capacity to generate good evidence, particularly in response to claims that there are too few novel drugs that meet real medical need; that drug design and development is imitative, not innovative; and that high prices bear no relationship to risk. One example of productive engagement in this space is the UK Office of Health Economics (OHE) now celebrating its 50th anniversary as a policy research enterprise. Through a close founding relationship with the Association of the British Pharmaceutical Industry (ABPI), OHE is linked to industry, but is not of it. Since 1962, the group—now with 15 professionals on board—has produced more than 350 studies and publications and sponsored nearly an equal number of public meetings and events, all with the goal of making discussions about medicines, health, and society truly objective, because it is based on objective, verifiable evidence. Pharm Exec spoke recently with OHE director Adrian Towse—who has led the OHE for nearly 20 of those 50 years—about the many external transformations that have shaped his work as well as his perspective on what the industry needs to prevail in an increasingly contested fight for reputational advantage.

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PE: Fifty years is a long time to be continuously engaged in the debate over the appropriate role of pharmaceuticals in the management of disease, as well as their larger contributions to society. What has changed in the content and flow of the issues—and what themes remain immutable?

Towse: The OHE was founded in 1962, a time when health economics as a distinct discipline, capable of guiding policy on the basis of objective, verifiable evidence, was still in its infancy. Back then, physicians made all the decisions and payers simply paid the bill. There were no HTA institutions primed to demand that drug-makers justify their claims with evidence that can be both technically complex and politically sensitive. Nevertheless, the essential questions we seek to address in healthcare have remained remarkably constant. Just like today, health decision makers in the 1960s wanted to know how much to pay for drugs—is there a "right price" that balances the requirement that innovators make a return on their investment with the need for fair access to all patients who can benefit? How do you reconcile the notion of health as a public good with the mainly commercial orientation of medical research? And finding ways to deliver health services more efficiently was just as important then as it is today.

What has changed is our increasing ability to marshal the analytical tools and evidence that allow decision-makers to take their questions to the next level. For example, we can not only tell payers how much an intervention costs, we can project outcomes and advise them how to allocate expenditure efficiently, across disease areas to improve value for money.

PE: Hasn't the scale of the challenge in delivering healt care services at reasonable cost increased since 1962? Annual outlays for the National Health Service (NHS) have risen from less than £1 billion in 1962 to £125 billion today.

Towse: Costs have indeed increased, both in real terms and as a percentage of GDP, which is why there is a bigger focus today on proving value for money. Economists possess the tools to do that, through sophisticated quality of life measures that allow us to build a patient centred definition of value, by services and treatments delivered and from large cohorts of the population down to the level of the individual patient. These expanding capabilities, in my view, can alleviate some of the pressures on the innovative industry from the current round of fiscal austerity measures here in Europe—without the ability we now have to quantify cost savings and realized value from the use of medicines, the impact of the economic crisis on drug spending could be far worse.

PE: Would you describe this work on valuing a drug the key progress metric for the profession over the past 50 years?

Towse: It is an important milestone in understanding how we fund and allocate scarce healthcare funds. The OHE was a pioneer in the development of methodologies to help payers assess the impact a particular intervention has on the root question that should drive all health spending: is the patient better off, and, if so, how does this translate to broader outcomes and savings to the system overall? We convened our first expert meeting in the United Kingdom on drafting quality of life measures back in 1983. This led the development of the EQ-5D and EQ-VAS patient scoring profiles that, for example, the NHS uses in its Patient Reported Outcomes Measures [PROMS] data set on elective surgical procedures, launched in 2009 and now being expanded to many additional procedures. As a result of this work, there is now much greater acceptance by payers of the usefulness of patient-reported outcomes. This is crucial to valuing drugs.

PE: How has OHE kept pace with the transformation of healthcare over the past six decades?

Towse: We have reinvented ourselves several times, but the most important change is the broadening of the OHE's focus—to issues beyond the narrow purview of pharmaceuticals, and with a perspective that is global, no longer limited to the United Kingdom. Both changes reflect the evolution of the industry itself, which today sees itself as a "partner" in healthcare across multiple markets. All the issues that drug companies face are now global. For example, you cannot build a coherent approach to HTA without recognizing that these new regulatory institutions are highly networked, and obtain their evidence from many sources outside their own jurisdictions. The emphasis on sharing practical solutions to health challenges has also motivated our expansion into consulting as well as research. Advising and project work for clients—both public and private, and within and outside the United Kingdom—has made us a self-sustaining enterprise.

PE: Who are the OHE's principal sponsors?

Towse: Our membership and client base is increasingly diverse. We no longer depend exclusively on funding from the Association of the British Pharmaceutical Industry [ABPI], which gave us our start in 1962 and continues to be a strong supporter. Half of our annual budget now comes from organizations outside the industry. Public and private clients—including emerging market countries such as Brazil and China—are driving a big portion of the consulting practice we launched in 2002.

PE: Over the two decades you have served as OHE director, what changes have you noticed in the way Big Pharma operates?

Towse: One key transition is the move away from the randomized clinical trial as the sole benchmark for establishing clinical value. The structure of the RCT often discounts important sources of information, skewing the way we look at some diseases and their treatments. The OHE has been a leader in advocating increased use of observational studies as a supplement to the RCT. Our work has helped payers and the industry evolve toward greater acceptance of diversity in the evidence base. The change is profound, as observational studies center decisions in the real world, where the patient experience is paramount. Better medicines are the result.

Another change—born of necessity—is the time and effort companies must devote to the conduct of studies post-launch. Such studies are often required today as a condition for regulatory approval, and involve large pools of patients. They can be both costly and time consuming—even extending beyond the life of the patent. As noted, our research strives to identify how these commitments affect the R&D enterprise, particularly in making sure the study process works as efficiently as possible. We are also examining the revenue and resource impact of certain regulatory changes that will accelerate the take up of post-marketing commitments, such as the European Medicines Agency's proposal on "adaptive" licensing, which entails periodic review of clinical efficacy over the life of a product.

PE: Can you provide an example of how OHE research has prompted a shift in thinking on the role that medicine plays in health financing and/or delivery?

Towse: OHE did much of the early work in defining and then explaining the positive economics of personalized medicine. By asserting that the value of a drug intervention is enhanced if it can be targeted more to the individual profile of the patients, personalized medicine represents a revolutionary break with the random, "hit or miss" approach to treatment. We led the field in showing that a higher price for a medicine in a smaller market is an acceptable trade off because the outcome for patients tends to be better. Our current work in this area goes even further by proving that additional value is obtained when a single medicine can be priced differentially based on therapeutic indication. A good example can be found in cancer treatments like Herceptin, whose value when used in early stages of the disease differs than when it is used after the cancer has advanced. In fact, you can make the same rationale for many of the innovative biologics now entering the market, one where the industry has staked its future. Making drug budgeters more aware of these important distinctions will, in my view, be of great service to innovative companies and to patients.

PE: In such a tightly regulated sector, business success in pharma ultimately depends on good policy. As an observer of the industry for many years, how effective do you think it is in making its case to stakeholders?

Towse: I have always believed that this industry has to respect science and eschew polemics­—as a research-driven enterprise, the preference is to try to engage in policy debates on the basis of good evidence. The problem is that much of what companies do is built around the mindset of the quarterly P&E report—it's all about the short term, and the policy model tends to reflect that. If you insist on compiling facts and analysis today for a problem that needs solving by tomorrow, the end result is going to be ammunition, not evidence. It strikes me that very few people in the industry have the time or inclination to make that investment in understanding what's really over the horizon. And there is so much personnel turnover in companies today that institutional memory, which consists of integrating the lessons of the past against an uncertain future, is not a skill that can easily be found.

PE: In what areas will OHE be concentrating its analytical efforts over the next several years?

Towse: We will continue to build on our past work as we open new areas of inquiry. The analysis of differential pricing across products and markets is an ongoing initiative, which complements efforts to expand the debate on the merits of personalized medicine. Pricing reform is a critical priority for the industry here in Europe, where companies confront a "race to the bottom" as more affluent countries seek to emulate the lower prices in poorer states through cross-border referencing. Should Germany expect to pay the same price for drugs as Romania, and is there a better rationale to oppose that beyond bland assertions that someone has to pay the cost of R&D?

Re-engineering the drug development process is equally important. Last month, we released a study on the cost to develop a new medicine, which adds to the academic discussion by putting practical emphasis on how facilitating market entry and take-up can influence the decision to invest in innovation. The OHE is also the co-recipient of a UK Medical Research Council grant to explore ways to reduce the time lag in translating research into medical practice, another project that reflects our position that much more needs to be done in relating R&D incentives to what happens after authorization. Next, we are closely following the evolution of HTA practice, leveraging our groundbreaking work on the EQ-5D survey set to improve the sensitivity of health outcomes measures, including those used to inform decisions on reimbursement status. This work underscores our strong commitment to the field of patient reported outcomes, where we are trying to nudge the decision criteria away from simply counting the volume of scrip to broader measures around quality of life.

Finally, we are expanding our investigations on whether competition in health services raises the bar on system performance, improving outcomes. The emphasis to date has been on applying this in the NHS, but now there is interest in the implications for the emerging countries, which are receptive to new approaches as they restructure their health systems to cope with the demands of a growing middle class.

PE: Can the OHE model in the United Kingdom be replicated elsewhere?

Towse: It can, and it should. The National Pharmaceutical Council [NPC] in the United States is a precedent, with its work in recent years to study approaches to HTA and comparative cost-effectiveness. At a time when critics of the industry have put deep roots in major academic institutions, advocacy-based think tanks, and government advisory panels, it is surprising how little resources the industry devotes to shaping the political and reputational debate through strong, independent policy research.

William Looney is Pharm Exec's Editor-in-Chief. He can be reached at

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