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Innovations in consumer genetic health are rapidly advancing-and pharma commercial thinking needs to catch up.
We are on the verge of a massive industry change in the world of pharma: individuals are starting to own their own genomes. The trend of innovation in consumer genetic health is blurring the lines between patient and customer. The introduction of relatively inexpensive biological assays, especially around known genetic biomarkers and mutations, is both creating a new industry and evolving the behavior of “consumer-patients.”
Although pharmaceutical companies are investing in R&D to capitalize on this new world, they are lagging in the innovation of their commercial models. The industry will need to step up to maximize value creation for their customers and themselves.
There is already significant innovation in treatments specific to genotypes or biomarkers. There are reportedly roughly 130,000 known biomarkers associated with about 2,500 diseases. Genetic testing is being prioritized, as underscored by the FDA, which has approved about 200 drugs for identified, actionable biomarkers, and there are another ~5,000 clinical trials in progress for drugs associated with those biomarkers. For example, in June 2017, the FDA approved Thermo Fisher Scientific’s Oncomine, which finds 23 genetic alterations. In addition, in November 2017, the FDA approved Memorial-Sloan Kettering Cancer Center’s profiling test, MSK-IMPACT, which looks for alterations in 468 genes.
People suffering from diseases and those who want to manage potential life-threatening illnesses can now achieve a better understanding of their own genetic risk profiles. As a result, they are more engaged with
treatment profiles and are seeking an increase in personal genetic health services such as those offered by 23andMe. We expect this to be a $50 billion market by 2026, and part of an emerging industry that provides personal access to genetic profiling, disease biomarkers, and mutations.
There is an opportunity and an imperative to link the science to the commercial relationship between innovators and their patients. We need to create not just personalized medicines, but a personalized interaction between drug company, healthcare professional, and patient.
As the volume of innovation specific to a biomarker or phenotype increases, pharma companies are speeding the pace of development of supporting diagnostic strategies. The growth of genetic testing companies like 23andMe means the amount of data that can be used to help R&D has also grown exponentially. Investments need to be made to understand how to use this data and make drug development more targeted, thus saving money in the long run.
For some pharma organizations, this has meant drug discovery through new strategic relationships, for example:
Other pharma companies have focused R&D innovation on companion diagnostic tests that enable screening and diagnosis. With more accurate diagnoses, companies can provide targeted therapy and create greater value for patients.
Commercial models as currently configured will not sustainably support this new class of product and, if left unchanged, will harm both patients and pharma companies.
Expensive drugs based around molecular genetics and biomarkers and the understanding of disease-causing mutations, such as Bristol-Myers Squibb’s Opdivo and Gilead Science’s portfolio against hepatitis C virus, have seen success in the market. In October 2017, BMS highlighted the strong sales of key immuno-oncology products Opdivo and Eliquis. In addition, while BMS is benefiting from these sales today, $250,000 to
$300,000 per patient is not sustainable for the healthcare system to absorb as more of these drugs are introduced to the market. The system must evolve for targeted treatments to flourish.
Novartis is responding by testing an innovative commercial model, and its effect thus far is startling. The company’s CAR-T therapy Kymriah carries a price tag for pediatric patients of $475,000 per treatment cycle. Yet Novartis’ commercial features are leading to more public acceptance of that high cost. First, if the treatment does not work, then patients do not pay for any aspect of the therapy, and, second, Novartis has introduced a call center to smooth the path for the patient and the healthcare provider. Gilead, in releasing its CAR-T-based treatment, Yescarta (approved for patients over age 65), has struggled to get reimbursement from Medicare/Medicaid, leading to a growing waiting list and lower-than-hoped-for revenue, according to published reports.
More companies need to think seriously about their future commercial models. We believe pharma companies should consider either adapting their payment model or their sales model.
The payment model
Payment models can become performance-based and flexible. Contingent payment models are in keeping with the growing need for outcomes-based payment. Novartis has taken the lead with the aforementioned pediatric CAR-T treatment for acute lymphoblastic leukemia: payment is required only if the patient shows improvement within 30 days. Also, by pricing the product at less than the equivalent bone marrow transplant, the company is demonstrating both commercial awareness and sensitivity to the high costs inherent in treating these indications.
Deferred or distributed payment models may encourage patients/payers who would otherwise refuse treatments due to the expensive, one-time, up-front payment. Amortization of the cost over months or years may challenge the industry in the short term but will provide longer-term income. This will smooth the cost, allow more patients to get treatment, and provide a respite from the boom and bust of new product introduction and patent expiry. It may be that pharma companies will use their significant financial muscle and comfort with long-term investment models to create new payment schemes that reduce the initial impact.
The sales model
The increased use of a scientifically qualified sales force by pharma companies in the last few years is an indication of the sales model changes that are required. The complexity of new therapies has already changed the ratio of sales representatives to scientifically qualified staff from the typical 10:1 to ~7:1. This trend will likely continue as treatments become more personalized. Scientifically qualified sales teams are supporting expensive treatments, working with healthcare professionals on reimbursement, helping patients get onto treatment plans, and supporting patients through the process.
Personalized wellness programs will also change. One of the big challenges for wellness has always been the uncertainty of disease progression and treatment effectiveness. If you indicate, for example, that there is a one in 10,000 probability of falling ill, most people cross their fingers and hope that they are safe. The REVEAL study on Alzheimer’s disease, conducted several years ago, showed that those patients who understood they had a genetic predisposition to develop the disease put more effort into educating themselves and working to remain healthy, according to a report in NEJM.Drug manufacturers could play a role that goes beyond their current patient-support programs.
Personalized medicine will bring the pharma industry closer to the patient than ever before. Innovation around commercial models must match the innovation going into the science and promote engagement with patients around a new common understanding of genetic profiles. Patients are looking for ways to prepare for risks that
they can now understand, and the pharma industry must support that.
Contingent payments recognize that, with greater certainty around disease causation, there needs to be a shared commitment to treatment success. Extended payment models can recognize that these treatments are highly expensive and often rationed. The use of a scientifically trained sales force can engage not only with patients, but also with potential patients who want to understand their options.
Craig Wylie is Partner, Arthur D. Little. He can be reached at Wylie.Craig@adlittle.com. Prashanth Prasad is Manager, Arthur D. Little. He can be reached at Prasad.Prashanth@adlittle.com