Pharma’s Choice After COVID: Hero or Villain
Following the COVID-19 pandemic, will drug companies be able to tame subdued anger against the industry by creating meaningful drug innovations?
The COVID-19 pandemic has deeply impacted our society at a time of intense public criticism over drug pricing. The urgent need for acute treatment facilities, medical supplies, drug treatments, and vaccines has subdued anger against the industry with hope and expectations for quick resolutions. Whether the deep-rooted frustration with the industry will evaporate is questionable and will depend heavily on drug companies’ ability to grab the opportunity and bring meaningful drug innovations while demonstrating social responsibility. Just like the hepatitis C drug cure caused an industry pricing crisis six years ago, a COVID-19 treatment or vaccine easily could wipe out any emerging goodwill and re-ignite lingering frustrations.
The industry’s drug pricing and reputational challenges, while important, signal a more fundamental-but related-issue that requires pharma leadership’s urgent attention: delivering value. The return on investment for research and development is at an all-time low of 1.8% (
Payers, providers, medical experts and patients indicate that demonstrating the value of prescription medications and addressing patient affordability are urgent issues. However, pharma’s attention is focused on the direct pricing rhetoric rather than the underlying problem. Many companies are still putting the highest priority on gaining rapid market authorization from the FDA while largely de-emphasizing the need to provide evidence of a product’s value to all customers. The COVID-related fiscal challenges and investment needs arising in acute care facilities will put more pressure on drug budgets and access negotiations, and further transform the healthcare environment in the “
The industry needs to address customer demands for demonstrated value of new drugs. Trade-offs between risk of clinical trial failure, cost of investment, and the strength of demonstrated value to payers often are complex and require a solid understanding of the rapidly evolving access environment. Many drugs are facing headwinds in today’s age of value and affordability, as government and private payers, empowered by societal critique on drug pricing, increasingly enforce strict evidence requirements to demonstrate improved long-term patient outcomes. At the same time, most of today’s customers require evidence of improved clinical outcomes for patients, rather than placebo-controlled trials or comparisons with treatments that aren’t standard of care. Despite this, any potential progress toward more meaningful programs often is stymied by pharma companies’ traditionally risk-averse nature. Moreover, the incentive compensation for R&D leaders is often tied to development milestones that don’t take patient access or revenue value into consideration.
The emergence of new high-cost technologies such as gene therapies and advances in immuno-oncology likely will further alter the access environment. These changes will add to affordability concerns and increase pressure on access decisions, evidence requirements and the role of innovative value-based agreements. It will be critical that all decision makers (payers, medical associations, prescribing physicians, provider organizations and patients) are convinced of the unmet need and value that these technologies offer to ensure that patients are reached upon approval.
Pharma companies need to focus on demonstrating value to gain credibility with their customers while securing their own financial footing. The path forward will require swift action, and there are a few ways that companies can get started. First, the industry needs to improve its drug development decision-making process by emphasizing commercial value through meaningful evidence demonstration options. Further, companies should consider and compare a full set of development options in trade-off as part of the decision-making process.
Next, it’ll be increasingly important to elevate the (patient) access discipline to the C-suite level to ensure that their expertise is properly represented in development and commercialization decisions. And to rectify internal bias and dispel assumptions, companies should include independent validation of the access and forecasted revenue.
Finally, company culture and the supporting R&D incentive compensation systems will need to be revamped to encourage team members to take rational risks that focus on the best long-term results in terms of patients reached and return on investment.
By fixating on the number of annual approvals coming out of the FDA and not on how the drugs are performing post-approval, we’re missing the bigger picture. The number of approvals may have gone up in recent years, but the market impact of each drug has declined (
Ed Schoonveld is a managing partner at ZS Associates, where he leads the value and access practice. Ed has held leadership roles in pharmaceutical pricing, access and health outcomes at Wyeth, Eli Lilly and Bristol-Myers Squibb. He is the author of "The Price of Global Health," a groundbreaking book on global drug pricing.
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