At Goldman-Sachs' health care conference last week, Merck CEO Ken Frazier said that his company would stock a higher proportion of its late-stage pipeline with in-licensed and purchased compounds. A business professor from the University of Michigan was moved by Frazier's remarks to comment, "Looking for late-stage deals is not a sign of confidence in the internal late-stage pipeline...Nothing is more expensive than a late-stage deal."
Frazier's comment and the reactions to it provide a capsule view of pharma's current condition. More than patent expirations, stingy, third-party payers or illegal and unethical promotions, the drug industry's current down cycle results from its reduced productivity at developing new drugs.
Signs are emerging, however, that the industry's leaders are at least starting to pay attention to this shortcoming. Analyst Tim Anderson at Sanford Bernstein finds it encouraging that pipelines may "improve as a result of the conscious effort by drug company management teams to try and fix” the complex problems affecting drug development.
Ross Weaver of Adjility Health in Chadds Ford makes the point that successful drug development rests on four pillars. The first consists of assessing the prospects that a particular compound will demonstrate sufficient efficacy and safety for inclusion in the standard of care. Secondly, new compounds must meet regulatory criteria for approval. Third, pharmas must demonstrate that their compounds provide a sufficient advantage over alternatives to permit the market access needed for commercial success. Specialists that work in this area, for example, try to forecast a compound's potential sales. And finally, the drug companies must successfully manage the "operational feasibility" of clinical trials to permit the adequate, timely enrollment of patients into clinical trials.
Weaver claims that, historically, pharmas have rigorously assessed and coordinated the first three elements while the challenges of recruiting patients have been shorted at the planning table. Clinical operations groups at pharma companies do assess the factors affecting recruitment and they typically model the approaches used by previously approved compounds in the pertinent classes. Nevertheless, Weaver claims that the heavy lifting of trial planning involves the first three pillars. Only after progress of a study has been delayed well beyond projections, typically as a result of slow recruitment, does attention turn obsessively to that factor. Too often, by then the stalled trials cause financial pressures that compromise one or more of the other three factors as companies scramble to enroll patients.
To prevent such "fire drill trial amendments," Weaver suggests a more rigorous effort at assessing feasibility and recruitment early in the planning process, taking into account the unique characteristics of the trial at hand. This involves such tasks as working collaboratively with nurse coordinators at appropriately selected trial sites to discern how patient candidates and referring physicians will react to a particular compound, its projected profile and overall trial design.
Factors that can hinder recruitment include things such as the number of times a patient must visit the clinic during the several weeks or months of a trial. Other influences can include the frequency of drawing blood samples from patients, the nature and severity of side effects, and the extent to which patients feel the test drug relieves their condition. The list of things that can affect recruitment remains quite long and can include considerations that are not easily predictable in advance.
Companies must then use this assessment of operational feasibility to modify the risk assessment, regulatory relations and commercial projections for each mid-to-late stage compound.
"The operational assessment," according to Weaver, "should receive the same strategic emphasis as the other three factors."
By his calculation, the money required to do this appears quite modest, compared to the costs for planning and carrying out the other functions. As a typical example, he claims it would mean, "spending $250,000 to inform an investment of $50 million."
Industries with long development times show a wide range of efficiencies at developing new products. Some of them, such as aerospace, have been notorious for getting away with cost overruns because they maintain captive customer markets, consisting of a few nations or airlines. By contrast pharma finds itself in a period where the incremental value of its new products fails to compel purchasing. Until such time as the science can restore pharma's growth prospects by creating new products that people want to buy, the industry must do a better job of managing the timing and costs of developing its drugs.
The fact that at least a few suppliers are proposing tactics for achieving this efficiency represents an encouraging sign.
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