Drug Firms Face Value Questions | April 29, 2013 Issue - Vol. 91 Issue 17 | Chemical & Engineering News
Volume 91 Issue 17 | p. 6 | News of The Week
Issue Date: April 29, 2013

Drug Firms Face Value Questions

Biotechnology: Attendees at BIO convention confront new standards for patient outcomes
Department: Business
News Channels: Biological SCENE
Keywords: reimbursement, biopharmaceuticals, Chicago, BIO
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Chicago took in about 14,000 attendees as the host of BIO’s 20th annual conference.
Credit: BIO
A scene from the BIO International Convention, held in Chicago in April 2013.
 
Chicago took in about 14,000 attendees as the host of BIO’s 20th annual conference.
Credit: BIO

Discussion at the Biotechnology Industry Organization’s annual convention, held in Chicago last week, centered on the question of how drugmakers calculate the future value of products before they are commercialized. It’s a question made urgent as insurance companies and regulators begin to factor patient outcomes into decisions on drug approvals and reimbursement.

Small to midsized biotech companies are doing a poor job of demonstrating the value of products they are developing, argued Glen Giovannetti, head of the life sciences consulting business at Ernst & Young. This shortfall, he said, will affect their ability to raise capital, land lucrative deals with potential buyers, and receive reimbursement for approved drugs.

“In today’s increasingly outcome-focused, evidence-driven health care system, biotech companies cannot afford to pursue an R&D strategy that only focuses on whether or not their drug works,” Giovannetti said during Ernst & Young’s annual BIO presentation.

Kristine Peterson, CEO of Valeritas, a New Jersey-based firm that has developed a needle-free insulin pump, said uncertainty over how drugs will be valued adds a “new dynamic” to determining how or whether to commercialize drug and drug delivery candidates. “Will you be reimbursed five, 10 years in the future?” she asked during a panel discussion. “Can you be a sustainable organization that makes medicines when you don’t know how all of this will play out?”

Although reimbursement is essential to success, Alkermes CEO Richard F. Pops argued that the focus of drug development will remain on curing diseases. “The value of what we do is measured in improving people’s lives,” he said on a panel hosted by Ernst & Young. “We don’t need to hire accountants and analysts to tell us where there is an opportunity.”

And investors are still placing bets on innovative research. GlaxoSmithKline, for example, announced at the BIO conference that it is teaming with Avalon Ventures to support up to 10 early-stage biotech companies. Lon Cardon, GSK’s head of alternative discovery and development, told C&EN that the deal expands the firm’s efforts to better tap into academic science.

 
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Comments
Gerry Atrickseeker (May 2, 2013 3:58 PM)
The issue of drug valuation is particularly acute in the cancer area. The pharmaceutical industry has recently developed several drugs that produce remarkable benefits in certain cancers. However, in some cases these life saving drugs come with astronomical price tags of $100,000 per year or more. Patients and insurers have long been concerned about these costs, but now oncologists have also started to rebel as described in the April 26 NY Times. This began with a group of physicians at Sloan Kettering cancer center in NY who objected to the high price of Zaltrap®, a new drug from Sanofi. It has since spread, and many oncologists support a commentary in the April 25 issue of the journal Blood advocating for lower drug prices. In addition to Sanofi, criticism has been leveled at Novartis the maker of Gleevec®, as well as at other producers.

One of the problems in this area is the increasingly fragmented nature of the cancer drug market. As studies in cancer genomics have progressed the existence of multiple cancer subtypes has emerged, with each potentially requiring a different therapeutic approach. One of many examples of this is the recently published study in Nature of endometrial carcinoma that has divided this disease into four distinct categories and also revealed previously unsuspected relationships to some forms of breast and ovarian cancers. Unlike ‘classic’ cytotoxic anticancer drugs like doxorubicin that are used in a variety of cancers, many of the newer agents are highly selective for particular cancer subtypes. Since each subtype involves far fewer patients than previous broader cancer classifications, the industry response has been to raise prices. The argument, of course, is that this is necessary to cover R& D costs.

We seem to be coming to a sort of end game with current models of cancer drug development. Patients need advanced drugs but our health system cannot sustain outrageous costs. Some new ideas about drug development strategies have been published recently and more thought needs to be given to this critical area. http://scienceforthefuture.blogspot.com/

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