New era of drug commercialization: value beyond safety and efficacy

Tony Gottschalk. Photo: Christine Fu

Safety and efficacy have long been the gold standard of bringing a new drug to the market. In our rapidly evolving healthcare industry, however, commercial success of therapeutics can no longer rest solely on these twin pillars. “Now there’s another dimension in that you have to prove value. You have to come to the table with a package that demonstrates where your product fits into the delivery of healthcare and what value it provides to the patients,” said Tony Gottschalk, director of Marketing Operations at Gilead Sciences.

How does a value-oriented approach influence strategies of different stakeholders? In a QED seminar held on Thursday, February 2 at UCSF Mission Bay, Gottschalk shared his personal perspective on emerging trends in the commercialization of new therapeutics.

Overall, the US medical system is faced with turbulent waters. Healthcare expenditure currently represents 17.6%-19.3% of GDP, and continues to grow unsustainably along with the aging population. Many big pharmas are plunging off “patent cliffs,” the precipitous decline in revenue upon patent expiration of blockbuster products. The 2010 healthcare reform, while beneficial for patients by expanding access to coverage, places downward pressure on pharmaceutical prices. Grappling with these challenges, pharmas appeared to be lagging on the innovation front, with decreased rate of new drug application and approval.

To help reduce the soaring healthcare cost, Obama’s 2009 stimulus package earmarked $1.1 billion for comparative effectiveness research (CER) studies, which compare the benefits and harms of medical interventions and inform the decision making processes. “CER is a big buzzword in the industry right now,” Gottschalk remarked. The demonstration of value through CER is vital in securing market access and commercial success. A drug that is safe and efficacious in clinical trials but proves marginal benefit in the market will fail to compete.

Gottschalk also noted a shifting power structure in the industry. The status of key stakeholder has transferred from pharmas to insurance providers. And with government agencies controlling the operation of CER, pharmas no longer provide the driving force behind product development. Big pharmas respond by forging alliances with insurance companies, such as the collaboration between Pfizer and Humana to share data on retrospective claim analysis and observational studies. One essential strategy for pharmas to cope with the changing landscape is to identify endpoints important to payers, and build them into early stages of drug development.

A glimpse into the pipelines reveals a trend of developing drugs for rare diseases. Despite the small market, such products command astronomically high prices. With the low-hanging fruit of drug discovery already plucked, this strategy appears to be economically viable within the short term, though unlikely to be sustainable in the long run.

The regulatory environment is also evolving significantly. Gottschalk commended the FDA for its effort in improving transparency and harmonization across divisions. He elaborated on Risk Evaluation and Mitigation Strategies (REMS), a relatively recent FDA-mandated program. REMS encompasses a set of tools the drug manufacturer puts in place to educate prescribers and patients on safe use conditions, as well as restrict drug distribution and monitor compliance. Gottschalk advised drug developers to consider REMS as early as Phase II of the clinical trials.

Gottschalk concluded the seminar on a more optimistic note. Venture capital funding for biotech has been on the rebound, and valuations are climbing for earlier stage merger & acquisition deals. For successful innovations, the rewards prove to be enormous. He encouraged the QB3 audience to rise to this new era of challenges, and “be bold, be inspired.”