Small- to mid-sized biotechnology companies must retool their R&D strategies to pay as much attention to how private and government insurers or "payers" will value their new drugs as is traditionally paid to making the medicines work, Ernst & Young concluded in this year's edition of its annual industry report, released Tuesday at the Biotechnology Industry Organization (BIO)'s 2013 International Convention in Chicago.
"Beyond Borders: Matters of Evidence" showed what it called an "implementation gap" in how executives judged drug value vs. corporate efficiency. The report featured a survey in which 94% of U.S. and European biotech executives from 62 companies with revenues below $500 million agreed it was "important" or "very important" for the companies to have a strategic focus on evidence of a drug's value and efficiency. Yet most companies acknowledged they held off launching drug-value initiatives.
"We didn't see a sense of urgency at all," Glen Giovannetti, Ernst & Young's global life science leader, told GEN. "We didn't see much movement toward actually implementing any strategies in the near-term, especially in companies with earlier-stage technologies."
Smaller biotechs cited five arguments: drug value is only an issue for commercial-stage companies; it's unaffordable; strong science always prevails; it only affects a few disease segments; and evidence-based healthcare won't materialize soon.
"Big pharma is facing it immediately in the sense that they have a lot of products in the marketplace that will be under pricing pressure," Giovannetti said.
Giovannetti and Gautam Jaggi, managing editor of "Beyond Borders" and senior manager with Ernst & Young's Global Biotechnology Center in Boston, told GEN smaller biotechs can assess value of new drugs without spending big—for example, by designing clinical trials to support evidence arguments for new drugs.
They cited creation by big pharmas of precompetitive collaborations intended to share data with entities that include payers, providers and disease foundations. In June 2012, Massachusetts joined with Abbott, Biogen Idec, EMD Serono, Janssen, Merck & Co., Pfizer, and Sunovion Pharmaceuticals to form the Massachusetts Neuroscience Consortium, to fund preclinical neuroscience research at Bay State academic and research institutions.
Two months later, 10 pharma giants—AbbVie, AstraZeneca, Boehringer Ingelheim, Bristol-Myers Squibb, GlaxoSmithKline, Johnson & Johnson, Eli Lilly, Pfizer, Roche and Sanofi—created TransCelerate BioPharma to speed up drug development, initially by improving efficiency of clinical trials.
Another precompetitive effort, DILI-sim Initiative, joins the Hamner Institutes for Health Sciences with 12 drug developers—Amgen, AstraZeneca, Bristol-Myers Squibb, Eli Lilly, Gilead Sciences, Glaxo, Janssen, Merck, Mitsubishi Tanabe, Novartis , Pfizer, and Sanofi—in developing the DILIsym predictive mathematical model of drug-induced liver injury, among new preclinical tools intended to quantify disease risk, thus shrinking R&D timelines.
"Understanding how the standard of care is changing in your disease, how the marketplace is changing is a key input to demonstrating value," Jaggi said. "It doesn't need to be something that companies compete on. It could be done through precompetitive collaborations. Biotech companies could benefit by participating because it may result in a more efficient use of resources."
Other highlights of "Beyond Borders:"
- VC investment dips: Venture capital funding across North America and Europe fell 5% in 2012, to $5.4 billion. The decline was slower than expected, suggesting VC firms have begun investing anew in biotech after the 2008 financial crisis. Pharma venture funds and other sources have begun filling the gap left when VCs retrenched on investment, Giovannetti said.
- M&A activity rises: The total value of mergers and acquisitions involving U.S. or European biotechs rose last year to $27.4 billion, up 9% over 2011 excluding the Sanofi-Genzyme and Takeda-Nycomed megamergers.
- Slower R&D spending: R&D spending by public companies grew 5% in 2012, down from 9% in 2011, reflecting the expense of late-stage trials for products that ultimately won market authorization. "If you take away the 16 commercial leaders, the rest of the industry actually declined in its R&D spending," Giovannetti said.
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