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European Biopharmaceutical Review

Adding Value

One of the biggest changes impacting the biopharmaceutical industry today is the presumed end goal of medicine development. While the ultimate purpose of developing and bringing a new drug to market has intuitively always been to improve patients' conditions, the specific parameters around that goal – and the definition of a successful product – have considerably changed. It is no longer sufficient to demonstrate a positive benefit-torisk ratio to regulatory authorities; a new product must go beyond that to demonstrate ‘value for money’ to payers.

While all those involved in drug development will be conversationally familiar with the notion of product value, is this sufficient or do we all need to become ‘technically fluent’ in the language of value? Is value the purview of commercial colleagues – to be first considered well down the development timeline – or does value represent the very raison d’etre of drug development, to be contemplated as seriously, and as early, as the notion of proof-of-concept?

Commercial Value

The role of payers in determining the commercial success of medicines has never been greater than it is today. With the vast majority of global healthcare systems under some kind of central or regional control, the payers’ role with regard to new products is to assess their value-price-access equation in determining whether, when, and under what conditions they will be reimbursed. Reimbursement at an acceptable price, under acceptable access conditions (which will drive the volume of product sold and used) is critically important for medicine developers, as it represents the return on investment made in bringing the product to market.

A product with a positive return on investment will be one that generates a positive net present value (NPV) – defined as the difference between the discounted projected revenues and the discounted projected costs over the product lifecycle. Figure 1 shows a hypothetical cash flow curve for a biopharmaceutical product. There are many types of costs that need to be included in the NPV calculation, along with their timing during drug development. These include pre-clinical, clinical development, stability testing, manufacturing scale-up, goods produced and marketing costs. Such expenses must be combined in the NPV calculation with estimates of the price and volume of future sales.

A developer who pays insufficient attention to payer value during development will end up in a situation where the level of return and/or period of duration of return are greatly reduced, due to factors which include:

● Forced to accept a lower than desired price
● Subject to restricted patient access
● Subject to delays in gaining reimbursement and, therefore, market access
● Obligated to conduct additional later phase studies (to prove value) at a much higher cost than if these studies had been planned earlier or if evidence of value had been an integral design objective of the development programme

This concept applies not only to developers who intend to take their product through to launch and commercialise it themselves. Companies with early development pipelines, who are seeking to outlicense their products to larger manufacturers, should be aware that those in-licensing companies pay a great deal of attention to their ultimate expected return on investment when negotiating a licensing agreement. This, in turn, places a strong focus on the payer value proposition, and the related plan to demonstrate proof-ofvalue. In this situation, it is clear that there is a link between the transaction price achieved and the ability to provide evidence of current value, as well as a framework of how value will be assessed by payers. Out-licensers who neglect payer value consideration will be in a substantially weaker negotiating position.

What is Value to the Payer?

In general, value to the payer is synonymous with value to the healthcare system. Porter states that: “Value (in healthcare) is defined by outcomes relative to costs” (1). In other words, from a total healthcare system standpoint, if a drug provides value, then the healthcare system is better off with it than without it – that is, if the net benefit (after accounting for the cost of using the drug versus its benefits in outcomes) is positive. This is an identical concept to that of positive NPV, yet much trickier to measure since the benefits are not simple inflows of cash accruing to a company, but are the more nebulous, multi-dimensional and hard-to-quantify human health outcomes, accruing to a healthcare system (or accruing to society as a whole, when taking a broader perspective). Furthermore, the cost side of the equation is also far from simple, often requiring contemplation, tracking and measurement of costs from a diverse number of sources over a long and uncertain timeframe.

However in simple terms, a payer will expect to see a product value proposition based on positive outcomes, relative to existing comparator treatments in the targeted patient population, for which there is a recognised, but as yet, unmet medical need.

Value Influences Development

Historically, people in early development have tended to focus on scientific value and assume it will be automatically converted into high commercial value. To those drivers of scientific value, the payer will be asking: “So what?”

Keeping in mind the payer expectations when evaluating a new product, it is important to begin with the end in mind and, as far as possible, map out a hypothesised value proposition at the start of pivotal study development. This is particularly important since, as treatments become more targeted to specific disease subsets, molecules increasingly go into humans for the first time in the actual patient population.

Building Your Value Proposition

The payer is expecting to see a product value proposition based on outcomes; thus, it is important to construct a ‘roadmap to value’ – linking and translating biochemical characteristics to clinical benefits, and through to outcomes-based human benefits. Figure 2 illustrates the ‘roadmap to value’ for a hypothetical diabetes drug, linking the scientific benefit of preserving beta cell function all the way through to expected human and economic outcomes.

Development of the ‘roadmap to value’, and related exploratory and confirmatory evidence, will be an iterative and evolving process. For example, the novel molecule Omecamtiv Mercarbil is currently being developed for the potential treatment of heart failure (2,3). The exploratory proofof-concept study demonstrated a positive change in ejection fraction (EF) assessed by echocardiography. This is scientifically important, but not meaningful to payers by itself. However, the information was used to design a Phase 2 programme, which will characterise the relationship between changes in EF with clinical outcomes that have relevance to regulators and payers.

Significant effort needs to be put into the selection of outcomes that are appropriate to the disease and the mechanism of action of the drug. Will you be able to demonstrate outcomes that already have precedent regulatory and payer acceptance, or will you be forced to develop your outcomes as well as your drug? Figure 3 depicts the increase of development risk when dealing with new mechanisms and outcome measures, which must be kept in mind. However, if the drug is successful in terms of value demonstration in an area where it was previously not possible, this should lead to commercial success via commensurate pricing and market access.

There are a limited number of surrogate end-points that have strong validity, but even those which are accepted are not completely understood. The example of blood pressure reduction is perhaps a reasonable one; reduction of blood pressure towards a ‘normal range’ is associated with a reduction in cardiovascular and cerebrovascular events. But it is not clear how important the absolute reduction in terms of mmHg is relative to the pharmacological mechanism that produces that drop. Payers will pose the question: “If I can purchase a 5mmHg drop in systolic blood pressure for a few cents with a generic diuretic, why should I pay more for the same reduction achieved via a different mechanism of action, for a new molecule that has less safety data?”

Effect Size

It is important that studies are designed to detect clinically meaningful effect sizes – noting that what is meaningful for registration purposes may not be sufficient to demonstrate value to payers. Large, clinically meaningful effects should be detectable in smaller studies. Small effect sizes will require large numbers of subjects to detect, and still may not be perceived as having high value, despite expensive trials.

The choice of end-points, and the cost of detecting clinically meaningful changes in those end-points, are some of the most important decisions that a developer must make.

Comparator Treatments

The development of a molecule in an isolated ecosystem, free from external inputs and factors, can lead to unexpected results when the molecule is released into the competitive space of value assessment. Choosing a development plan that strengthens the molecule by knowing how it performs against current and potential future competition is generally to your advantage. If you choose not to make the comparison against the accepted standard of care, it will be made for you by the healthcare system.

This means serious consideration needs to be given to the choice of active comparator treatment arms and variations in standards of care in global registration programmes. Should the study be a superiority or non-inferiority design? If you are operating in an indication where there is currently no effective treatment, it may be a challenge to define the natural progression of the condition and allow detection of treatment effect. A prospective cohort study may have to be run to define progression in terms of the chosen outcomes.

Patient Populations

Another key aspect of the value proposition is determining the target patient population early, so that the possibility of generating outcome data that drives value in the population to be registered is maximised. Related to this is the importance of thoughtfully determining the initial indication within that population, as it will likely set a reference price point for all subsequent indications.

Payers generally look favourably upon products with specific targeted subpopulations, compared with broad, illdefined target populations, since those products generally provide evidence of value in those populations, and allow for more manageable and predictable budget expenditures.

This partly explains why ‘stratified medicine’ and the use of techniques such as companion diagnostics are gaining significant traction in early development. Giving a drug to patients who do not respond, or suffer poor tolerability, rapidly erodes value. High certainty that those who receive the medication will experience a good response and favourable risk benefit is of great value.

Payer Landscape and Hypothesis Testing

We have discussed what payers want to see in general terms, but an important aspect of the development process is to continually survey and account for market dynamics and the likely payer perspective when a specific product is evaluated. The payer assessment to decide price, reimbursement and/or access will be influenced by the payer’s perception of the clinical and economic burden of a disease, as well as their view on the product’s value proposition and robustness of its evidence package. Therefore, it is critical for the developer to also assess what the price/reimbursement/access landscape will look like at the time of launch, as well as how payers are likely to react to the product as part of their planning process. Once hypotheses are developed around payer assessment and utilisation, they should be tested and validated with payers and payer-advising experts for realistic forecasts and targeted evidence generation.

Integrated Planning Framework

It is clear that the scale, duration and risk of a development programme is related to the target product profile, which should reflect not just a registerable product, but also one with a compelling value proposition. Furthermore, the eventual revenue stream flowing from a product will depend, to a large extent, on the level of pricing and market access it receives. The inter-relationship between the product profile, the programme of evidence, the degree of customer acceptance and the ultimate return on investment from the product, is reflected in Figure 4.

The value-driven approach to clinical development is to view it as a continual learning process, integrating strategy and evidence to address both regulators and payers. Strategic input and an integrated assessment of alternative scenarios within this framework are repeated at each decision point throughout the development process (see Figure 5).

The framework is essentially used at each major decision point in development to help answer two key questions. Should we progress this molecule? If so, how should we progress this molecule? As developers, the challenge is to ensure that each activity adds more value than it costs.

Conclusion

In 1997, Lewis Scheiner expressed the dangers of focusing exclusively on regulatory requirements, and of placing insufficient weight on the exploratory aspects of early drug development (4). His ‘learn and confirm’ paradigm encouraged iterative and integrated development thinking.

Adopting a value-driven approach to development follows Scheiner’s concept, and broadens it to include product value and payer considerations from the early development stage. A new way of treating a patient is not worth more than the old way if the trials are showing the same outcomes in the same patients.

Equal intellectual rigour must be applied to learning and confirming about how to measure and then demonstrate value and effectiveness as is applied to measuring and demonstrating efficacy and safety. This will lead to products that are of real value to patients.

References
1. Porter M, What is value in health care? N Engl J Med 363: pp2,477-2,481, 2010
2. Cleland John GF et al, The effects of the cardiac myosin activator, omecamtiv mecarbil, on cardiac function in systolic heart failure: a double-blind, placebo-controlled, crossover, dose-ranging phase 2 trial, The Lancet 378: pp676-683, 2011
3. Teerlink John R et al, Dose-dependent augmentation of cardiac systolic function with the selective cardiac myosin activator, omecamtiv mecarbil: a first-in-man study, The Lancet 378: pp 667-675, 2011
4. Sheiner L et al, Learning versus confirming in clinical drug development, Clin Pharmacol Ther 61(3): pp275-291, 1997

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About the authors

Dr Pinar Akpinar is Senior Director, Value Strategy and Market Access at ICON plc, and has over 10 years of experience spanning pricing and reimbursement-focused consulting, pharmaceutical licensing and biomedical research. Before PriceSpective, she evaluated in-licensing and merger and acquisition opportunities for the Business Development group of Forest Laboratories. Pinar holds a PhD from Rockefeller University, where she studied the development of Type 2 diabetes. In addition to her doctorate, Pinar graduated summa cum laude from SUNY Stony Brook, where she was an Honors College scholar and obtained a BS in Pharmacology.

Dr Cyril Clarke is Vice President, Translational Medicine at ICON plc, with over 21 years of experience in clinical research. He trained in Medicine and Immunology at University College London before joining ICON Development Solutions in 1994 as a Clinical Research Physician. Cyril then moved into the roles of Associate Medical Director, Medical Director, and then Medical and Scientific Vice President, prior to taking up his current role. He is an Honorary Reader in Translational Medicine at the University of Manchester.

Nigel Gregson is the co-founder of PriceSpective which was established in 2003. With his financial training, marketing acumen and 16 years of pricing- and reimbursement-focused industry experience at top tier pharmaceutical companies, Nigel specialises in the development of pricing process and analytical/educational frameworks for pharmaceutical pricing. He is a frequent lecturer on this subject in both industry and academic settings and is the primary author of the widely acclaimed 2005 Nature article, ‘Pricing medicines: theory and practice, challenges and opportunities’.
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Dr Pinar Akpinar
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Dr Cyril Clarke
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Nigel Gregson
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