The increasing cost of new innovative medicines is debated by payers and healthcare professional all over the European Union. How to optimize the pharmaceutical purchasing budget and get as much value for money is the objective of public buying organizations and private insurance companies. One way of doing this is to implement Pharmaeconomics or cost-benefit evaluations of new and existing drugs.
The UK government has structured the National Institute for Health and Clinical Excellence (NICE) - an organization that evaluates the value for money in newly approved medicines and line extensions. The National Health Service (NHS) is legally obligated to provide funding and resources to the hospitals purchasing budget in England & Wales, if a drug is recommended by NICE. If a treatment is not recommended it means for the time being it should not be prescribed routinely by NHS doctors. When a Pharma company is introducing a new drug a positive recommendation by NICE can be crucial.
I believe that every Pharma stakeholder must get use to cost-benefit evaluations of newly approved and existing drugs, and if the value for money is “to low” the product will not be reimbursed or recommended. But this can induce a bad trend in Pharma. The industry has to deliver ROI of pipeline investment and if a marketed product is not reimbursed/recommended, the market potential is decreased and hereby the future earnings. This will increase the prices and for that reason more products will exceed the NICE threshold of £30.000 a year for “good-quality life gained”. If NICE do not increases the threshold, I think future approved drugs will have a difficult time gaining recommendation – the companies could be trapped between delivering ROI (increase prices due to costly development and a longer approval process) and get recommendation (decrease prices to meet NICE threshold). Pharma could hereby be fenced in by this pricing schism.
Pharmaeconomic evaluations are already an integrated part of getting a new drug approved and get reimbursement/recommendation. Many countries are taking pharmaeconomics into account, but the extent to which differs. The Netherlands, the UK, Sweden, Estonia, Latvia and Lithuania have specific guidelines for conducting pharmaeconomic analyses[1] and I think it’s only a matter of time before more will follow. To answer my question in the headline: Yes, pharmaeconomics is the future and many companies do already build the approval on cost-benefit analysis. But if an organization like NICE do not implement some flexibility in the evaluation, it could induce the mentioned bad trend – and that would be non-beneficial for companies, patients and payers.
[1] http://ppri.oebig.at/index.aspx?Navigation=r20-
Wednesday, October 8, 2008
Thursday, September 11, 2008
Aside the normal agenda of this Blog
I would like to encourage you to check-out another interesting Blog – www.thebusinessupdater.com . The objective is a little bit aside this Blog – focus is not on a specific line of business, but on business life in general. However I have read many of the articles with great pleasure and think it has some good perspectives on business related topics in general. I can positively recommend the newly published article about using passion to create a competitive advantage.
In my time as a student, I was part of a team conducting an internal analysis to clarify the vision, mission and strategic focus of a smaller Danish software company. The company was not doing well and we identified big differences in the perception of the future strategy between key employees, and a total lack of company vision and mission. The only thing that drove the company was a shared passion for the company and the product
A missing strategic outlook is a common problem when a newly started entrepreneur is setting up a business: the passion is there, but many do not take the time to identify the competitive advantage and how the company can be differentiated from competitors. When setting up a new business it’s not enough to have passion and a gut feeling of how to get success. In addition you have to analyze the market and clarify your vision, mission and a strategic focus. All elements are pivotal for success and no one can be left out – unless you are extremely lucky, and luck will only give you a short term of success.
[1] The company was a family owned business. The mom was the CEO, the father was a programmer and the daughter was head of sales. We quickly identified this as part of the problem.
Monday, September 8, 2008
Big Pharma and Academic institutions partnering: “The New Old Trend”
The easy double-digit growth rate is something of the past for Big Pharma and many companies has been forced to cut sales staff, streamline the pipeline and look beyond own boundaries for in-licensing opportunities with blockbuster potential or company acquisitions with a strategic fit[1]. All this to accommodate the threat from generic manufactures when blockbuster drugs are losing patent protection[2]. To paint up an even gloomier picture; FDA did only approve 16 new drugs last year (2007), and is on the pace to approve just 18 this year. The approval rate in 1997 was 39 drugs, and the staggering decrease from 39 approvals to 16 approvals in 2007 is making the future for Pharma pretty bleak.
Big Pharma is always on the look-out for the next blockbuster product and the search is not only focusing on late-stage, but also early-stage candidate. This has created the trend I call: “the new old partnering trend”.
The Old Trend: Big Pharma-academic partnership engaged university researchers for a certain line of research that benefited their projects, and that research was carried out exclusively by the university scientist.
The New Old Trend: The new involvement tend to be more of a team based approach, where university and industry scientists are working together on wide-ranging experiments to advance new drug discovery and stimulate basic research – in hope of more potential blockbusters in the future.
Examples of this New Old Trend are[3]:
GSK entered into a five-year, US$25 million deal with Harvard to support stem-cell research, focusing on heart disease and cancer.
AstraZeneca signed a multi-year collaboration contract with Columbia University to develop novel therapeutics for metabolic diseases.
Pfizer formed a three-year, US$14 million collaboration with four research universities to study the field of diabetes.
To sum it up: Pharma needs to approach the R&D process from another perspective, and one way could be to collaborate with academic institutions, instead of only using them for a certain line of research. But if The New Old Trend should have a reel impact the academic institutions and Big Pharma needs to break down the barriers and start look at the positive benefits of working together – the three mentioned cases could indicate willingness from both sides.
[1] UCB recently refocused and cut workforce by 17%.
[2] The world best selling drug Lipitor (Pfizer) will lose patent protection in all territories over the next 3-4 years. Risperdal (J&J) the 10th best selling drug lost patent protection in EU in 2007.
[3] From:”Big pharma gravitates to the academe”, Financial Times.
Big Pharma is always on the look-out for the next blockbuster product and the search is not only focusing on late-stage, but also early-stage candidate. This has created the trend I call: “the new old partnering trend”.
The Old Trend: Big Pharma-academic partnership engaged university researchers for a certain line of research that benefited their projects, and that research was carried out exclusively by the university scientist.
The New Old Trend: The new involvement tend to be more of a team based approach, where university and industry scientists are working together on wide-ranging experiments to advance new drug discovery and stimulate basic research – in hope of more potential blockbusters in the future.
Examples of this New Old Trend are[3]:
GSK entered into a five-year, US$25 million deal with Harvard to support stem-cell research, focusing on heart disease and cancer.
AstraZeneca signed a multi-year collaboration contract with Columbia University to develop novel therapeutics for metabolic diseases.
Pfizer formed a three-year, US$14 million collaboration with four research universities to study the field of diabetes.
To sum it up: Pharma needs to approach the R&D process from another perspective, and one way could be to collaborate with academic institutions, instead of only using them for a certain line of research. But if The New Old Trend should have a reel impact the academic institutions and Big Pharma needs to break down the barriers and start look at the positive benefits of working together – the three mentioned cases could indicate willingness from both sides.
[1] UCB recently refocused and cut workforce by 17%.
[2] The world best selling drug Lipitor (Pfizer) will lose patent protection in all territories over the next 3-4 years. Risperdal (J&J) the 10th best selling drug lost patent protection in EU in 2007.
[3] From:”Big pharma gravitates to the academe”, Financial Times.
Tuesday, August 26, 2008
Trend in clinical trials
An analysis of clinical trials registered between October 2005 and September 2007 has been published by Nature[1]. The conclusion is clear: Most registered trials were in oncology, followed by central nervous system (CNS) disorders and cardiology. This could indicate the future for marketed products within the three therapeutic fields.
Oncology is the largest therapeutics area with more early phase trials than any other area. The market for anticancer drugs[2] is the second largest therapy market, with US$34.6 billion in global sales in 2006 – only exceeded by lipid regulators[3].
The position as a follower is occupied by CNS – most depression and schizophrenia trials are being conducted. However both indications have experienced a negative growth, with moderately few early phase trials. This could indicate a shift in CNS-focus by the Pharma and Biotech companies, maybe due to the lack of success in psychiatric diseases compared to other areas – sleep disorders, multiple sclerosis and Alzheimer’s etc.
Cardiology is the third biggest therapeutic area with targets like hypertension, cardiovascular diseases etc. Both indications showed a decrease in trials and why the industry has paid less attention to cardiology development is not clear. One explanation could be the intensive competition from strong market leaders, many of which soon will become generics.
To sum it up: the future competitive environment within oncology is increasing based on the number of clinical trials registered. A too crowded market with strong market leaders could make it financially risky to develop a new oncology drug. Nevertheless, many indications are still untreated or with a limited number of competitors and before this has changed I cannot picture a decrease in registered oncology trials.
[1] www.nature.com/reviews/drugsdisc
[2] Drugs like Gleevec, Taxotere, Leustatin, Gemzar etc.
[3] Drugs like Lipitor, Zocor etc.
Oncology is the largest therapeutics area with more early phase trials than any other area. The market for anticancer drugs[2] is the second largest therapy market, with US$34.6 billion in global sales in 2006 – only exceeded by lipid regulators[3].
The position as a follower is occupied by CNS – most depression and schizophrenia trials are being conducted. However both indications have experienced a negative growth, with moderately few early phase trials. This could indicate a shift in CNS-focus by the Pharma and Biotech companies, maybe due to the lack of success in psychiatric diseases compared to other areas – sleep disorders, multiple sclerosis and Alzheimer’s etc.
Cardiology is the third biggest therapeutic area with targets like hypertension, cardiovascular diseases etc. Both indications showed a decrease in trials and why the industry has paid less attention to cardiology development is not clear. One explanation could be the intensive competition from strong market leaders, many of which soon will become generics.
To sum it up: the future competitive environment within oncology is increasing based on the number of clinical trials registered. A too crowded market with strong market leaders could make it financially risky to develop a new oncology drug. Nevertheless, many indications are still untreated or with a limited number of competitors and before this has changed I cannot picture a decrease in registered oncology trials.
[1] www.nature.com/reviews/drugsdisc
[2] Drugs like Gleevec, Taxotere, Leustatin, Gemzar etc.
[3] Drugs like Lipitor, Zocor etc.
Thursday, August 21, 2008
Strategies when your product is losing patent protection
Expiring patents is one of the Pharma industry’s weak points. When a product goes out of patent the generic manufacturers are often quick to grab the opportunity and erode the market with cheap copies. The price is often reduced by 70-90% and has a significant effect on the revenue made by the original producer.
As I see it the originator has four strategic alternatives:
The last alternative is often applied because of the possibility of protecting the revenue by moving all patients from the patent losing product to the new and improved version. For this strategy to succeed the company has to demonstrate a better efficiency or safety compared to the old version. The Danish pharmacies cannot substitute between the generic and the new improved version – if the benefit is approved and acknowledge by the Danish health department, and hereby is the generic risk bypassed.
Imigran (sumatriptan): a case study of applied patent strategies
Imigran from GSK lost DK patent protection in May 2006 and 10 companies has eroded the Danish market with different tablet variations of sumatriptan (GSK has a nasal and an injectable variation of sumatriptan with no generic competition on the Danish market). GSK tried to protect their revenue stream by using the second and last strategic alternative:
The first strategic move was to introduce Imigran Sprint and deregister the four pack of Imigran[1]. GSK could hereby get around the generic challenge, but the Danish health department did not find the rapid formulation of Imigran Sprint evident and made the new and the old version substitutable.
The second strategic move was to launch a generic copy and try to cannibalize the market. Sumatriptan “GSK” was launched when the patent expired in May 2006 and the idea behind this move must have been to compete on price with the other generic alternative from Sandoz – many generic manufactures followed.
If you examine the sales figures of Imigran it gets evident that the revenue was reduced by half from 2006 to 2007. The three biggest Migraine products on the Danish market are Imigran (GSK), Maxalt (Merck) and Relpax (Pfizer). GSK has protected their position as a market leader, but I think it is only a matter of time before the market share of Maxalt or Relpax exceeds the one of Imigran.
To sum up: GSK tried to apply two of the described strategies and has to some extend protected their market share – Imigran is still the market leader in selective 5HT-receptor agonists. But the revenue was cut by half when the patent protection expired.
[1] http://www.laegemiddelstyrelsen.dk/db/filarkiv/5938/20060406.pdf
As I see it the originator has four strategic alternatives:
- Follow the price level of the generic competitors
- Waive the product and let it generate as much profit as possible with a minimum of resources utilized
- Launch a generic copy and try to cannibalize the market
- Launch an improved version and pull the patent losing version out of the market before the patent expires (the company can of course keep both on market)
The last alternative is often applied because of the possibility of protecting the revenue by moving all patients from the patent losing product to the new and improved version. For this strategy to succeed the company has to demonstrate a better efficiency or safety compared to the old version. The Danish pharmacies cannot substitute between the generic and the new improved version – if the benefit is approved and acknowledge by the Danish health department, and hereby is the generic risk bypassed.
Imigran (sumatriptan): a case study of applied patent strategies
Imigran from GSK lost DK patent protection in May 2006 and 10 companies has eroded the Danish market with different tablet variations of sumatriptan (GSK has a nasal and an injectable variation of sumatriptan with no generic competition on the Danish market). GSK tried to protect their revenue stream by using the second and last strategic alternative:
The first strategic move was to introduce Imigran Sprint and deregister the four pack of Imigran[1]. GSK could hereby get around the generic challenge, but the Danish health department did not find the rapid formulation of Imigran Sprint evident and made the new and the old version substitutable.
The second strategic move was to launch a generic copy and try to cannibalize the market. Sumatriptan “GSK” was launched when the patent expired in May 2006 and the idea behind this move must have been to compete on price with the other generic alternative from Sandoz – many generic manufactures followed.
If you examine the sales figures of Imigran it gets evident that the revenue was reduced by half from 2006 to 2007. The three biggest Migraine products on the Danish market are Imigran (GSK), Maxalt (Merck) and Relpax (Pfizer). GSK has protected their position as a market leader, but I think it is only a matter of time before the market share of Maxalt or Relpax exceeds the one of Imigran.
To sum up: GSK tried to apply two of the described strategies and has to some extend protected their market share – Imigran is still the market leader in selective 5HT-receptor agonists. But the revenue was cut by half when the patent protection expired.
[1] http://www.laegemiddelstyrelsen.dk/db/filarkiv/5938/20060406.pdf
Wednesday, August 13, 2008
Lundbeck: a company facing tough challenges
The Danish CNS company Lundbeck has released an interim report for the second quarter of 2008 that illustrated positive elements. But it was impaired by the failure of Flurizan.
The Q2 revenue continued to grow and reached DKK 2,938 million. But the increase had no impact on the bottom-line due to the DKK 481 million depreciation of Flurizan – Flurizan was in-licensed from Myriad in May 2008. Lundbeck and Myriad has decided to discontinue the clinical trials and the DKK 481 million investment made by Lundbeck is hereby gone down the drain. The investment was considered as part of the defense against the pending patent expiry of Lexapro/Cipralex. The product will lose patent protection in March 2012 in US and if Lundbeck doesn’t in-license or develop a successor it will be impossible to secure a positive development in revenue. The Q2 revenue of Lexapro/Cipralex was DKK 1.926 million and a big part of that can, and probably will, vanish when the patent expires.
Pfizer’s major anti depressant Zoloft (sertraline) lost patent protection in 2005, causing severe attrition in sales resulting in the product’s displacement from market leader to number two in the global anti depressant market in 2006. A number of generic versions are present on the Danish market and has made the sales of Zoloft drop significantly.
The solution
Lundbeck’s pipeline product Lu AA21004 has potential, but I find it almost impossible to prepare the product for market introduction – to get it through phase III trials and get marketing approval, on less than four years. The product will enter a market with fierce competition, both from marketed products like Lilly’s Cymbalta/Yentreve, Wyeth’s Effexor and the generic versions of Lexapro/Cipralex. The market potential of Lu AA21004 is hereby uncertain and the clinical trials needs to document an improvement in efficacy and/or side-effects etc. compared to the competitors.
Lundbeck could in-license a product but the company hasn’t had success yet and the clock is ticking. The company must in-license a late stage product if it should take over from the patent-losing Lexapro/Cipralex and it is a tough challenge. The competition from other Pharma companies interested in licensing future blockbuster candidates is harsh and a late stage candidate is expensive – as showed in the case of Flurizan.
To sum it up: Lundbeck has to act fast and has limited attempts at coming out of this heads first.
The Q2 revenue continued to grow and reached DKK 2,938 million. But the increase had no impact on the bottom-line due to the DKK 481 million depreciation of Flurizan – Flurizan was in-licensed from Myriad in May 2008. Lundbeck and Myriad has decided to discontinue the clinical trials and the DKK 481 million investment made by Lundbeck is hereby gone down the drain. The investment was considered as part of the defense against the pending patent expiry of Lexapro/Cipralex. The product will lose patent protection in March 2012 in US and if Lundbeck doesn’t in-license or develop a successor it will be impossible to secure a positive development in revenue. The Q2 revenue of Lexapro/Cipralex was DKK 1.926 million and a big part of that can, and probably will, vanish when the patent expires.
Pfizer’s major anti depressant Zoloft (sertraline) lost patent protection in 2005, causing severe attrition in sales resulting in the product’s displacement from market leader to number two in the global anti depressant market in 2006. A number of generic versions are present on the Danish market and has made the sales of Zoloft drop significantly.
The solution
Lundbeck’s pipeline product Lu AA21004 has potential, but I find it almost impossible to prepare the product for market introduction – to get it through phase III trials and get marketing approval, on less than four years. The product will enter a market with fierce competition, both from marketed products like Lilly’s Cymbalta/Yentreve, Wyeth’s Effexor and the generic versions of Lexapro/Cipralex. The market potential of Lu AA21004 is hereby uncertain and the clinical trials needs to document an improvement in efficacy and/or side-effects etc. compared to the competitors.
Lundbeck could in-license a product but the company hasn’t had success yet and the clock is ticking. The company must in-license a late stage product if it should take over from the patent-losing Lexapro/Cipralex and it is a tough challenge. The competition from other Pharma companies interested in licensing future blockbuster candidates is harsh and a late stage candidate is expensive – as showed in the case of Flurizan.
To sum it up: Lundbeck has to act fast and has limited attempts at coming out of this heads first.
Sunday, August 10, 2008
This Blog
This Blog will mainly focus on the Pharma and Biotech industry - implemented/future strategies, business insight etc. I will give my view on the industry, that has been the focal point of my attention for many years.
Further I will try to update you on recent articles, business reports etc. - that can update or enlighten you and give you insight in the exciting world of Pharma and Biotech.
Further I will try to update you on recent articles, business reports etc. - that can update or enlighten you and give you insight in the exciting world of Pharma and Biotech.
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