Epoch 6: Is Cost-Effectiveness Killing Innovation?

Recommendations for Sustainable Biopharma Innovation

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Hello Avatar! Welcome back for another week of biotech analysis. This week we are dialing in on an important post-approval concept called cost effectiveness research (CER).  What is CER exactly?  It is defined as: “analysis of prescription drug spend based on research studies and is intended to inform public policy about drug prices and insurance coverage given those prices.”  Essentially this is the process that helps to value drugs and is used by payers as part of their decision making whether to include drugs on formularies or not.  Our view is that this is a flawed process which consistently underestimates the value of medicines to society. 

As a result, not only are medicines held back from patients due to cost, but as an industry we have lost control of the narrative around the value of pharmaceutical innovation.  As a result the industry and innovation is under attack from the political class.  Not only in the United States, but in Europe as well.  These are two of the largest markets which support innovation, and the direction of recent policy making  has us highly concerned that industry’s ability to bring novel medicines to market in future years has already been damaged to a far greater extent than most realize.  Today we aim to shine light on this topic and provide talking points for each of you to intelligently advocate on behalf of our industry.

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DRUG PRICING

When it comes to drug pricing, the master on this topic is Peter Kolchinsky from RA Capital.  Anyone that really wants to dig into this area is encouraged to visit Peter’s site NoPatientLeftBehind which you can access here.

Back in November Peter presented at the CVCT conference in DC. The title slide is shown below: Do Fish Know About Water?  Of course right?  Fish live in water, it is their habitat.  However, often the familiar becomes the mundane and we overlook the details of what is around us everyday. Of course there is always more to learn and while those of us in the biotech industry are hyper focused on bringing medicines to patients,  many of us are naive to the political process that unfolds post-approval. While the CVCT conference was focused on CV trial design, Peter’s talk was anything but that. The focus was on drug pricing.

Below are a few slides from the presentation, we encourage you to download it in its entirety here.  We are going to give you the key points:

1. Nonprofits and government agencies tasked with calculating drug cost effectiveness do not calculate drug cost effectiveness correctly.

2. As a result they are completely off the mark in judging the value of novel medicines and vaccines to society.

3. Modified frameworks to more accurately capture cost effectiveness exist.

4. He shares his go-forward vision for changing the healthcare system to support affordable and sustainable innovation.