By David Pyott
At the recent BIO Convention, Ernst & Young issued its annual biotechnology industry report Beyond Borders: Matters of Evidence. The report featured a survey of biotech CEOs (of companies under $500 million in revenue) and provided insights into how these companies are approaching matters of efficiency as well as matters of evidence, which presents an interesting dichotomy on the issue of demonstrating value to payers. How this contradiction is resolved is likely to have an impact on the industry in the coming years.
On one hand, a huge majority of respondents in the survey said that demonstrating the value of drugs to payers is crucial. Yet at the same time, those CEOs described their current activities as much more focused on achieving efficiencies in their operations than in taking steps to demonstrate the value of their products to payers. Their reasoning seems to be that demonstrating value is a “late stage” consideration, and with limited resources their more immediate focus should be on establishing “strong science” behind their products.
I’ve noted in a past post the growing importance of proving value to public and private payers. While it’s true that securing regulatory approval based on robust science was once the primary objective in the development process, now it’s one of several milestones on the road to a successful product. The changing nature of drug development, and trying to anticipate future changes in the standards of care and insurance access and reimbursement that will exist when new drugs come to market, are driving new approaches to product development. Therefore, small and mid-sized biotechs cannot afford not to keep up with this pace of change. Interestingly, the Matters of Evidencereport also includes commentary from larger pharmaceutical companies and venture capitalists that say when considering partnerships with smaller companies, more and more due diligence is done to determine how deeply the biotechs have considered the proof of value for their products.
From my perspective, while these smaller biotechs may be foregoing investment in the value demonstration for now (largely for immediate financial reasons), this is mostly a matter of getting used to how value and evidence-based medicine are becoming embedded throughout the healthcare system. Biotech companies are invaluable to the innovation pipeline, and whether on their own or in partnership with larger companies and organizations, it’s unavoidable that “demonstrating value” will become as important as “strong science” for their products.
David Pyott is the CEO and chairman of the board of Allergan. This post has been re-printed with permission from his blog Allergan Views. Please send any feedback via email@example.com