Big Pharma’s business model is broken; New drug OKs plunged this year, highlighting an ugly reality

End­points as­sesses the big bio­pharma R&D sto­ries of the week, with a lit­tle added com­men­tary on what they mean for the in­dus­try.

Big Pharma’s busi­ness model is bro­ken, so change it

When your ac­coun­tant tells you the busi­ness you’re run­ning is un­sus­tain­able, it’s a good idea to pay very, very close at­ten­tion to the de­tails. So it is with Big Pharma and drug de­vel­op­ment, a game which the largest play­ers in the in­dus­try have not mas­tered. De­loitte reck­ons that an al­ready bad ROI just got worse for the top 12 pharma com­pa­nies, and there are no signs that the num­bers are going to get any bet­ter. So maybe it’s time that these big out­fits re­think how they’re run­ning R&D. What are they good at? Why in­vest heav­ily in early-stage re­search? Are they bet­ter at de­vel­op­ment? Aside from a few rare ex­cep­tions, there’s lit­tle ev­i­dence that any­one in this league has thought through the long-term con­se­quences of a lack of pro­duc­tiv­ity. It’s time to start, and come up with some­thing bold and new. The old busi­ness model, where you con­tin­u­ally hike the price of aging ther­a­peu­tics, won’t cut it going for­ward.

New drug OKs plunged this year, high­light­ing an ugly re­al­ity

Speak­ing of poor pro­duc­tiv­ity, we’re see­ing one of the worst years in the past decade for new drug OKs, a fact high­lighted in John Jenk­ins’ lat­est — and last — an­nual re­view as head of the Of­fice of New Drugs. When a year goes by and some of your biggest de­vel­op­ers whiff on new drug ap­provals, it adds to the pres­sure for some kind of fun­da­men­tal change. The FDA in part blamed its will­ing­ness to beef up 2015 num­bers with ac­cel­er­ated ap­provals ahead of their 2016 PDUFA dates, but logic would in­di­cate that you could make that up with some snappy de­ci­sions at the end of 2016, and we’re not see­ing a whole lot of that. In­ter­est­ingly, no one can pin this short­fall on reg­u­la­tors, who have en­gi­neered a sea change in the way many drugs are re­viewed. When you re­move one pos­si­ble el­e­ment from an equa­tion, it’s eas­ier to gain some clar­ity on where the prob­lem is. And at the risk of re­peat­ing my­self, that prob­lem has come home to roost.

Sarepta sparked a payer re­volt, and the FDA needs to pay at­ten­tion

There’s fresh ev­i­dence this week that quite a few pay­ers will do every­thing pos­si­ble to avoid pay­ing for Sarepta’s Ex­ondys 51. And why should they cover an ex­per­i­men­tal drug that was given an ac­cel­er­ated ap­proval based on the opin­ion of a sin­gle FDA ex­ec­u­tive? The FDA set the stage for a payer re­volt and it should think through how it plans to han­dle fu­ture cases — which are cer­tain to come along. I’m not op­posed to ac­cel­er­ated ap­provals based on lit­tle ev­i­dence when the pa­tient pop­u­la­tion faces a slow death and there are no ap­proved ther­a­pies. And there are good rea­sons for mak­ing Ex­ondys 51 avail­able. A spe­cial ap­proval cat­e­gory for com­pas­sion­ate use makes sense. But there’s no rea­son why com­pa­nies should be al­lowed to make money on those ap­provals. If you want to make money on drugs, you have to es­tab­lish the safety/ben­e­fit pro­file first. End of story.

 Maybe the odds will ac­tu­ally favor New York’s big gam­ble on biotech

I’ve seen state ini­tia­tives aimed at spark­ing a biotech rev­o­lu­tion come, and I’ve seen them go, usu­ally after fail­ing woe­fully at cre­at­ing any­thing like the num­ber of jobs that were promised. (Hello Florida, Cal­i­for­nia and Texas.) This week, New York, state and city, came up with more than a bil­lion dol­lars worth of in­cen­tives to do the same thing. And maybe, just maybe, it’s dif­fer­ent this time. It’s im­por­tant to re­call that Mass­a­chu­setts saw the birth of a mas­sive biotech hub after local gov­ern­ments had gained the rep for being hos­tile to new busi­nesses. When it added in­cen­tives to fos­ter the in­dus­try, the growth in life sci­ences was al­ready well en­trenched, for rea­sons that had noth­ing to do with gov­ern­ment plan­ning. The changes in at­ti­tude and pol­icy made a pos­i­tive, sig­nif­i­cant im­prove­ment, but they did not cre­ate Kendall Square. What I’m hop­ing is that the basic el­e­ments needed to cre­ate a biotech re­nais­sance are al­ready in place in New York. The sci­ence is out­stand­ing. There’s space and grow­ing streams of ven­ture cash. And there’s plenty of tal­ent avail­able in the coun­try to helm a fleet of star­tups. So, fin­gers crossed. A rival hub is just what the US needs to keep the juices flow­ing.

Biotech deja vu: That big R&D over­haul story isn’t going away

R&D over­hauls are not a trend. They are a per­ma­nent con­di­tion, as Bris­tol-Myers demon­strated with its an­nounce­ment this week that it is rip­ping up its old struc­ture and cre­at­ing a new one. Jobs will end. Jobs will move. New jobs will be­come avail­able. And they’ll all be that much closer to the biggest hubs as the con­cen­tra­tion of R&D fire­power con­tin­ues. I’ve been see­ing this move­ment play out for the past decade as Roche, Merck, Pfizer and on and on all did the same thing. In some cases, com­pa­nies are in their sec­ond or third re­vamps. Job se­cu­rity in R&D is over, un­for­tu­nately. But it all makes biotech look all that much more ap­peal­ing. If you’re gam­bling every­thing on a pro­ject, it’s likely to be more fun and lu­cra­tive at a startup. The tal­ent will con­tinue to head into biotech, and away from Big Bio­pharma. Where do you think that leads?

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