Health and private enterprise in a new economic environment

In 2014, the pharmaceutical industry faces a set of choices about how to adapt to a changed marketplace.

Historically, the pharmaceutical industry has focused on developing new, breakthrough and blockbuster medicines. These can be very financially rewarding but also require huge investment.

The onset of the global financial crisis in 2008 has had a considerable impact on global healthcare budgets. Historically the pharmaceutical sector has been less exposed to economic fluctuations. The most recent slump, however, has made a sustained and deep impression on the sector.

Pharmaceutical companies are now facing mature markets, slow organic growth and national austerity programs, all of which are leading to pricing pressure. This has had a substantial influence on pharmaceutical innovation and pipelines, with often serious repercussions. A number of the big pharma companies have had to reassess their R&D budgets and workforces – 120 companies announced restructuring plans in 2008-09 alone.

Pharma companies are constantly looking for clarity about the future pricing and regulatory environment they will be operating in, in order for them to plan for their long-term investment in to the UK.

With the average cost of bringing a new drug to market between $4–11 billion, it is hardly surprising that new products and R&D are falling by the wayside, a move that could ultimately lead to a stark stagnation in innovation.

In the UK, NHS finances are under more pressure than ever, and demand for services is continually rising. The UK has a strong history of innovation in medicine and is a major pharmaceutical exporter. At least ten of the current top-selling drugs worldwide have UK-trained chemists as named inventors, and the UK biotechnology sector leads Europe in the number of drug candidates at all stages of clinical development.

So how should industry respond to this shift in the global market?

Now is the time for us to better understand the needs of payers and patients. We must re-shape our innovation model and put value at the heart of it.

Value means more than just price. Value means clinical excellence without the uncertainty; innovation without the risk; quality without the premium.

The critical question is how we deliver this.

In the divergent worlds of high-end R&D and generics, it is difficult to offer these value assurances. There is inherent risk at both ends of the spectrum – in terms of price, quality and efficacy.

There is now a new space emerging – one that sits between these two sectors, and allows those within this new space to offer payers some of the assurances they need in order to invest with confidence.

At Mundipharma, we understand that in the current economic climate, customers are juggling efficacy, quality and price often being forced to make a trade-off on some or all of these variables. This new “middle segment” model means that such a trade-off is no longer the only option.

We choose to work with molecules for which the medical concepts are already well proven. They have well-established safety and tolerability profiles; serve clearly defined patient populations; and deliver positive health outcomes. We then share this value with payers, minimising uncertainty around the impact on their budgets and patient outcomes. Combined, this is equivalent to an insurance policy for payers.

In a world of economic uncertainty, now more than ever we need to invest in products that will deliver clinical excellence, without breaking the bank.

We are making this happen by innovating from the outside-in. To achieve real cut-through in the market, pharmaceutical innovation needs to start in the real world, proving solutions to real-world problems, and not spending money on innovating for innovation’s sake.

While creating leaner and more focused R&D departments plays a crucial role in cost-cutting within the industry, pharma companies can and should be exploring their ability to make further savings by shifting the focus away from blockbuster development and towards upcycling existing treatments to make them work harder.

Only by focussing on what works for patients and payers can the industry as a whole find the right way forward.

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