Dreams to Reality
Drug Discovery World
Pharma today: the challenges ahead – predicting the future
Dr Steve Arlington & Dr Kate Moss
Insights 2015

In our 1998 publications Pharma 2005: An Industrial Revolution in R&D and Silicon Rally, we foresaw the challenges ahead for Pharma and predicted the fundamental need for transformation in R&D.

We focused on changes in early discovery with the adoption of highthroughput screening and combinatorial chemistry as well as the huge explosion of data that would accompany the new way of doing things. We anticipated the need to alter the traditional three-phase clinical trial processes, adopt modelling and simulation and work more closely with the regulators. In 2002 we followed up our first reports with the Pharma 2010 series in which we predicted the shift to biologicals and the need for companion diagnostics. The 2010 reports stated that treatments would come with diagnostics and supporting services. The new world would require a networked organisation, interfacing with new informatics players and forming virtual communities.

In 2005 the writing was already on the wall regarding the need for biologics that were personalised medicines capable of prevention or cure. The regulators were under fire and we suggested an expansion of the conditional licence to a ‘live’ licence which allowed early launch and continuous monitoring enabled by mobile technology.

In short, many of the concepts we introduced in our series are now taking place. Ten of the world’s top 20 drugs are biologics, representing 54% of sales. Many of these drugs are sold with companion diagnostics. These biologics include cures for hepatitis C with Gilead’s Sovaldi, as well as new immunotherapies for cancer which have dramatically lengthened mean survival rates in areas where we were making little progress. We have moved to combination therapy in oncology and other areas. The results have been very encouraging.

However, the same challenges that faced the industry at the turn of the 21st century still exist. The rising cost of discovery, development and launch of a product remains too high, challenging the sustainability of the present business model. Recent economic pressures have exacerbated the problem of realising return on investment, with austerity measures being widely applied across global healthcare in the form of expanding health technology assessment (HTA) for all new medicines, forcing outcomes analyses to be included alongside a range of other health economic measurements for reimbursement to be considered. We are seeing the introduction of pay for performance measures for high cost therapeutics in a number of indications and a number of territories with new HTAs in Brazil, Italy and Japan. We predict that these will become more universal for all new therapies in the future.

Economics, and in particular health economics, lies at the centre of the problem. Healthcare is already consuming an increasingly large percentage of GDP in rich and poor countries alike. This is predicted to increase and many believe that unless the trend is stopped, by 2030 this will reach an unsupportable level1. The pressure from government, payers, healthcare systems and large companies is reaching a critical mass. In our view the most promising strategies will be those that consolidate medical care costs and the outcomes within a single payer or group of payers with aligned incentives to improve patient quality, access and cost outcomes. This represents a considerable challenge.

There are new models emerging that have progressed from bundled payments to models of risk bearing full service healthcare delivery models (ACOs in the USA) where the healthcare delivery players exist under one umbrella combining doctors, hospitals, hospice, clinical labs, outpatient care and health plans.

Healthcare payers and providers are already tackling this agenda by altering their business practices. They identify their high cost patients and aggressively manage them. More than 70% of today’s healthcare costs are attributable to Hypertension, Obesity, Noncompliance, Diabetes and Asthma (HONDAs). Across the world we witness efforts to persuade populations to drink less, stop smoking and exercise more. Prevention is seen as vital to manage what is seen as an unaffordable cost burden to society. In the USA we have seen the formation of the preventative task force in 2013 which has set aside $928 million to finance preventative healthcare in the areas of the leading causes of death.

We’ve identified the ageing world population – and the resulting large increase in chronic disease sufferers – as a key megatrend which will reshape the global economic and commercial landscape2. Paradoxically there will be an added burden due to our successes in treating cancer with combination immunotherapy. This will increase the number of cancer survivors who will require chronic treatment.

Our predictions are Pharma will only be rewarded for the outcomes they deliver in collaboration with other players – not merely for the pills they supply to patients. PwC analysis shows that return on R&D investment reached 6% in 2013, double the rate seen in 2009. This should lead companies to invest more into R&D in the short term. Understanding where to invest (not merely deciding to invest) is going to separate the winners from the losers. Equally, investing in long term chronic conditions with complex aetiologies is more challenging but carries the promise of higher reward.

Research and Development will alter their focus and drive, delivering long-term healthcare value. Recently, we have seen the launch of ground-breaking therapies in the fields of infectious disease (eg Sovaldi) and oncology (eg Rituxan, Avastin). The challenge for the business remains the price needed to remain viable, especially in areas such as dementia. Huge challenges remain in certain disease areas such as anti-microbial resistance, Alzheimer’s and other neurological disorders. We know that in many cases the diseases have genetic links but we cannot connect them to a specific pattern of genetic activity – or even worse we could argue that our fundamental understanding is lacking. Within these challenges lies large opportunity and the industry is now partnering with external resources, research institutions, biotech, investment communities and regulators. We have seen G7 initiatives in health such as the setting up of dementia platforms designed to focus and align our efforts to tackle these problems.

Discovery has had somewhat of a renaissance recently with a number of large organisations having undergone structural changes, emphasising genetics, genomics and immunotherapies. Many new and exciting precompetitive alliances such as Genomics England, GENE consortium, the Oxford Structural Genomics consortium and the US biosimilars consortium have been formed between industry and academia.

Governments across the globe are funding efforts in patient-centred outcomes research and personalised medicines. The US Patient- Centered Outcomes Research Institute (PCORI), established through the Affordable Care Act, has to date awarded around 400 projects funds totalling more than $850 million3. Pharma is collaborating in a way that we have not seen before.

Today we have made progress in understanding many disease pathways through advances in techniques used to explore fundamental sciences. This has broadened the areas where the industry can invest and makes portfolio decision-making all the more complex. We predicted the increasing role of semantic technologies and predictive modelling and simulation leading us to be able to carry out trials in silico. We even went as far as suggesting the virtual man. This is still quite a way off, however the use of virtual cells, tissues, organs and systems is within sight.Moreover in silico modelling docking and SAR ligand design are now routine. For more progress we will need to see collaboration increase on a scale bigger than we had for the human genome project.

Clinical trials and the commercial viability of new medicines will become intertwined to an extent not seen previously. Trials will extend their reach to provide evidence of outcome in health economic terms rather than merely obtaining regulatory approval. The traditional three phase trial programmes will alter. They will be more focused and help reduce costs, demonstrate value, leverage the impact of biomarkers, determine time to market and differentiate the treatments commercially in health economic benefit terms, thus providing enhanced benefits to patients and payers alike. The data will be from the real world and will involve the patient, regulator, payer and provider. The payers, providers and regulators will work together more closely and define the parameters needed to ensure the viability of new medicines. Pharma has to better trust regulatory feedback, not overengineer trial plans and work more in partnership with the various stakeholders.

The focus within R&D will therefore be to demonstrate both clinical and economic value (total cost of care) and communicate with payers and providers. The emphasis needs to be on the demonstration of benefit to the patients and the payers, creating, testing and quantifying meaningful product differentiation within clinical development. Supporting all this, IT capabilities must improve and focus on access to internal and external non-structured data, drive differentiation and deliver results that capture the value of the drug. We see the whole area of IT in its broadest definition as a key enabler but there also has to be recognition of the new challenges posed regarding patient data and security, the future of big data and the unique opportunities we can see on the horizon are coupled to the very real issues health data pose.

R&D has made significant progress leading us to predict an increase in the pace of change in discovery and development of new medicines and supporting our belief that R&D in Pharma will provide the momentum needed to transform healthcare. All in all the industry has both significant challenges alongside huge opportunity. It has to balance and re-evaluate investments and the development of new business models, new relationships and collaborations. There will be increased complexity as pay for performance payments are introduced and these will differ by geography and mechanism. The markets will remain attractive and grow. Where Pharma focuses and how it responds to the challenges as they emerge will be key to its success.

Bloom, DE, Cafiero, ET, Jané-Llopis, E, Abrahams- Gessel, S, Bloom, LR, Fathima, S, Feigl, AB, Gaziano, T, Mowafi, M, Pandya, A, Prettner, K, Rosenberg, L, Seligman, B, Stein, AZ and Weinstein, C (2011). The Global Economic Burden of Noncommunicable Diseases. Geneva: World Economic Forum.

2 http://www.pwc.co.uk/issues/megatrends/.

3 http://www.pcori.org/research-results; site visited on June 24, 2015.