The third millennium is seeing a profound evolution of the pharmaceutical business model: no more large, diversified companies running R&D projects in multiple global hubs developing products mainly targeted to primary care. This model was typical of the 1990s and early 2000s; the deep impact of emerging new biotechnologies has then caused a shift towards a major focus on the development of specialty products and biologics. The expansion towards not yet mature emerging markets is another driver sustaining the pharma business. R&D activities are now mostly run within innovation clusters on the base of public-private partnerships greatly involving the academic researchers. The evolution of the model for pharma business during in years 1995-2015 has been analysed in detail in an article by Ajay Gautam and Xiaogang Pan published in Drug Discovery Today.
The declining of mergers & acquisitions
“Bigger is better”, i.e. the research of economies of scale was the driver of many M&A deals up to 2005s, says the study, but the final outcomes often showed poor results as they have been characterised by a lack in cultural integration of the merging companies. The following ten years saw a shift towards a more “leaner and focused” model, with companies more focused on their areas of strengths, thus disinvesting non-core assets. In this period M&A operations were targeted to build a strategic complementary expertise, and financial engineering based on tax inversions played also a role in many deals closed in the recent years, say the authors.
The last decade has been characterised by emerging markets – Asia (especially China), Latin America (Brazil), Russia, Middle-East and Africa – sustained by the growth of the local middle class and the consequent request for more healthcare. The dynamics of patent expiry in the different geographical areas are another factor to be considered to fully understand the increasing role played by many primary care products in these markets, explains the article.
The new paradigm of research and business
Big, hub-based R&D silos were the characteristic of the 1990s model, using high-throughput technologies to solve scientific challenges, while attention is now more paid to innovative, breakthrough technologies developed in strict collaboration with the university. These technologies can then be adopted by big pharma companies to produce new value-based products able to meet the needs coming from the market. “Medicine-as-a-service” is the new business model coming from this vision, those a primary consequence sees the moving of the headquarters of many pharmaceutical major companies in the closed proximity of leading innovation clusters.
Biologics and specialty products have become a major component in the pipeline of many companies (up to 58% for Lilly and 44% for BMS, according to the Gautam’s study), supported by the increasing relevance of personalised medicine, companion diagnostics and an ad hoc regulatory framework; on the other hand small-molecule-based products for primary care are experiencing a declining phase.
Paul Tunnah made an exercise to imagine how a pharma company 2.0 would look according to the new business model (read more here on Pharmaphorum).
It would include three core operating units, says Tunnah: therapeutic area interventions, product development and central operations. The first one should include all the different expertise needed to guide the patient’s journey in the disease. These includes, for example, the “customer story” to build the narrative of the journey from the perspectives of the single actors involved, and a “customer engagement” team working on-field to capture needs arising from doctors and all other components of the journey. Expertise in diagnostics, devices and digital health shall become an essential part of product development, extending far over the simple pharmaceutical development. The design of central operations of the pharma company 2.0 might also look quite different than today; the Chief Insights Officer may assume more importance as the responsible for the monitoring of all data and research, in close collaboration with the therapeutic area and product development, and for external data provider partnerships.
How artificial intelligence is changing medicine
“Big data” is the new mantra of the third millennium, and the acquisition of real-world data referred to the true contest of use for pharmaceutical products is becoming a key driver also to support regulatory decisions. Many are the examples of the application of machine- and deep-learning algorithms to improve the diagnostic and therapeutic processes available globally. Artificial intelligence (AI) should not overcome doctors, say the experts, but the future shall see an increasing complementarity of humans and AI to drive the journey into disease. The London Medical Imaging and AI Centre for Value Based Healthcare, for example, is a consortium between the academic, NHS and industry partners led by King’s College working to new models for value-based healthcare to optimise triage and target resources to deliver significant financial savings for the NHS and healthcare systems overall.
Artificial intelligence may also prove important to improve pharmacovigilance. This is one of the goal of the newly established International Working Group (IWG) on Signal Detection and Management in Pharmacovigilance, an initiative of the independent UK charity Drug Safety Research Unit (DSRU). The IWG groups experts from many big pharma companies, academia and regulatory authorities to help define the needs and propose ideas and guidance for the future on the basis of the most recent scientific evidences (see here the Pharmatimes report on the first meeting of the group).
The value-based model
Biopharmaceutical products are characterised by very high prices, with a deep impact on both the possibility to access the most innovative therapies and the ability for healthcare systems and other payers to sustain the costs of the new therapeutics. This has caused a deep, negative impact on the perception of the pharmaceutical industry, says Meagan Parrish on Pharmaceutical Manufacturing.
Giants as Merck, GSK and Pfizer are at the last positions of the 2018 RepTrack report for pharmaceutical companies, the analysis run by the Reputation Institute on the perception of companies in different industrial fields. At the bottom places are Sanofi, Genentech and Celgene. A falling reputation may be linked to the divergence between the expectations of its stakeholders and what the company is delivering, and for the pharmaceutical sector it might include six different factors, ranging from ethics to innovation, safety, sustainability, quality and security, reports Parrish in her article.
The “value-based” model is becoming the new paradigm, overcoming the prior “pay-for-services” model, explains Jim O’Donoghue from Pharmaphorum’s columns. A model that is sustained also by the associations representing the pharmaceutical industry (see for example Medicines for Europe).
Quality, and no more quantity, is the key characteristic of a value-based medicinal product: a quality to be measured on the positive outcomes obtained while treating patients in the real-world contest, away from the highly selected cohorts of clinical studies. These outcomes are also the main factor guiding new reimbursement policies in order to ensure the overall sustainability of the health systems. But a true “patient centric” approach – paying fewer attention to health professionals – is still needed to reach the goal, says O’Donoghue. Pharma companies are also starting to test new models in order to pro-actively engage patients along the journey, for example through patient support programmes (PSPs) or around-the-pill (ATP) services (to better involve the patient in the management of its disease). The Beyond-The-Pill (BTP) approach targets also the patients’ lifestyle that may play a role in keeping under control the progress of chronic conditions.
Smart medicinal products, which typically include a sensor within the pill to monitor the adherence to therapy, are another possible way to support the value-based model. Smart pills may help to reduce the inappropriate consumption of medicines and to cut costs to dispense therapies that patients then do not really use, says Angel Au-Yeung on Forbes.
These sensors can also track the physical activity of the patient and some physiological parameters i.e.temperature or heart beat, which are communicated to the healthcare team using smart devices for a better monitoring of the patient overall condition.
The first-in-class medicinal product of this type, Abilify MyCite to treat schizophrenia and other mental disorders, was approved in 2017 by the FDA; it has been developed by Proteus Digital Health and it is commercialised in collaboration with Otsuka Pharmaceutical. Similar approaches have been developed by etectRx, working to an empty gelatin capsule with an embedded wireless sensor, while Keratin Biosciences has reversed the situation and is developing a microchip hosting hundreds of sealed compartments, each of which can store up to 1 mg of a drug.
But such an approach to monitoring has to be carefully evaluated as its impact on the privacy of patients can be relevant, as smart pills exert an H24 control. Something that might frightened many persons, and that might be used, for example, by insurances to increase costs should the lifestyle result not to be appropriate (see here the comment on Consumer Reports).