Healthcare Reform Comparative Effectiveness will really mean Comparative Value

Most Big Pharma development programs focus on regulatory requirements for FDA approval.  Makes sense.  There is no commercial value in a product that can’t get approved.  Healthcare reform and the evolving new market, however, are going to impose another level of expectations that go well beyond FDA product approval.

Big Pharma research teams often develop elaborate target product profiles that provide the reasons for developing drugs in the first place.  New mechanisms, less of this or more of that, better dosing schedule or something that makes the product worth developing.  These profiles often provide the theoretical rationale for why the product is better than what is out in the market.  These points are also highlighted every time a budget is reviewed to support continued investment in the product.  Unfortunately, few development plans reflect “proving” these points of differentiation.  Being able to demonstrate “better” for your product compared to other therapeutic options, including generic drug alternatives is rarely part of a regulatory path to approval.  In fact, being “as good as” or “not worse than” is the statistical goal of most programs.

So holding research teams accountable to deliver the “differentiation” proof and data would be one place to start, especially in the face of market expectations for “comparative effectiveness” studies.  But here is the real kicker.  Even if they can demonstrate some clinically meaningful superiority to an available alternative treatment that doesn’t ensure market acceptance with widespread adoption or that the product will become the “treatment of choice.”   I’m not talking about product launch failures or poor commercial execution issues here.

Once the company has demonstrated (solid clinical data) a clinically meaningful difference it will have to have data to show that the difference is worth paying for.  This will be especially challenging when the alternatives are less expensive generic drugs.  I can hear the formulary verdict already.  “We have determined that your product is clinically better than the treatment options available to us but the price difference doesn’t’ justify including your product on our formulary.”  What the market will really be asking for is “comparative value” data.

We’ll discuss what companies should be doing to deal with this in the next post.

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