Please login to the form below

Not currently logged in
Email:
Password:

Darwin's Medicine blog

Professor Brian D Smith is an authority on the pharmaceutical industry and works at SDA Bocconi University and Hertfordshire Business School.

Pricing's dodos

Mylan isn’t alone in its outdated practices

As often happens, events in my three streams of work converged this month to illuminate a phenomenon that can only be explained by evolutionary science. One of my research streams is focused on the evolution of market access capabilities. One of my current advisory roles involves the market access strategy for a huge but ageing brand. And, as I prepared for an interview about my imminent new book, I took the news story about Mylan's EpiPen as an example. In all three parts of my work, I was observing real-world behaviour that perfectly illustrates the evolution of the industry. As usual, allow me to digress into the science before I return to the practical implications.

Perhaps the most well-known example of biological extinction is the dodo, that giant flightless bird that was once endemic to Mauritius. After surviving for millennia, it was hunted to extinction by European sailors and invasive species in the first few decades of the 1700s. Today, the dodo is synonymous with being maladapted to its environment but this is unfair and misses the evolutionary lesson it can teach us. The dodo had in fact evolved from its pigeon forebears and was very well-adapted to its forested environment, which was free of dogs, rats and other predators. It was the sudden arrival of humans, who destroyed its habitat, and the species that came with them that caused the demise of the dodo. Dodos couldn't escape dogs or human hunters and their eggs were vulnerable to rats. The lesson of the dodo is that superb adaptation to one environment, coupled with an inability to adapt quickly, is a huge disadvantage when the environment changes.

We see the same evolutionary lesson being taught to today's research-based life science companies. Their historical environment included powerful prescribers, powerless payers and differentiated drugs and devices. In that relatively benign environment, these companies developed well-adapted traits. These included the ability to magnify small differences in efficacy, justify pricing in terms of research investment and manipulate spendthrift clinicians. These traits, like the dodo's size and stubby wings, are both examples of superb adaptation to the evolutionary environment.

Companies that persist in 20th century behaviour will, in the 21st century, go the way of the dodo

But the parallel goes further. It is easy for us to see how the arrival of European sailors, their rats and their dogs altered the dodo's habitat. Equally, we can see how the arrival of Health Technology Assessment bodies, aggressive payers and passive prescribers has changed the habitat of the research-based company. And the issue of adapt or die faces those companies, just as it did the dodo.

My research, my advisory work and my reading of the news all reveal life science companies struggling to adapt to this rapid change, just as the dodo did. To be positive, there is a lot of evidence of successful adaptation: the recruitment surge in market access and working with academic health economists and HTAs. The work of some companies with NICE's Office of Market Access is an example of such adaptation. But, from what I can see, for every well-designed health-economic outcome comparison or intelligent risk-sharing pricing agreement, there are at least two examples of stubborn, unchanging, dodo–like behaviour. The most high-profile is that of companies such as Mylan and others that attempt to exploit their market position. Less obvious but more common are naive marketing strategies that price barely superior products at large differentials from their competitors. Perhaps most disappointing are those attempts at adaptation that are obviously misguided.Comparison studies against the wrong comparator for example. Or those using small and unrepresentative trial data when the payer demands real-world data. Most egregious of all are those market access strategies I see that ignore the heterogeneity of payer contexts and attack the entire market with one value proposition that appeals to no one. All of these are examples of life science companies doing exactly what the dodo did: behaving in a way that is perfectly well-adapted to an environment that no longer exists. 

The dodo therefore provides an allegory for the pricing behaviour of the life science industry. Companies that persist in 20th century behaviour will, in the 21st century, go the way of the dodo. The allegorical message is not perfect, however. The dodo's extinction was an evolutionary dead-end. Its genes no longer exist. My research reveals that the future is brighter for a small number of life science companies, who are in fact adapting to the new environment, albeit painfully slowly. They will evolve into business models that create and demonstrate genuine health economic value, which is a vital trait needed for their survival. This bifurcation of models raises a question however. What's the future of your firm? Adapter or dodo?

21st October 2016

From: Sales

Share

Tags

Featured jobs

Subscribe to our email news alerts

PMHub

Add my company
Publicis Resolute

Publicis Life Brands Resolute provides real-life practical solutions to your issues, without fuss or fluff. We are an experienced team...

Latest intelligence

PM Society Digital Awards – the power of together
Our chief executive, Emma Statham, writes about the value of awards and the power of together....
Seduction_feature_image_thumb.jpg
Seduce anyone in four simple steps
You know the health of the global economy is dependent on our ability to seduce one another – don’t you? And you know that we need to be able to...
What Would Jeremy Do? : Assessing the impact of a Corbyn-led Labour government
GK Strategy are delighted to announce the launch our latest briefing paper entitled ‘What Would Jeremy Do? Assessing the impact of a Corbyn-led Labour government’....

Infographics