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Biotechs urged to focus on value

Simply creating a drug that works may not be enough warns new report

E&Y biotech report 

Biotech companies have to take more account of issues such as reimbursement and pricing if they are to make the most of their products, according to a new report.

Ernst & Young's annual biotechnology industry report, this year called Beyond borders: matters of evidence, says firms may be losing out if they do not understand this.

It identified what it calls an 'implementation gap' at most small- to mid-size biotech companies when it comes to gathering evidence to demonstrate the value of products under development. 

“This gap has implications on the future ability of these companies to raise capital, obtain attractive deal valuations and be successfully reimbursed for their drugs upon approval,” the report said.

In a survey of US and European biotech executives from 62 companies, 94 per cent agreed it was 'important' or 'very important' for biotech companies to have a strategic focus on matters of efficiency and matters of evidence. 

Despite this, there seems to be little appetite for taking on specific evidence-focused initiatives: just 11 per cent of respondents have added payer or reimbursement expertise to their management teams, for example.

Only 13 per cent have brought such experience into their clinical development teams - while a mere 4 per cent have put such experts onto their boards of directors. 

By contrast, E&Y found “there was no such implementation gap around initiatives focused on matters of efficiency”.

The analysts advise biotechs to monitor evolving standards of care to identify the unmet health needs or failures that those who ultimately pay for the drugs will be looking at - and says such 'value leakages' offer an opportunity for companies, which can design trials to develop evidence in these areas.

Evidence-focused initiatives such as engaging stakeholders earlier on issues of value and reimbursement, rethinking trial design or exploring pre-competitive data collaborations could be a wise investment, the report insists. 

“In today's increasingly outcomes-focused, evidence-driven health care systems, biotech companies cannot afford to pursue an R&D strategy that only focuses on whether or not their drug works,” said Glen Giovannetti, E&Y's global life sciences leader. “They need to also understand whether it will be valued and reimbursed by payers.”

Waiting until a launch to look at value is perilous, the report said, because the pharma companies most likely to partner with biotechs “now consider such data to be key drivers of their product and company valuations”, Giovannetti added.

UK trade body the BioIndustry Association agreed with the thrust of this argument, saying that the organisation's recent conferences have also discussed “the need for companies developing new therapies to think at an early stage about the pricing, reimbursement and access profile of the candidates”. 

How a product is differentiated relative to both current and prospective standards of care is also crucial, the BIA went on in a blog post. “Failure to do this can result in delays to partnerships or lower valuations,” it added.

Despite this stark warning, the E&Y report made clear that biotech development is actually going pretty well, with companies in the US, Europe, Canada and Australia seeing total revenues last year grow 8 per cent on 2011 to $89.8bn.  

Some issues remain, however - in particular on funding: biotech companies in North America and Europe raised $28.2bn in 2012 (down from $33.3bn in 2011), largely because of a reduction in debt funding.

25th April 2013

From: Research, Sales

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