Written by Mark Osterman, Senior Vice President, Kineticos

Reflecting on 2016, there were many ups and downs of the biopharma industry. From a negative standpoint, Turing was one of several companies publicly scrutinized for a significant hike in the price of medicine. There were also some major clinical trial failures, such as Opdivo’s expanded use trial in patients with advanced lung cancer. The failure of that trial alone caused a 15% drop in BMS’s market cap. However, there were some positives as well. It remains to be seen, but the election of Donald Trump sparked a favorable response in the biopharma market. Furthermore, according to 51 biopharma CEOs that were surveyed in the Q3/Q4 Biopharma CEO Confidence Index, any remaining ripples of the “biotech bubble” burst of late 2015 have faded away. Perhaps the industry can now focus on the “other biotech bubble” – specifically, pricing and reimbursement of rare and orphan disease therapies.

The concerns regarding very costly rare disease therapies have been increasing steadily for some time now, which gave me the idea of naming it the “other biotech bubble.” The most recent high profile example is Biogen’s Spinraza, a therapy spinal muscular atrophy therapy that carries a price tag of $375,000 per year. There are several other rare and orphan therapies that are similarly priced, and as more of these individuals, and ultra-expensive therapies become available, the question becomes, “How can we pay for them?”

Biopharma has been investing heavily into the area of rare and orphan diseases. In 2015, companies requested 472 orphan disease designations from the FDA, and 354 were granted. The clinical trials for these therapies are very complicated, as most are first in class, and thus require significant regulatory input on study endpoints and design. Recruiting patients is often difficult, as well as time consuming, adding an extra level of risk for clinical development, which provides some support for premium pricing. However, the foundational argument for supporting a premium for these medicines is the ability to address substantial unmet medical needs. These therapies are generally the only option for many patients who cannot be adequately treated with currently existing medicines.

As more of these groundbreaking therapies become approved, what can biopharma do to hedge against the inevitable bubble burst? Could an internal pricing agreement be struck within the industry? As nice as that sounds, I think that would be difficult to accomplish, and would draw significant scrutiny.

Perhaps a more constructive solution would be to create a consortium of industry, academia, and government experts to establish a health economic platform for value-based pricing. This platform would, in theory, incorporate the latest data on healthcare costs, societal cost, and quality of life impact for patients and caregivers, resulting in increased awareness of the benefits that these life-saving or life-changing therapies provide. The argument against ultra-expensive therapies will always exist, but building a framework to justify the substantial benefits to patients, caregivers, and the healthcare system will be a positive step in the right direction.

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    Mark Osterman Pic

Mark Osterman, Senior Vice President of Kineticos’ Biopharmaceutical Practice, brings 25 years of experience in the biopharmaceutical industry to the team.  His team is focused on helping growth-oriented biopharma companies realize their commercial potential at the corporate, portfolio and product levels. Mark’s therapeutic expertise includes cardiovascular, pulmonary, metabolics and cell/gene therapy.

 Contact Mark