Home > Articles > Finance & Investing

  • Print
  • + Share This
This chapter is from the book

Sacrificed on the Altar of “Market Size”

The extent to which the large R & D-based pharmaceutical firms have developed, or are developing, capabilities to use biomarkers in drug development is somewhat of a mystery. Why? Most likely, they fear that if they predict which specific patients will benefit from a new drug, it will reduce the size of its potential market. After all, as explained above, when a drug is approved for use in all patients—rather than just the few who are predicted to benefit—the drug maker earns revenue even from patients that the medicine doesn’t help.

One startup in the Boston-area cluster of biopharmaceutical firms attracted investors to its business model of partnering with big pharmaceutical firms to search for genomic biomarkers that were specific to drugs in development, particularly targeting common chronic diseases. But there was little interest in such partnerships among pharmaceutical firms. The insurance carriers, though, saw the financial advantage if expensive drugs were given only to those patients with a high likelihood of benefiting. Those carriers pay for medicines.

In 2005, the FDA issued what it calls a “guidance” on the use of genomic data and biomarkers in drug development, aimed at encouraging firms to engage in such work at least on an exploratory basis.19 The FDA’s initiative offers pharmaceutical firms that collect data on genomic biomarkers a “safe harbor” to submit confidentially what its researchers use “internally,” so the FDA can use this information to gain a better understanding of the potential for improving the effectiveness and efficiency of drug development. The FDA promises these pharmaceutical firms that the data won’t be used to limit approval for a new medicine only for use in patients who can be identified from biomarkers. However, the drug firms, securely tied to their blockbuster mentality, remain unconvinced.

Not long ago, Pfizer was forced to suspend its clinical trials for a new cholesterol-lowering drug because the researchers were finding high levels of toxicity. It was a tremendous disappointment for the company, which had hoped to combine the new drug with its blockbuster, Lipitor, and thus extend the patent life—and also the blockbuster status—of its cash cow. If biomarkers were part of the picture, might things have turned out differently? No one can say for sure. But it’s reasonable to assume that if Pfizer had opted for a strategy to identify a biomarker for the percentage of patients who wouldn’t have the toxicity found in the large trial population, then the outcome would probably have been a viable drug. Yes, it would have a much smaller market. No, it would not rake in the cash like a blockbuster. But patients would benefit. Now, there is no new drug. (More on this story in Chapter 7, “How to Lower Drug Prices.”)

Without proper and sensible incentives, it’s no wonder the pharmaceutical firms all too often think like businesspeople concerned only about their shareholders rather than like scientists who work for the good of society. Can Americans afford such an impasse? Should we let business concerns determine whether new, innovative medicines get into the hands of prescribing doctors and their patients who need treatment? Wouldn’t society’s interests be best served by moving forward aggressively to realize the full scientific value of biomarkers?

Consider another example. A group of students in an MIT class taught by one of the authors built a model of personalized medicine for asthma, using a medicine mentioned earlier—Merck’s drug Singulair. They found plenty of available scientific knowledge that would make it relatively easy to develop a genetic test to identify which patients would respond positively to Singulair for their asthma. Today, Singulair is a blockbuster, but it must be the case that tens of thousands of patients who buy it realize little or no benefit. The students estimated that limiting the drug’s use only to those who “passed” such a test would increase the efficacy rate of Singulair by a huge margin. But it would also reduce Merck’s revenues by more than a third.

Everyone who takes Singulair but doesn’t fully benefit enriches Merck and depletes society’s resources available for medical treatment. But where are the incentives for the pharmaceutical companies to do business in any other way?

The complexity of the U.S. marketplace has increased since 1980 as the portion of health costs consumed by medicines has nearly doubled. Many private insurers and managed care plans that offer a drug benefit have made it difficult for doctors to prescribe costly, brand-name medicines. Often, that restricts a patient’s access to innovative therapies. For blockbuster drugs with large target populations, payers frequently engage the services of so-called pharmaceutical benefits management (PBM) firms (more about these in Chapter 3, “The Drug Industry Today”) These third-party organizations negotiate discounts from drug manufacturers on behalf of the payers in exchange for helping “move market share” to one drug and away from the competition. For the premium-priced orphan drugs, many payers establish strict criteria for patient selection, restricting access to a small proportion of its covered population. This keeps the impact of their high costs relatively low when spread over a large insured population. The industry calls this measure costs per member, per month. But as more of these targeted therapies enter the market, concerns about the cost impact only heighten.20

Payers also face costs for diagnostic tests required for some of the newest, most innovative targeted therapies. These tests, which come at a significant cost, predict a prospective patient’s response to treatment. Payers have to figure out a cost-effective process that facilitates access to the most expensive drugs for those who will benefit from them. It’s uncharted territory.

The situation seems to go from bad to worse. Scientific advances only spur higher drug prices. Does it have to be this way? Why has the problem gotten so out of hand?

  • + Share This
  • 🔖 Save To Your Account