Health Care Reform and Pharmaceutical Innovation

Although the Patient Protection and Affordable Care Act of 2010 (PPACA) is expected to have broad societal benefits, moving forward, it will be important to monitor its potential impact on innovation with a recognition that there remains considerable unmet need for new therapies and that there continues to be significant scientific challenges in pharmaceutical research and development (R&D). 

In addition, over the last decade, a gradual shift has been occurring in the health care purchasing community from accepting that a health care intervention (a service or a technology) “can work” in an ideal clinical setting to a desire to know that it does work in the “real world.”  Moreover, many health care professionals are increasingly asking that if it does work in the real world, for whom does it work, and how does it compare to the treatments that are already available. 

This shift is evident in the new health care reform law with its emphasis on comparative effectiveness research (CER), the desire to integrate best available evidence with improved health outcomes, pay-for-performance initiatives, incentives to reduce avoidable hospital readmissions, and the concept of “Accountable Care Organizations.”

Taken together, a picture emerges of a set of elements that are designed to accelerate the ongoing shift from purchasing health care services that meet regulatory requirements alone to those that meet such requirements, but also demonstrate evidence of comparative value.  Such a change is also impacted by increased consumer involvement in health care decisions and price sensitivity, particularly in a challenging economic environment.

The implications for industry are clear:

  • The comparative value proposition for a new technology must be as clear as possible
  • In addition to generating evidence that satisfies the needs of the regulator, we also need to generate evidence that conveys the net benefit of biopharmaceuticals in the broadest “real world” context (clinical, economic, quality of life, and productivity measures)
  • Our development enterprise must be as efficient as possible, including taking advantage of new clinical trial designs as well as employing industrial design techniques to increase speed without compromising quality
  • Incremental innovations will be closely scrutinized and we will increase our understanding of targeted therapeutics based on biomarkers with the goal of drug-diagnostic companions

All of this is focused on reducing uncertainty for decision makers -- payers, providers, and consumers -–improving outcomes/quality, and potentially reducing costs. While we have now come to the close of an intense national debate on the form of health care reform, as we begin to implement this law, we should be mindful not to impede the continued drive to meaningful scientific discovery in both the public and private sectors.

Today, Americans are living longer, healthier lives in part, as a result of new effective medicines, devices, diagnostic tools, and better treatments or surgical techniques. However, many challenges remain for pharmaceutical development as illustrated by a few important facts:

  • The success of unique new drugs per R&D dollar invested has steadily declined since 19701
  • While supplemental indications and new drug formulations received considerable investment during this period, the majority of R&D spending supported the development of unique new drugs2
  • More than 90% of all compounds fail during clinical development3 with an increasing number now failing in late stage development
  • Over the past decade, the overall probability of success for small molecules has decreased by 5% while the time required for R&D has increased by 12-18 months4
  • Lastly, while scientific challenges in R&D are considerable, the impact of these challenges has been increasingly complicated by higher go/no go decision hurdles such as global access/reimbursement pressure, increasing regulatory requirements, constrained expected patent life, and increasing evidentiary requirements for new technologies
  • Despite these challenges, the prospects for a new generation of innovative discovery have never been brighter. Driven by acceleration in our understanding of molecular genetics following the decoding of the human genome, an improved understanding of systems biology, and new scientific collaboration models, we may be poised for a marked improvement in R&D productivity in the coming years.

Last year, CER gained a lot of interest when as a part of the American Recovery and Reinvestment Act, Congress allocated $1.1. billion to be split among the Agency for Healthcare Research and Quality, the National Institutes of Health, and the Office of the Secretary of HHS. Moreover, the recently enacted health care reform law calls for the establishment of a new CER institute, the Patient Centered Outcomes Research Institute (PCORI).

We believe that it should be the goal of the public investment in CER to ensure that high quality comparative evidence is recognized by independent experts, considered appropriately by payers, and incorporated into clinical practice through the best judgment of the provider with appropriate consideration of patient preferences. While costs are an important consideration, CER should be focused on clinical comparisons with a broad view of the net benefit for a therapeutic intervention.  Findings should be current and able to be amended with new information and, lastly, the new CER Institute should be a credible, independent, trusted organization with stakeholder input at all levels.

These principles for CER were reflected to a large extent in the new health care law.  The law also included a reporting requirement for PCORI to assess “not less frequently than every five years,” the “effect of the research conducted and disseminated on innovation and the health care economy of the United States.”  In addition to addressing the need for appropriate CER methods and communication standards, we believe that this assessment of the impact of CEER on innovation is critical and often overlooked aspect for a successful new publicly sponsored CER initiative.

For new health care innovations, the additional expectation for a demonstration of comparative effectiveness has already contributed to disinvestment in some products in late stage development as well as a drive to generate new evidence for products already on the market. In addition, while the comparative evidentiary bar may not be the sole driver, we can expect that it will contribute to the drive to develop drugs targeted to stratified populations using biomarkers. We also need to consider the potential impact of CER on investment in what some have termed “incremental innovations.” In this context, it will be important to take the long view of the importance of incenting the capture of the sometimes unexpected benefits of medical research that only reveal themselves over the life cycle of a product.

If conducted with high scientific standards, we strongly support the CER effort reflected in health care reform. However, it is also important to note that taken together, the changes already taking place in health care and those included as a part of health care reform, may result in an acceleration in market access challenges for new technologies which, in turn, can be expected to impact innovation investment decisions. The magnitude of the impact and the innovation investment mix that will follow remain hard to predict. At this moment, we are well to remember what Yogi Berra said about predictions – they are hard, especially when they are about the future.

1 Huth, B. and Zemmel, R. Prospects for Productivity, Nature Reviews Drug Discovery, Vol. III, May 2004. pp. 451 – 456.
2 Ibid.
3 Murugan, S.S. and Kumaravel, T. Global Approach to Modern Drug Discovery,, accessed March 30, 2010 
4 David, E., Tramontin, T., and Zemmel, R. Pharmaceutical R&D: The Road to Positive Returns. Nature Reviews Drug Discovery, Vol. 8, August 2009. pp. 609-610.