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Big Pharma’s business model is broken; New drug OKs plunged this year, highlighting an ugly reality

Endpoints assesses the big biopharma R&D stories of the week, with a little added commentary on what they mean for the industry.

thumb down  Big Pharma’s business model is broken, so change it

When your accountant tells you the business you’re running is unsustainable, it’s a good idea to pay very, very close attention to the details. So it is with Big Pharma and drug development, a game which the largest players in the industry have not mastered. Deloitte reckons that an already bad ROI just got worse for the top 12 pharma companies, and there are no signs that the numbers are going to get any better. So maybe it’s time that these big outfits rethink how they’re running R&D. What are they good at? Why invest heavily in early-stage research? Are they better at development? Aside from a few rare exceptions, there’s little evidence that anyone in this league has thought through the long-term consequences of a lack of productivity. It’s time to start, and come up with something bold and new. The old business model, where you continually hike the price of aging therapeutics, won’t cut it going forward.

thumb down  New drug OKs plunged this year, highlighting an ugly reality

Speaking of poor productivity, we’re seeing one of the worst years in the past decade for new drug OKs, a fact highlighted in John Jenkins’ latest — and last — annual review as head of the Office of New Drugs. When a year goes by and some of your biggest developers whiff on new drug approvals, it adds to the pressure for some kind of fundamental change. The FDA in part blamed its willingness to beef up 2015 numbers with accelerated approvals ahead of their 2016 PDUFA dates, but logic would indicate that you could make that up with some snappy decisions at the end of 2016, and we’re not seeing a whole lot of that. Interestingly, no one can pin this shortfall on regulators, who have engineered a sea change in the way many drugs are reviewed. When you remove one possible element from an equation, it’s easier to gain some clarity on where the problem is. And at the risk of repeating myself, that problem has come home to roost.

thumb down  Sarepta sparked a payer revolt, and the FDA needs to pay attention

There’s fresh evidence this week that quite a few payers will do everything possible to avoid paying for Sarepta’s Exondys 51. And why should they cover an experimental drug that was given an accelerated approval based on the opinion of a single FDA executive? The FDA set the stage for a payer revolt and it should think through how it plans to handle future cases — which are certain to come along. I’m not opposed to accelerated approvals based on little evidence when the patient population faces a slow death and there are no approved therapies. And there are good reasons for making Exondys 51 available. A special approval category for compassionate use makes sense. But there’s no reason why companies should be allowed to make money on those approvals. If you want to make money on drugs, you have to establish the safety/benefit profile first. End of story.

thumb  Maybe the odds will actually favor New York’s big gamble on biotech

I’ve seen state initiatives aimed at sparking a biotech revolution come, and I’ve seen them go, usually after failing woefully at creating anything like the number of jobs that were promised. (Hello Florida, California and Texas.) This week, New York, state and city, came up with more than a billion dollars worth of incentives to do the same thing. And maybe, just maybe, it’s different this time. It’s important to recall that Massachusetts saw the birth of a massive biotech hub after local governments had gained the rep for being hostile to new businesses. When it added incentives to foster the industry, the growth in life sciences was already well entrenched, for reasons that had nothing to do with government planning. The changes in attitude and policy made a positive, significant improvement, but they did not create Kendall Square. What I’m hoping is that the basic elements needed to create a biotech renaissance are already in place in New York. The science is outstanding. There’s space and growing streams of venture cash. And there’s plenty of talent available in the country to helm a fleet of startups. So, fingers crossed. A rival hub is just what the US needs to keep the juices flowing.

thumb  Biotech deja vu: That big R&D overhaul story isn’t going away

R&D overhauls are not a trend. They are a permanent condition, as Bristol-Myers demonstrated with its announcement this week that it is ripping up its old structure and creating a new one. Jobs will end. Jobs will move. New jobs will become available. And they’ll all be that much closer to the biggest hubs as the concentration of R&D firepower continues. I’ve been seeing this movement play out for the past decade as Roche, Merck, Pfizer and on and on all did the same thing. In some cases, companies are in their second or third revamps. Job security in R&D is over, unfortunately. But it all makes biotech look all that much more appealing. If you’re gambling everything on a project, it’s likely to be more fun and lucrative at a startup. The talent will continue to head into biotech, and away from Big Biopharma. Where do you think that leads?


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John Carroll, Editor and Co-Founder

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