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Reasons for R&D Project Discontinuation

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Reasons for discontinuing R&D projects in the biopharmaceutical industry are gradually changing. This presentation suggests how.

Reasons for discontinuing R&D projects in the biopharmaceutical industry are gradually changing. This presentation suggests how.

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  • 1. Reasons for ProjectDiscontinuation inDrug DevelopmentDr Jorge Mestre-FerrandizDirector of Consulting 25th AnnualOffice of Health Economics EuroMeeting 4-6 March 2013 RAI, Amsterdam Netherlands
  • 2. Agenda1. Background2. Objectives3. Methods4. Results5. Discussion and conclusions 2
  • 3. Background• Many countries have price control that makes it very difficult to: – increase price once a product is launched – price a subsequent or follow-on indication differently from the lead indication• Hypothesis: the additional indications may be discontinued because of anticipated conflict between indications in pricing or reimbursement (P&R) systems, i.e. different indications would potentially have different "value propositions"• If true, this poses hurdles to the development of stratified medicine -> potential loss of drugs and indications that could have delivered value. 3
  • 4. Background • Published estimates of the mean (average) cost of R&D per new medicine that is launched on the market suggest an increase in cost over the last decade -- from the estimate of US$1.0bn (£600m) by DiMasi et al. (2003), expressed in 2011 price terms, to US$1.9bn (£1.2bn) by Paul et al. 2010) • Four main variables determine the capitalised cost of a new drug estimate – Out-of-pocket costs – Success rates – Development times and – Cost of capital 4
  • 5. ObjectiveAnalyse the rationale behind pharmaceuticalcompanies’ decisions to discontinue new products andadditional indications (for marketed drugs or for drugsunder development) 5
  • 6. Previous studies – Reasons for failures• Commercial reasons have been increasingly important for discontinuing projects• Since 2000, companies have been focusing more on high- risk, high-premium areas with a lower “expected probability of success” (POS), such as: – Chronic diseases (Alzheimer’s disease, diabetes, obesity, rheumatoid arthritis) compared to acute diseases (6.9% vs 8.8%) – Potentially lethal diseases, mostly cancer and some infectious diseases (5.5% vs. 9.7%) [Pammolli, Magazzini and Riccaboni (2011)] 6
  • 7. Methods• Survey of four pharmaceutical companies in the top 15 rank in 2008.• Two part questionnaire: 1) lead indications, 2) follow-on indications• Time frame: Jan 2005‒Dec 2009• Data: – # of successful, discontinued and active projects – reasons for discontinuation (3 maximum), # of years projects remained active, phase at which projects were stopped, source of projects and their therapeutic area 7
  • 8. Reasons for discontinuation Portfolio rationalisation Portfolio rationalisation Exiting disease area Technical Generic competitionReasons Weak value proposition Commercial Reimbursement hurdles Market value Timing Clinical trial costs Other commercial Market value/Net present reasons value Existing price (only follow- on ind) 8
  • 9. Results Successful Discontinued Active Total (n=1,053) 8% (n=86) 51% (n=541) 40% (n=425) Lead indications (n=602) 2% (n=13) 55% (n=332) 43% (n=257) Follow-on indications (n=451) 16% (n=73) 46% (n=209) 37% (n=169) Time to discontinuation Lead indications Follow-on indications Average project life (years) 2.22 6.43 St. deviation (years) 2.25 4.87 Minimum project life (years) 0* 0* Maximum project life (years) 14 19 Sample size 318 144 9
  • 10. Percentage of projects by phase ofdiscontinuation 10
  • 11. Percentage of projects discontinuedbetween 2005 and 2009, by year 30.0 28.0 25.0 24.1 23.6 23.1 20.0 18.6 18.9 18.9 17.5 % 16.0 15.0 11.1 10.0 Lead indications 5.0 Follow-on indications 0.0 2005 2006 2007 2008 2009 (n = 39;37) (n = 65;50) (n = 98;51) (n = 81;40) (n = 66;34) 11
  • 12. Reasons for discontinuation Lead indications Follow-on indications Number of reasons N % N % 1 307 92.5 170 81.3 2 20 6.0 32 15.3 3 4 1.2 6 2.9 4 1 0.3 0 0 Total projects 332 100 209 100 Lead indications Follow-on indications Reasons N % N % Technical 253 72.1 121 50.4 Market Value/NPV 32 9.1 43 17.9 Portfolio rationalisation 62 17.7 57 23.8 Other commercial reasons 4 1.1 19 7.9 Total responses 351 100 240 100 12
  • 13. Reasons for discontinuation – by year Lead indications: reasons by Follow-on indications: reasons by year of discontinuation year of discontinuation100.0 2.5 1.5 0.0 1.3 1.5 100.0 1.8 2.5 5.0 7.6 6.0 10.4 12.4 10.3 10.3 90.0 2.5 90.0 16.1 17.5 4.5 23.4 80.0 24.1 26.9 21.6 80.0 27.6 16.1 70.0 70.0 14.9 41.0 25.0 60.0 Other reasons 60.0 Other (n=4) 50.0 17.0 reasons% 50.0 24.1 (n=19) 90.0 % 83.6 Market value 40.0 Market value (n=32) 40.0 (n=46) 66.0 67.1 65.7 30.0 66.1 30.0 Portfolio 55.0 48.7 Portfolio 20.0 rationalisation 44.7 rationalisatio (n=62) 20.0 37.9 n (n=57) 10.0 Technical 10.0 Technical (n=253) (n=121) 0.0 0.0 2005 2006 2007 2008 2009 2005 2006 2007 2008 2009 13
  • 14. Reasons for discontinuation – by phaseLead indications by phase and Follow-on indications by phase andreasons for discontinuation reasons for discontinuation100% 0.4 1.2 4.8 3.1 100% 0.8 6.3 5.390% 11.6 11.6 15.8 17.4 90% 10.5 19.4 25.080% 80% 25.0 22.8 27.9 70% 33.170% 31.6 30.4 60% 29.0 25.060% 50%50% 31.3 32.6 40% 33.9 45.6 26.340% submission 30% submission phase 3 10.5 phase 330% 20% phase 2 23.3 50.6 46.8 50.0 phase 2 10% 20.7 15.8 15.820% phase 1 34.4 4.7 phase 1 0%10% phase 0 phase 0 0% 14
  • 15. Future key trends – from companies• Commercial reasons, especially linked to reimbursement, will not only continue to apply, but also will grow in importance over time• Significant resource constraints are expected over the next couple of years. As a result, this will lead to increased portfolio rationalisation, linked to the need to make more trade-offs on which projects to progress• The need to demonstrate product differentiation (compared to Standard of Care) plus the need to clearly demonstrate "value" will increase, and if not clearly achieved will lead to more discontinuations Commercial reasons are likely to have more influence in the future 15
  • 16. Discussion and Conclusion• About 72% of discontinuations for lead indications were for technical reasons ‒ similar to earlier studies. – But when analysed on an annual basis, clear suggestion that this rate is reclining, e.g. 66% in 2009 versus 90% in 2005 – Since 2007, portfolio prioritisation has played a more significant role in driving discontinuations, increasing from 2.5% in 2005 to 27% in 2009. 16
  • 17. Discussion and Conclusion• The pattern for follow-on indications is more complex – Technical reasons triggered a smaller proportion of discontinuations, presumably because many were addressed with the lead indication – Influence of market value was variable over the 5 years – Portfolio prioritisation again appeared to have driven a higher proportion of discontinuations over the last 2 years 17
  • 18. Discussion and Conclusion• Main hypothesis not proved: to date, lack of payer flexibility does not appear to have been a key driver for discontinuation of follow-on indications• No evidence found suggesting that pricing inflexibility will inhibit the development of stratified medicine. The surveyed companies suggest this may reflect: – The “noise” of rationalisation over the last couple of years – The stage of evolution of stratified medicine• The companies expect commercial factors to increase in importance 18
  • 19. Contact usTo enquire about additional information and analyses, please contact Dr. Jorge Mestre-Ferrandiz at jmestre-ferrandiz@ohe.orgTo keep up with the latest news and research, subscribe to our blog, OHE News.Follow us on Twitter @OHENews, LinkedIn and SlideShare.Office of Health Economics (OHE)Southside, 7th Floor105 Victoria StreetLondon SW1E 6QTUnited Kingdom+44 20 7747 8850www.ohe.orgOHE’s publications may be downloaded free of charge for registered users of its website.©2013 OHE 19