Incentives and disincentives to drug innovation: evidence from recent literature

Value drivers of development stage biopharma companies

OBJECTIVE

Scholars previously estimated research and development (R&D) costs of the internal drug development process. However, little is known about the costs and value arising from externally acquired therapeutics. This study identifies and estimates the magnitude of factors associated with Biopharma acquisition value.

METHODS

SDC Thomson Reuter and S&P Capital IQ were screened for majority acquisitions of US and EU Biopharma companies developing new molecular entities for prescription use (SIC code: 2834) from 2005 to 2020. Financial acquisition data were complemented with variables characterizing the target's product portfolio extracted from clinicaltrials.gov, Drugs@FDA database, US SEC filings, and transaction announcements. A multivariate regression assesses the association of firm value with extracted variables.

RESULTS

311 acquisitions of companies developing prescription drugs were identified over the study period. Acquirers paid 37% (p < 0.05) more for companies with biologics and gene therapeutics than small-molecule lead drugs. Multi-indication products were acquired for a 12% premium per additional indication (p < 0.01). No significant valuation difference between companies developing orphan and non-orphan designated lead products was observed (18%, p = 0.223). Acquisition value positively correlated with the total number of further products, headquarter location in the US, underlying market conditions, and acquirer market capitalization (p < 0.05).

CONCLUSIONS

Internal and external drug development consumes many financial and human resources, yet it is important for entrepreneurs, regulators, and payers to understand their precise magnitude and value drivers. This information permits the design of targeted pricing and industrial policies that incentivize the development of novel drugs in areas with high unmet needs.

Effect of statin on age-related hearing loss via drug repurposing

Hearing loss in the elderly cause communication difficulties, decreased quality of life, isolation, loneliness and frustration. The aim of our study was to investigate the effect of drug repurposing candidates in aging mouse. The selected candidate drugs for age-related hearing loss (ARHL) included atorvastatin (AS) and sarpogrelate. Monotherapy or fixed dose combination (FDC) products were administered via oral gavage for 6 consecutive months. Auditory outcomes showed significant hearing preservation in AS-treated aging mice compared to aging control, especially in the early stages of ARHL in both 8 and 16 kHz frequencies. However, none of the FDC products were able to prevent ARHL regardless of AS involvement. In aging mice, damage and dysfunction of mitochondria was noted as well as reactive oxygen species overproduction leading to oxidative stress and intrinsic apoptosis. These processes of ARHL were significantly prevented with administration of AS. Normal structures of mitochondria were maintained, and antioxidant activity were proceeded by activation of HSF1/Sirt1 pathway. Our study suggests that AS is a promising drug repurposing candidate to delay the progression of ARHL.

Access and pricing of medicines for patients with rare diseases in the European Union: an industry perspective

INTRODUCTION

The EU Orphan Regulation has successfully stimulated R&D of medicines for rare diseases, resulting in substantial increase of orphan designations and authorized orphan medicinal products in the EU during the last decade. Despite such important advances, access to treatment across the 27 EU Member States is still highly variable.

AREAS COVERED

We provide an overview of the current situation of patient access to orphan drugs in the EU. We discuss the EU policy landscape regarding joint assessment and pricing & reimbursement negotiations of medicinal products, price and sustainability of orphan drugs for health care systems and the importance of Real-World Data and registry infrastructures for rare diseases. Additionally, we provide recommendations for areas of improvement throughout the lifecycle of orphan drugs, aiming to preserve a positive R&D climate for rare diseases in the EU and accelerate patient access.

EXPERT OPINION

The EU needs to maintain a strong patient-centric pharmaceutical ecosystem that encourages long-term investments and rewards innovation in areas of high unmet medical need. Areas of potential improvement range from enhanced alignment of regulatory and HTA evidence requirements and use of specific value frameworks for the assessment of orphan drugs to the development of registry infrastructures and innovative performance-based pricing agreements.

Medicine price transparency and confidential managed-entry agreements in Europe: findings from the EURIPID survey

Pricing of pharmaceuticals is an all-time challenge for healthcare systems. Often public payers agree with companies on confidential managed-entry agreements (MEAs) that, e.g. foresee discounts under specific circumstances. The EURIPID Executive Committee surveyed 22 European countries, who all reported the use of confidential agreements between pharmaceutical companies and public payers, confirming that the actual prices paid are typically lower than the published list price. In 68% of the countries, the confidentiality of MEAs is required by non-disclosure clauses between companies and public payers. In some countries (27%) this is even backed up by a specific law. Our study identified legal constraints for the sharing of information on actual prices and confidential agreements among European countries and consequently restrictions in transparency. In conclusion, the EURIPID survey findings suggest that the current possibility to improve the medicines' price transparency across countries is limited and the issue probably requires international institutional engagement, at least to coordinate initiatives toward a greater collaboration among member states.

Potential approaches for the pricing of cancer medicines across Europe to enhance the sustainability of healthcare systems and the implications

Introduction: There are growing concerns among European health authorities regarding increasing prices for new cancer medicines, prices not necessarily linked to health gain and the implications for the sustainability of their healthcare systems.Areas covered: Narrative discussion principally among payers and their advisers regarding potential approaches to the pricing of new cancer medicines.Expert opinion: A number of potential pricing approaches are discussed including minimum effectiveness levels for new cancer medicines, managed entry agreements, multicriteria decision analyses (MCDAs), differential/tiered pricing, fair pricing models, amortization models as well as de-linkage models. We are likely to see a growth in alternative pricing deliberations in view of ongoing challenges. These include the considerable number of new oncology medicines in development including new gene therapies, new oncology medicines being launched with uncertainty regarding their value, and continued high prices coupled with the extent of confidential discounts for reimbursement. However, balanced against the need for new cancer medicines. This will lead to greater scrutiny over the prices of patent oncology medicines as more standard medicines lose their patent, calls for greater transparency as well as new models including amortization models. We will be monitoring these developments.

Drug Repurposing: Considerations to Surpass While Re-directing Old Compounds for New Treatments

Drug repurposing has increased in recent years as an attractive option for treating a number of diseases. Compared to those brought forward via traditional chemical development, drugs intended for repurposing can enter the market faster and with lower investment from pharmaceutical companies. However, a common trend is to focus on diseases that yield higher returns to the industry, such as cancer and common metabolic and inflammatory conditions, resulting in orphan illnesses and neglected tropical diseases having fewer repurposing options for affected patients. In addition, certain legal concerns, including limited patent coverage for the repurposed drugs and pharmacological challenges in performing clinical trials, reduce the likelihood of success. In this review, we discuss the most important concerns that affect the pathway of drug repurposing, with special emphasis on the economic revenues, government-industry associations, and legal considerations that together impact the pharmaceutical industry's decision-making on which compounds may be eligible for repurposing.

Effects of innovation and insurance coverage on price elasticity of demand for prescription drugs: some empirical lessons in pharmacoeconomics

AIM

Prescription drug prices in the United States are considered rather extreme. Americans spend over $460 billion on drugs annually, or almost 17 percent of total national healthcare spending. How innovation incentives and insurance coverage drive pricing, diffusion, and utilization of drugs, under conditions of risk and competition, are multi-dimensional issues in medical economics that remain under-explored in the current empirical literature. We seek to address these issues in reviewing relevant studies presented at the 2020 AEA-ASSA annual convention.

APPROACH

Drawn from the 2020 convention panel sessions devoted to health economics, empirical evidence was thematically analyzed for charted new research terrains and trajectories. Their theoretical and practical implications on efficiency, effectiveness, and value in drug production and consumption were then identified.

FINDINGS

With certain qualifications, evidence confirms price inelasticity of prescription drugs and medical treatments, along with substitution effects from high or continuously rising prices. While health insurance induces ex ante moral hazard, albeit on a larger scale than previously considered, losing dependent coverage can incentivize price-substitution to risky and illegal drugs, including those sold on the black market. At the firm level, drug patenting and exclusivity rights suggest that innovation incentives increase new or novel clinical trials and generic utilization to a considerable extent. But innovation can produce strong, offsetting effects. It can distort competition and cause (at times sharp) price increases from product-hopping, (compensatory) list pricing, industry mergers and acquisitions, and capture of positive spillovers by competitors, rather than by focal developers, in follow-on innovations. In fine, there remains room for opportunism among firms, particularly market incumbents, and many loopholes are unplugged by U.S. healthcare reform. These make drug utilization costly to the insured, and risky to those who are - or become - uninsured or underinsured for various reasons.

CONCLUSIONS

The fundamental disconnect between innovation cost and drug pricing demands public attention and policy intervention, which have proved largely elusive to date. Gaming the system in the name of scientific invention and discovery to reap additional benefits, at the expense of consumer health and income, brings to question the offsetting benefits of firm innovation. It also raises separate issues of fairness and equity. Innovation needs to be considered from the perspective of value lines and beyond conventional marketing incentives to drug utilization, with or without insurance coverage. Cost-effectiveness and cost-benefit analyses figure prominently under a value-based system of resource allocation, insurance, medical prescription, purchasing, and reimbursement.

Emerging drugs for treatment of focal segmental glomerulosclerosis

BACKGROUND

Glomerulosclerosis represents the final stage of glomerular injury during the course of kidney disease and can result from a primary disturbance in disorders like focal segmental glomerulosclerosis or a secondary response to tubulointerstitial disease. Overall, primary focal glomerulosclerosis (FSGS), the focus of this review, accounts for 10-20% of patients of all ages who progress to end stage kidney disease. There are no FDA approved therapeutic options that effectively prevent or delay the onset of kidney failure.

AREAS COVERED

Current immunosuppressive therapy and conservative management including inhibitors of the renin-angiotensin-aldosterone axis and sodium-glucose cotransporter are reviewed. FSGS is now recognized to represent a heterogeneous entity with multiple underlying disease mechanisms. Therefore, novel approaches targeting the podocyte cytoskeleton, immunological, inflammatory, hemodynamic and metabolic pathways are highlighted.

EXPERT OPINION

A number of factors are driving the development of drugs to treat focal segmental glomerulosclerosis in particular and glomerulosclerosis in general including growing awareness of the burden of chronic kidney disease, improved scientific understanding of the mechanism of injury, and the development of noninvasive profiles to identify subgroups of patients with discrete mechanisms of glomerular injury.