Commercializing Curative Therapies
Challenges and implications for biopharmaceutical companies
The traditional biopharma business model is being disrupted by biopharma companies ushering potentially curative treatments to market. However, these companies will need to navigate an outdated reimbursement model and challenge traditional commercialization approaches to succeed in the market.
In the US market, even the most cost-effective cures can face significant challenges from the health insurers that must bear the upfront treatment costs. Due to the nature of the commercial insurance market, a health plan that pays for an expensive therapy might never reap the long-term benefits of a member’s improved health. Consider recently developed drugs that cure chronic Hepatitis C. Due to the short-term budget impact, these drugs faced intense pricing scrutiny and payer pushback when they were introduced.1,2 In response, the drug manufacturers had to offer substantial discounts to private payers.
In the context of cures for rare diseases, high prices are often needed to recoup substantial research and development (R&D) investments. Case in point: uniQure NV recently removed the world’s first commercially available gene therapy, Glybera,3,4 from the market. Despite its ability to cure a rare blood disorder, the therapy was unable to achieve commercial success due to a $1 million price tag and a tiny pool of potential patients.
Four key commercialization challenges for curative therapies
This paper describes four key challenges manufacturers might face when commercializing curative therapies. Two of these challenges are broadly applicable to all types of cures. The other two are specific to gene and cell therapies, which are expected to play an increasingly important role in delivering curative treatments to the market.* We also examine how bringing curative therapies to market differs from strategies for more traditional biopharma drugs.
#1: Sticker shock, budget impact, and outdated payment models
Curative therapies represent immense value to patients. In many cases, they might also generate value for the health care system, and to society in general, due to avoided costs, better outcomes, and an improved quality of life for the patient. However, even cures with demonstrable cost effectiveness can face challenges if it takes too long for health plans to recoup their costs. Potential barriers to commercial success include:
High short-term costs: The price tag attached to some curative treatments could create public relations issues. Case in point: Sovaldi, Gilead Sciences, Inc.’s cure for Hepatitis C., offered a strong economic value story based on avoided long-term costs (e.g., liver cancer, transplant). However, outrage over the $1,000-per-pill cost of the treatment fuelled significant negative press coverage, led to congressional hearings, and gave payers leverage to push back on the price.Future curative treatments could be even more expensive, and could face similar barriers. For example, new CAR-T therapies are projected to have prices as much as $700K that could be justified by cost effectiveness analysis.
Budget strain: Curative treatments could strain payer budgets in the short term as the new therapy becomes available to previously untreated and chronically treated patients. This could be particularly challenging for diseases with large prevalent populations. Ineffective treatment options for Hepatitis C, for example, left a large patient population with unmet needs. While treatment costs were relatively low compared to other specialty drugs, the curative treatments for Hepatitis C, introduced by Gilead and AbbVie, Inc., created a significant and unplanned budget impact on payers as patients sought treatment. This challenge will likely be repeated as new—and expensive—curative treatments become available. For example, gene therapies that can halt the progression of Alzheimer’s disease are in pre-clinical research and early-stage clinical trials.
Outdated payment models: The existing payment model for pharmaceutical treatments—where cost is incurred when treatment is administered—does not generally work well for cures that generate value through long-term avoided costs. Given that patients tend to switch insurance carriers every few years, payers might never reap cost savings from costly curative treatments. As more cures reach the market, pressure to design and experiment with alternative funding models (e.g., performance-based annuity payments, value-based contracts) will likely increase. Case in point: Spark Therapeutics, Inc. is on track to launch voretigene neparvovec—the first approved gene therapy in the United States, which could cure an inherited form of blindness with a single treatment. Analysts estimate treatment could cost $500,000 per eye. The company is said to be considering an amortized payment plan in which a health plan could make a down payment followed by annual instalments if the therapy succeeds.
Challenge #2: Atypical demand and impact on capability requirements
A typical biopharma forecast model might assume strong growth from launch to peak sales after five years on the market. This would usually be followed by modest but steady growth through loss of exclusivity (LOE). Curative therapies, by contrast, might initially have large pools of eligible patients. However, most sales could be in the rearview mirror after five years. Sales of Gilead’s two Hepatitis C products, Sovaldi and Harvoni, fell substantially between 2015 and 2017 (Figure 1).
Challenge #3: Complex administration and management
Gene and cell-based therapies will likely represent an important segment of future curative treatments, but these entail additional commercialization challenges that extend beyond cost and payment models.
One challenge stems from complex administration protocols and clinical-care requirements. Higher complexity therapies might be more difficult to commercialize because they can require highly specialized resources and constrained medical capacity both to deliver the therapies and to manage their side effects post-administration. Such therapies also could require further medical education to ensure high quality of delivery. A potentially smaller universe of centers administering treatment, combined with a greater need for health care provider (HCP) education, suggests that the traditional biopharma field sales model may need to be adapted.
Consider this: CAR-T treatment is a process in which a patient’s own T cells are extracted, cryopreserved, transported, and modified. Patients undergo preparation for the infusion (e.g., chemotherapy), and after the infusion they must be monitored closely for side effects. A common side effect of this treatment is cytokine release syndrome (CRS), which can be life threatening and complex to treat. Similarly, a treatment in development to cure Parkinson’s disease requires intracranial administration, using an MRI to guide the injection. As a result, CAR-T, and similarly complex treatments, will require providers to have sophisticated capabilities. In addition, manufacturers will likely need to work within a more elaborate ecosystem of stakeholders that are involved in the treatment process.
To provide some perspective on this challenge, we have analyzed the overall gene and cell therapy pipeline (not limited to cures) to assess the complexity associated with how these treatments are administered. This analysis finds that, as of November 2016, about 40 percent of gene and cell therapies in phase II and close to half of those in Phase III have highly complex methods of administration (Figure 2).
Challenge #4: High cost and complexity to manufacture and distribute
Complex cures are challenging and costly to manufacture due to the lack of commercial scale of the technologies involved in producing them. Careful planning is required to determine which centers will be positioned to deliver these therapies, how this aligns with the manufacturing footprint, and how patients are to be scheduled for therapy to maximize the manufacturing capacity. Likewise, some patients will have to travel long distances to receive the therapy, which adds complexity and risks in the supply chain.
Highly personalized treatments, such as CAR-T, could be produced in large, centralized facilities, which could exacerbate logistical challenges (e.g., transport, handling). Given this, CAR-T cell manufacturing is projected to cost between $25,000 and $35,000 per patient, even after maximum process efficiencies have been exploited. This does not factor in the cost of cryopreserving the cells, nor does it include all of the other costs associated with CAR-T treatment (e.g., pre-infusion treatment, administration and follow-up care).
First-generation personalized cancer vaccine therapies for prostate cancer illustrate the potential consequences of not adequately addressing these manufacturing challenges. At launch, these products were unable to meet robust initial demand because manufacturing capacity was still coming online.They also were reported to have initial cost of goods sold (COGS) over 75 percent. Though investments to automate and cut costs were able to bring COGS down over time, this undermined their commercial viability.
Given the potential demand pattern for curative therapies, it will be critical to ensure that capacity can economically meet peak demand. This requires understanding the geographic nature of demand and its implications for the supply chain and manufacturing footprint, capacity planning and financial risk management.
Implications for commercialization of cures
So far, success has been elusive
Few cures have come to the market—particularly highly complex ones—and there is little precedent to help understand how to commercialize them successfully. As previously mentioned, UniQure’s Glybera was the first commercially-approved gene therapy. A lack of demand, however, recently prompted the company to stop commercializing the product. It was developed to cure lipoprotein lipase deficiency, a very rare disease. But administrative complexities—combined with reimbursement challenges for a therapy with an estimated $1 million price tag—limited its access to only one patient in its first years.
The four major challenges identified demonstrate the need for biopharmaceutical executives to adapt their strategic toolkits. Key areas of difference versus traditional pharmaceutical launches include:
- The nature of the business opportunity and how to drive uptake
- The realities of gaining coverage, reimbursement, and the financing of cures
- The capabilities required to go to market and manufacture/supply the products
Key choices for commercialization teams:
As commercialization teams prepare to bring curative treatments to market, they will need to consider how the challenges above impact the strategic choices they will make for launch. These choices are illustrated in Figure 3, based on Deloitte’s Strategic Choice Cascade framework.
The table below highlights some of the choices that are most important for the commercialization of cures.
Advances in the understanding of disease biology—combined with the development of new treatment modalities, including gene therapy— are paving the way for biopharma manufacturers to develop cures for diseases and conditions that were previously only managed. The payment model needed to finance the development of these innovations, however, has generally not kept pace with the biopharma industry. Developing and manufacturing cures and treatments for complex diseases can be a daunting and costly process, due to a lack of commercial scale and the potenially novel technologies involved in producing them.
This paradigm shift—from managing a disease to curing it—involves a distinct set of challenges related to pricing and market access, biopharma resourcing models, and (for complex treatments) the health care delivery system and manufacturing/supply chain.
In the world of curative treatments, cautionary tales continue to outnumber success stories. Before this narrative can change, biopharma companies might need to reimagine their organizations and lead payment-model innovation that rewards effective and cost-efficient cures
By: Cousin, M.,Brian, R., Yang, T.,Serres, M.”Commercializing curative therapies“. https://www2.deloitte.com/us/en/pages/life-sciences-and-health-care/articles/commercializing-curative-therapies-biopharma.html (15 Feb, 2018)