Joshua Hattem co-wrote this blog post with Emily Mandell.
The pharma industry faces a growing problem: The return on development investment is declining. The industry is compensating by pivoting to the next disease area (such as NASH) and technological frontiers (like cell and gene therapy). Pharma leaders may be disappointed if they believe that they can fix the problem by simply adding products to their pipeline that target these future opportunities. Take Gilead, which recently had to write down $820 million of its Kite Pharma acquisition as it cut Kite’s leading cell therapy for multiple myeloma. According to FierceBiotech, this decision to terminate the CAR-T’s clinical development “reflects the increasing competition in the anti-BCMA category.”
NASH, considered one of pharma’s biggest untapped opportunities, has 75 active in-human clinical trials in the United States. Backing the right horse has never been more important, and when your horse isn’t the obvious front-runner, pharma companies need product differentiation to compete in crowded markets.
Fundamental changes are needed in how pharma companies make development decisions. These changes aren’t easy to make, but if done well, they can alter the economics of development investment. Here are three core challenges that get in the way of effective development decisions:
1. Misaligned incentives: Most of the stakeholders who influence forecasting for pipeline assets are under pressure to inflate rather than deflate expectations. Executives who sit on internal investment boards are rewarded by Wall Street’s enthusiasm for their pipeline, development leads are rewarded for speed to market and clinical success, and commercial strategy leads may become brand leads when the asset gets to market. There’s little incentive to face up to the challenge and risks of attempting to differentiate early in development.
2. Narrowly defining differentiation: Medical organizations creating clinical development plans tend to use traditional endpoints and definitions of target populations. If you develop your product profile on the same parameters as every other, the only way to differentiate is to be superior, and being meaningfully superior is getting harder and harder.
3. Under-resourcing: Finding creative paths to differentiation requires focus from people in strategic commercial roles, which are often inadequately staffed prior to phase III. Getting senior people from commercial strategy and market access dedicated as part of core asset teams from phase I is critical to enable this creativity.
The symptoms of these ills are present in phase III when a commercial team is beginning launch prep. We are regularly asked by our clients a variation on this question: “I’m coming to the market with a product that’s slightly superior to the standard of care, but it’s one of three products launching in a new class within the year and they’re undifferentiated. Can you help me win anyway?” The order of entry then dictates opportunity, and the company pours money into commercial strategies focused on share of voice while telling the same story as the competitors.
There are other paths, but they require a realistic and thoughtful exploration of how to differentially meet unmet needs in a market, starting early in development. We’ve observed many examples of successful differentiation outside of the status quo, which fall along four distinct paths:
- Raise the bar: The traditional approach requires having a product that significantly beats the current and pipeline competition on traditional measures of effectiveness.
- Precision play: If your product can’t be the best for all patients, be the best for some patients.
- Solve a different problem: When efficacy is undifferentiated, consider differentiating on emerging value drivers, such as tolerability or convenience.
- Build a different yardstick: Build a clinical story around endpoints that are more aligned with customer needs than the competition (patient needs, health system needs, etc.).
In subsequent blog posts, we’ll share examples of how some companies used these four approaches to differentiate their products, and what pharma companies need to consider to be successful on each path.