In Vivo Article: New Pharma Ecosystems
We now live in a world of mature medicines markets, where value is king. Incremental efficacy increases aren’t enough to open payers’ wallets. Consequently, a new paradigm is needed to assess value and long-term viability. This article illustrates an Oliver Wyman framework that consists of 10 “ecosystems” to help steer companies through the development process and determine business-wide priorities.
Each ecosystem is cluster of diseases that share common profile on dimensions of unmet need, value proposition to the health system, and traction for innovation. And each ecosystem has a common set of business challenges a different way of thinking about its component drugs.
This value-based lens reveals that disease states long grouped together – i.e. most cancers – do not all belong in the same ecosystem. For example, prostate cancer and lung differ on the dimensions of therapeutic headroom, prevalence, disease criticality & complexity, putting them different ecosystems. Prostate Cancer sits with other large spend diseases for which payers are seeking help in managing the overall disease burden, while lung cancer sits in a space that will likely face less scrutiny from payers in the near term
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One great advantage of the ecosystem approach is that it provides a tool for distinguishing between diseases that are traditionally thought of as related—but present far different market opportunities and challenges. Consider, for example, prostate and lung cancer, two of the “big four” solid tumor types.
Historically, companies see both diseases as residing within the oncology franchise—after all, they’re both treated by medical oncologists, they’re commonly treated with a combination of surgery and other therapy, and they’re highly prevalent cancers. However, they have important differences. In prostate cancer, the treatment paradigm includes watchful waiting before expensive branded therapies are used. As a result, total medical expense per patient tends to be lower. In lung cancer, patients are treated more aggressively, but with a mix that includes both high-cost novel drugs and a range of less expensive chemotherapeutics.
These differences mean that these diseases should be approached differently. A prostate cancer strategy must take one of two approaches: either focusing on providing incremental value to payers through drugs that offer clearly superior results or treating patient niches with high unmet need (for example hormone-resistant prostate cancer, which is currently seeing a wealth of clinical activity). Meanwhile, the higher therapeutic headroom in lung cancer suggests that there are more areas in which to win. Placing these nominally similar diseases in different ecosystems brings out important context on the nature of the opportunity they offer.
Most companies think of drugs in terms of traditional categories – body geography, technology platform, and medical specialty and so forth. These schema have their uses, but they are not very good at differentiating opportunity for drugs.
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What makes this new view necessary?
For years, pharma had abundant innovation, relative freedom to set prices, and a benign regulatory environment. That’s all changed. The low-hanging fruit have been picked, the science has gotten harder, and payers are more and more resistant to paying for branded drugs unless they make economic sense. -
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Where does your new framework fit in?
Most companies think of drugs in terms of traditional categories – body geography, technology platform, and medical specialty and so forth. These schema have their uses, but they are not very good at differentiating opportunity for drugs – why is lung cancer thought to be a bigger opportunity than prostate cancer? So we set out to develop an approach that identifies more ‘value-sensitive’ patterns across disease markets. -
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What were some of the specific factors you considered?
Here are some examples: How much room is there for improvements in efficacy, safety, or route of administration? What is the economic burden of the disease? Who makes decisions about treatment, and what matters most to them? -
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What are examples of diseases where you see great opportunity?
One particularly rich area is the ecosystem we call “Help Desperately Needed,” which includes diseases such as ischemic heart disease, prostate cancer and lymphoma. They tend to be progressive chronic diseases with complex biology. They are big drivers of cost, and payers are managing the treatment cycle more aggressively. On the other hand, they offer substantial therapeutic headroom and lots of drugable targets, and innovation could help both cost and quality. -
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So should pharma companies drop diseases with low opportunity and focus on ecosystems like this?
Not necessarily. Our belief is that it’s more important to be structured properly for the markets you’re in than to focus on a particular ecosystem. -
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Then how should companies use the ecosystem approach?
Well, we don’t suggest that companies reorganize around ecosystems, or that they prioritize their pipelines by “good” and “bad” ecosystems. Instead, they should use it to understand how value drivers and opportunities differ across disease markets, to better align their portfolios and capabilities today, and to understand where they want to play in the future and how they will need to shift their model to win.