Measuring Pharma Productivity: Should Biopharma Kick Eroom's Law To The Curb?
By Anna Rose Welch, Editorial & Community Director, Advancing RNA
I’m sure you’ve heard that, in terms of new drug approvals, pharma had a productive 2014. There were 51 new treatments approved by the FDA’s Center for Drug Evaluation and Research (CDER) and the FDA’s Center for Biologics Evaluation and Research. According to PhRMA, member companies have invested more than $600 billion on drug R&D since 2000. Last year alone, biopharmaceutical R&D spending hit $51.2 billion.
But despite this approval surge and large R&D spend, Eroom’s Law is still a hovering dark flag. Eroom’s Law (Moore’s law spelled backward) states that the number of drug approvals per billion spent on R&D has been cut in half every nine years since 1950. According to Forbes, for the past 15 years, less than one drug has been approved per billion spent on drug R&D.
While this seems indicative of a dire lack of pharma productivity, a recent article in Forbes presented a different and perhaps more uplifting way to look at pharma productivity. According to Forbes, the best way to date to determine pharma’s productivity has been to look at the number of drugs approved per dollar spent on R&D. But a recent dissertation written by a University of Chicago health PhD candidate Kristopher Hult has proffered the notion that productivity can best be measured in terms of a drug’s effect on patient health — also known as a drug’s “health impact.” As Hult and his colleague Tomas Philipson from University of Chicago stated in a previous Forbes article, “A single drug that cured all cancers would be immensely more valuable than 100 new molecules that treated acne.”
A drug’s health impact comprises total number of users, patient adherence, and efficacy (measured in quality-adjusted life-years). Considering a drug’s health impact can provide a more realistic view of pharma productivity, as it incorporates “incremental innovation” into overall productivity. For instance, according to Hult and Philipson, dosage changes, reformulations, and getting a drug approved for new indications are just as much a pharma innovation as a new drug is. In fact, many of these improvements (also known as “me too” drugs) expand the number of patients who can take that drug, in turn boosting its health impact.
If we subscribe to the health impact form of measurement, pharma productivity actually increased by 30 percent from 1989 to 2009. Of course, this productivity could be turned around, Philipson and Hult warn, especially because you need new drugs on the market to be able to create “me too” drugs. The fewer new drugs being created and released onto the market, the fewer incremental innovations, which ultimately leads to a decline in health impact.
While the end goal has always been to release the most effective drugs for a patient’s condition, I feel like an increasing amount of attention is being placed on the industry’s overall health impact. Or, at least, there are some more vocal members of pharma causing stirrings — the most recent being Sanofi’s President of R&D, Elias Zerhouni.
In a recent address at the European Medicine Agency’s 20th Anniversary Conference, Zerhouni spoke out against the trend of investing in drugs for lower-risk specialty and orphan diseases. These drugs are certainly important for the small portion of the population suffering from a disease that has few treatment options. Not to mention orphan and specialty drugs also offer some tempting financial perks for company’s looking at dwindling pipelines and looming biosimilar and generic competition to blockbusters.
However, despite financial and unmet health need benefits of orphan drug development, Zerhouni argues that the increasing emphasis on orphan and specialty drugs cripples the development of primary care drugs and will lead to a larger chronic disease burden on patients and healthcare systems. “We are going in the wrong direction. At the end of the day, the diseases where I see approvals coming through affect less than 20 percent of the population — 80 percent is not affected,” Zerhouni said in his address. That 80 percent of the population could be a goldmine for pharma if we’re looking at Philipson and Hult’s definitions of innovation and productivity.
While it might seem like an impossible metric to measure, there has been a push to determine the extent to which pharma and its drugs are having the desired effect in poor populations. (Perhaps we can apply the term “health impact” here.) Therefore, a new metric was created to measure pharma’s effects on treating tuberculosis, HIV/AIDS, and malaria in poor countries. According to The Wall Street Journal blog, The Global Health Impact Index focused on the overall need for the drugs to treat these infectious diseases, the effectiveness of available treatments, and the number of patients who had access to the drugs. There were 16 companies evaluated, and it was determined that Sanofi ranked first in terms of effectiveness (good news for Zerhouni), followed by Novartis and Pfizer.
In their comments to the WSJ blog, representatives from various companies spoke to the benefits such an index holds for pharma companies. Many of these experts emphasized how indices such as The Global Health Impact Index can bolster competition among companies and, in turn, corporate social responsibility. It still seems to me that measuring a company and its drug’s “health impact” is tricky territory, and there are no doubt going to be inaccuracies. In contrast, measuring pharma productivity by the number of approved drugs per R&D dollar spent is understandable and quantifiable.
But pharma is also entering new territory: with the help of new technologies and scientific discoveries, we are able to find answers, solve medical problems, and alter or create new and existing drugs in ways we never thought possible. It seems to me that as development becomes more complex, our ideas of productivity and how we’re measuring it need to undergo a shift, as well.