Patient Adherence Key To Pharma Industry Success

By Graham Hughes, MD, chief medical officer, and Brad Sitler, principal industry consultant, SAS Center for Health Analytics and Insights

The pharmaceutical industry is in the midst of an unprecedented change as combined U.S. product portfolios are losing patent protection for numerous blockbuster brands, costing the industry hundreds of billions in revenue. Over the last five years, it’s been estimated that the industry has lost over $60 billion due to patent expirations. And as more patents expire, the loss in revenue is anticipated to balloon to $200 billion through 2015. It’s no longer business as usual for the pharmaceutical industry as firms attempt to shore up their pipelines through acquisitions, bring new drugs to market, and right-size organizations based upon decreased revenues.

The industry as a whole – especially the largest pharma companies – is well positioned to weather the storm with sizable cash reserves. Most of the top 20 firms have access to over $7 billion in cash, equivalents and short-term investments, providing time for the largest companies to evaluate their options and focus on their traditional business model of identifying new molecules to bring to market.

That said, an untapped opportunity still eludes the industry – patient adherence. Non-adherence costs our health care industry an estimated $290 billion in hospitalization stemming from complications and the opportunity for pharma is estimated to be billions annually. The pharma industry has long pursued the goal of driving patient adherence, but to limited success.

So why is this time different? First, with the passing of the Affordable Care Act, our health care payment system is moving from activity-based payment to value-based payment and payers will now be required to take all comers for health insurance with limits on underwriting. Now, in addition to the pharma industry, payers and providers have financial motivation to help patients be more adherent and engaged in managing their health. Second, both payers and providers have or will take on new levels of risk, which they are open to sharing with other parties in the health care ecosystem. This presents new found opportunity for pharma both in short- and longer-term opportunities.

For example, what if in a crowded disease category one of the dominant brands during the early stages of its maturity started to invest in developing a sophisticated disease management/patient support program? What if the company paid for all of the fixed cost of the infrastructure prior to patent expiration (e.g. call center facility, program materials development, campaign management software, database, interactive voice response system)? Additionally, what if the brand also pursued an expanded indication with additional studies with their drug combined with the disease management/patient intervention program together AND secured a patent extension for the combined patient services wrapper and branded drug? The requirements for this type of expanded indication are largely unclear. However, the implication is for brands to develop expanded indications affording extended patent protection.

Of course, the disease management/adherence program would actually have to demonstrate improved patient outcomes during the studies. If it did however, there could be broad implications for both the brand and future studies that would retain larger numbers of patients and ideally reach end-points with sufficient patient numbers faster. Additionally, the number of trials would likely increase due to the pursuit of patent extensions for the “adherence service wrappers” that each drug could leverage for patent extension.

To further build barriers to entry from generic competition, what if the brand covered all of the fixed costs for the disease management program and the cost to run the patient support/intervention program was entirely, or almost completely, based upon the incremental costs of the patients enrolled? The brand would have established a defensible moat to new generic entrants AFTER the patent expiration, with or without an “expanded indication” of patient support wrapper and brand drug combination. Generics would not be able to pay for the costs for the program because they would have to carry the burden of both the fixed costs AND incremental costs of the program.

Finally, the disease management/patient program would be substantially different than our health care industries existing approach to disease management which is one-size-fits-all. The program proposed here would align resources with the patient’s level of risk to experiencing a critical care event and/or preventable disease progression. Essentially, a base level of service would be provided to all patients but those that were at high-risk would receive additional support paid for by the brand and/or payer or provider.

The goal for pharma would be to develop a patient support program that is a compliment to its branded drug such that it is so supportive of improved patient outcomes that providers would prescribe and plans pay for it over generic drug equivalents alone.

To be clear, this has not yet been accomplished. It is innovation. It is fraught with challenges and requires a proactive investment in an unproven manner. However, if successfully navigated, the pay-off could be significant for the pharma companies that make the first move.