Ahead of the Game

As pharmaceutical companies face growing competition and shortening periods of exclusivity, G�nther Illert makes the case for early commercialization in the drug development process.

"We were not given the opportunity to Provide early input into discovery and development. Actually, we didn't even know about this product until it was close to launch."

Quotes like this are not unusual from marketers in many pharmaceutical companies. Typically, scientists start the process of drug discovery and design, with the marketing department becoming involved around Phase II or Phase III. The topic of early commercialization seems to divide opinion in the industry, with much disagreement between the science and the commercial functions. While scientists often argue that it takes freedom to explore creative ideas and time to develop new medicines, others argue that due to limited resources, non-viable ideas should be filtered out of the pipeline in the early stages, to focus on those drug candidates that have the potential to be successful in the market.

Innovation management is a hot topic in almost all industries, whether they are involved in introducing a car with a hybrid motor, launching an innovative household cleaner or providing unprecedented internet services for banking clients. What makes it more difficult in the pharmaceutical industry are the long timelines involved and the risks and complexity associated with the development of new medicines.

Pharmaceutical companies today state that they suffer from a lack of innovation, a lack of adequate focus on patient needs, and a growing need for clinical data. Half of all respondents in a recent Capgemini survey on early commercialization saw the growing importance of portfolio management creating a greater need for earlier commercial input. Or, as one respondent said: "Portfolio management is all about investment decisions, it requires trade-offs. You can't make trade-offs without marketing input."

A third of interviewees saw the need to become more patientcentric, as opposed to product-centric, as an important driver. This is not only because of the long-term promise of personalized medicine, but because of the potential immediate implications "the product needs to deliver on unmet medical needs."

The pharma industry needs to improve how commercial input is incorporated into the R&D process - one respondent said: "Pharma companies have to become more effective and cost-conscious when bringing new products to the market." In the words of another: "Commercial involvement at the transition from discovery to early clinical stages [is required] to drive development of new products."

Other respondents saw another driver for early commercialization in the increasing demand for clinical data and outcome-based information:

* "Clinical data is required for product reimbursement and product differentiation."

* "We need head-to-head studies and outcome-based information to support 'me too' products. Being a late entrant to the market requires more data."

* "We need to convince payers of favourable levels of product differentiation. Having input from payers upfront is important to be able to adjust the communication strategy accordingly."

A changing landscape

R&D expenditure in the pharma industry has increased consistently since 1970, and (measured as a percentage of sales) has stabilized since the early 1990s. But while increasing amounts of money are being spent on R&D, its impact on the outcome is decreasing. This is true in both the US and Europe, and the trend prevails. The average cost per drug - from development to FDA approval - increased 7.3% annually from 1975 to 2000. While there have been a wide range of estimates of the cost of developing a new drug today, the Tufts Center for the Study of Drug Development (Boston, USA) figure of $802 million is the most widely cited.1

But besides the sheer cost issue, why is early commercialization such an important issue in pharma? On the one hand, the industry is facing changes in the market place, with increased competition and shortening periods of exclusivity - even for innovative mechanisms and compounds. This has led to more and more money being spent on marketing and sales, in turn creating a greater need for a financial return on investment. On the other hand, the progress in discovery and biotechnology has yielded a much larger number of potential therapeutic and product candidates, increasing the number of opportunities a company can pursue. These two trends are diametrically opposed, squeezing drug development in the middle.

Currently, the average time it takes to develop a new drug is approximately 11.4 years, but as with the cost (which can be much higher than the commonly accepted $802 million), it can take much longer, particularly if the entire discovery phase is considered. Mean development speed per drug (across all therapeutic areas) for major pharmaceutical companies ranges from seven to more than 14 years.2 Although the time required for developing drugs increased through the 1980s, FDA approval times for standard and priority new chemical and molecular entities (NCEs and NMEs) have been decreasing since the middle of that decade. Improved use of technology in patient and compound screening, R&D focused on core competencies or targeted at specific therapeutic areas, quicker FDA approval and outsourcing are major drivers of faster drug development.

From a pool of approximately 11 million compounds, a drug manufacturer will get approval for only one drug. In other words: of the estimated $802 million to develop and market a drug, approximately 73% is attributable to failed drugs. Could these figures be altered with earlier commercialization?

What exactly is early commercialization?

Early commercialization is, quite simply, the process of providing commercial input early in the development of a pharmaceutical or biological product. It starts long before the commercial launch in order to shape the product for the market and to shape the market for the product. Although it varies from company to company, most view early commercialization as running from preclinical to ending sometime during Phase II (Figure 1).

Early commercialization requires involvement from many different functions outside of R&D (R for research on early stage targets, mechanisms of action and so on, usually within a therapeutic area; D to test the compound in clinical trials, that is, Phase I, II, III). The commercial functions involved typically include:

* Market research - to identify trends in disease areas, patient segmentation, competitor information and intelligence. What would the market accept from different customer perspectives? What data can back up decisions in product development?

* Marketing and sales - to help shape a molecule's development into a product. Are we going after the right target population? Who are the key customers? How can we position the product? How will we sell the product?

* Health economics - to look at the market and managed care. What will be required to get on formulary or to get reimbursed? How can we shape the product to better position it for launch? Are there clinical studies that can be done that will prove the case that this product is not just safe and effective but that there is an economic value?

* Reimbursement - to provide insight on the way reimbursement systems will work. Is there a way to prepare the product and market to secure that the product will be reimbursed at launch?

The arguments against

Reliably forecasting the future market potential for innovative drugs is, of course, difficult. Even though trends in disease prevalence and demographics can be used to estimate growth of patient populations, external factors make it almost impossible to predict what price will be realized after a few years for any given drug. For instance, certain companies had invested years and vast amounts of money on making insulin treatment more convenient for diabetes patients when the German healthcare authorities decided it would no longer reimburse inhaleable and analogue insulins. Should early commercialization therefore kill such development efforts before knowing the full commercial potential of the resulting drugs?

Another major argument against early commercialization is the perceived risk of hampering innovation. Too much commercial focus can lead to short-term strategies and could jeopardize the long-term viability of a company's pipeline. R&D executives like to tell of how products were almost killed for lack of a potential market, and then went on to become blockbusters. These anecdotes follow a familiar arc: a commercial department forecasts a tiny market and moves to kill a project; strong-willed managers fight to keep the programme alive. Years later they are vindicated by billions of dollars in sales.

Perhaps one of the most telling issues is that more than one out of every four interviewees in the Capgemini study could not give an answer about the ownership of drug development. Survey respondents spoke of hand-offs and changing ownership from Research to Development, and then again to Commercial. However, simple project management rules dictate that a lack of accountability will lead to disaster or, at the very least, a 'passing the buck' mentality and inefficiencies.

One of the key issues in drug discovery and development is inefficient use of information sharing, when discovering a new cellular pathway or exploring a new molecule, it is often not yet clear what kind of drug will eventually result from this. Drug development requires going down many dead-end streets before finding the open road to the market. Biologists are trained to know that it takes time to nurture a seed before seeing the flower grow out of it. Commercially trained people, on the other hand, are educated with the concepts of limited resources and bottlenecks. They apply deterministic approaches to reach a maximum result with given resources or a pre-defined result with minimal resources. This conflict is only one of the reasons that early commercialization is so difficult.

The reality is that both sides are right. The question is not whether to do early commercialization or not, but how to do it well. Early commercialization does provide tangible benefits, if done well. If not, early commercialization can hinder innovation and drive a short-term focus in the R&D pipe.

Working together

According to the Capgemini study, four out of five of all pharma executives believe that the lifetime value of drugs could be increased by at least 10% if the commercial department were to be fully involved. In fact, 32% of our survey respondents believe that the lifetime value could be increased to 20% and another 38% believe that it could even go as far as increasing the lifetime value up to 50%.

In organizations today, commercial and R&D departments are intended to focus on the same objective of marketable products; however, they overwhelmingly lack the processes and structure to support their collaboration. Typically, the target product profile (TPP) is used to facilitate joint development efforts. Often R&D 'owns,' or acts as if it owns, the TPP, but since the commercial department needs to launch the product, the process needs to be improved to incorporate real input into the TPP from both parties. Ideally, the decision-making authority is either shared or ultimately motivated with the end in mind.

In a recent case, Capgemini facilitated a three-day workshop, using its Accelerated Solutions Environment (ASE), with 45 members from R&D and commercial functions (in the same company) to ensure that the TPP will not end as a dead document. The ASE approach represents the synthesis of a creative environment and an effective working process for large groups. Encouraging creativity and open, constructive teamwork is a key success factor for groups with such diverse backgrounds as science and commercial, within the scope of the ASE Scan-Focus-Act method, all participants are first brought up to speed about what they need to learn (Scan), then they jointly prioritize key points that need to be changed (Focus) and finally decide on very specific next steps that they commit to for changing the current shortcomings (Act). Iterative solution finding with all stakeholders involved ensures that key concerns are addressed and new ideas tested for validity. As a result, a new TPP process was defined and agreed that ensured that key milestones were met and points when competitor data were announced are used to review and potentially modify the TPP. in addition to mobilizing all parties, speed and sustainability of implementation is significantly increased. All participants commented that this was a new and positive way of working between Science and Commercial. They felt that early commercialization will greatly enhance the lifetime value of their product because of the jointly assessed priorities and early start on planning life cycle strategies.

Conclusion

The bottom line is that the current model of developing drugs is no longer sustainable. Companies can no longer afford to make the wrong bets or to find themselves failing in Phase III trials or at prelaunch of a product simply because a critical market requirement was not incorporated earlier in the development process. As the costs of development continue to increase, companies will need to do a much better job of picking the right development candidates and indications early on and making those products competitive. The role of early commercialization will be to capture innovation whether market- or technology-driven - making it a reality by ensuring that "the product is ready for the market and the market is ready for the product."

[Sidebar]

... of the estimated $802 million to develop and market a drug, approximately 73% is attributable to failed drugs. Could these figures be altered with earlier commercialization?

[Sidebar]

THE VALUE OF EARLY COMMERCIALIZATION

The latest edition of Capgeminl's annual life sciences Thought Leadership' research studies (vision & Reality 6th Edition, From Market to Discovery and Back - The value of Early Commericlalization) focuses on early commercialization in the pharma and biopharmaceutical industries, increased competition and difficulty in bringing new and innovative products to market has forced the industry to define ways to ensure that scarce R&D and Commercial resources are focused on the most commercially viable targets. Attempts to address these challenges have resulted in various models incorporating cross-functional project teams aligning around a therapeutic area, or establishing cross-functional portfolio decision-making bodies.

The study explores the efficacy of early commercialization efforts to date and the benefits, limitations and challenges of collaboration between commercial and R&D functions; it also addresses the risks of an excessive commercial focus on the long-term viability of the R&D portfolio. It is based on 43 one-on-one interviews with leaders in the pharma and biotech sectors in Europe and the US and was supplemented by an online survey of 150 experts from across the globe.

[Reference]

References

1. Parexel's Bio/Pharmaceutical R&D Sourcebook 2006/2007.

2. Ibid.

[Author Affiliation]

About the Author

Gunther Illert is vice president and head of the Central European life sciences business unit at Capgemini (Germany). In 15 years as a consultant, he was involved in complex business transformation projects - often with a focus on market-oriented processes. Prior to consulting, Gunther worked for several years in marketing and market research for a major international consumer goods company. He studied Business Administration at the University of Passau, Germany, and obtained his MBA from IMD in Lausanne, Switzerland.

guenther.illert@capgemini.com