By: Stuart Henderson - Global Industry Lead for Life Sciences - Accenture
Biopharma executives have leveraged technology to navigate the global pandemic: using it to collaborate on research and development, to conduct clinical trials virtually and reconfigure supply chains. They’ve leveraged science to enable multiple COVID-19 vaccines to be developed in record time despite the remote working environment.
Now the question biopharma executives are faced with is: How to continue to step up to create new pathways for innovation, more access and improved affordability? Many tell us they are using the lessons of the past year to help address system and patient-level affordability issues, while still advancing the discovery, development, and delivery of new treatments for all health conditions.
Executives we talk to are looking to New Science, a dynamic combination of the best in science and health technology to fill unmet needs with more precise and effective treatments. Indeed, New Science is projected to drive 81% of biopharma revenue growth and 61% of all revenues between 2021 and 2026, outpacing our previous forecast of 54% of all revenues from 2017-2022.1
But – there is a challenge – New Science often has a higher price tag. People can’t afford it: In the US, the average premium for family coverage has increased 22% over the past five years and 55% over the past ten years.2 Governments are struggling to manage costs: Healthcare spending reached nearly $4 trillion in 2019, more than 17% of the US GDP accounting for 24% of government spending. And payers are feeling the pain: Increased focus on financial consideration is causing friction between pharmacy benefit managers, payers, HCPs and patients.
These pressures aren’t new, but the continued profit erosion by the private sector is creating a new catalyst for change.
New Operating Models
The pandemic has shed light on our ability to turn old ways of operating into new ways of discovering, developing and commercializing treatments. For example, in response to the crisis, virtual clinical trials grew by more than 50 percent in 2020,3 And are expected to triple next year, improving access and reducing Inequities.4 Our research also revealed that during the past year 65 percent of pharma sales representative meetings were held virtually across therapeutic areas, and increased engagement was reported.5 Many of these changes are likely here to stay.
Meanwhile, executives say they are re-examining the cost of bringing a successful treatment to market. It currently is between $2.6 billion6 and $6.7 billion (including the cost of capital and cost of failure).7 To succeed in the new economic environment, biopharma companies are evaluating opportunities to speed and improve research and development and commercialization of these new treatments while lowering the cost to do so.
More executives are pursuing New Science given that the efficiencies include a greater likelihood of success, smaller patient cohorts, and overall genomic efficiencies. Our analyses modeled the cost savings of the improved Probability of Technical and Regulatory Success (PTRS) for each New Science treatment and the cost saved from smaller population trials - and this amounted to about $134 million in additional savings per treatment.
Across the board we are also seeing that data-led drug discovery is on the rise. This is primarily influenced by advanced biomarker discovery capabilities with deep learning and predictive models. These capabilities are revolutionizing the way research is done and improving disease understanding to better and faster identify, validate, and optimize targets that are at low risk of failing during development. For example, Exscientia, an AI drug discovery company, is using algorithms to compare a target protein against a database of protein interactions to generate a manageable list of compounds that are favorable drug candidates. According to Exscientia, this process can reduce discovery costs by 80 percent and cut the time spent in discovery from four-and-a-half years to as little as a year.8
We are also seeing an increasing clinical trial innovation. Virtual, hybrid or decentralized clinical trials leverage in silico and digital twin capabilities and enable near-to-patient trials using digital technology to accelerate the operational timeline across many aspects – such as patient identification, recruitment, and enrollment. Indeed, we evaluated the impact of virtual components of clinical trials with our research partners that cover more than 100 new trials across 30 countries and found that virtual components improve patient enrollment, retention, and overall time to trial completion. We estimate this could save approximately US$146 million per treatment.
Finally, virtualized selling is not only helping to bring savings but also, in some instances, creating greater customer engagement. However, this savings may be rebalanced by broader digital marketing efforts in the long haul.
New Business Models
Some industry executives are re-examining their business models as well. Accenture conducted a survey among 40 payers and Pharmacy Benefit Managers (PBMs) in the fall of 2019 to understand whether they foresaw changes in contracting - and what those would look like. The results were profound, with broad shifts anticipated in reimbursement models, embracing a much more diversified approach than we see today.
The rebate model currently dominates across payers and PBMs, but by 2025 senior executives at payers and PBMs expect their portfolio of contracts to dramatically diversify. Many expect to see a shift to value. Very few payers currently report that outcomes - and value-based contracts represent a quarter of their portfolios. But in five years, 38 percent of payers believe at least a quarter of their contracts will be value - or outcomes-based, and 31 percent believe that a quarter of contracts will be built on value-based pricing.
For many, the next step will be to redefine economic relationships with customers, demonstrating value, and sharing in outcome-based risk. Understanding how to quantify, communicate, and capitalize on the better health outcomes delivered by scientific advancements will be critical to biopharma’ success - especially in the context of increasingly costly New Science. This starts with changing the financial relationships with customers, stakeholders, and markets. The aim will be to diversify and tailor contracting models to the needs of treatments, markets, and customers. This will include everything from how players set value-based prices to how they work with agencies, develop evidence, and so forth. We expect the focus will be on targeted tactics and strategies for specific treatments.
The path forward does not require a wholesale shift in contracting strategies away from the rebate model. Some treatments will not be economically “worth it” to pursue innovative models for the payer or the manufacturer. In such cases, simple rebate-based contracts will remain the most efficient and effective means of engaging customers. Biopharma companies should seek targeted opportunities to pursue innovative contracting models where it matters most - in cases where a treatment will be access-constrained--and where there is meaningful shared value that can be unlocked for manufacturers, ecosystem players across the value chain, and patients. In those instances, half measures will not be enough - biopharma companies must invest early in the lifecycle and fully in development and deployment of the new model. The model can’t be in addition to the overall brand strategy, it must be a core part of it.
What is clear is that the healthcare ecosystem is changing at an unprecedented pace. In addition to redefining economic relationships where it matters most, biopharma companies can and will continue to play an active role in shaping the future.
References
- Accenture Research New Science Model August 2020 and. New Science Model Analysis April 2019.
- Medicare Part D: Use of Pharmacy Benefit Managers and Efforts to Manage Drug Expenditures and Utilization https://www.gao.gov/products/gao-19-498 (Accessed 04/12/2021)
- PharmaPhorum, June 4, 2020, COVID-19 driving adoption of virtual trials, https://pharmaphorum. com/news/covid-19-driving-adoption-of-virtual-trials/ (Accessed March 30, 2021)
- Accenture Primary Research 2020. Digital innovators in R&D & Taylor, P. (2020 June 4)
- Accenture Research 2020. COVID-19 Impact on HCP Behavior
- 2 DiMasi JA, G. H. (2015, 03 02). TUFTS CSDD’S 2014 COST STUDY. Tufts Center for the Study of Drug Development: https://csdd.tufts.edu/tufts-csdd-cost-study (Accessed March 30, 2021)
- Accenture Research, leveraging Evaluate Pharma R&D spend data (2011-19)
- Freedman, D. H. (2019). Hunting for New Drugs with AI. Nature, 576(7787), S49–S53. https://doi. org/10.1038/d41586-019-03846-0 (Accessed March 30, 2021)
Stuart Henderson is Accenture's global industry lead for Life Sciences. He is a member of Accenture's Global Management Committee and the North America Leadership
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