Beyond Borders: Global biotechnology report 2010

partnering in the pre-competitive space,
for instance, where it makes sense to pool
resources and tackle early-stage scientific
challenges. One prominent example, Enlight
Biosciences, is discussed in some detail
in last year’s Beyond borders. Eli Lilly has
launched its PD 2 initiative to attract early
intellectual property (IP) from academia. In
2009, we also saw GlaxoSmithKline open
much of its IP portfolio in neglected diseases
and invite other companies to follow suit (as
Alnylam did in July 2009). We don’t expect
such open innovation approaches to account
for the vast majority of biopharmaceutical
R&D, but it will be an important presence
in certain niche areas — primarily in early
research and preclinical development.
Payors and governments
In recent years, biotech and pharma
companies have faced growing pricing
pressure from governments and
private-sector payors. The drivers of
this trend — rapidly growing health care
costs, the desire to expand access to a
greater percentage of the citizenry and
aging populations — continue unabated,
and as a result, pricing pressures are
expected only to grow over time.
The global recession has further increased
the budgetary pressures on governments.
Tax revenues have plummeted with the
downturn in economic activity, while
policy-makers have had to boost spending
on stimulus packages and unemployment
benefits. In the US market, where health
insurance coverage is largely tied to
employment status, widespread layoffs have
dramatically increased the number of people
at risk of losing access to health care.
Meanwhile, the rules of the game are
changing. Over the last year, significant
health care reforms have been introduced
in some key pharmaceutical markets, the
most prominent among which are the US
and China. These reform measures — which
promise over time to redraw the competitive
landscape, revise rules and regulations
and reorder economic incentives — are
largely attempts to find more sustainable
ways of providing health care in response
to the pressures mentioned above. Not
surprisingly, similar measures are being
considered or enacted across a number of
other major developing markets as well,
from Brazil to Russia to India.
Sweeping changes to health care systems
will, almost inevitably, create new
opportunities and challenges for biotech
and pharma companies. (See A closer
look on the next page for more on the
implications of the recently passed US
legislation.) One of the biggest challenges
may come from the increased adoption
of comparative effectiveness measures.
The fact that many health care reform
efforts need to reconcile two somewhat
contradictory goals — expanding
access to health care while containing costs
— will require increased efficiency across
the health care ecosystem and
will likely increase the adoption of
comparative-effectiveness regimes.
While they have become fairly
commonplace in some European markets,
comparative-effectiveness systems — in
which reimbursement decisions are based
not just on the efficacy of a particular
treatment but on the incremental benefit
it provides relative to cost — have been
largely absent from the US health care
system. That may not change dramatically
in the immediate future; while the new US
legislation provides funding for comparativeeffectiveness
research, it also explicitly
prohibits government payors from making
coverage decisions based on the findings.
Still, the provision is widely viewed as
potentially setting the stage for wider use
of comparative-effectiveness findings in
the US market going forward. Meanwhile,
the significant increase in coverage under
the new law will only increase the need to
control costs — making the future adoption
of comparative-effectiveness considerations
ever more likely. To some extent, the moveto
comparative effectiveness is likely to proceed
regardless of the actions of government
payors. The increased use of health IT,
for instance, will permit anyone with access
to significant volumes of data — hospital
systems, insurance companies and others —
to use data mining to identify which patient
populations a certain treatment is most
effective on. (For examples of such initiatives,
see the 2010 issue of Progressions.)
continued on page 13
“The fact that many health care reform
efforts need to reconcile two somewhat
contradictory goals — expanding access
to health care while containing costs — will
require increased efficiency across the
health care ecosystem and will likely
increasing the adoption of comparativeeffectiveness
regimes.”
11