Bruce Booth (yet again) published a terrific post on his blog, entitled “NextWave of Pharma Innovation?” His premise is that reformulations, like the once-daily liquid methylphenidate product, Quillivant XR, is not “innovative.”
But let me now share my broader concern and where my enthusiasm for the deal dims: why is Pharma spending hundreds of millions for a reformulated 50-year old molecule, methyphenidate, in a world where healthcare costs are spiraling out of control? At a time when Pfizer is cutting its internal R&D budget and missing out on innovative BD deals (i.e., they aren’t one of the top buyers of innovation these days, or known as a preferred strategic partner in the biotech world), why are they going to fork out up to $700M for a liquid version of Ritalin?
The big question is what should we – and we all are paying for it in our insurance premiums – pay for this type of product advance? Is it worth a significant price premium over all the generic alternatives? For a parent with a child who doesn’t like pills and wants convenience with effectiveness, a once-daily liquid would be great – especially if health insurance pays for the bulk of it. But should this narrowly differentiated improvement demand a big premium over other ADHD alternatives, especially generics?
We commented on his post, and we won’t repeat it here. But in our view, any innovation, even with a 50 year old drug, that provides a patient benefit, is innovation. Not all innovation comes in the form of headline-stealing, previously unknown mechanisms of action discovered in an Ivy League lab. Innovation comes in many different forms, including drug repurposing, reformulation, and alternative routes of administration.
Those of us of a certain vintage can recall when Doxil was first introduced. Even at that time, people noted that it’s “only” doxorubicin. Ditto with Procardia XL. Yet these products reduced side effects and/or improved compliance. This results in better efficacy and better patient out comes. That’s good, no?
Now I concede Bruce’s point that not all reformulation can and should be reimbursed. He’s right. In fact, a number of the reformulation concepts we see are difficult to justify because of marginal patient benefit. Some reformulation ideas we see have a “slice of the market” approach to forecasting. That is, if they enter a huge market with a marginal product, a small slice of that market will result in a great ROI. However, as we see in Europe, these arguments are becoming increasingly difficult to justify.
Will they grab the Fierce headlines or generate 10x returns for traditional VCs? Probably not.
Regardless, as long as drugs have side effects and/or poor compliance, there will be a need for innovative reformulators and innovative delivery experts to tackle these challenges. If patient benefit can be demonstrated, then the insurers will have to support these products.
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