LEADING ARTICLE
`
`Pharmacoeccnorncs 1997 May: it (5) 389-397
`I l rcnavo/9710005 0389/$04 50/0
`43.‘ Adis International Ltrnvtacl. Alright‘-. reserved
`
`The Effect of Pharmacoeconomics
`
`on Company Research and
`Development Decisions
`
`Henry Grabowski
`
`Department of Economics, Duke University, Durham, North Carolina, USA
`
`Summary
`
`There is a strong rationale for integrating phamiacoeconomics into research
`and development (R&D) project selection and termination decisions. The average
`cost for the typical new drug introduction now exceeds $US300 million. Further-
`more, a growing proportion of phase III projects are terminated because of eco-
`nomic factors relative to efficacy and safety concerns. While the use of
`pharmacoeconomic studies by payers is still evolving, the pressures on firms to
`show that new products are cost effective will only intensify in future periods.
`Accordingly, it is imponant for firms to begin analysing the cost effectiveness of
`new drug candidates early in the R&D process.
`The cost effectiveness of a new therapy can be simulated prior to clinical
`testing using different assumptions about the efficacy, tolerability. pricing and
`fonnulation of the new therapy. These models can be refined and updated as data
`become available from clinical testing and other sources. A key objective is to
`make uncompetitive projects fail sooner while channelling development re-
`sources to projects with high expected returns. Cost—effectiveness analysis should
`be an integral component of the firms‘s strategic action plan and its return on
`investment analyses.
`
`The use of pharmacoeconomics in research and
`development (R&D) decisions has been growing
`over time. Nevertheless. few companies appear to
`currently employ it as an integral part of their stra-
`tegic decision-making approach to selecting and
`terminating projects. A 1993 survey found that only
`40% of major phannaceutical companies used
`pharmacoeconomics for R&D decisions, com-
`pared with over 90% in the case of marketing and
`reimbursement decisions.'” This
`situation is
`
`changing. however, given the new competitive dy-
`namics now at work in the industry.
`The primary objective of this article is to con-
`sider how pharmacoeconomics can be employed in
`the R&D process to improve a company’s produc-
`tivity and return on its investment. Ideally, phar-
`macoeconomic analysis should begin early in the
`development stage. It should be refined in an iter-
`ative fashion as new data become available from
`
`clinical trials and other sources, as a major function
`
`Dr. Reddy's Laboratories, Ltd., et al_ v. Helsinn Healthcare S_A_
`Page 1 of 9
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`390
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`Grabmuski
`
`Q
`I
`
`INFA-:
`NCFS
`
`~ 300
`
`200
`
`—l5O
`
`— 100NumberofNCE:8.NDAs
`
`
`
`
`
`
`
`R&DexpenditureSUSDIIIIOHS,1990Vcl|L)QS1
`
`
`1980
`1081
`1982
`1983
`1984
`1085
`Kiss
`1os7
`1988
`1083
`1996
`1001
`Year
`
`J
`
`0
`
`1995
`
`Fig. 1. Expenditures on research and development (R&D). and the numbers oi new chemical entities (NCEs) and invcstigational
`new drug applications (INDAs). between 1980 and 1992.|3‘4l
`
`of pharmacoeconomics in the internal decision-
`making process is to identify uncompetitive pro-
`jects at an earlier stage.
`
`1. The New Competitive Dynamics
`
`Although there is great optimism at the present
`time about the scientific potential for important
`new drug discoveries, there is also mounting evi-
`dence that R&D costs are growing rapidly in real
`temts. DiMasi et al.”] found that it took an average
`of $US23l million (1987 values) and 12 years to
`discover and develop a typical drug in the mid-
`1980s. This figure includes the cost of candidates
`that fail in the R&D process, and the interest or
`time costs associated with the long investment pe-
`riod for new drugs. If this number were simply up-
`dated for general economy-wide inflation. the cur-
`rent cost of discovering and developing a new drug
`introduction would exceed $US300 million (1995
`values). However, there is reason to believe that the
`
`rise in R&D costs for new drugs significantly ex-
`ceeds general inflation.
`
`Figure I shows the annual R&D expenditures of
`Pharmaceutical Research and Manufacturers of
`
`America (PhRMA) member companies between
`1980 and 1992. It also shows the annual number of
`
`invcstigational new drug applications (INDAS) and
`new chemical entities (NCEs) approved by the US
`Food and Drug Administration (FDA). It indicates
`that R&D expenditures have increased several-fold
`since the early 1980s, while the annual numbers of
`lNDAs and NCEs have changed only moderately.
`DiMasi and colleagues at the Center for the
`Study of Drug Development are currently under-
`taking an update of their prior analyses of R&D
`costsm Although the issue of R&D costs is best
`analysed with a representative sample of NCES, the
`aggregate data series in figure 1 strongly suggest
`that R&D investment costs per new drug introduc-
`tion have continued to increase significantly in real
`terms over the past decade.
`What are the reasons for the rapid increase in
`R&D costs over time? Among the factors cited in
`the literature are increased research on drugs for
`
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`Research and Development Decisions
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`391
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`difficult-to-treat chronic diseases, higher discov-
`ery costs, and much higher out-of-pocket costs in
`the development phase.
`With respect to this last factor, various studies
`indicate that approved NCES now involve an in-
`creasing number of phase III trials, as well as an
`increasing number of patients per trial.‘-“"' This is
`an important reason to begin pharmacoeconomic
`studies early, so that the economic prospects of a
`new drug candidate can be evaluated before under-
`taking costly phase III trials.
`Another reason for beginning pharmacoecono-
`mic studies early is that returns on new drugs are
`highly variable. The distribution of returns across
`various cohorts of new drug introductions are
`highly skewed across NCEs.'7-3' For example, fig-
`ure 2 shows the present values of net revenue,
`grouped according to decile, for 1980 to 1984 US
`NCE introductions. The top decile has an estimated
`present value of net revenues that is more than 5
`times the average capitalised R&D cost. Hence,
`these products recoup a disproportionate share of
`the returns on R&D. Furthermore, only the top 3
`deciles have present values of net revenue that ex-
`
`ceed average R&D costs. The products below the
`third decile do not typically cover the average dis-
`covery costs or the costs of the large numbers of
`products that fail in the development process.
`This analysis indicates the importance of inno-
`vative drugs to a company’s returns on R&D and
`its ongoing viability in the phamiaceutical indus-
`try. In particular, companies must enhance the like-
`lihood of producing drugs with the economic char-
`acteristics of those in the top deciles if they are to
`earn positive, long tenn returns on their total port-
`folio of projects. Furthermore, most companies are
`dependent on a small number of very high volume
`products for the majority of their sales and profits.
`A large number of these blockbuster products have
`patents that are due to expire in the next few
`years,l9‘ with rapid sales losses now being com-
`monplace when gencric products enter the market;
`a recent analysis indicates that major products can
`be expected to lose more than 50% of their sales
`within the first few months of generic entry.'“"
`The implications of figure 2 can also be consid-
`ered from the perspective of public and private
`payers. Historically, the drugs in the top decile
`
`
`
`
`
`Alter-laxPV(SJSmlll|0l'lSL1990values)
`
`1200-
`
`7:588II
`
`Averaqe R&D cost
`
`Declle
`
`9
`
`10
`
`Fig. 2. Present values (Pvs) of alter-tax net revenue. grouped according to decile, for new chemical entities introduced in the US
`between 1980 and 1984.17‘ Abbreviation: R&D = research and development.
`
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`
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`392
`
`Grabowski
`
`have been the first or second products launched in
`their particular therapeutic class. They are typically
`launched at premium prices, and are the products
`that generally result in the rapid growth of phanna-
`ceutical budgets of payers. With the increased cost
`consciousness exhibited by payers in the 1990s,
`there is an increasing burden on companies to show
`that innovative new products really do provide sig-
`nificant value for money to users.“ '1 Products that
`cannot demonstrate this through superior therapeu-
`tic propenies will need to offer significant price
`discounts, relative to current entities, to be cost
`effective.
`
`A recent analysis of drugs launched in the US in
`I992 and 1993 shows that this competitive process
`is well under way."’] The vast majority of new drugs
`were launched at significant discounts relative to
`the market leader in their therapeutic class. In the
`markets of countries in which drug products are
`subject to price regulations and reimbursement
`controls, there is also a growing need for compa-
`nies to justify price premiums for innovative prod-
`ucts on the basis of cost effectiveness and other
`
`pharmacoeconomic analyses} ' " '31
`In this more competitive environment, it is in-
`cumbent on companies to undertake early strategic
`analysis of their R&D portfolios, with phar-
`macoeconomic analysis being one of its main tools.
`R&D resources should be directed towards prod-
`ucts that can provide users with high value for
`money. Early indicators, using pharmacoeconomic
`analysis, may identify products that cannot earn an
`acceptable rate of return and these should be can-
`didates for early termination.
`
`2. Pharmacoeconomics and the
`
`Drug-Development Process
`
`2.1 Early-Stage Development Planning
`
`The R&D process for pharmaceuticals involves
`sequential decision-making under uncertain condi-
`tions. At each stage, the company can incur incre-
`mental costs to obtain additional information and
`then decide whether it wishes to continue to the
`
`next stage.l"‘~'5l
`
`There are a set of natural decision points or mile-
`stones in this process. These involve the decision
`to establish a discovery programme in a particular
`disease area, to form a project team for preclinical
`development of a promising compound, the first
`human testing of the compound, the first efficacy
`testing in patients, the decision to undertake large-
`scale clinical testing, regulatory submission and
`marketing launch. As a compound moves through
`each stage of development, the resource commit-
`ments also grow significantly. This relates primar-
`ily to the increased number of patients and trials at
`each stage.‘
`Companies should begin internal modelling
`analysis on the cost effectiveness of a product well
`in advance of the go/no-go decision on phase III
`trials. Before committing major resources to a de-
`velopment project, a company should know the po-
`tential value of a new therapy. It is also important
`to understand, at an early stage, who the key deci-
`sion—makers are in selecting treatment regimens
`and how they are likely to weigh gains in clinical.
`economic or quality-of—life outcomes.
`The first step in this planning process is to un-
`dertake an impact analysis of the illness using cur-
`rent treatment options. The main objective of this
`analysis is to find out what factors account for most
`of the disease impact, and also to obtain a bench-
`mark on the cost effectiveness of current thera-
`
`pics.‘ '‘’-'7' Using information from the impact anal-
`ysis, a simulation model can then be constructed,
`which analyses the desired effects of the new drug
`candidate on the burden of the illness, using the
`target clinical profile. This model can be used to
`estimate both patient progression through the
`health states and the cost effectiveness of various
`
`options involving different assumptions about the
`efficacy, tolerability, pricing and formulation of the
`new therapy.
`
`First human testing (phase 1) is performed on a small
`I
`number of individuals to obtain safety infnnnation on dosage
`ranges. A few hundred individuals are required in first clinical
`trials that assess efficacy (phase ll). This leads to the key go’no-go
`decision point on whether to undertake (expensive) phase III
`testing on several thousand patients to show ‘substantial evi-
`dence‘ of tolerability and efficacy to regulatory authorities.
`
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`Research and Development Decisions
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`In the early stages of the R&D process, it is very
`important for the company to learn as much as pos-
`sible about the sensitivity of the product’s cost ef-
`fectiveness to changes in various parameters. This
`analysis must be done with reference to existing
`treatment options, and is incremental in nature (i.e.
`how much would the proposed product alter cost
`effectiveness compared with the usual standard of
`care and other products?).“"‘ If it is found, for ex-
`ample, that the cost effectiveness of the product
`under consideration is highly sensitive to the costs
`of treating adverse effects. this will be an important
`input to the target profile of the drug. In addition,
`this kind of information will be useful in planning
`data-collection efforts to ensure that the correct in-
`
`puts are obtained in the clinical trial process and
`from other data sources. The simulation model
`
`may also be useful in determining the indications
`toward which the drug should be targeted, if the
`analysis shows that the product could be especially
`cost effective for particular subpopulations.
`As an illustrative example, it is useful to con-
`sider the steps that are necessary to construct a sim-
`ulation model for a company considering a new
`antineoplastic therapy.’ The first step is to model
`the progression of patients through different health
`states, according to existing antineoplastic therapy
`regimens. Each state is associated with different
`costs and patients’ levels of well-being. Data inputs
`for the clinical parameters include the rates of pro-
`gression, mortality and adverse effects.“9] Costs
`analysed in the model include those associated
`with drug administration. treatment of adverse ef-
`fects, and treatment and monitoring of the under-
`lying disease symptoms. Data pertaining to clinical
`parameters and resource use can be obtained. at
`this stage, from the published literature, expert
`opinions and, possibly, patient questionnaires. The
`model provides outputs in terms of measures such
`as cost per increased year of survival (possibly
`quality-adjusted), and can be used to simulate the
`
`This pedagogical example is based on a discussion with
`2
`Dr Josephine Mauskopf of Glaxo Wellcome, Inc.. Research
`Triangle Park. North Carolina, US. which recently launched
`a product for non—small-cell lung cancer.
`
`cost effectiveness of a new treatment regimen with
`alternative profiles of clinical outcomes and eco-
`nomic values, and then to compare this with exist-
`ing treatments.
`Sharples et al.”‘’' developed a model ofthis kind
`in the area of transplantation, which investigated
`the primary clinical events after cardiac transplan-
`tation and linked them with survival and costs. Em-
`
`ploying a Markov modelling approach. they used
`observed survival rates, and estimated resource use
`
`and costs for patients in this environment. The
`model was estimated using data from a UK hospital
`that performs cardiac transplants. The authorsl2°‘
`showed how this model can be used to analyse the
`cost effectiveness of a proposed new immunosup-
`pressive therapy. This was accomplished by trac-
`ing its projected effects on the transition prob-
`abilities between disease states and the associated
`
`resource use and costs. This is another example of
`how a pharmacoeconomic simulation model can be
`utilised by companies in the R&D planning pro-
`cess to assess candidate drug treatments.
`This internal modelling analysis is not only use-
`ful in assessing the potential of self-originated
`drug candidates, but also those arising from licens-
`ing and partnership opportunities. The number of
`new products that originate outside the traditional
`pathways of the major company R&D organi-
`sations has grown dramatically in recent years,
`with the emergence of the biotechnology industry
`and related developments.'2” Agreements between
`companies are now structured with various mile-
`stones and key decision pointsml Pharmaco-
`economic analysis can be useful both for the nego-
`tiation of terms, and to facilitate the sale and the
`
`licensing out of compounds that the companies
`choose not to pursue.
`
`2.2 Strategic Planning and
`Go/No—Go Decisions
`
`The simulation model formulated in the earlier
`
`stages of development can be refined as clinical
`data become available, and used in conjunction
`with economic modelling to formulate a strategic
`action plan. In particular, the company can use it
`
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`Grabmvski
`
`with traditional retum-on-investment analyses that
`incorporate cost, demand and other relevant com-
`petitive considerations.““l Before making the
`go/no-go decision on phase III trials, it is important
`to determine whether the set of prices that can
`achieve the company’s target return on investment
`is feasible in terms of what payers are expected to
`pay, based on the product’s projected cost effec-
`tivencss.
`
`In a recent paper on clinical success rates,
`DiMasi[27" found that there is a clear tendency for
`economics to become an increasingly important
`reason for project termination as product candi-
`dates progress through the development cycle. In-
`deed. economics has become the leading cause of
`product terminations that occur 4 years or more
`after INDA f"iling.[23l For the 1980 to I984 cohort
`of INDA filings, 43% of these later-stage termina-
`tions were the result of economic factors. com-
`
`pared with 31% for efficacy problems and 21% for
`tolerability problems.
`Economics also accounts for an increasing rel-
`ative share of INDA terminations for recent time
`
`cohorts, compared with older ones. In this regard,
`economic factors explained 27% of all NCE termi-
`nations in the I980 to 1984 cohort, compared with
`22% for the cohort beginning a decade earlienml
`More significantly, at December 1993, economics
`was the cause of 29% of all research abandonments
`
`for the 1985 to 1989 cohort of INDA filings, al-
`though it should be noted that this is a relatively
`short time period to observe INDA terminations.
`As a consequence, there is still a large proportion
`of open INDAS, and the results for this cohort are
`biased toward causes that are revealed relatively
`soon after INDA filing (i.e. factors associated with
`tolerability and efficacy). Hence, the share of aban-
`donments related to economic factors can be ex-
`
`pected to grow significantly for this cohort as more
`time elapses.
`While the majority of projects are terminated
`before 4 years, and efficacy is the most important
`overall factor in project failures. the projects tenni-
`nated in the later stages obviously result in the larg-
`est financial losses to the company.
`
`DiMasi’s findingsml are consistent with the
`changing cost consciousness on the part of payers
`(section I). His findings also point to the increasing
`importance of utilising pharmacoeconomic analy-
`ses as a strategic decision—making input during the
`clinical trial period. As initial data on formulation,
`tolerability and efficacy become available from
`phase I and II trials, the modelling analysis of cost
`effectiveness that began in earlier periods (using
`best-guess estimates) must be updated in an itera-
`tive fashion. Information on resource use and costs
`
`should also be refined during this period. Ideally,
`uncertainty surrounding the project’s cost effec-
`tiveness and the likelihood of the company achiev-
`ing its rate-of-retum target can be substantially re-
`duced before undertaking expensive phase III
`clinical trials.
`
`Paul Freiman, former chief executive of Syntex
`Corporation, Palo Alto, California, has provided 2
`case-history examples of how pharmacoeco-
`nomics have helped to shape the R&D portfolio of
`that company (personal communication). The first
`product example involved a new cholesterol-
`lowering drug with a novel mechanism of action.
`about which the company’s scientists were very
`excited. The current group of major cholesterol-
`lowering drugs, the HMG-CoA reductase inhibi-
`tors, has an established market presence, with 4
`drugs launched between 1988 and 1994. Each suc-
`ceeding product entrant in this class has been
`launched at a significant price discount relative to
`
`the pioneer drug, lovastatin.[3‘” In addition, the pro-
`posed product would have had a limited time on the
`market before 2 of the leading products in this class
`experienced patent expiration. Accordingly, the
`analysis conducted on this project indicated that a
`significant therapeutic gain in terms of cholesterol
`lowering, and thus mortality. was necessary for the
`new product to be both profitable and cost effec-
`tive. When the early clinical trials showed that, des-
`pite its novel mode of action, the product was only
`expected to be similar to existing entities in terms
`of efficacy and other key properties, it was termi-
`nated.
`
`to Adis International Limited. All rtgits reserved.
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`Research and Development Decisions
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`395
`
`The second case history involved the develop-
`ment of an antiemetic drug in the serotonin; (5-
`hydroxytryptamineg; 5-HT3) receptor antagonist
`class. This is a relatively new drug class, with only
`2 products on the US market in the first part of the
`l990s, ondansetron and granisetron. Animal data
`suggested that the proposed product would have a
`significant incremental gain in efficacy over these
`existing products. However, a specific, larger gain
`in efficacy was projected as being necessary for
`this product to demonstrate cost effectiveness at
`the price level that would be profitable on rate-
`of-return grounds. This outcome reflected the mar-
`keting lag of the product relative to the first 2 en-
`trants, as well as other economic considerations,
`
`such as the patent expiration dates of the early en-
`trants. Accordingly, when the targeted gain in effi-
`cacy was not realised in phase II studies, this pro-
`duct was terminated before undertaking major
`phase III clinical trials.
`Of course the use of pharmacoeconomics is not
`restricted to terminating uneconomic projects. For
`example, early modelling may indicate that a pro-
`duct candidate is highly cost effective compared
`with existing entities for a wide range of values
`centred around the target clinical profile. This in
`turn may result in higher projected market size
`and/or price for the product and cause the firm to
`assign a higher priority status to the project in its
`overall development programme.
`These examples show how pharmacoeconomic
`analysis can be employed in the R&D process to
`focus the company’s phase III development efforts
`on those projects with the greatest potential to be
`both technically and economically successful.
`Many products that were clearly profitable to de-
`velop in periods before cost constraints were com-
`mon (e.g. products with novel modes of actions,
`incremental advances in efficacy, etc.) now de-
`serve greater attention by drug companies, as buy-
`ers increasingly demand evidence that the pur-
`chase of new products is really cost effective
`and/or cost beneficial. In response to this new
`environment, many companies are now in the
`process of streamlining their development pro-
`
`gramme into fewer projects with more intensive
`resource commitments.l35-3°‘ Pharrnacoeconomics
`
`has an important role to play in the ‘weeding out’
`process, in conjunction with traditional return-
`on-invcstment analyses.
`
`2.3 Concerns and Qualifications
`
`2.3.1 Adequacy of Data
`To many company scientists, R&D directors
`and executives.
`the use of pharmacoeconomic
`analysis as an integral part of the go/no-go decision
`may be controversial. For one thing, it can be ar-
`gued that there will be too much uncertainty, at this
`point, about a product’s cost effectiveness to make
`a decision using available data. This may be true
`much of the time, but even if this is so, the company
`has little to lose from integrating pharmacoecono-
`mic analysis into the strategic decision-making
`process. As discussed. the analysis can be highly
`beneficial in targeting information that should be
`collected in phase Ill clinical trials and from other
`sources, in order to demonstrate cost effectiveness
`
`to prospective users. In addition, the cost of inter-
`nal modelling analyses, undertaken to this point, is
`likely to be small compared with the costs of un-
`dertaking clinical trials.
`As several
`researchers have observed,
`
`the
`
`randomised clinical trial design, while being the
`best approach to evaluate a product’s efficacy, pro-
`vides an artificial environment in which to observe
`
`many of the key inputs necessary for cost effective-
`ness and other pharmacoeconomic analysis.'37-331
`The problems include the use of placebo compara-
`tors in clinical trials rather than the usual standard
`
`of care, a focus on intermediate endpoints rather
`than ultimate health outcomes, the use of nonrcp-
`resentative populations, and the employment of ex-
`traordinary measures to ensure patient compliance
`with treatment regimens. As a consequence. phar-
`macoeconomic analysis typically requires signifi-
`cant data collection outside the clinical trial setting
`
`(and/or modelling) to supplant the evidence on ef-
`ficacy that arises from clinical trials.
`
`Co Adls lntemallonol Umited. All rights reserved.
`
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`Gmbowski
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`2.3.2 Inappropriate rermlnafion
`A second issue concerns the risks of terminating
`a project. identified as a likely loser. that could
`have resulted in a successful product. There are
`clearly 2 types of errors present in this situation.
`While the risk of prolonging projects that would
`ultimately be unsuccessful is reduced. the possibi-
`lity of terminating projects that would ultimately
`have proven to be successful is increased. The com-
`pany obviously must strike a balance between these
`2 types of errors.
`Some products introduced for one indication
`find an important use for another
`indication
`through serendipity in the clinical use of a product.
`To the extent that this is an important, but totally
`unpredictable, discovery pathway, attempts to
`make the decision process more rational and objec-
`tive (from the perspective of company decision-
`makers) may lead to inadvertent costs in the form
`of lost products (from society’s perspective).
`It is a principal thesis of this article that there
`are large benefits to be gained from identifying and
`terminating uncompetitive projects sooner, and
`that this issue warrants priority attention in the
`pharmaceutical
`industry. Several
`indicators are
`consistent with this point of view, including the
`growing percentage of NCE projects that are ter-
`minated in phase 111 because of economic factors,
`the failure of most NCES to fully recover R&D
`costs, and the continued introduction of many
`closely related products into crowded therapeutic
`classes. These trends were less of an issue to indus-
`
`try decision—makers in the 1970s and 19805, when
`expenditures on healthcare services were growing
`at double—digit rates. However, with the current
`pressures and constraints on healthcare expendi-
`tures in virtually all developed countries, it is pru-
`dent for companies to reconsider their R&D allo-
`cation decision-making as they have recently done
`with other areas of their business operations.
`
`2.3.3 Appropriate Use of Economics
`
`A final key issue is whether pharmacoeconomic
`analysis is really being used by decision—makers in
`the healthcare field to make product selection and
`utilisation decisions. If not, how can companies
`
`justify using them internally in R&D allocation de-
`cisions? We recently organised a conference at
`Duke University (Durham, N.C., USA) on the use
`of pharrnacoeconomic analysis by public and pri-
`vate decision-makers in the US and 6 other coun-
`
`tries. The resulting papers will be published
`soon.“” As expected, we found that the use of
`phannacoeconomic analysis in healthcare alloca-
`tion decisions is very mixed in nature.
`Managed care organisations (MCOs) in the US
`are clearly at the forefront, on the demand side, in
`applying these studies in drug adoption and utilisa-
`tion decisions.”'’' A high percentage of MCOS re-
`ported using external assessments in their drug-
`adoption and formulary decisions. At the same
`time. our symposium pointed to some definite hur-
`dles and barriers to the use of pharmacoeeonomie
`studies in both the public and private sectors. The
`expressed concerns ranged from methodological
`issues to questions about the relevance, timeliness
`and credibility of these studies. A discussion of all
`the relevant issues is beyond the scope of this arti-
`cle, but the core issues have recently received con-
`siderable attention in the literature.‘3°-3”
`
`Despite the expressed concerns, there is a strong
`prevailing view among the private-sector decision-
`makers who were surveyed in our symposium vol-
`ume (and several public-sector ones as well) that
`the importance of pharmacoeconomic analysis in
`healthcare decisions will evolve and grow rapidly
`in the future. Given the long timeframes associated
`with R&D decisions, it behooves pharmaceutical
`companies to begin internalising these approaches
`into their R&D allocation decisions.
`
`3. Conclusions
`
`The pressures on pharmaceutical companies to
`demonstrate the cost effectiveness of their new
`
`product introductions will only intensify in the
`coming years. Almost all major companies have
`recognised this fact and have begun to invest large
`sums in health economic analysis. However, to
`date, most of this effort has started late in the de-
`
`velopment process and has been done in an effort
`
`© Ads Inlernatloncl Llrnited. AI rlghts reserved.
`
`Phcumacoeconomics 1997 May; 11 (5)
`
`Page 8 of 9
`
`

`
`Research and Development Decisions
`
`397
`
`to influence product adoption and reimbursement
`decisions.
`
`The use of pharmacoeconomics in R&D plan-
`ning and selection decisions has been more limited
`in nature. Nevertheless, there is a strong rationale
`for integrating phannacoeconomic analysis di-
`rectly into strategic decision-making, starting as
`early as possible in the R&D process. As the eco-
`nomic hurdles for new products continue to rise,
`pharmacoeconomics has a key role to play in shap-
`ing the target profile of a new drug and helping to
`ensure that a company's R&D resources are being
`committed to those projects that are the most likely
`to produce a positive return on R&D investment.
`
`[xi
`
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