The Innovation Dilemma

Amitabh ChandraHARVARD UNIVERSITY

Innovation

Proton Beam Accelerator Facilities Operating, Planned, or Under Construction

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15

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1990 1995 2000 2005 2010 2015 2020

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Oncology is the Largest Area of Focus in R&D

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Source: IMS Institute for Healthcare Informatics. Innovation in Cancer Care and

Implications for Health Systems: Global Oncology Trend Report. May 2014.

Number of active products in the pipeline to date = 6,234

Over the Next 5+ Years, Combinations of Targeted and Immuno-Oncology Agents will Account for Many

NME Launches

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Expected Combination Regimen Launches in Oncology

Source: IMS Institute for Healthcare Informatics. Developments in Cancer Treatments, Market

Dynamics, Patient Access and Value. Global Oncology Trend Report 2015. May 2015.

Annual Cost Of Recently Approved Oncologic Drugs

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Source: Hirsch BR, Balu S, Schulman KS, et al. The Impact of Specialty Pharmaceuticals as Drivers of Health Care Costs. Health Affairs.

2014;33:1714-1720.

Attrition Profiles Across Therapeutic Areas

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Source: Calcoen D, Elias L, Yu X. What Does it Take To Produce a Breakthrough Drug? Nature Reviews Drug Discovery. 2015:(14)161–162.

Potential Combination Therapies Launching by 2021

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Source: IMS Institute for Healthcare Informatics. Global Oncology Trend Report 2015. May 2015.

• ACA will increase innovation

• expanded market-size

• reforms increase value of insurance

• 21st century cures act will increase

innovation

• Personalized medicine will

increase price

• Multi-Manufacturer Combination

therapies will increase price

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Monthly and Median Costs of Cancer Drugs at the Time of FDA Approval

1965-2015

Year of FDA Approval

1970 1980 1990 2000 2010

Mo

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$1

$10

$100

$1000

$10000

$100000

Individual Drugs

Median Monthly Price (per 5 year period)

Source: Peter B. Bach, MD, Memorial Sloan-Kettering Cancer Center

Monthly and Median Costs of Cancer Drugs at the Time of FDA Approval 1965–2015

• US has revealed an infinite appetite for innovation– unsurprisingly, manufacturers deliver what we’re willing to pay for.

• Efforts to reform delivery system are small relative to getting the right type and price of innovation.

• Current efforts to reduce prices have a ‘something for nothing’ flavor: Medicaid rebates, price transparency, indication based pricing, cost-based reimbursement, will all miss the mark

• No substitute for asking whether price of innovation is worth its benefit.

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Source: Chandra A, Shafrin J and Dhavan R. Utility of Cancer Value Frameworks for Patients, Payers, and Physicians. JAMA May 17, 2016, Vo 315, No 19

Comparison of Incremental Survival Improvement and Cost of Treatment for Several Cancer Drugs Across Different Approved Indications

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Plus a Hypothetical

Scenario in Which Price Is

Set per Indication to Yield

the Same Total Treatment

Cost per Median Benefit

(Indication-Specific

Pricinga)

Source: Bach P. Indication Specific Pricing for Cancer Drugs. JAMA. October 2014;312(16)129-130.