May 4, 2016 edition of the ‘MIT Technology Review’ published an interesting article carrying the headline, “The World’s Most Expensive Medicine Is a Bust”.
The obvious question that floats at the top of mind: What is this most expensive drug in the pharma history, and why has it failed commercially, despite being a product of disruptive innovation and a marvel that stands out in the space of contemporary drug innovation?
The product is called Glybera (alipogene tiparvovec). It heralded the dawn of the “first gene therapy” in the Western world, whose approval helped ignite an explosion of investment and excitement around treatments that correct DNA, as the MIT article said.
Glybera promises to cure rare inherited diseases with one-time repairs to a person’s DNA. A single dose of gene therapy can change the genetic instructions inside a person’s cells in ways that last many years, or even a lifetime.
Interestingly, even with this unprecedented product offering, the product has become a commercial flop, due to its staggering million-dollar price tag, which very few patients can afford.
Is this an extreme example of price-value relationship for a new breakthrough pharma product? Yes, of course! Nevertheless, it makes us ponder on some key fundamentals, afresh, such as:
- The core purpose of drug innovation
- The price-value relationship of even breakthrough drugs
The proper understanding of these points comprehensively, especially the above two fundamentals, would enable the drug companies to achieve both, the core purpose of intricate drug innovation initiatives, and also making these medicines commercially successful with increased access to patients, through innovative ‘value delivery’ mechanisms.
I believe, the pharmaceutical industry is now at the threshold of a paradigm shift. The new paradigm would signal a metamorphosis in the price-value equations for all drugs, mostly due to changing socio-political environment, across the world, as we have started witnessing in the topmost free economy of the world – the United States.
Pharma business is a ‘value delivery system’:
Way back in June 2000, an article published in ‘McKinsey Quarterly’ on delivering value to the customers, deliberated on a 1988 paper of Michael J. Lanning and Edward G. Michaels. The study combines the value-maps developed in the price-value models with the idea of the “business system,” which was introduced in 1980.
The paper titled, “A business is a value delivery system,” emphasizes the importance of a clear, well-articulated “value proposition” for each targeted market segment. This means a simple statement of the benefits that the company intends to provide to each segment, along with the approximate price the company will charge each segment for those benefits.
Looking at this concept in pharma perspective:
Keeping the above paper in perspective, when we look at the pharma value delivery system, besides the key benefits that a drug offers, one of the most critical value parameter continues to be the financial value...............
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