The Value of Medical Innovation Council of State Governments September 20, 2013 Rich Bagger, Senior Vice President Celgene Corporation
The Paradox of Medical Innovation: The Promise of Medical Science Has Never Been Greater … 2
…Yet There is Great Concern About Whether Innovation is Affordable and Sustainable Doctors Denounce Cancer Drug Prices of $100,000 a Year Editorial Exorbitant Prices for Leukemia Drugs By THE EDITORIAL BOARD Published: May 1, 2013 3
We Are at a Critical Crossroads for Medical Innovation A MAJOR PARADOX The potential But the outlook for investment has of science is never been more greater than uncertain ever … R&D Investment Longer, Better, Healthier Lives Source: Celebration of Science. Available at www.celebrationofscience.org/about. Accessed 9/10/12. 4
The Value of Medical Innovation: Living Longer, Better & Healthier Lives Medical Innovation Involves High Risks and Long Time Horizons Track Record of Success The Promise of Medical Science Medical Innovation Drives Economic Growth and Societal Benefit Delivering on the Promise for Patients 5
It Takes 12 Years or Longer to Bring a New Treatment to Patients The Drug Development Pyramid Years 12 Product Introduction Phase IV 11 surveillance Registration 1 10 Phase III 9 2 Clinical Tests 8 (Human) Phase II 7 2-5 Development 6 5-10 Phase I 5 Preclinical 10-20 Tests 4 Substances (Animal) 3 Basic Synthesis, 2 10,000-30,000 Research Examination Substances 1 & Screening 0 Source: Briggs A. Effective Use of Health Technology Assessment to Maximize Market Access: Start Early and Update Often. Oxford Outcomes (an ICON plc Company). Available at http://www.iconplc.com/icon-files/insight-newsletter/June11/effective.html. Accessed 11/16/12. 6
Drug Development Costs Reach New Highs The average cost to develop one new approved drug – including the cost of failures – increased approximately 50% between the late 1990s and early 2000s Drug Development Costs $800 m $1.2 b $320 m $140m Source: DiMasi JA, Hansen RW, and Grabowski HG. The Price of Innovation: New Estimates of Drug Development Costs. J Health Economics. 2003 (22); 151 – 185. Note: Data for early 2000s is adjusted to 2000 dollars based on correspondence with study author. DiMasi JA and Grabowski H. The Cost of Biopharmaceutical R&D: Is Biotech Different? Managerial and Decision Economics. 2007 (28): 469 – 79. 7
New Cancer Therapies Face High Clinical Hurdles Higher Overall Success by Disease 15% 14% 13% 12% 12% 11% 7% 7% 4% 3% 3% 2% 2% 2% Infectious Endocrine Autoimmune Respiratory Neurology Cardiovascular Oncology Disease Lead Indications Secondary Indications Source: BIOtech Now. Clinical Success Rate by Disease Area. Available at http://www.biotech-now.org/events/2011/02/release-of-biobiomedtracker-drug- approval-rates-study/attachment/clinical-success-rate-blog-pic-2. Accessed 11/15/12. 8
Even After Approval, Few Medicines Recover Their R&D Costs 2000 Just 2 in 10 Approved Medicines Produce 1500 Revenues that Exceed Average R&D Costs $M 1000 After-T ax Average R&D Costs 500 0 1 2 3 4 5 6 7 8 9 1 0 New Medicines Introduced Between 1990 and 1994, Grouped by Tenths, by Lifetime Sales Source: Vernon JA, Golec JH and DiMasi JA. Drug development costs when financial risk is measured using the Fama-French three-factor model. Health Economics. 2009; 002-5. 9
Limited Time for Innovators to Recover R & D Investment Developing a new medicine takes an average of 10 – 15 years; the Congressional Budget Office reports that “relatively few drugs survive the clinical trial process.” Discovery and Brand Generic Development Commercializatio n Preclinical Clinical FDA Trials Review & Scale- up to Mfg. ~5,000 – One FDA- 10,000 5 Approved Compound Compounds Pre- Therapy s Discovery NDA SUBMITTED IND SUBMITTED PHASE I II III Number of Volunteers 20- 100- 1,000- 100 500 5,000 3 – 6 6 – 7 0.5 – 2 10 – 12 Indefinite Years Years Years Years Source: Drug Discovery and Development: Understanding the R&D Process. Available at www.innovation.org. Accessed 11/15/12. CBO, Research and Development in the Pharmaceutical Industry, 2006. 10
Majority of Biotechnology Investors Fail to Recoup Their Investment Investors who Investors who failed to recouped at least recoup their their initial investment investment 44% 56% In a study of 180 biotechnology companies, less than half of the investors recouped the money they had invested Source: Biotech M&A Review. Windhover Information 2008 11
The Value of Medical Innovation: Living Longer, Better & Healthier Lives Medical Innovation Involves High Risks and Long Time Horizons Track Record of Success The Promise of Medical Science Medical Innovation Drives Economic Growth and Societal Benefit Delivering on the Promise for Patients 12
Longer Life Through Better Medicines 1900-2010 Deaths per Life 100,000 Expectancy people >62% >96% Increase Decrease 1987 – 1936 – Yellow Azidothymidine Fever vaccine (first HIV treatment) 1908 – First large- 1930s – 1974 – 1955 – Polio scale adoption of Pertussis Meningococcal water chlorination vaccine vaccine disease vaccine 1940s – Penicillin 1921 – Diphtheria first used as a 1963 – Measles 1985 – Influenza and TB vaccines treatment vaccine vaccine 1935 - Sulfa drugs (first antibiotic) 1995 – Hepatitis A vaccine Source: The Hamilton Project at the Brookings Institution. Available at http://www.hamiltonproject.org/multimedia/charts/deaths_from_major_infectious_disease/. Accessed on 11/1/12. 13
New Therapies are the Greatest Contributor to Increased Life Expectancy 73% 45% New therapies account for 73% New drugs account for 45% in the increase in life in the increase in life expectancy expectancy Source: Lichtenberg FR. NBER Working Paper No. 18235. Pharmaceutical innovation and longevity growth in 30 developing and high-income countries, 2000-2009. 14
Impact of New Therapies on Death Rates 1,500 80,000 70,000 1,300 Mortality Rate 60,000 1,100 (All Causes) 50,000 900 Millions Deaths Per 40,000 of Dollars 100,000 700 30,000 500 20,000 R&D in Millions 300 10,000 100 0 Source: Centers for Disease and Prevention’s National Center for Health Statistics. Health, United States, 2011: With Special Feature on Socioeconomic Status and Health. Available at http://www.cdc.gov/nchs/. Accessed 11/16/12. PhRMA Annual Reports 1960-2010. Available at www.phrma.org. Accessed 11/16/12. 15
Decline in Death Rates from Leading Causes 1960-2011 10 Liver Disease 13 15 Pneumonia & Influenza 54 2011 22 Diabetes 23 1960 38 Stroke 178 169 Cancer 194 173 Heart Disease 559 0 100 200 300 400 500 600 Deaths Per 100,000 Source: Centers for Disease Control and Prevention and National Center for Health Statistics. National Vital Statistics System. 2011. Available at http://www.cdc.gov/nchs/data/nvsr/nvsr61/nvsr61_06.pdf#page1. Accessed 11/12/12. 16
The Value of Medical Innovation: Living Longer, Better & Healthier Lives Medical Innovation Involves High Risks and Long Time Horizons Track Record of Success The Promise of Medical Science Medical Innovation Drives Economic Growth and Societal Benefit Delivering on the Promise for Patients 17
Investment in Medical Innovation: Outpacing Moore’s Law 100,000.00 Today, it takes 6 hours and 13 years $900 to read 150 million 10,000.00 ~$3,000,000,000 bases of genetic code 1,000.00 100.00 $ Millions 10.00 Moore’s Law 1.00 0.10 <2 weeks 0.01 ~$10,000 0.001 1990 2001 2007 2009 2012 Source: Life Technologies. Available at http://www.lifetechnologies.com/us/en/home.html . Accessed 11/16/12. National Center for Human Genome Research Institute. Available at http://www.genome.gov/. Accessed 11/16/12. 18
Medical Innovation is Increasing Patient Survival Cancer-Related Death Rates Have Declined Since 1990 220 Deaths per 100,000 200 180 160 140 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 As Cancer Patients Live Longer 5-Year Survival Rates (%) 80 67 70 63 61 60 56 60 53 50 49 49 50 40 1975-1977 1978-1980 1981-1983 1984-1986 1987-1989 1990-1992 1993-1995 1996-1998 1999-2008 Source: National Cancer Institute, Surveillance Epidemiology and End Results (SEER). Available at http://seer.cancer.gov/faststats/selections.php?. Accessed 11/1/12. 19
Cancer Innovation Tells the Story 1.0 U.S. 0.5 Annual War on Percent 0.0 Cancer – 1972 Change in Death Rate -0.5 from Cancer -1.0 -1.5 -2.0 Death Rate from Cancer Has Been on the Decline for Over 30 Years Source: Kort EJ, Paneth N, Vande Woude GF. Cancer Res. 2009;69:6500-6505. 20
Case Study: Survival Rate for Multiple Myeloma Patients Soar with New Innovative Therapies 50% 5-year relative survival rate, myeloma INCREASE 1992-2008 5-Year Survival Rates (%) Year of diagnosis Source: National Cancer Institute, Surveillance Epidemiology and End Results (SEER). Available at http://seer.cancer.gov/csr/1975_2009_pops09/browse_csr.php?section=18&page=sect_18_table09.html. Accessed 10/31/12. 21
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