risk management in the pharmaceutical industry_john bennett

Risk Management in the Pharmaceutical Industry

Dr John Bennett

JABPharma Consulting

© Risk Decisions, 2010

Overview

•

Pharmaceutical Industry Background⎯

Drug Research and Development Processes⎯

Industry Challenges and trends

•

Risk Management Maturity


•

Internal⎯

Continued high failure rate / attrition• No Research organisation can sustain company needs

⎯

Increasing development costs • Single programmes are costing $7-800m in OOP$

⎯

Decreasing productivity

•

External⎯

Fierce competition• Patent expirations & generic competition

⎯

Increasing pressures to reduce healthcare spend.⎯

Litigation⎯

Emerging markets offer huge opportunities

3

Environment



4Distribution of UK850 R&D expenditure 2007



5Distribution of G1400 expenditure 2007



6

Growth in R&D expenditure by sector across UK850 (2003-07, £m)



7

Growth in R&D expenditure by sector across G1400 (2003-07, £m)



8

UK850 Pharmaceutical sector


R&D spendR&D spend((££m 2007)m 2007)

R&D as % of sales R&D as % of sales (% 2007)(% 2007)

% Growth % Growth

from 2006from 2006

GlaxoSmithKlineGlaxoSmithKline 32463246 14.314.3 ‐‐66

AstraZenecaAstraZeneca 25332533 17.117.1 3030

ShireShire 261261 21.321.3 7272

PfizerPfizer 258258 19.919.9 ‐‐3030

RocheRoche 163163 34.834.8 1515

Total top 5Total top 5 64616461 16.016.0

Total Total ‐‐

sectorsector 79137913 15.315.3


9

G1400 Pharmaceutical companies


R&D R&D ((££m 2007)m 2007)

% Growth from % Growth from

2006 2006 CountryCountryPfizerPfizer 4063.64063.6 6.46.4 USAUSA

Johnson & JohnsonJohnson & Johnson 3858.13858.1 7.87.8 USAUSARocheRoche 3679.93679.9 25.925.9 SwitzerlandSwitzerland

SanofiSanofi‐‐AventisAventis 3351.53351.5 3.63.6 FranceFranceGlaxoSmithKlineGlaxoSmithKline 32463246 ‐‐6.16.1 UKUK

NovartisNovartis 32223222 21.121.1 SwitzerlandSwitzerlandAstra ZenecaAstra Zeneca 25332533 29.829.8 UKUK

MerckMerck 24532453 2.12.1 USAUSA


10

Key parameters relative to 1996


1996 spend 50% higher than 19911996 output 70% of 1991 value

CMR


The drug discovery and development processThe drug discovery and development process

Research Development

0 155 10

Patent life 20 years

Registration

First administer ed to Humans

Paten t Filed


Drug Development Phases

Clinical EvaluationClinical Evaluation

Phase I 10’s

Healthy volunteer

s

Phase I 10’s

Healthy volunteer

s

Phase II100’s

Patients

Phase II100’s

Patients

Phase III1000’s

Patients

Phase III1000’s

Patients

Safety, ADME

Preliminary Efficacy & SafetyDosing Regimen

Long Term Efficacy & Safety Global

Comparative StudiesHealth Economics

Pre-

clinical Evaluation

Pre-

clinical Evaluation

1-2 years 1-4 years 2-5 years


0

100

200

300

400

500

600

700

800

900

1000

0

2

4

6

8

10

12

14

16

18

20

1 2 3 4 5 6 7 8 9 10 11 12

Cost

Surv

ival

Pre-clinical Phase I Phase II Phase III Approval / Launch

Survival of candidates and cost of development

Years after nomination

($m)


14

Portfolio / project cost model


$0

$20

$40

$60

$80

$100

$120

$140

$160

$180

$200

PreClin P I P IIa P IIb P III REG

CandidatePortfolio


Risk Management

•

Macro⎯

Sharing risk at project / programme / corporate level

•

Operational / technical⎯

Time Cost Quality Value

•

Product Safety⎯

Protecting patients, avoiding harm


Macro Risk Management•

Marketing agreements have been in place for years⎯

Geographical reach⎯

Field force size

•

Historically relatively few R&D agreements⎯

Usually single products between small pharma / biotech and large pharma.

⎯

Driven by capability & capacity


•

Now - Huge increase in partnerships / networks⎯

AZ – ‘working with 1000 companies’⎯

Individual project alliances• Pfizer / BMS - Apixaban

Therapeutic alliancesPfizer - GSK therapeutic alliance on HIV

Emergence of other investors / paradigmsEnd of fee for service relationship with contract organisations?

Lily / CovanceAZ / Quintiles‘Lily looking to find additional funding rather than partner’

17

Macro Emergence of risk sharing



18

Pfizer partnerships


1985 1990 1995 2000 2001 2002 2003 2004 2005 2006 2007 2008

CamptosarInspra

SutentLipito r

Celebrex

Aricept

Zithromax

Genotropin Eraxis Fesoterodine

Rebif

Spiriva

Macugen

Bend BMSApixaban

Transtech Cytos

Gene Logic Meridica

Celldex WuXi Rige l

Incyte

Quark Adolor

Icage n

Vicuro n

Taisho

Medivation

Scil

Five Prime

Launched / Approved

Pipeline / technology


•

Large Pharma companies no longer ‘full thickness’ R&D organisations

•

Reduced ‘fixed cost’

•

Increased flexibility to manage swings in demand

•

Increased capability in CRO world⎯

Companies that can do / manage everything

•

Go east⎯

More clinical trials in emerging markets⎯

Moving away from ‘established’ countries

19Macro Continued rise in outsourcing



20

Balance of in house and outsourced spend ($bn)


Clinical Development spend

Outsource percent


Operational Risk Management•

Risk Management practices still basic.⎯

Many companies have PRAM like processes⎯

But not convinced that they are consistently and effectively applied

•

Quantitative approaches (e.g. Monte Carlo) rare⎯

Not believed or trusted

•

Use of ‘State of the Art’ tools very rare (if at all)

•

‘Majority (over 90%) of clinical trials do not meet their timeline targets’⎯

Unrealistic Planning?⎯

Impact of uncertainties and risks⎯

Unable to take advantage of opportunities.


•

Sharing of project or risk management plans with outsource partners is rare.⎯

Not very open discussions⎯

Risk is a ‘bad thing’ – can’t admit that we don’t know what we’re doing’⎯

‘Up to the contractor to sort out’

•

Need for integrated planning and project management that involves all partners

Operational Risk Management


•

Pharmaceutical R&D is very ‘risky’⎯

High project ‘attrition’, very costly, uncertain commercial value.⎯

Most projects do not meet their operational targets⎯

But Product Risk is very thorough.

•

High Rewards for success⎯

Patient benefit⎯

Commercial value

•

‘Room for improvement’ needed in managing risk

23Summary


risk management in the pharmaceutical industry_john bennett

Documents

years risk decisions

usausa risk decisions

valuecmr risk decisions

preclin p i p iia p

costsurvivalpreclinical

shealthy volunteer s

jabpharma consulting1996

research organisation