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Tufts: Billions wasted in pharma R&D despite new biz models

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Pharma outfits have engineered all kinds of newfangled strategies to streamline aspects of drug R&D, yet many of these approaches fail to fix broken areas of development that cost companies billions of dollars.

Ken Kaitin, director of the Tufts Center for the Study of Drug Development, delivered this sobering assessment a day before his group delivered this morning its Outlook 2013 on research, regulatory and reimbursement issues facing the industry.

"You can't change your R&D model and find new leads for compounds to bring into the clinic and plug them into the old process for developing new products and expect that your company is going to do better," Kaitin told FierceBiotech in an interview.

Kaitin's group expects pharma outfits to emphasize academic collaborations in 2013 in a continued march back to campus to find new drug leads. Yet he also highlighted an up to $6 billion annual problem that stems from unnecessary procedures in clinical trials. New discovery tie-ups with academics, of course, won't rid that waste.

Which comes back to the growing problem of the rising cost of drug R&D. In 2007, Kaitin says, Tufts analyzed the situation and estimated that the average cost of bringing a new drug through development was $1.3 billion. Based on recent studies we know that figure has jumped, and part of the problem is the high rate of failures in the clinic. Expect Tufts to update its highly cited R&D cost figures later this year, he notes.

To reduce failures, Kaitin's group expects pharma to cut the guesswork or trial-and-error approaches in favor of biomarkers, modeling and simulation, dynamic study designs and other methods to boost success in trials. He's also pushing for companies to expand the use of adaptive trials, which have seen more action in the first and second phases of clinical development than Phase III where failures and waste cost the most. He prescribes more adaptive protocol designs in late-stage studies.

Not surprisingly, he also noted the growing influence of payers on pharma research.

"Companies are increasingly going to have to demonstrate value in their products. And that has been a challenge for many years for many companies but I think it's getting much more critical for companies not to just demonstrate safety and efficacy for new products but also demonstrate value."

Get ready for a standoff between biopharma and payers.

"Payers are currently stressed by a relatively few number of very expensive medicines that are on the market," Kaitin says. "But when you look at the portfolio of many companies, a large number of them are focusing on targeted therapies for severely debilitating and life-threatening diseases. And their expectation is that when those products reach the market, they're going to be able to charge premium prices for those products, which may in fact break the bank of many of these payers."

"So I think there's going to be a standoff at some point," Kaitin says, "where the payers are going to have to make some very clear decisions about what products they are going to cover and reimburse."

Many "neglected" diseases aren't so neglected anymore as pharma outfits plow billions of dollars into development of targeted therapies for niche cancer indications and rare genetic diseases. Given the growing number of new cancer drugs winning approvals, the Tufts group predicts that payers will take a tougher stance on reimbursement for oncology therapies with small benefits for patients.

The bottom line: Pharma companies need to continue to adapt their R&D games to control rising costs and lower failures in the clinic and after approvals. -- Ryan McBride (email | Twitter)