Industry Leaders Push For “Disruptive Innovation” At Biovision

EU stakeholders see “disruptive innovation” in life sciences as a means of exiting the sector’s economic crisis. While pharma says that process comes at a high price, other players see it as a means of cutting costs.

The European pharmaceutical industry wants a collaborative approach to addressing “disruptive innovation,” a broad term originally coined to describe innovation that makes products more affordable and available. The phrase has become more loosely defined today and industry sees it as a key tool to break away from economic austerity, to secure meaningful returns and safeguard the future of R&D. Still, different interpretations of the costs associated with disruptive innovation could make this goal difficult to achieve.

Sanofi CEO Christopher Viebacher told delegates to Biovision 2014's opening plenary session in Lyon, France on June 5 that he shared governments’ views that disruptive innovation was a means of exiting the current period of economic austerity.

“Disruptive innovation means there has been a break from what we know,” he said. But it was clear from the follow-on discussion that his views did not equate to lower costs or margins for the industry. Nor did the CEO address the subject of affordability, which is a fundamental aspect of Harvard professor Clayton Christensen’s description of disruptive innovation.

Viehbacher’s interpretation of the phrase was more about cost recuperation, and devising and developing products that would be better suited to navigating through increasingly complex health technology assessment processes.

His aim appears to be to push disruptive innovation as a means of improving pharma’s disappointing performance of the last decade. “Although we have seen about 400 new drugs approved, really only about 20% of those drugs ever recovers their cost in research and development. In fact for probably every euro we spend on R&D, we only get about 70 eurocents back,” Viehbacher said.

Because the previous model has run out of steam, disruptive innovation is gaining significance, he added. “Part of that is because we are not getting a return on our investment, but the second is that payers can certainly put much more pressure on,” Viebacher said.

Essentially, economic hardship and the consequent focus on cost containment through more stringent health technology assessment have given rise to a different way of thinking in the area of R&D.

Still, there exist wide-ranging discrepancies over what the term ‘disruptive innovation’ really means. And unless parties agree a uniform definition, it is difficult to see how this can become a future platform for R&D, much less how stakeholders can move together towards collaboration.

Simpler, Cheaper And Good Enough

The theory was first coined by Christensen in his research on the disk-drive industry and later popularized by his book The Innovator’s Dilemma, published in 1997. For Christensen, disruptive innovation is a positive force involving innovations that transform sectors to make products affordable and convenient, thereby making them available to a much larger population.

So it is not surprising perhaps that interpretation of the process’s impact on the life sciences field has come to focus on cost or, more specifically, on payment.

James Barlowe, Professor of Technology and Innovation Management stressed to conference participants that technological innovation in healthcare is a double-edged sword. “We all want it and need it ... but it's also a problem for taxpayers and for governments because it drives up costs,” he warned.

Barlowe said this was why disruptive innovation had become so important, while also becoming more loosely defined. Whereas today it is being touted as any kind of innovation that breaks from the past, this was not Christensen’s original meaning.

“It is really all about moving away from very high cost, high-tech and possibly over-specified models of services or products towards versions that are simpler and cheaper, but good enough for people,” Barlowe explained.

He went on to describe examples in developing countries, such as the introduction of the $3,000 car in India, which was designed to increase the market there for the automobile by producing a cheaper, simpler version. In the medical world, he cited the cheap, but efficient GE ECG cardio scanner as being “good enough.”

He said that this was a far cry from the radical innovations that involved harnessing the power of biology and data analytics to dramatically improve the performance of drugs.

“That is different from the models of disruptive innovation that are now beginning to be developed and applied in healthcare services in the U.K., the US and elsewhere,” Barlowe said. These are all about driving care away from very high-cost, high-technologies delivered in expensive hospitals by highly paid consultants.

“It is a little bit more difficult to apply that 'cheaper, simpler but good enough' model in biopharma, I think. A cheaper, good-enough pill doesn't quite cut it with regulators, payers and the public,” Barlowe said.

Innovation Costs Money – Period

The word “cheaper” does not sit well with drug manufacturers when it comes to innovation. As Paul Stoffels, Chief Scientific Officer Johnson & Johnson, told delegates: “You have to have a world that is prepared to pay for innovation.”

Stoffels noted that in the area of HIV, 25 years ago, life expectancy was two years, but today it is a full lifespan minus two years. “Probably $20 billion to $30 billion went into HIV research to in the end arrive at a single pill, taken once a day, which is now available to make people survive for forty years,” he said.

The point Stoffels made is that, while technology inevitably gets cheaper, someone has to make the initial investment to make that happen.

His stance was backed by Viehbacher, who stated that “clearly, there has to be an element of cost that is associated with innovation.”

He noted that there is currently a lot of controversy around the eye-watering $90,000 a year price tag for Gilead Sciences Inc.'s hepatitis C drug Sovaldi.

“Some say it is outrageous, but it is not outrageous at all: for the first time we can actually cure hepatitis C,” said Viehbacher. He added that if Solvaldi were not used, health systems would probably pay more in the region of $250,000 to treat hepatitis C.

It has got to be said that Sovaldi has in fact been a big commercial success, generating $2.3 billion in sales in the first quarter, making it one of the most successful drug launches in history (Also see "Sovaldi Stunner: $2.27 Billion In Sales In Its First Full Quarter" - Pink Sheet, 28 Apr, 2014.).

It is important to get stakeholders reading from the same page on disruptive innovation if new breakthrough drugs are going to be brought to market. There are signs – at least in Europe – that governments and industry have moved closer to a shared understanding of what the phrase might mean and this has taken shape in the Innovative Medicines Initiative. Bringing academics and health technology assessment bodies on board, though, is likely to take more time and much more negotiating.