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Study Funded by National Pharmaceutical Council Determines PGx May Yield Big Returns for Drugmakers

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By Turna Ray

Although big pharma has historically expressed a healthy dose of skepticism about the economic value of pharmacogenomic strategies, a recent study funded by the pharmaceutical industry suggests that pharmacogenomics has the potential to increase investment in R&D and yield greater financial returns for drug companies.

An economic analysis funded by the National Pharmaceutical Council, a research organization backed by top players in the drug industry, found that pharmacogenomics could shorten drug-development timelines and thus provide firms with greater earnings from expanded patent exclusivity periods. Furthermore, the report outlines pricing models that would allow drug companies to compensate for the smaller market size of personalized drugs by charging more for the added benefit to certain subpopulations.

The study, titled “The Future Costs, Risks and Rewards of Drug Development: The Economics of Pharmacogenomics,” is authored by Joseph Cook and Graeme Hunter of NERA Economic Consulting and John Vernon of the University of North Carolina at Chapel Hill, and is published in the July issue of PharmacoEconomics.

The authors describe how pharmacogenomics could lower the cost of drug development by shortening drug development times.

“Thus, pharmacogenomics may lead to an increase in a drug's effective patent life, and may also increase the demand and adoption rate for new products,” they note.

“For these and other reasons, pharmacogenomics may one day enhance expected future returns to R&D, leading to higher levels of R&D investment and an increased pace of pharmaceutical innovation,” they add.

The authors present their findings with the caveat that the field of pharmacogenomics is still developing and "there is considerable uncertainty as to how the area will evolve, both clinically and economically."

Still, the fact that this research is endorsed by a group funded by pharmaceutical companies signals growing acceptance within the industry of personalized medicine based on PGx concepts. Two years ago, large pharma executives maintained that even though they were investing in PGx-guided drugs that benefit certain subpopulations, they would continue to pursue blockbuster drugs [see PGx Reporter 11-28-2007].

Several of NPC's big pharma members include companies that already sell or have recently invested in developing pharmacogenomics products, including Abbott, Pfizer, Bristol-Myers Squibb, Boehringer Ingelheim, and AstraZeneca, among others.

The economic analysis by Cook and colleagues identifies four main benefits of PGx-based strategies in drug development: the ability to pre-identify best-responders to a drug who also experience lower side effects; the opportunity to make drug development more efficient through shorter development times and smaller clinical trials; the promise to genetically screen patients to treat disease earlier; and the ability to develop low-risk vaccines using either DNA or RNA.

“While there is not enough evidence yet to establish which of these will be the most important, we believe the first two will likely play important roles in changing the nature of supply and demand for the drugs where genetic markers can help determine efficacy,” the authors note.

Does PGx Save Money?

There has been ongoing debate within the pharma industry as to the economic benefit of using pharmacogenomic strategies in clinical trials. While some hold that pharmacogenomics can reduce cost by allowing companies to conduct smaller clinical trials with lower attrition rates, others feel that FDA’s study design criteria make PGx trials larger and more expensive to conduct [see PGx Reporter 04-18-2007].

However, the example of Herceptin, often upheld as the first example of a drug launched with a companion diagnostic test, also offers lessons on how PGx strategies can save drug developers time and money by running leaner clinical trials, according to the study's authors.

“Using the diagnostic test to pre-select patients permitted a study that had only 470 patients but a 50 percent response rate,” they noted. Without the help of the genetic test, the Herceptin study would have required 2,200 patients, yielded a 10 percent response rate, and taken 10 years to complete, whereas the actual study took 1.6 years.

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In the case of Herceptin, PGx strategies reduced clinical trial costs by approximately $35 million, the study authors estimated.

Moreover, cost savings can occur from avoiding drug-related adverse events. The authors note that pharmacogenomics could play a role in reducing the estimated 100,000 deaths and 2 million hospitalizations that occur each year as a result of adverse drug reactions.

In the article, the authors use the example of PGx-guided warfarin dosing to suggest that genetic testing to determine patients who have the CYP 2C9 or VKORC1 polymorphisms could help avoid between 4,500 and 22,600 serious bleeding events annually.

A study published in the Annals of Internal Medicine earlier this year reported that it may not be cost-effective to perform genetic tests to guide initial warfarin dosing in "typical" patients with atrial fibrillation, but it may be cost-effective to test individuals at high risk for hemorrhage [see PGx Reporter 01-21-2009].

Does PGx Make Money?

The study authors acknowledge that the ability of pharmacogenomic strategies to detect sub-populations of patients most likely to respond to a drug and not experience side effects may cut into drug industry profits.

“One negative implication of [pharmacogenomics for] manufacturers is that sales may be lower, as some members of the patient population are excluded, thereby lowering the chances of launching a traditional ‘blockbuster’ drug that sweeps over a patient population,” Cook and his colleagues write in the paper.

According to their analysis, the revenues from a drug marketed with a genetic marker “can be shown to be no greater than those in the absence of a marker.”

When a genetic marker is available for a drug, manufacturers may be able to avoid a hit to their revenues by marketing the drug to the general population but charging a premium to a sub-population that receives some incremental benefit in relation to the rest of the patient population, the authors proposed.

“If there is a marker, and assuming the drug company has the ability to price- discriminate based on the marker … the drug company would offer the drug to the subpopulation that receives the larger net benefit at a [premium] price and at a [lower] price … to everyone else,” the authors state, offering an equation for calculating revenues for a drug based on a genetic marker. “Such a scheme would result in the same revenue as before, where all patients were charged the expected value" without the aid of a genetic marker.

“Under these circumstances, the drug company does not fare any better even with the ability to price-discriminate than it did when it could charge the expected value,” the study authors write.

However, this strategy of marketing a PGx drug to both the general population and a subpopulation will be difficult to execute from a regulatory standpoint.

In order to encourage payor reimbursement and physician adoption for a therapeutic/diagnostic combination product, manufacturers seek updates from the US Food and Drug Administration to drug labeling with information about genetic associations to drug response and adverse reactions. Such updates often accompany recommendations from the FDA that essentially restrict a portion of the population from receiving the drug.

A recent example is FDA’s update to the labels of two colorectal cancer drugs, Vectibix and Erbitux, in which the agency recommended that patients with certain KRAS mutations should not receive the drugs due to lack of efficacy in this population [see PGx Reporter 07-22-2009].

Approximately 40 percent of colon cancer patients have the KRAS mutation. While the developers of Vectibix and Erbitux are not making the revenues they would if they could market these drugs to the entire colorectal cancer population, the genetic marker still allows for the drug to be marketed to 60 percent of the population.

Furthermore, Amgen recently reported prospective study results that may allow the company to expand Vectibix into colorectal cancer patients with KRAS wild-type tumors in first- and second-line treatment in combination with other chemotherapy regimens (see related story, in this issue).

Thus, as Cook and colleagues point out, the application of a genetic marker in the administration of drugs may increase the "expected revenues for the drug" in certain circumstances. Vectibix may offer an example of this principle in action.

Similarly, if PGx helps bring a drug to market or helps keep a drug in the market by avoiding adverse reactions in a small subpopulation, then the drug company can make more money than it could hope to without aid of a genetic test.

“An example of this appears to exist with [GlaxoSmithKline’s HIV drug] abacavir,” the study authors point out. “Once it was shown that ADRs could be avoided by a portion of potential patients, prescriptions for the drug increased in the UK with the advent of genotyping.”

The FDA last year updated the label for abacavir to warn that “patients who carry the HLA-B*5701 allele are at high risk for experiencing a hypersensitivity reaction to abacavir.” The agency advised healthcare officials to “discontinue [abacavir] as soon as a hypersensitivity reaction is suspected” [see PGx Reporter 07-30-2008].

Increase R&D Investment

Currently, “the US is ‘under-investing’ in medical and pharmaceutical R&D,” Cook and colleagues note. If pharmacogenomics fulfills its promise to bring drugs to market faster and avoid adverse reactions in certain populations, then this could drive increases in R&D investment, the authors write.

“Pharmacogenomics, it seems, has the potential to increase the future incentives for investment in R&D, and this can mean improved availability of new pharmaceutical and biological innovations for many Americans,” the authors note. “Moreover, pharmacogenomics offers the very real potential for more rapid access to drugs via expedited market launches and higher probabilities of technical success.

“This is especially so in the sense that this technology could result in products being brought to market that otherwise would have been terminated in development because of severe ADRs among a relatively small number of patients,” according to the authors.

However, the authors caution that many of their projections may be premature, since the field of pharmacogenomics is still young and rapidly evolving.

“Of course, we have yet to see how any of these factors are likely to play out; however, pharmacogenomics certainly has the makings of a powerful force for economic change and encouraging the financing of new drugs and treatments for patients,” they state.

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