Product Development Strategy
The lifecycle of a branded medicine usually spans more than 20 years with the first 5-10 years generally being in research and development prior to commercialisation. In order to stimulate future R&D investment in the mid-term an adequate return on the investment made in the short-term will still be needed. The impact of rewarding R&D investment through a value based price has still to be carefully evaluated.
The new value based pricing approach will need to take account of product life cycles and the timescales associated with bringing new medicines to market. For example, a new innovative medicine may provide significant benefits, but because of the length of time taken for research and development or because of regulatory delays may enter the market at a point in time after the comparator medicine has lost patent or its period of exclusivity. The reduced generic price of the comparator at that point in time may significantly affect the pricing of the new medicine. The new system should look to minimise risks and uncertainties in this regard. For example, the price of a comparator medicine could be taken over a period of time (say the last 5 years) rather than a point in time at launch of the new medicine.
Pharma design can offer a dedicated impact assessment of the introduction of value based pricing component into the new regulatory system and it will affect companies’ financial margins. Pharma Design will provide its experience in measuring efficacy and outcomes, something that will be increasingly required across the healthcare system.
Product Development Valuation and Net Present Value
Valuation is a key tool to help understand the value of a molecule and its indications, and to help quantifying trade-off decisions in dimensions such as launch date, sales potential, development cost, and risk. We represent those tradeoffs in a single value called aNPV (adjusted Net Present Value). NPV is a related metric, but does not account for the risk inherent in our development programs. There are three major components to an aNPV calculation:
- Timing (When will the product launch and provide revenues?)
- Cash flow
- Revenue (How much revenue/return will be provided?)
- Cost (How much will we spend to realize this return?)
- Risk (What is the risk of our not realizing the return after having invested?)
Contact Pharma Design today for more information on clinical trial management and our expert clinical research associates. Call +44(0)20 3875 4111 or +353 (0)1 902 0049 or complete our online enquiry form and one of our pharmaceutical consultants will be in touch within 24 hours.