The
next horizon of innovation for pharma
An
executive partner at Flagship Pioneering discusses what’s next for the
industry, disruptive technologies, and patient care.
What’s next for the pharmaceuticals industry,
amid digital disruption and rapid technological advances? McKinsey’s Martin
Dewhurst sat down for a wide-ranging conversation with David Epstein of venture
firm Flagship Pioneering to explore ways the sector could shift in coming
years. In this interview, part of our Biopharma Frontiers series on how the pharmaceutical industry
is evolving and how leaders can adapt, Epstein discusses the next horizon of innovation,
critical elements of an effective business, and the kind of culture he tries to
foster. An edited transcript of their conversation follows.
McKinsey: How do you see the
pharmaceutical industry evolving?
David Epstein: If our job is to help people
live longer and better lives, as I believe it is, then we’ve never had a better
understanding of biology or better tools to affect it than we do today. I’m
excited about the possibility of addressing diseases in a much more targeted
way, with fewer unwanted effects, and identifying the patients who are most
likely to respond well to a given intervention and who will benefit most.
If we can avoid
exposing people to side effects when they won’t get benefits from a given
treatment, we can take some of the waste out of the healthcare system, not to
mention patient discomfort. Studies show the system has enormous inefficiencies
at every level, whether it’s in the use of drugs, the way hospitals are run, or
how patients go from doctor to doctor. If we can figure out how to customize
treatments by selecting the right therapy for individual patients or by
combining therapy with digital interventions,
there is an opportunity to use the huge amount of money we spend on healthcare
more efficiently—and to help make people healthier and happier in the process.
McKinsey: Do you think any of that will
happen in the next three to five years?
David Epstein: I think it’s already starting
on a small scale with targeted drug therapies, particularly in cancer and
immunology. Take Gleevec and Herceptin: at first, few believed that targeted
cancer therapy could have much impact, but after those two medicines came out,
R&D dollars shifted to targeted treatments and spawned dozens of
medications, some of which are true breakthroughs. The first generation of
cellular therapies should come to market as early as the end of 2017. And
diagnostic tests are increasing, too, with academic institutions and companies
doing whole-genome screening.
An opportunity that
will take longer to capture is remote monitoring, where patients are cared for
in the comfort of their homes rather than in the doctor’s office or at the
hospital. That might mean the doctor is seeing the patient via
videoconferencing or the patient is wearing a patch to monitor some bodily
function in real time. All that will happen, but it will be slow, because the
system needs to adapt to address questions such as how you pay for it and how
you build the infrastructure to get the quality of data you need.
McKinsey: Over the past decade, the
excitement about the next horizon of innovation hasn’t been matched by the rate
of delivery of new therapies. Why is that?
David Epstein: It’s always that way. Take
antibodies. In the beginning, there was a lot of excitement about all the new
druggable targets we were going to have and how they were going to change
everything. Then there were one or two, and then nothing, and everybody thought
that was it. The same goes for proteins. How many missteps have there been in
gene therapy and cell therapy? It takes perseverance.
Most new approaches
take more than ten years in our industry. When you see the idea at the
beginning, you’re hoping it’s a year or two away, and then it doesn’t arrive.
But scientists and companies are continuing to work on it in the meantime, and
eventually there it is. If you watched Star Trek as a kid, think how long it
took for many of those fictional devices to become real. It took decades after
someone first dreamed them up, but now many of them are here in some form or
other.
McKinsey: What about industry pipelines
over the next five years? Do you think they are getting healthier?
David Epstein: They are much better in
general. There are fewer me-too drugs. The challenge for many companies is
that, because their top line hasn’t been growing, they can’t figure out how to
fund everything in their early pipeline. That may create opportunities for
spinout companies or other mechanisms to address the shortfall.
Increasingly more money
has gone into venture capital over the past three or four years to capture the
opportunity to find new therapeutics in previously dark spaces. In addition,
the ability to take these companies public or address the need to supplement
pharmaceutical-company pipelines has made the economics attractive. Attracting
talent is now sometimes more rate limiting than the discovery and application
of new biology and tools.
You also have to look
at the external environment and think about what could go wrong. We should
always worry when there’s political change. For instance, when payors—which is
the government in most parts of the world—come under economic pressure, changes
in legislation could disrupt the innovation process. If all of a sudden
investors had no hope of being able to take their companies public and make a
good return, that money would dry up, as would innovation. If pharma companies
saw prices fall so far that their margins came under huge pressure, they would
cut costs and reduce R&D as well as other spending. Eventually there would
be an industry shakeout, and it would correct itself, but you’d have several
years or longer where things slowed down or paused, and that’s an ongoing risk.
Last but not least,
what’s fundamental in our industry is intellectual property [IP]. It comes
under attack from time to time. If IP were not to hold, it could change
everything and reduce all incentives that spur research and development, and
therefore reduce progress.
McKinsey: Let’s discuss innovation.
Which areas strike you as having the biggest potential?
David Epstein: There are many fertile areas
as well as new tools to find new targets. I think we are going to see a series
of products addressing liver disease, an area where not much has been
available. And right now, the industry is spending a lot of energy and time on
degenerative diseases of the brain such as Alzheimer’s. The problem is that we
still don’t fully understand the biology of how the mind works or degenerates.
If we did, we’d have many additional opportunities to create new interventions.
And of course, oncology and autoimmune disease offer a rich opportunity.
Thankfully, companies are now beginning to reengage in antibacterial research
as well.
On top of that, I think
cellular therapies will allow us to treat genetic diseases such as sickle-cell
disease, thalassemia, and hematologic cancers. These are all near-term
opportunities.
Then there’s all the
excitement about the microbiome and its role in human health. We have more to
learn, but it could give us a host of new ways to attack disease or identify
new targets for small molecules. In two or three years, there will be
breakthroughs not just in obvious areas, such as gastrointestinal disease, but
around the connection between the mind and the gut, and between heart disease
and the gut. Over time, these things will be elucidated, and new approaches
will be developed. One day, we may be able to manage the microbiome in a
prophylactic way by, say, modifying certain bacteria and giving it to people to
prevent arthritis or depression.
McKinsey: That’s the science part, but
what about technology innovation? Where do you see digital taking the medical
field?
David Epstein: I believe there’s enormous
waste in the way we do things. You go to a doctor, he or she makes a diagnosis
and sends you home, and there’s little follow-up until you next return. There
has to be a more effective way to monitor people over time. Digital allows that
possibility. There are some incredible innovations out there—technology that
enables a different level of efficiency, joined-up thinking within patient care.
When I was at Novartis,
we built a digital-medicine group with teams of experts who worked with the
products and the patients who needed them to determine what the digital
enhancements should be, as well as to tackle the challenge of communicating
with physicians and patients about what’s possible through social media.
There’s so much that can be done to improve diagnosis and compliance, and in a
lower-cost way. It’s hard to prove that the new approach works, but it
certainly seems to have engaged lots of people, including some who had never
been engaged before. Regulation is a factor, but pharma has a long way to go to
catch up with other industries in this respect.
McKinsey: Patient-centricity is one of the buzzwords we keep hearing, but it’s extremely important. How
do you see it playing out?
David Epstein: There are two aspects to
this. One is that the pharmaceutical industry dramatically misunderstands what
a patient goes through to get diagnosed and treated, so the first thing that’s
necessary is to understand this better. With those insights, one can develop
drugs with labels that are more likely to meet patients’ needs, commercialize
them in a more patient-oriented way, and perform clinical trials more
efficiently.
The second thing about
patient-centricity is that it’s an enormously powerful tool to motivate your
workforce about why we’re here and what we’re doing. Most employees don’t get
excited about generating $X of sales each quarter. It’s important because we’re
a business, but if people feel someone will live a better life because of what
they are doing, it will motivate them to pick up the phone, break a
bureaucratic process, or get the team together to have that meeting earlier and
make a decision rather than waiting. It makes you more responsive and engaged,
so you get innovation across the line more quickly.
Seeing the world
through patients’ eyes makes employees feel good about helping people and
leaving a legacy they can be proud of. You need to make it real. If you’re
sitting in a meeting, you need to ask, “What would patients say if they were
watching?”
McKinsey: What do you think will change
in the way you move from innovating and developing new therapies to
commercializing them?
David Epstein: Clinical trials will be
different. Patient data won’t be collected only in the doctor’s office, and we
won’t monitor only the standard indicators like heart rate; we’ll also consider
quality-of-life measures. Eventually, patient-reported outcomes will routinely
be included on drug labels. Trials will be smaller, because there will be a
better way of determining which patients are likely to respond from the very
beginning.
Unfortunately, the
commercialization process isn’t going to change much. You still need to do many
of the same things we do now to educate physicians and reach patients, although
the social-media component will be bigger.
And payment is starting
to move toward paying for outcomes. It won’t be that this therapy costs $X, but
rather $X if it works and less—or even zero—if it doesn’t. If you buy a car and
it doesn’t go, you take it back and get a new one, or you get your money back.
The pharmaceutical industry is moving in the same direction.
McKinsey: This raises the issue of
generating real-world-evidence data. What do you see as the pharma company’s
role in that?
David Epstein: Healthcare systems and
providers are generating data sets and have a huge advantage in controlling the
data, and most of these organizations are willing to collaborate with pharma on
a given medicine or therapeutic area. We’re going to have to do it together.
Otherwise, we’ll both be generating data, and the data sets will say different
things because we’ll ask different questions and use different analytic tools.
Some regulators are
saying they may even give additional indications based on real-world data sets—or,
if not new indications, then a follow-up commitment to getting a first
indication to confirm the drug works in a real-life setting.
McKinsey: What advice would you give
CEOs managing in today’s environment? How do you balance the long and the short
term and be resilient?
David Epstein: Don’t fool yourself that
making the quarterly numbers for your shareholders is the be-all and end-all.
What really matters is how you create a vision. How do you hire the right
people, build collaborative teams that can achieve more together than as
individuals, and make a difference in the world? Ultimately, that’s what drives
financial success and still more R&D to help future generations.
http://www.mckinsey.com/industries/pharmaceuticals-and-medical-products/our-insights/the-next-horizon-of-innovation-for-pharma?cid=other-eml-alt-mip-mck-oth-1703
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