Why is this second phenomenon occurring? Because in an world of tiered co-payments (and now co-insurance) industry can’t get third party payers to reimburse for them and most consumers don’t have the money to pay premium prices for pharmaceuticals out of pocket. If you can’t sell it, why go to bother of developing and submitting it for FDA approval in the first place?

Now what we see are firms trying to hit home runs every time by slanting their portfolios toward the sort of “breakthrough” compounds everyone agrees they want but are very technically challenging to discover and develop. If one looks at the historical record, it is unusual to find a year in which more than 2-3 true breakthrough products get approved.

Where we wind up is with pipelines full of specialty products for cancer all of which the developers presume will command five-figure to six-figure annual price points if/when approved. Unfortunately, this “bubble” is also showing signs of bursting in the near future as payers develop even more elaborate cost shifting benefit designs.

The answer to this problem lies in working with payers to develop better documentation of value for novel biopharmaceuticals. There is still an attractive market for the common chronic diseases, it’s just not in the first line therapy that produced the “blockbusters” of the 1990s. Identifying segments of patients likely to fail low cost first-line treatments and developing benefit designs that ensure no access barriers exist for these individuals is at least as important to improving industry R&D productivity as anything firms do back in the laboratory.