Differing priorities: Spurring innovation versus rewarding it

June 23, 2017

Innovation in biotech

Biotechs and startups are not the only ones at BIO2017 trying to attract investment. Many countries are here to try to attract investment and innovation to their shores. It is definitely an attractive area for economic growth; for example, in the US, the biopharmaceutical industry has a significant impact on the economy and represents 3.8 percent of total US output in 20141. Industry association representatives and politicians are here to promote their countries and discuss the policies they have instituted to nurture an innovation-friendly environment. Attractive R&D credits, tax benefits, IP policies, and regulatory environments are all being discussed.

One issue that has only been touched on but not necessarily addressed is the commercial / market access environment that countries offer. After all of the effort to attract local innovation, will the country be willing to pay for that innovation when it is ready for the market? For example, the UK has made significant efforts to spur innovation, and are behind only the US in terms of venture funding, with the US at $9.9B and the UK at $2.4B in total biotech venture capital funding in 20152. However, it has arguably the most restrictive pricing and reimbursement policies of the major markets. Biotechs based in the UK can take advantage of the many incentives and scientific resources of the UK, yet when products are ready for market, that innovation may not be rewarded in the UK as it would in other markets.  Recent examples of breakthrough therapies running into commercial and market access challenges around the world highlight the difference in priorities between the desire to foster innovation and the willingness to reward it.

Two actions that companies should be taking to best position themselves for success in the current environment include:

1) Building commercial considerations into product development as early as possible to align customer expectations with innovation delivered

2) Identify global opportunities early in the process. In order to capture the most value from their innovations, it is essential for companies to understand the value requirements of the global market and be adept at defining partners and commercial models that can successfully deliver value to global customers.

 

Sources:
1: PhRMA, TEConomy Partners, The Economic Impact of the U.S. Biopharmaceutical Industry: National and State Estimates. 2016.
2: Ernst & Young, Beyond borders 2016: Biotech financing. 2016.