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Patheon’s Mullen: Drug Price Debate Could Shape Pharma’s Future

Xconomy Raleigh-Durham — 

Even as Patheon CEO Jim Mullen sees promise in the scientific advances made in drug development, he says many of the pharmaceutical industry’s challenges ahead are economic.

With pharmacoeconomics—the comparison of the economic value of therapies—playing a greater role in how insurance companies cover medicines, it’s critical for companies to think about reimbursement early on, Mullen said, speaking at the annual meeting of the North Carolina Biosciences Organization (NCBIO) last week. Mullen knows a thing or two about pricing drugs, having served as CEO of Biogen (NASDAQ: [[ticker: BIIB]]) prior to taking on his current post at Durham, NC-based Patheon, a contract drug manufacturer. Mullen said that a reimbursement strategy is becoming increasingly important as drugs become more specialized, and in turn, more expensive.

The cost of specialty drugs is drawing more scrutiny from payers, patients, and government officials. Mullen cited as examples two companies that have made headlines recently: Valeant Pharmaceuticals (NYSE: VRX) and Turing Pharmaceuticals. Valeant is currently the target of a federal probe into its drug pricing practices. The company’s business model spurns R&D in favor of acquiring specialty drugs, and then raising their prices. Turing acquired rights to toxoplasmosis drug pyrimethamine (Daraprim) in August, and then raised its price by more than 5,000 percent.

While specialty drugs represent a small percentage of the overall drugs taken by patients, Mullen said their higher prices are sparking political proposals of price controls, which threatens the entire industry. Patients aren’t drawing distinctions, and they believe that the drug price spikes they see in some specialty drugs represent the entire sector, he said.

Pricing is one of several challenges that Mullen highlighted at the NCBIO event. Here are some highlights from Mullen’s keynote presentation, as well as perspectives from others at the event:

Business models are changing. Years ago, pharma companies did everything from R&D through drug manufacturing. Big pharma has already shifted away from that model, and Mullen said that by 2020, few will do that because the model won’t work. Forces affecting pharma companies are changing. An aging patient population drives where healthcare dollars are spent. Meanwhile, the developing world’s population growth continues to outpace growth in the developed world, and will shape how and where companies market their products. Pharmas must adjust their business models in response to these changes, while also making themselves leaner and more efficient.

—-Boom times ending? Overall venture capital activity is healthy, with the number of deals and the dollars raised showing slight increases this year across all sectors, said Jon Hammack, managing director at Moelis & Company, a New York-based investment bank. But healthcare deals are not keeping pace. Healthcare investments, as a percentage of venture capital dollars invested and total VC deals, are decreasing, Hammack said. Looking within the healthcare sector, most of the dollars—60 percent—are going to biopharmaceutical companies as investors move away from medical devices and medical technology. But Hammack pointed to one area of medical technology drawing business interest—and not just from smaller players. Large tech companies historically not considered healthtech players now see opportunities in health through … Next Page »

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