We often get pushback from clients about the merit of including launch price assumptions and value proposition statements in the target product profile (TPP) for early-stage development programs. “What is the point of guessing at price when we don’t even know what the drug can do clinically yet?” or “there is too much that could change in the marketplace between now and the time we would get to launch”, are typical pushbacks. It is true that building and maintaining a TPP requires projection in the face of high uncertainty, but in our view, it is never too early to start thinking about value as an integral part of the product profile. If you don’t know where you’re aiming, you’ll find it more difficult to get there.
TPPs are generally first created when drug development programs enter preclinical studies, and are continually refined through each phase of clinical development. They serve as a statement of the intended “destination” (i.e., what the drug will look like when it reaches the market), rather than being a “roadmap” (e.g., development plan or product strategy plan).
There are three main benefits to including pricing assumptions and value arguments in a TPP from the outset:
- It’s impact on development assumptions.
- Uncovering potential pressures to cost of goods sold (COGS).
- To underpin a sales forecast or valuation.
Impact on development assumptions
Understanding the association between unmet need, cost of care, burden of illness, and how disease stakeholders measure the value of a therapy can have a critical impact on the way development is approached. It can uncover how important or hard it will be to show value over current therapies (in its simplest form value = cost vs benefit), and what elements of value matter. Early analysis on price and value also allows time for the program team to think about which pieces of differentiating evidence will be gathered in the clinical trials, or provided elsewhere (e.g., health economic studies). Left by themselves, any clinical group should adopt the path of least resistance (risk, time) to regulatory approval. Whether or not commercial colleagues can generate sales after launch is not the natural priority when decisions are being made about patient and endpoint selection in clinical trials. Though, having the conversation at least about price and how to support it, can lead to inclusion of some parameters in trials which prove critical to commercial success. Furthermore, when a new drug has potential activity in more than one potential indication, pricing is an important factor that feeds into the indication selection/sequencing decision.
Uncover potential pressures to cost of goods sold (COGS)
A TPP is not just for the clinical members of the program team. Pharmaceutical development and CMC representatives are working to ensure that the molecule can be manufactured in a reproducible, compliant, and economical way. The TPP also includes assumptions on the dosing and administration goals for the drug at launch. Early assumptions on price per dose, or price per treated patient, allow the CMC team to assess potential for any disconnect between what it may cost to make the product and the achievable price, in the context of corporate margin goals. This of course, is especially challenging analysis before the clinical dose of the drug has been determined, but is still valuable using preclinical to clinical projections. The potential need for a drug delivery device and for patient diagnostic tests can also factor into these considerations.
Use TPP to underpin a sales forecast or valuation
Having price and value proposition assumptions in a TPP also allows it to be used as the basis for a sales forecast or risk adjusted net present value (rNPV) analysis. Biotech companies often need to raise funding on the approach to IND, or may need a valuation to support partnership discussions. Larger companies need to demonstrate the economic attractiveness of preclinical projects for internal resource allocation decisions. Even a sales forecast with broad assumptions for low-medium-high cases are absolutely essential to provide the economic justification for continued investment (we also recommend the use of Monte Carlo simulations to manage uncertainty and illustrate the likely range of outcomes).
Never Been so Important
The direction of travel in the healthcare regulatory and commercial environment is negative, with increasing pricing/reimbursement pressures in Europe, the Inflation Reduction Act and its sequelae in the US, continued price reductions in Japan, to name a few prominent examples. These have been long in the making and much discussed, but thus far the US market has been relatively immune to pressures brought about by HTA bodies such as NICE or G-BA (NB at the time of writing, BMS has announced that it will not be launching Opdualag in Germany due to pricing issues). Despite the relative insulation of the US arena, ICER is increasingly influential and the wave of cell and gene therapies and orphan drugs progressing to market will put an enormous strain on healthcare spending. There is little doubt that those companies which are best able to translate clinical impact into budget impact will increasingly be the only ones to achieve market access at premium prices.
How to Generate Early Price and Value Assumptions
Analysis of price assumptions and value propositions for preclinical programs should be stage appropriate. In the first instance, secondary analysis of price benchmarks, unmet need and cost of care provides the basis for an initial approximation. This analysis often enables identification of potential cost-offset arguments, and bases of value. Price ranges are often used initially as clinical impact is not yet known, in recognition that better drugs command higher prices. Depending on the indication and the treatment alternatives, it may also be worth conducting some qualitative primary research in the form of selected interviews with key payers (we normally conduct 6-12 interviews across US and EU4/UK, occasionally more if the situation warrants it). Such strategic payer research is not expensive or time consuming, but can reveal issues and opportunities that may play a critical role in the ultimate product’s commercial prospects.
The Early Bird Catches the Worm
A TPP is a unifying document that the entire development team and, critically, senior management must buy into. It needs to be constructed as soon as possible when a candidate product enters development, and needs to be revisited, refined and potentially restructured on a regular basis and when important trigger points such as competitor development and external market events occur. Achievable price and winnable value arguments are essential components from the outset if the program team wants to ensure that the regulatory access and the market access for the drug are aligned once it is launched.
Our TPP & Opportunity Mapping Expertise
We have rich experience mapping opportunities and developing TPPs for individual programs, for multiple programs in a portfolio, for drug discovery platforms, or for enabling technology platforms. Opportunity mapping involves quantifying the realistic commercial potential, mapping out the go-to-market path, and describing the key risks and sensitivities. The process may also involve primary market research to garner additional expert opinion and to validate assumptions. Such assessments often involve making trade-offs between multiple potential lead indications, and across several geographic territories.