A Revolution in R&D

34
would be excluded from the trial, in order to show
high efficacy levels for the subset of patients who
would eventually use the drug. Also excluded would
be patients having a specific genetic variation associated
with side effects.
To see the streamlining effect of such exclusions,
consider the case of Herceptin, a treatment for
advanced breast cancer. It is effective only in a subset
of patients—the 25–30 percent whose tumors
overexpress the HER2/neu oncogene. It is this
gene that serves as the drug target. By screening for
HER2/neu expression, Genentech was able to
exclude nonresponders—some two-thirds of the
subjects originally tested—early in the clinical trial.
Without this prescreening, Genentech would have
needed nine times as many patients in phase III to
achieve significant results. The cost of such a trial
would have made Herceptin economically unviable.
Turning to the second benefit, for failing compounds
pharmacogenetics lowers the hurdle by easing
the conditions for market viability. Consider
specifically those candidate drugs that reveal serious
side effects in a significant proportion of the subjects
(such as the 7 percent of Caucasians with low
levels of CYP2D6, an enzyme that helps metabolize
some 25 percent of all drugs). Traditionally, any
such drug would be perceived as too risky to market,
and would be abandoned in preclinical studies.
Today, however, pharmacogenetics makes it possible
to identify the at-risk patients, so the drug would not
be disqualified right away, and could go on to prove
marketable—patients would just need to be tested
for vulnerability before being given prescriptions.
These are the potential benefits to R&D, the primary
focus of this report. Even greater potential,
some observers believe, may lie in market advantages.
Three such advantages are possible: price
premium, share shift, and new patients. In other
words, if a perception emerges that the pharmacogenetics-assisted
drug is distinctly less risky or distinctly
more efficacious for the (now restricted) target
patient population, payers may tolerate a higher
price for the drug, physicians may favor it when
offering new patients a prescription, and patients
who have shunned previous medications (owing to
side effects, typically) may now choose to try it.
Although it seems reasonable for pharmaceutical
companies to expect some market upside from
more efficacious, better tolerated therapies, it
remains to be seen to what extent they will be able
to reap these market rewards.
Putting figures on the cost savings pharmacogenetics
benefits might achieve, our model estimates an
average of $335 million in the cost to drug—if
pharmacogenetics were to work every time it were
applied. But pharmacogenetics won’t work every
time. Given the set of cases where it is applied and
succeeds, the expected savings would average about
$80 million, as discussed below. And of course, corresponding
to the potential market upside, there is
the counterpart scenario—potential destruction of
value in the market. Why the uncertainty? (See
Exhibit 8.)
EXHIBIT 8
PHARMACOGENETICS’ POTENTIAL IS CONTINGENT
Cost to drug
Pre-genomics
Pharmacogenetics:
the promise 1
Pharmacogenetics:
expected savings 2
ID Biology
Target ID Target Validation
0
200
Chemistry
400
Screening Optimization
600
545
800
800
Development
Preclinical Clinical
SOURCES: Technical literature; industry interviews; publicly available information;
BCG analysis.
1Savings per drug assuming pharmacogenetics can be applied across the
R&D pipeline.
2 Average savings across R&D pipeline, given scientific and market limitations.
880
1,000
$M