Policy Convergence and the Future of Pharma Value Creation with Steve Mather, Global Practice Lead of Strategy and Insight at Lumanity

[00:00:00] Hello, everyone, and welcome back to the Outcomes Rocket. I'm Saul Marquez, and I am so excited to be doing another episode on a series we're doing with the team at Lumanity on building pharma brands that win. It's a six-part series that focuses on commercial success in pharma. And today, I have the privilege of hosting Steve Mather on the podcast. He's the Global Practice Lead for Strategy and Insights at Lumanity.

[00:00:35] And we'll be covering volatility to value. It's time to rewrite that playbook for development. So I'm excited to have you on the podcast, Steve. Thank you so much for joining us. Thank you, Saul. Good to be here. Looking forward to hopefully giving some pearls of wisdom and some pointers to people who are listening to us today in thinking through how we make decisions earlier in that process of development and commercialization to get a better result with regards to ultimate value we can put around our assets.

[00:01:07] Yeah, it's going to be a value-packed topic. You just sort of came from Reuters where you had this discussion. So I'm excited to have it as an extension of that talk you had there. Before we kick it off, Steve, give us your background. Tell us about you and what brought you into the business.

[00:01:24] Very good, Saul. So I've been in the pharma industry knocking on for 40 years now. I came out of an academic background in microbiology. I spent 25 years working in pharmaceutical companies and the bulk of that time was at Sanofi, always in commercial roles.

[00:01:40] And about 14 years ago, I made the transition into strategy consulting. And I now lead the business that is Lumanity Strategy Insight Practice that covers our various faces of strategy consulting and primary research function. That's great, Steve. You know, with a background like that, it's definitely a position of trust that you hold. So I'm excited to have this conversation with you.

[00:02:08] You know, there's been a lot of policy change happening right now. And the way pharma and biotech need to be thinking about both development of assets and commercialization has fundamentally changed. Talk to us about the implications.

[00:02:22] Yeah. So let's first of all, think about the policy changes themselves. You know, the implications of needing to make early commercial decisions is nothing new. That's something that has been developing ever since I came into the industry.

[00:02:41] The very specific things that are going on right now. It's almost like an acceleration of climate change for the farmer industry. And it will have that sort of seismic effect in really irreversible impacts that are requiring a rethink in how we create value in our assets and portfolios.

[00:02:57] We've got a convergence of multiple policies all at the same time. And I'll speak to a couple of those. We've got the IRA launched several years ago in the States. The impact of that is compressing revenue horizons in the world's largest market, reducing opportunities to create revenue.

[00:03:15] There's the MFN, Trump administration brought in, and that's effectively linking pricing decisions across borders, but making it much more acute now. That element has always been there. But bringing the U.S. into that, again, restricts pricing opportunity for pharma companies.

[00:03:32] And the third one is the joint clinical assessment that's now active in Europe. And that is a new approach in rethinking, redefining, if you like, what constitutes acceptable evidence of value across Europe.

[00:03:48] All of those things are creating downstream constraints in their own right. But as they converge, that creates sort of a multiplier in reducing opportunity for revenue from assets that are brought through development and commercialized. And it just means the implications for that are that people need to be taking decisions much more early in the planning cycles.

[00:04:14] And I know people who are listening to us today will recognize where we have been and where we need to travel to. So I expect we'll have a lot of nodding heads on our way. And I'll talk to you a little bit about a model we have at Lumanity, which talks to a number of inflection points, which are where critical values won or lost in that new landscape.

[00:04:35] But Saul, maybe for people who don't know, I'm sure there'll be people listening to this who are experts in this area and don't need me to tell them what's going on. But for the generalist, you know, what's the IRA done? It's set a nine year window for small molecules before pricing negotiations to effectively reduce price to the Medicare and now Medicaid coming into that in the US. There's a slightly longer term frame for biologics. That's 13 years.

[00:05:04] But the implication there, it fundamentally alters NPV calculations. And what it means is that the decision points around portfolio strategy, you've got to be thinking in an IRA adjusted modeling right from day one as you're thinking about things like indication sequencing. The way you build a portfolio of assets will mean different choices are taken because of that runway you've got towards that IRA horizon.

[00:05:33] If we think about the joint clinical assessment, it's a harmonized European evidence demand. Countries around Europe are looking at the same clinical assessment, but they're looking at that clinical assessment from their own perspective, from what goes on in that country. So it effectively means that you have got to be, the clinical trials have to simultaneously serve regulatory and health technology assessment needs.

[00:06:01] That's nothing new. But the way that that happens now and countries considering the clinical assessment in the context of health care systems and treatment pathways, care pathways in their local situation means the scenarios are multiplied. The decision point is your protocol design becomes your global market access strategy. You're writing your global market access strategy as you're defining your protocols, again, pointing to early decisions.

[00:06:29] And then finally, there's the most favored nation pricing policy. And it's effectively looking to tie US Medicare and now we're moving to Medicaid as well to the lowest prices abroad. That's asking for much more sophisticated pricing strategy, modeling those spillovers from one country to the next. And that means people will be having to be much more selective about launch sequences and access strategies to optimize their pricing opportunity.

[00:06:53] And that we'll see in a moment is having some impact on choices being made today by pharma companies. Now, this is very insightful, Steve. And there's a lot of tripwires out there right now that you have to maneuver through. And, you know, I'm sure different it goes differently for an asset that was really maybe just about to launch and now they have to recalibrate versus one that's starting. So there's different scenarios.

[00:07:20] So given everything that you've shared with us, how does this fundamentally change the game for pharma in the approach to asset development and commercialization? Yeah. As I say, we've been on this journey a long time. It's just got a lot more acute. That traditional sequence of discovery to development, to approval, to launch, to growth and the success of an asset very much dependent.

[00:07:45] Yes, of course, on its clinical profile, but also the commercial excellence that was around that launch and uptake process. And, you know, the reality is that however strong we are at commercial excellence and however sophisticated our engagement with our stakeholders is developing, it's worthless really if the value hasn't been built into the asset as you've gone along. Commercial excellence can't recover that value if it's never designed into the asset.

[00:08:15] But the new reality, the new reality values determined at a handful of irreversible decision points. And all those constraints downstream that I talked about are pushing the decisive choices up front. Our most consequential commercial decisions are going to occur now in indication sequencing, evidence planning, clinical design, the pricing architecture and the market entry strategy. Commercial excellence really is bolted at the end of that.

[00:08:43] And if you haven't got the first bit right, your commercial excellence is not going to fix that for you. Yeah, it's I mean, you definitely summed it up so well here, Steve. And so you have this framework. You and the team at Lumanity have built this model around four value inflection points. I had a chance to walk through those with you before this conversation. I'd love if you could walk through the framework with our listeners and viewers.

[00:09:11] And at each one, what should leaders be thinking about when and what should they be actually doing at each stage? If I may, for everybody, just take those inflection points one at a time and just talk about implications and give you a bit of an example, maybe. In this case that helps bring this to life.

[00:09:31] So if we think about that, that first inflection point, which is engaging early to create the path to value, all of those requirements I highlighted about the shorter time horizons that we've got because of IRA, the nature of the global European single clinical assessment that happens now by HTA bodies alongside that regulatory decision, all of that have to inform target selection.

[00:09:57] So even what are we going after in that first instance? What's the opportunity? And that traditional best science approach is just insufficient. Coming with innovation and a new mode of action is, you know, for many years never been enough. It's got to be able to add value. But we've got to go even further in integrating, you know, modeling of policy impact onto that target identification and how we start to think about development.

[00:10:26] So if we think about sort of almost a policy adjusted portfolio optimization as a capability that's required now, you've got to be doing your predictive modeling of IRA negotiation outcomes at an asset level at this stage. You've got to know what your scenarios are as you think about the impact of JCA. There's a model called PICO. People will recognize that, I'm sure, that is used in health technology assessment, very relevant in joint clinical assessment.

[00:10:54] It's, you know, governments will ask, what's the population? What's the investigation? What's the comparator? What's the outcome? And the interesting thing about JCA is that 27 European countries will tell you how they're going to evaluate your asset in their version of that PICO. You could be facing an large number of scenarios.

[00:11:14] You've got to think through those scenarios in thinking through your indication prioritization in the context of IRA horizons in those very earliest stages of how you take your asset into early stages of development. Just an example here of a company that's thought through this. This was a top 25 company thinking through the impact of our IRA negotiation timelines having on a limited time horizon.

[00:11:44] They actually chose to sort of pivot their portfolio and shift the balance more towards complex therapies to have that longer runway of 13 years versus nine years and reduce their small molecule pipeline. And they did it by modeling out what the impact would be as they looked at their portfolio and shifted their investment pattern to make their portfolio rebalanced towards longer exclusivity periods in terms of generating value.

[00:12:12] So there's a very immediate impact of IRA shifting how a company in the earliest stages of designing their future portfolio is building that in. Let's for folks move up to the second inflection point. This I think is where really a lot of the river hits the road in terms of what people need to be thinking about differently. And this is when you're defining optimal development strategy. And I've called this almost JCA first global ready clinical design.

[00:12:41] I'm sure people are not leading with maybe European consideration. It's always been a US market opportunity. That's the biggest and that tends to drive the thinking. But people have got to be bringing the JCA aspect into thinking. And as I say, what's changed here is an even more acute perspective that clinical protocols have to serve dual masters, both the regulatory and the HTA. And the issue is your evidence generation. You can't retrofit it post-development.

[00:13:10] Your die is cast. You've generated your evidence. And if a PICO request comes your way you hadn't anticipated, you've got to move pretty fast to try and work out how you fill that gap. And that's very difficult. So the new capability here is much earlier and much more iterative evidence planning.

[00:13:27] And if we think about impact for organization, it truly is a cross-functional effort that needs to be involved early medical, HUR, commercial, real world evidence within companies to bring those experts together in thinking this through at the early stages. The interesting aspect here is the local element of European countries telling you how they're going to evolve, how they're going to evaluate your asset in their PICO frames.

[00:13:57] It means that the experts in those local markets are your affiliates. And you need to be able to build in that local view to inform on a care pathway or where that might be going and a sense of how an asset may be evaluated in one of those countries. So you can plan out what all those PICO scenarios need to be. You need to be mapping those scenarios early.

[00:14:20] I'll tell you, Roche were public on this at a recent ISPOL meeting, and they had two oncology assets moving in towards JCA. They anticipated being asked for, in one sense, 25 and the other 36 PICO scenarios that they were going to have to look at and provide evidence for. That's a lot of scenarios to manage.

[00:14:45] But you need to be thinking that before you go into your trial design, before you go into your building of real world evidence, so you know what you've got to deal with, you're planning ahead. You know, people are building modular trial designs to make them much more flexible so they can accommodate divergent requirements of different scenarios, which might want to look at different populations, which might want to look at different comparators. The evidence planning has got to be much more iterative and more flexible.

[00:15:12] And your integrated evidence roadmaps have got to stretch beyond approval and reimbursement into demonstrating value in the longer term. The nub here is early integrated cross-functional teams making some of those decisions together as that asset enters the earliest phases of asset shaping through development.

[00:15:33] So you've anticipated what's ahead of you and know what you need to do as different things come towards you in that eventual approval and reimbursement decision making. If we then, let's move on to the third one, and this is as you're configuring your go-to-market strategy, and people will relate to this. I know that because people are very familiar with the launch sequencing that needs to happen and thinking about how we shape our access strategy.

[00:15:59] But no surprises, your market access strategy is already cast almost at this point. Your market access strategy has got to proceed, not necessarily follow your commercial strategy. Your ability to land an asset and then use your commercial muscle to drive uptake has not been sufficient for a long time. But again, the message of all of this is that just life has got a lot more acute in the pressures that's putting onto us.

[00:16:28] But the capability that's needed at this point is sophisticated launch and access strategy. So we're thinking about scenario modeling on pricing spillovers as we think about NFN. We're taking deliberate decisions about launch selection and sequence, how we optimize that, how you manage mechanisms to preserve visible pricing. And some companies are more and more frequently turning to direct-to-patient supply chain solutions to look at other ways of managing the access challenges.

[00:16:58] We're seeing a lot more of that happening now as well. But again, we've got various examples and people can Google this and read up in different papers of large pharma companies coming at this in different ways. Knowing the challenge of low X US prices that impact that US pricing opportunity, making decisions about sequencing, scenario modeling all the way in a sophisticated fashion to understand impact of different list prices,

[00:17:27] how we work with health authorities to maintain a visible list price, but also a real price, if you like, which is generally confidential and discounted to enable access within that country. And what this is doing is leading to tighter command and control of local pricing strategies.

[00:17:45] So we can enable global access without denting too much the US pricing opportunity in keeping as much value as we can at the same time as making sure patients get access. Finally, Saul, just to sort of wrap up this walk through the different inflection points, it's how do you sustain market success? And that really is the continuous value reinforcement using real-world evidence.

[00:18:10] You know, value demonstration becomes even more important to show as you land and generate access and use for a new drug. It's not just a one-time thing at launch. You've got to build plans to be able to demonstrate that because at some point you're going to need to defend pricing in those negotiations that would happen in a context of IRA in the US. Maybe reassessments as new indications come on board with JCA.

[00:18:38] You're going to need a continual demonstration of value. So having a real-world evidence generation plan that supports that narrative long-term, an integrated evidence roadmap that uses real-world evidence to know how you're going to generate the data, how you're going to use that data to demonstrate value long-term. And again, an example here from a US biotech company. You know, this is a company that's working in anticipation of needing to demonstrate value.

[00:19:08] Very high dollar value rare disease asset that is moving towards Medicare negotiation. They've built in a comprehensive real-world evidence program to demonstrate societal value. They've used predictive analytics to try and quantify the healthcare system savings using that real-world data. So they've got the argument there ready to be in a strong negotiation position because they've got that real-world evidence providing the proof.

[00:19:35] All of this may sound really obvious, but I can guarantee you in many, many companies, a lot of what I've been talking about is recognized but still nascent in its application and those governance structures, organizational aspects and processes to actually make all that happen. You know, we've got to accept there's still a lot of uncertainty about the way some of this may turn out, but we shouldn't let uncertainty paralyze us because, you know, if we're not thinking ahead,

[00:20:03] it is those companies who are thinking ahead. The future's not going to be decided by how well we can launch products. It's absolutely about how intelligently we navigate these inflection points that precede launch. And at Lumanity, we work in each of those inflection points with different combinations of cross-functional teams, but to help think through, anticipate, and ultimately build in incremental value that holds for assets.

[00:20:32] Thank you, Steve. That was a really great run through. Some of the nuggets that I pulled out of that discussion, looking at those different stages, you said policy-adjusted portfolio optimization. I love that. I feel like that captures it so well. JCA first, global ready, early integrated cross-functional teams, making sure they're there, and that real-world evidence for continuance demonstration of long-term value. These are all things we've got to be thinking about,

[00:21:01] and I really love how sort of well you laid it all out. You know, as leaders think about their business, where's the urgency? And what should they take from this conversation back to their offices tomorrow? Let's think about one context, Saul, and that is in 2028, rare disease assets are going to be subject to joint clinical assessment. And the message here is if you are not thinking about that now,

[00:21:30] you are almost already too late to prepare. So it's never too late, of course not. But you've got to be thinking about this well in advance two years ahead. You know, rare diseases really bring the challenge into sharp focus. The situation of care pathways being very different in many different countries. So those different countries are going to be assessing your drug in a very different way. There may be comparators that are available in some countries, not in others.

[00:22:00] There may be no comparator from a drug perspective. If we think about how these drugs developed, they're typically sometimes developed as single-arm studies without a control. The need to be able to use real-world data to be able to model that is really important. There's probably about six or seven things that are even more important to think about in a rare disease situation as you're heading towards JCA than in an asset that would be coming into a larger population.

[00:22:27] So the urgency really is now. And, you know, I know of several companies right now that are grappling with how they get informed local insight into development conversation early enough to be able to anticipate different PICO scenarios and almost the governance and the organizational structure that needs to be there to enable that input to happen at the earliest stages.

[00:22:53] So whichever way you look at it, IRA, JCA, MFN, we could even think about the European pharmaceutical legislation, which changes the game a little bit as well. It's all about anticipation. It's all about planning. It's all about early integrated decision-making. And it's never too early to be thinking about that. Thanks so much, Steve. I totally agree. And you've given us some really great things to think about, some tangible ways to frame

[00:23:22] a lot of these processes. And so I want to thank you so much for spending today with us, sharing your knowledge and expertise. And folks, I want to thank you all for tuning into this episode with Steve Mather. It's been a great discussion. He is the global practice lead for strategy and insights at Lumanity. In the show notes, take a look at the ways to get in touch with him, the company, as well

[00:23:49] as to listen to this six-part series where the entire Lumanity team is laying out what it takes for pharma brands to win. Steve, just want to thank you so much for being with us. That's a pleasure, Saul. Thank you. Thank you.