Regulatory Insights For Life Sciences And Health Care Investments: Drug Pricing And Reimbursement

Author:Ms Alice Valder Curran, Christopher H. Schott, Elizabeth (Beth) Halpern and Margaux J. Hall
Profession:Hogan Lovells

Investing in the life sciences industry without an understanding of the key regulatory factors that could determine a product's success or failure could cost you millions of dollars.

As the industry readies itself for the 2019 edition of the annual pilgrimage to the J.P. Morgan Healthcare Conference in San Francisco, our market-leading Global Regulatory Team has prepared a series of updates covering the following topic areas that we hope will help guide your 2019 investment decisions.

Drug pricing and reimbursement Regulatory changes in Europe Digital health and medtech Data privacy and cybersecurity Value-based purchasing Cell and gene therapies In this first edition, we explore the pre-commercial drug investment risks related to pricing and reimbursement.

Pre-commercial drug investment risks: Will insurers pay for this product?

Investors continue to be drawn to the pharmaceutical industry, particularly as novel therapies like gene and cell therapies and potential blockbuster treatments for cancers and Alzheimer's disease proceed through U.S. Food and Drug Administration (FDA) approval. It may be tempting to focus primarily on a drug's clinical trial results and expected market value when making investment decisions. Yet, the value of the projected market is entirely dependent on the product's coverage, reimbursement, and pricing profile. The specifics will differ by product, but an investor ignores such matters at their own peril. The following three key questions can help to get the conversation started.

  1. Does the drug have multiple possible indications?

    A pre-commercial product often has multiple possible uses in development. Where that is the case, it is important to think through each possible indication's coverage, reimbursement, and pricing profile, and the order in which the uses are expected to be commercialized. The first indication approved and launched can lock in and limit the coverage, reimbursement, and pricing options available for subsequent indications. Investors need to consider whether subsequent uses can be commercialized using different FDA approvals or different product presentations (different concentrations, strengths, or routes of administration, for example) to generate the possibility for market differentiation and flexibility down the road.

    Why it matters: If the product under consideration is being valued based on the possibility of multiple indications, you need to test whether your market valuation of the...

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