Investing in Sustainable Healthcare: Part 2

Continued from Investing in Sustainable Healthcare: Part 1.

In part 2 of our interview with Swiss asset manager Viopas Partners, co-founder Michael Schröter explains what pharma and biotech companies can do to ensure their therapies save health systems money – and make themselves more attractive targets for investors.

It’s not nearly enough these days for pharma and biotech companies to discover breakthrough medicines. Companies need to be as savvy commercially as they are scientifically.

In my last blog post, Schröter talked about what he believes will be a burgeoning trend – investors being much more selective about the companies they back and prioritizing their investments in sustainable companies that offset their costs or even save the healthcare system money.

Schröter and his partners have taken this one step further. They are ONLY investing in companies that do this. He knows it’s a hard line. So, he’s offering advice to companies on how to achieve this and secure funding from forward-looking investors.

“First and foremost, companies need to consider where their product will fit in the current treatment pathway, what it would replace, and what costs it would take out of the system,” Schröter says. “In the case of oncology, companies should be strategic and focus early in a product’s development on whether their medicines could replace the need for subsequent lines of therapy and management of side effects, as well as consider the other treatment costs associated with the existing standard of care. Then, they need to make sure these benefits are articulated in a comprehensive and transparent value proposition that underscores the product’s relevance for healthcare systems, patients, clinicians, and other important stakeholders.”

There are signs that companies are starting to develop products with the additional goal of taking costs out of the healthcare system. They recognize that embracing this concept would give them an additional competitive edge over and above purely distinguishing themselves at a clinical level, he adds.

Many companies though, have yet to systematically make cost offset a central development objective. They usually run their numbers after they have developed the product. But by the time the pivotal studies are complete, it’s too late to set out a broader value proposition – because at that point only the clinical characteristics of the product are driving the analysis.

Schröter sees more flexible pricing solutions, such as outcome-based pricing approaches, as one way to alleviate certain payer concerns – especially as regulators like the FDA and EMA approve drugs on slimmer evidence packages that are often too scant for payers. But he stressed that it’s vital that companies think about developing a holistic access strategy early, and work with payers and other key stakeholders throughout the development process – not just at the time of launch if they want to convince payers to open their checkbooks.

Analysts at Deloitte agree.

“Executives at pharmaceutical companies should integrate the payer perspective throughout the suite of decisions they make. It is not sufficient to ‘bolt on’ new market access or payer plan to an existing set of brand strategies,” Cameron McClearn and Thomas Croisier wrote in their report, “Big Pharma’s Market Access Mission.”

Clearly communicating the total value package of an innovative medicine to patients, healthcare providers, and healthcare systems as well as society could also make payers more likely to reimburse it if they can see that the benefits will touch the broader healthcare ecosystem as well as their own budgets. Transparency and collaboration with a range of stakeholders are essential – so companies can go beyond scientific breakthroughs, add value to healthcare systems, and drive sustainability.

Schröter believes the pharma and biotech sectors can learn a lot from the way the medtech industry is developing its value propositions.

“Everyone involved in the delivery of healthcare will become aware of a much more constructive way to address the pricing issue,” he says. “The medtech industry has been taking this approach for a while now. You can’t launch a medtech product unless it takes costs out of the system in some way; that could be a reduction in surgery time, shorter periods of rehabilitation, or less time spent in the hospital. Medtech companies have embraced a new way of doing business and we see this coming to the biotech industry.”

In November 2017, the Medical Technology Group concluded in its report “Keeping Britain Working” that the use of eight technologies, including hip replacements, implantable cardiac defibrillators, and insulin pumps, could save the UK government up to £476 million per year. This would pay for 20,000 nurses or 10.5 million visits to a general practitioner, the authors calculated.

Swiss medical device maker Medacta Group SA, which made its debut on the Swiss stock market in April 2019, is one example of a medtech company that is focusing on both better results for patients as well as cost reduction for healthcare systems: “Our innovation leads to better results for both patients and healthcare systems in terms of efficiency and economic savings,” the company states on its website.

Broader value narratives that allow everyone working in the healthcare system to clearly understand why a medicine or service will make their lives better will play a crucial role in supporting more constructive and effective partnerships. They will enable clinicians, nurses, institutions, payers, and many other key stakeholders to deliver better outcomes for patients and ensure more effective use of finite healthcare resources. If done right, they will also give a competitive edge to a pharma or biotech company trying to attract vital investment money.


The Viopas Team

Michael Schröter: Over the last 20 years, Schröter has held several executive positions within the R&D and commercial organizations at Roche and Eli Lilly. He also co-founded a biotech company. In his last role at Roche, he was responsible for establishing sustainable innovative pricing models with national payers in over 20 major markets.

Nathalie Flury: Flury has an 18-year track record as an equity manager. She invested a combined $3.7 billion in listed and private equities for several European-based mutual biotech and healthcare funds, and managed biotech and life sciences funds for Clariden Bank (Credit Suisse), Global Asset Management, and Pictet Asset Management. She also provided start-up and growth capital to more than 10 private companies by investing in ventures such as Biomarin Pharmaceuticals and several Swiss private companies.

Simon Nebel: Nebel has worked for four private equity vehicles in healthcare and renewable energy over the past 20 years as managing partner at Aravis, with a total of more than 250 million Swiss francs under management.

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