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  • Writer's pictureJohn Q Leonard

Roche's Kadcyla Outstrips Marginal Utility in UK

Roche Kadcyla UK.jpg

An innovative new cancer drug shown to extend the lives of women with breast cancer by an average of 6 months has recently crossed an important threshold for the industry. The potential blockbuster treatment developed by Roche will not be availed to patients in the UK because the National Institute for Health and Care Excellence deemed the drug too expensive, at $160,000 per patient treatment.

To borrow from the vernacular of Harvard professor Clayton Christensen, Roche has overshot the current marginal utility for the pharmaceuticals in the UK. It is important that this signal be recognized for what it is—a turning point in the industry.

Roche has argued that the high price is commensurate for the risk and cost of developing Kadcyla in a high cost environment, and officials in the UK say the drug is far too expensive to gain approval for widespread use.

NICE chief executive Sir Andrew Dillon said: "We are really disappointed that Roche were not able to demonstrate more flexibility. The company is well aware that we could not have recommended Kadcyla at the price it proposed."

Patients will unfortunately be caught in the middle as NICE and Roche try to reach an agreement on price. There will be violence and expensive lawsuits, but it is important that we not be distracted from the point however. The pendulum may have finally come to rest, preparing to set course on another trajectory. This is a signal a growth shift to a new part of the value chain, the fully integrated models will begin to fail, and a new era of modularization will come to dominate the business landscape. Treatments will come to people with no option before at an accelerated rate. A new age of entrepreneurship will be enabled as new business models appear aimed at driving down R&D cost, and eventually risk. New jobs will be created, and human life expectancy will extend.

Jennifer Cozzone, head of health economics and pricing at Roche, said: "We're very disappointed with this decision and, frankly, not just for patients who would have had the opportunity to receive Kadcyla with a positive decision. Considering Kadcyla is the eighth medicine in a row that NICE has declined to make available to women with advanced breast cancer in the UK, we don't believe this is a question of the price of Kadcyla. We believe that this is an issue with how NICE considers medicines in advanced breast cancer."

Christensen and Raynor write in The Innovator’s Solution that when your customers (or payers) start complaining that they don’t want to pay more for the extra bell & whistle, (ie. This particular bell & whistle combo is not worth the extra coin) and sales and marketing start complaining that, “these customers just don’t see the value in these great new features!,” then the industry is about to be disrupted. Some will argue that the pharmaceutical industry is simply incomparable to other industries (like tech and music), but exactly the same underlying economic principles apply in all three. Kadcyla is likely to be only the first of many new innovative drugs from big pharma we will witness being held from patients as organization quarrel over price. As of this month, value no longer lives where it used to in the pharmaceutical industry.

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