The early ISCT organization provided a powerful forum for sharing solutions, developing standards, and moving the emerging concepts in cell therapy forward as the field grew up and out of academia. Currently, the ISCT organization is uniquely positioned to facilitate sharing of best practices, standards, and strategies across the for- profit cell therapy industry through its Commercialization committee. The Business Models, Reimbursement and CoGS (cost of goods sold) subcommittee of the ISCT Commercialization committee was formed to address several key business topics with direct impact on the industry’s ability to develop, register, and ultimately market cell therapies successfully. The subcommittee aims to define the issues as well as examine successful approaches and solutions companies have used, with a goal of sharing best practices and strategies. Activities in the United States, the European Union, Japan, and China will be evaluated, as well as in other Asia-Pacific countries such as Singapore and Australia. Although the latter are smaller markets, they have very well developed and advanced cell therapy infrastructures and regulatory environments. Cell Therapy Business Models The business aspects of developing and successfully marketing cell therapies are genuinely complicated but becoming better defined as the field progresses. An ideal cell therapy product business model fits well with a company’s overall business plan and integrates all relevant aspects of the product throughout its lifecycle. Many companies are currently wrestling with overall go/no-go investment decisions for cell therapy programs. Taking into account all of a technology’s components can help determine the appropriate manufacturing approach and help determine whether that technology can be a good fit within a company’s portfolio, and therefore a solid investment.
As conventional wisdom has it, if a technology is autologous, then its primary emphasis will be on a service model, whereas an allogeneic product’s model is akin to a pharmaceutical, long-term–storage model. However, only taking “allo- or auto-” into account is not sufficient for building an appropriate business model for a cell therapy. All cell therapy business models are dictated primarily by the technology: e.g., the specific cell type, source tissue and manufacturing process, route of administration, and the medical condition for which the product will be used. Beyond that, however, is the need to consider a product’s market, including all current and forthcoming competition; the practice of medicine for that indication; and flow of product, patients, and money through the overall system. After those factors have been considered, a company can build a fully integrated forecast of production (for example, the number of products per month) for the entire lifecycle (phase 1–3, launch, growth, and maturity). This forecast will quantify the needs for GMP manufacturing, show when those needs occur, and therefore help make the difficult “rent or buy” (deciding between contract manufacturing and internal production) decision. Here is a suggested pathway for mapping out an overall model. First, consider your product technology, which encompasses the following questions. Source Tissue/Cells: Common or rare? Hardy or delicate? Immunogenic or not? Production Process: Simple or complex? Public or proprietary? Cheap or expensive? Bedside, local, or remote? Packaging: Single or multiple doses? Fresh or frozen? Based on your technology’s characteristics, next build a sales forecast that incorporates
- a regulatory strategy, with timing and target content for each filing (e.g., it is not sufficient to write “File an IND”; map out laboratory, clinical, and other data that each filing must contain to schedule what must be gathered at each point)
- a manufacturing/process development and scale-up plan, including a plan for transitioning to commercial GMP scale-up
- a CoGS estimate, providing costs for each step-up in “GMP-ness”
- a clinical development plan, including a cost estimate, expected timing and geographies in which trials will be conducted, and description of the specific 1’ and 2’ endpoints to demonstrate safety, efficacy, and “reimbursibility,” because these all determine the product profile
- a market overview, including a description of how the condition is currently treated, the major competitive threats, and a projected description of the market at launch.
Finally, combining those product technology details with the forecast will help determine the overall appropriate business model for a product. Although traditional models are service (e.g., surgery), device (e.g., bedside processing), and off-the-shelf (banked or shelf-stable product), cell therapies will cross over into multiple models. All models present advantages and disadvantages, but understanding the full aspects of the product, its manufacturing, and uptake forecast and overall market will help determine whether the product is a good portfolio fit — an important milestone. Reimbursement Reimbursement is a word that many people in the cell therapy commercialization world dread irrationally. At this point in cell therapies’ “toddlerhood,” the costs for most final cell therapy products are relatively high, whereas reimbursement for those products is likely to be constrained. In many countries, there is a need (and regulated requirement) to incorporate economic, cost–benefit aspects into clinical trials. That is, concepts of quality-of-life (QoL) benefit (beyond clinical outcomes) and impact on overall costs to the healthcare system must be considered. Before you can define reimbursement potential, you must fully understand your product’s predicted use in terms of its exact medical coding and understand the full range of competing therapies in that code — and their associated costs to payers. Many developers focus only on the requirements to get a cell therapy through regulatory approval and licensed for sale. Licensure, however, is only the beginning. In countries such as the United States, where the government is not the primary or sole payer for medicines, a product’s approval for sale is not tied in any way to its reimbursement status. However, actual clinical use and uptake of the product is completely dependent on having achieved a “reimbursable” status from multiple key payers such as Medicare and large private insurers. That said, in many countries where the government is the primary payer for medicines, licensure and reimbursement are tied closely together. In the United Kingdom, for example, approval of new medicines entails an economic justification for the medicine and an assessment of its overall impact to the national health budget. With either type of payer system, clinical trials should include endpoints that address concepts the payers will be evaluating when considering whether or not to pay for the therapy. An example of this would be to include a validated quality-of-life questionnaire t o the case report forms. A good QoL survey will address not only clinical-type questions (e.g., such as those referring to pain), but also general everyday-life questions about a patient’s ability to care for himself, drive, and return to work. Building the case for adequate reimbursement based on a therapy’s clinical and social benefits as part of the clinical trials is crucial. It is also crucial for the developer of a cell therapy to understand fully the costs of making its product. Although this may not be considered a primary rationale for payers to agree to a certain price point, it can provide good secondary rationale. It is also critical for the understanding of the potential areas of savings and for building out the long-term business plans for the product. Cost of Goods Sold A therapy’s long-term financial outlook begins with the above concepts and assesses the product’s costs to understand the impact to business. Certain cost drivers can be identified as likely to be lowered either through technology improvements such as automation or through economies of scale. Understanding all cost drivers allows developers to identify areas for savings. Common critical questions include
- What influences economies of scale in cell therapies — autologous or allogeneic?
- How can costs be driven down?
- When is the right time to start thinking about automation?
However, it is often the unanticipated costs of cell therapies that drive the profitability down substantially. Companies need to be prepared for the high cost of biologistics, maintenance of (and documentation of) chain of command throughout the entire process, and the potentially staggering cost of long term follow up of patients treated in clinical trials. A corollary to that is the high cost of obtaining clinical trial insurance/underwriting for trials that will entail very long-term patient follow ups, as do most gene therapy trials. Importance of an integrated Business Model In conclusion, companies can address the difficult go/no-go investment decisions for cell therapy programs, by building an integrated business model, including in the model realistic and thorough estimates for both anticipated reimbursement and CoGS. This can be developed to map out a full development and sales pathway for cell therapy products and provide a clear picture of the product’s fit within a company’s structure.
Author Details Dawn Driscoll, MBA, PhD, is chair of ISCT’s Business Models, Reimbursement, and CoGS subcommittee as well as principal of DCi Biotech Inc., 1-215-847-0777 or 61-4-8734-3292; firstname.lastname@example.org; www.dci-biotech.com.