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Life Sciences

Why Now is the Best Time to Build a Specialty Pharma Startup?

Once a small niche of the pharmacy industry, specialty pharma has grown rapidly over the last ten years. Changing market trends and increased focus on specialty medications for rare and complex diseases have translated into a substantial increase in specialty drugs (1). This decade, 90% of top pharma sellers (2) and 47% of total pharma revenue (3) are expected to be claimed by specialty pharma. Given the current market and regulatory environment, now is the perfect time to launch specialty pharma startups that aim to pioneer drug development in underserved areas.

What is Specialty Pharma?

Specialty pharma focuses on treatments targeted to improve clinical outcomes for patients with complex (i.e., cancer, inflammatory diseases, etc.) and/or rare conditions that affect fewer than 200,000 people. Due to the multifaceted and rare nature of these conditions, one of the most notable characteristics of specialty pharma drugs is a high price tag. Other key characteristics of specialty pharma drugs are as follows:

  1. Treat complex, chronic, and/or rare diseases
  2. High drug cost—often over $650 per month
  3. Exclusive, restricted, and/or limited distribution
  4. Special storage, handling, and administration requirements
  5. Ongoing monitoring for safety and efficacy
  6. Established risk evaluation and mitigation strategies

How Much is Specialty Pharma Expected to Grow Over the Next Decade?

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Fewer than 30 specialty drugs were on the market over 20 years ago. The last ten years witnessed both big and emerging pharmaceutical companies expanding their development pipelines. Most of these pipelines now include one or more specialty pharmaceutical products—primarily in oncology, immunology, HIV/AIDS, and other life-threatening diseases. The pharmaceutical and medical product markets in 2019 alone saw exponential growth in specialty drugs to over 400 products (4). Following this trend, its projected that 65% of new drug launches and $240 billion dollars in revenue will belong to specialty pharma therapies over the next four years (5,6).

Specialty pharmacy providers (e.g., hospitals, physicians, independent pharmacies) have also multiplied with the expanding specialty pharma therapy market. Between 2015 and 2018, the number of unique pharmacy locations with specialty pharmacy accreditation more than doubled (6).

How Have Legislative and Regulatory Developments Benefited Specialty Pharma?

The passing of the 2012 Advancing Breakthrough Therapies for Patients Act and the 2016 21st Century Cures Act created additional pathways for expediting new pharmaceutical and medical product market approval and entry. Both Acts aim to accelerate the approval process for products targeted towards life-threatening and/or rare diseases in order to deliver life-saving treatments.

“Standard” FDA evaluation timelines for medical product approval require a lengthy multi-year study period of minimum 6-8 years, which may outlive the patients who need the treatment. The Advancing Breakthrough Therapies Act shrinks this period to 2-3 years by allowing patient access while phase III trials are still underway. These legislative changes also allow for “fast-track” acceleration of FDA review time from the “standard” 10-month review period to 6 months for qualified products.

Fast track products benefit from actions to expedite product development and regulatory review including regular FDA meetings (e.g., pre-IND application meetings, end of phase I and II meetings, pre-NDA application meetings, etc.) and rolling application review where companies can submit portions of the new product’s NDA application prior to submitting a completed application.

In order to qualify for fast track designation, drugs and medical products must meet the following criteria:

  1. Treats a serious, life-threatening condition
  2. Possesses capacity to address an unmet medical need
  3. Demonstrated potential to be significant improvements in safety or effectiveness

Fast track approval processes can minimize specialty pharma product development to market entry time and allow pharma startups to corner niche markets with “first-in-class” or “first and only” designation status for new products. In 2018, a record-breaking 73% of total new approved drugs qualified for fast track review—up from 38% of approved drugs in 2008. In 2018, 60% FDA approvals went to firms that had never before received an approval (7).

Summary

Changing market trends and increased support for the development of specialty treatments has created a prime environment for building pharma startups. Between 2013 and 2018, 63% of new drug approvals originated at pharma startups (8) with 73% of new drug applications eligible for priority FDA review (9).  Moving into the next decade, emerging pharma startups can capitalize on the legislative developments of the 2010s to expedite approvals for new specialty pharma and breakthrough medical products and corner their share of the pharmaceutical and biomedical markets.

References:

  1. FAQs from Genetic and Rare Disease Information Center, U.S. Department of Health and Human Services
  2. The 2018 – 2019 Economic Report on Pharmaceutical Wholesalers and Specialty Distributors, The Drug Channels Institute
  3. The Drug Channels Institute, Future Vision: The Top 10 Drugs of 2020
  4. Trends in FDA Approval of Specialty Drugs 1990 through 2017, RJ Health
  5. The Global Use of Medicine in 2019 and Outlook to 2023, IQVIA Institute
  6. The 2019 Economic Report on US Pharmacies and Pharmacy Benefit Managers
  7. 2018 New Drugs Approvals: An All-Time Record, And A Watershed
  8. The Global Use of Medicine in 2019 and Outlook to 2023, IQVIA Institute
  9. FDA 2018 New Drug Therapy Approvals Report

This article was originally posted by Janardan Prasad on LinkedIn on January 7, 2020.

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