I recently attended the CNS Summit in Boca Raton, Florida to learn more about what digital therapeutics and pharmaceutical companies are doing in their collaborations together. I came away with a new insight I wanted to share.
Pear Therapeutics and Novartis have discussed several times in public forms, including this conference, their joint research and collaboration related to patients with multiple sclerosis (MS). Novartis has also publicly shared the results of surveys with MS patients where they asked them to list in order of importance those issues that most impact their quality of life, and these are:
- Cognitive function
- Motor function
Novartis has pointed out, when sharing this data, that their drug only addresses those things that are least important to MS patients, which creates the need to develop some kind of adjunct therapy that supports patients most important needs, which are anxiety, depression, cognitive function and fatigue.
Pear Therapeutics has developed digital cognitive behavior therapies (dCBT) that it has applied to substance abuse disorder and opioid abuse disorder, the former having been recently cleared by the FDA through a De Novo application. Pear and Novartis have begun to seek health plan payment so they can offer it through its Sandoz subsidiary to physicians who would prescribe it to patients. Both Pear and Novartis think that this same dCBT approach, combined with some other digital psychosocial therapies could be effective in addressing the psychological needs of MS patients.
It appears they have been working on their MS joint development project for 12-24 months and may be approaching the FDA within the next 12-18 months to get approval to market their MS digital therapy.
In the CNS Summit a few weeks ago, several people asked questions about their commercial purpose and strategy for co-creating this new digital therapy. Was it to:
- Justify obtaining a higher level of reimbursement for Novartis’s Gilenya MS therapy, which is now reimbursed at a little over $60,000 per year? or
- Have no impact on reimbursement level for Gilenya, but instead provide Novartis a significant competitive advantage in the marketplace as it would be the only pharmaceutical company in the MS space that was treating the whole person by addressing all six things that are important to patients?
Novartis representative, Joris Van Dam, said that such a question demonstrated a very narrow view of the opportunity. Novartis is thinking much, much bigger, he said.
Joris went on, “we offer one of about 16 drugs that treat MS, and due to the nature of the disease, our drug would likely have a natural limit of 10-15% of the patients it could ever treat. But if we create a digital therapy that would work with all MS patients and all MS drugs, we have a much larger opportunity.”
So I took out my pencil and did some rough calculations as follows:
- Novartis Gilenya had global annual 2017 revenues of $3.2B, with with roughly half of that in the US
- It is paid about $62,000 per year per patient in the US and an estimated $10,000-15,000 per year in the EU
- It seems to have about 25,000 patients in the US and perhaps 50-70,000 in the ROW, which could give it about 8-15% market share
- We assumed that with a Pear-MS therapy Novartis would not only improve anxiety, depression, cognitive function and fatigue, but that it would also improve adherence to Gilenya such at it would increase the volume of drugs consumed by one month, or 8%, per year. We also assumed that Novartis could persuade third-party health plans to pay $10,000 in the U.S. and $1,500 in the EU for Pear-MS, where these price differences are roughly consistent with the pricing difference that already exists between the U.S. and EU on Gilenya.
- We also assumed that 10% of physicians treating MS patients would prescribe the Pear-MS digital therapy that would be distributed through Novartis’ sales force.
Based upon this quick-and-dirty analysis, it would appear that Novartis could generate $500M in new revenues through the partnership with Pear, where 20% of the revenue comes from greater drug adherence and patient retention, 30% comes from reimbursement for the Pear-MS therapy for Novartis existing patients, and a whopping 50%, or $250M, would come from physician prescription for Pear-MS digital therapy that would work with its competitor’s MS drug.
What this showed us was what Novartis could create a digital strategy that could generate economic value beyond what it could do with its analog therapies. All of its analog therapies have a natural cap or limit to their market share for various commercial, structural, physiological, pharmacological, and other reasons. But what digital allows them to do is to make money associated with competitor’s therapies, thereby not only enhancing their own therapies for their own patients with digital therapies, but also significantly increasing their market opportunity in every therapeutic market by piggybacking of their competitor’s successful pharmaceuticals.
For Novartis, they can increase their MS related revenues by 15-20%, from $3.2B to nearly $4.0B by adding a digital therapy.
This is something they could never do with analog alone. They are brilliant!