Since 2008, Shire PLC 's market cap has nearly doubled ($8.3 billion to $16 billion) and its employee count has grown from 1,600 to roughly 4,300. Analysts say the U.K. company is on track to deliver its revenue guidance of 15% compound annual growth rate (CAGR) through 2015 – far above the expected anemic performance of most pharmaceutical companies.

Clearly, Shire – and in particular its Human Genetic Therapies division, which sells drugs for rare diseases – is benefiting heavily from the manufacturing problems of one of HGT's chief competitors, Genzyme Inc (Also see "Despite Rival's Supply Problems, No Guarantee That Shire Will Re-File Replagal In U.S." - Pink Sheet, 13 April, 2011.). HGT posted sales of $909 million in 2010, up from $555.5 million in 2009.

But Shire's other franchises, in attention deficit hyperactivity disorder and its newer division in gastrointestinal diseases, also are poised to grow in the mid-to-low teens – the GI business albeit off a much smaller base. Overall, the ADHD franchise – consisting of Vyvanse (lisdexamfetamine dimesylate) and Intuniv (guanfacine), as well as Equasym (methylphenidate hydrochloride) and Adderall XR (amphetamine, dextroamphetamine mixed salts) – which represented 36% of Shire's total 2010 sales of $3.5 billion – is forecast by analysts to grow at 13% CAGR. The company faces limited patent loss exposure.

Against this healthy backdrop, Shire CEO Angus Russell has made a point of arguing that the industry's value proposition for its new medicines has to change (Also see "For Shire, Life After Adderall XR? Yes" - In Vivo, 1 June, 2010.). "We've got to stop thinking about clinical endpoints. This industry has talked of proof of concept and high unmet medical need, but when did we ever say this drug is a high value or this drug reduces value in the system?" he argued in a keynote address talk at Elsevier's Pharmaceutical Strategic Outlook conference on April 1 in New York.

The industry needs to demonstrate tangible value early in the clinical development process in order to maximize the potential of its drugs, he said – but most companies are still struggling with how to demonstrate that value in a way that resonates with payers, yet preserves the asset's value.

The industry will have to accept that it can't depend on the same level of return – average return on invested capital, which used to be 35% to 50% for pharma is now closer to 10% to 15%. At the same time, however, it has to make a profit that it can justify to shareholders, a trade-off society must decide.

Learning from its rare disease business, Shire is responding to the rapidly changing specialist markets – it doesn't participate in primary care – by forging stronger relationships with patients, as well as providers and looking for the best way to present data to payers. It's been obtaining feedback from patients, such as one at New York University Medical Center, who warned Shire executives about high prices, noting that even though he didn't have to pay for the cost of his medication, he was taking a drug that had been on the market 12 or 13 years and earned its manufacturer billions of dollars. "When is enough enough?" this patient asked.

Shire made a splash last year when it launched Vpriv (velaglucerase alpha), its drug for Gaucher disease, at a 15% discount to Genzyme's Cerezyme (imiglucerase) even though it wasn't under competitive pressure because of the latter's manufacturing situation. Vpriv posted sales last year of $143 million.

Pharmacoeconomics also has become a priority criterion for deal making. Russell says he won't approve any acquisition in which the target company can't explain the pharmacoeconomics – even a deal in which the risk related to unknown pharmacoeconomics is built into the terms.

Following the talk at PSO, he sat down with "The Pink Sheet" to expand on his views:

“The Pink Sheet:” When we talk to biotechs about pharmacoeconomic data, they're not at all prepared to provide pharmacoeconomic data. They don't have the money or the resources.

Russell: The industry is changing. I feel sorry because biotechs are much more scientifically based. But unfortunately, that won't be enough. You've got to be thinking about how you're going to get paid.

I told a story about an investment banker. He's saying people aren't showing up to auctions anymore from the big companies – and it's a shame because some of these people have worked a lot of years on their drugs.

"The Pink Sheet": What exactly is the pharmacoeconomic data that you're looking for? Do payers want to get that education from a pharma company?

Russell: I think we've had some good meetings with the payers. That's not to say we can do an awful lot more and this is the start of a journey. I don't see this as something that's well organized or evolved.

But the evidence speaks for itself. People are always predicting we're going to have our prices cut back, that we won't be able to sustain our positions, and that's not been the case. When we introduced Vyvanse to the market, people said, "There's going to be a lot of generic products in the market. There's no way you'll exist with your old kind of premium pricing." And yet, Vyvanse sits out there with a premium price.

We do have a post-approval clinical study that supports the pharmacoeconomics case. It's the longest-acting drug. We're the only one with the label that says "acts for more than 14 hours of the day." For the old drugs, like our Adderall XR, and [Johnson & Johnson's] Concerta (methylphenidate HCl), the average usage was about 1.25 when you weighted it across the whole patient group. That extra 0.25 [one-quarter more dose per day] costs managed care.

"The Pink Sheet": So how did you approach payers?

Russell: We went early. When we went to launch Vyvanse, we went to look at relative pricing in the tiering, which is obviously important in the U.S. The challenge was to show compelling data. Interestingly, in the first few months we went, it was our data from our studies prior to launch, it was all somewhat theoretical.

Managed care was unmoved at that point because basically they wanted to collect their own data and look at outcomes. We sat down with them after about six months and looked at the outcomes data. It was comparable. Therefore, the tierings all got changed from Tier 3 to Tier 2. And now, we have the same position we had on Adderall XR.

"The Pink Sheet": What other steps are you taking?

Russell: We're very prepared today to change what I think has been an old paradigm generally: doing a head-to-head study was something that you didn't do voluntarily.

My view is we should do that now if there's an existing treatment. Germany changed the rules. In Germany, from the first of January of this year, if there's an existing product on the market, you have to have a comparison to that standard of care, not placebo (Also see "Germany's Comparative Effectiveness Debate Concludes; Dossier Refinement Begins" - Pink Sheet, 10 January, 2011.).

"The Pink Sheet": How do you prove value in a diffuse, grayish area where you've got kids that stay in school but they're not criminals or high-school dropouts?

Russell: So it's very interesting. If you start focusing on a market, on a lifestyle and what happens to these people [with ADHD], and you start to track that in more detail, our ownership kind of historically ended with, getting the physician. We didn't bother too much about the patient.

I'm saying if you look at this more holistic world of now you've got to show payers data, now you've got to go to the patients and work with patient advocacy groups – How do you get some of this more quantitative? This happens much more in the rare disease end of the business. We know everything about those patients' lives.

"The Pink Sheet": Isn't that something that Genzyme does very well?

Russell: Yes, they do. But they're in the rare disease business. I'm not saying Shire's unique. I think there are a small number of us who do this. There are a lot of people announcing their interest in rare diseases, so there is an issue there maybe of saying to them, "As you get into that, maybe it's not quite like the business like I told you about."

About how can you get to know the life history of hundreds and hundreds of thousands of patients? But maybe something pushes us nearer to that. Just to give up on Day 1 and say, "Oh, it's too difficult. We can't do any of that," that's crazy.

We've been willing to pour hundreds of millions of dollars into TV advertising with commercials and with other things. Why wouldn't we be prepared to spend even $10 million saying we'll take a group and ask them to build a much stronger relationship?

In Europe, there are certain rules and regulations about access to patients. That's something we need to address. That's why we've got policy-makers.

We need to sit down with the policy-makers and say, "If you really want us to save cost and bring value to the system, you've got to allow us to talk to patients.” They have this fear that we'll manipulate that and it's up to us. Unfortunately, this industry's track record isn't always spotless in misusing our access to these kinds of things. I think, again, we have to be very careful to say if we get the access to the patient, we'll use it responsibly. We'll use it to try to produce more value in the system.

"The Pink Sheet" How are you going to be implementing some of this at Shire right now?

Russell: Well, in ADHD it's a challenge. My point is if we, being a market leader and thought leader in ADHD, could develop that same value chain, what more could we do to help these patients? What is it that makes their lives so difficult? [Help them] have a perception that Shire generally is concerned about them, beyond just providing a drug.

Here's another example around ADHD. Earlier this year, we formed a strategic customer group of about 35 representatives in the U.S. who don't have sales milestones or goals. They focus on connecting with non-prescriber audiences to create the awareness about ADHD and its challenges. We also have a college scholarship program.

"The Pink Sheet": Does that cut into your margins?

Russell: It's redistribution of money. Maybe it does cut into the margin. I don't know. But I'm not necessarily sure you have to think of it in those terms. That again is a rather defeatist approach. Let's look at this as a different kind of marketing expense. I get asked a lot by investors and other people who say, "How many field force do you have in your rare disease business?" We don't have a field force. We have medical science liaison people. We have commercial people. And then, they get stunned because you tell them that Elaprase is marketed here in the U.S. with 35 people in commercial. But then they think, "Oh, so you have 35 sales people." I say, "No, I just told you we don't have field people."

"The Pink Sheet": Did your experiences in the rare disease side of the business influence your thinking?

Russell: The president of our business, Mike Cola, has done a lot about that. Mike and Sylvie Gregoire [president of HGT] are part of my leadership team. It's small – only six of us. Mike and Sylvie have their own management teams. They do a great job of running the business operationally. Our job is to think more strategically and be visionary in our leadership in the company.

We discuss improvements of the week's operational issues. We brainstorm as a team. And Mike has gone back to his business team and said, "There's a lot we can learn from our colleagues in rare diseases. We need to start looking at their world, and we need to think and brainstorm what we can do."

– Wendy Diller (w.diller@elsevier.com)

Shire CEO Angus Russell On The Value Proposition For Drugs

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