OPDIVO: The High Stakes of Comparative Efficacy

The Wall Street Journal recently reported that Bristol-Myers Squibb stock dropped dramatically on August 5th, 2016. This occurred after clinical trial results indicated that BMS’s immunotherapy drug OPDIVO® (nivolumab) failed to demonstrate a clinical improvement compared to chemotherapy in patients with newly-diagnosed lung cancer.

The financial market reaction to the clinical trial results highlights the growing importance of comparative efficacy research, both for obtaining approval and market access and, increasingly, for remaining competitive and driving profits. The impact of this announcement shows that the stakes are higher than just obtaining regulatory approval. Clinical trial results can have immediate and significant consequences before any regulatory decisions are even made. Here we discuss the importance of comparative efficacy research on market access, pricing, profitability, and competition.

What is comparative efficacy research?

Drugs undergo several types of studies and assessments to prepare them for the various challenges of regulatory approval and market access. These assessment types include efficacy, effectiveness, and cost-effectiveness research.

  • Efficacy concerns drug performance in controlled circumstances.
  • Effectiveness concerns real-world conditions and considers additional factors such as ease of use and tolerability.
  • Cost-effectiveness research considers all of the results of effectiveness research in addition to the cost of a drug to evaluate if a treatment represents a good use of healthcare resources.

For more on understanding the difference between efficacy and effectiveness, please review our prior blog post.

Comparative efficacy research is generally undertaken before effectiveness or cost-effectiveness research. Establishing that a drug works under controlled conditions is an important first step toward demonstrating that a drug helps patients and offers value in the real world.

The goal of comparative efficacy research is to guide health policy decision making by weighing the benefits and harms of different treatment options against each other. Comparative efficacy research uses evidence from clinical trials to compare the health outcomes from a new drug to the current standard of care in a given health system to treat a specific indication.

Market Access

Market access is the best-known purpose of comparative efficacy research. There are two main stages for obtaining market access for drug therapies. First, the drug must demonstrate efficacy (i.e., ability to treat the condition for which it is indicated) and safety in order to be granted marketing authorization by regulatory authorities such as the FDA or EMA.

Designing clinical trial studies only to overcome the regulatory hurdle is no longer sufficient. In the second stage of the market access process, manufacturers face the hurdle of health technology assessments (HTAs). HTA agencies—the entities designated to make recommendations for reimbursement in certain countries, such as NICE (UK), G-BA (Germany), and PBAC (Australia)—consider comparative efficacy evidence when making reimbursement recommendations and decisions.

HTA agencies have been operating in Europe and elsewhere for years—some for more than a decade—but similar institutions are not part of the United States healthcare system. However, various organizations in the United States, such as the Institute for Clinical and Economic Review (ICER), are trying to make comparative efficacy research a more significant consideration after marketing authorization. Despite criticisms of these efforts, comparative efficacy research is likely here to stay. The response to the BMS trial results demonstrate that people are paying attention and taking these trial results very seriously.


Comparative efficacy research is a major factor in drug pricing, especially in healthcare systems with HTA agencies. For example, in France and Germany, a drug is priced relative to the improvement that the drug offers over existing therapies. The more improvement that a drug demonstrates over its comparators, the more leverage a manufacturer has to negotiate the drug’s price with payers.

Historically, there has not been such a strong link between pricing and comparative efficacy research in the United States. This may, however, be changing. Again, ICER and other organizations are arguing that a drug’s price should be closely linked to its clinical performance. The uproar over the pricing of the Hepatitis C drug SOVALDI® (sofosbuvir) in 2014, which included an investigation by the U.S. Senate Committee on Finance, also indicates that Americans seek a better understanding of drug pricing in the context of clinical performance.

Profitability and Competition

As OPDIVO’s clinical trial results demonstrated, the profitability of individual drugs and of drug companies can depend heavily on comparative efficacy data. BMS’s market value dropped by $20 billion after the results of the trial were released. This opened the door for Merck’s similar drug KEYTRUDA® (permbrolizumab) to gain market share. Merck’s share prices increased by 8%.

Financial analysts and the public are paying close attention to clinical trial results. Failing to obtain market access may not be the worst consequence of poor trial results. When multiple companies are working to bring similar drugs to market, evidence that one company’s drug doesn’t work as well as predicted may spark major activity by investors before a drug even reaches the market for a particular indication. Companies may need to work harder to set reasonable expectations and to acknowledge uncertainty. The WSJ article notes that “many financial analysts expected OPDIVO to show a benefit in patients with newly diagnosed lung cancer.” When comparative efficacy evidence does not match the expectations, investors may lose confidence, which could result in a negative perception or competitive disadvantage.


Comparative efficacy research is no longer the domain of a small group of highly-specialized researchers and regulatory professionals. HTA agencies have been using comparative efficacy data to inform reimbursement decisions in Europe and elsewhere for years. Trial results can have major implications for market access, pricing, competition in the United States as well. Lawmakers and the public are increasingly focused on the connection between a drug’s price and its efficacy, so they are paying close attention to the comparative efficacy results. Investors have picked up on this trend: strong trial results can drive share prices up, but poor results may cause them to plummet. As comparative efficacy research takes on ever greater prominence, manufacturers need to adapt by designing strong trials, managing expectations, and preparing for tough questions about their pricing decisions.