The Big Red Biotech Blog

Comparative Effectiveness Research May Alter Care Standards in US Too

The Tufts Center for the Study of Drug Development (CSDD) just a published a report assessing the probable effects that Comparative Effectiveness Research will have in the future of the US drug industry. Increasingly, new drugs will have to show proven benefits in relation to their costs to gain 3rd party payer and goverment reimbursement approvals.  It likely will no longer be enough to get your drug through the licensing process with FDA, EMEA, etc. - you also have to prove its cost effectiveness.

In comparing the access to oncology drugs in the US versus Australia, the CSDD study found that regulatory approval in Australia was not synonymous with reimbursement.  Only cost-effective drugs (under their criteria) received reimbursement status.  However, the following features of the Australian system were noted:

• Oncology drug prices were about 30% lower than the US
• 100% of drugs in Australia were designated with prior authorization whereas the comparable US figure was only 60%
• Australian patient cost sharing was lower and more evenly spread, where in the US the average co-insurance rate per cover drug was 35%

So in Australia, the use of cost-effectiveness standards led to lower prices and more affordability for approved medications.  As compared to the US, drugs not seen as cost effective had their access severely limited.

It will be interesting to see what occurs - as the US system generally has allowed patients to immediate access drugs more or less on demand (comparatively).  But, under an increasing cost-conscious and under cost pressure system, will the US also find itself moving much more into a more critical cost-effectiveness based standard that will make drugs put up?  Is Provenge an early case where this type of standard my first be applied?  The Medicare reimbursement decision on that drug will be interesting to watch.

Posted by Bruce Lehr July 11th 2010.

Son of Innovation Crisis in Biotech

Late last week I posted comments by Lilly's CEO John Lechleiter stating that there was an innovation crisis looming in the US and we needed to make 4 key policy changes to combat it. These were:

• Broad improvement in science and math education
• Immigration laws that permit top foreign scientists to work in the US
• A well-funded basic research infrastructure in academic and government labs
• Tax policy that fosters innovation

Today, I came across this article by Chris Rivera, President of the Washington Biotechnology and Biomedical Association, in Xconomy.  In it, a recent study by Batelle, commissioned by the Council for American Medical Innovation, states there are 4 major areas that policy needs to address to maintain America's medical innovation world leadership position.  The Council is Chaired by former House Majority Leader, Dick Gebhardt (I'm a St. Louis constituent from his district).

Biotech Must Have Predictable Regs, More Capital, More Talented Workers to Thrive.

The four areas of challenge for our medical innovation ecosystem (government phrasing) were outlined as:

• Lack of consistency and predictability in US FDA regulatory review and uncertainty in reimbursement
• Inadequate private investment for company formation and R&D growth
• Gaps in translating research innovations to commercial new treatments
• Limitations in the US bioscience talent pool

Read the Batelle report here - Download Gone_Tomorrow (I didn't name it!).

How should we meet the challenge?  Interestingly, Lechleiter's four suggestions probably would help address issues 2-4 identified by the Council to some degree and resemble some of the Council's own recommendations.  His promoted changes probably would not address the regulatory and reimbursement challenge identified in the Batelle report.

The Council's recommendations for these 4 Challenge areas:

Regulatory Policy

• Support FDA's Advancing Regulatory Science Initiative to improve science based risk-reward analysis
• Fund FDA to support more complex science and increased jurisdiction
• Expand ICH efforts to spread best practices re: Technical Requirements for Registration of Pharmaceuticals for Human Use and increase use qualified expert input
• Adopt policies that encourage new medical technology under reimbursement policy and don't penalize early adopters of technology

Increase Private Investment

• Strengthen the federal R&D tax credit by making it permanent and globally competitive
• Adopt tax and economic incentives to boost manufacturing
• Encourage venture financing from formation through IPO by creating federal angel investment tax credit, incentives to foster capital pools, and promoting alternative stock market methods for IPOs
• Private federal financing support for bioscience R&D infrastructure

Translational Research

• Commit to 10 year growth budget strategy for NIH with more emphasis on applied research
• More specific university-industry collaboration approaches following model of National Science Foundation or Department of Energy for "innovation hubs"
• Protect university technology transfer as set out in Bayh-Dole act (cost of patent recovery, overhead support, etc)
• Funding for the Cures Acceleration Network to support innovation for rare disease
• Reform SBIR & STTR programs to address "valley of death" challenges in commercialization
• National policies to encourage participation and retention in US-based clinical trials

Talent

• Federal support for K-12 science, technology, engineering, and math efforts
• Funding for vocational, technical schools, community colleges and industry consortia to retrain existing workforce in biomedical careers
• Increase number of US and foreign students pursuing graduate degrees in biosciences in US - could include scholarships and loan forgiveness for US student in technical fields; and a streamlined green card process for foreign grads of US universities at master's and Ph.D level

At face value, this looks like it will cost some money - finding the budget with all the other federal commitments is undoubtedly a big issue.  However, investment in biomedical innovation does pump needed support into an industry where the US can claim leadership.  It is a major engine of economic growth and a source of better paying knowledge based jobs.  It is vital to the health of healthcare and ALL its ancillary benefits to the US population.

I think a key is to get more public-private investment and to leverage collaboration between those two sectors. It goes back to exploiting more open innovation models in pursuit of new biomedical discovery - a historic US strength and an acknowledged source of our current leadership position.

If the government is to invest in an industry, this would seem to be a good choice given a current level of high competence and leadership, and with good prospects of offering a long term payoff.  The payoff coming not only for the industry itself but for the public it serves as we're ultimately taking about delivery of healthcare and quality of life.

As the report states, 'global leadership in medical innovation and biomedical development is "ours to lose"'. As I posted yesterday in the Innovator's Paradox, the best time to invest in innovation is when you are in the lead.

Posted by Bruce Lehr June 25th 2010.

Everyone's Gene into the Pool!

This week I read a post in Patent Doc blog critical of an editorial that appeared in Nature Biotech regarding the state of patent law with respect to patenting genes. The editorial (spurred by the recent Myriad decision by Judge Sweet) took the position that allowing gene patents was a effectively a license to block innovation. Society, according to the editorial, was worse off as a result.  The editorial opined that patent pools or clearinghouses might serve the public's interest in breaking through patent thickets, but that it would likely take government legal coercion to implement these remedies in the biotech arena. 

The Patent Doc post argued that the Nature editorial writers were confusing the role of patents in preventing infringement relative to commercial activity, with perceived blocks by these same patents on basic research.  The latter activity hasn't been impeded by patent enforcement actions relative to patents like the BRAC gene patents. This - according to Patent Doc's - is where the innovation is occuring unencumbered. This post also criticizes the Nature Biotech writers for not understanding the "balance of rights" that the patent bargain actually strikes relative to protecting both incremental improvements and the groundbreaking ones. Finally, the Nature writers are called to task for asserting that patent pools will require government coercion to be enacted in biotech -- in conflict with actual recommendations given by the US Health and Human Services Secretary's Advisory Committee on Genetics, Health and Society (SACGHS) report.

See report here Download SACGHS Patents Report Approved 2-5-20010 and page 92 for patent pool recommendation.

Patent Pools are an interesting concept, and not new, for resolving the gene patenting issue.  A patent pool as defined in Wikipedia is a consortium of two companies agreeing to cross-license patents relating to a particular technology. Follow link for more history.

Patent pools date back to 1850's and have been used to break up logjams of overlapping patents, referred to as patent thickets, in industries as diverse as sewing machine manufacturers, aircraft manufacturers, digital broadcast signals, DVDs and RFID technology.  Now, will they work for biotechnology and specifically for gene patent issues?

In 2000, the US PTO issued a white paper, Patent Pools:A Solution to the Problem of Access in Biotechnology Patents?  The paper does a great job of summarizing history of patent pools, requirments/characteristics of a pool to be legal (interaction with anti-trust law), discusses their plusses and minuses, and finally discusses potential benefits to their application in biotechnology.

The major benefits in terms of biotechnology (according to this report):

1. Elimination of problems caused by "blocking" patents or "stacking" licenses
2. Significantly reduce several aspects of licensing transaction costs
3. Distribution of risk across all members of the pool can spur more innovation due to effects of sharing risk
4. Pools often lead to systematic, more open exchange of technical information (not covered by patents) among pool members, i.e. sharing trade secrets for advancement of all

There can be negatives too, primarily pools can inflate costs of competitively priced goods, can shield invalid patents (thrown illegally into the pool), can encourage collusion and price fixing among pool members.  The US PTO concluded that there were enough existing guidelines, regulations, and laws to prevent this type of behaviour. Their conclusion?  Patent pools are win-win for biotech.

In a similar paper, published in The Journal of Philosophy, Science & Law, the author, David Resnick, Prof. of Medical Humanities, Brody Sch. of Medicine, ECU, similarly concluded that "companies, universities, and other interested parties should form a biotechnology patent pool" to prevent problems related to licensing from undermining scientific research and technical innovation. The key is to convince potential members of the pool that it is in their long term best economic interests to be in the pool. If members perceive that they have individual patents that are more valuable than those in pool, there is an incentive to "go rogue" as Sarah might say.

The jury is still out - both for the appeal of the Sweet verdict and for the viability of patent pools in biotechnology.

Other references

Verbeure, B., van Zimmeren, E. et al. Patent pools and diagnostic testing. Trends in Biotechnology 24(3): 115-120.

Patent Docs blog, Debating Gene Patents - Round four

Posted by Bruce Lehr June 3rd 2010.

 

 

Biopharmaceutical Boom and Bust

Here's a nice post from Eric Greb at the PharmaTech Talk blog.  It contains links to both a new Ernst & Young report entitled, Biotech industry showing resilience despite challenging conditions, and a link to a new white paper from Deloitte called, Global Economic Downturn LIkely to Change Face of Life Sciences Industries for Years to Come.

PharmTech Talk » Biopharmaceutical Boom and Bust.

The crux of the post is that we're seeing tremendous change in the industry.  We can expect consolidation amongst pharma and biopharma.  Bigger companies will get bigger.  Smaller, less capitalized companies, will fail or be acquired. 

In other words, as an industry matures it gets more competitive  and there is a shake out.  Fewer competitors are left standing when the dust settles.  Business models change to meet the new competitive stakes in the environment.  We can expect there to be a blurring of lines between big pharma, biotech, generics and biosimilars.  Likely, the biggest remaining players will have their hands in all those pies. And, there will be global expansion to the Asia Pacific region where we will realize a truly global pharmaceutical industry -- made up of a smaller number of large players from each region. 

Then we can begin a new cycle of niche players developing (think microbrews) ..............but let's leave that for another day.

Posted by Bruce Lehr May 11th 2010.

Pharma Industry Must Plot New Path Forward

In a new white paper entitled, The Future of Life Sciences Industries: Aftermath of the global recession, Deloitte and their collaborators at the Economist posit that the recession of 2008-2009 will forever change the biopharm industry.

Interviews conducted with 281 leaders from pharmaceutical, medical device biotechnology, and CROs paint a changed future coming.  Respondents (44%) felt that from 20-40% of existing biotechnology companies would disappear in the next 5 yrs. Senior execs (68%) from biotech were even more certain that the 20-40% figure was likley to occur. More than 65% of these stated the economy had already negatively affected their company.  In 2009, 14% of biotech companies closed but this was far short of the 20-33% that had been predicted by some industry analysts.

Many of these companies have reacted as you might predict.  More than 43% have reduced R&D expenses and staff - and 32% predicted this downward trend to continue in the future. This despite the fact that the same executives said "innovation"  - yes the dreaded "i' word - was their most likely salvation.  I still get the feeling there is some street peddler out there selling "innovation business plans" out on the street corner.

Despite the call for innovation, most of these companies have shifted toward R&D projects/products that offer an expectation of a near term payoff. To further support this line of thinking, a panel of venture capitalists, speaking at BIO last week, urged companies to be as efficient as possible with capital and learn to "fail fast".   In other words, don't waste money on potentially innovative projects in phase II or III that don't show a clear avenue for success.  No one can afford these failures any more. 

Plus, it is not enough to get approved - you need to also show a differential advantage over competition and comparative effectiveness.  This will be needed to get justify the value of these new products to 3rd party payers and to earn reimbursement.  Reimbursement approval may be as or even more important than initial regulatory approval in the future.   

Capital markets are less available to small biotechs.  The VCs urge companies to look at non-traditional funding mechanisms - inlcuding non-dilutive financing and ones that pursue creative collaborations.  More outsourcing is needed as well as risk sharing. Virtual models may become more attractive. More mergers are also expected as Big Pharma continues to cherry-pick the best clinical candidates.

Despite some of the negatives, biotech as an industry did earn a profit last year. In coming years, the industry will become more global.  It is clear the growth opportunities lie in pharmerging markets - like the BRIC countries.  Most MNCs are making significant moves into this space.

The emerging markets are also attractive to the growing generics industry.  Even in the US, 76% of all prescriptions written in 2009 were for generics. This trend will continue with Healthcare Reform and with more than $60 B worth of drugs reaching their patent expiration within the next two years.  Thus, you will see continued investment by significant portions of Big Pharma in generic companies.

The market will continue to evolve and companies will need to adjust their strategies and chart a new path in order to meet these challenging circumstances.

Posted by Bruce Lehr May 9th 2010

Whitepaper: Supplier-Integrated Raw Material Systems Support

My colleagues, Mason Williams, SAFC Market Segment Manager, and Brad Riesenberger, Corporate Communications have created a new whitepaper entitled, " Supplier-Integrated Support of Biopharmaceutical Raw Material Systems Promotes Operational Excellence and Risk Mitigation".

The paper discusses opportunities to reduce risk and cost by working with suppliers who can offer novel supply chain solutions and promote reproducibility in production processes. Vendor-partnered solutions are highlighted that can deliver leaner and safer processes for raw material handling.

Posted by Bruce Lehr April 22nd 2010