When Innovation Isn't Enough

There is always a self-congratulatory flavor to BIO’s annual meeting. Which is as it should be: it’s the lobbying group’s best venue for justifying its membership dues.

And I think they have – with exhibit 1 being their clever R&D tax credit, a $1 billion piece of reform money to provide a few hundred biotechs with non-dilutive cash most can’t get anywhere else.

And yet I still can’t shake the feeling that, by and large, BIO’s leaders – or maybe BIO’s members – are fighting the last war, over innovation, when the new fight is all about value.

Even a political idiot like me can get why Jim Greenwood reads gushing letters from patients about drugs that have saved their lives. And given just how few important biotech medicines have gotten approved lately, I understand why Dendreon’s Provenge gets a prominent mention. And I also get why Greenwood didn’t mention its cost ($93K for a full course of therapy). He would then have had to explain just how Dendreon calculated that Provenge will be cheaper than Taxotere per-month-of-life-saved (on theoretical average, Provenge gives you an extra three). Which would have been kind of boring.

But why wasn’t the Provenge price front and center in the more purely business speeches about cancer products (or frankly any biological therapy)? Given just how often people gave passing nods to the needs of payers (e.g., in Steve Burrill’s theories-of-everything talk), you’d figure that the Provenge price might be a relevant topic. Pricing is at least passingly important to a product’s commercial prospects and so apparently exceptional pricing might indeed be worth a chat, whether you think that price bodes well or ill for the industry (e.g., the Provenge price will be a) the straw that breaks the camel’s back or b) another gold nugget that shows just how strong the camel’s back still is or c) a meaningless topic because Dendreon, supply constrained, is only going to sell a few thousand therapies so total costs for any one payer won’t rise to a meaningful level). But I heard nothing about it.

Or let me put this another way. Greenwood said that "the recent recession and policy hurdles” hadn’t “diminished our passion to innovate.” First, I don’t think most investors or, frankly, executives would agree. For most VCs I know, passion for pharmaceutical innovation has turned into a massive case of indigestion (to continue the gastro-intestinal metaphor: VC portfolios are clotted with innovative companies).

But more importantly have Greenwood’s “recession and policy hurdles” increased our willingness to prove value – which isn’t the same thing as novelty and which Greewood’s r&ph will certainly require?

I don’t get the sense that drug companies have done much to show that they see the difference. (Full disclosure here: I’m now so interested in this subject that I’m part of a group exploring a new company focused on it.)

Innovation, by and large, can be judged pretty objectively. A new mechanism is innovative. A new compound too. But value is subjective – what’s valuable to you may be burdensome to me. Yet the industry’s main arbiter of value, clinical trials, too often proves value to only one audience: regulators.

That audience is certainly crucial. But everything we’ve learned over the last year says that a regulatory audience is hardly predictive of what other equally crucial audiences want: Lilly’s Effient, Bristol/AZ’s Onglyza and J&J’s Simponi and Ultram ER all provide customers with – well, given their commercial performance, very little they’re willing to pay the price for.

This isn’t to say that these drugs’ suppliers couldn’t create the necessary value. It’s to say that they haven’t, at least in part because they’re focused on just one audience.

Instead of simply proving that a pain drug reduces pain without causing other big problems, maybe the trial should prove that the pain drug does something the payer wants from it – maybe a reduction in follow-up visits to the doctor to get another pain drug. Or delays the prescription of an opioid. Or allows a generic to be used in most cases. Or shows that a GP, after a relatively low-cost visit, can prescribe the product without sending the patient along for specialist follow-up. Or can avoid an expensive diagnostic procedure. A me-too cancer drug (and there are plenty of them in development) could justify premium pricing by measuring, along with whatever purely clinical data it needs for approval, reductions in hospital-acquired infections, or length-of-stay.

I spoke with one CEO who told us that the nurses in hospitals testing his oncology drug loved it because they spent less time cleaning up after patients nauseated by the standard of care. I asked: Are you measuring how much less time they’re spending? No, he said.

Biotech wants to be paid like it’s always been paid: for promises of novelty. I’d be curious to hear a biotech claim that it should be paid, as the UK’s NICE pays for Millennium/J&J’s Velcade, when the drug delivers the value the payer and patients want. That value could be a particular medical outcome, or better quality of life, or lower medical costs. Or something that makes the payer’s services more attractive to the employers its competing with other payers to win as clients. But it isn’t necessarily whether it’s clinically better than placebo. Or even standard of care. Effient’s head-to-head trial against Plavix proved – in crude summary – that it’s clinically better. But payers clearly don’t see enough value to justify switching away from a drug soon to be generic.

So my suggestion: if BIO really wants to promote the long-term health of the biotech industry (and the broader pharma business as well), maybe the theme for the next convention should focus on customers.

How about “What’s In It for Me?”

image from flickr user zizzy used under a creative commons license