Almost uniquely across business sectors, health care innovation invariably drives costs higher, while elsewhere innovation usually leads to cost reductions.
This observation, put forward by Mark Pearson, head of the health division at the Paris-based Organisation for Economic Co-operation and Development (OECD) at The Economist's 2012 Global Healthcare Summit in London Nov. 29, is a worry for pharma companies expecting ever higher prices for their shiny new targeted therapies.
A second driver of increasing health care spending is the lack of productivity gains achieved by making changes to the health care labor force, pointed out Pearson. Health care apparently has far and away the worst record among workforces when it comes to increasing productivity, particularly in Europe. The medical profession is full of restrictive practices, like the way training is pursued, and restrictions on who is allowed to prescribe, or allowed to perform minor procedures.
These are both bigger drivers than the growth of the elderly population, which is often cited as the reason why health care spending is increasing, Pearson argued. The increasing number of elderly patients is only a weak driver of health care spending, accounting for around 10% of the rise in health care costs in European countries, he noted.
Bringing more private funding into health care is one solution, and maybe the only solution, to fill the gap between health care expectations and cost, Pearson continued.
But it must be the right sort of private financing. Private health insurance which just duplicates publicly funded health care is particularly bad at improving the efficiency of health care systems, Pearson said. It just explodes costs. What's needed is supplementary insurance, which builds on a core group of services.
Finding new sources of funding is one area where the experience of developing countries can shed some light. In Singapore for example, those patients who want to have better hospital experience can pay extra for larger, more luxurious rooms.
Developing economies, such as Chile and Mexico, also have experience in defining a set number of diseases and conditions that the public health care system will treat, with other health care paid for by patients out-of-pocket.
Pearson liked the idea of "sin taxes," for instance taxes on fatty foodstuffs in France and Denmark, but admitted that they don't raise much money. They might make sense for public health reasons, but they are not the future for financing health care. Instead a rational discussion about what services a public health care system is prepared to fund is needed, so that a larger private market can develop, he concluded.
--John Davis
With that suggestion, we turn to see which innovations might have attracted the attention of Europe's economists in this week's ...
Sanofi/Selecta: Selecta Biosciences has signed its first Big Pharma partner, Sanofi, in a deal to discover up to three targeted, antigen-specific immunotherapies for life-threatening allergies. The deal announced Nov. 28 gives the French pharma license to one program and options for two more. The financials were fuzzy, with no up-front payment disclosed and an imposing but unstratified $900 million in development, approval and commercial milestones should all three succeed, and tiered double-digit royalties on potential product sales.
The companies will apply Selecta’s targeted tolerogenic Synthetic Vaccine Particles (SVP) platform to discover and advance potential immunotherapies designed to abate immune responses against an undisclosed, life-threatening food allergen. Based in Watertown, Mass., Selecta researchers will conduct the early-stage work in tandem with Sanofi’s Boston-based scientists; when a candidate is chosen for clinical development, Sanofi will take over development. The companies currently are pondering two additional indications for immunotherapies to food- or air-based allergens, Selecta CEO Werner Cautreels said in an interview. In 2011, Selecta partnered with the Juvenile Diabetes Research Foundation to seek a tolerogenic vaccine for type 1 diabetes using Selecta’s SVP platform. Months later, it partnered with the Science Applications International Corp. (SAIC) to work toward a synthetic malaria vaccine. That work is being financed by NIH’s Malaria Vaccine Product and Support Services contract.--Joseph Haas
AstraZeneca/Pfizer/Quebec Provincial Government: Quebec’s new Neomed Institute, a drug discovery effort unveiled Nov. 23, will be seeded with a $77 million cash investment over five years, plus about $30 million in in-kind donations from AstraZeneca PLC, the initiative’s primary backer. Also contributing funding are Pfizer Inc. and the government of Quebec. Heading up the effort will be former biotech executive Max Fehlmann, previously the president and CEO of the Quebec Consortium for Drug Discovery (CQDM).
CQDM, which is backed by seven pharma companies including AstraZeneca and Pfizer, focuses on creating new tools for drug-discovery an “open innovation” environment, said Fehlman, while Neomed has more of a classic biotechnology business model. To start up the project, Pfizer is contributing $3.5 million while the provincial government is kicking in another $28 million. AstraZeneca is the largest initial contributor, however, providing $5 million in cash plus facilities, lab equipment and three pain molecules. Fehlmann said Neomed has $38 million in cash at present – including future donations from other firms and the in-kind contributions, the total investment is expected to exceed $100 million.The research center was closed under a workforce reduction announced by AstraZeneca in February that also resulted in the shuttering of a facility in Sodertalje, Sweden. Fehlmann said the incentives that brought pharma R&D efforts to Quebec in the first place, such as tax incentives and a strong academic community, remain in place. “It is now my challenge to go and get additional pharmaceutical companies into our consortium,” Fehlmann said, adding that he already has begun talks with the other companies involved in CQDM’s efforts. One of those is Merck & Co. Inc., which announced a $12.5 million investment in research by three university-affiliated and hospital-based research centers in Quebec on Nov. 26. That investment, part of a larger five-year $100 million commitment by Merck to R&D funding in Quebec, does not rule the New Jersey-based pharma out of participation in Neomed, Fehlmann added.--JH
Evotec/Probiodrug: German CNS specialist Evotec AG’s latest collaboration is with Germany’s privately-owned Probiodrug AG to develop new therapies for treating major age related diseases.
Under the terms of the agreement, announced Nov. 28, Evotec will set up and validate assays to support the pre-clinical and clinical development of glutaminyl cyclase (QC) inhibitors for the treatment of Alzheimer's disease. Glutaminyl cyclase is a proprietary enzyme target discovered and validated by Probiodrug which plays a crucial role in the pathogenesis of Alzheimer's disease as well as potentially other diseases.
Evotec remains on a collaborative “roll,” partnering with drug companies to discover new compounds and bring them into clinical trials. Last month it linked up with fellow German firm Bayer AG in a five-year collaboration to develop drugs for endometriosis, a frequent and painful condition in which endometrial cells grow outside of the uterine cavity. The German drug discovery company also has broad collaborations with Roche and Boehringer Ingelheim GMBH to find therapies for diseases of the central nervous system. Evotec also has a pipeline of preclinical and clinical CNS drugs of its own and it intends to find partners to take on development of the drugs in late-stage clinical trials.--Sten Stovall
Nestle/Chi-Med: Food and nutrition giant Nestle SA announced a joint venture with Chinese health care company Hutchison China MediTech Ltd. to explore nutritional and medicinal products based on Chi-Med’s Chinese medicine library and fund Phase III trials on an existing clinical candidate. The Nestle Health Science division, established two years ago, joined with Chi-Med in a 50-50 JV that created Nutrition Science Partners Ltd., which will specialize in gastrointestinal products derived from botanical plants. The JV will also oversee late-stage development of Chi-Med’s Phase III-ready inflammatory bowel disease drug HMPL-004. Nestle has made an initial cash investment to establish the JV, and will fund a 2700-patient Phase III trial beginning early next year. The move is part of Nestle’s overall strategy in personalized health care, which includes nutrition, drugs and diagnostics; the company acquired GI diagnostics company Prometheus early last year as well. Nutrition Science Partners expects to build a pipeline in GI, and may also extend its reach into metabolic disorders and brain health in the future. Nestle Health Science president and CEO Luis Cantarall will be the JV’s chairman, while Chi-Med CEO Christian Hogg will be a director and its general manager.--Paul Bonanos
Roche/Broad Institute: Roche is hoping to get a little more bang for its buck by repurposing some of the drugs that have been languishing on its shelves for as far back as 20 years. The Swiss pharma giant has tapped the Massachusetts Institute of Technology’s and Harvard University’s Broad Institute to screen more than 300 compounds that it had previously tested in a variety of indications. The compounds were sidelined during preclinical or early clinical development because they either did not prove efficacious in the tested patient populations or addressed a disease area that wasn’t pertinent to the Roche pipeline; none fell due to safety concerns. Roche believes that the amount of time and money already spent on the compounds make them a very valuable resource and potential fast-track development opportunities. The initial agreement between Roche and Broad is expected to span two years. Beyond that, the partners will evaluate any progress and determine if any of the compounds are worth investigating further. Roche’s head of medicinal chemistry, Karen Lackey, told “The Pink Sheet” DAILY that the company hopes to find at least 10 to 15 projects that could merit further clinical trials.--Lisa LaMotta
Curis/Genentech: In conjunction with a debt financing deal that net the biotech $30 million in fresh, non-dilutive capital, Curis Inc. said on Nov. 28 that it had in-licensed from Roche’s Genentech unit exclusive, worldwide rights to develop and commercialize a Phase I anti-cancer agent. Curis has brought in GDC-0917, a small molecule that antagonizes IAP (inhibitor of apoptosis) proteins, which Genentech has studied in 42 patients with refractory solid tumors or lymphoma. Genentech gets $9.5 million up-front, potential “first commercial sale” milestone payments should the molecule, now named CUDC-427, makes it to market in certain territories ,and and single digit royalties on net sales. Curis receives a royalty from Genentech on sales of Erivedge (vismodegib), which was approved by FDA to treat advanced basal cell carcinoma in January 2012 and is in Phase II for a less severe form of the disease. Curis has used this royalty to secure its debt financing – essentially trading future revenue for a bolus of cash that will fund ‘427’s development, and development of other drugs in its pipeline, now. Analysts predict the deal gives the biotech an extra year of cash runway at current burn rates.--CM
BioCryst/Presidio: This week’s “No-Deal” is of a predictable nature, as the planned merger between BioCryst Pharmaceuticals Inc. and Presidio Pharmaceuticals Inc. has fallen apart in the weeks since dual setbacks hit BioCryst’s pipeline. In early November, BioCryst said it would withdraw an IND for an experimental hepatitis C therapy over toxicity concerns; a few days later a Phase III study of the company’s peramivir antiviral was halted due to lack of efficacy. Though the writing seemed to be on the wall at the time, on Nov. 8 BioCryst said then that it would move forward with its planned merger with privately held Presidio, though it would work to conserve cash. On Nov. 30, the companies mutually terminated the deal.--CM
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