2011 Alliance Of The Year Nominee: AZ/HealthCore

It's time for the IN VIVO Blog's Fourth Annual Deal of the Year! competition. This year we're once again presenting awards in three categories to highlight the most interesting and creative deal making solutions of the year. The categories are: M&A Deal of the Year, Alliance Deal of the Year, and Exit/Financing Deal of the Year. We'll supply the nominations (a half dozen in each category throughout December) and you, the voting public, will decide the winners (by voting early and often, commencing once we've announced all the nominees). Strap yourselves in, it's The Race for the Roger™.

Never mind scientific or regulatory challenges. Payers are arguably the single most important hurdle between pharma and future profits -- and a flurry of 2011 deals showed that drug firms know that. They also know that, where payers are concerned, it's time to move from the battlefield into bed.

AstraZeneca's February 2011 tie-up with HealthCore was the first and among the most ambitious of 2011's pharma-payer deals, so that's our nomination here, but votes count toward any/all of the copy-cat deals, too: Sanofi/Medco (June) and Pfizer/Humana (October). They are all aimed, ultimately, at measuring health outcomes and understanding how drugs contribute (or not) to those outcomes. They're looking at cost-effectiveness. They're seeking to identify the inefficiencies in the provision of health care, and, in theory, feeding that information back into pharma development plans and pipelines.

Hoorah! These alliances are the surest sign yet that industry realizes that the game isn't about getting novel chemicals (or biologicals) past FDA, fun as that might be. That the way to reap future financial rewards involves developing practical, value-for-money health care solutions to prop up a crucial service within modern society that's on its knees.

Now if that financial-crisis-defying, social-responsibility-ridden big picture doesn't draw your vote from you, let's dig down. AstraZeneca -- which hasn't shied away from declaring its ambition to be a leader when it comes to payer interactions -- has tied up for at least four years with HealthCore, which is the clinical outcomes research unit of WellPoint, the U.S.'s largest managed-care organization. The partners aim to generate real-world data on the most cost-effective ways to treat chronic diseases like diabetes, cardiovascular disease and dyslipidemia -- and to evaluate drugs' cost-, clinical- and comparative-effectiveness.

In sum, AZ hopes that, by drawing on HealthCore's database of pharmacy and medical claims from 36 million members of Blue Cross and Blue Shield insurance plans, it can get better at persuading payers to cover its drugs, not least by better anticipating the kinds of cost-effectiveness studies that payers will use to decide whether or not to reimburse. The deal may also help identify where AZ should invest its future R&D efforts.

So for now, it's mostly words. But they're the right words. AZ is working more closely with the groups that influence drug purchasing decisions, and that's sensible. It may be ambitious in its aim to expand the project into a public-private consortium, including other drug firms, payer organizations and governments, but working with real-world data on real-world problem-solving is big and requires multiple collaborators. That's in part why the U.K. government recently announced plans to make accessible unnamed patient records from the country's vast National Health Service.

Indeed, AZ's business development chief Shaun Grady has made it clear he wants to emulate the HealthCore deal in other geographies, likening these actual and future collaborations to "building up a toolbox of solutions and approaches" to addressing health care issues.

What about the potential conflict of interest (since WellPoint is a big customer)? Not an issue, said AZ's executive director, corporate business development Mahmood Ladha, speaking at Elsevier's Pharmaceutical Strategic Alliances conference in New York in September. "There's an extraordinarily solid firewall" between HealthCore and its parent. "This is not a vendor relationship. HealthCore is a true partner."

Sanofi no doubt would say the same of its global deal with Medco Health Solutions and its United BioSource health economics and outcomes research unit. This tie-up appears to be more directly focused on informing development strategy for drugs in Phase II and III of the French giant's pipeline. But the thrust is the same.

So is that of the five-year Pfizer-Humana deal. Speaking in October to "The Pink Sheet" DAILY, Jim Harnett, Pfizer's Senior Director of U.S. health economics and outcomes research, neatly summed up why this trio of deals deserves your vote: "Previously we had not [included] the decision-makers" in our work to identify and define a research agenda.

Seems silly, really, doesn't it?

No Glass Ceilings: Medtech Women Gather at Unique Industry Meet-Up

MedtechWOMEN co-founders Amy Belt and Deborah Kilpatrick

Something new happened in the medical device world two weeks ago. It wasn't a new technology or a big research discovery, nor was it a breakthrough treatment for heart disease, cancer or diabetes, though it could possibly lead to one of these.  

What happened was an unprecedented medical technology conference, featuring exclusively women speakers, panelists and attendees. The sold-out Medtech Vision conference in Menlo Park, Calif. on September 15 and 16 brought together more than 200 business executives, entrepreneurs, investors, physicians, inventors, providers, patient advocates, policymakers and regulators and generated an energy that attendees claimed – and I will vouch -- was not just palpable but electrifying.  

The idea was hatched a year ago when Covidien Ventures director Amy Belt got fed up with the typical medtech meeting scene. "I was looking up from the audience and realized that there were no women on the podium – again. I was frustrated not to see women on the podium, as well as on boards and executive teams, because I know the women experts are out there and I wanted to hear from them," Belt said. So she pulled together a like-minded group and set about, with major support from Covidien, Abbott Laboratories and law firm Fish & Richardson, to create something new.  

The invitation that landed in my inbox July 27 came from a new organization called MedtechWOMEN and promoted the conference as "the first ever to highlight women on the forefront of medical innovation." Intrigued, I anticipated speeches about glass ceilings and male dominated C-suites. Boy, was I wrong. Instead, the presentations and panel discussions proved true to the meeting's agenda: to identify solutions to today's big challenges in medtech: a jittery venture capital community, shifting models of care delivery and reimbursement, increasing regulatory demands, and laser-like attention to healthcare outcomes and costs.

Speakers set right to the task with pointed advice. On an investor panel, Versant Ventures managing director Beckie Robertson advised against entrepreneurs working on small projects. "The opportunity for a win-win is in meeting a huge unmet need and getting out before commercialization," she said. Johnson & Johnson worldwide VP of new business development Susan Morano agreed, highlighting spectacular exits in the last two years for companies that genuinely responded to unmet needs. 

Among big populations with unmet needs are women themselves, noted Lynn Westphal, director of women's health at Stanford University. Westphal named several common diseases and treatments that are inadequately studied in women, explaining that females often display symptoms and respond to therapy differently than males. Imagine the opportunities, she suggested, awaiting companies that break the mold and extensively enroll women in large trials for cardiovascular, cancer, diabetes and other diseases. 

Interventionalists and surgeons had their say, too. Surgical oncologist Shyamali Singhal explained that for new technology to be adopted, "it has to be faster, easier, and more doable than what I'm doing now in surgery." And the designers of those new technologies need to interact more with physician users, said Bonnie Weiner, a cardiovascular researcher, clinician and former president of the Society for Cardiovascular Angiography and Interventions. "Nobody ever asks us how we're going to use the device. Come to the cath lab and follow us around!" 

On a reimbursement panel, speakers agreed that the days of "build it and they will come" are over, and the way forward is to improve health outcomes or procedure workflow. "We look for clinically meaningful improvement in outcomes" backed by high-quality evidence, said Betsy Thompson, chief medical officer for the San Francisco regional office of the Centers for Medicare & Medicaid Services. Advancing patient safety is also a good bet, she said: "If a new product improves safety but not effectiveness, we would probably cover it." 

Liesl Cooper, VP of global healthcare economics, policy and reimbursement at Covidien, pointed out that with patients paying more for their care, industry also needs to think more about how to educate them. "We're not used to that," she said. "Shame on the medtech industry for not touting better outcomes such as a 24-hour stay compared to a six-day stay!"

So what difference did it make that the people talking were all women? Amy Belt put it this way in her opening speech: "Leadership doesn't have to wear a navy blue blazer. Women represent 51% of the population, 58% of the population over 65, spend two out of three healthcare dollars, are half of the graduating classes of physicians today and over 90% of all the registered nurses. Why would it make sense for women not to be significantly represented in leadership positions where key decisions are made about the delivery of care and investment in innovation when they represent half the population, control the healthcare dollar and provide the majority of healthcare services?"

Beyond Belt's introduction, though, the conference was not about advancing women, but about advancing medical technology and healthcare. MedtechWOMEN founder Deborah Kilpatrick, a senior VP at diagnostics firm CardioDx, was pleased it went that way. Women's place in the industry "was just not what we were there to discuss," Kilpatrick said. 

Nevertheless, the thousand-watt energy at Medtech Vision was a departure from the standard atmospherics of industry conferences. It reflected, I think, the pride of 200 women medtech leaders seeing themselves assembled in one place, listening closely to each other, making new connections, and realizing – unexpectedly, inspiringly – that solving the challenges ahead may suddenly have gotten a little bit easier. -- Mary Houghton

Insulin Pricing: Let The Battles Begin

In the same week that Novo Nordisk filed its latest-generation insulins, ultra-long-acting Degludec and the DegludecPlus combo, in Europe and the US, the drug makers says it won't be seeking the highest price it feels its new offerings could command.

"We could probably justify a higher price premium [for Degludec] than in reality we can ask for," acknowledged EVP & CSO Mads Krogsgaard Thomsen in a Sept. 28 phone call. He alluded to a host of health economic outcomes research the Danish group has carried out on its new products from Phase II onwards, but admitted that "the financial crisis and the focus on short-term financial optimization rather than long-term societal costs" means Novo won't push its luck.

You bet it won't. Even without the financial crisis, insulin pricing is becoming a hot issue as governments and payers try to cut down on the costs of a disease that's spreading fast. Never mind that insulin's value-proposition is still significantly better than that of many cancer drugs. Never mind the argument about long-term cost-savings from effectively controlling diabetes. The bottom line is that older insulins are cheaper, and not that much less effective, at least according to this BMJ Open article published Sept. 22 . That piece went on to declare that the U.K. NHS could have saved over £600 million between 2000 and 2009 if it had prescribed human instead of analog insulins. (The Germans reached a similar conclusion years before).

Now as with any analysis, the BMJ study wasn't perfect. Many would dispute the size and value of analogs' advantages over the human version. But by underscoring the high overall cost of insulin treatment, it comes to a conclusion that "should scare the daylights out of the major insulin companies," according to Diabetic Investor publisher David Kliff.

Indeed, NICE, the cost-watchdog for England and Wales, was quick to jump on the bandwagon, issuing a release Sept. 26 to remind the world that it recommends using human insulin treatment as first-line, and that had those guidelines been followed, those millions would have been saved.

If some payers aren't even convinced about the relative value of so-called 'modern' insulins (now 15 years old) and still recommend versions first introduced in the 1980s, what hope for the positively futuristic Degludec, a next-next-next generation version of this hormone first discovered in 1921?

Novo management itself hinted in this IN VIVO feature from 2007 that Degludec may represent the last innovation round in injectable insulin -- in other words, we're reaching the point where it can't get any better. The remaining challenges are education, adherence, convenience, delivery -- which, along with lack of new products, explains Sanofi's integrated service strategy.

Still, Degludec is better, Novo argues. But the company will have to work hard to prove it. A decrease in night-time hypoglycemic events may not be enough to convince all, though flexible dosing ("at any time of day, on any day"), a Lantus-beating half-life and a nice device will help.

Novo's remarks on pricing arguably represent its opening hand in payer-negotiations that will occur against a backdrop of already-raging pricing battles in the ranks of less-innovative insulins. Lilly in particular is attempting to squeeze whatever it can from a dwindling, market-trailing franchise that lacks new products: when Novo (prematurely, as it turned out) withdrew its human insulins in the UK in 2010, Lilly lowered the price of its human insulins to secure Novo's patients.

Meanwhile, Lantus goes off patent in 2015, after which time biosimilars (including one from Lilly) could start to pull down the price not just of Lantus, but of other basal insulins including Novo's own Levemir (though admittedly, biosimilar insulin isn't the most attractive target for large-molecule copycats).

In sum, we're not surprised Novo's saying it won't be greedy. The question is, will it get anything at all? And as regards the BMJ paper: "I expect there will be a reaction from leading diabetologists," predicted Thomsen.

In other words, keeping watching this space. There will be more to come.

image by flickrer james.gordon6108 used under creative commons

We Bet No Champagne Corks Popped at AZ

Brilinta's long-delayed FDA approval yesterday should have meant party-time at AstraZeneca. After all, this blood-thinner showed itself, in head-to-head trials, to be better at preventing heart-attacks than the $8.8 billion Plavix, the number-two drug in the world. And unlike in the case of beleaguered dapagliflozin, AZ doesn't have to share Brilinta profits with anyone.


We suspect there weren't many champagne corks popping, though. FDA's nod was reluctant, to say the least, and came with a sting in the form of a boxed warning about bleeding risk and the aspirin-problem: if patients are on too much aspirin (more than 100mg per day), Brilinta ain't so brilliant. Most if not all heart patients take aspirin. And most also take host of other pills, too -- meaning that Brilinta's twice-daily dosing could be a significant turn-off.


No wonder that, despite a small share rise for AZ yesterday, the analyst reaction was muted. Jefferies' Jeffrey Holford halved his peak sales estimates for the drug to $1 billion, calling the FDA victory 'pyrrhic' and advising investors to sell. Indeed, even the $1 billion, if it's reached, won't come fast: AZ is talking about a 12-month roll-out period, given reimbursement hurdles (raised, probably, by today's planned merger of Express Scripts and Medco, giving buyers even more clout to squeeze prices) and a REMS that calls for the company to educate physicians as to the aspirin problem.


By then, generic Plavix will have flooded the U.S. market (multisource generics are expected in May 2012), providing yet more compelling reason -- cost -- for payers to dismiss, or at least disadvantage, Brilinta.


They certainly aren't embracing Effient, Lilly's blood-thinning offering, launched in 2009. Granted, that drug came with a narrower label than Plavix, and additional bleeding risk (and not only among high-dose aspirin patients). Despite some advantages over Plavix -- it doesn't share the blockbuster's efficacy problems among slow metabolizers, and can be used in conjuction with PPI drug omeprazole -- Jefferies expect Effient sales to reach only $244 million this year.


The bottom line is that Brilinta won't do much to plug the gaping, multi-billion dollar revenue hole left at AZ after the likes of Seroquel, Nexium, Symbicort, Atacand and Zomig (worth about $14 billion in 2010) lose exclusivity in 2014 or sooner. Not to mention the $5.7 billion Crestor, which goes off in 2016 but whose growth is already slowing ahead of generic competition to class-competitor Lipitor this year.


So AZ's in the same boat as Lilly: sitting there (albeit while re-organizing its R&D), faced with the harsh reality of today's pharma scene: if there's a big drug out there that works good enough, and is about to become a lot cheaper, don't bother trying to better it. Better has to be so much better these days; and safer has to be safer in all patients, not just those going easy on the aspirin.

Meanwhile in Europe (where, in those patients included in the 18,000-strong Phase III PLATO trial, the aspirin problem didn't show up), Brilique (as it's known there) is already reimbursed in seven countries (including Iceland) and the company expects decisions this year in France (following an earlier withdrawal), Germany (where it's the first to test a new reimbursement system) and the U.K, where the drug received a preliminary approval in June.

image by flickrer creative tools used under creative commons

Live From ASCO: Time To Cool Down?

It's day three of ASCO and the meeting is at a fever pitch, as the National Cancer Institute's Antonio Tito Fojo wryly observed during a panel on designing randomized controlled trials to achieve meaningful benefits. Not that it's an unusual state for the world's largest meeting on the largest field of drug development.

There is the typical fervor surrounding promising early data, a few major advances to report (for instance, the melanoma data from Roche and BMS covered by among others, the NYT, WSJ, Reuters, and, of course, "The Pink Sheet" Daily), and the meeting halls are packed with clinicians, investors, and journos. (Saturday's clinical science symposium on ovarian cancer had such throngs waiting for it to start that McCormick Place called in bouncers, from "Armageddon Security," nonetheless. And if you weren't in the initial crush, you probably got diverted to an overflow room. Or the second overflow room.)

Still, compared to other years, analysts aren't finding much to write home about. And, increasingly, the importance of the data being presented before packed meeting halls is being questioned. "We need to get away from things that add cost but not value," UnitedHealthcare's Lee Newcomer noted during a panel on health care reform.

Defining what value means, however, is a trickier subject.

Most clinical trials don't mean much for clinical practice, Ralph Meyer of Queen's University asserted at the plenary on randomized clinical trials. With all the controls and standardization, they represent the ideal – not real world practice. And registration studies are intended for that purpose.

In a talk called "Raising the Bar for Efficacy In Cancer Therapeutics," Alberto Sobrero, Head of the Medical Oncology Unit at Italy's Ospedale San Martino, took on whether or not those trials produce clinically meaningful data, or just go after statistical significance. Looking at the 15 pivotal Phase III trials for 9 biologics covering 8 different cancers approved over a 5-year period, he found that the hazard ratios (a statistical metric for calculating risk reduction) for progression-free survival and overall survival looked good at (respectively) 0.57 and 0.73. But when you considered the absolute gains of 2.7 and 2 months, the data were far less clear. Or as Sobrero put it, "Hmmm."

It's a complicated situation, he acknowledged. In an aggressive cancer like metastatic melanoma, a 0.8 HR would mean a 1.5 month gain – not really meaningful. But in breast cancer, that same 0.8 HR becomes worthwhile with a 6 month gain. So, both hazard ratios and absolute gain need to be considered --as well as the context of the specific tumor type-- when making a value judgement about a clinical benefit.

NCI's Fojo also questioned the significance of statistical significance. Paraphrasing an earlier researcher, he noted that if you torture data long enough, you can get it to confess to significance. Fojo found much of the clinical benefit shown in studies has marginal value. By definition, clinical benefit rate (CBR) is what you get when you add stable disease to partial and complete responses. Or, as Fojo put it, it's what you report when you have a drug that underperforms. It's "the corruption of an endpoint," he said.

Shrinking a tumor is good, he agreed, but unless it correlates with survival, stable disease does not mean anything. In prostate cancer, for instance, where some novel drugs have been reporting CBR, objective response rate (PR+CR) correlates highly with overall survival. But when you include patients that met stable disease criteria, the average benefit drops by more than half. "Because you're adding a parameter that has no value at all," Fojo said.

Of course, part of the concern is that these absolute gains aren't coming without costs. It's one thing for a drug to provide 2 months of life, quite another if it costs thousands of dollars and comes with toxicities. And given the proliferation of oncology drugs, there's more room for payers to actively manage the disease, benchmarking more expensive newer agents against cheaper, older ones, and using the ultimate metric --survival -- as the measuring stick. That's playing out at ASCO too, as Newcomer's comments indicate.

Unlike in the past, the skepticism of therapeutic value outlined in posters and abstracts isn't limited to the back corridors or the marginal sessions on clinical trial design and practice issues -- it's coming from the podium at scientific sessions. For instance, a review of recent Phase III trials in upper GI malignancies was organized around the theme of whether the findings were clinically meaningful or just statistically significant, and included a talk about the health care economics of treatment. (Hint: It wasn't pretty.)

It's all part of a larger trend toward more concentration on value, cost and payer issues as IN VIVO covered recently in the May 2011 issue.

It's great to see researchers and industry execs coming out of the convention with excitement about promising new pathways and the potential for combinations. But they should also start thinking harder about raising the bar. Otherwise climate change (of a reimbursement and/or regulatory nature) could spark a cool down in one of the hottest therapeutic areas of the industry.

Image courtesy of flickrer Joe Seggiola through a creative commons license.

Market Access: Pharma's Hot Potato?

Strangely enough, given that market access is nowadays probably the single most important determinant of near-term (and indeed any-term) commercial success for pharma, there weren't that many companies attending a recent event dedicated to this topic. Instead, it was mostly consultants -- gearing up one supposes to later suck hefty fees out of said absentee firms by relaying information on how to convince payers to reimburse their drugs. (Which is what market access is, in case you'd also missed it).

Then again, maybe it was understandable that many pharma stayed away: the messages aren't happy ones. The various overhauls of Europe's market access systems (that's to say, health technology assessment methods and processes) have already had "major consequences" on drug pricing, said Pierre-Phillippe Sagnier, VP Global Market Access at Bayer Schering Pharma.

Yet it remains unclear precisely what criterial those overhauling systems use to judge the value of new drugs. Thus, in Germany, Europe's largest and arguably most influential market, all new products are now subject to a compulsory cost-effectiveness exam after just six months on the market. Moreover, while this exam determines a drug's pricing fate, the marking system remains opaque.

That matters because many European countries look to Germany when making their own pricing decisions and drug-value judgments. Thus, a bad mark in Berlin could spell disaster for a product in Europe as a whole. (Tip: Germany's hot on relative cost-effectiveness, so you can mostly forget placebo-controlled trials.)

On the other hand, most European countries do nevertheless now have their own HTA systems, with their own particular methods and biases. That means each requires a bottom-up information feed from local execs and a degree of regional tailoring. Pharmas still aren't that comfy with the trend towards regional empowerment even at the marketing level; now it has to consider regional input during development to make sure it generates appropriate data.

Partly because of the complexities required to account for these regional difference and partly because big drug makers are resistant to change, pharma apparently have little idea how to fit the market access function into their traditional basket of activities. "Market access works across all functions; it's essentially an integrating function," commented Janice Haigh, Senior Director, Pricing & Market Access for Astellas Pharma Europe. She's trying to figure out market access for the Japanese firm, which has shifted from part of Operations to Marketing. She and other executives suggest that, at the moment, no-one's really managed to position market access right. Bayer has moved it about from development to commercial and is now trying to integrate the two. "It will take some time," says Sagnier.

There are some ideas trickling through, including better mechanisms to address the global vs. local disconnect that can arise in market access. Astellas, for instance, groups payers into five or six types, according to Haigh, which share similar priorities.

But there are also signs of a wait-and-see attitude that most pharma can ill afford. Regarding the the German system, for instance, where the first outcomes are expected in August 2011, "we're quite glad we are not launching anything in 2011/2012; we're happy to see how other drugs get on, " admitted Bayer's senior market access manager, Jens Lipinski.

Top management at several Big Pharma are talking big talk about market access. It's unclear, from this blogger's lunch chats during the above-mentioned meeting, that this world view has trickled down through the ranks.

In reality shifting the commercial mentality away from pushing drugs at doctors and towards building relationships with national and regional payers requires new skills. So too, does dreaming up risk-sharing deals and embracing integrated care contracts. It's tough stuff that will remain a hot potato no one department wants to own -- let alone a subject that can attract conference attendees.

image by flickrer Jess Gambacurta used under creative commons

AstraZeneca Polishes Up Brilinta As It Woos EU Payers

Still reeling from the FDA's knock-back to its blockbuster cardiovascular hopeful Brilinta, AstraZeneca is doing its utmost to push uptake in Europe. So on Monday the company issued a press release highlighting a health economics sub-study of PLATO – the 18,000-patient Phase III trial that underpinned EU approval in December– showing that even though Brilique (as ticagrelor is known in Europe) costs up to 20 times more than generic Plavix, it is actually, dear payers, more cost-effective…as a result of lower hospitalization costs.

The sub-study took patient data from PLATO and used it to work out event rates and thus ultimately a cost-per-quality adjusted life year (QALY) for the drug for one year, using Swedish health care costs. Since PLATO had shown a reduced rate of MI, stroke or death from vascular causes, without a significant increase in the rate of overall bleeding, relative to Plavix, the theoretical health care bill was lower. The study then used "necessary assumptions and external data sources" to extrapolate longer-term QALY data, according to a description in the International Society for Pharmacoeconomics and Outcomes Research's Value in Health journal.

The result: Brilinta's cost-per-QALY was in the €2,350-€5,700 range, making it look rather cheap against the backdrop of an informal €25,000-€38,000 cost-per-QALY threshold applied by watchdogs like NICE in England.

One of the professors behind the study described this result as "particularly impressive". Whether or not Europe's most important payers agree is still unclear. AZ concurrently announced that Scotland and Denmark had agreed to reimburse Brilique, but these tiny nations alone won't move the needle for the Big Pharma.

Decisions from Europe's biggest markets will. But France's health technology assessor has already requested further data, notably from AZ's response to FDA's complete response letter, delaying its decision (AZ withdrew its submission as a result, but plans to re-submit within months). Cost-effectiveness assessments in the UK and Germany are due to report later this year.

It's unlikely that this particular sub-study will sway NICE's decision. That agency often questions manufacturers' assumptions and models in their cost-effectiveness analyses; like many US payers, it's (probably rightly) skeptical of pharma-sponsored studies. Even the Scottish Medicines Consortium's approval document from April notes that "the manufacturer may have underestimated the potential uptake of this product" in its calculations of the impact of Brilique on the Scots' drug budget.

Meanwhile Germany has one of the highest generic usage rates in Europe and is notoriously harsh in its judgment of what constitutes innovation (and thus warrants a premium price). But it will at least appreciate that AstraZeneca bravely pitted Brilique head-to-head against the relevant competitor in its Phase III trials, rather than trying to get away with a placebo-controlled trial. Indeed, Germany now requires head-to-head trials with existing therapies before it will grant reimbursement at a premium relative to existing treatments.

As such, Gunnar Olssen, head of AZ's CV/GI iMed, reckons the company couldn't have done a lot more to prove Brilique's superiority, and thus its value to patients. "I don't believe in this case we should have done anything differently," he said. "The drug led to a statistically significant reduction in cardiovascular mortality."

At what price, that reduction, though? That's what the payers are asking.

image by engnr_chik from flickr, used under creative commons

AZ's Payer Push No Help to Brilique in France

These days, you've got to schmooze with the payers as well as the regulators. AstraZeneca knows that; it has indeed been playing up its payer-focused strategy, with recent declarations of its bid to become "the number one company in terms of payer interactions," according to top AZ dealmaker Shaun Grady.

So it should have known that just because clot-buster Brilique was approved by the European authorities in December 2010, that wasn't the end of the story. And indeed, the French health technology assessment agency, known as the Transparency Commission, following a Jan. 19 review meeting, rejected the drug for reimbursement/pricing discussions. Hence AZ withdrew its submission.

The agency is concerned about the drug's side-effect profile, and was also influenced by FDA's lukewarm response to AZ's application for approval in the U.S.: FDA in December sent the company a complete response letter questioning the drug's efficacy in U.S. patients.

Fair enough; after all, the drug didn't seem to work among the U.S. cohort of AZ's 19,000-patient, multi-national Phase III trial. There are all sorts of discussions ongoing as to whether it's because the U.S. patients were on higher aspirin than those in other countries. According to AZ, the French want to see additional information, including clinical data contained within the company's response to the CRL, which was submitted on Jan. 21. (In other words, too late for the French meeting).

Anyway, the moral is that payers are likely to jump on concerns raised by any approval agency, even those outside their own territories. (We don't suspect France's concerns are anything to do with the fact that the genericizing competitor drug Plavix is ... well, French.)

It's tough luck for AZ, though, despite its best intentions (..."we're meeting payers' needs for value-based product differentiation by improving our ability to assess clinical and economic outcomes in real-world populations (as an example, earlier this year we announced a new outcomes study we were kicking off for Brilinta) declared an AZ spokesperson earlier this year).

France accounts for nearly a third of the market share for anti-platelet drugs in Europe, according to Sanford Bernstein analyst Tim Anderson. And AZ needs Brilique it faces expiries for Nexium and Seroquel. It also needs the drug to start generating revenues fast, because Plavix is either going or gone off patent.

AZ says it plans to supplement the Brilique reimbursement dossier and plans to resubmit to France's Transparency Commission within the coming months. Hopefully for it, the French set-back won't give FDA, set to rule by July 20, any further concerns. Anderson suggests in a March 23 note that "the odds of a negative ruling would seem to increase at least slightly."

Zut alors.

Update: AZ has corrected us on a couple of technicalities: The Transparency Commission didn't actually reject Brilique, they asked for additional information, and AZ withdrew its submission. Similarly, FDA wasn't questioning the drug's efficacy in U.S. patients, it was requesting additional analyses with respect to those patients. Sorry.

Sex, Payers & Product Development

OK – the title is a bit of a come-on, I’ll admit. Still, there’s a certain logic to it, if you’ll just bear with me.

To start with the sex part: I read in The Atlantic that men are doing a great job of making themselves irrelevant while women, economically speaking, are fast making up for lost time.

One big problem for the guys, says Hannah Rosin, the author of The End of Men: they aren’t willing to retrain when they have to.

Maybe she’s right; maybe women are more willing to learn new stuff. But it seems to me both sexes fail on that front. And particularly in that little niche of presumed intellectual flexibility, venture capital and the broader start-up world.

Like the broader economy, the health-care business is undergoing a vast economic disruption. And as the giant pharmas and device companies and insurers twist this way and that to figure out just how they’re going to continue to make money in an outcomes-focused economy, start-ups and their VC supporters are among the tiny creatures getting shmushed.

One has to be sympathetic given just how much work a start-up has to do. God knows the clinical and regulatory worlds are complicated enough to exhaust any mere mortal’s brain – and expensive enough to exhaust most wallets, too. Particularly because Big Pharma is asking for later-stage data before they’re willing to pony up significant purchase and licensing fees for a piece of one of those start-ups.

And yet the further a start-up goes down the development path, the more it’s making reimbursement choices – even if it doesn’t recognize it’s doing so. Because just as Big Pharma is learning: the data gathered in clinical trials is not necessarily the data payers want.

Ask Lilly after their huge Phase III Effient trial. Or Merck (or perhaps more appropriately, Schering-Plough) for both Saphris and Bridion. Or Bristol-Myers Squibb and AstraZeneca for Onglyza. All of those drugs passed muster with regulators (in Bridion’s case, European regulators) but payers have simply turned up their noses.

The inattention to payer-focused endpoints is not just a pharmaceutical problem. My bet is that discovery-intensive diagnostic companies like Genomic Health, CardioDx, and XDx would have seen success far earlier had they accelerated their efforts to jibe clinical and reimbursement endpoints.

Managed care increasingly wants to see drugs developed and proven for patients that can’t be served by generics – where PBMs, at least, make most of their money.

(And with PBMs staring out at the very visible end of the big series of patent expirations – which has been almost as lucrative for them as it’s been disastrous for Pharma – they’re trying to figure out innovative ways of using generics in place of proprietary drugs. Medco’s trial comparing Effient just to the 70% of people who respond well to Plavix is a case in point: Medco is looking forward to the genericization in 2012 of Plavix and didn’t want doctors switching willy-nilly to Effient, which had proven modest superiority to Plavix, at least in part because it was comparing itself to a population in which 30% of patients didn’t fully metabolize Plavix). I’m also curious to see how Medco uses its developing pharmacogenomic understanding of warfarin dosing and response as Boehringer Ingelheim’s Pradaxa and the Xa inhibitors that follow it come to market. But I digress.)

Those development decisions need to be made early – and making them requires an understanding of both what managed care wants and how it works. Certainly it’s possible to come to market having proven a drug, as pharmas by and large are wont to do, basically comparable in a broad population to an existing brand. But then gaining market share with such a product, which is to say displacing the Tier 2 player, will require heavy rebating. And then companies should be asking: could they have spent less on a smaller trial showing dramatic benefit for an underserved targeted population, doubled or tripled the price to reflect the value, and ended up with a higher NPV?

In this new world -- our world today – physicians have been demoted from key decision-maker to stakeholder while payers have gone from stakeholder to key decision-maker.

The implications for start-up financing and exits are significant. Because they’ve got the money, and because they see that regulatory risk continues to rise, Big Pharma is requiring more than mere clinical proof-of-concept for the products they in-license or buy from start-ups. But because Big Pharma is also getting the message about payers (increasingly hard to ignore it after having been hit over the head with the formulary problems of their most important launches over the last two years) they also are beginning to ask for proof of reimbursability. They know that gathering that pharmacoeonomic data after approval, and waiting for insurers to make their own judgments, eats away at the economics of the product – which lowers its value.

Start-ups still by and large don’t spend a lot of time worrying about what payers might want from a clinical trial. Understandably. Their managers and investors have spent their professional lives learning how to prove discovery and clinical value to pharmas, and developing an extensive network of scientific and medical contacts to help them do so. Now they have to learn a brand new language, understand the dynamics of a new business, and develop a new set of contacts?

Oh, there’s plenty of lip service paid to the importance of payers. All the VCs and start-up execs I talk with tell me they know their products have to prove value to payers. And yet when I probe just a teeny bit deeper, virtually none of them know anything about how formularies work, which formularies matter, which non-traditional endpoints (both clinical and non-clinical) matter most to the most influential payers. Or seem to be doing much to figure it out. As one VC admitted to me: he knows five people to call when it comes to assessing a Phase II diabetes drug – but nobody when it comes to judging the criteria likely to win that same drug Tier 2 status or the implications if it gets Tier 3 but with no restrictions on its use…or Tier 3 with step-edits, prior authorization, and quantity limits.

From my conversations with them, most VCs and senior start-up executives still haven’t met more than a few medical directors from payers, let alone pharmacy directors (whose variable comp often depends on how well they manage the formulary budgets, which itself depends on how well they negotiate what goes onto the formularies in the first place).

I’ve also heard that while a deep understanding of payers might be important for companies developing me-too products, it’s unnecessary for those coming out with breakthroughs. Payers will have to pay for them. And that’s probably true. But the definitions of breakthroughs are getting tighter (my guess is that Effient would have been a breakthrough had it come out in 2005). And in any event, breakthroughs are rarer than hens’ teeth. Particularly breakthroughs that remain breakthroughs long enough to capture the full value of their development (the first-generation protease inhibitors against Hep C will certainly be breakthroughs when they arrive next year – but not after the next-gen protease inhibitors or the nucleoside polymerase inhibitors arrive in the definitely foreseeable future).

I’m not saying that any of this is easy. Or will guarantee results. Like regulators, payers can change their minds later (“I might have told you back then to prove such-and-such, but now, in order to pay for this, I want you to prove something else.”) But unlike regulators, there is no single reimbursement reviewer – a payer willing to pay for a cost-effective drug or device should attract additional business. And just as I don’t think it’s sensible to dismiss the regulators’ development advice just because they might change their minds later, I’d argue it’s probably not sensible to ignore – or forgo soliciting – payers’ advice because their requirements might change down the road.

Certainly, proving reimbursability makes everything more expensive (trial sites will have to gather more data, case-report forms will grow longer and more complex, and on and on and on). I don’t doubt that fewer companies will get started.

But there are a whole host of start-ups going now. And if we don’t want all that investment thrown away, then it’s time for the boys to go back to school. And any of the girls who want to play with them.

Roger Longman, a founder of Windhover and later head of the pharma group at its acquirer, Elsevier Business Intelligence, is CEO of Real Endpoints LLC, a new company focused on helping payers and drug and device companies create greater value from new and existing products in an outcomes-focused health-care economy.

image from flickr user truthout.org used under a creative commons license

French Doctors' Deal Provokes Fuss, so It Must Be Working...

Funny what happens at Halloween. Yours truly was looking up the latest on the French doctors' pay-for-performance scheme, the CAPI (Contrat d'Amelioration des Pratiques Individuelles) and she comes across the Centre for Advanced Paranormal Investigation. Rather spookily Halloweenic.

In the real, mostly pumpkin-free world of biopharma, CAPI represents France's first step towards Anglo-Saxon capitalism: rewarding docs with good old cash when they hit their performance targets--targets aimed at lowering drug costs, boosting generics and improving outcomes. The scheme was introduced last year as part of a host of changes aimed at cutting the mega-deficit. (Read about other more recent measures here.)

As one has come to expect of our French neighbours, there was outrage when CAPI came along. Outrage from physicians' councils ("...contrary to ethical guidelines!"), and from the drug industry association ("...this will be a brake on innovation!").

A year on, however, the scheme is undoubtedly working. (In tough times, money speaks louder than principles.) After a strong start in mid-2009, it had pulled in almost 15,000 doctors by September 2010, according to Le Quotidien du Medecin.

And most of those are apparently doing what the scheme--which is voluntary, by the way--wants them to do: prescribe more generics, do more screenings and vaccinations. Two thirds of CAPI doctors have met their one-year objectives and received, on average, €3,101--or their "thirteenth month"'s salary, as the assurance maladie describes it.

But there's always a reason to complain, it seems. This time, the anger's with the one third of CAPI-affiliated docs (about 1700) that didn't get their money. It's a scam, say some. Others claim the measures on which docs are assessed are inappropriate and unreliable. And besides, they ask, how can the same body that sets the objectives for the scheme be the one to measure whether those objectives have been met?

We'll spare you most of the details (you can read about some of them, in French, here). One complaint that seems fair, though, is that the authorities, in setting the scheme's objectives (in terms of numbers of diabetics remaining compliant, number of mammograms carried out, for example) didn't control for the prevalence of these particular diseases in particular areas. So for some doctors it might be much easier to clock up the figures than for others.

But all this misses the more important point that CAPI is working. It's making doctors prescribe more generics (generic prescription targets are set at 90% for antibiotics, at least 80% for PPIs and 70% for statins) and it's making them more aware of long-term outcomes. So assuming that happy doctors with a bonus continue to outweigh unhappy ones without (and encourage the unhappy ones to try harder rather than to have a tantrum and pack it all in), CAPI--the non-paranormal version--may yet prove an important component of France's ongoing attempts to rein in the deficit. Spooky.

image from flickr user ...antonio... used under a creative commons license.

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

Summing Up the Biotech Way: Beyond Borders 2010

One scorecard from 2009 is in: Ernst & Young's annual report on the global biotech industry, Beyond Borders. This Summing Up –which this fanciful blogger envisions as an annual, exhaustive biotech version of Somerset Maughan's eclectic memoir—is published annually just as the industry gears up for BIO, as a mix of sweeping generalizations, trend-spotting, and interesting statistics on financing.

Much of the 2010 report isn't news, especially to followers of IN VIVO Blog—how hard is it to figure out, after all, that biotech is an industry of 'haves' and 'have-nots?' or that the venture investment model is under pressure, resulting in new financing and R&D models (asset-based financing, options-based deals, FIPNets), and pharma companies are divesting assets? More importantly though, the report contains interesting datapoints, piecing them together to obtain a coherent picture of the industry at a given point in time, and providing fodder for BIO networking.

So what are some chatable points? Biotechs took their lumps last year but, overall, they fared better than E&Y or others had predicted. They've been aggressive about paring costs, cutting back on R&D, staff, and shelving non-core assets. They've been creative about finding new ways to finance operations as they slog through the long R&D tunnel. The number of public companies fell by only 11% in 2009 to 662 from 700 a year earlier, E&Y calculates--not healthy, surely, but far short of what E&Y last year predicted would be a 25% drop.

Industry global revenues fell by 9% from $86.8 billion to $79.1 billion in 2009, true, but that includes the impact of Roche's acquisition of Genentech. Without this acquisition, biotech revenues would have grown by 8% (An 8% rise is better than a 9% decline, but it still isn't up to growth rates of years past, EY points out). Tighter regulatory safety requirements have slowed new drug approvals, not only in the US but in Europe as well.

Other tidbits: Biotech companies raised $23.2 billion last year, up 42% from 2008, and while venture capital totals were flat globally, the US had its second-best venture funding year since 2000, while Europe had its worst. That said, about half of US venture capital raised went to only 45 companies, with Clovis Oncology the big winner. And companies with early-stage technology need more money than ever to carry their products through clinical development.

More to the point, industry R&D spending fell 21%, after years of double digit growth. It's hard to say if this is a self-correction or a true stab at improving R&D efficiency, but that drop helped biotechs in aggregate to post a net profit for the first time of $3.7 billion; in 2008, the industry lost $1.8 billion. Other reasons included a change in accounting rules, fewer public companies, since most of the acquired companies were losing money anyway, and other cost reductions. Asset sales, royalty and milestone payments also played a role, but even E&Y couldn't say by how much.

Another weight hanging over the biotech head: reimbursement: E&Y notes that companies, which traditionally viewed marketing approval as the finish line for deal-making, now must cross additional hurdles related to reimbursement. Nothing new for IV Blog followers here: Now, we've been tracking this still esoteric but increasingly talked about trend of setting special reimbursement milestones for deals and its counter argument: that traditional sales milestones cover reimbursement risk--an evolution we find fascinating.

The takeaway:

Life is getting tougher: Gaining an FDA approval alone is no longer an event worthy of popping the champagne, unless payers can be convinced of a product's value. This means, the earlier biotechs and big pharmas alike invest in pharmacoeconomic analysis, the better. As E&Y puts it – there needs to be a thought process of: "If you build it, will they pay?"

Easier said then done, in the eyes of some. E&Y however, notes the industry was built by entrepreneurs, who will find creative responses to pricing pressures. Just what will these look like? Even E&Y can't say right now.

image from flickr user nim used under a creative commons license

What's the Hardest Job in the Biopharma World?

Maybe it's yours. Maybe it's Jeff Kindler's (keep Pfizer small? Yeah right.) Maybe it's Elan CEO Kelly Martin's(all those shenanigans with Biogen over the J&J Alzheimer deal, ouch).

Most likely, though, it's Andrew Dillon's--he, in case you forgot, is the CEO of UK cost-effectiveness watchdog, NICE. That's what David Mott, ex-CEO of MedImmune and now a General Partner with VC firm New Enterprise Associates, thinks (and this blogger agrees). "Andrew has the hardest job of anyone up here," Mott remarked from the stage during a panel at last week's Pharmaceutical Strategic Alliances conference in New York.

Harder, then, than that of drug developers like co-panelist Peter Wirth, EVP Legal & Corp. Dev at Genzyme, which (besides dealing with manufacturing snafus extraordinaire) is having to "quite deliberately gather the information [around our development programs] that people like NICE will use in their decisions"--(not that we think all of NICE's analysis is right, he added later on). Harder than Mott's, faced as he is with the "triple whammy" of reimbursement hurdles, the elimination of the IPO market and "fundamental changes in Big Pharma's pipelines," all of which have "raised the innovation bar significantly," leaving him (and one presumes any other VCs that have money) with fewer promising investment opportunities. Harder than Ian Spatz's--no longer VP, Global Health Policy at Merck, instead running his own policy advisory firm (and due to start a policy advisory service with Elsevier Business Intelligence, too--plug plug).

Yup, Dillon's job takes the biscuit: He is responsible for 'rationing' health care in the UK--a word so hated in the US that we were pleasantly surprised that no audience-launched projectiles made it up onto the stage. To him (and his teams) to decide "what level of reward is given for the benefit being offered, and....how much of a fixed resource to make available [for a particular drug] given the opportunity cost, if that cost was allocated somewhere else, for another patient group perhaps."

We felt Dillon calmly defended NICE's approach, acknowledged its weaknesses, and tried to correct misconceptions. "I know we have a reputation for only caring about cost, but that simply isn't the case," he argued. "We begin our exploration of the product with the evidence of its clinical effectiveness and try to measure the impact [of that] on patients," he said. "By and large our decision-makers are physicians in the NHS," he added, who know their decisions affect patient wellbeing. (Not that this necessarily means they don't think about cost, mind you.)

In response to accusations that NICE stifles innovation, Dillon elaborated on how the agency attempts to unpick sponsors' 'innovation' claims and translate them into concrete clinical benefits. It's not easy, and he knows NICE needs to be more transparent in explaining how and at what point in the assessment process this is done. "We need to be much more explicit about the particular innovative features that [we believe] will bring benefits to patients. We probably didn't [used to] spend enough time talking about that [with sponsors] right at the start" of the assessment process, he told the PSA audience.

While conceding on transparency, though, Dillon put up a robust defense of the QALY, the controversial utility metric used by NICE, and its 'acceptability range' of around £30,000-per-QALY. (Refresher: Quality-Adjusted-Life-Year is the estimated cost of one additional year of life per person when comparing a new drug with the current standard.) "The QALY is the best approach despite its flaws," he said. And as to why the QALY threshold hasn't increased over the years, with inflation, "well there isn't really a fixed threshold. Advisory Committees aren't told not to go beyond £30,000-per-QALY," he said. (Hear that? Indeed there's already ample evidence of slippage....)

Dillon left the stage at PSA composed and unscathed, we'd say. Which is a very good thing (thank you, audience, for not throwing things) since he--and others with similar jobs, and there will be a growing number thereof, including, yes, in the US--will be invited back to similarly important industry events. Reimbursability is the new proof-of-concept, after all.

image by flickrer Brooks Elliott used under a creative commons license

NICE and the Definition of Innovation

What 'innovation' means to NICE--or at least, how it takes innovation into account in its cost-effectiveness assessments--may yet become a little clearer. Tomorrow the National Institute of Clinical Excellence will hold one of its regular public board meetings and item 7 on the agenda is the agency's response to the Ian Kennedy report.

In case you'd forgotten (it was before the summer holidays, after all): Sir Ian Kennedy published a report in July proposing, among other things, how NICE should take into account the 'innovative' nature of medicines. We summarized it here, noting that industry was particularly peeved about Kennedy's support for the controversial QALY measure which NICE uses to judge cost-effectiveness.

Innovation is a tricky one. Kennedy had a shot at defining it, including criteria such as that a drug should 'substantially and significantly improve the way that a current need is met'. NICE argues that it already 'has flexibility in supporting the use of technologies' whose cost-per-QALY exceeds the £30,000 threshold (the cut-off point as to whether a drug will be reimbursed or not), including 'where the intervention is an innovation that adds substantial, distinct and demonstrable benefits that may not have been adequately captured in the measurement of health gain'. The agency also points to recently-introduced guidance which allows it to raise the threshold for treatments which extend life at the end of life (from which several drugs have already benefited) and the even-newer "Innovation Pass" notion foisted upon it by the UK government in its bid to kick-start the sector.

Still, recognizing its role in supporting innovation (and in particular the UK government's fresh call for it to do so), NICE is proposing two measures that, if not exactly radically change the way the agency values and assesses innovation, certainly try to make the process clearer and thus make the agency more accountable.

Firstly, if a company claims its product is 'innovative' and that this confers specific benefits upon it, scoping workshop meetings (prior to assessment) will be used to explore those 'unique characteristics [of the drug or technology] which support this proposition, and the data sources through which the Appraisal Committee will be able to validate it'. In other words, NICE is saying, we'll explicitly lay out, up-front, the company's claim to innovation and how we can validate it.

But clearly, NICE must establish whether a supposedly 'innovative' product in fact has a substantial impact on health-related benefits and improves the way a current need is met (above and beyond best supportive care). Innovation for its own sake isn't much help.

Thus in its second measure, the agency states that where the Appraisal Committee is satisfied that a product represents a 'step change'--noting that it's up to the Committee to decide what 'step change' means--it will have to demonstrate that these innovative characteristics have been taken into account (and, one presumes, how they've been taken into account) in the QALY calculation of health-related quality of life. If they haven't directly been factored into that calculation, the Committee will have to describe how it has evaluated their impact (if at all) on its overall judgment of the drug's cost-effectiveness.

Basically, then, NICE's committees are going to have to better explain themselves and their evaluation processes, and pinpoint how and where they factor in innovative value, rather than just claiming that they do. "We're going to be more systematic in cataloging those [innovative] features and in tracking our assessments of those features through the appraisal process, all the way through to the final guidance," explains NICE's CEO Andrew Dillon.

At the end of the day, though, the exercise isn't going to get any easier. "We have to convert a proposition that a drug or technology is innovative into a measurable assessment of patient benefit," Dillon continues. "We have to unpick the proposition and find out in what way a product's innovativeness can benefit patients. Then we factor that into the value of a drug."

Drug companies, are you paying attention? Don't just go in and say your drug is 'innovative'.

(NICE's proposals, if agreed at the meeting tomorrow, will be open for consultation.)

The Next Phase For Regenerative Medicine: New Advocacy Group Will Focus on Regulatory, Reimbursement Policy

We are enthusiastic believers in the proposition that political capital and venture capital are both vital to successful business models in biopharmaceuticals, so we were intrigued to see the announcement of a new Washington, DC-based organization—the Alliance for Regenerative Medicine—devoted to advancing the science of tissue engineering.

ARM was put together by two former Biotechnology Industry Organization staffers—Michael Werner (formerly BIO VP-Bioethics and now a partner at Holland & Knight) and Morrie Ruffin (formerly EVP Capital Formation & Business Development at BIO, and now managing director of Adjuvant Global Advisors).

Founding members include biopharma companies big and small (Johnson & Johnson, Geron, Aldagen, iZumi, Fate Therapeutics and Maxcyte), venture capitalists (Kleiner, Perkins, Caufield & Byers and Proteus Ventures) as well as academic institutions (Wake Forest Institute for Regenerative Medicine, Stanford University, the University of Washington, and Georgia Tech University; the Genetics Policy Institute.)

The Alliance is “dedicated to promoting regulatory, research, and reimbursement policies that will foster innovation in regenerative medicine,” the press releases announcing its formation says. It will also “serve as a source of information about regenerative medicine for policy makers, the media, and the general public.”

What that really means, Werner explains, is that ARM is devoted to making sure the tremendous political capital expended on changing stem cell research policy does more than generate “research for research’s sake.”

The goal is to move to “the next phase” and create “a way to focus on commercialization issues,” he says. Goals include shaping “regulatory policies at FDA that are predictable and facilitate a pathway,” finding a “way to start talking to CMS about value” and to “talk to NIH about future funding of research.”

ARM will be a member-driven, non-profit corporation, with no full time staff. Nothing is finalized, but Werner is likely to be representing ARM in its lobbying and advocacy work, while Ruffin will be handling operations. And they hope to recruit more members (potentially including associations like BIO and the medical device organization AdvaMed). Look for a formal launch later this year.

Biotech & The Unexamined Business Plan

In this post, we noted a disturbing set of analogies between Big Auto’s pickle and Big Pharma’s . We’d like to point out another one – this time between the Detroiters and biotech.

About the same time the car CEOs were begging bailout money from Sens. Dodd & Co., biotechs were asking for a few favors as well (see our Pink Sheet Daily coverage here).

The Senators, a trifle miffed that the three Detroiters had each flown in separately on his company’s corporate jet, were more irritated that they had also come without a specific plan for using the money to turn around their companies – and were dismissed with a homework assignment to do so (homework is due today, by the way).

What’s odd to us is that BIO didn’t get the same assignment from Congress. We’ve never gone so far as Socrates in suggesting that the unexamined life isn’t worth living. But we do go so far as saying that the unexamined business plan sure isn’t worth funding. We’re all for biotech investors getting some additional incentives for funding the industry, but we’d also – for the good of investors, patients and taxpayers – like to see some ideas for how biotechs ever plan to make back the money they’re asking for.

The issue isn’t innovating scientifically. Or even clinically. The challenge is getting products approved and paid for.

And at the moment, biotechs aren’t doing that well enough to justify their funding. Neither is Big Pharma of course. But biotech, lacking cash flow, can’t afford Pharma’s strategic inertia any more than it can afford Pharma’s rate of scientific innovation.

We don’t entirely blame biotech’s execs for what we see as a lack of real business innovation. The money guys deserve their share of responsibility. VCs and hedge funds have, until now, quite logically focused all their attention on the most straightforward way to make money: passing most of the downstream risk on to other investors and corporate buyers. Originally, VCs and a few privileged fund managers were able to sell their stakes on to IPO investors or, at worst, follow-on investors. As the public market disappeared, they’ve focused on selling the risk to Big Pharma, which worked pretty well in 2006 and 2007 (see this Start-Up analysis of how M&A valuations have changed).

But we’re seeing more-than-anecdotal signs (as we detail in this IN VIVO article) that Big Pharma is getting tired of this game, that they’re reluctant to pay up for assets which don’t come with better chances of approval and reimbursement. And their skepticism over biotech’s assets – for the moment – seems to be outweighing their need for new products. That’s at least partly because Pharma assumes, with reason, that their dealmaking leverage will only increase over the next year, as biotechs run desperately short of cash.

None of this sounds good for anyone. Pharma strings out biotechs until this source of pipeline dries up. A medically important source of innovation dwindles away. Investors scatter.

In our next post, we’ll try to explain why there are alternatives – in particular, the necessity for biotechs and their investors to mine a new territory for innovation – approval and reimbursement strategies.

Legislators may not be smart enough to ask for these business strategies. But biotechs and VCs better be ready to provide them.