The Soul of Biotech

Ok, I’m back, and I spent a lot my Sunday putting this together just for you! There are lots of spoilers in this post. There, that’s your warning. Now let’s dive in. I’ve decided to give a synopsis of the movie and intersperse my own comments and responses.

SiCKO starts out by focusing on a couple of individuals among the uninsured in America (about 45-50 million by current estimates) and how tough it is to have to deal with your own illness, whether by paying an enormous amount of money like Rick, or by suturing your own wounds (!) like Adam.

The problem of the uninsured is a fascinating one. For a long time, most assumed that the American uninsured population did not get health insurance because they could not afford to do so. But according to a recent Aetna study of the American uninsured population, about 14.2 million of the 44 million uninsured last year came from households with incomes at or above $50,000. That’s nearly one-third of the uninsured who can (most likely) afford their own health insurance, but decline to get any.

The study also revealed a significant number of college student without health insurance, prompting new “hip” health insurance programs aimed at young people, like Wellpoint’s Tonik (I mean, just look at the graphics on that site!). Finally, the study revealed a large number of immigrants working for small businesses that were uninsured, spurring cross-border programs, like Health Net’s Mexi-Plan. The cross-border programs allow immigrants in Southern California to get health care in Mexico should they wish to do so.

Of course, as Moore explains, the movie isn’t about Rick or Adam — it’s about the quarter of a billion Americans with health care coverage. He launches into a litany of stories of people whose claims were expertly denied. Or whose coverage application was denied for being high-risk. Or whose coverage was cancelled because of a vague pre-existing condition. The consequences are lives of penury, working long past retirement, flights to other countries, or death from lack of care. All of these stories are heartrending, of course, and show how the system provides incentives toward the least or worst health care possible. Moore summed that point up well in his conversation with Linda Peno, who as a claim reviewer for Humana, detailed her company’s incentive program in her 1996 congressional testimony. Humana reviewers, Peno says, were expected to maintain a ten percent denial rate, and were provided with individual performance metrics, with bonuses for the best performers (most claims denied).

I confess, I had a brief consulting flashback when I heard the words “performance metrics.” I’m better now. But there’s nothing here I didn’t already know — just more color commentary. Moving on.

Moore asks how we got onto this path. The answer is in the somewhat infamous 1971 tape between President Nixon and John Ehrlichman, his Assistant for Domestic Affairs. The tape shows how Nixon incorporated Kaiser’s HMO model (which provides incentives towards the least amount of care) into the HMO Act of 1973, thus setting up much of the private health care industry as we know it.

Moore also shows how close we came to overhauling this system, when Hillary Clinton’s committee to examine universal health care was born in the early 1990s, and how adroitly Republicans and MCO lobbies defeated efforts toward public medicine.

Of course, not everyone stays on the same side for long. First Lady Hillary eventually became Senator Hillary, and warmed to MCOs. And Republicans suddenly didn’t mind swinging to the more populist side for the gray vote when they approved the Medicare Modernization Act of 2003, which created the prescription drug benefit for seniors, also known as Medicare Part D.

Moore didn’t do a great job of explaining Part D. For example, he claims that Part D allowed drugmakers to charge Americans as much as possible. That’s not really true. Drugmakers could already charge what they believe is a competitive price. Part D just added more covered patients to the system. Moore neglects the fact that there are downward pressures on price, too. If a manufacturer charges too much for a drug, then the MCO might give it “disadvantaged status,” meaning that the MCO provides fewer benefits for that drug relative to other therapies. Surprisingly, the point that Moore didn’t quite explicitly make is that the senior prescription drug benefit is administered by MCOs, even though it is paid for by the federal government.

Moore also takes this moment to deliver a jab at direct-to-consumer (DTC) drug ads. I haven’t come to a hard decision on how I feel about DTC, but there is no doubt that for the right drugs, it works, and works well. So should we ban it? I don’t know. Maybe I’ll expand on DTC in a separate post.

Moore gives several examples of systems that are already public and either free or cheap: the police department, the fire department, the library, and the US Postal Service. He then wonders why the health system isn’t the same.

What he could have also pointed out is that many of these are really public / private mixes: I can send something by USPS, or I can choose to pay more for FedEx. I can use the police, or I can pay more for my own personal security. I can go to the Santa Monica Public Library (and I do, because it’s gorgeous there) or I can go to Barnes & Noble. A public / private mix is my ideal solution. Basic coverage for all, with better coverage for those who can afford it.

Moore also goes overseas and explores other countries’ approaches to universal health care, such as Britain’s NHS and services in France and Canada.

Unfortunately, he grossly oversimplified all three systems as completely perfect, which they are not. To start, most public health systems have very long wait times, because governments pass on the non-monetized costs (waiting time) to citizens in place of the monetized costs (the actual cost of care). A quick Google search reveals a long list of stories about NHS failures, and even a nascent complaint forum. Canadians are actively considering switching to an all-private system. Not to mention the potential tax implications.

Finally, he shows the high quality of care given to Guantanamo Bay detainees. So he takes noncovered 9/11 rescue workers to Gitmo, leading to the best quote of the film. Moore stands on a boat with a megaphone, and asks a watchtower for health care: “They just want some medical attention, the same kind that Al Qaeda is getting. They don’t want any more than you’re giving the evildoers, just the same.” The theater cracked up, and I did, too. Having been turned away, the group heads to Cuba, where the rescue workers receive high-quality, cheap care. (Hard to say whether or not that portrayal is realistic, though. I’d imagine that both Mr. Castro and Mr. Moore would have wanted to show Cuba’s healthcare system in the best possible light.)

Overall, I really enjoyed the movie, and would recommend it, provided that you take it with a proverbial grain of salt. I think Moore did a great job of identifying the problems with the system. Namely, that critical care is often denied because it’s unprofitable for MCOs to pay for it, and that a large swath of people can’t get coverage at all. I do think that he was a little quick to suggest that we throw out everything and start over with a single-payer model. In reality, a lot of the foreign models are public / private mixes, anyway. What would a good public / private model look like? In short, start with a free or cheap coverage package for every American citizen that includes a fundamental level of care. Then let the MCOs compete with that. The more money you have, the higher quality of care you can get.

More importantly, though, I am hopeful that SiCKO will trigger a larger debate on the direction of the American health care system. It’s a critical and challenging problem for our country, and if we needed a movie to jumpstart the discussion, then it will have served a wonderful and very important purpose.

I’m writing this about an hour before I head down the block to the sneak peek tonight. I’m very excited about SiCKO, because although I’m a strong proponent of the health and life sciences industry, I’ve never been a fan of managed care organizations (MCOs). I feel that, unlike doctors, nurses, pharmacists, and pharma / biotech companies, the core values of these organizations are not always the improvement of patient health. MCOs generally focus on denying access to care (especially innovative care) that can save lives, and are as hesitant as possible to pay for any therapy that can be avoided. It’s not their fault — it’s the only way they can make money.

Most consulting engagements for MCOs are about cost-cutting in some way or another. For example, one project (that I steadfastly refused to join) methodically identified cases where the patient was covered by both the client’s policy and by another form of insurance, so that it could diligently refuse any claims and send the patient elsewhere, while still collecting premiums. It works very well, it’s brilliant, it’s legal, and it makes the client a ton of money. But I found it difficult to admire the mentality behind that project, and thus I found it difficult to sign on.

Additionally, I’ve heard that Mr. Moore gives an ancillary indictment of the pharmaceutical industry, a stance that I’m looking forward to responding to.

More when I return…

My friend Lexi sent me a link to a NYT article that discusses personalized medicine (also known as pharmacogenomics), which is an area of great interest to me. It’s what I focused on in my master’s work, and it’s an area that, given the right opportunity, I intend to start a biotech in one day.

The article describes the promise of personalized medicine reasonably well: The opportunity to select the best therapy for a patient based on his or her genetic profile. Dr. Friedman correctly notes the opportunity for improvements in patient outcomes in terms of drug efficacy and safety, with a special eye towards his own specialty of psychology. He goes astray, however, at the very end:

Aside from the potential to transform clinical psychiatric practice, these new developments will surely change the relationship between doctors and the drug industry and between the industry and the public. Direct-to-consumer advertising will become nearly irrelevant because the drugs will no longer be interchangeable, but will be prescribed based on an individual’s biological profile. Likewise, doctors will have little reason to meet with drug company representatives because they won’t be able to give doctors the single most important piece of information: which drug for which patient. For that doctors will need a genetic test, not a salesman.

I find several things wrong with this paragraph.

Although doctors may find it challenging to select the right treatment for a condition (especially depression!), the available therapies are hardly interchangeable, even today. That’s one of the most important reasons why clinical trials exist: to demonstrate clinical attributes that differentiate a given drug from other existing therapies. Also, Dr. Friedman assumes that the genetic screens will always produce extremely clear results — but what if they don’t? Or what if the screens can only point to a set of therapies — what then? Those are critical situations in which reps will be able to consult physicians on the remaining differentiating attributes.

Furthermore, reimbursement education (for both the genetic screen and for the drug itself) is also a major function of most reps. Many doctors and caregivers struggle to understand whether or not a patient can afford a therapy, especially if the patient is on Medicare. Drug companies, including Amgen and many others, often step up to help educate physicians and guide patients to the form of coverage that best allows the physician to treat in the manner they see fit. That role will become even more critical with a screen to pay for on top of the therapy.

Finally, I don’t see personalized medicine making direct-to-consumer advertising irrelevant. If anything, marketers would focus even more on getting patients into the office to get the test, thus feeding the genetic screen funnel.

What about you? What do you think genetic screening will mean for the pharmaceutical and biotech industries?

Just bought tickets, and I’m going on Saturday with my friend K, who is finishing her EMT certification. I’m looking forward to a spirited conversation afterward.

Get your tickets here

Yes. I have several draft blog posts percolating. The approximate themes are:

• Grad School vs The Working World
• My experience with the brand planning process
• Review of Sicko and my perspective on MCOs

Any preferences?

If you’ve been following our news, you may have heard about the FDA’s warnings on erythropoetic-stimulating agents, or ESAs. ESAs are a class of agents manufactured by Amgen that treat anemia. The first ESA was epoetin alfa, which was marketed in dialysis as Epogen by Amgen, and marketed in non-dialysis indications as Procrit by Johnson and Johnson (J&J). In 2001, Amgen launched Aranesp (darbepoetin alfa), a longer-lasting agent that can be dosed less frequently. Amgen retained the rights to all indications for Aranesp, and competes with Procrit in the non-dialysis markets such as chronic kidney disease (CKD) and chemotherapy-induced anemia (CIA).

In December 2006, a Danish head and neck study concluded that when Aranesp is used in anemia of cancer (AoC), it triggered adverse events. It is important to note that Aranesp had never been approved by the FDA for use in AoC, and as such, Amgen has never promoted the use of Aranesp in AoC. When Amgen learned of the preliminary data, it informed the FDA within 24 hours, per FDA rules. However, because the data was preliminary, it did not tell investors until late January. (This is what the informal SEC inquiry is about.)

In February, the FDA confronted both Amgen and J&J in February and asked both companies to add a black box warning to their products that advised physicians to use the lowest possible dose of ESAs in treating anemia. Initially, this warning covered all use of ESAs (even use in chronic kidney disease), but after an outcry from the nephrologist community, the FDA amended the warning to include only AoC.

In May, the FDA’s Oncology Drugs Advisory Committee (ODAC) voted overwhelmingly to ban the use of ESAs on patients with certain types of cancer. The committee also recommended placing greater restrictions on ESA usage, including stopping the use of ESAs once chemotherapy treatments are over. Furthermore, the committee unanimously decided that more studies were necessary. As this is an advisory committee, its recommendations to the FDA are nonbinding, although the FDA usually follows its advisory committees’ recommendations.

The following week, based on the ODAC recommendation, the Centers for Medicare and Medicaid Studies (CMS) announced that it would curtail reimbursement for ESAs when used in AoC. Additionally, although CMS would still reimburse for CIA, they added a grace period to the last chemotherapy dose, after which they would not reimburse for ESAs.

ESAs make up a large portion of the CMS budget. Given that budgetary significance, it looks a lot to me like the FDA and CMS are working together to create policies that would reduce the cost of ESAs to the federal government.

But what’s the impact to Amgen? Well, although Aranesp and Epogen aren’t indicated in patients with AoC, we do make some money from off-label use, and that revenue source could taper off. Furthermore, the general cloud of suspicion over ESAs could cause physicians to use lower doses of ESAs or administer them less frequently, even for CKD and CIA. As a result, Amgen’s overall anemia revenues could grow more slowly than anticipated.

Our stock price took a major hit over this month, of course — major enough to make it to a lot of national news outlets. We took a bigger percentage hit than J&J did over Procrit, probably because more of our revenues are concentrated in ESAs than J&J’s revenues are. On the other hand, we have a more flexible cost base, so although it has been a little uncomfortable to make adjustments to cope with the new reality, we’re not going to become much less profitable.

Overall, I have been impressed by how well upper management handled this crisis, especially internally. Communication from the senior team has been forthcoming, and every manager between myself and my VP has sent out communication encouraging us to come talk about any concerns we have. I see a lot of confidence in the hallways, and no one is whispering about jumping ship. I bought our stock at $55 right after ODAC, and it’s already up to $57. We feel good. I feel good.

My only complaint is that I wish we had taken a more aggressive stance in messaging that our drugs are safe and effective when used properly, because I believe they are. Epogen and Procrit have been safely used for EIGHTEEN YEARS. Aranesp has been on the market for six. This stuff ain’t rat poison. Amgen is still learning how to win battles of public opinion, but if that’s our biggest problem, then we’re going to be just fine.

What are your thoughts?