The Soul of Biotech

In the afternoon, I attended the Biotech/Pharma panel, which was fascinating. A lot of great questions were tackled. I’ve laid out the three best ones, and the panel’s responses.

Is the FIPCO (fully integrated pharmaceutical company) model still viable, and if not, then how will it evolve?

On one side was William Annett of Genentech, who maintained that economics actually dictate that it’s not cheaper to outsource. Given a 20-year life cycle, integrated management is necessary: In the pre-clinical phase, commercial input is necessary for market viability. Then, when a product gets to market, good post-marketing trials require R&D input.

On the other side were both Sarah Cairns-Smith of BCG and Mark Goulet of Merck. Cairns-Smith insisted on a rapidly arriving disintegration of FIPCO, while Goulet added that the only reason FIPCO hadn’t disintegrated yet because the existing market pressures hadn’t forced companies to do so. In the current atmosphere, where efficiency dominates, the industry is likely to be redefined soon (though neither laid out specifics as to how). Skip Irving of Health Advances, made what I felt were a couple of strong points: Companies are sticking to therapeutic areas they know well, in order to reinforce areas of strength. Thus, licensing and M&A are here to stay. He also pointed out something I personally agree with: a strong move in the industry from the PCP-based model to specialty-based models.

Everyone talks about the success / failure of R&D. Is R&D working fine, and we’ve seen an accidental blip, or is there something ineffective and inefficient about it? What can and should change about it?

Goulet pointed to the need for better pre-clinical validation in order to help products fail faster. And on a note reminiscent of the earlier personalized medicine panel, he emphasized the need for biomarker research, to help determine which patients respond to a drug, and whether or not the drug is truly binding to its target.

Annett’s comments focused less on the R&D process than on the coming “patent cliff.” Over the next five years, the industry will lose $45B worth of US revenue and $65B worth of global revenue from loss of patent protection. Although current pharma pipelines are lacking, current biotech pipelines are fairly full, and we are likely to see more M&A as a result. [This comment proved most prescient given that Pfizer announced its acquisition of Wyeth less than 10 days later.]

Many European countries have put in place single-payer systems. Given the contentious nature of pricing, is the way that pharma/biotech companies capture value going to change?

Goulet, again echoing the PM panel, pointed to the drug/diagnostic combination of therapy plus information as the most attractive value proposition for payors.

Cairns-Smith brought up a great point about the need for cancer patients to take a combination of therapies, all of which are expensive. Being one of ten needed therapies is different from being just the one. We could see a move to outcomes-based pricing.