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.

The next session I attended was the personalized medicine panel, which was new this year. The panelists spoke to a standing-room-only crowd in an HBS lecture hall. The panelists briefly explained what personalized medicine was, and emphasized its importance as technology began to deliver whole genome sequences for less and less money. The first human genome cost about $3 billion dollars to sequence. As of March 2008, that price had dropped to $60,000. More recently, SingularityHub predicted that whole genome sequencing would fall to $1,000 before the end of 2009.

So what are some of the consequences of a high volume of genetic data becoming rapidly available?

• Noubar Afeyan provided an overview of the current diagnostics market. One company recently did a deal with Humana to develop simple treatment response markers (non-predictive) — the kicker is that patient co-pays will depend on the values of the treatment response marker.

• Dr. Teresa DeLuca, Medco’s VP of Personalized Medicine, capably explained not only how personalized medicine can achieve improved outcomes in targeted patient populations, but also how the technology can reduce costs for payors. Payors may not be able to make a patient go into wellness program or enforce a patient’s compliance, but they will soon be more able to get the right patient the right drug at the right dose at the right time. Medco is working to create diagnostics reports for doctors that provide medication recommendations for patients.
• Mara Aspinall, president of Genzyme Genetics, emphasized the need to more deeply understand the pathways and MOA for the drugs we already have, and add the right diagnostics and pharmacoeconomic data to deliver a total value package for payors.

Curiously, Afeyan also mentioned current research into biomarkers that may predict response to anti-TNF medications such as Enbrel.

Later on, I also spoke with Wayne Rosenkrans, the panel moderator and the chairman of the Personalized Medicine Coalition, which works on evolving healthcare policy in this area. He agreed that the Genetic Information Nondiscrimination Act was a promising step forward, but insufficient protection for most patients. Case law will have to fill in the gaps left by the law, which is only months old.

On Saturday, January 17th, I took a break from helping organize this year’s Mystery Hunt to attend the 6th Annual HBS Healthcare Conference in Boston, MA. I took extensive notes on the conference, and will spread out my notes across a few posts.

The leading keynote featured Lonnie Smith of Intuitive Surgical, which makes robotic surgery equipment that allow remote surgery. The devices themselves are remarkable, as demonstrated by a video that showed a doctor delicately peeling a grape from several feet away.

More interesting were Mr. Smith’s points on disruptive innovation. Smith first introduced the conventional disruptive innovation model, highlighted in Geoffrey Moore’s classic, “Crossing the Chasm”. Smith then went on to identify the first application for Da Vinci, Intuitive’s first device: prostate cancer. Market research showed that patient’s priorities in prostate cancer removal were focused on (in order): Cancer removal, Continence, Potency, Safety, Pain, and Blood Loss. Da Vinci achieved improvements in all of these. More importantly, patients began to drive adoption of the technology, not physicians. This “crossed the chasm” for Intuitive’s technology. More indications have followed suit.

When Mr. Smith explained how patients drove adoption, I was reminded of websites such as PatientsLikeMe, which allow patients to communicate about their treatments for serious disorders, such as cancer. I think it’s important to remember that medical learnings and achievements in patient care can travel through informal patient networks much (and informal physician collaboration networks, such as Sermo) more quickly than through formal physician networks such as conferences and journals. So what’s stopping adoption of those disruptive innovations?