Pharmaceutical Executive

It’s rather refreshing, in these gloomy economic times, to attend an event that bucks the trend for austerity, and the 

Pharmaceutical Contract Management Group (PCMG)

 annual conference last week certainly did that. For the last four years of its eight-year history, the meeting has been held at locations rather quaintly described by its current chairman Andy Parrett as “by the sea”. This year saw it unfold at the Sheraton Pine Cliffs Resort in Portugal’s Algarve, amidst a playground of golfers and well-to-do sun seekers. Parrett asserts that “if it’s in a nice location and they are enjoying themselves, people will take home a lot more from the conference”. By the end of Day One I could see his point.

But content plays a big part; fortunately, the content was also very refreshing. On the agenda was innovation: Where is it in the client-vendor interface space? Is it really adding any value? Can it really be made sustainable? And, not least, is the CRO industry actually being more innovative than pharma?

From afar this might not look earth-shatteringly new, but PCMG like to turn things on their heads. This was apparent from the first morning when Parrett’s own presentation declared “the term ‘strategic partnership’ is an oxymoron”. This set the tone for the rest of the conference: it wasn’t going to be your usual two days of dry statistics, articulate griping and bouts of sober self-congratulation.

Many in the CRO camp (the conference adheres to a strict ratio of two CRO delegates to one pharma delegate) went on to emphasize the innovations achieved in the industry. Josef Von Rickenbach of Parexel noted the transformation of the business from “a kind of art” to an industrial process and pointed out the progress made in forecasting budgets for large clinical trials. Others talked about the CROs’ ability to do more with less, and waxed lyrical on the benefits of knowledge transfer. But the industry failed to win the day in the Oxford-style debate, provocatively titled, ‘This House Believes CROs are the Source of All Innovation” (which, admittedly, was quite a claim to live up to). Arguing from the pharma side, Craig A. Coffman of Endo was more convincing when he said, “Don’t lay the blame for lack of innovation at the feet of the CROs. They’re just a mirror image of what’s going on in pharma.”

So this was no big pat on the back for CROs. Indeed, IT processes came under fire, with their tendency to “over-promise”. John Bennett of JABPharma said CROs should limit or eliminate the need for accurate predictions when producing forecasts because it just can’t be done with accuracy in complex trials. And PCMG’s founder Mike Sitton had plenty of provocative things to say, such as CROs are not transparent enough, business development directors are paid too much, and the large organizations don’t treat mid-size pharmas as well as they treat Big Pharma.

Speakers such as Sitton and Professor John Seddon embodied the overall sense of a desire to puncture the conventional thinking on any topic; they got away with making quite controversial statements, albeit with a degree of mischief. (This is the first time I’ve heard the ‘F word’ used so casually in a pharma industry presentation-and I’m not talking about ‘FDA’.) “I’m not sure I’d call it courting controversy,” Parrett told me later, “but challenging the way we think is definitely important for us.”

The inclusion of Seddon, an occupation psychologist by trade and now a self-styled “management guru”, was  likely to shake things up a bit. PCMG is always keen to include speakers from external industries and academia as “people aren’t often aware of the benefits of crossing over different streams of thinking,” explains Parrett. “It’s not necessarily to import ideas from one industry to another, but we should be looking at where there may be overlap and be thinking outside the box.” Parrett mentions his own background in genetics. “I was interested in evolution, for example, and that alerted me to the crossover between the teachings of Darwin and psychology.”

How about Professor Richard Dawkins for next year then, I ask. Parrett laughs: “We do aim high as far as speakers are concerned, but obviously it comes down to what we can afford.”

Whatever that will be, it seems the ‘anti-austere’ approach will still hold as regards next year’s conference location. I hope I get an invite back.

Articles

Who's the More Innovative: CROs or Pharma?

A keynote speaker at the 9thAnnual SaS Health Care & Life Sciences Executive Conference on May 10, ‘disruptive’ author of The Innovator’s Dilemma and Harvard business professor Clayton Christensen sat down with PharmExec to discuss the future of the pharmaceutical industry, and what Mitt Romney could bring to the White House.

Like tech companies a decade ago, many pharmaceutical companies are now outsourcing more and more of their core competencies in the name of efficiency, often short-term efficiency. Do they risk losing their core in the process?

We absolutely worry that that’s exactly what is happening. I wrote a book called The Innovator’s Prescription, about the future of healthcare, and chapter nine is our view of where the pharmaceutical industry is headed. But the genesis is that, when we thought that diseases were defined by their symptoms rather than their causes, there were big blockbusters out there that were very attractive for [treatment]. And now we realize that a disease should not be defined by the symptom, but rather by the cause. It used to be that the FDA clinical trials process was like a final exam. If 30 to 35 percent of the patients responded to a drug, it was judged as a passing grade. And if your percentage was less than that, then you failed the test. But now we realize that if only 20 percent of the patients responded, then there must be something different about those 20 percent. They must have a different disease than all the rest. Rather than just project it, now we understand that managing clinical trials is an indispensable element of drug discovery. And so if you outsource that, then you’re outsourcing the activities that in the future will be the critical capabilities.

 How can big pharma companies foster a culture of innovation in the context of a large, lumbering bureaucracy?

 Rarely is the development or the absence of a product the problem in a company. Almost all companies are awash in ideas for new products. What they don’t do – and they could but they choose not to – is to create new business models that are tailor-made to the characteristics of the new product. You come up with this great idea, and you can’t do anything with it unless you get funded. To get funded, you have to, little by little, morph and shape and modify your business plan so that it fits the current business model. If it doesn’t fit the business model, they don’t perceive that it will be successful. So what comes out of the process is incremental innovation after me-too innovation. It’s not that the original idea wasn’t innovative, but in order to get it funded, you have to change your strategy so that it ultimately conforms to your company, rather than to the problem or unmet need in the market.

 Is it a viable strategy for pharma companies to spin out a separate entity, away from headquarters, to facilitate new kinds of development?

 It doesn’t have to be totally thrown outside of the corporation, but it needs to be a different business unit underneath the corporate umbrella. And you have to manage it at the level of the CEO, differently, than the mainstream. Almost never do you need to accomplish or accept lower profits when you set up this new business. But the formula by which you make acceptable money will be different.

 Is current US public policy harming or helping innovation in this country?

: I think that it facilitates a particular type of innovation. But I don’t think government is the core problem. I think finance and hedge funds and private equity funds are the big bad actors in the system. Investors like hedge funds and private equity funds and venture capitalists have a measure of performance called internal rate of return. And internal rate of return is a ratio; the way you get internal rate of return up is that you only invest in things that have a very short time horizon. If you just invest more and more for faster and faster quick wins, IRR goes way up. And you think that you’re innovating, because of the quick returns you’re getting. But what that means is that you can’t invest for the long term, because the truly disruptive business units don’t pay off for five to eight years. So then because the government says, ‘Well if you keep your money in the investment for 366 days, we’ll count it as long-term capital gain.’ There isn’t anything about 366 days that is long term. So the government should re-frame that, so that if you keep your money in for five years, there’s no tax, and if you keep it in for eight years, it’s a negative tax. All of these massive amounts of capital that are in private equity funds and so on, you re-purpose it through the tax code, and it would behave very differently, and invest in very different kinds of things.

What is your message to the pharmaceutical industry, and is there a solution to the productivity gap?

 I think I know the right question, but I don’t know the answer. I would love to get together with deep thinkers in the industry to sort it through. As a general rule, when other industries are at this kind of an intersection, what has happened is that, at one stage in the value-adding stack in an industry, at one stage if it’s becoming commoditized and modular, you cannot make money at that level in the stack. But the whole industry doesn’t become unprofitable, rather its activities above and below that original [product or service], that’s where the money is made. And that has to be happening in the pharmaceutical industry, but I can’t see what it is yet. By example, the auto industry is becoming commoditized; cars are being assembled by sub-assemblies from tier-one suppliers. Anybody can get these modules and snap together a car. So it’s really hard to differentiate your car from anybody else’s car, so where the money is being made is in the subsystems that define the performance of the car, and by activities that sit on top of that, like OnStar. That’s where the money is made. Somehow, I have a sense that selling the pill, in the future, is not where the money will be made. It will be the attachments on top or underneath it. I haven’t heard anybody articulate what those look like, but I think they’re emerging, and we need to identify them.

 that you’ve lived near the Romneys, and both you and Mitt are active in the Mormon church. Do you have any thoughts about a President Romney?

He’s really a good man. He’s very smart, but it’s true that he was raised in a wealthy home, in a prominent home, and then accrued even more wealth, and his kids have been raised in an even more prominent family. And that’s actually about the toughest environment in the world to be raised in, and have your head be screwed on straight. It truly is. And so people think of that, that he’s not connected with the real world. But he has raised his family to create unbelievably good kids. But more important than that, in the Mormon church, we don’t pay professional ministers to teach us and to take care of us, but we help other people and teach each other the gospel of Jesus Christ. What that means is – because the members have to take care of one another – you meet everybody. And so Mitt was the bishop of our church, and bishop just means that he had responsibility for about 500 members of the church. And he had a family, he was trying to build Bain at the same time, and to be the bishop meant that he spent, on top of all that, 30 hours a week. And I don’t know if you ever saw the first Star Wars movie, but Luke Skywalker came in to meet Han Solo at some kind of a café, and the band that was playing, there was one of every conceivable form of life in the band, that’s what a Mormon church looks like; one of every conceivable type of person. If you’re the bishop, you’ve got to help all of those people. Under his leadership we built three significant new congregations in the inner city, in three different languages. So he really has seen a lot. I don’t think journalists have really realized, when he left [Bain & Company], the consulting firm, to create Bain Capital, that was going great. And the original owners of Bain & Company decided to sell their ownership stake to the next generation of partners. In order to pay the selling founders off, they had to take all of the profits the consulting activity made, and then some, to pay off [the owners]. And these people were just sitting at the side, rolling it in. As a result, Bain & Company would have gone bankrupt in two weeks. So they said, ‘Mr. Romney, could you please leave [Bain Capital] and come here and take presidency of Bain & Company, and somehow you have to prevent bankruptcy.’ So Mitt sat down with the six selling partners, and essentially convinced them to agree to take one-sixth of the amount of money that they thought they were owed, and got them to feel good about it. Just the way that he got these people, instead of knocking their heads together, he led them to agree on something that was very counterintuitive to all of them, and that is the idea that we are all best served if we try to help the other side win. I just think that someone with that instinct in the White House, in the climate of Washington, that would be a good skill.

takes his experience and thinking in business and applies it to personal decision-making. He has been the subject of lengthy profiles this month in both

Clayton Christensen on the Future of Pharma

Will France’s new socialist president, François Hollande, prove too strong for pharma’s taste? Reflector, Pharm Exec’s EU correspondent, reports.

So it has happened. A leading European country has gone against the predominant political grain, and elected a socialist head of state. France is now ruled by François Hollande, a mild-mannered but avowedly drug-industry-skeptical president. Is the sky about to fall?

Certainly, the rhetoric of the French socialist party has frequently been directed against industry profits—and drug industry profits in particular. And it has repeatedly evoked the risks of commercial interests perverting disinterested research and rational use of medicines. So there is wide agreement that pressure will emerge to cut overall drug consumption, by reducing volume, by bringing down the prices of medicines, and by boosting the use of generics.

Close reading of the runes at this stage of a new administration is as much a matter of studying new appointments as second-guessing upcoming policy announcements. And here too industry expectations are being edged towards the negative.

Hollande has just appointed his minister of health and social affairs. He has chosen Marisol Touraine, a specialist in social security, and a social and economics scientist. She figured in the French debate on health system reform in 2010, questioning some of the orthodoxies of the French approach. And her high-grade academic background includes studies at Paris’ notoriously left-wing elite political science school, Sciences Po.

Anxieties about anti-industry bias have been further fuelled by the new president’s appointment of Aquilino Morelle as his chief political advisor. Morelle, a high-flyer with a medical as well as a management background, was until now a member of the French inspectorate of social affairs. Since 2007, he has had specific responsibilities there for issues relating to public health and to medicines. So he certainly knows the industry. More to the point, he is certainly more than familiar with some of its less attractive aspects, since he was closely involved in the investigation into the adverse effects of Servier’s Mediator—the benfluorex antidiabetic now at the heart of a criminal trial and numerous civil law suits. Last year he also had a hand in producing a report on the not-unrelated subject of drug monitoring and post-authorization governance of medicines. He knows government too, since he worked ten years ago as technical advisor for former health minister Bernard Kouchner.

So there is plenty of material to fuel some drug industry hysteria—or paranoia—about what is in the legislative pipeline.

How justified are the fears? A closer look at the sort of things hinted at by Hollande and his party in the run-up to the presidential election offers some interesting nuances. For instance, one of the ideas circulating among Hollande’s people is to modify the French system of tax credits for research, so as to give smaller firms a better chance of benefitting. Bad news for Pfizer or Sanofi perhaps, but hardly fatal. And possibly a boost to some upcoming innovators.

Another near-promise from the Hollande set is to improve the environment for clinical research, by simplifying the related administrative procedures. No-one in the industry would deny that clinical trials are still bedevilled — in France as in many other European countries—by excessive bureaucracy and complexity. So there is certainly room for improvement there. It remains, of course, to be seen how far Hollande aims to make things easier for drug firms, since one man’s simplification can be another man’s complication. But again, the beneficiaries could well be smaller research exercises, currently heavily burdened by regulations that are designed predominantly to control large-scale multi-centre multinational trials.

And Hollande has explicitly backed the idea of supporting innovative firms—particularly biopharmaceutical companies—through changes to taxation and financing. Back in February, he told the bosses of a dozen biotech firms outside Paris that he considers that health and biotechnology industries are important for the country’s future. He said he understood the financing difficulties they face, particularly in funding clinical development, and promised to support a long-term vision that matched the necessary investment cycles for the sector. Among concrete ideas he threw into the debate were a specialised investment bank, regional seed funds, and adjustments to the French system of promoting young innovative companies.

Observers have been quick to note that among the companies at this meeting was Génopole, one of France’s most prominent bio-parks—since back in 2005, the special advisor to its director general was none other than Morelle, the new president’s new policy advisor. They have also noted that Morelle’s background also includes a spell as deputy director general at Meditech, a cluster dedicated to the use of high-tech in pharmaceuticals and healthcare. Some hopes may be rising—at least among France’s smaller, high-tech drug firm— that anti-industry socialist rhetoric may be leavened by at least some understanding of the challenges of innovation.

Nor should it be forgotten that the drug industry was not enjoying exactly a glorious period of friendly relations with the Elysée Palace when Nicolas Sarkozy was in residence there. As a reminder, one has only to look at some of the legislation that was coming into effect just as the supposedly pro-industry former incumbent was in his last weeks in office. A new pharmaceutical agreement piloted by his administration was reached reining back incentives for pharmacists to dispense expensive drugs, and promoting instead generic substitution. The French drug industry has also been complaining bitterly for the last eighteen months that it is being made vulnerable by levies that are penalising employment and investment.

Similarly, France’s drug industry association, LEEM, was writing angrily only weeks ago to the outgoing prime minister, François Fillon, about the new law introduced on health product safety. LEEM said it was not being adequately consulted on the implementing regulations. Among a wide range of complaints, LEEM highlighted particular concerns relating to rules on transparency of agreements between companies or with the state, to recommendations on temporary use and temporary authorisations, and on health economics in relation to medicines. The competitiveness of the industry and the credibility of the government’s health and industrial policy were at stake, said LEEM.

New rules on drug promotion—also hatched on Sarkozy’s watch—are also due to come in over the coming weeks. Advertisements targeting health professionals will be subject to new controls, including prior approval by a new agency for medicines safety, with only limited opportunities for submitting draft adverts. Industry executives were already venting their frustrations and expressing their fears long before Hollande came on the scene. So the echo of those accusations down the corridors of history should dispel any false nostalgia for the old administration, as a new administration takes shape and takes charge.

In reality, the real threat to the French drug industry—and to its peers right across Europe—is not the personality or even the health politics of the man in the Elysée. While French industry executives and fresh health ministry officials tussle over the arrangement of the seating arrangements on the passenger deck, the Titanic of the euro is still heading steadily for the iceberg represented by sovereign debt in Spain and Italy—and that presupposes it is not torpedoed even earlier by full Greek default and exit from the common currency. What Hollande chooses to do, up on the bridge with Germany’s chancellor Angela Merkel, is of much more significance, for the drug industry and for everyone else.

Too Much Sauce Hollandaise? Pharma, France, and Socialism

The news that Roche scrapped development on its CETP inhibitor dalcetrapib, a drug designed to raise HDL cholesterol in the blood, likely presages the shuttering of Lilly’s development program for its CETP inhibitor, evacetrapib, industry experts and analysts say.

Merck’s CETP inhibitor, anacetrapib, will probably receive additional scrutiny as well, although Tim Anderson, senior analyst at Bernstein Research, identified a “bull case” for the product in an analyst note. The argument in favor of anacetrapib, per Anderson, hinges on the drug’s apparent lack of safety problems compared with torcetrapib (Pfizer’s CETP inhibitor that hit a developmental dead end due to safety problems in 2006), and the fact that it lowers LDL cholesterol, whereas Roche’s dalcetrapib only raised HDL. At any rate, Merck’s Phase 3 trial “is not likely to conclude for two or three years, in the best of circumstances,” wrote Anderson.

The CETP inhibitors—those still being developed—are justified by the assumption that raising HDL levels correlates with a lowering of cardiovascular risk. Donald McCaffrey, CEO at Resverlogix, a Canadian biotech firm, says with HDL, it’s all about “reverse cholesterol transport,” or in other words, plaque removal from the arteries. With HDL, “it’s not about the huge numbers, as Roche’s program has just shown. It’s about functional HDL…and whether you can make more of it.” A simple blood plasma test can show that a patient has higher levels of HDL, says McCaffrey, but HDL differs in function and capability. Resverlogix is developing a product (RVX-208) that acts on the “main protein” in HDL, known as ApoA-1 protein. By causing the body to make more of the ApoA-1 protein, more HDL is created, but it’s “empty” HDL. The idea is to “take the garbage out of the arteries, which requires more garbage bags.” With CETPs, the approach is to stop HDL from leaving the system, which causes it to build up. But the HDL build-up in that scenario resembles a garbage dump. That kind of HDL is “not going to go back into that arterial wall and take out any more plaque…it cannot,” says McCaffrey.

Another concern for CETP inhibitor programs is the class-wide effect of increased C-reactive protein (CRP) levels, a “very serious” inflammation marker, according to McCaffrey. “If you’re increasing your HDL, and you’re increasing CRP, that has been deemed a serious problem,” he says. Lilly and Merck’s respective CETP inhibitors have both demonstrated CRP increases; Lilly’s evacetrapib had the largest increase, followed by Merck’s anacetrapib, and then, in third, Roche’s dalcetrapib. McCaffrey claims that RVX-208, his company’s product, decreases CRP levels by 28%. RVX-208 is currently in two Phase 2 trials, both of which are being conducted by the Cleveland Clinic. The ASSURE trial, which aims to demonstrate plaque regression, not just an HDL increase, is expected to be complete by the first quarter of 2013. The drug is being tested in combination with atorvastatin and rosuvastatin—Lipitor and Crestor, respectively—because “we believe they will be the most efficient statins in the generic market.”

McCaffrey agrees with Anderson on the fate of evacetrapib: “I think the board in Lilly’s case is very conservative, so I think they’ll probably shelve [evacetrapib].” As for Merck’s anacetrapib, “they’ll probably continue on, they’re deep into that program and I think they need to find an answer,” says McCaffrey. (Norman Wong, Resverlogix’s chief scientific officer, outlined the problem with CETP inhibitors in a

Analysts have long predicted blockbuster sales for the CETP inhibitor class of drugs, and yet, none have made it through to approval. With the closure of Roche’s dalcetrapib program, is there enough blockbuster potential remaining to justify the enormous development costs these drugs require?

CETP Inhibitors: Blockbusters that Never Ran?

While the FDA continues to develop its guidance for US biosimilars, including a one-day public hearing on May 11, 2012, the basic legal underpinnings of biosimilars in the United States. may be under threat, as the Supreme Court debates the healthcare law, a large chunk of which includes provisions for biosimilars.

As background, biosimilars were discussed for many years in the United States., but unlike Europe, no regulations were developed. As part of the health care law’s cost controlling measures and to promote biosimilars innovation in the United States, the Biologics Price Competition and Innovation Act (PPACA) was included in the bill. However, the act was stated to be “non-severable” from the rest of this law, meaning that if the PPACA is struck down, so is the biosimilars part of the law. That means, even if the Supreme Court does not specifically object to the Biologics Price Competition and Innovation Act, its mere inclusion in the PPACA could lead to its downfall.  As a side note, the Supreme Court does not seem to have much of an opinion on generic biologics one way or the other, with Supreme Court Justice Stephen Breyer referring to “the biosimilar thing” during oral arguments.

This uncertainty comes at precisely the wrong time. Innovation in biologics has taken off in the Unitd States. The FDA reported that at least 35 requests for biosimilar pre-IND meetings were made in reference to 11 biological drugs as of February 15, 2012; as of that date, 21 pre-IND sponsor meetings were held and 9 INDs had been received. The FDA is instituting measures which are likely to further increase the popularity of this program, including providing a path to regulatory approval in the United States for similar biological products licensed outside the United States.

Although the Biologics Price Competition and Innovation Act could be passed again as a separate law, the upcoming presidential election and campaign maneuvering are both likely prevent any real action on that particular motion. The bill will probably be swept to the side as “politicking” takes the place of “policy making.” This would be unfortunate, as the Act would clearly benefit consumers by reducing the price of biological drugs, which are typically among the most expensive on the market. The bill would also prevent originator biotech companies from enjoying a de facto “post patent” monopoly, due to the current expense and uncertainty of achieving regulatory approval for “generic” forms of these drugs.

Originally written by Dr. D’vorah Graeser for 