Clayton Christensen on the Future of Pharma

Posted under Blog, business model, change, Clayton Christensen, commercial model, Companies, conference, Diagnostics, Events, FDA, Funding, health analytics, healthcare, innovation, IP, leadership, Medical Devices, Medical Supply, Mitt Romney, People, Pharmaceuticals, Politics, Public Policy, R&D, Regulatory, Safety, SaS, Startups, Strategy, Technology, Uncategorized, Universities, Videos by Ben Comer

A keynote speaker at the 9^thAnnual 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.

Ben Comer: 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?

Clayton Christensen: 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.

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

CC: 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.

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

CC: 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.

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

CC: 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.

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

CC: 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.

BC: I read in The New Yorker 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?

CC: 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.

Christensen’s new book – How Will You Measure Your Life? – 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 Bloomberg Businessweek and The New Yorker.

Biosimilars Ahead, Proceed with Caution

Posted under Affordable Care Act, Affordable Care Act (ACA), biosimilars, Blog, Companies, Diagnostics, FDA, FDA Guidance, Food and Drug Administration, Funding, Health, Health Care, healthcare, Medical Devices, Medical Supply, Pharmaceuticals, regulatory pathway for biosimilars, Startups, Universities, Videos by biotechnow@bio.org (Biotechnology Industry Organization)

By Richard M. Dolinar, M.D., Chairman, Alliance for Safe Biologic Medicines

In today’s budget-constrained world, the goal for health care is not only to save lives but also to save money. On Friday, May 11, the Food and Drug Administration (FDA) will hold a one-day public hearing on important medicines, known as biosimilars, that are under FDA consideration to come to the United States (U.S.) and offer the opportunity to help achieve the second prong of the health care goal: to save money. However, similar to any new medicine approval, patient safety must be paramount.

Biosimilars are attempted copies of innovative biotech medicines that have been available in the U.S. for a number of years. As members of the biotech community know, biologics have revolutionized the treatment of many serious and life threatening diseases in the short history of this industry. Biosimilars offer the hope of bringing life saving biologic drugs from the bench to the bedside in a cost effective manner and serve as another tool in the toolbox of healthcare providers. Unlike traditional pharmaceutical drugs that are made from chemicals and have structures that are well characterized, most biologics are made from living cells, with highly complex structures that are not easily understood, characterized or replicated. As a result, biosimilar medicines differ from generic drugs in that they are “similar to” but not exact copies of the innovator drug they attempt to replicate.

In 2010, the Patient Protection and Affordable Care Act (PPACA) granted the FDA the authority to approve biosimilars. Later that year the agency began consulting with patient groups, physicians and industry to exchange information that would eventually lead to the approval of biosimilars in the U.S. A few months ago the FDA took the first concrete step to create a pathway and issued draft guidance. The public hearing on Friday will allow stakeholders to provide testimony in response to the draft guidance and I am honored to be able to speak on behalf of the Alliance for Safe Biologic Medicines (ASBM).

In addition to my day job seeing patients as a practicing endocrinologist, I serve as the Chairman of ASBM, an organization that is working to raise awareness of biologics and biosimilars, as well as the important steps that should be taken to ensure safe use of these important medicines.   Our organization is composed of diverse healthcare groups—from patients to physicians, medical innovators, and others who have come together to ensure that patient safety is at the forefront of the biosimilars policy discussion.  We were pleased but not surprised to see the FDA lay out a science-based approach in the draft guidance largely building on the foundation laid by the European Medicines Agency (EMA).

The EMA began to establish the first formal regulatory pathway for biosimilars in 2003 and has gathered much data over the past 8 years that can, at a minimum help inform the development of policy in the U.S.  Policy makers should take advantage of this opportunity to learn from their experiences, both positive and negative.

We must also acknowledge that are differences between the EMA and FDA approach most notably in the area of “interchangeability” where the FDA has the authority to designate a biosimilar as interchangeable with its reference product and the EMA does not. This difference is not insignificant for patients in the U.S. because in theory it could lead to biosimilars being automatically substituted for the originator product by the pharmacist without consulting the prescribing physician. In the draft guidance the FDA signaled that it is not ready to prescribe a path to interchangeability at this time, and instead indicated that additional guidance will be necessary to better understand the challenges involved.

Differences aside, there is much to learn from the EMA experience and we believe that it provides a solid blueprint for the FDA to follow. At a minimum, ASBM members believe that the FDA must require biosimilar manufacturers to conduct clinical studies and produce analytical data sufficient to reassure patients and doctors that their products are safe. We also believe that unique nonproprietary names must be assigned to all biologic therapies so that physicians and patients know what caused an adverse event if one occurs.  Finally, as a practicing physician it is imperative that doctors and patients should be able to carefully choose the best course of treatment rather than have legislators and regulators decide for them.

For nearly 18 months, ASBM has been working to educate the public and policymakers about the great promise that biosimilars offer to patients in the U.S. Our message has been relatively simple, making lower cost medicines available to patients should be a priority but their availability must come with the absolute assurance that they are first and foremost safe. Our organization and its members have written Op-Eds, conducted webinars and hosted policy forums to exchange information about the issues and challenges associated with biosimilars. I am proud of the work we have done but ultimately realize as the late great Karen Carpenter sang so many years ago “we’ve only just begun.”

You can find more information at safebiologics.org, find us on Facebook or follow us on Twitter @SAFEbiologics.

Help Children and Adults with Brittle Bones During OI Awareness Week

Posted under Blog, Companies, Diagnostics, Funding, Health, Health Care, healthcare, Medical Devices, Medical Supply, OI, Osteogenesis Imperfecta, Osteogenesis Imperfecta Foundation, Pharmaceuticals, Startups, Universities, Videos by biotechnow@bio.org (Biotechnology Industry Organization)

By Stuart Tart, Director of Development, Osteogenesis Imperfecta Foundation

Ten years ago, Greg and wife Leigh brought their new daughter, Mallie, home from the hospital.

When she was 9 days old, Mallie was fussy, leading Greg and Leigh to discover that their baby girl had fractured her right tibia and fibula.  The new parents immediately took their daughter to the doctor, who advised them to take Mallie straight to the emergency room. They discovered that Mallie was born with osteogenesis imperfecta, a genetic bone disorder characterized by fragile bones that break easily.

“We were just absolutely frightened,” Leigh remembered.  “I am a nurse, and I don’t remember hearing any of this from nursing school.”

Osteogenesis imperfecta (OI) is a rare heterogeneous disease of connective tissue that affects 8/100,000, or about 30,000 persons in the United States. Although the cardinal manifestation of OI is bone fragility, this rare disease encompasses all body systems. A person is born with this disorder and affected throughout his or her lifetime.  Thus, an infant may be born with multiple fractures, or a child can break his arm and collarbone while putting on a T-shirt. Each fracture is as painful as the first!

Many children and adults with OI have multiple surgeries to try to correct bone deformities and straighten bones so they can live independently. Mallie had her first surgery when she was just 2 ½ years old! Rodding surgery is considered major surgery, and the Holmans knew that it would require their little girl to deal with an overnight stay at the hospital, a hip-spica cast for six weeks, and then months of physical therapy. This surgery was necessary to relieve the bowing in her legs and thus, to prevent osteogenesis imperfecta from stealing Mallie’s ability to walk. To make matters worse, the Holmans learned that Mallie would likely need to repeat the surgery every two to three years, depending on how fast she grows, to replace the rods with longer ones.

Mallie, who turned ten this year, is an excellent student, and she is active in a variety of activities, including swim team, golf, band and orchestra. Although she tries not to allow OI to slow her down so she can still just be a kid, Mallie recently fractured her forearm and reinjured her tibia in her lower leg. Her arm was so severely injured that she needed surgery to place two rods in her bones.  Even though this was her fifth surgery in eight years, it was still an extremely frightening and traumatic experience for her.  After a brief overnight stay in the hospital, Mallie was home and showing off her unbreakable spirit.

The Role of the OI Foundation

The Osteogenesis Imperfecta (OI) Foundation provides information and resources to parents, doctors, educators, and adults with OI; organizes the National Conference on OI for families to gain the medical, research, and coping information they need (to be held in July this year); and advocates for increased funding from the National Institutes of Health, foundations and corporations.

The Foundation also funds groundbreaking research, including the multi-site Longitudinal Study of OI, which is tracking the health of 500 children and adults with OI for 5 years. The goal of the study is to develop a more detailed picture of osteogenesis imperfecta across a lifespan and to improve the level of care.

Build Awareness and Improve Lives!

The OI Foundation is hosting its second annual National OI Awareness Week from May 5-12, 2012. Awareness Week is a week-long event designed to educate communities across the country about osteogenesis imperfecta. National OI Awareness Week is held in conjunction with Wishbone Day on May 6, an international community awareness effort.

Hundreds of volunteers have planned fundraising events, secured proclamations from their city and state officials proclaiming May 5-12 ‘OI Awareness Week’, and are distributing educational materials throughout their communities.

Excitement for this year’s Awareness Week is growing—just last month, the City of Rochester, NY proclaimed May 5-12, 2012 ‘Osteogenesis Imperfecta Awareness Week’!

Awareness efforts like National OI Awareness Week help educate the greater community, leading to additional funding towards research programs and vital information and resources for our caregivers, doctors, nurses, teachers, and the OI community.

For more information or to donate, please visit our website.

Together, we are creating a better future for children and adults living with OI!

National Infant Immunization Week, April 21-28

Posted under Blog, CDC, center for disease control and prevention, Companies, Diagnostics, Funding, Health, Health Care, healthcare, immunization, Medical Devices, Medical Supply, Pharmaceuticals, Startups, Universities, vaccine, Videos by biotechnow@bio.org (Biotechnology Industry Organization)

Routine immunization of one birth cohort (i.e. people born in a particular year) during childhood prevents about 20 million cases of disease and 42,000 deaths in the U.S. These statistics are staggering, especially when we consider how far vaccinology and preventive medicine have come in such a short time period. Today, vaccines help protect children against 14 diseases before the age of two. Many diseases that parents once feared have been long forgotten. In the 1950s, nearly every child in the U.S. contracted measles. In 2011, 222 measles cases were reported in the U.S according to a report published last week by the Centers for Disease Control and Prevention (CDC), and this was the highest number of reported measles cases in the U.S. in 15 years.

New vaccines continue to be developed by private companies, both large and small, and by non-profit product development organizations. In 2006, vaccines against rotavirus, a leading cause of severe diarrhea in infants and young children in the U.S., were introduced. A study published by the CDC in the New England Journal of Medicine last September estimated that rotavirus vaccination prevented approximately 65,000 hospitalizations of children under age 5 from 2007 to 2009 and resulted in $278 million in healthcare cost savings. Innovative vaccines against diseases such as tuberculosis, meningococcal B disease, and respiratory syncytial virus (RSV) are currently in development and could significantly improve the health of children if added to the CDC’s childhood immunization schedule.

With these statistics, it may seem hard to deny the benefits of immunization. Yet, vaccines are sometimes the victims of their own success. They are so effective that parents are unable to remember the illness and associated disability and death that a vaccine prevents. To remind the American public about the positive impact of vaccination on the lives of infants and children, National Infant Immunization Week was launched in 1994. To learn more about this annual initiative led by the CDC, Dan McGirt, Director of Communications at BIO, spoke with Dr. Yabo Beysolow, a Medical Officer at CDC as well as a pediatrician and mother of three children. The podcast is available here.

In recognition of National Infant Immunization Week, Dr. Yabo Beysolow, Medical Officer at the CDC, talks about the benefits of immunization for children under the age of two and the achievements of immunization programs in promoting healthy communities throughout the U.S.