I am not one to make New Year’s resolutions, but like a lot of people, I find the beginning of the year a time of hope and optimism. There has been a lot of recent news, both positive and negative, from the life sciences industry. I see opportunities.
Why We Do What We Do
I entered the industry years ago as a research scientist with the sincere desire to be part of developing new drugs and vaccines that improve human health. In spite of much public cynicism to the contrary, I still believe that better health really is the core mission of pharma/biotech companies. This is not naiveté. Profit, of course, is a primary motivator for companies and investors, but one can commit one’s time and money to many less risky businesses than drug development.
The reality is that developing new treatments is a really hard yet rewarding business, as anyone in the industry is fully aware. Drug development has a trifecta of fundamental business risks—technical, regulatory, and market—and relatively few drugs ever make it. But it is not all bad news—let’s examine some challenges and then consider opportunities.
There have been tremendous scientific advances in the past 40 years. As Bernard Munos wrote in his recent January 2nd, 2015 Forbes article, we are starting to see actual cure rates for hepatitis C and cancer remission. There are also impressive new technologies including synthetic biology, biochips, bioprinting, and tissue engineering with the potential to transform drug development and disease treatment.
We still have, however, a long way to go in understanding how the complex and remarkable systems of our human bodies function, not to mention all the individual variability. In addition to significant technical hurdles, the regulatory barriers to get a drug approved for sale in the US and other countries are high, as they should be. That is not to say that there is not room for improvement at the FDA and other regulatory bodies, but fundamentally these organizations are not rewarded for taking risks.
Then there is market risk. Regulatory approval does not a market make, as nearly every company realizes at some point. The market for pharmaceutical and biotech products is complex. The patient is not the only customer for drugs, and certainly in most cases, not the decision maker. Not only does the consumer generally not pay directly or even know the actual cost of the drugs they are taking, they typically don’t choose their drugs (direct consumer marketing notwithstanding).
Most consumers generally pay a fraction of the actual drug cost, with insurance covering the rest. Consumers will likely be asked to pay a higher share of their healthcare costs, either through individual costs or higher insurance premiums. There is increasing pressure on pharmaceutical and biotech companies to demonstrate treatment cost effectiveness. Even with very effective treatments, drug prices are becoming a greater focus of cost cutting by insurers especially when large patient populations are involved. The industry got a striking reminder of this from the recent resistance of pharmacy benefit programs to cover the cost of Gilead and AbbVie’s HepC drugs.
So why am I optimistic in the face of all these challenges and instead see them as opportunities? The old adage that “the first step to solving any problem is to admit you have one” rings true here. In spite of the view held by many, the industry does see the need to adopt a broader perspective and view of their mission. In addition to partnerships with research institutions and other external innovation initiatives, pharmaceutical and biotech companies are seeking more non-traditional partnerships and approaches. Here are just a few notable examples:
Patient/consumer communities: There is an increasing desire by patients, the FDA, and companies to have patients more actively participate in the drug development process. 23andMe has a database of over 800,000 participants with genetic and other personal data, including disease symptoms. More than 80% have opted in to participate in research. They have received NIH SBIR funding and I believe they are genuinely interested in innovative approaches to accelerating and improving disease treatment and prevention. They have recently formed collaborations with Pfizer for IBD and lupus, and with Genentech for Parkinson’s. The data from 23andMe will be used to help the companies identify new drugs, and improve the development of existing ones. 23andMe has certainly not been without controversy, and in the view of some this is another questionable move. However, I believe this effort shows real promise. These are the types of collaborations between non-traditional partners that I hope may yield new and more comphrensive information to advance the R & D process.
Bacteria as medicine: The idea of using bacterial and viral vectors as part of biological drugs is not new. Such vectors have been used for delivery of nucleic-acid-based treatments and vaccines. However, the recent announcement by J & J and Vedanta (a company backed by PureTech Ventures) is different. J & J has entered into the collaboration with Vedanta to develop VE-202, a potential bacterial treatment for IBD. While the drug candidate is still in preclinical development, if successful it could be a great advance in proving the concept of treating disease by directly rebalancing the gut microbiome.
Tech meets pharma: It is hard to escape all the buzz around the technology driven healthcare revolution from wearables and other next generation monitoring devices. Between all the buzz, a partnership between Qualcomm and Novartis to form a joint investment company focussed on digital health technologies was announced last week. Novartis’ goal is to support technologies, products, and services that “go beyond the pill.” Merck, Sanofi, GSK, and Pfizer are also among the companies increasingly interested in nontraditional approaches to monitoring and improving health through digital devices.
Payer Influence: As mentioned above, there has been increasing focus on the influence payers have in setting drug pricing. The recent deals between AbbVie/Express Scripts and Gilead/CVS Caremark to cover the respective HepC drugs are just two examples of what is most certainly going to be an increasing dialog between payers and their representatives, and pharmaceutical/biotech companies. As an example, Kite Pharma announced plans to open discussions with payers regarding its immunotherapy treatment. This is especially significant since Kite’s treatment, as well as similar treatments in development by other companies, involve a personalized immunotherapy approach likely to be complicated and expensive to produce. It will be interesting to see if other developers of CAR-T and other breakthrough therapies will also adopt Kite’s strategy.
The reason I find these recent announcements promising opportunities is that they represent companies expanding the view of their businesses. One could argue that it is just good business—placing strategic bets on where you think the industry will go and disrupt yourself before you get disrupted. Of course, that is part of it. But perhaps sitting down and having broader dialogs with payers, tech companies, and consumer groups may also remind companies why they do what they do. Improving human health is a societal concern and we really are all in this together.
That, to me, is both hopeful and exciting. Here’s to a great 2015!