Saving animals, dooming people

Earlier this month, neurobiologists in Milan had their lab broken into in a deliberate attempt to slow their research.

As the Wall Street Journal reported:

The lab was targeted because its work, like just about every other medical advance and effort of our time, involves mice. Hundreds of small, cute, furry mice, which in this case had been genetically modified for protein mutations meant to model, as [Dr. Michela] Matteoli puts it, "what goes wrong in the synapse."

The animal-rights crowd decided it had better plans for the mice. So on Saturday five members of Italy's "Stop Green Hill" group (initially formed to protest a nearby dog-breeding facility) broke into the Milanese lab and "occupied" the area housing 800 animals, mostly mice but also some rabbits. They chained themselves by their necks to the facility's doors, Ms. Matteoli says, ensuring that any attempt at forced entry by the police could "harm them really seriously. They could kill them, break their necks."

The researchers lost mice, and others were scrambled such that it was impossible to associate a specific animal with a given experiment. The damage is estimated to cost a year of work and hundreds of thousands of euros. The research is intended to develop drugs “that might arrest neuron destruction in Alzheimer's patients, or avoid the synaptic dysfunctions apparent in autism.”

Columnist Anne Jolis concluded:

[C]onsidering the zealousness of the people who have a problem with their work, Ms. Matteoli and her colleagues may hit on the cure for Alzheimer's before they convince any "Stop Green Hill" types that studying the caged mice and bunnies is worth it. Even Ms. Matteoli, polite to a fault, admits that she has been "impressed" with some of the "really completely crazy" online comments about news articles on the lab attack.

"One guy wrote that you should only study mice if you're developing medicine for mice. I mean, this is the level of—it's very hard to understand." Here's hoping she doesn't try too hard—and can get back to her regular work soon.

I realize I’m a species bigot, but I never got why people valued primitive animals over human life. (Dolphins and chimps I understand — at least up to a point.) The advances will come too late to help me, but perhaps they could help my in-laws (in another decade) or people of my generation (in 30-40 years).

The biopharma industry will continue to have these sorts of problems unless it can find a way to persuade the public of the necessity of their research and research methods. The anti-capitalist, anti-science challenge seems greatest in Europe, but the U.S. is far from exempt.

Myriad: does it matter?

Today marks the Supreme Court hearings in the Myriad patent case. It is no exaggeration to say this is the most closely watched life science patent case in more than a decade.

In one sense, the case has the potential to be as significant as Diamond v. Chakrabarty. That is the 1980 Supreme Court decision that (to quote a 2005 review) “held that a live, man-made microorganism is patentable subject matter” under the patent code.

There is more than a little posturing on both sides. The patients’ rights, open IP crowd is promulgating op-eds in the Washington Post and Los Angeles Times asserting that no company “should own our DNA”. Not surprisingly, the news pages of the New York Times are promoting sympathetic stories on the anti-IP crowd.

In response, the CEO of Myriad Genetics submitted an op-ed to Forbes and letters hoping to rebut these op-eds. The argument is summed up by the title of the Forbes piece: “We're Not Patenting Your Genes, But Our Research.”

We used the HBS case on Myriad in my Innovation Management class at KGI this semester. The students really enjoyed it. It provided very interesting discussion questions at the intersection of genomic medicine, patent law and public policy. It didn’t hurt that this is a high-profile unsettled question of the law.

For the legal issues, a great place to start is the PatentlyO blog. For example, a December 3 article listed the conventional wisdom among legal scholars. A February 11 article lists the questions to be addressed by the two parties:

1. Are human genes patentable?
2. Did the court of appeals err in upholding a method claim by Myriad that is irreconcilable with this Court's ruling in Mayo Collaborative Servs. v. Prometheus Labs., Inc., 132 S. Ct. 1289 (2012)?
3. Did the court of appeals err in adopting a new and inflexible rule, contrary to normal standing rules and this Court's decision in MedImmune, Inc. v. Genentech, Inc., 549 U.S. 118 (2007), that petitioners who have been indisputably deterred by Myriad's "active enforcement" of its patent rights nonetheless lack standing to challenge those patents absent evidence that they have been personally threatened with an infringement action?

The arguments on each side were highlighted in an August 17 summary of the appeal at the Genomics Lab Report, as well as a blog posting the same day on Derek Lowe’s “In the Pipeline” blog.

However, probably the most interesting article was in my Sunday morning paper here in San Diego, by Bradley Fikes, the longtime biotech reporter who’s one of the few North County Times reporters after it was acquired last year by the San Diego Union. His lead on the Union story captures it all:

No matter which way the Supreme Court rules on the Myriad Genetics BRCA breast cancer gene test patenting case, the importance of such patents is diminishing over time. Biotechnology is moving beyond patents derived from naturally occurring gene sequences. The most important biotech patents nowadays are becoming synthetic gene and RNA sequences, proteins and other indisputable contrivances of human ingenuity.

The article highlights the important pioneering efforts of Craig Venter (now in San Diego) who competed with the Human Gene Project.

In the long run, will Myriad matter? The experts consulted by Fikes think not, for two reasons. First, the relevant patents are expiring and thus at some point won’t be enforced anyway. Second, the IP strategies of biotech companies are getting more sophisticated, emphasizing synthetic organisms rather than isolated DNA strains from natural organisms. Meanwhile, as the New York Times reports, Myriad’s latest business model is using trade secrets for its database.

So in the end, this may be tempest in a teapot. In a decade or two, the industry will have moved on, and the patent lawyers will need something else to debate.

Beginning of the end for big pharma distribution?

Since taking my job at KGI nearly two years ago, one of the questions I’ve been asking is when the existing pharmaceutical distribution model is going to disappear. It’s an important question for graduates of our current school (School of Applied Life Sciences), and also for our newest school, the School of BioPharmacy, where I now spend some of my time. Both schools send (will send) many of their graduates to biotech and traditional pharma companies.

The existing commissioned sales force model is both expensive, and also a barrier to entry that separates traditional pharma from upcoming biotechs and the various generic producers. At the same time, in industry after industry over the past two decades, we have seen expensive distribution channels disrupted by e-commerce and other more efficient delivery mechanisms. Here we have both competition from more efficient channels and also the lost of margins as drug patents expire.

This week, Indianapolis-based Eli Lilly announced it would lay off “less than 1,000” sales representatives. But the Wall Street Journal reported that the total would be close to that ceiling, amounting to 30% of its US sales force. The changes will take effect by July.

The proximate cause is the company’s patent cliff for Cymbalta and Evista. The former accounts for nearly $5 billion annually, $3.9 billion of that in the US, and its patent expires at the end of 2013. Evista accounts for another $1 billion, and will face generic competition in early 2014.

So on the one hand, Lilly is losing the margin that supports this expensive sales force. On the other hand, it wouldn’t be firing nearly a third of the people promoting its products if they continued to be effective at generating sales. As the WSJ dryly noted:

[T]he influence of sales representatives has shrunk, as many physicians no longer have the time to take the calls and some doctors refuse to see pharmaceutical representatives out of concern about improper promotions. Growing numbers of doctors prefer digital marketing.

Lilly's U.S. sales force "will move to a smaller structure that is more directly aligned with our business realities—along with the realities our customers face, and the way they want to interact with us," a spokesman said.

Instead, big pharma is using computerized tools (such as iPad apps) to communicate with doctors.

This reminds me a lot of airlines, which used to have travel agents, ticket offices, customer support personnel and so on. When I started teaching strategy in 2002, I drew the distinction between full service and discount airlines, but after a few years the post-9/11 bankruptcies eliminated almost all of the distinction. (In a separate article this week, the WSJ noted that Pfizer and GSK cut free lunches and other doctor perks last year, in part to save money.)

The WSJ article on Lilly continued:

Today, there are about 60,000 pharmaceutical sales representatives, down from a peak 104,000 in 2006, according to ZS Associates, a sales and marketing consultant that advises many drug makers.

By 2020, I’m convinced that the traditional sales force will be a thing of the past. Those 60,000 employees will be under 10,000, with 90+% of the young salespeople (earning six figure compensation with commissions) looking for other work.

The industry needs to figure out another way to accomplish the same goal. How will doctors keep up with all the new medications — when they’re already having major difficulties doing so? Consistent with other trends, are they going to rely on pharmacists to stay on top of this and let others make the final decision on selecting therapies?

Achieving Wal-Mart efficiencies in healthcare

Everyone agrees that ACA (Obamacare) is going to fundamentally transform the US healthcare system. That was, after all, its intention — the legacy that Hillary and Bill Clinton sought 16 years earlier and failed to achieve. At the same time, the US system — from pharma companies to providers to insurance to clinicians — was facing its own multi-faceted crisis. The crises were used as a justification for ACA, but for some problems, ACA may have no impact or make things worse.

The “US Health Care Outlook” panel today at KGI examined the likely culmination of this coming storm. The panel featured Pete Clagett (CEO of Express Scripts), Jeff Mason of United Healthcare, Don Jones of Qualcomm and consultant Linda Cullen.

Pullen highlighted the nominal impact of ACA is that the government will be buying more healthcare and thus have more control over supply, demand and pricing. Mason reviewed the dying throes of the traditional US fee-for-service, to be replaced by bundled payment plans (such as capitation — commonly used in California).

Pullin recited the depressing statistics of declining R&D productivity. A simple ratio of gross R&D expenditure to new therapeutics ranges from $3.7b per drug (Amgen) to $12b per drug (AstraZeneca). The industry has $200b of revenues disappearing from expiring patents of 2012-2018.

Their provocative openings spawned an interesting discussion: there will be winners over the next few years whether or not the ACA takes hold. Both public and private payers want cost reductions, so innovators who deliver efficiency improvements have lucrative business opportunities.

Kathy Webster, dean of KGI’s new School of Biopharmacy, asked about the costs of the very sickest. The panelists noted the high burden produced by the sickest of the sick (perhaps top 2-3%) — where the severe (and largely incurable illnesses) require a societal resource allocation discussion. However, the next 3-5% are those with chronic disease, who today are very expensive but offer tremendous opportunities for improved efficiency (and thus attractive margins for the right solution).

My question picked up on one of Pullen’s factoids: that 80% of the global pharmacy profits come from the US. I asked the panel: "what would happen to pharma profits if the US reimbursements were cut to Canada’s levels?” (An increasingly single payer system is a textbook increase in buyer power and thus the ability of the government to force industry to cut prices).

The audience groaned at the question and the flip answer that the profits would go down. However, Clagett noted that while the reimbursement levels for branded drugs are lower than the US, generic drugs are higher. (NB: Canadian provinces pressured generic suppliers earlier this month to take a sizable price cut). Even if reduced reimbursements destroyed current business models, there was a suggesting that new business models might emerge (whether through increased generics or by opportunities for lower cost solutions).

Overall, the general tone — consistent with KGI’s mission — was that market forces, private innovation and competition (to the degree it’s allowed) is most likely to provide sizable improvements in efficiency and efficacy. One example was cited by KGI advisory council member Jamie Danenberg (of Takeda), who noted an NPR report comparing a bargain basement MRI machine to a local hospital: the discount clinic was both cheaper and better.
But perhaps the most inspirational example came from Don Jones. Noting the recent rumor that Wal-Mart was getting into health insurance by setting up a health insurance exchange, he took that scenario to its logical conclusions:

• With their retail locations, they could open in-store clinics (as CVS has MinuteClinic in its locations).
• Their locations (and other services) would offer convenience and efficiency to shoppers that would attract business (cf. MinuteClinic).
• Unlike traditional healthcare companies, they would be consumer-focused rather than patient focused. (Most consumers would rather not be patients — they just want the healthy outcomes)
• They would bring their now operational efficiencies and buying power to the operational of any such business. Their buying power alone could cut capital equipment costs by 50%. (Would you like an MRI scan when you’re done shopping?)

Jones predicted that other pressures to do things better would come from Fortune 500 companies that are bringing healthcare onsite to improve worker productivity. Tech companies are well situated to effect such changes, because they understand the potential of the technology to improve the efficiency of service delivery, such as through mobile apps (on Qualcomm-enabled phones) that do for pharmacy what Amazon (or Pandora) have done to simplify purchasing of other goods.

Overall, it was an encouraging — in fact exciting — prognosis for the US healthcare system. Instead of going down the path of increasing bureaucratization and rationing, we could get improved outcomes at a lower cost. Perhaps if we’re lucky it will even turn out to be true.

Regulation, free speech and health care innovation

Over the centuries, much of the progress in health care has come through experimentation by doctors. The creation of the FDA regulated new therapies, but at least in the US, doctors have been able to try new applications through “off label” prescribing of existing therapies.

Such off-label uses today play an important role in fueling improvements in health care. The father of user innovation, Eric von Hippel, co-authored a paper (Monaco, Ali and von Hippel, 2006) that studied the new applications of therapies approved by the FDA in 1998. They concluded that “Eighty-two (57%) of the 143 drug therapy innovations in our sample were discovered by practicing clinicians through field discovery.” In other words, the majority of new approvals were the result of doctors (not the drug companies) doing experiments.

Recognizing the potential for abuse, doctors still see such off-label prescription as an important treatment option. The American Academy of Orthopaedic Surgeons states:

The American Academy of Orthopaedic Surgeons (AAOS) believes that surgeons may prescribe or administer any legally marketed product for an off-label use within the authorized practice of medicine in the exercise of appropriate medical judgment for the best interest of the patient.

Similarly, the AMA provides this example

An example is a congenital condition known as Kidney Reflux Disease, which mostly affects infants and young children. This disease is caused by improper development of the ureters which leads to a back flow of contaminated urine into the kidneys resulting in an infection. No medications have been approved to meet the needs for effective management of this condition. However, the off-label usage of multiple antibiotics has been shown to be the most effective course of treatment. Left untreated, Kidney Reflux Disease can lead to permanent damage and failure of the kidneys.4

Nonetheless, the FDA has worked to prosecute some cases of doctors or drug companies recommending off-label uses. One famous example involves the drug Xyrem, which was sold by Orphan Medical (a company acquired by Jazz Pharmaceutical in July 2005).

The government successfully prosecuted Orphan sales rep Alfred Caronia for making truthful but unapproved statements. Last month, Caronia got his conviction reversed on appeal — recognizing his free speech rights — with help from amicus curiae briefs by the Washington Legal Foundation and the Medical Information Working Group.

However, the victory came too late for Peter Gleason, M.D., a doctor who was arrested, prosecuted and had his assets seized (preventing him from paying for private counsel). Author Harvey Silverglate wrote about Gleason in a Dec 26 op-ed column in the WSJ:

The ordeal of fighting a federal indictment, a daunting process even for the wealthy, exhausted Gleason, with whom I corresponded when I included his case in a book I was writing about how federal bureaucrats and prosecutors go after innocent defendants for innocuous behavior. He grew increasingly dispirited and finally decided to accept an offer that he felt he could not refuse. He pleaded guilty to a misdemeanor alleging his conspiracy with Orphan Medical and was sentenced to one year of probation and a $25 fine.

But Gleason's career was ruined and his pride decimated. He had difficulty holding a hospital or clinic job, and his medical license was placed into question. He was despondent the last time I spoke with him, and he subsequently took his life by hanging himself.

Friday’s paper brought three letters about the article. One, from a 501(c)3 used this to attack FDA attempts to control physicians:

In recent years Food and Drug Administration officials have engaged in a campaign to control every detail of the practice of medicine by individual physicians. They prosecuted a physician for taking stem cells from a patient on the basis that the cells are a chemical they have the power to regulate—even though they are reinjected in the same patient. Neither you nor your physicians may use your cells in your own body without government permission. Another physician is hounded by the FDA for the use of venal catheters that the FDA has approved without FDA approval of every individual use. Now, when you visit your physician, the FDA always wants to be in the room with you.

A second lamented the use of asset seizure (against Dr. Gleason and others) as a violation of unreasonable seizure. Meanwhile, the third letter defended the FDA’s prosecution of Gleason:

The government was right to prosecute Gleason because he violated the law and people's health and lives were at stake. Xyrem can have serious side effects, and when improperly used can induce comas and cause death, which is why it has a "black-box" warning. Orphan also was prosecuted for promoting Xyrem for dangerous, unapproved uses and pleaded guilty. Jazz Pharmaceuticals, which acquired Orphan, paid $20 million to settle civil and criminal charges.

The third author did not note that she was a partner in a DC law firm, but her Friday op-ed in Forbes (predicting such prosecutions will continue) concluded with this disclaimer:

Disclosure note: My firm represented whistleblowers whose cases were part of several of the settlements mentioned. In addition to the Orphan Medical/Jazz Pharmaceuticals settlement, we had “qui tam” cases that were part of the settlements by Amgen, Glaxo and Pfizer.

When they win, such plaintiff attorneys are paid sizable legal fees. Plaintiff attorney rates typically range from 25-33% but it’s hard to tell since terms tend to confidential. The legal fees for one “whistleblower” case were divulged by a tax case as being 40%, while a dispute in another case revealed as being 43.5% plus expenses.

Forty percent of $20 million is $8 million, and the $20 million settlement is a relatively small settlement for such cases. That’s a lot of reasons for plaintiff attorneys to continue to sue doctors and pharma companies in hopes of punishing them for off-label uses, no matter what the FDA does.


References
Harold J. DeMonaco, Ayfer Ali, Eric von Hippel, “The Major Role of Clinicians in the Discovery of Off-Label Drug Therapies,” Pharmacotherapy Volume 26, Issue 3, (March 2006), pages 323–332, DOI: 10.1592/phco.26.3.323 (or free working paper)

Life science without ethics

One of the things that has struck me about life science researchers, entrepreneurs, teachers and students is the sense of mission — compared to other technology entrepreneurs, it’s not just about the money.

The story of John Crowley (as immortalized by the movie “Extraordinary Measures”) and others fighting to solve rare childhood diseases are particularly good examples of this. (Some of their pricing decisions are controversial, but that’s another issue).

But no industry or line of work is full of saints (not even, alas, the Catholic church). Every industry has its bad apples.

This week Fortune tells the story of four executives of Synthes who plead (in effect) no contest over deaths due to an untested medical implant called Norian. The short version is that Norian is a calcium glue that works well for (and was approved for) arm and skull breaks — because gradually over time it transforms itself into bone.

However, Synthes wanted to go after the larger spine fracture market. The execs used a variety of marketing techniques to try it on humans while bypassing GRAS or FDA qualification procedures (as an off-label treatment).

The problem is that when used with spines, in some cases the glue got into the bloodstream, caused blood clots and killed people almost immediately. And, in fact, this showed up pretty quickly in animal tests. Several employees raised alarms, but top management went ahead anyway.

As intended by the magazine, the story is chilling. We expect this sort of behavior out of tobacco companies (or, once upon a time, out of polluting factories) but not out of FDA-regulated companies selling life-saving products.

I don’t get how this happened, but then I’ve never worked in an organization with a culture as toxic as this one appears to have been. It can’t just be about the money. At some point, perhaps there was the escalation of commitment — the cover-up or fear of getting caught — but surely someone early on thought “we can’t do this” or “it’s not worth the risk” (whether to the patients, companies or the individual employees).

Perhaps it’s just mirroring a broader decline in society’s moral compass (or maybe just a more effective process of rooting out fraud that has always existed at some level). Even so, as an educator we all wonder what we can or should do to prevent, inoculate against or early identify such attitudes and behaviors.

The importance of teamwork

One of the major reasons for the existence of KGI is to span the gap between the academic and corporate views of life science research. We all tend to focus on the nature of the output, i.e. basic vs. applied science. However, as our students discover during their yearlong projects with companies, the way work gets done is also very different.

One area of potential culture clash is the real world importance of teamwork, as highlighted by an article earlier this month in Nature Bioentrepreneur. A few excerpts:

From academic solos to industrial symphonies
Gwen Acton, Alicia Gómez-Yafal & Emily Walsh

Published online: 17 May 2012

Academic researchers often need to stand out to advance, but the corporate world calls for team players. Moving from one world to the other can be a culture shock.
...
Individual project ownership is often encouraged and rewarded in academia, yet this approach in industry downplays the contributions of the team and inhibits key communication required for the success of highly multidisciplinary drug development projects. ... Over the years, we have seen many scientists undermine their careers by trying to do too much on their own.
...
Individual project ownership, and the recognition that follows, is the pillar on which careers are made or lost in the academic arena. ... Competition is indeed the name of the game in academia, and it is arguably not a bad thing. In industry, on the other hand, rapid, nonlinear career evolution is business as usual. Competition is reserved for external parties and has no place within your team. Development of the product, which will bring benefit to the patient, is central. Individual contributions routinely take a peripheral place, and any meritocracy is team based, because drug discovery projects are among the most multidisciplinary projects of all scientific endeavors.

Going solo in this atmosphere is at best a kamikaze approach and definitely career limiting, in our experience. ... Scientists who are not team players are often passed over for roles in startup biopharmaceutical companies. This is because industrial R&D is as much a team- and people-oriented effort as one that relies on an individual with particular expertise. As one venture capitalist (VC) puts it, when selecting startup management, “choose attitude over aptitude”. These views are likely shocking for scientists in academia, but they are widely held in industry.

I am going to recommend this reading for our entering students, particularly those in our PPM program (the world’s first post-PhD master’s program) who have chosen to leave the world of academic science in hopes of finding a corporate position. A graduate professional education is as much about developing norms and expectations as it is imparting specific technical or business knowledge.