Biotech not like other high tech

In teaching, research and talking to industry professionals, I am often tempted to refer to “high technology” industries, “technology startups” and the like. This would tend to emphasize the commonality between IT and biotech.

And then there are days like Friday, when I’m reminded that biotech — and human health more generally — is completely different.

The occasion was an event on pharmaceutical quality, organized by KGI’s student chapter of the Parenteral Drug Association, a professional organization concerned with drug quality and safety issues.

The students invited three industry speakers.

First up was Susan Weber of Baxter introduced us to the principles of Quality by Design, i.e. start from a quality goal and work back through the entire design, development an production process. The ideas are more than 20 years old, but apparently have recently have begun to influence pharmaceutical manufacturing in the US.

The second speaker was Marsha Hardiman, a consultant for Concordia Valsource. After showing a stunning video by the American Society for Quality on the consequences of quality failures, she summarized the regulatory and process failures of the New England Compounding Center that have led to 64 deaths so far. Nothing illustrates the difference between a bad drug and a bad iPhone app.

The final speaker was James Sesic of Amgen, talking about the challenges of maintaining regulatory compliance for drugs sold in more than 100 countries.

This was the real eye-opener. We all know about the need for drug companies to spend years and hundreds of millions of dollars to get the first NDA or BLA approval. Sometimes we talk about getting the second approval — e.g. in Europe or Japan after the US. But I’ve never heard anyone talk about the rest of the world.

How does a company like Amgen handle approval in dozens of countries? The richest countries have their own large-scale regulatory systems (US, Japan, Canada, Europe), the smallest grant approval after certified approval from one of the major regulators, while a range of countries attempt to form their own regulatory judgements without a lot of resources.

On top of that, regulatory approval is required for any major change in the production process. Normally this discourages companies from making major changes, but if there’s a major improvement in the process — or the company needs to comply with new regulations — it will go through the process.

One example is getting approval to shift manufacturing to a new factory. The company will have to apply for approval in dozens of countries and cannot sell drugs in country X from the new factory until regulatory agency X has approved such production.

If a drug has several deliver modalities — concentration, IV vs. injection, etc. — then when multiplied by the disparate languages, marking requirements and other national regulations, a single blockbuster drug could be sold in 100s of SKUs. Double that with separate SKUs from the old and the new factory.

When it takes 4-6 years for all the countries to approve the change, then an Amgen needs to keep track of all those 200? 500? SKUs (for one drug) to know which SKU is legal to sell in one country.

Contrast this to the rollout of the latest iPhone, a product that (unlike software or PCs) must satisfy strict government and operator requirements to be sold in a given country. Apple launched the iPhone 5c in 10 countries in September, added 60 countries between October 25-November 1, and expects to have more than 100 countries by the end of the year (i.e. in less than 4 months).

The process of global drug regulation seems pretty inefficient, and we pay for this inefficiency through higher costs (or lack of access by smaller countries to non-blockbuster drugs). It would be nice if we could develop a drug regulatory system where the first review is highly rigorous but the remaining process is streamlined so that drug companies spend their money on development (and safety), not SAP and paperwork.

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)

New markets, new models for old pharma

One of the most knowledgeable healthcare economists, Scott Gottlieb (M.D.) of AEI has weighed in on big pharma’s dying business models. While no Pollyanna, Dr. Gottlieb finds the glass surprisingly half full — while (as he often does) identifying areas where the FDA is a barrier to innovation.

Writing at the WSJ (and the AEI website) Dr. Gottlieb summarizes the success and limitations of the old business model. The former was represented by Lipitor, which earned $13b/year at its peak. The latter “mostly involved screening millions of random compounds against a molecular target.”

However, he argues that big pharma is learning the proper lessons from the end of their traditional models.

Lesson number one is to use a biological (rather than scattershot chemical) approach:

They took advantage of new science that allowed drug discovery to become a much more targeted endeavor—focused around precise information about the molecular fingerprints of disease.

In this kind of "rational" discovery process, size matters less than precision. Drugs are designed around the individual biological receptor they're targeting rather than being screened out of a library of random compounds. Deploying bigger tools no longer counts as much as having concentrated expertise in the particular pathway that causes a disease.

The next lesson has to do with the organization of innovation:

[B]ig bureaucracies were hostile to the kind of risk-taking and scientific focus needed to do good research. At most companies, the majority of new drugs are discovered by a handful of scientists with repeated successes. There's something unanticipated in drug research that can't be industrialized.

In recent years, pharmaceutical companies started to carve up their sprawling research enterprises into smaller, more focused teams. The right size of a research team is now said to be 20-40 people. To get at new science early, drug makers rely on collaborations with academic research teams and licensing deals with smaller biotech outfits.

(We call the latter process “open innovation”).

The final point is one that been often remarked over the past few years. Drug companies shouldn’t try for incremental improvements for conditions that have been treated in the past 30 years, but instead try to address other conditions (like Alzheimer’s) which lack an effective theraphy.

As a success story for the new, improved big pharma, Dr. Gottlieb cites Pfizer bringing Crizotinib (a lung cancer therapy) to market in 6 years instead of 10-15. Still, he points to the role of the FDA as increasing the costs and delaying the availability of therapies, by increasing the length of trials and the cost per patient.

While various regulatory reforms have been proposed, “none has been meaningfully advanced.” He concludes:

Drug makers are renewing themselves by realizing that their research success wasn't tied to the scale of those endeavors, but their precision. Today, the continuation of these scientific advances depends on their regulators reaching a similar understanding.

HIPAA vs. preventive medicine

This is finals week for the fall semester at KGI. Teams from our first year Medical Devices course (ALS 320 in KGI-speak) are presenting their technical and business analysis of why the world needs a specific new medical diagnostic test.

As an aside, one of the teams made a persuasive case the compliance and liability issues associated with HIPAA will deter (and possibly prevent) the adoption of new technologies for preventative medicine.

The specific context was monitoring of diabetics, of the most expensive chronic conditions in the United States. (I didn’t write down the statistics, but this article estimates diabetes directly accounts for 10% of healthcare spending, or more than $90 billion/year).

The students suggested that the health impacts of diabetes could be reduced through computerized monitoring of various symptoms — not just glucose, but hypertension and other effects as well. (Disclaimer: I am not an MD not do I play one on TV). One product they pointed to was the Withings blood pressure monitor, which uploads data to your iPhone, iPad or iPod Touch and can be manually emailed to your doctor.

The idea is that if data were gathered and stored in the EHR, then it would be possible to catch problems well before a regularly scheduled test. Getting these widely deployed would probably take a HMO (like Kaiser) or hospital group that is caring for diabetics on a long term basis.

However, the security implications of such as system are daunting. Yes, a firm or nonprofit needs to be diligent in avoiding security breaches that compromise patient privacy. However, a data breach (of the source that seem routine nowadays) could lead to government fines or even a lawsuit.

A regulatory barrier like this could be a dealbreaker for efforts such as San Diego’s wireless health initiatives. This chilling effect seems a perfect example of the law of unintended consequences.

How to solve the problem? One way is that the Federal government can’t be fined or sued under HIPAA. Does this mean that these approaches for data monitoring to support preventative health have to wait until the Feds are innovative enough to try this approach? (Or private insurance is out of business and we all are covered by the Feds anyway?)