Allergan CEO David Pyott

Allergan CEO David Pyott is bullish on Botox’s potential as a salve for chronic migraine. He’s also betting on a next-gen dihydroergotamine (DHE) – Levadex – from MAP Pharmaceuticals.

It’s hard to know whether migraine sufferers will get behind Botox as a treatment; migraine patients are notoriously allergic to doctor visits, and many go undiagnosed. But for the worst kinds of migraines, particularly those that don’t respond to triptans or currently marketed DHEs, patients will probably be willing to try just about anything. Allergan CEO David Pyott, and MAP Pharmaceuticals CEO Tim Nelson, see headroom for growth in the category.

In 2009, the migraine market slipped into a steady decline after Imitrex, the go-to member of the triptan class, lost its patent (and blockbuster sales). Many of Imitrex’s classmates – Maxalt, Amerge, Zomig, and others – will face generic competition this year, if they aren’t facing it already. That makes Botox for migraine a difficult sell – it’s for chronic migraine, firstly, and it costs exponentially more than generic Imitrex – but during a 4Q earnings call yesterday Pyott said the migraine indication is performing “better than planned.” Around 4,600 physicians have been trained to give the injection, to date, said Pyott. “The vast majority of neurologists will inject for as long as three injection cycles,” even if they’re skeptical about the drug’s efficacy for migraine,” he Pyott. He’s hoping they’ll be convinced after that.

Branded print ads for Botox migraine will launch in women’s magazines this month, and an unbranded disease awareness campaign on television “has worked – the click-through on the website is positive,” said Pyott, adding that Allergan’s internal consumer surveys have shown “a high level of satisfaction” among patients.

After an upfront payment of $60 million last February, MAP Pharmaceuticals scored a $20 million milestone payment last August, when it filed Levadex with FDA. The company could receive up to $97 million more from Allergan if all goes well with the regulatory process; the PDUFA date on Levadex is March 26. Levadex, like Valeant Pharmaceuticals’ Migranal, is a DHE, but Migranal is a nasal spray, while Levadex is inhaled. The benefit with inhalation means that the drug sidesteps first pass metabolism en route to the brain – it avoids the GI tract, and potential dilution. At JP Morgan’s 30^th Annual Healthcare Conference in January, MAP CEO Tim Nelson said that Levadex “works faster, and has fewer side effects, than the triptans.” He added that 29 million scripts for migraine were written in 2008, and close to half of them were written off-label. After triptan, “41 percent of the scripts were for opioids, and 28 percent were anti-depressants,” said Nelson. MAP will hire 50 specialty sales reps if Levadex gets the FDA go-ahead, and will expand the drug into pediatrics and other neurological conditions later on, he said.

Levadex won’t compete directly with Botox for migraine; the former is for acute migraine, the latter for chronic migraine. Nelson said Allergan’s expertise in managed care, reimbursement and experience with FDA, makes it a good partner for Levadex. MAP is also looking for “a partner in Asia, and in ex-US in general,” said Nelson.

At $40 to $80, with a ceiling at $100 per dose, though, Levadex may be as tough a sell as Botox. But then again, migraine sufferers only want one thing when the pain sets in: for it to be gone.

A magazine ad for Boniva, fronted by actor Sally Field, generated the DDMAC (now the Office of Prescription Drug Promotion, or OPDP) Untitled Letter last year due to following phrase: “After one year on Boniva, 9 out of 10 women stopped and reversed their bone loss.” That didn’t jibe with the scientific data, DDMAC said in the letter, before requesting that all ads containing the phrase be removed from the campaign.

Genentech went a step further. In September of last year, the company began running corrective magazine ads addressing the overstated claim. The corrective ad states that the violative ad “may have given you the wrong impression.” It goes on to state that “Boniva has not been proven to stop and reverse bone loss in 9 out of 10 women and is not a cure for postmenopausal osteoporosis.” The corrective ads will run though April 2012.

Unlike their mild-mannered, Untitled Letter cousins, Warning Letters are considered more severe, and they typically mandate corrective ads to clear up any overstated claims or minimized risk information. Given that Genentech received the former communique and not the latter, it’s notable that the company chose to run corrective ads without a mandate.

After speaking with DDMAC about the Untitled Letter, Genentech worked with the agency to create and then “voluntarily” launch the corrective ads last September, according to Chris Vancheri, director, public affairs, at Genentech.

In a statement, Genentech said that in addition to the corrective advertisements – which are running in several women’s magazines, including Weight Watchers and this month’s WebMD the Magazine – “our clinical specialists have reached out to health care providers” to inform them about the corrective ads, which intend to “clarify the benefits and risks of Boniva in women suffering from post-menopausal osteoporosis.”

Sally Field was the face of Boniva beginning in 2006, but Vancheri says Field is “no longer engaged” on the campaign. GlaxoSmithKline signed a co-promotion deal with Roche on Boniva in 2001, but the companies broke the partnership in 2010.

In response to off-label inquiries about a drug, biopharma companies can use the kind of boilerplate they’ve been inserting on social media sites for years – thanks for your comment, here’s our contact information, call us for more information – but they cannot address the question publicly, where it appears, a privilege many hoped would be included in FDA’s long-promised and long-awaited social media guidelines. Companies must also include a “mechanism for providing readily accessible current FDA-required labeling,” but cannot include a link to anything that could be construed as promotional, like a “product website, product promotional materials, firm websites, or third-party websites.” Guidance on responding to unsolicited requests for off-label information was published in the Federal Register a few days before the end of 2011.

Responding to an unsolicited off-label question/comment is only appropriate when a specific brand is named, and if the question is “broad in nature,” drug companies should “appropriately narrow the question.” FDA recognizes the fact that companies are “capable of responding to requests about their own products in a truthful, non-misleading, and accurate manner,” and that companies probably know more about their own products than other self-appointed responders:

It can be in the best interest of public health for a firm to respond to unsolicited requests for information about off-label uses of the firm’s products that are made in public forums, especially since other responders may not provide or have access to the most accurate and up-to-date medical product information.

Unlike other forum responders, who can comment publicly in response to any question, manufacturers must wait for the original commenter to respond to the boilerplate message with contact information, before providing “any substantive communication about off-label uses for the product, in response to the original unsolicited off-label question,” and that communication must occur “solely between the firm and the individual who made the request…the firm should not make its detailed response with off-label information publicly available within the same forum.”

FDA’s guidance on industries’ social media interaction with patients, at least with respect to off-label inquiries, seems to be: Don’t participate publicly. According to the guidance document, this sentiment reflects a concern that publicly posted off-label information – in response to an unsolicited query – would be available for an indefinite period of time, and would also reach the eyes of readers who have not requested such information. Even if the drug information is accurate when it’s posted, it may not be accurate next month. For viewers who didn’t ask about an off-label use, but are still party to a public response, the information itself, regardless of its scientific merit, “may promote a product for a use or condition for which FDA has not approved or cleared.”

Those companies that would like to respond to an individual with a question, assuming that person has called or emailed the company in response to the provision of contact information – contact info that leads to a firm’s medical or scientific department, not a marketing department, the guidance clearly states – should include the following materials, according to the document:

• FDA—required drug label
• A prominent statement saying the product has not been FDA approved
• A prominent statement disclosing approved indications, if any
• A prominent statement of all important safety info, including box warnings, if any
• A complete list of references for all of the information disseminated in the response (firms should use peer-reviewed articles whenever possible)

Companies should also maintain the following records about off-label responses:

• The nature of the request for information, including the name, address and affiliation of the requestor
• Records regarding the information provided to the requestor
• Any follow-up inquires or questions from the requestor

The guidance is open for comment for 90 days. Here’s the Federal Register entry.

Joe Panetta, president and CEO of BIOCOM, discusses an emerging model of M&As in which human and IP assets are valued and biotech brings expertise to Big Pharma as venture capitalist funding dwindles and patent cliffs loom large.

Pharm Exec: Can you tell me about how small biotech and specialty companies have started switching from relying on venture capitalist (VC) funds to M&As, and when that shift came about?

Joe Panetta: I wouldn’t say they’re switching from relying on VC. I think the fact is that VC investment has taken on a different approach than it had traditionally; so we’re seeing a different, let’s say more conservative, shorter-term VC investment model. That’s combined with the fact that we’ve seen for a couple of years now that VC firms have been much more engaged in investing in their current portfolio companies, and there’s been less of an appetite for investment in new companies than there was five years ago.

Part of that is the fact that we’ve got economic challenges; part of it is the fact that we have a tremendously challenging environment at FDA; and part of it is the fact that we have uncertainty from a political standpoint. So those kinds of things have created a much more conservative approach to VC investing than we’ve seen in the past, and that’s had an impact in terms of the ability of our companies to be able to raise the kind of funding that they still need to raise to move their products through the pipeline.

What that means is that companies need to turn toward alternative sources of funding beyond VC. VC is also taking a much shorter timeframe perspective in terms of the investments that they’re making now. But that leads us to the need that large pharma companies see for innovative technology to fill their pipelines; the ability of biotech companies to attract large biotech and large pharma partners much more successfully than they have in the past; and the dynamic that we’re beginning to see—biotech companies becoming much more focused on management of the products that they’re developing, and on partnering to gain the expertise that is needed to move through development and clinical testing and commercialization.

So that creates the opportunity for companies to focus on innovation and to team up and partner with the experts on product development, commercialization, and manufacturing. And that’s where pharma comes in and plays an enormous role. Obviously pharma’s pipelines have become more depleted in terms of new innovative products over time, so there’s a greater appetite from the pharma side to engage in real partnerships with biotech companies. It’s not outright acquisition; rather, what I’m hearing more and more from a number of different pharma companies, is that the partnering model is more attractive than the outright acquisition model. And if the outright acquisition takes place, then the ability to allow a biotech company to continue to function as a satellite entity is much more attractive than simply acquiring the assets and letting the people go.

PE: What has changed in the industry or the economy that has larger pharma realizing that partnerships where both organizations work together on a level playing field may be more valuable than the straight acquisition model?

JP: There isn’t so much of an appetite any more in biotech, from the investor side or even from the management side, for creating fully integrated future large biotech companies that look like pharmaceutical companies. That used to be much more the direction that the companies were headed in, and for the most part that model has gone by the wayside. Now there’s a more virtual model, a leaner model, and that makes it much more attractive for partnering. The larger partner doesn’t have to worry about what to do with an entity that is duplicating—or at least attempting to duplicate—what they already have the ability to do.

The other thing that’s changing is the fact that we’re seeing generics come on the scene. Now there’s a future road map for biosimilars that is being developed. We see that way forward, and larger companies are beginning to plan for the world of biosimilars. Also, Big Pharma is beginning to plan more for the world of generics and of patents expiring, and I think they’re beginning to realize that they need to go into fast forward to begin to fill the pipeline, and to develop more innovative products. That’s not coming out of the merger of pharmaceutical companies. Those mergers are actually resulting in the large pharma companies having to deal with duplicate organizations and integrating existing products together, so that isn’t providing for innovation.

PE: So the mergers with smaller or more specialized biotech companies are where you believe the more specialized knowledge can come from?

JP: Absolutely—the more specialized knowledge, and the ability to do early-stage research and development much more nimbly and more quickly, resulting in more candidate products that can be developed through partnerships.

PE: How is this working so far as an economic strategy? Is this helping to bridge the financial gap that’s left from VC funding?

JP: I think it’s more than bridging the gap. Last year we did our first pharma/biotech partnering conference here in San Diego, but the relationship between large pharma and biotech has been evolving slowly over time. There was a time when the attitude on the pharma side was, ‘don’t call us, we’ll call you.’ But what we saw at out partnering conference last year and we are continuing to see now is a real appetite for equal partnership on both sides.

Everything we hear and everything we see points to a greater desire for there to be a real partnership between the two. And I think that can sustain smaller biotech companies. Pharma needs biotech as a partner, and biotech needs pharma, but pharma especially needs to continue to appreciate the value of biotech as a partner in terms of the people assets, and not just the intellectual property assets.

PE: Can you tell me more about the dynamic? How is this model of partnering different in terms of what both sides might be gaining, compared to the traditional acquisition model?

JP: The major difference is that by utilizing the resources of smaller biotech companies and by creating partnerships with various smaller biotech companies, a larger pharma can take advantage of the diversity of technologies that these small biotech companies are working in; they can take advantage of the creative environments that exist within these companies; they can harness all of that energy. Just as the biotech model is evolving away from creating a fully integrated pharmaceutical company, the pharma model is evolving away from creating these enormous R&D organizations; if we look at the performance over the last few years for the investment that’s been made, it’s pretty clear that that model isn’t as successful as it was years ago.

PE: What are some factors that result in VCs not being as willing to invest as they were in the past?

JP: I think FDA is overwhelmingly the concern right now. I don’t think a day goes by where I don’t hear or read something about how the FDA is negatively impacting the ability of the industry to be competitive in terms of developing and introducing new drugs. The climate has changed. Because of the risk-averseness at FDA, the lack of ability to accept innovation at FDA, the investor community—particularly the VC community—has been encouraging its members to obtain their approvals outside of the US, in Europe in particular. And that’s because the review process at the European Medicines Agency (EMA) is much more predictable and much more innovation-focused than the FDA is here.

If we look at what has happened with a number of drugs that have been reviewed by the FDA in the last year or two, in the obesity arena in particular and in diabetes drugs, the FDA has shown a real reluctance to approve new products and new technologies. So why invest in a process that’s unpredictable and has demonstrated that the ability to get all the way through the process to commercialization is pretty slim? That wasn’t the case years ago with FDA, especially when the Prescription Drug User Fee Act (PDUFA) came into play 15 years ago. There was a real desire on the part of the FDA to move products through the pipeline more efficiently, to take advantage of the user fees and the deadlines that were agreed upon. But now we’ve got an FDA that’s just mired in bureaucracy and risk-averseness.

Part of that is fear of making a mistake. We’ve got examples like Vioxx where, post-approval, there have been issues that have come up, and FDA is taken to task by Congress for having made a mistake. There’s a lack of understanding of the fact that there are risks associated with all products that are approved; from a media standpoint, from the Congress standpoint, from the public’s standpoint. So that all makes for a very risk-averse climate and VCs won’t invest in a process that isn’t predictable. That’s why we’re seeing a lot of VC investment moving more towards early-stage product development with an investment period of maybe three years. This way, they can be more focused on the part of the process that doesn’t involve FDA review, and can let pharma or other partners deal with the later stages of review at FDA.

I think FDA is beginning to appreciate the fact that this is an issue, and is beginning to talk more about the need to focus more on innovation. But making good on that is a long-term process, and it’s going to take years for it to happen.

PE: How do you see all of this panning out in the next five to ten years? Will M&As continue to spread, and will VCs come around if they see certain changes occurring within industry?

JP: I think pharma will continue to need to engage in M&A over the next five years. I think biotech is becoming more sophisticated in terms of its ability to rely on outside expertise and predictive tools.

Two weeks ago I talked to a VC firm that actually has an FDA expert within the firm, who now goes in and looks at all of the relationships that the biotech company might have had with the FDA before making a decision on investing. I think that’s good; I think it helps to focus in on the companies that are doing it right, and it helps to drive other companies to understand that they need to bring in the expertise to help them to create greater predictability for the investors.

But I think in the next five years, if we see an FDA that truly responds to this call that’s coming from the industry and from Congress to focus more on innovation, and we begin to see some results, then I don’t think there’s any doubt that we will see the VC community engaging in later-stage investing. But I don’t think that changes anything in terms of the need for Big Pharma to create more partnerships across the board with biotech companies. And I think we’ll continue to see that happening as there’s a need to fill pipelines and as the patents expire on products, and as we move more towards the implementation of the biosimilars legislation. VC funding and healthy, dynamic M&A deals do not have to be mutually exclusive.

On November 17, FDA’s Risk Communication Advisory Committee (RCAC) will convene to discuss the best ways to take a drug’s complex clinical data, and present it to doctors and patients in an understandable way. The stated goal is to improve healthcare decision-making by clinicians, patients and consumers.

At issue is the implementation of a drug facts box or table, which would appear in a drug’s promotional labeling and print advertising. Research shows that a drug facts box, or a “table quantifying [health] outcomes with and without a drug,” as described by Dartmouth Medical School profs Lisa Schwartz and Steven Woloshin, could do a better job presenting the benefits and risks of a particular medicine, which facilitates a more informed decision about treatment. It would also dramatically change the way drugs are currently promoted, at least in print. (For a facts box mock-up, click here)

Woloshin says he has not looked into broadcast media applications for the facts box, but suggests that certain warnings, such as approval on the basis of a surrogate outcome, or the main efficacy finding for a drug, could be easily inserted into broadcast spots. For broadcast, “we imagine the primary goal would be to point people to a drug [facts] box, either in print or online…we have not tested these ideas, but hope to in the future,” says Woloshin.

On facts boxes in print, however, Woloshin and his colleagues have conducted extensive research, and have published a substantial body of literature. In fact, three years ago, FDA’s RCAC – then chaired by Baruch Fischhoff, of Carnegie Mellon University – gave the facts box a unanimous recommendation. Speaking to PharmExec about the facts box, Fischhoff calls it “a sound design, both analytically and empirically…it follows the theories of risk communication, it has demonstrated efficacy in its field trials, and is clearly much better than what we have out now.”

So what’s the hold-up on implementation, you may be wondering. Unsubstantiated suspicions abound, and a request for comment from HHS – which received a mandate via the Patient Protection and Affordable Care Act (Section 3507) to review the evidence for or against a quantitative summary of a drug’s risk and benefit, “such as a table or drug facts box,” and to make a judgment – went unanswered. A report filed to Congress by HHS in March requested at least three more years for additional research.

“It’s crazy that people – doctors, patients, tax-payers – don’t have ready access to summaries of [a drug’s efficacy and risks] in a way that we’ve shown can help them make better decisions,” says Woloshin. “FDA is supposed to be interested in transparency, getting information out to people in the most transparent form; that’s exactly what the facts boxes are meant to do.” Asked about possible reasons for foot-dragging at HHS, Woloshin says he’s “completely baffled by the delay,” an opinion he made known in the editorial pages of the New York Times last July. Fischhoff agrees: “Given the amount of work that’s gone into the fact box and the evidence that supports it, it’s hard for me to believe that [alternate design studies conducted by HHS/FDA] would justify a delay of a couple of years.”

RCAC is unlikely to make any bold decisions on Thursday; the discussion is primarily geared toward whether or not substantial gaps exist in the literature around a standardized risk/benefit format, and if data exist to shed light on how to select and present information for clinicians, patients and consumers. Interested parties can sit in on the RCAC meeting remotely, here.

In an exhaustive review of the literature on using quantitative summaries for the presentation of drug benefit and risk information – published on August 15^th – FDA admits that “numeric presentation of risk/benefit information appears to have had a positive impact on several outcomes relative to non-numeric presentation,” (non-numeric presentation means using words like “often” or “rare,” in place of numeric statistics). But the report insists that important gaps exist in the literature, such as “insufficiently investigated actual behaviors” versus theoretical behaviors, and a “focus only on risk information rather than on both risk and benefit information.” The report also cites differences in “a person’s numeracy or literacy levels” as a point against standardized, quantitative summaries.

Note: Apologies for the lack of a facts box quiz, alluded to in PharmExec‘s weekly newsletter. The quiz unfortunately died from editorial and technical complications. -BC

According to eligibility requirements on the CMMI website, the advisors program is seeking professionals employed by a “public health or healthcare facility, institution or department,” including, but not limited to, “physicians, nurses, allied health professionals, instructors and non-clinicians (i.e. health care executives, practice managers) with experience in the healthcare field.” Management experience is considered an asset, and the selection process will consider an individual’s “career achievements”; “pre-existing skill set (and it’s relevance to transforming the healthcare delivery system for Medicare, Medicaid, and CHIP beneficiaries)”; “quality of their proposed innovation project in their home organization or area;” and “their organization’s explicit commitment to their work.”

The key areas of focus for innovation advisors include healthcare economics and finance, population health, system analysis and operations research. As many as 200 individuals will be selected between now and 2012, with the first group of advisors beginning a “six-month intensive orientation and applied research period” beginning this December. CMMI notes that advisors will not become government employees, although an advisor’s home organization will receive a stipend. Advisors will be expected to commit up to 10 hours a week, which includes a mix of on-site, in-person meetings, as well as ongoing meetings conducted remotely.

Given that any changes to the Medicare and Medicaid systems would directly impact pharmaceutical companies, it may be wise for the C-suite to consider participating; the deadline for applications is November 15^th.

Robert Epstein, chief clinical research and development officer at Medco, said too often pharmaceutical companies “show up in the middle of Phase III with a half-baked cake,” which inevitably raises questions. “What about sub-populations with side effects? What about an additional endpoint, an observational study or comparative information?” asked Epstein.

In response, panel moderator Richard Pasternak, an associate professor at Harvard Medical School and a former Merck VP, said “payers aren’t interested in early stage research, and pharma isn’t set up to listen to them.” Barry Gertz, SVP and head of clinical research and regulatory affairs at Merck, suggested that despite regulations and other challenges, “We have to force that dialogue to occur. The mechanisms haven’t evolved to include the needed communications, and the structure for payer/pharma communications.”

Epstein said R&D departments – not marketing departments – should be in direct contact with payers at the very earliest stages of development. Researchers, after all, are “more candid,” and they “ask the right questions.” Roger Longman, founder of Windhover Information and CEO at Real Endpoints, said Medco may be interested in early stage communications with pharmaceutical researchers, but “other payers aren’t, and R&D [researchers] aren’t.” R&D departments “are marketing-driven,” and health insurance payers have “very little incentive to dialogue with pharma early on,” said Longman. “Insurance companies wait and then say you don’t have the right data, we’re going to screw down the price, and government is banned from using cost effectiveness to determine how much it will pay” for a drug. Longman cited Italy as the “most aggressive” geography for value-based agreements involving payers in the drug development process. In Italy, “you have a drug, you bring it to a payer, an endpoint is identified, and if you meet the endpoint, you get paid,” he said.

Peter Pitts, president of the Center for Medicine in the Public Interest, wondered which R&D groups would be available for speaking with payers. “Are we talking about the Quintiles of the world? Who, inside pharmaceutical organizations, is left to think about clinical trial designs?” asked Pitts, somewhat rhetorically.

Regardless of what endpoints are pursued in clinical trials, Epstein said comparing a drug to placebo, as opposed to a comparable therapeutic product, “doesn’t work for us.” He cited a JAMA article published last May, finding that over “50% of all new drugs” approved by FDA come with comparative effectiveness data. The study also found that more than two-thirds of new molecular entities recently approved in therapeutic categories where alternative treatment options exist contain comparative effectiveness data.

The panel, titled “What is ‘Value’ and How Can it be Measured and Demonstrated in Therapeutic Innovations,” was part of a forum associated with the Galien Foundation’s Prix Galien ceremony, held last night in New York City. Prix Galien winners this year included Janssen’s (J&J) Stelara and Amgen’s Prolia, for best biotechnology products, and Pfizer’s Prevnar 13, for best medical agent.

As a member of a working group on the future of the U.S. science and technology research enterprise, which consults with the President’s Council of Advisers on Science and Technology (PCAST), you’ve participated in discussions with Congress and other high-level politicians on the role of government in supporting innovation in the biopharmaceutical industry. How can government help to facilitate job creation, and what barriers exist?

Making changes that encourage innovation are critical, not only for creating jobs but also for lowering healthcare costs, which is one the most serious threats to our economy and our competitiveness across the board, not just within our sector. The 20^th century was an American century in terms of innovation and leadership in the economy, and a large part of that was due to our leadership in science and technology innovation, from winning World War II and the Cold war, to the laser and the transistor, to the rise of the internet and the eradication of polio, to the decrease in death rates from heart disease, stoke, tuberculosis and HIV. All of those developments occurred during the second half of the 20^th century, and came from American innovations in science and technology. In the last five or 10 years, it has become very clear that we are dropping behind, competitively. We are going way down. For example, we used to be number one in R&D incentives offered to businesses among the 21 OECD countries that are offering such incentives. Today we’re number 17. That’s why some of the jobs are going overseas. I have a team that’s thinking about how to create jobs in France. Why? Because they offer a 45% R&D tax credit that is immediately reimbursable to development stage companies like [Synta].

What kinds of incentives should the government provide to stimulate job growth?

R&D tax credits, is one thing. What I want to emphasize is that this is important not just for job creation, but also for our economy overall. If we can’t get healthcare costs under control, then all of our businesses in this country are going to be at an increasing disadvantage relative to businesses in other countries, where they do have healthcare costs under control. We have $100 trillion of unfunded liabilities and an aging population, which is a double whammy. Innovation in medicine is a key ingredient in solving this problem. Just over 50% of all healthcare costs are related to hospital stay and services. Creating innovative drugs – a sector that represents only 10% of the total healthcare cost – can keep patients out of hospitals. Those drugs lower healthcare costs. I would argue that lowering healthcare costs is just as important as job creation, national security, and the overall health of the US population, in terms of competing successfully in the global economy.

There seems to be a disproportionate belief among the American public that drug spending accounts for a lot more than 10% of the total healthcare cost. Many industry critics and others argue that increasing generic utilization, and shortening product exclusivity periods are necessary reforms. What’s your response to that argument?

Every dollar spent on drugs lowers healthcare costs, depending on the disease, by anywhere from $2 to $7. There are a number of studies that have shown this. It’s different for each disease and drug, but you want to be very careful to avoid being penny wise and pound foolish. Imagine that you have a patient going in for kidney dialysis, the patient has to go in to the hospital three times a week or more, or has to stay in the ICU. Imagine the costs that are accruing to our system as a result of that patient, and then multiply that by the doubling in the number of patients that are going to require this type of care over the next few decades, not to mention other chronic diseases besides kidney disease, for example, the various complications from diabetes or Alzheimer’s disease. These are enormous burdens on our system. Take Alzheimer’s. As the percentage of elderly patients increases, and the time that people are living gets longer, the incidences and size of the Alzheimer’s patient population is increasing dramatically. Some very straightforward estimates show that the care required for Alzheimer’s patients in 2050 – a straightforward extrapolation from the size of the population and the incidence rates today, none of which are going to change dramatically – shows that Medicare and Medicaid will have to pay $800 billion a year [by 2050]. When you add in the other costs, it’s well over $1 trillion a year. That’s a major fraction of the government’s budget, for one disease. If you had one pill that could delay Alzheimer’s by even 5 years, the impact – which is fairly straightforward to calculate – would save close to half a trillion dollars in terms of costs that the government would have to pay. Then the question becomes, should we have $200 million of research into Alzheimer’s sponsored by the government, or $300 million? Now you’re talking penny wise, pound foolish. You’re talking about a burden of one trillion dollars to the economy. You multiply that by the burden of treating cancer, the burdens of treating kidney disease and other chronic conditions, and that’s a major threat to our economy and our competitiveness as a country, these looming healthcare costs.

How much has government R&D spend decreased?

We’ve gone from 2% of GDP invested in R&D, to 0.7%.

Why? Obviously the US is facing a significant budgetary deficit, but what are the reasons for this decline?

A lot of people in our generation don’t remember polio, for good reason. It’s gone. But if you think back 60 or 70 years ago, it was a fatal and debilitating condition with a very high cost burden to society. That was a very visible reminder to the public and to Congress of the benefits of R&D.  Tuberculosis almost disappeared in the 50s. When you got TB, and your lungs were going to cave in, you were told good luck and sent to a sanatorium for the final six months or a year of your life. In the mid-50s, isoniazid and a combo isoniazid and penicillin and PAS essentially wiped that out. It was no longer a death sentence. People got that, they saw what happened with polio and with TB. The foundation is people and knowledge. It’s education that generates good STEM talent – science, technology, engineering, mathematics – and investment in agencies like the NSF, NIH and DARPA, which led to these projects. It was the investment in R&D that led to the dominance of the US economy in the second half of the 20^th century.

Almost every form of government expenditure is on trial politically these days. Is there a way to frame this kind of investment that would hold up better with the American public?

You have to start by understanding the benefits of innovation to society, period. Innovation helps national security, health and jobs. Once you get that, then the question becomes, what should the federal government do to reduce the barriers to innovation, and increase the incentives for innovations? R&D incentives for companies are one example. Another example is regulatory and reimbursement reform. The FDA is regulating 25% of this nation’s economy, and you have several hundred people looking at medical products, that’s it. We’re funding this agency at a miniscule amount of the resources it needs to create rules that are consistent, clear, and based on the latest and strongest science. This is counterintuitive for some folks on the Republican side, who may say, “Well, let’s just eliminate all government agencies, that would be great.” That’s not actually the case. If it were up to me, I’d double the size of the FDA’s medical product review group. That would actually reduce the barriers and increase the incentives to innovation. With reimbursement, there should be policies at CMS to allow parallel reviews, so companies can better understand how to get reimbursed. If you go to an investor and say, we’re going to spend 10 years and a billion dollars creating a drug, but when it’s done, we have no idea if it will ever get paid for, what investor would give you money? It’s like a natural gas company saying it’s going to drill 50 wells, and it’s going to take 10 years and $1 billion, and when they find natural gas, some agency comes in and says you can’t sell it, you used the wrong drill. You need to go back again and use a different drill, sorry about those 10 years and billion dollars. It’s not that you want to eliminate these agencies, or that they’re doing a terrible job. There are people there that are national treasures at the FDA, that get flack from every side all the time, and they manage to keep their eyes on the ball, sticking to the data, sticking to the science, looking at benefit/risk as best they can in a difficult situation. But you have to have the resources.

Speaking of resources, you mentioned a decline in the number of US biotechnology companies. What can be done to reverse this trend?

The costs of developing a drug have gone up 1000% in the last 25 years. They’ve gone from $100 to $200 million to $1-$2 billion. The Tufts study cites it as $1.2 billion, but that’s a real underestimate of the true cost today. The true cost is closer to $4 billion. The costs have gone up by this enormous factor, but the rewards haven’t changed. You still have roughly the same patent life or protection once a drug gets developed, once the drug gets approved. It’s basic mathematics. If the risks have gone up and the costs have gone up, and the rewards are staying the same or going down, who’s going to invest in that business? You need to reduce the barriers and increase the rewards. Put in a10-year minimum market exclusivity for an innovative drug. If there’s a drug that comes out that could lower total healthcare costs, give it 10 years of market exclusivity. Why should venture capitalists be investing in a better way to buy pretzels online, or different ways to poke people online? Who cares? That does nothing for our economy. It creates a few jobs, but it does nothing from the more global picture of lowering healthcare costs and creating new jobs.

What about public/private partnerships? Are there any specific policy changes that could better facilitate those kinds of partnerships?

There are many concrete specific changes: Updates of the Bayle-Doyle amendment, policy on the NIH, NSF, policies for getting university technologies into the private sector even faster. What many other countries are doing are government-enabled venture partnership, where the government provides a financial kickstart to sectors that are of high strategic interest, by partnering with venture funds, and augmenting them on a 1-for-1 basis. Additionally, we need a flagship project, a flagship public/private partnership, like the Manhattan Project or the goal to land a man on the moon. We need something like that for our sector. The European Commission representing the EU created a 2 billion euro partnership between the EC and the European Federation of Pharmaceutical Industries and Associations, to fund innovation in precompetitive technologies. Precompetitive technologies lower the cost for everybody and increase the probability of success for everybody. Predictive models in medicine are an example of precompetitive technology. If you can determine if a molecule in preclinical development is going to cause kidney toxicity or not, you can decrease your failure rate by a very significant percentage. Decreasing your failure rate decreases your cost. If we had models that were even 80% predictive of cancer, we could cure cancer in the next 20-30 years. We don’t have those models. If we had more predictive models for Alzheimer’s, of course you could actually get a pill that could lower heathcare costs by half a trillion dollars over the next several decades. Precompetitive technologies are often too expensive for any one company to invest in by itself. What you need is a flagship project like the Manhattan Project, or like Europe has done with a $2 billion investment, to bring together companies, agencies like the FDA, NIH, and universities, around a common goal. Better models for Alzheimer’s, better models for cancer, better models to predict kidney toxicity. Some of these things can only be done as a partnership. For example, there is clinical trial data from individual companies that have sponsored individual clinical trials. Or individual oncology groups like ECOG or SWOG that have sponsored individual trials. Each of those data sets has very rich patterns that could be seen if you pooled them together. But who is going to pool them together, there’s no venue for pooling those data sets together. A public/private partnership, a flagship like the Manhattan Project around precompetitive tools and technologies would help the entire industry, but it has to be funded. Take the FDA Critical Path Initiative, which is designed to find ways that reduce the barriers and increase the incentives for new technology. The funding for the FDA Critical Path Initiative in ’08, ’09, and ’10, was $8 million, $16 million, and $18 million dollars, respectively. Compare that to the close to $3 billion that Europe has committed. How do we expect to be competitive?

The interview has been edited and condensed.

Getting FDA approval on a brand name for vandetanib, AstraZeneca’s very first orphan drug, isn’t the only challenge the company has faced during launch. The size of the patient population eligible for Caprelsa is decidedly small, but ultimately fuzzy. “We don’t really know how many patients there are at any given time,” says Eric Vogel, executive director of oncology, at AstraZeneca. “In some reports its 1,000 [in the US], and the FDA thinks it may be 2,000 to 2,500.” Compounding the difficulties presented by a tiny patient population, relatively speaking, is the fact that not all medullary thyroid cancer patients would benefit from Caprelsa; the drug is indicated only for patients whose cancer “has progressed to the point where surgery is no longer an option.”

Vogel says the company is “learning as we go” during the launch. “We believe that roughly half of the patient population will end up in the major treatment centers around the country, but that the other half may or may not continue to be followed by the community endocrinologist or medical oncologist,” says Vogel. Traditional market research hasn’t uncovered a network of physicians treating medullary thyroid cancer, since Caprelsa represents the first pharmaceutical treatment option for those patients, says Vogel. “There are some things that we can do to find physicians that look like they might be treating [medullary thyroid cancer], but it’s an inexact science at this point.”

AstraZeneca signed an exclusive distribution deal with Biologics, an oncology management company and specialty pharmacy, last April. Biologics also distributes AstraZeneca’s Arimidex, as well as Novartis’ Afinitor, Gleevec and Tasigna, Bayer/Onyx’s Nexavar, Celgene’s Revlimid, BMS/Otsuka’s Sprycel, Pfizer’s Stutent, Merck’s Zolinza, Roche/Genentech’s Xeloda and others, according to an “in stock” list on the company’s website. The decision to partner with Biologics for distribution had to do with the size of the patient population, and the amount of support that patients using Caprelsa would need, says Vogel. “We’re pleased with the relationship. [Biologics] spends 45 minutes, on average, with each patient, according to the reports we get from them,” Vogel says. Biologics, for its part, provided a team of 10 nurse liaisons tasked with educating physicians about the drug, and easing the administrative burden on the physician’s practice, Dan Duffy, executive VP and general manager, oncology pharmacy services group, told PharmExec.

In addition to Biologics’ nurse liaisons, AstraZeneca has deployed “regional scientific managers” – physician and/or nurse-facing individuals, to “communicate to our HCP audience about risks associated with Caprelsa, the REMS programs and all of the precautions, as well as any questions they might have around the efficacy or safety of the product,” says Vogel. The REMS program has helped AstraZeneca identify customers, since physicians have to become certified through REMS before prescribing the drug. “Down the road, we may broaden our reach out to community oncologists, those who we’re already calling on with our sales forces for Faslodex,” says Vogel.

The company hopes new indications will be forthcoming, and is currently looking to Europe for the next Caprelsa launch. Laura Woodin, senior manager, corporate affairs, said in an email that Caprelsa is being evaluated in “more than 40 early-stage studies” and various tumor types, including pancreatic, glioblastoma (brain), biliary tract (liver duct), as well as two other forms of thyroid cancer, papillary and follicular. “We’re trying to take our learnings from the US and apply those to other markets,” says Vogel. In terms of a possible launch in the EU, Vogel says the patient population size across Europe is roughly the same as the US patient size, but right now, “it’s not efficient to commercialize [Caprelsa] country by country.” “We will commercialize it country by country as we get new indications, but we have to look at it more broadly by much larger markets” for now, says Vogel.

Caprelsa is currently under review with the European Medicines Agency (EMA) and Health Canada, according to Woodin.