On a panel titled “Activist FDA: Transformation Agent,” Prevision Policy founder and former Pink Sheet editorial head Cole Werble relayed the tale of Acadia Pharmaceuticals, a San Diego-based company with a stage three compound (pimavanserin) targeting Parkinson’s disease-related psychosis.

A month ago, Acadia met with FDA to discuss the proper design of a new phase III trial intended to confirm the results of a previous, 17-month study that met its primary endpoints. A confirmation trial was needed, Acadia presumed, since the first phase III trial of pimavanserin, conducted in 2009 at half the dose of the successful trial, had failed. Acadia had already begun to enroll patients in the confirmation trial – which represented an $18 million commitment – when it met with FDA in April to get the agency’s blessing.

To Acadia’s surprise, FDA responded that the additional confirmation trial wouldn’t be necessary, based on the pivotal phase III trial already on the books, combined with supportive data from other studies on pimavanserin. As a result, Acadia scrapped plans to do another trial, and began preparing its NDA posthaste. But the company wasn’t hasty enough, and investors dialing in to a call about the FDA meeting balked at the company’s projected filing date – near the end of 2014. Why not file immediately, they wanted to know? Acadia executives’ refrain in response, was, “these things take time.” FDA had reversed the waiting game, making Acadia itself responsible for the delay in review and commercialization of a new product.

This is just one example, of course; it isn’t likely that a big pharma looking to introduce another DPP4 into the market for type 2 diabetes, for example, would be told not to worry about additional trials studying cardiovascular or pancreatic side effects. But the fact remains that FDA approved 39 NDAs in 2012 – the most since 1997 – and the agency launched yet another expedited regulatory pathway – breakthrough therapies – at the beginning of 2013. The breakthrough therapies designation is likely to shorten the timeline from discovery to commercial approval – for those drugs receiving the designation – to between three and five years, according to IMS estimates.

Rachel Sherman, associate director of medical policy and director of the Office of Medical Policy, CDER, FDA

The timeline from discovery to approval could be as short as 26 months, said Rachel Sherman, FDA’s associate director of medical policy at the Center for Drug Evaluation and Research (CDER). Sherman said her office had received – to date – 39 requests for breakthrough therapy status, of which 12 have been granted and 14 denied, with 11 pending and two withdrawn. She said the breakthrough therapies program is already “an enormous success.”

Joseph Herring, CEO at Covance, noted that pharmaceutical companies are often difficult to work with, from his perspective as the head of a CRO. “[Investigators] want a perfect trial that can’t be enrolled.” He wondered about the interplay companies have with FDA regarding trial design discussions. In response, Sherman advised more communication. “If what we say doesn’t make sense, ask us. Argue with us. We’re receptive to it.”

How does a company know whether it’s sufficiently engaged with FDA? “If your lead clinical person is on a first name basis with the [respective] lead reviewer at FDA, you’re in good shape,” said Sherman. “If you’re not, you’re not.” Sherman cited the Clinical Trials Transformation Initiative as another program aimed at “identifying and promoting practices that will increase the quality and efficiency of clinical trials.”

“The point of all our programs is better evidence generation…we lack evidence,” said Sherman. “The most expensive drug is the one given to the wrong patient, or given incorrectly.”

On the subject of biosimilar approvals, Sherman said FDA hasn’t received a single application yet, adding that the phrase “follow-on biologics” is dead. The requirements for biosimilars, according to Sherman, are that a biosimilar be “highly similar” to the original product, with “no clinically meaningful differences.” Sherman said that does not mean “interchangeability,” though, suggesting that a biosimilar could not be substituted for a brand biologic at the pharmacy, without specific doctor’s orders.

Comparing the current activist FDA with the activism the agency demonstrated during the HIV epidemic, Werble said that in addition to the breakthrough therapies designation, FDA has also launched the GAIN ACT, and its anti-infective exclusivity provision; has opened up FDA meetings to rare disease outside consultants, who advise companies on efficient FDA regulatory navigation; and has implemented PDUFA 5’s “patient-focused drug development meetings,” which solicit patient opinions around specific diseases.

Speaking on the “agency-wide impact of management attention and staff commitment” mustered during the HIV crisis 20 years ago, Werble said the pendulum has once again swung back toward FDA activism. “That commitment [to HIV] was infectious 20 years ago, and it’s occurring again,” said Werble. He also noted that a solid one-third of all drug applications submitted to FDA now come from small companies, a rejection of the thesis that only big pharma is properly equipped to navigate FDA’s regulatory structure.

The Rutgers Business School Annual Healthcare Symposium, convened on April 30, was presided over by Mahmud Hassan, director of the Blanche and Irwin Lerner Center of the Study of Pharmaceutical Management Issues, at Rutgers. John Castellani, president and CEO of PhRMA, and Seyed Mortazavi, president of IMS Health US operations, also gave presentations.

At the beginning of the Reboot Camp – held at New York City’s Alexandria Center on April 12 – Intouch Solutions’ CEO Faruk Capan declared the days of Don Draper effectively over. The route to patients’ hearts and minds isn’t Old Fashioned cocktails and intuition; it’s solutions based on patient, provider and payer needs, and making disparate data streams pool around brand objectives.

Katherine Patterson, global marketing communications manager, growth initiatives, GE Healthcare

Katherine Patterson, global marketing communications manager, growth initiatives, at GE Healthcare, gave the keynote address, which focused on clarity of mission in marketing execution, and the importance of marrying science and emotion for consumers. Marketers too obsessed with social media, or the newest digital platform, might impress only themselves. “It’s like peeing down your leg…hot to you, but nobody else,” said Patterson. In Japan, for example, GE Healthcare’s medical device customers “are moving back toward print” as a preferred marketing channel, although growth markets “want digital,” and they want it on their mobile devices, she said.

Citing Eric Topol, currently director of the Scripps Translational Science Institute, Ben Chodor, CEO at Happtique, said we’re not too far away from a time when physicians prescribe more apps than pharmaceutical drugs. Chodor is betting on Topol’s prediction; Happtique, a mobile health application store, will “curate” mobile apps for docs through a private, customized dashboard of Happtique-certified health apps. The company’s patent-pending software would allow physicians to electronically prescribe apps to patients. Chodor says he’s lobbying the SEC to reimburse medical apps, noting that some private plans already do.

Happtique doesn’t make apps itself, but Chodor appeared before the US House of Representatives’ Energy and Commerce Subcommittee on Communications and Technology in March to support FDA’s regulation and definition of mobile medical apps. “It’s relatively simple to take an app through FDA” [for a medical device designation], and it only costs between $10,000 and $20,000, he said, noting that 75 mobile devices/apps have already been approved. Chodor said the Affordable Care Act’s medical device excise tax – “the absolute worst tax ever” – should not be levied on smartphones or apps.

Asaf Evenhaim, co-founder and CEO of Crossix, reminded Reboot Camp attendees about the unfathomable amount of individual consumer or patient data that exists for marketers, while insisting on the importance of privacy and HIPAA regulations. His company collects this data to create “propensity scores,” which serve as the basis for highly specific predictive models. The models can then be used to predict healthcare purchase decisions.

Where does all that data come from? Some of it is volunteered, some is collected invisibly through cookies, Facebook and other online aggregators, and some of it – but not Crossix’s data – is gleaned from trolling social media channels and blogs. Passive data collection, said Intouch Solutions’ senior vice president David Windhausen, is revolutionizing pharma marketing and health itself. Windhausen said he looks at his Nike FuelBand in the evening, and if he hasn’t been active enough, it’s time to exercise.

Windhausen’s talk lovingly described the Sanofi mobile app “GoMeals,” an app for diabetics specifically, but also for anyone who wants on-the-go nutritional facts about nearby restaurants (among other things). An attendee representing Sanofi – which is an Intouch client – let slip that GoMeals, and possibly the iBGStar glucose meter, would start to integrate passive data from wearable tracker gadgets like Fitbit or the FuelBand as early as this year.

Capping off the Reboot meeting was Augustin Fou, founder and chief digital strategist, Marketing Science Consulting Group. Fou emphasized the importance of recognizing how patients’ habits, expectations, and actions – in the context of healthcare – have changed, and how they continue to change. He referenced a Capgemini Consulting report on “digital maturity” that placed pharma at the very bottom of the list.

Despite regulatory hurdles and because of an explosion in mobile technology, data capture, and the influence patient’s have on the delivery of healthcare, pharma marketers could use a reboot. But they’ll need to back-up some of the dusty old tropes of yesteryear, even those that precede Don Draper. As GE Healthcare’s Patterson noted, Aristotelian rhetoric, comprised of ethos, pathos and logos – in equal measure – works as well in a sales detail as it did in symposia. The occasional Old Fashioned might be okay, too.

It’s no secret that the pharmaceutical industry faces significant challenges. In his opening remarks as emcee of this year’s NYPF General Assembly, BIO president and CEO James Greenwood didn’t shy away from some of the starker realities, like the fact that annual venture capital funding for biotech hit an all time low this year, at $2.9 billion as of early November, compared with nearly double that amount in 2007.

The dream of “going public” as a start-up biotech is more or less a pipedream for most organizations these days; while capital raised from an IPO has slowly crept back up from almost nothing in 2008 to around $13 billion in 2011, the number of deals done hasn’t kept pace. Roughly 10 deals were done in 2011, according to Greenwood’s slides, compared with nearly 30 deals and $28 billion in capital raised through IPOs in 2004. FDA approvals are up, relatively speaking, but VCs once active in the biopharmaceutical space are now taking their dollars elsewhere, to industries with clear exits on investment and shorter periods to payoff.

In what appears to be a show of solidarity, however, companies are combating external market forces by working together. Greenwood cited a collaboration between Pfizer, Lilly and Merck to create a not-for-profit cancer research partnership, which pools resources to bring down the costs of developing new treatments.

Part of this collaboration, the Asian Cancer Research Group, is tasked with creating “one of the most extensive pharmacogenomics cancer databases known to date…composed of data from approximately 2,000 tissue samples from patients with lung and gastric cancer,” that will be made publically available to researchers.

But emerging markets represent more than an opportunity for growth, balanced against stagnant Western markets. People living in these geographies are “facing problems we don’t fully comprehend,” noted Tadataka Yamada, EVP, board member, and chief medical and scientific officer at Takeda Pharmaceuticals. “Eight million children” – three billion in India alone – “under the age of five die every year from diseases that could be treated,” said Yamada. “We must become a partner in finding solutions to these countries’ biggest problems.” Yamada said innovation comes in two forms: evolutionary innovation and revolutionary innovation. The latter is most desirable, as it represents fundamental change and progress.

But what kind of environment is needed to facilitate this kind of innovation? One that doesn’t rely on peer review, for starters, said Yamada. “Innovators have no peers.” In addition, companies need to facilitate an environment that’s willing to “challenge dogma, to fail and to fail often…success is built on the backs of failure.” Reflecting on his time with the Bill & Melinda Gates Foundation, and emphasizing the importance of collaboration among industry and other groups, Yamada offered an African proverb: “If you want to walk fast, walk alone. If you want to walk far, walk together.”

Alan Paau, vice provost, president of the Cornell Research Foundation and executive director at the Cornell Center for Technology Enterprise and Commercialization, acknowledged the importance of working with industry to translate academic research into new treatments, but said companies should keep things simple. “Universities are not your competitors…you don’t need a six-figure salaried lawyer to write a contract with a university,” said Paau. Companies interested in partnering with academic institutions need to understand the two basic tenets of the university with respect to IP: “If we create it or invent it, we own it,” and secondly, “use it or lose it.”

Bringing things back to a local context, Ann Li, EVP, business development for the New York City Economic Development Corporation, underscored the importance of the biopharmaceutical industry as an engine for economic growth in New York, adding that New York City is second only to Boston in the amount of grant money received from NIH. Li provided several examples of municipal investment – including the Alexandria Center, on the East River, which, when completed, will house 1.1 million square feet of laboratory and office space; BioBAT, a commercial life science research park in Brooklyn’s Sunset Park neighborhood, which will provide over 500,000 square feet of lab and office space when completed; the New York Genome Center, an organization designed to facilitate resource sharing in genomics and bioinformatics, of which nine academic medical centers in New York have already joined; and a series of Small Business Innovative Research (SBIR) workshops aimed at helping NYC-based biotechs get access to over $2 billion in federal SBIR funding each year.

Greg Wiederrecht, VP and head of external scientific affairs, worldwide licensing and acquisitions at Merck, wrapped up the speakers portion of the General Assembly, noting that 55% of Merck’s $49 billion in human health revenue for 2011 came from licensed products and patents. While Merck continues to invest in internal research – to the tune of $8.5 billion a year – the company still relies on partnerships to bring new drugs to market. “More than one third of our current pipeline is licensed in,” said Widerrecht. In addition to direct partnerships and licensing deals, Merck also funds the California Institute for Biomedical Research, or Calibr, a non-profit led by Peter Schultz, formerly the director of the Genomics Institute of the Novartis Research Foundation. Calibr is funded “mostly by Merck,” which has earmarked $92 million for the cause, over the next few years, said Widerrecht.

Despite the fact that VCs “aren’t so venturesome anymore,” as Widerrecht put it, when it comes to biotech and pharmaceutical drug development, there is reason to believe that collaboration is on the rise, as industry takes stock of its predicament and concludes that together we stand, divided we fall.

How can the emerging field of data science help to fruitfully translate research and discovery into successful drug development? Academics and pharmaceutical executives at Mount Sinai’s School of Medicine discussed ways to build a bridge across the valley of death, and the growing importance of data across all business areas.

Academic institutions are good at identifying and planting seeds with the potential to flower, eventually, into life-saving medicines and devices. The National Institutes of Health, as a primary source of the fertilizer needed to germinate these seeds, has helped enable big pharma to focus on what it does best: middle and late-stage drug development and commercialization.

The path from discovery to product development, however, often detours into a “valley of death,” where academic research and early-stage clinical programs languish in the shadow of risk. Some academic institutions are addressing this problem by “building the infrastructure necessary to better demonstrate” the potential value of an early stage program, said Uwe Schoenbeck, chief scientific officer for external R&D innovation at Pfizer. Schoenbeck said Pfizer’s Centers for Therapeutic Innovation (CTI) is finding ways to work together with academic investigators to achieve better results.

Asked about the most frustrating aspect of collaborating with academic organizations, John Sninsky, VP, discovery research at Celera, a molecular diagnostics firm, said that academics can sometimes “overestimate the value of what has been done, in the context of what still needs to be done” to bring a drug or device to market. Noting that “IP is central to our existence,” Paul Stoffels, worldwide chairman of J&J’s Janssen Pharmaceuticals division, said, “If we’re spending between one and four billion dollars [to develop a drug], IP must be protected.” IP rights don’t come cheap, of course. In the antibody space specifically, Stoffels said “the cost of goods is becoming unbearable” when royalties start stacking up. Nowadays, companies pay 15% or more in royalties on the sales of most new drugs, said Stoffels.

Muzammil Mansuri, SVP, Gilead Pharmaceuticals, noted that a lack of exit options for venture capitalists (VCs) represents a key dilemma to financing early stage development programs. “Conditional exits mean less money up front,” said Mansuri. Pharma, VCs and academia “need to take the risk together,” he said.

In his keynote speech at Mount Sinai’s SinaInnovations conference this morning, Jeffrey Hammerbacher, formerly head of Facebook’s data team and co-founder of Cloudera, an open-source software firm, said healthcare is witnessing a “manifest destiny for data,” which will expand not from sea to shining sea, but from “atom to shining bit.” Ever-growing data sets and analytics are coming, so companies can either “ride the wave or complain about it, and get washed up.”

Hammerbacher, who recently joined Mount Sinai’s School of Medicine as an assistant professor, also stressed the importance of failure, a sentiment echoed later on by Stoffels. To illustrate his point, Hammerbacher referred to the Kremer prize in the UK, which offered a cash prize to the first engineer capable of designing an airplane powered by a single human being. Many engineering firms spent large sums of money to design and develop planes that, when tested for the prize, crashed into pieces. The engineer who finally won the contest, 18 years after it was first announced, won by taking a different approach to the problem, Hammerbacher said. “His approach was to design a plane that could be rebuilt quickly after it crashed, so that he could try out new ideas faster.” After failing in the initial tests, the engineer was able to quickly reassembled his plane, make modifications, and try again until he won the contest. “Building a harness for innovation, in order to fail quickly and try again,” is critical, said Hammerbacher.

The need for transparency and trust in producing and sharing data, whether it’s for licensing deals or regulatory approval, also necessitates a willingness to fail, said Stoffels. Pharmaceutical companies should “create an environment where [scientists and researchers] can fail, and leadership stands up for them.” If people lose their jobs every time they fail, it creates a strong incentive to fudge the data, which is bad for everyone.

The three-day SinaInnovations conference was held at Mount Sinai’s School of Medicine in New York City.

Amidst jokes about the red tape constraining pharmaceutical marketing efforts in online social platforms were insights into where the industry should move to better incorporate social media, mobile, and digital content into marketing plans.

Kerri Sparling, a type I diabetes patient and avid blogger stressed the importance of using tactful, personable communication to influential ePatients when canvassing them to write and advocate new therapies, as well as to address issues pertinent to a company’s agenda. Her ePatient manifesto also drew upon the insight that pharma companies should focus less on creating online communities themselves, but instead should join existing, neutral platforms that promote honest, healthy discussion, as opposed to excessive, disjointed efforts that usually result in lax participation,  tepid dialogue, and an eventual decline into one more digital desert.

An informed panel of physicians gave their often convergent points of view on how they use mobile and other technologies in making decisions in prescribing medicine. One of the common opinions expressed was that although it is good to have access to drug information on a mobile platform (not only for the physician’s reference but for the patient’s as well), the physicians preferred face-to-face interaction with pharmaceutical reps so that they could engage and ask questions directly, and to simply enjoy the human element. This preference jibes with a recent report suggesting similar physician preferences.

One of the conference’s keynote speakers, Sinan Aral, a Professor of Informatics, Operations & Management Sciences at NYU’s Stern Business School, spoke on what makes online content viral; using social media to change behavior; and what to make of the huge quantity of data that social media platforms are generating. He stressed the importance of the development and use of apps such as pregnancy tracking and pill reminders as a way to effectively cull data for marketing and research purposes. In this context, Aral also referenced the Quantified Self movement and the enormous amount of data this movement represents, as a growing number of people begin to measure different aspects of themselves, using trackers and mobile devices in an effort to gain further understanding of the world within the body, and what such self-studies suggest about the world outside.

These are just a few examples of some of the pockets of wisdom embedded at Digital Pharma East. Let us know if you attended the conference and if so, what were your takeaways?

Successfully commercializing a proprietary drug in China can be a Kafkaesque affair. The all-important hospital listing, a prerequisite to sales detailing, in turn requires first a national price from the central government, followed by an acceptance onto the tender in each province where the drug will sold. Before the product can be listed at a given hospital – which requires a committee meeting – it must first get on the tender in the province where the hospital is located.

“After SFDA approval, it takes about one and a half to two years to really get to a point where you are 80% commercial in the country,” says Blobel. “That’s a big difference” from the US, for example, where the PDUFA date is a pretty reliable marker for anticipating commercialization of a new drug – assuming the product in question receives approval.

The second major challenge, according to Blobel, is that drug patents and IP don’t prevent local generics from emerging. “In China, [IP] doesn’t do anything to keep competitors away.” On the flip side, though, IP expiries don’t necessarily lead to a sharp patent cliff. “You aren’t depending on the protection from IP, so the life cycle continues growing,” says Blobel, adding that SciClone grew revenues faster for Zadaxin (thymalfasin), a treatment for hepatitis B and C, liver cancer and other cancers, and as a vaccine adjuvant, after the patent expired.

IP is beneficial in China, however, because it allows a company to fetch a better reimbursement price. “If you are the originator and have IP, it allows you – for a long time, even after the patents expire – to enjoy preferential pricing,” says Blobel. Measured by revenue, Zadaxin is one of the largest imported products in China, earning roughly $100 million in 2011, and $30.4 million in 2Q 2012, according to company reports. Although Zadaxin is approved in 30 countries, 97% of sales come from China, where the product was first approved in 1996. The product is listed on the Reimbursement Drug List – which is distinct from the Essential Drug List – and receives government reimbursement as a result. Last month, SciClone announced a government-mandated 18% cut to Zadaxin’s retail price, but the company says the ultimate impact of the price cut will amount to roughly 5%, as SciClone’s importation and distribution network will shoulder the majority of the percentage decrease.

SciClone’s sales force numbers around 850. Sanofi, on the other hand, employs multiple thousands of sales reps in China. So why does it make sense for Sanofi to pay SciClone to market Depakine, a broad-spectrum anticonvulsant? “Sanofi focuses its four or five thousand reps on Plavix and Lantus,” says Blobel. “When they were promoting Depakine, they grew it bys eight or nine percent a year, topline. Since we took over in 2008, we have grown the brand by 30% every year.” Blobel says one of the reasons SciClone is able to be more effective is due to the company’s focus on fewer products. “It’s very difficult to focus an organization on 10 products and get the same power behind them,” says Blobel. “At SciClone, the business unit that handles Depakine, that’s the prime product they’re selling. For Sanofi, it would have been an also-ran. That’s the key difference.” Blobel says another important element of professional promotion in China is an expertise in the hospital system, and its myriad departments. “If you want to sell Depakine as an anti0epilepsy drug, you need to go to the people who are treating this. For bipolar disorder, it’s another department. Focusing [reps] on specific departments within the hospital” is crucial to generating new sales, says Blobel.

Like several companies operating in China, SciClone is currently under investigation by the SEC and the DOJ for potential violations of the Foreign Corrupt Practices Act (FCPA). Last November, the company hired a VP of compliance – Min Yin – based in Shanghai, and has conducted it’s own investigation to determine what practices were violative, and what needed to change. Based on the internal investigation, Blobel says the problem boils down to three issues.

First, Chinese physicians visiting the US for medical meetings like ASCO took side trips on the way home, stopping over in Disneyland, for example, which is “not okay,” says Blobel. Secondly, the policies and training put in place by the company were not intensive or explicit enough, admits Blobel. Lastly, the finance team in China was “too independent and was run on too long of a leash.” Now, the financial team reports directly to the US-based CFO, and new training programs and other compliance practices have been put into place, and shared with the SEC and DOJ. The SEC investigation was launched in August 2010, and Blobel is hopeful – based on guidance from his legal representation – that “maybe later this year, or maybe in Q1 2013” the investigation will be concluded.

One of the particular challenges with respect to the FCPA, according to Blobel, is that “in the definition of the SEC and the DOJ, every doctor in China is a government official,” since just about every hospital has at least some equity participation from a municipal or provincial government entity. “In the eyes of the SEC, since every doctor is a government official, if you give them four mooncakes in a year, that’s already too many,” says Blobel.

On the question of whether China’s Essential Drugs List (EDL) will be expanded to include specialty drugs, especially cancer drugs, Blobel says its likely to happen late this year or early next year. But the big question, according to Blobel, is what the government will do to ensure acceptable quality. Since the prices on the EDL are so low, manufacturers can feel forced to take shortcuts. “With these rock bottom prices, the government pushes too aggressively, which causes some companies and many local manufacturers to cut corners,” which is unfortunate, says Blobel.

While health insurance is expanding to include much of the country, it’s mostly at a low level – around 200 renminbi per person, per year – at least relatively speaking. “A consultation at a university hospital might cost only two or three renminbi, so in this context, 200 is a pretty decent amount,” says Blobel. “But most originator drugs, including Zadaxin, an injection might cost five or six hundred renminbi, so two hundred doesn’t last very long.”

Blobel says that China’s economy is likely to change so that more and more people will be able to afford innovative medicines, but that change will take time. “The government realizes, and most economists agree, that the Chinese economy needs to be switched from an exporter model to a more consumer-driven model. The people have the money, they have the savings, but they will only use it to consume more if two fundamental concerns are solved: health insurance, and a pension plan, or what happens when they grow old.”

At a meeting hosted by The European Institute on Tuesday morning, Dr. Elias Zerhouni, Sanofi’s president of global research and development, said that biological complexity is a mandate for collaboration. In the 1970s, he said, the approach to disease and treatment was based on identifying a magic bullet. Science and biological systems were viewed as mechanistic; one intervention equals one result, which will work for everyone.

This approach “is no longer tenable…there is not a single institution, country, government or organization” able to solve the problem of biological complexity. And if you accept that, “you have to use open innovation,” said Zerhouni. “Innovation is a team sport, not something that can be done in isolation,” and this has been demonstrated, for example, by the “fundamental gap” or failure rate associated with predicting a drug’s efficacy or safety in humans based on its efficacy or safety in mouse models.

Zerhouni said that fundamental discovery is an individual endeavor, but after that, it takes a team. “What is broken right now is not process alone, it’s also fundamental gaps in our understanding of human disease.” Zerhouni’s proposal? “If I had one innovation to promote, it’s the ‘phase zero’ trial concept. In other words, bring together patient groups, scientists, academics, industrialists and so on, to do in the pre-competitive space what I call verifiable insight selection. When someone has an insight, how do they verify it, as early as possible, with creative methodologies, which are here, but which aren’t being used in humans,” said Zerhouni. “We have a huge lack of connectivity. What ails us in translation is the lack of participation of patients who are affected by chronic diseases in clinical trials.”

FDA’s Dr. Vicki Seyfert-Margolis, senior advisor for science and innovation, office of the chief scientist, said one of the things she hears in discussions with scientific reviewers at FDA is that, for many conditions, “the science isn’t there yet, the diseases aren’t well understood.” One of the reasons for this conundrum is that “we aren’t capitalizing on the knowledge we already have…FDA has a pre-market data asset. What can we do with it? What can reviewers offer to industry in terms of identifying gaps?” Seyfert-Margolis stressed the fact that she promotes collaboration between the pharmaceutical industry and FDA, and called for a clearly defined, national strategy for technology investment to address the many disconnects between patients, physicians, government, payers and other actors within the healthcare ecosystem.

Internally at FDA, Seyfert-Margolis has helped to develop and implement software – called “scientific enclaves” – for data sharing with other government agencies. A pilot program launched in September 2011 is being expanded this year to “communicate collaboratively within and outside the FDA,” including communication with the President’s Council of Advisors on Science and Technology (PCAST) and the CDC.

On intellectual property collaboration, Robert Wells, head, biotechnology unit, directorate science and technology at the Organization for Economic Cooperation and Development (OECD), said the traditional “own and protect” approach to IP needs to be changed to an “own and share” model, especially in the pre-clinical stages. He cited synthetic biology as an example of a field that has “come of age with online social networks” and collaboration online, and the David H. Koch Institute for Integrative Cancer Research as an example of collaboration, where biologists and engineers sit on the bench together.

On the merits of preventative collaboration, Sanofi CEO Chris Viehbacher cited the Asheville Project in the US, “where if you can actually intervene on things like type 2 diabetes and get people to goal, you can drop the cost of a person with type 2 diabetes by 40%, and maintain that over five years.”

Collaboration may indeed be the solution to many of the problems industry faces, but as Zerhouni pointed out, rational decisions about investment, risk or health interventions at the individual level are often irrational in aggregate; consider the political debate around the budget in Washington DC, as an example. For collaboration to work, organizations and governments have to go all in from the beginning, together.

John Lechleiter

Following his keynote address last week at the Financial Times US Healthcare and Life Sciences Conference in New York, Eli Lilly CEO John Lechleiter huddled into a corridor to speak with PharmExec about his agenda as incoming chairman of PhRMA, and how to fix innovation.

Ben Comer: Will PhRMA endorse a presidential candidate?

John Lechleiter: It’s not been our policy to endorse political parties. We support individual candidates who support our positions. We’ve been clear about what we think the important policies and legislation  are: those that at enable us to do the work of medical innovation, to make our products accessible and affordable for the people who need them, and that promote a balance between incentivizing new effective medicines and ensuring safety, which is very very important. I think in recent years you’ve seen evidence that we’re able and willing to work with people on both sides of the aisle to help achieve those ends.

The US leads the world in biomedical innovation, and we like to think we’re among the first to benefit from that innovation as well. That’s really at the heart of what we aim to do to keep this industry strong. And a strong industry will also control the rising costs of healthcare. We know that if medicines are  properly used, they will offset or eliminate other cost burdens; at  10 cents on the dollar, which is what medicines comprise as a percentage of total healthcare [costs], these are a great bargain. We want to make sure that the ecosystem that supports medical innovation is not undermined by wrong-headed policies.

BC: Do you have a wish list of changes to the health reform bill?

JL: I think the major thrust of our activity subsequent to the passage of the Affordable Care Act in March 2010  has been to call for the repeal of the Medicare spending advisory board, IPAB. We’re not alone. As laudable as the  objective of controlling costs might be, we believe it’s a system that is just not going to work. It’s not going to serve the interest of patients; it’s certainly not going to accelerate progress in medical innovation.

BC: Polls show the American public looks at this question and says, well, price controls on drugs is a great idea.

JL: There is a tendency to look at price controls or controlling input cost as some sort of a solution.  But every time we try that experiment it backfires; we’ve seen that at the state level. The mirror image of that, on the positive side, is Medicare Part D. This is a program where the discounts that the system reflects in cost savings are negotiated between third party payers and the pharmaceutical company; we compete to get on Humana’s or UnitedHealth’s Part D formularies.  The estimated costs of Part D over this 10 year period has dropped by $40 billion because of this market-driven approach, which also means  that more and more medicines are available as generics.  Access thus comes at much lower cost.  Our conclusion?  The market works.  At the same time, I think we have to adopt a mindset that says while we do want people to  access our medicines, no one should  stand between them and their doctor on a decision about what’s the best medicine. Again, our industry role in Part D scores high because  seniors in most Part D plans pretty much have access to the full formulary.

BC: What is the industry contribution to addressing the debt crisis in Europe?

JL: We’re paying a certain price already, with challenges we have on receivables in certain countries, on arbitrary price cuts and a more stringent application of cross-border therapeutic reference pricing.  Germany has  a new system in place for a little more than a year  that we believe works against innovation by setting very stringent access controls for new medicines, in some cases comparing new medicines to very old and largely antiquated off patent drugs. This does nothing to reward innovation. Despite that, given the chance, we can demonstrate that the new medicines that we’re producing do add value, and save money in the long term. The evidence is there but it is not always reflected or accepted in the systems of health technology assessment adopted by many European countries, led by Germany and the UK.  The UK is rethinking its system, and we’re going to have to look at that very carefully.  The goal is to work diligently with the NHS to make sure  the UK remains a place, as it has been, that rewards innovation.  It’s in the interest of all parties to continue to foster a viable R&D industry in the country.

BC: In your keynote, you spoke about the importance of the long term, and taking the long view as a prerequisite to innovation. Are there any ways that investors or other stakeholders might be persuaded to take a longer view, and are there any emerging financial tools or tax restructurings that could be brought to bear on that?

JL: That’s a good question. Certainly we’ve argued, when we get back to this notion of innovation as an ecosystem, that tax policy is very important. Domains for establishing tax liability is a key concern, as is making the US R&D tax credit permanent.  Right now, unless it’s reauthorized later this year by Congress, the credit will  expire. Other countries have permanent and frankly more robust R&D tax credit systems, so that’s one thing we need to look at. As far as  other structural ways of incentivizing innovation, I think at the end of the day the biggest incentive for any investor, whether it’s a venture capitalist or whether it’s a person deciding whether or not to buy Lilly stock, is a level of confidence that new medicines can be taken through a clear and well-defined pathway, with the prospect at the end – if it’s successful – of being rewarded by gaining access to patients and being able to price the product at a level commensurate with its value. That is the number one incentive for anybody wanting to invest in this area, versus investing in automobiles or steel or Facebook. Capital is scare and investors do have a choice. So while I think the tax structure is important – we like other industries  argue for a territorially-based approach – I don’t think that’s decisive in our case. It has to be evaluated in terms of the broader investment environment.

BC: Is there one overriding action that could be done to fix the innovation problem?

JL: There is no magic bullet. We’ve talked about IP  protection: we should have longer data exclusivity guarantees and better enforcement of global standards in other countries.  We need regulatory systems that are timely, consistent, predictable, and scientifically based. Opportunity for access and market-based pricing are key incentives as well. There are other things in the constellation:  immigration reform is one.  It’s hard enough for us to hire the best scientists, who may happen to be foreign born and who went to US universities; but then we have to fight to keep them here. Why do we want them to go back to China and compete against us? Or the K-to-12 education system in this country; if it doesn’t improve in science and math, it’s going to undermine our competitiveness even further. There are primary elements and secondary elements, but I think patent data protection, regulation, market access and market-based pricing are probably, from a policy domain, the areas that represent the biggest levers, where we will need to continue to do the most work.

We see some progress in Japan, the second biggest drug market in the world.  It recently ended its traditional approach of cutting prices every two years for new innovative products. So now we have the hope that there will be greater price stability in Japan for new patented products as they’re introduced, which is a tremendous incentive for us to invest more there. The government  also recognizes that  a lot of medicines approved outside of Japan have never been approved in Japan, so they want to close that drug lag. Specifically, they’ve said their regulatory system needs to become timelier, consistent, predictable, and science based. Dr. Hondo, the official  who runs Japan’s registration authority,  has hired more reviewers, review times are now more predictable, faster, more thorough, better communication with the companies.  This is real progress.  What’s happened as a result is that Japan is getting more medicines in a time frame that’s more consistent with the rest of the world.  The lesson is what  happens when you look at these levers I’m talking about, and make the changes required. You see more clinical trials taking place  in Japan and more new drugs are being approved, many of which are already on the market elsewhere. So reforms can  work.

BC: On Lilly. Do you have any thoughts on research work with academic institutions in terms of the value of those relationships?

JL: The traditional model of academic industry collaboration is evolving and that’s a good thing. Companies and academic institutions are taking different approaches. I think we have to recognize that t academic institutions have different cultures, and different approaches that they want to pursue consistent with their own mission.  This is a refreshing contrast from the  traditional quid pro quo:  here’s a certain amount of money, you do a certain amount of work, and we’ll see if we like what comes out or not. Through our open innovation platform, Lilly is partnering with over 200 universities, research institutes and biotechs around the world, to open our laboratories up as a way of testing molecules that these institutions synthesized or developed. A range of screens provide confidential data t that remains the intellectual property of the submitter. What we ask for is the first right to negotiate a deal, and we’ve struck several of these already, so this is one way that we are establishing a fairly broad connection with academic labs around the world. Other companies have chosen to do broader and higher-dollar cost partnerships.  Likewise, I think the tightening of funding at the NIH has caused academic institutions to think more positively about the merits of doing things with us, in  new ways.

BC: With respect to outsourcing, what are the core functions that shouldn’t be outsourced, if any?

JL: At Lilly, what’s most important is to maintain a strong in-house research enterprise.  Even if we partner and collaborate with universities or other research partners around the world, we must maintain a critical mass of world class scientists who are really expert in the therapeutic areas we intend to focus on. In development, we’ve shown in the last decade that we can bring partners in to many different parts of the cycle. Again, I think we aim to retain a core base of functionality where, beyond a given project, we will understand not only how the processes works – this is that embedded knowledge that is so important in this industry – but also to understand how we can improve on that and really drive improvement over time.

BC: What’s Lilly’s most exciting product stream? Is there a transformative therapeutic target for the company?

JL: The key therapeutic areas of focus remain neuroscience, diabetes and cancer. We also have a very promising program in autoimmune disease, and a presence still in bone disorders and bone and muscular/skeletal disease. I think we’re very competitive across a whole number of different kinds of targets, and today we have twelve molecules in phase 3 that are good representatives of all of these therapeutic areas, and 11 of those were discovered in our laboratories. That’s an indication of  what we think is a new upsurge in productivity.

Clayton Christensen

A keynote speaker at the 9^thAnnual SaS Health Care & Life Sciences Executive Conference on May 10, ‘disruptive’ author of The Innovator’s Dilemma and Harvard business professor Clayton Christensen sat down with PharmExec to discuss the future of the pharmaceutical industry, and what Mitt Romney could bring to the White House.

Ben Comer: Like tech companies a decade ago, many pharmaceutical companies are now outsourcing more and more of their core competencies in the name of efficiency, often short-term efficiency. Do they risk losing their core in the process?

Clayton Christensen: We absolutely worry that that’s exactly what is happening. I wrote a book called The Innovator’s Prescription, about the future of healthcare, and chapter nine is our view of where the pharmaceutical industry is headed. But the genesis is that, when we thought that diseases were defined by their symptoms rather than their causes, there were big blockbusters out there that were very attractive for [treatment]. And now we realize that a disease should not be defined by the symptom, but rather by the cause. It used to be that the FDA clinical trials process was like a final exam. If 30 to 35 percent of the patients responded to a drug, it was judged as a passing grade. And if your percentage was less than that, then you failed the test. But now we realize that if only 20 percent of the patients responded, then there must be something different about those 20 percent. They must have a different disease than all the rest. Rather than just project it, now we understand that managing clinical trials is an indispensable element of drug discovery. And so if you outsource that, then you’re outsourcing the activities that in the future will be the critical capabilities.

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

CC: Rarely is the development or the absence of a product the problem in a company. Almost all companies are awash in ideas for new products. What they don’t do – and they could but they choose not to – is to create new business models that are tailor-made to the characteristics of the new product. You come up with this great idea, and you can’t do anything with it unless you get funded. To get funded, you have to, little by little, morph and shape and modify your business plan so that it fits the current business model. If it doesn’t fit the business model, they don’t perceive that it will be successful. So what comes out of the process is incremental innovation after me-too innovation. It’s not that the original idea wasn’t innovative, but in order to get it funded, you have to change your strategy so that it ultimately conforms to your company, rather than to the problem or unmet need in the market.

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

CC: It doesn’t have to be totally thrown outside of the corporation, but it needs to be a different business unit underneath the corporate umbrella. And you have to manage it at the level of the CEO, differently, than the mainstream. Almost never do you need to accomplish or accept lower profits when you set up this new business. But the formula by which you make acceptable money will be different.

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

CC: I think that it facilitates a particular type of innovation. But I don’t think government is the core problem. I think finance and hedge funds and private equity funds are the big bad actors in the system. Investors like hedge funds and private equity funds and venture capitalists have a measure of performance called internal rate of return. And internal rate of return is a ratio; the way you get internal rate of return up is that you only invest in things that have a very short time horizon. If you just invest more and more for faster and faster quick wins, IRR goes way up. And you think that you’re innovating, because of the quick returns you’re getting. But what that means is that you can’t invest for the long term, because the truly disruptive business units don’t pay off for five to eight years. So then because the government says, ‘Well if you keep your money in the investment for 366 days, we’ll count it as long-term capital gain.’ There isn’t anything about 366 days that is long term. So the government should re-frame that, so that if you keep your money in for five years, there’s no tax, and if you keep it in for eight years, it’s a negative tax. All of these massive amounts of capital that are in private equity funds and so on, you re-purpose it through the tax code, and it would behave very differently, and invest in very different kinds of things.

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

CC: I think I know the right question, but I don’t know the answer. I would love to get together with deep thinkers in the industry to sort it through. As a general rule, when other industries are at this kind of an intersection, what has happened is that, at one stage in the value-adding stack in an industry, at one stage if it’s becoming commoditized and modular, you cannot make money at that level in the stack. But the whole industry doesn’t become unprofitable, rather its activities above and below that original [product or service], that’s where the money is made. And that has to be happening in the pharmaceutical industry, but I can’t see what it is yet. By example, the auto industry is becoming commoditized; cars are being assembled by sub-assemblies from tier-one suppliers. Anybody can get these modules and snap together a car. So it’s really hard to differentiate your car from anybody else’s car, so where the money is being made is in the subsystems that define the performance of the car, and by activities that sit on top of that, like OnStar. That’s where the money is made. Somehow, I have a sense that selling the pill, in the future, is not where the money will be made. It will be the attachments on top or underneath it. I haven’t heard anybody articulate what those look like, but I think they’re emerging, and we need to identify them.

BC: I read in The New Yorker that you’ve lived near the Romneys, and both you and Mitt are active in the Mormon church. Do you have any thoughts about a President Romney?

CC: He’s really a good man. He’s very smart, but it’s true that he was raised in a wealthy home, in a prominent home, and then accrued even more wealth, and his kids have been raised in an even more prominent family. And that’s actually about the toughest environment in the world to be raised in, and have your head be screwed on straight. It truly is. And so people think of that, that he’s not connected with the real world. But he has raised his family to create unbelievably good kids. But more important than that, in the Mormon church, we don’t pay professional ministers to teach us and to take care of us, but we help other people and teach each other the gospel of Jesus Christ. What that means is – because the members have to take care of one another – you meet everybody. And so Mitt was the bishop of our church, and bishop just means that he had responsibility for about 500 members of the church. And he had a family, he was trying to build Bain at the same time, and to be the bishop meant that he spent, on top of all that, 30 hours a week. And I don’t know if you ever saw the first Star Wars movie, but Luke Skywalker came in to meet Han Solo at some kind of a café, and the band that was playing, there was one of every conceivable form of life in the band, that’s what a Mormon church looks like; one of every conceivable type of person. If you’re the bishop, you’ve got to help all of those people. Under his leadership we built three significant new congregations in the inner city, in three different languages. So he really has seen a lot. I don’t think journalists have really realized, when he left [Bain & Company], the consulting firm, to create Bain Capital, that was going great. And the original owners of Bain & Company decided to sell their ownership stake to the next generation of partners. In order to pay the selling founders off, they had to take all of the profits the consulting activity made, and then some, to pay off [the owners]. And these people were just sitting at the side, rolling it in. As a result, Bain & Company would have gone bankrupt in two weeks. So they said, ‘Mr. Romney, could you please leave [Bain Capital] and come here and take presidency of Bain & Company, and somehow you have to prevent bankruptcy.’ So Mitt sat down with the six selling partners, and essentially convinced them to agree to take one-sixth of the amount of money that they thought they were owed, and got them to feel good about it. Just the way that he got these people, instead of knocking their heads together, he led them to agree on something that was very counterintuitive to all of them, and that is the idea that we are all best served if we try to help the other side win. I just think that someone with that instinct in the White House, in the climate of Washington, that would be a good skill.

Christensen’s new book – How Will You Measure Your Life? – takes his experience and thinking in business and applies it to personal decision-making. He has been the subject of lengthy profiles this month in both Bloomberg Businessweek and The New Yorker.