OK – the title is a bit of a come-on, I’ll admit. Still, there’s a certain logic to it, if you’ll just bear with me.
To start with the sex part: I read in The Atlantic that men are doing a great job of making themselves irrelevant while women, economically speaking, are fast making up for lost time.
One big problem for the guys, says Hannah Rosin, the author of The End of Men: they aren’t willing to retrain when they have to.
Maybe she’s right; maybe women are more willing to learn new stuff. But it seems to me both sexes fail on that front. And particularly in that little niche of presumed intellectual flexibility, venture capital and the broader start-up world.
Like the broader economy, the health-care business is undergoing a vast economic disruption. And as the giant pharmas and device companies and insurers twist this way and that to figure out just how they’re going to continue to make money in an outcomes-focused economy, start-ups and their VC supporters are among the tiny creatures getting shmushed.
One has to be sympathetic given just how much work a start-up has to do. God knows the clinical and regulatory worlds are complicated enough to exhaust any mere mortal’s brain – and expensive enough to exhaust most wallets, too. Particularly because Big Pharma is asking for later-stage data before they’re willing to pony up significant purchase and licensing fees for a piece of one of those start-ups.
And yet the further a start-up goes down the development path, the more it’s making reimbursement choices – even if it doesn’t recognize it’s doing so. Because just as Big Pharma is learning: the data gathered in clinical trials is not necessarily the data payers want.
Ask Lilly after their huge Phase III Effient trial. Or Merck (or perhaps more appropriately, Schering-Plough) for both Saphris and Bridion. Or Bristol-Myers Squibb and AstraZeneca for Onglyza. All of those drugs passed muster with regulators (in Bridion’s case, European regulators) but payers have simply turned up their noses.
The inattention to payer-focused endpoints is not just a pharmaceutical problem. My bet is that discovery-intensive diagnostic companies like Genomic Health, CardioDx, and XDx would have seen success far earlier had they accelerated their efforts to jibe clinical and reimbursement endpoints.
Managed care increasingly wants to see drugs developed and proven for patients that can’t be served by generics – where PBMs, at least, make most of their money.
(And with PBMs staring out at the very visible end of the big series of patent expirations – which has been almost as lucrative for them as it’s been disastrous for Pharma – they’re trying to figure out innovative ways of using generics in place of proprietary drugs. Medco’s trial comparing Effient just to the 70% of people who respond well to Plavix is a case in point: Medco is looking forward to the genericization in 2012 of Plavix and didn’t want doctors switching willy-nilly to Effient, which had proven modest superiority to Plavix, at least in part because it was comparing itself to a population in which 30% of patients didn’t fully metabolize Plavix). I’m also curious to see how Medco uses its developing pharmacogenomic understanding of warfarin dosing and response as Boehringer Ingelheim’s Pradaxa and the Xa inhibitors that follow it come to market. But I digress.)
Those development decisions need to be made early – and making them requires an understanding of both what managed care wants and how it works. Certainly it’s possible to come to market having proven a drug, as pharmas by and large are wont to do, basically comparable in a broad population to an existing brand. But then gaining market share with such a product, which is to say displacing the Tier 2 player, will require heavy rebating. And then companies should be asking: could they have spent less on a smaller trial showing dramatic benefit for an underserved targeted population, doubled or tripled the price to reflect the value, and ended up with a higher NPV?
In this new world -- our world today – physicians have been demoted from key decision-maker to stakeholder while payers have gone from stakeholder to key decision-maker.
The implications for start-up financing and exits are significant. Because they’ve got the money, and because they see that regulatory risk continues to rise, Big Pharma is requiring more than mere clinical proof-of-concept for the products they in-license or buy from start-ups. But because Big Pharma is also getting the message about payers (increasingly hard to ignore it after having been hit over the head with the formulary problems of their most important launches over the last two years) they also are beginning to ask for proof of reimbursability. They know that gathering that pharmacoeonomic data after approval, and waiting for insurers to make their own judgments, eats away at the economics of the product – which lowers its value.
Start-ups still by and large don’t spend a lot of time worrying about what payers might want from a clinical trial. Understandably. Their managers and investors have spent their professional lives learning how to prove discovery and clinical value to pharmas, and developing an extensive network of scientific and medical contacts to help them do so. Now they have to learn a brand new language, understand the dynamics of a new business, and develop a new set of contacts?
Oh, there’s plenty of lip service paid to the importance of payers. All the VCs and start-up execs I talk with tell me they know their products have to prove value to payers. And yet when I probe just a teeny bit deeper, virtually none of them know anything about how formularies work, which formularies matter, which non-traditional endpoints (both clinical and non-clinical) matter most to the most influential payers. Or seem to be doing much to figure it out. As one VC admitted to me: he knows five people to call when it comes to assessing a Phase II diabetes drug – but nobody when it comes to judging the criteria likely to win that same drug Tier 2 status or the implications if it gets Tier 3 but with no restrictions on its use…or Tier 3 with step-edits, prior authorization, and quantity limits.
From my conversations with them, most VCs and senior start-up executives still haven’t met more than a few medical directors from payers, let alone pharmacy directors (whose variable comp often depends on how well they manage the formulary budgets, which itself depends on how well they negotiate what goes onto the formularies in the first place).
I’ve also heard that while a deep understanding of payers might be important for companies developing me-too products, it’s unnecessary for those coming out with breakthroughs. Payers will have to pay for them. And that’s probably true. But the definitions of breakthroughs are getting tighter (my guess is that Effient would have been a breakthrough had it come out in 2005). And in any event, breakthroughs are rarer than hens’ teeth. Particularly breakthroughs that remain breakthroughs long enough to capture the full value of their development (the first-generation protease inhibitors against Hep C will certainly be breakthroughs when they arrive next year – but not after the next-gen protease inhibitors or the nucleoside polymerase inhibitors arrive in the definitely foreseeable future).
I’m not saying that any of this is easy. Or will guarantee results. Like regulators, payers can change their minds later (“I might have told you back then to prove such-and-such, but now, in order to pay for this, I want you to prove something else.”) But unlike regulators, there is no single reimbursement reviewer – a payer willing to pay for a cost-effective drug or device should attract additional business. And just as I don’t think it’s sensible to dismiss the regulators’ development advice just because they might change their minds later, I’d argue it’s probably not sensible to ignore – or forgo soliciting – payers’ advice because their requirements might change down the road.
Certainly, proving reimbursability makes everything more expensive (trial sites will have to gather more data, case-report forms will grow longer and more complex, and on and on and on). I don’t doubt that fewer companies will get started.
But there are a whole host of start-ups going now. And if we don’t want all that investment thrown away, then it’s time for the boys to go back to school. And any of the girls who want to play with them.
Roger Longman, a founder of Windhover and later head of the pharma group at its acquirer, Elsevier Business Intelligence, is CEO of Real Endpoints LLC, a new company focused on helping payers and drug and device companies create greater value from new and existing products in an outcomes-focused health-care economy.
image from flickr user truthout.org used under a creative commons license
No comments:
Post a Comment