A custom collaboration with: Quintiles
The high-risk, high-reward endeavor of making pharmaceuticals faces an entirely new landscape from drug discovery to post-marketing surveillance. In fact, the foundation of this business itself faces upheavals that can only be survived by finding ways to make better medications more efficiently and improving the real-world outcomes they produce.
As summed up in “Top 10 Health Industry Issues in 2010: Squeezing the Juice Out of Healthcare” from PricewaterhouseCoopers: “Faced with a revenue growth rate that has dropped from 9.9% in 1997 to 1.3% in 2008, pharmaceutical companies are shifting toward a more comprehensive patient-centered approach.”
A report by the New Development Paradigms (NEWDIGS) program of the Center for Biomedical Innovation at the Massachusetts Institute of Technology (MIT), outlines the basis of the problem: “Despite an enormous increase in R&D investment, and historical advances in technology through genomics, automation and computation, the number of new drugs produced each year remains at the same level that existed over 40 years ago (about 20 per year). Many of these new drugs do not match up to the most pressing medical needs we face today, and serious safety issues still crop up on medicines that have been approved, marketed, and administered to millions of patients.”
In short, the central business model of pharmaceutical companies is old, and ready for renovation. “Since World War II, big pharma has operated as a vertically integrated conglomerate,” explains Ron Wooten, executive vice president of corporate development at Quintiles in Durham, N.C. “They relied on their own research, development, sales, marketing—all within their own control.” That strategy worked while big pharma companies reaped the benefits of drugs for infectious diseases, cardiovascular diseases and other blockbusters. “Companies can no longer get that kind of return on capital,” says Wooten, “so they need a new model: more virtual, more partnering oriented and more collaborative with all of the stakeholders, including policymakers, payers and even financial resources.” In this way, the risk behind drug discovery and development gets spread among a team.
Such a business transition makes sense in theory, but presents numerous challenges in practice. While many large pharmaceutical firms face dwindling revenue as blockbusters go off patent, the companies also face higher expectations of drug safety and efficacy from regulators, payers and consumers. Moreover, drugmakers must leverage today’s technological tools to offer more personalized, patient-specific medicines for tomorrow and find ways to serve emerging markets, such as China and India, where economic boundaries and educational barriers are dissolving, paving the way for many more market opportunities. To make so many transitions at once, pharmaceutical companies will need new collaborations, fresh thinking, and all of the tools for furthering innovation.
The Personal Challenge
Any pharmaceutical company using any business model must aim for making medicine more personal and individualized. The tantalizing prospect of optimizing medical outcomes by tailoring drugs and therapies to match features in each individual’s unique genetic makeup and environmental profile drives the buzz surrounding personalized medicine. “The idea is to develop drugs that work for selected individuals and reduce adverse events, and to charge a premium for them, knowing that they appeal to payers because overall they save money,” says Edward Abrahams, executive director of the Personalized Medicine Coalition, a non-profit consortium of drug and biotech companies, patient groups and research organizations in Washington, D.C.
But for personalized medicine to achieve its potential (including 11 percent annual growth to $452 billion by 2015, according to PricewaterhouseCoopers), large pharmaceutical companies will need to cast aside their old model of developing blockbuster drugs and adopt a more collaborative approach that focuses on developing specialized therapies for patients who carry biomarkers or genetic variants indicating risks for diseases such as breast and colorectal cancer, diabetes, macular degeneration and other conditions.
Doing so will require the development of more powerful genome-scanning technologies and companion diagnostic tests to determine whether a particular drug or therapy will help (or harm) a specific patient. Currently, however, other than the largest drug companies, most pharmaceutical companies are wary of incorporating biomarkers and companion diagnostics into clinical trials for fear they will increase costs and delay drug development. According to a recent McKinsey & Company survey, the average drug company is developing companion diagnostics for fewer than 10 percent of its compounds, despite clear urgings from the government to do so across the board.
The Food and Drug Administration already requires companion diagnostic tests before prescriptions are written for several drugs, including Pfizer’s Selzentry (maraviroc) for HIV, and Genentech and Roche’s Herceptin (trastuzumab) for breast cancer. In Europe, the European Medicines Agency requires companion diagnostics for about a dozen drugs, among them, Novartis’s Tasigna (nilotinib) for leukemia and GlaxoSmithKline’s Ziagen (abacavir) for HIV/AIDS.
Many large pharmaceutical companies are developing their own diagnostics divisions and merging or collaborating with established companies. Roche is already a diagnostic market leader with a 20 percent share of the in vitro equipment market. Last July, GlaxoSmithKline (GSK) and Abbott Laboratories announced they would develop a companion diagnostic for GSK’s MAGE-A3, an antigen-specific cancer immunotherapeutic drug under development. In February, Pfizer and DxS Diagnostics similarly declared they would develop a companion diagnostic for an immunotherapy vaccine in development for the treatment of glioblastoma multiforme.
Despite all of this work, no firm has yet determined a timeline for successive stages in the drift to smaller populations treatable by single drugs. The issue doesn’t call for an immediate one-shot solution. “You’re not going to get down to one patient–one drug for a long time, if ever,” says Wayne Rosenkrans, chairman and president of the Personalized Medicine Coalition. “It’s going to happen in stages.” Initially, pharmaceutical companies might develop drugs that effectively treat, say, a third or a quarter of patients with specific conditions. Improved understanding of the genetics of disease will then open up opportunities for drugs targeted at smaller and smaller groups of patients. Advanced knowledge of other physiological systems, such as the immune system, will also play a role in new treatments (see “Immunological Patriots”).
The stratification process has already started in some cases. Phase 3 clinical trials of Iressa—an AstraZeneca drug targeting a gene overexpressed in small lung tumors—showed that patients with a particular mutation responded to the drug, whereas others didn’t. Approval of the drug thus contains the proviso that it should be administered only to those patients who will respond to it. That approach applies “not just to lung cancer, or just cancer,” says Raju Kucherlapati, professor of genetics at Harvard Medical School. “It’s true for other diseases.”
But that is only a start. “Tailored therapy today is directed at relatively large populations of 10,000 to several million,” says Jerry Kinzel, vice president of bioproduct research/development at Eli Lilly. “The challenge will come when it’s truly individualized: creating new reagents for each individual.”
From Virtual to Vertically Integrated
The business models that could facilitate personalized medicine might end up as individualized as the treatments. Today’s options range from a virtual pharmaceutical company, like Celtic Pharma in Bermuda, to the vertically integrated companies often called simply “big pharma,” like Pfizer and Merck. These two ends of the pharmaceutical business–model spectrum, as well as the endless options in between, all come with specific advantages and disadvantages. In fact, it is even possible to build a pharmaceutical company that sidesteps profit (see “Putting Compassion behind Compounds”).
In today’s world of online businesses, it’s no surprise to see virtual pharmaceutical companies like Celtic, which was started by two investment bankers. Rather than building an extensive and expensive R&D team, Celtic relies on the work of others, and then buys the rights to products at the late clinical stage. Then, Celtic outsources clinical trials, manufacturing and marketing the launch of a drug. As the company’s Web site states: “Celtic Pharma is pursuing a rigorous ‘virtual pharma’ model of outsourcing for all activities except strategic decision making, regulatory interactions, contract negotiations and project supervision.” Then, Celtic auctions off the drug to a brick-and-mortar pharmaceutical company.
Large pharmaceutical companies might also benefit from increased outsourcing. Clearly, some of these companies are looking for ways to reduce costs. For example, AstraZeneca, GlaxoSmithKline and sanofi-aventis recently announced cuts in their R&D budgets. But that choice, says Novartis chairman Daniel Fasella, can easily prove self-defeating, leading to a situation in which “you have no sales anymore.”
So although the passing of the blockbuster era leaves vertically integrated pharmaceutical companies suffering under their own heavy budgets, they must think carefully to find efficient and economical ways to reduce spending. Some companies select mergers, as evidenced in 2009 by Pfizer joining with Wyeth and Merck purchasing Schering-Plough. Mergers will also be complemented with acquisitions—a trend that is likely to continue. On May 17, 2010, international intellectual property group Marks & Clerk in London reported that a survey of 381 biopharmaceutical executives found that 7 out of 10 expect acquisitions to be substantial in the next two years.
Nevertheless, most pharmaceutical companies lie in between the totally virtual Celtic and merging, multinational giants. All of these companies, though, can usually benefit from a similar tactic: the increased use of contract research organizations. Traditionally, pharmas engaged contract research organizations (CROs) for single tasks— clinical trials or process development, for example. Now, however, the contract companies offer entire suites of services, from drug discovery all the way to manufacturing. And contract manufacturing is growing rapidly on a global level, particularly in the biologics arena. Lonza Biologics, for example, plans to extend its manufacturing facilities from New Hampshire to Singapore and Spain.
Still, the current model of outsourcing needs substantial improvement, according to Michael King Jolly, head of Quintiles’s innovation business unit. Requests for proposal (RFPs) issued to CROs for provision of services are usually based upon internal—often erroneous—assumptions concerning feasibility, Jolly points out. Moreover, he says, “The RFPs are issued just prior to the need for such services—and hence on the critical path, with little opportunity for readjustment—with overall timelines already having been committed to the pharma company’s senior management.” CROs generally have significant insights into program feasibility based upon experience with patient availability and access, competitive trials in process, study design, inclusion and exclusion criteria, study budget, and logistical considerations, which Jolly says “should best be accessed far upstream to the RFP response point in the current process.”
To give CROs more responsibility, they need to be brought into the process sooner. Some companies already do just that. “We partner with the pharma company six to nine months prior to the time at which RFPs are usually issued, under a planning and design work order,” Jolly says. There’s even evidence that this approach can benefit both a pharma and a CRO. As Jolly concludes, “To date, such pilots have demonstrated that operational execution risk is lowered, program feasibility has been enhanced, and change orders/budget variance have been significantly reduced.”
Tuning Up the Tools
Improving the efficiency of the pharmaceuticals business depends on more than just a business model. It also relies on how these businesses use the tools that are available (see “The J&J Way”).
When asked what tools can advance healthcare technology, Peer Staehler, chief scientific officer at febit, a synthetic-gene company in Heidelberg, Germany, says, “We need to fully exploit the genome. We know it contains the code of life; let’s take this fact seriously!” He adds, “Molecular biology tools can be used for disease detection, prevention and therapy monitoring. We already know that blood-borne nucleic acids are highly informative for dozens of disease states, yet their use is still in its infancy.” As an example, Staehler mentions that cancers include molecular fingerprints, which could be exploited to create more effective therapies.
Successful pharmaceutical companies will also find new ways to use traditional genomics knowledge. “The conversation about human health is shifting from a debate on nature versus nurture to a more nuanced discussion about how both nature and nurture affect the trajectory of disease,” says Nathan D. Lakey, president and chief executive officer at Orion Genomics in St. Louis, Mo. “Clearly, nature—or the sequence of As, Ts, Gs and Cs that make up our genetic code—plays a principal role in determining who will develop disease. However, environmental factors have been shown to alter the epigenetic signature, which is a second code written on top of the DNA sequence that regulates gene expression.” Such changes in expression can trigger disease. “Research is yielding critical insights into how epigenetic signatures influence the start and progression of diseases like cancer, developmental disorders and diabetes,” Lakey explains This knowledge is also being turned into medical tools. As Lakey notes, “Epigenetic tests in development promise to predict risk of future disease, offering doctors and patients the opportunity to take preventative action. In the near future, clinicians will more effectively treat disease by targeting therapy to patients’ genetic and epigenetic profiles using epigenetic biomarkers.”
Beyond simply finding more ways to use genetics of any sort, companies should look for tools that determine technology’s potential at earlier stages of development. In some cases, the best tools can arise from a combination of old and new. In an e-mail interview, Arthur Sands and Brian Zambrowicz—chief executive officer and chief scientific officer, respectively, at Lexicon Pharmaceuticals in The Woodlands, Texas—write: “For example, researchers started using lab mice decades ago. Since mice and humans share about 99 percent of the genes considered to impact health, this animal remains a useful model for many diseases. To make this tool even more useful, mice can be combined with genetic engineering to create knockout mice—mice in which a specific gene has been inactivated.”
They continue: “A knockout mouse can be used to model how a drug will work before it is even invented. Since most drugs work by inhibiting a particular target—for example, an enzyme—a gene knockout is the equivalent of a drug that completely inhibits its target.” Consequently, knockout mice can give pharmaceutical researchers a head start on unraveling how a drug will work, as well as what side effects might occur.
“Over the past several years,” write Sands and Zambrowicz, “Lexicon has used this powerful technology to discover over 100 biologically validated targets, and currently has four compounds in phase 2 clinical development— demonstrating that knockout mice are indeed a good tool for developing novel drugs for human disease.” So, tools like this could make pharmaceutical companies more efficient at finding new drugs.
Other experts also encourage pharmaceutical companies to find ways to reduce the failure rates of drugs by turning to more advanced technology. For example, Kevin Hrusovsky, chief executive officer at Caliper Life Sciences in Hopkinton, Mass., says, “Given that one of the greatest drains on pharma R&D is the cost of clinical failure, it is imperative to ensure that in vitro and preclinical in vivo data are predictive of the clinical outcome.” He sees a range of ways to accomplish that. “An abundance of recent technological developments, such as next-generation sequencing, genomic/proteomic biomarker discovery, companion diagnostics and in vivo imaging with new modalities have strengthened the bridge between in vitro and in vivo research efforts, thereby facilitating more clinically relevant drug development,” he says.
Moreover, Hrusovsky sees technology as a potentially economical solution. “The good news is that the current cost of enabling tools, both in terms of capital equipment and labor, has reached an attractive price point that renders this a compelling value proposition,” he says. “Given the long timeline and high cost of drug development compared with the relatively modest cost of these technologies, the benefit of being able to make swift decisions at critical junctures is a simple yet tangible way of improving the return on investment.”
More Than New Drugs
The tools that will help pharmaceutical companies move ahead to personalized medicine will go beyond new drugs. For example, Mehmet Toner, a biomedical engineer at Harvard Medical School, understands that advanced compounds fine-tune the cancer treatment for a specific patient, but he says, “there is no doubt that the most profound impact on decreasing cancer mortality would be derived from accurate approaches to early detection—the ‘holy grail’ in cancer biology.” Toner works on one of the leading candidates for such detection—circulating tumor cells (CTCs). First documented in 1869 by Australian physician Thomas Ashworth, CTCs are cells from solid tumors that break off into the bloodstream. The trouble with turning CTCs into accurate biomarkers arises from their scarcity, about one CTC in every billion blood cells, which makes quantification of them extremely difficult. Toner and his colleagues, however, developed a CTC chip that, as he explains, “can now isolate viable CTCs from solid tumors carried into the bloodstream.” Toner continues, “The ability to monitor cancer noninvasively using a highly specific and sensitive blood test could potentially change how doctors manage cancer care, or better yet, be a revolutionary tool for early detection.” Such a tool could also be used by pharmaceutical researchers to see if a new compound attacks cancer, potentially measured as a reduction in CTCs in the peripheral blood.
Clinical trials are another area ripe for improvement. As Peter K. Honig, head of global regulatory affairs at AstraZeneca, notes, “Randomized clinical trials have long been the gold standard for demonstrating comparative efficacy; however, the real value of a product may not necessarily be demonstrable in such studies. Medical innovation is defined by its ability to address an unmet medical need and that must be looked at more broadly.” He cites captopril as an example, which was the first angiotensin- converting enzyme (ACE) inhibitor approved as a treatment for high blood pressure. “Follow-on drugs in the same class did not necessarily lower blood pressure better than captopril,” Honig explains, “but they required less frequent dosing and had improved safety profiles. This is valued innovation in that it improves patient adherence and blood pressure control in the real world.”
Others note that clinical trials could do much more to simulate real-world scenarios for, say, chronic diseases. “Almost half of all people with a chronic condition have two or more chronic conditions,” says Gerard F. Anderson, professor at the Bloomberg School Public Health at Johns Hopkins University in Baltimore, Md. “The challenge is to evaluate the comparative effectiveness of different technologies in real-world populations, including those with multiple chronic conditions. Most clinical trials exclude people with multiple chronic conditions because it is difficult for clinicians to measure efficacy in a complex patient. One possibility is to expand the scope of clinical trials to include a more representative sample of the population. In that way, doctors would know if the technology has added value for their patients.” The best scientific approach, however, might not be the most economical. “While this is the preferred scientific option, it could add significantly to the cost of conducting clinical trials,” Anderson explains. “A less expensive option is needed.”
Anderson sees one option that’s already available and economical. “Claims data have information on a representative sample of insured individuals and can be used to see which technologies are most effective in treating different types of patients in the ‘real world’ and not in the world of clinical trials,” he says. Nevertheless, he notes that “there are some methodological issues to resolve to make sure that similar patients are being compared.”
Turning More to Translational Research
Some of the best tools to improve the business of making pharmaceuticals come from basic research, and pharmaceutical companies can reduce risk by relying more on translational research. That is, companies improve the odds of making safer and more effective treatments by knowing more about human biology, individual genomes and mechanisms behind diseases. “Your investment dollar should yield more money because you are applying cutting edge research,” Wooten says. New research could also change the use of medical devices.
A cascade of new scientific and technological discoveries promises to streamline healthcare delivery, boost disease detection and create new surgical and investigational tools. “We are just beginning to see how new technologies will transform medicine,” says C. Donald Combs, vice-provost for planning and health professions at Eastern Virginia Medical School in Norfolk, Va.
For instance, Anthony Altala’s laboratory at Wake Forest University School of Medicine is one of several worldwide growing replacement human tissues in the laboratory, including bladders, heart valves, livers and blood vessels. In this emerging field of “regenerative medicine,” cells from individual patients are extracted, cultured and “engineered” or grown into replacement tissues and organs to be transplanted back without risk of rejection. Currently, researchers are using ink-jet printer technology to spray regenerated skin cells onto burn patients. In the future, lab-grown tissues will be combined with three-dimensional imaging technologies. “With stereo-lithography machines, one day you will be able to fabricate hip joints tailored to each specific patient,” Combs says.
New technologies and novel applications are also advancing disease detection. Hur Koser and colleagues at the Yale School of Engineering & Applied Science have invented a ferrofluid (a liquid mixture that reacts to an applied magnetic field) and a detector that can jointly uncover and separate various cells, including cancer biomarkers, sickle cells, viruses and bacteria from blood, saliva or other body fluids. The ferrofluid includes magnetic nanoparticles suspended in a liquid carrier that allows human cells to survive in it for several hours. The detector’s magnetic field pattern can be set to attract different cell types, depending on their size, elasticity and shape. “Using this technology, we can create diagnostic systems that are cheap, portable and easy to use,” Koser says.
Similarly, James Reuben and colleagues at the M.D. Anderson Cancer Center in Houston have found another way to unmask breast cancer CTCs using magnetic beads covered with monoclonal antibodies, offering the possibility of early diagnosis and new therapeutic targets. “This has applications for any tumor of the epithelial type,” Reuben says. Prospective studies of this technology are now under way.
While ongoing R&D in pharmaceutical company laboratories and basic research from academic researchers reveal new ways to improve the science of drugs and medical devices, a changing world also provides new challenges for medicine to conquer. What is more, specific regions can face very specific health problems.
“The key health challenges in Africa arise largely from the burden of three diseases: HIV/AIDS; tuberculosis, or TB; and malaria,” says Vaila Clements, vice president for public health and government services at Quintiles. “To give an idea of the impact those diseases are having, the average life expectancy fell by half in Swaziland between 1990 and 2007 to 37 years. That’s predominantly because of HIV, or a combination of HIV and TB.”
Clements continues, “The key to battling these diseases is the successful development and approval of efficacious treatment and preventative technologies—most importantly, vaccines. This could come from efforts like the Critical Path Institute, which was pioneered by the Global Alliance for TB Drug Development. The institute harnesses several pharmaceutical companies, the Bill & Melinda Gates Foundation and the U.S. Food and Drug Administration with the aim of reducing the development time frame from 24 to 6 years. Moreover, this will avoid the repetitive efforts and multiple independent journeys to a dead end.”
To take on such regional challenges, however, more funds must be made available. “Despite the efforts of the Critical Path Institute,” says Clements, “Africa still requires more resources. For example, the Aeras Global TB Vaccine Foundation only gets 8 percent of its funding from governments. Furthermore, we have—as a global health community—allowed TB to evolve from multidrug-resistant to now extremely drug-resistant TB. We need strong global political will to solve these burdens, and we don’t have that now.”
These emerging markets—places with new diseases or evolving health challenges—attract attention from many segments of the pharmaceutical industry. To some extent, changing approaches to investment reflect such interest. For example, the April 29, 2010, Dow Jones VentureSource reported that first-quarter venture financing in China increased by 35 percent in comparison with the first quarter in 2009. By the same comparison, venture capital financing in India more than doubled.
Other events illustrate the specific emergence of pharmaceutical opportunities in Asia. In the April 2010 Nature Biotechnology, for instance, Bea Perks wrote: “Three big pharmas—Pfizer, Merck, and Eli Lilly—are pooling their resources to set up an independent nonprofit company to spur research into innovative treatments for cancers common in Asian populations.” This Asian Cancer Research Group (ACRG) will start by collecting data on lung and gastric cancers. “The pharma giants are searching for ways to capture the emerging Asian markets,” wrote Perks. In particular, this collaboration will provide the big-pharma trio with the information needed to develop drugs specifically aimed at Asian populations.
As Western pharmaceutical companies move east, harmonization of regulatory requirements could simplify the development of drugs for use around the world. According to “HealthCast: The Customization of Diagnosis, Care and Cure,” a 2010 report from PricewaterhouseCoopers, “Globally, more health leaders are talking about a common regulatory regime for all healthcare products and services, rather than separate regimes for pharmaceuticals, medical devices, diagnostics and the like (as is presently the case in most countries). The next step would be a single global system, administered by national or federal agencies responsible for ensuring that new treatments meet the needs of patients within their respective domains.” While such a global regulatory approach would benefit multi-national pharmas, many experts see such a system as unlikely, at least for now.
When speaking about regulatory harmonization, Sir Andrew Dillon, chief executive of the UK’s National Institute for Health and Clinical Excellence (NICE) says, “It’s pretty unlikely that we’d get some Europe-wide or world-wide assessment of products. What could be harmonized, though, are the methods. Some standard techniques for bringing evidence together and interpreting it could be unified around the world.”
But the development of emerging markets should not just be about identifying new populations to treat or smoothing the pathway to drug approval; it should also represent an opportunity to build innovation resources in new places. For example, Merck runs facilities in Hong Kong and Shanghai, and Pfizer, which built its first plant in China in 1989, now employs nearly 4,000 people in four plants operating there.
So as pharmaceutical companies continue to expand across the globe and into new markets, they must find faster pathways to more effective and safer medications. Tomorrow’s compounds must also provide personal treatments, based on an individual patient’s condition and genotype, as well as other physiological indicators, cultural background and behavioral experience. In many cases, reaching these objectives demands remodeling steps from drug discovery and development to clinical trials and post-market surveillance. The economic environment created by the need for more personalized medicine—as well as the end of the era of blockbusters— impedes the success of vertically integrated pharmaceutical giants that do not reach out for productive collaborations. Consequently, tomorrow’s successful companies will work with academics, reach out to CROs, spawn innovation around the globe and build strong networks of capable and creative teammates.
The process of developing therapeutics has multiple expense points, which will undoubtedly change as new business models replace old ones. Here is a snapshot of the current major expenditures related to the bench-to-bedside enterprise.
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