The Soul of Biotech

This post originally appeared here as a guest post on the Better Health blog network. It has since also appeared here on the I Am Biotech blog.

Much has been made of the recent pressure on the FDA to create a pathway for follow-on biologics. On June 9, 2009, Rep. Henry Waxman, chair of the Energy and Commerce committee, sent a letter to President Obama imploring him to approve a pathway for generic biologics: “I urge the administration to consider what steps can be taken under existing authority to prepare and even begin to use a pathway for generic biologics.”

Six days later, President Obama, in his June 15, 2009 speech to the AMA, followed Waxman’s lead, asking the FDA and industry “to introduce generic biologic drugs into the marketplace.” He continued: “These are drugs used to treat illnesses like anemia. But right now, there is no pathway at the FDA for approving generic versions of these drugs. Creating such a pathway will save us billions of dollars.”

Is this true? Are follow-on biologics, biosimilars, or generic biologics (all names for the same concept) truly the path to healthcare savings? And what are they, anyway? To clear up the confusion, this post aims to explain what biologics are, what generics are, and what the challenges are in the creation of an approval pathway for generic biologics.

What are biologics? How do they differ from traditional small-molecule therapies?

When you think of a drug, you probably think of a pill like Tylenol or Lipitor. You may not be as familiar with biologics, which are attracting a great deal of attention from policymakers and media. Biologics represent a different set of drugs, distinguished by their size, their informational and manufacturing complexity, and their therapeutic advantages.

If you were to look at most drugs under a microsope, you would find that they are actually rather small relative to a typical biologic. Acetaminophen, which is the active ingredient in Tylenol, weighs 150 daltons (a dalton is a unit of atomic mass). Enbrel, on the other hand, which is a top-selling biologic indicated for several autoimmune diseases, weighs 150,000 daltons. To put that thousand-fold difference in visual terms, if Tylenol weighed as much as your mountain bike, then Enbrel would weigh as much as an unfueled 12-passenger private jet. Hence you will often hear people in the pharmaceutical industry refer to “small molecule” drugs and “large molecule” drugs — because these are two truly distinct classes.

Biologics are often designed to closely mimic the body’s own specific natural processes. Because of this higher specificity, biologics tend to bind to drug targets in the body more precisely than do traditional drugs, which may bind to other unintended targets in the body, placing the patient at greater risk of side effects.

On top of it all, there is currently no defined pathway at the FDA for companies to develop generic versions of biologics, so biologic manufacturers retain data exclusivity over their products. Not surprisingly, the therapeutic and market advantages of biologics have caused pharmaceutical companies to focus their efforts on developing or acquiring biologics over small-molecule drugs. In fact, according to a recent forecast, by 2014, seven of the top ten drugs in America will be biologics, including every single one of the top six.

Unfortunately, while biologic therapies provide a great deal of therapeutic benefits, they are also extremely challenging for biopharmaceutical companies to develop and manufacture, because they are composed of entire proteins, carefully grown through recombinant DNA methods which are newer and less practiced than traditional drug chemistry methodologies. A traditional drug is usually derived through a set of chemical reactions. It’s a lot like following a recipe. Synthesizing a biologic, however, is a bit more like cloning a cat. In order to synthesize a biologic, host mammalian cells, usually Chinese hamster ovary cells, must be implanted with a gene that codes for the desired drug. The host cells are maintained in a special bioreactor that is designed to keep the cells alive as they translate, synthesize and excrete the drug. The broth must then be harvested, modified, purified, and tested. The solution is finally packaged into vials or pre-filled syringes for distribution.

This manufacturing process is unusually challenging to reproduce consistently, even within a company. For example, Johnson & Johnson manufactures epoetin alfa, an anemia therapy, under the name EPREX in Europe. In the late 1990s, J&J changed its manufacturing process for EPREX at the request of the EMEA (the European version of the FDA). The process change caused some patients to develop pure red blood cell aplasia, a serious adverse reaction. Rather than receiving the benefit of the anemia therapy, these patients actually lost their ability to make red blood cells because they produced an antibody (triggered by the faulty EPREX) that inactivated both the EPREX and the body’s natural protein that is essential for red blood cell production. J&J eventually determined the cause of the adverse reaction and corrected it, but only after a lengthy and expensive investigation.

Because of the intense development and manufacturing process, biologics are also significantly more expensive than traditional therapies. Herceptin, an effective treatment for some forms of breast cancer, can cost as much as $48,000 for one year’s worth of treatment. It’s important to keep in mind, however, that virtually every drug company provides programs to help underinsured or uninsured patients get financial assistance in the form of co-pay cards, co-pay grants, or free drug programs. Simply contact the drug manufacturer.

Why have biologics gotten so much attention from healthcare reformers such as Rep. Waxman and President Obama?

The high cost of biologic therapies has attracted attention from both private payors, such as Aetna and UnitedHealthcare, and public payors, such as Medicare, Medicaid, and state health insurance programs. While payors agree that the therapeutic benefits of these treatments are important, they are still anxious to limit their exposure to the high price tags. Most insurers require several other therapeutic steps before allowing a physician to prescribe a biologic therapy.

What are follow-on biologics (FOBs)?

Follow-on biologics (FOBs) are the name given to the generic versions of biologic therapies.

Wait, what exactly is a generic? And what’s all this talk of bioequivalence?

The Hatch-Waxman Act of 1984 established a pathway for generic versions of small-molecule drugs to be offered to the public. Once the patent ends on a drug, generic drug makers may manufacture and sell the same drug without repeating the research, expensive clinical trials, or marketing efforts conducted by the original patent holder. These savings allow generic manufacturers to sell their versions for a lot less.

In order to gain approval, the maker of the generic must still show bioequivalence to the original drug, called the “reference listed drug” in the generic drug maker’s application. In a bioequivalence study, the reference listed drug is administered to one group of healthy volunteers, and the generic is administered to a second group. The blood concentrations of the active ingredients are measured over time and graphed. If the generic drug’s graph lies between 80% and 125% of the graph of the reference listed drug, then the two are deemed bioequivalent, and the generic drug is approved. Once approved for the market, it may be sold and independently substituted by a pharmacist for the branded medication without telling the physician, assuming the doctor has not expressly forbidden generic substitution. This last permission is referred to as the “interchangeability” of the drug.

Why can’t Congress just duplicate the same approval process used for generic small-molecule drugs?

In theory, Congress could. In practice, however, there are several technical hurdles that remain to be cleared. As discussed above, the processes used to create biologic therapies are extremely sensitive to manufacturing changes, as in the EPREX case. If a generic biologic manufacturer develops its own process, there is a good chance that the quality of the product would differ from that of the reference listed drug. Furthermore, no one has yet confidently measured bioequivalence for a biologic.

Frank Torti, Chief Scientist of the FDA, summarized these issues very well in a September 2008 response to a Congressional inquiry about follow-on biologics:

Because of the variability and complexity of protein molecules, current limitations of analytical methods, and the difficulties in manufacturing a consistent product, it is unlikely that, for most proteins, a manufacturer of a follow-on protein product could demonstrate that its product is identical to an already approved product. Technology is not yet sufficiently advanced to allow this type of comparison for more complex protein products.

All is not lost, though. The FDA could still create a pathway for generic biologic manufacturers to develop “biosimilars,” which are products that are intended to be close to a reference listed drug but cannot be shown to be the same. Because they are not the same, biosimilar manufacturers would likely have to conduct clinical trials to show that their version is safe and effective for human use, and can be manufactured consistently.

What are the realistic cost savings?

Because of the added cost of clinical development, testing, and marketing of a biosimilar product on top of the difficult manufacturing process, competition and pricing of generic biologics is more likely to resemble brand-to-brand biologic competition than the generic-to-brand competition seen in the small-molecule drug marketplace. Therefore, it’s not yet clear how much more affordable a FOB would be for health insurers. Without being able to show that the products are truly identical and therefore interchangeable, physicians are also likely to be reluctant to try what is essentially a “new” drug that does not truly share the established track record of the original drug. Payors and patients may be excited about the lower cost but skeptical of potential safety issues. As a result of these factors, generic biologic manufacturers may ultimately fail to capture enough business to make up for the upfront expenses of clinical testing, as well as the ongoing manufacturing and marketing expenses.

The Federal Trade Commission recently published a report that studied and called out these limitations. The consequences of the market dynamics imply that only two or three companies with large biologics manufacturing capabilities will even bother to get involved in this field, because only those companies will already have the plants and people to compete effectively. Ironically, the FOB manufacturer for a given reference drug will probably be other biologics innovators who already have the manufacturing capabilities but don’t normally compete in that particular market.

What would be some of the other implementation challenges for the government?

For one, CMS would need to decide how to bill and code for the new products, a subtle referendum on how identical the biosimilars will really be. If they give the generic versions the same codes as the originals, interchangeability is easier and the cost savings are more likely to materialize. On the other hand, it’s important for both the FDA and CMS to track adverse events with these new products (an activity known as “pharmacovigilance”), which is easier to do if the codes are different.

Where does the policy debate stand? What are the Eshoo and Waxman proposals?

The current Waxman bill is remarkably similar to the Hatch-Waxman Act of 1984, which was originally designed for small-molecule drugs. It would not require any new clinical trials for generic biologics provided that the generic had a “highly similar molecular structure,” and allows a case-by-case determination on whether or not safety and efficacy data would be required before pharmacies could substitute generics for reference biologics without telling the physician, but the default would be to allow substitution on approval. The Waxman bill allows for five to nine years of data exclusivity for the original patent holder.

The current Eshoo bill would require clinical trials comparing the generic biologic to the reference biologic, unless the FDA waived them. Rather than automatically granting interchangeability upon approval, the FDA would have to publish guidance with data that describe the criteria required for interchangeability. The bill also recognizes the greater challenge in developing biologics by allowing for twelve to fourteen years of data exclusivity.

Can the healthcare system really save billions of dollars with biosimilars?

President Obama’s speech to the AMA suggested that billions of dollars would be saved by the creation of a biosimilars approval pathway. Several others to study the issue have cited fairly conservative numbers. Avalere Health put the federal savings at $3.6 billion over a ten-year period, while the Congressional Budget Office says $6.6 billion. Avalere’s model assumes moderate discounting, several entrants, slow uptake of biosimilars, and a ten-year data exclusivity period. The CBO report scores a bill that resembles the Eshoo option described above, but doesn’t account for some of the market dynamics discussed above and in the FTC report.

Finally, to keep pharmaceutical costs in perspective, policymakers should remember that prescription drugs currently make up only 10% of healthcare costs, while physician services make up 21% and hospital care makes up 31%. The CBO estimate also predicts that follow-on biologics would save $25 billion on national biologics expenditures over ten years. Even if correct, those savings still make up one-half of one percent of all national spending on prescription drugs, which is itself one-tenth of all healthcare spending in the United States.

Which option makes more sense?

Overall, the Eshoo bill appears to do the best job of reflecting the current technical challenges particular to biologic therapies. The need for clinical trials to insure the safety, efficacy and quality of FOBs ought to be non-negotiable. However, given the high cost of becoming a FOB manufacturer, and the small number of likely entrants, the optimal length of data exclusivity is a good open question. Henry Grabowski of Duke University studied the issue and concluded that an ideal breakeven point is 12.9 and 16.2 years, also suggesting that the Eshoo option is the most likely to drive economic growth. The European Union currently allows for biosimilars and permits ten to eleven years of data exclusivity. Let’s hope that policymakers work hard to thoughtfully strike the right balance that maintains both a stream of innovative therapies from scientific pioneers and a structure that wisely manages costs for payors.

Author’s bio:

Jonathan Sheffi is a summer intern in the FDA Office of Biotechnology Products. Before the FDA, Jonathan worked for Amgen, first as a marketing analyst and then as a biopharmaceutical sales rep. He will start at Harvard Business School in the fall of 2009, and is seeking an internship opportunity for the summer of 2010. Follow Jonathan’s blog at http://jonathansheffi.com/ and on Twitter at @sheffi.

Acknowledgements:

Thank you to Val Jones (Better Health), Niko Karvounis (The Century Foundation), and Kimberly Barr (UnitedHealthcare) for their comments and suggestions.

Disclosures:

All included information has been derived only from publicly available sources. This blog post reflects the author’s personal opinions and do not represent the opinion of any other organization or individual.

I’ll be attending the FDA Transparency Meeting on Wednesday. To catch my livetweets, follow
me on Twitter.

Posted via email from sheffi’s posterous

Giving Posterous a whirl…

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The Promise and the Peril of Personalized Medicine from Jeriaska on Vimeo.

Many thanks to Drew Reynolds for taping this and editing together this abbreviated version. The uncut talk was about ten minutes long — I started out explaining what treatment-response biomarkers are, and how they can improve patient outcomes and save money for payors.

The EEOC has invited the public to comment on the Genetic Information Nondiscrimination Act (GINA). GINA was passed in the spring of 2008 as a way to bar employers from discriminating against employees on the basis of genetic information. GINA also prevents healthcare insurers from discriminating based on genetic information.

GINA is an important step forward, as mentioned by Wayne Rosenkrans at the HBS Healthcare Conference. There are two obvious deficiencies in the current law:

1. There are no restrictions on life insurance companies. A life insurance company could still deny coverage (or even revoke coverage) if it learned of your genetic predisposition to a certain disease state.

2. There are no restrictions on the genetic research activities of personal genomics companies such as 23andMe and Navigenics. Privacy and security regulations are still up to the individual company and the license agreement it enters into with its customers.

Here’s to hoping that activists will take the opportunity to help shape GINA into a law that will cement the foundation of the ethical use of genetic data for the new millennium.

In the afternoon, I attended the Biotech/Pharma panel, which was fascinating. A lot of great questions were tackled. I’ve laid out the three best ones, and the panel’s responses.

Is the FIPCO (fully integrated pharmaceutical company) model still viable, and if not, then how will it evolve?

On one side was William Annett of Genentech, who maintained that economics actually dictate that it’s not cheaper to outsource. Given a 20-year life cycle, integrated management is necessary: In the pre-clinical phase, commercial input is necessary for market viability. Then, when a product gets to market, good post-marketing trials require R&D input.

On the other side were both Sarah Cairns-Smith of BCG and Mark Goulet of Merck. Cairns-Smith insisted on a rapidly arriving disintegration of FIPCO, while Goulet added that the only reason FIPCO hadn’t disintegrated yet because the existing market pressures hadn’t forced companies to do so. In the current atmosphere, where efficiency dominates, the industry is likely to be redefined soon (though neither laid out specifics as to how). Skip Irving of Health Advances, made what I felt were a couple of strong points: Companies are sticking to therapeutic areas they know well, in order to reinforce areas of strength. Thus, licensing and M&A are here to stay. He also pointed out something I personally agree with: a strong move in the industry from the PCP-based model to specialty-based models.

Everyone talks about the success / failure of R&D. Is R&D working fine, and we’ve seen an accidental blip, or is there something ineffective and inefficient about it? What can and should change about it?

Goulet pointed to the need for better pre-clinical validation in order to help products fail faster. And on a note reminiscent of the earlier personalized medicine panel, he emphasized the need for biomarker research, to help determine which patients respond to a drug, and whether or not the drug is truly binding to its target.

Annett’s comments focused less on the R&D process than on the coming “patent cliff.” Over the next five years, the industry will lose $45B worth of US revenue and $65B worth of global revenue from loss of patent protection. Although current pharma pipelines are lacking, current biotech pipelines are fairly full, and we are likely to see more M&A as a result. [This comment proved most prescient given that Pfizer announced its acquisition of Wyeth less than 10 days later.]

Many European countries have put in place single-payer systems. Given the contentious nature of pricing, is the way that pharma/biotech companies capture value going to change?

Goulet, again echoing the PM panel, pointed to the drug/diagnostic combination of therapy plus information as the most attractive value proposition for payors.

Cairns-Smith brought up a great point about the need for cancer patients to take a combination of therapies, all of which are expensive. Being one of ten needed therapies is different from being just the one. We could see a move to outcomes-based pricing.

The next session I attended was the personalized medicine panel, which was new this year. The panelists spoke to a standing-room-only crowd in an HBS lecture hall. The panelists briefly explained what personalized medicine was, and emphasized its importance as technology began to deliver whole genome sequences for less and less money. The first human genome cost about $3 billion dollars to sequence. As of March 2008, that price had dropped to $60,000. More recently, SingularityHub predicted that whole genome sequencing would fall to $1,000 before the end of 2009.

So what are some of the consequences of a high volume of genetic data becoming rapidly available?

• Noubar Afeyan provided an overview of the current diagnostics market. One company recently did a deal with Humana to develop simple treatment response markers (non-predictive) — the kicker is that patient co-pays will depend on the values of the treatment response marker.

• Dr. Teresa DeLuca, Medco’s VP of Personalized Medicine, capably explained not only how personalized medicine can achieve improved outcomes in targeted patient populations, but also how the technology can reduce costs for payors. Payors may not be able to make a patient go into wellness program or enforce a patient’s compliance, but they will soon be more able to get the right patient the right drug at the right dose at the right time. Medco is working to create diagnostics reports for doctors that provide medication recommendations for patients.
• Mara Aspinall, president of Genzyme Genetics, emphasized the need to more deeply understand the pathways and MOA for the drugs we already have, and add the right diagnostics and pharmacoeconomic data to deliver a total value package for payors.

Curiously, Afeyan also mentioned current research into biomarkers that may predict response to anti-TNF medications such as Enbrel.

Later on, I also spoke with Wayne Rosenkrans, the panel moderator and the chairman of the Personalized Medicine Coalition, which works on evolving healthcare policy in this area. He agreed that the Genetic Information Nondiscrimination Act was a promising step forward, but insufficient protection for most patients. Case law will have to fill in the gaps left by the law, which is only months old.

On Saturday, January 17th, I took a break from helping organize this year’s Mystery Hunt to attend the 6th Annual HBS Healthcare Conference in Boston, MA. I took extensive notes on the conference, and will spread out my notes across a few posts.

The leading keynote featured Lonnie Smith of Intuitive Surgical, which makes robotic surgery equipment that allow remote surgery. The devices themselves are remarkable, as demonstrated by a video that showed a doctor delicately peeling a grape from several feet away.

More interesting were Mr. Smith’s points on disruptive innovation. Smith first introduced the conventional disruptive innovation model, highlighted in Geoffrey Moore’s classic, “Crossing the Chasm”. Smith then went on to identify the first application for Da Vinci, Intuitive’s first device: prostate cancer. Market research showed that patient’s priorities in prostate cancer removal were focused on (in order): Cancer removal, Continence, Potency, Safety, Pain, and Blood Loss. Da Vinci achieved improvements in all of these. More importantly, patients began to drive adoption of the technology, not physicians. This “crossed the chasm” for Intuitive’s technology. More indications have followed suit.

When Mr. Smith explained how patients drove adoption, I was reminded of websites such as PatientsLikeMe, which allow patients to communicate about their treatments for serious disorders, such as cancer. I think it’s important to remember that medical learnings and achievements in patient care can travel through informal patient networks much (and informal physician collaboration networks, such as Sermo) more quickly than through formal physician networks such as conferences and journals. So what’s stopping adoption of those disruptive innovations?

Hello, meet Gautham. Or rather, meet Gautham’s Facebook ad. He’s looking for a job in the biotechnology industry, and he’s found one of the better places to advertise: Facebook. Clicking on the ad directs you to his resume page.

Why is this remarkable? It’s one of the first instances I’ve seen of job-seekers advertising to prospective employers on social media rather than the other way around. Facebook’s ad structure makes it possible for job seekers to limit out-of-pocket expenses, and Facebook only shows your ad to those whose interests closely match yours (which is probably why I’ve seen Gautham’s ad many times on Facebook). What a clever way to bring the right employers to you!