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Okay, this one is pretty rough, but I don’t have time to tune it now.
The Life Sciences as a Constituent Community
The Society has made a very substantial investment in a CRM system recently, and, in California at least, we’re taking the practice pretty seriously. So it seems appropriate for me to look at the potential of relationships with life science companies within a CRM framework.
There certainly are enough reasons to look seriously at greater engagement with life science companies.
1. The “industry” is big and every indication is that many forces are driving it to grow and diversify in coming years. Its role in cancer resolution will only grow.
2. We’re in the same game…sort of. While the ACS has an exclusive mission to eliminate cancer as a problem, the life science industry has a mission to produce products that are marketable in the systems of cancer research, detection, and therapy. If cancer gets eradicated in the process, so much the better, and a lot of money is to be made along the way. Indeed, if Andy von Eschenbach’s recent statement that by 2015 cancer will become a “chronic” disease, the life science industry will be delighted to provide the therapeutics to cancer patients as long as they need them. Payers may not be so delighted.
3. The industry has a lot of resources to pour into the cancer arena. As stated above, R&D budgets in the billions of dollars for cancer products each year are many times the amount the ACS has been able to put into cancer research during its entire history. That’s the power of investment. Those eye-popping figures seem to be the source of the mention in National priorities that influencing the allocation of resources in companies is something to do.
4. The companies themselves are a resource for up-to-date knowledge about new technologies research is adopting, about the changing understanding of cancer itself, about what things are near reaching the clinical world, and about how the real world process of going from the lab bench to the doctor’s office works via companies right in our backyard. These companies can also shed light on what obstacles lie ahead—from their perspective—in reaching the mission of diminishing cancer as a problem.
5. Whether or not the marketplace of cancer products is an area in which the Society decides to play or not, I think, as a putative expert in cancer matters, it’s in the interest of the Society to have knowledge of this large sector and how it works. How commercial research gets done, how it moves into the development sector, how it reaches the marketplace, and how it reaches patients and doctors is often a matter of following the money. The cash flow is a pretty good indicator of how things work.
There may be other opportunities with life science companies. Some companies are big, the people working in them are well paid, and past surveys of giving in industry suggest that life science companies and employees have a predisposition to be generous to health charities. There is the potential for corporate donations, gifts from wealthy executives and investors, and the possibility of programs.
I’m not sure what the National organization has in mind when it suggests influencing resources in companies, and only time will tell what that strategy becomes. If there is initiative at the NHO about developing relationships with life science constituents, I have not been able to detect it. The California Division has an opportunity to lead in this area as it has led innovation in the past.
A basic assumption I make about CRM, especially in relation to for-profit companies, is that influence is reciprocal. As Elenor Roosevelt said, “Understanding is a two-way street,” and so is influence. In order for us to influence them, we need to be prepared for them to influence us back.
The question in my mind is: What’s the quid pro quo? What would the reciprocal value propositions of the ACS and the life science industry be? If we want them do something we think is important, what are we prepared to do in return? Do life science companies have needs? You bet they do; they need all the friends they can get.
A first principle of constituent relationship management is to get to know your constituent’s circumstances enough to identify a fulfillment opportunity. So I’d like to sketch in more of the issues that impinge on the enterprises producing biology-based products.
The life science industry, especially the pharmaceutical part, is the center of controversy. They are criticized from many quarters. They need friends, especially friends with good reputations that will speak kindly of them on some of the issues that affect them or at least not take initiative against their interests. Let’s take a look at a few.
Re-importation of drugs
In an election year nothing could be hotter than pieces of legislation to make legal at the state level importation of brand-name drugs from Canada and other countries. There is legislation pending in several state capitols to allow re-importation of brand-name drugs, and apparently advocates of such laws have the weight of public opinion in their favor. With the cost of prescription an ever-rising part of health care costs and heart-wrenching stories of fixed income elders not able to take life-saving medications, it’s not hard to see the appeal of price-reducing plans that may have immediate benefits for many.
The drug companies, on the other hand, maintain that their prices are justified by the high costs of development, the level of risk in the industry, the benefits that people derive from medications, and the savings on other health care costs when drugs work. Because pharmaceutical firms are huge and often have what many see as egregiously high profits, the drug companies don’t get much sympathy from the public. But they maintain that if the re-imported drugs undercut their US sales they won’t be able commit the billions to research and the flow of new drugs will stop.
This is a very complex issue with many arguments on both sides. What the industry would like is a hearing for its side of the story. The question for the ACS to ask is: What is in the best interests of the cause of cancer control in the long run? Will short-term savings for patients damage the industry so that the long-term development of future cancer therapeutics is harmed?
Cancer is in some ways a disease at the crux of this situation. Cancer is the exemplar of the class of diseases called “complex, multi-genic” diseases. In other words, there are not simple one-gene, one-drug cures for most cancers. They’re complex and finding effective solutions will not be cheap.
The industry acknowledges that the US is the cash cow for development of therapeutics. Indeed, developing technologies for cancer and other diseases will require many, many billions of dollars in future years. Where are they going to come from? The answer to that will be the subject of debate for a long time. It hardly seems that the Society can escape being some sort of participant in this issue, and, in my opinion, it merits careful study.
Global marketplace
Following from the remarks above, the practice of developing therapeutics at full price in the US and picking up marginal sales abroad at other prices may be coming to an end. The American public may not stand for it, and the drug companies will have to come up with an alternative.
The market for serious medications is global, but a very irregular one. The industry says the “gray market” where drugs are sold at different prices in different countries and then re-marketed by arbitrage so they end up undercutting the more lucrative markets (i.e., the US) can’t go on. There is some indication that pharmaceutical companies are cutting off supplies of drugs to some Canadian wholesalers to prevent them from selling them back into the US. People in the industry I’ve talked to say they’re going to have to set one price for new drugs worldwide and stick to it, regardless of ability or willingness of some countries to pay.
Pressures to reduce the cost of development may also lead to offshoring of more development in life science to lower the cost of labor-intensive science and of clinical trials. Also, as the marketplace for products expands, as rising standards of living in countries around the world increase, the US/Europe-centric world of health care and life science will respond to new needs and culture peculiarities.
Global markets also means moving toward global regulation standards, more uniform marketing/negotiation products process, protection of markets from cross-border movement. For industry globalism is a double-edge sword, but one they must adjust to.
Regulation and its costs
The companies developing products would say that what makes the cost of drugs hellishly high is the very expensive process of drug testing and approval by the FDA. Everyone is familiar with the process of three-stage clinical trials. For therapeutic development the stages are the source of a very large part of the cost and the inevitable part of why it takes so long to get drugs out.
In many cases cancer-related therapeutics already receive “fast-track” treatment by the Food and Drug Administration, but some pharmaceutical and biotechnology companies say the bar is set too high to bring cancer drugs to market. They would like to see some examination of the trials process with an eye to streamlining it; something, they argue, is in everyone’s interest.
Changing Technology and Science of Cancer
New facets of biology and the life sciences often spin out of advances in science tools and technology. Biotechnology started with application of recombinant DNA. Automated gene sequencing enabled the Human Genome Project. Microarrays—gene chips—continue to spawn new uses such as whole-genome arrays, and protein microarrays. All of these open new dimensions for research and frequently act as “disruptive” technology. That is, new technologies come along that enable new understanding of biology, and they change the economics and feasibility of research and therapeutics. One of the challenges of the industry is adjusting to new technology and utilizing it for products before the next wave changes the rules of the game. One person’s breakthrough is another person’s disruption.
And there is the need for much, much more deep biological insight. So far, no amount of automation has resulted in predictable, manageable progress, and that’s where the corporate model has difficulty. They’ve invested billions of dollars in “rationalizing” drug development without the results they expected…so far.
Of particular interest now is pharmacogenomics. High-density, low-cost microarrays make possible simultaneous measurement of the activity of many genes. This has revealed varying gene expression within categories of disease thought previously to be homogeneous. This has led to sub-categorization or “stratifying” of diseases such as breast cancer. Aggressiveness of the tumor and predictable reaction to drugs may be determined. These more differentiated diagnoses of breast cancer may become useful—indeed may become essential—for determining different treatment protocols.
Recall, however, that the model of pharmaceuticals that has been most successful is a single drug that is marketable for a large incidence group. Moving from one broad category to a differentiated category is threatening to the marketing side of drug development. The further stratification of disease requiring the development of other forms of drugs runs contrary to the blockbuster business model of the past. If subtle differences in drugs need to be developed, each at the same high cost, then how will there ever be the return on investment? The subtle complexity of diseases like cancer and the new-found ability to identify it has, so far, left pharmas grasping for a path to the incentives for development. But the reality of the disease process may leave little option. The days of throwing whatever is available at a case of cancer may come to an end. Cost-effective—and investment effective—alternatives are yet to be worked out.
No business model has emerged yet to respond to the differentiation of disease from pharmacagenomics. It’s the antithesis of the old blockbuster model. However, another decade of development in high throughput assay devices, databases of genetic profiles, in silico biology, could make a big difference. For “personalized medicine” to become reality where effectiveness of prevention, diagnosis and treatment are optimized to the individual’s genetic and metabolic characteristics a lot of progress in making interventions “rational” or targeted or customized is needed . It could happen. And the efficacy of such approaches is yet to be clearly established although current cases are encouraging.
Inflection-point Ahead?
The life sciences industry can count on continued development of advances in important technologies. For instance, centers labs the Institute for Systems Biology in Seattle, Cal Tech, and MIT are working toward the ramp-up of biological assay devices that may achieve a growth curve approximating Moore’s Law. Work is underway to increase exponentially the sensitivity and density of analytic tools such as gene and protein microarrays. Microfluidic chips (labs-on-a-chip) that can isolate, measure, and manipulate single molecules from cells or from blood are in use in research. All these techniques will drop the cost of biological devices precipitously the way the cost of microprocessors has dropped for several decades. This will put unparalleled sensing, measuring, and analytic power in the hands of researchers, clinicians, and consumers. The impact on research, therapeutics development, medicine, and consumer behavior can only be guessed at.
This development curve may have parallels with that of microelectronics. Biology, it seems to me, is where computing was in the late 1960s. Effective computers were available (standard IBM business mainframes), but they were still very expensive, could only be run by technicians, and were only accessible to a few. Gene and protein tools in labs are like than now. However, today’s PCs cost $500, are many times as powerful as those ‘60s machines, they’re on desktops and homes everywhere, and they have changed many aspects of our lives. So what will be the consequence of a similar increase in biological information power in, say, the next decade or so? What if we’re going to see the equivalent to the Home-Biocomputer with the health-related equivalent of Word, Excel and PowerPoint? The impact will likely be extraordinary for companies, for the medical profession, and for ordinary citizens alike.
Changing Nature of Health Marketplace
Another change in the works is the expansion of the degree to which biological products is driven by the possibility of marketing them to consumers for purposes other than relief of frank disease, pain and suffering. The medications process of the past was pretty strictly through the physician. Biological research was under the direction of academics, governmental agency programs, or dedicated organizations such as the ACS.
Increasingly, however, the life science developers are responding to and finding ways to market more directly to the public on a broader range of needs. The DTC (direct to consumer) advertising abounds on television. The industry has effectively piqued the interest of the public with vague ads showing people enjoying life more as a result of all but unknown drugs. The admonition to “ask your doctor if Xorax is right for you” is working well. They are reaching past doctors—the gatekeepers of medicine—and marketing to their clients.
It’s interesting that the IBM vision of the future mentioned above says: “Medical science breakthroughs will become increasingly common, due to increasing consumerism.” With the rise of the for-profit life science industry has come a greater orientation to satisfying consumer needs whether or not those perceived needs align with the priorities of traditional health care providers. Enhancements to lifestyle, amelioration of physical and mental discomfort, quality of life products, will become more prominent. Some prognosticators see this as a fundamental change in the application of resources and availability of products in health care. The public has a broader definition of “health” than most physicians, and the life science industry stands ready to help them expand the boundaries.
Cancer, however, will continue to enjoy a large share of the market and receive development resources because it’s such a loathsome disease. The recent Fortune Magazine cover article, “Why We’re Losing the War on Cancer,” by Clifton Leaf suggested that 25% of for profit R&D budgets are devoted to cancer therapeutics. I don’t know where he got that figure, but it seems reasonable. From attending conferences on molecular medicine and similar topics, Id say much more than 25% of the talk is devoted to cancer product development.
Intellectual Property (IP)
Along with the explosion of life science research from the injection of greatly increased budgets at NIH/NCI and the concomitant second wave of spin-off biotechnology, a phenomenon of altering our understanding what constitutes assets came as well. The biotechnology growth and the financial backing for it came with legal protections for patenting genes and technologies exploiting fundamental biological processes. This is property, not so much of material, but of ideas and findings.
This twist in the law has been controversial from the beginning. To some it seemed like we were giving away the rights to nature or patenting living things; to bioscience researchers and companies it seemed like it was doing the right thing: giving people incentive to commit time and money to discovering things that would eventually benefit everyone.
The controversy continues, but within the life science industry IP is the lifeblood. Intellectual property is definitely their most important product and most treasured asset. The investment money from VCs or from Wall Street is not forthcoming without secure patents. But even within the industry there is controversy. There is a stream of patents starting at the most fundamental level of genes and molecules from living things. Then comes processes based on molecules or chemical dynamics. Then come machines and devices that utilize biological material. Those who are downstream of any of these stages think there shouldn’t be such restrictive patents of anything upstream. Those downstream have to pay upstream patent holders—often many layers of patent holders—to enable their own products and research. They claim that the upstream patents are “strangling” research and development on disease or causing the cost from licenses and litigation to drive the cost of R&D up resulting in more expensive drugs to the consumer.
Again, this is a very complex area with arguments on all sides. But what is important from the perspective of ACS is sorting out of how conflicts or what policies and laws affect the progress of research, of bringing new therapeutics to the health care system, and how the whole thing affects cost and accessibility to treatment. But IP is affected by federal patent and copyright office policy and by law. The patenting of genes was opened by the xxxxxxxxxxxx Law. How does one reach an advocacy position? Various players in the life sciences what support for their position.
The Bottom-Line
One thing is clear: pharmaceuticals and biotechnology are first and foremost a business. They are governed by the rules and influences of the marketplace. Although they make products that affect human wellbeing, these businesses are not in the social salvation part of society. The chief constituents of life science businesses are Wall Street analysts and bankers, VCs, and other equity holders. They are the people that affect whether they are in business at all. Most investors are not in life science to fund human betterment; they are in to grow their own financial betterment. Perhaps Martha Stewart exemplified what investors do when they get wind of trouble for a product such as Imclone’s cancer therapeutic, Arissa, they bail. They don’t ordinarily put more money in because it might help cancer patients. Two companies recently had bad FDA committee recommendations for their cancer products. Their stocks tumbled immediately. It happens over and over again and CEOs of life science companies know the rules.
The chief influences on resource commitment in biotech companies is potential market size, clear IP availability, technological feasibility, competition, and regulatory hurdles.
