Fueling the Fire
Transcript of BioCentury This Week TV Episode 184
Steve Usdin, BioCentury Senior Editor
Eric Pierce, BioCentury Publisher
Erin McCallister, BioCentury Senior Editor
PRODUCTS, COMPANIES, INSTITUTIONS AND PEOPLE MENTIONED
Rep. Henry A. Waxman (D-CA)
Max Baucus, United States Ambassador to China
Rep. John Dingell, (D-CO)
Rep. Frank Pallone, (D-NJ)
Rep. Nancy Pelosi (D-CA)
Rep. Anna Eshoo (D-CA)
Rep. Steny Hoyer (D-MD)
Sen. Ronald Wyden (D-OR)
Dicerna Pharmaceuticals, Inc.
Gilead Sciences, Inc.
Astellas Pharma US, Inc.
Johnston & Johnson, Inc.
Esbriet pirfenidone, InterMune, Inc.
Sovaldi sofosbuvir, Gilead Sciences, Inc.
Health & Human Service
Affordable Care Act
Food & Drug Administration
Centers for Medicare & Medicaid Services
Avalere Health LLC
American Society Clinical Oncology
Bio Industry Organization
Steve Usdin, Senior Editor
ERIC PIERCE: Is the biotech bull market losing steam?
ERIN McCALLISTER: Will Obamacare enrollment go out like a lion or a lamb?
STEVE USDIN: And will high drug prices provoke a backlash?
ERIC PIERCE: I'm Eric Pierce.
ERIN McCALLISTER: I'm Erin McCallister.
STEVE USDIN: And I'm Steve Usdin. Welcome to BioCentury Reporters Roundtable.
NARRATOR: Connecting patients, scientists, innovators, and policymakers to the future of medicine. BioCentury This Week.
STEVE USDIN: BioCentury is expecting a packed agenda this spring. The good times on Wall Street for life science companies may be slowing down. What could rekindle the momentum? On the healthcare front, Obamacare enrollment is set to end on Monday. Will the numbers fuel Republican attacks or help Democrats in the fall elections?
Another big question -- who will replace departing Democratic congressional healthcare leaders like Henry Waxman, John Dingell, and Max Baucus? Also on the spring agenda -- the debate over drug prices is intensifying, and should social media drive decisions about compassionate access to unapproved medical products?
We'll discuss these issues and more on the BioCentury Reporters Roundtable. Eric, we're about five years into the biotech bull market. Things are starting to change now. What's happening?
ERIC PIERCE: It's been a little choppy. But I want to say newsflash, markets don't go up forever, in perpetuity. I think the pullback is actually healthy. If we look at where we were at our last roundtable in January, from the market bottom, March 2009, to our last roundtable in January, the biotech market was up over 250%, a pretty sizable gain.
Since then, through March 21st, the market's added on another 16%. So that window -- they've already built on a 250% increase. We've already gone up almost 20% after that. So there's profits to be made. There are a lot of paper profits that investors have, and we're also coming up against the end of the quarter. And this is when a lot of these portfolio managers get measured on a quarterly basis. And if they have paper profits in a sector, a lot of times those companies come under selling pressure, because those managers want to actually realize those gains.
ERIN McCALLISTER: We hear a lot about generalists now on the biotech market and how much of this hiccup or whatever it is we're seeing right now, how much it has to do with who's investing in biotech?
ERIC PIERCE: It's a great point, Erin. The generalists, they're generalists by name. So a lot of times they might know Amgen. They might know J&J, but they may not know a smaller IPO name that they might have bought in January. So when the markets get a little bit rattled, they might go through their portfolio and say, I don't know this company. I really don't know this company. And a lot of times those are the biotech names.
STEVE USDIN: So I wonder on a bigger picture, two years ago, three years ago, the story was biotech companies -- the model of having venture-backed biotech companies go out and do an IPO and raise a lot of money was broken. People said they the IPO window closed. They couldn't do it. We've seen in the last couple of years that window opened back up. A lot of companies got a lot of money. What has it meant for the whole sector, even if the biotech bull market were to stop tomorrow?
ERIC PIERCE: What it means, Steve, is that the companies have raised the cash. It's on their balance sheets. It's the company's to spend. So if we have 20% correction in the biotech market, the companies still have the money. So their stock price may be down, but the cash is in the bank, so to speak. So they'd still be able to move forward with their programs. They'd still be able to develop the drugs and move forward with their business plans, because the cash has already been raised.
STEVE USDIN: Is part of this also that so many companies went out with IPOs in the last year that it isn't possible or it isn't likely, it seems to me, that you could have that many more companies that are good companies waiting to come out with IPOs going forward?
ERIC PIERCE: You know what's interesting? I said that at the last roundtable. But since our last roundtable, we've had another 33 companies sell IPOs. And this is in a 12-week period, and they've raised 2 and 1/2 billion dollars.
And what's interesting is you -- not to really speak about the quality, but the investor mindset really shifted more toward platform companies. Some of the earlier companies that went out on the IPO were later stage companies, some even commercial companies with late-stage assets. And now some of these companies that are going out recently are pre-clinical, Phase I. But they're more platform assets, like a Dicerna, which raised 90 million. And they have an RNA platform.
ERIN McCALLISTER: And like you mentioned, you have the VCs that invest in these companies, they're making these profits now from the companies going public. What are we going to see from them in terms of using those profits to reinvest in?
ERIC PIERCE: There's been a lot a liquidity, and we know it will recycle. But we don't know when it will recycle, so it probably will take some time. But clearly the VCs are in a much better spot than they were two or three years ago, when really the only opportunity for them to exit their investment was to sell to a big pharma, when the IPO window was closed.
STEVE USDIN: So you're seeing this -- again, there's this big run-up in valuations, IPOs. Is everything good news? Or is there some sector, some part of the biotech industry that's still struggling to get financing?
ERIC PIERCE: Well, you know, it's interesting. I mean, biotech basically lives and breathes on good and bad news. Every day there's some failure. In fact, last week there was a Swedish orphan company that had a failure of their neonatal drug, which was a Phase III failure. And their stocks are going to take a haircut because of it.
So there's still going to be bad news in the system. I think what investors are looking for are some of the really key fundamentals that the industry has lined up for them, like product launches, Phase II data, Phase III data, and PDUFA dates.
STEVE USDIN: And briefly, we're going to get back to some predictions at the end of the show. But how does the rest of the year look? Are there a lot of milestones teed up that might keep things -- keep investor excitement?
ERIC PIERCE: I think I can honestly say I think the biotech industry as a whole is about as healthy as it's ever been in the last 10 years. We'll dig into that a little bit more later.
STEVE USDIN: That's a great way to end this segment. We're going to be back in a moment to talk about the politics of the Affordable Care Act and the uproar over a breakthrough hepatitis C therapy.
NARRATOR: You're watching BioCentury This Week.
STEVE USDIN: We're back with BioCentury's Eric Pierce and Erin McCallister for more of the BioCentury Reporter's Roundtable. Erin, the Affordable Care Act, the deadline was going to be on Monday. What's happened with that, for enrollment in the exchanges?
ERIN MCCALLISTER: So they've just come out this week, and they've said that you have until Monday to start your application. Then you have until about mid-April to finish the application. So is that going to have a big impact? I don't think it's going to have a material impact. We'll see somewhere between I think 5 and 1/2 million. I don't think they'll hit the 6 million mark.
I think the bigger question about the Affordable Care Act and whether or not it's successful in this first year is going to be, who are these people that are signing up?
STEVE USDIN: What do we know about them?
ERIN MCCALLISTER: What do we know about them? And I have a feeling we're not going to know much. HHS is going to tell us how old they are and things like that. So we'll see what the risk pool looks like. But in terms of their insurance status before and what it is now, I don't know that HHS will do that so much as other people will go and find those numbers.
STEVE USDIN: The real question there is, is the administration really bringing in people who weren't insured and getting them insured, or are they just shifting people around from one kind of insurance to another?
ERIC PIERCE: I think the key question is, are these new people, who were totally uninsured, or people that were partially insured are now getting better insurance?
ERIN MCCALLISTER: There's that word, they use under-insured and uninsured. It's kind of like jobs saved or created. And so I think that the under-insured part comes from before, there were plans that weren't required to meet these essential health benefits. There's ten of them. Now, all the plans in the exchanges meet them.
So maybe they didn't have dental insurance before, and now they have it now. But does it necessarily mean the plan is better? We've seen analysis from Avalere that suggests the formularies in these plans on the exchanges are more restrictive than formularies in private plans.
ERIC PIERCE: So they may not be better.
STEVE USDIN: For some people. I want to shift over to another topic that you've written about recently and that's really hot, which is the uproar around the pricing of a breakthrough hepatitis C therapy. Can you talk about that?
ERIN MCCALLISTER: The drug is Sovaldi. It's from Gilead. Add it's to treat hepatitis C and multiple different genotypes of hepatitis C. Costs $84,000 for a 12-week regimen. When you add in peginterferon and ribavirin, the cost goes up to just over $90,000. And on the surface, it's really not too different from the other HCV drugs that are out there that had to be used in a similar triple therapy combination, from a pricing standpoint, similar.
But the difference is, is this drug doesn't have a lot of the side effects. It's going to be used by a lot more people. And then you get down to cost. The other part is, you can have a completely interferon-free regimen. But you have to take it for twice as long.
That is much more tolerable. That's 65% of the HCV population that is interferon-intolerant. So then you're just adding to the cost even more.
STEVE USDIN: So to summarize, there's this new drug that's come out from Gilead that's much better. Everybody acknowledges that it's a therapeutic breakthrough, and it's much better for the patients. It costs $80,000 to $100,000. And the concern is that there are going to be a lot more people who are going to take in it.
How's that concern manifested itself, politically, from payers?
ERIN MCCALLISTER: From the day Gilead priced the drug, we had the Coalition for Fair Pricing suggest that it was way too much. And then it's showed up in headlines over the course of the last several months. The drug was launched in December. And then earlier in March, Waxman and some of the other ranking members on the House Energy and Commerce Committee sent a letter to Gilead and said, what's going on here, how did you come up with the price of this drug, what sort of discounts are you giving, and things like that?
Now Gilead hasn't said if it will respond. So now, it's really --
ERIC PIERCE: I have a question So is this a one-time issue with an HCV drug, or is this a harbinger of things to come?
ERIN MCCALLISTER: Well, I think the HCV thing, I think it is a harbinger. But I think the HCV drug, it will sort itself out, because in the next 18 months, we're going to see about four more drugs launched. And it give payers the opportunity to negotiate and get some leverage and maybe get the price down.
But I think overall, I think it is absolutely a sign of things to come. There'll be a lot more pressure on companies to justify these premium prices. We've seen it in the UK, with an orphan drug.
STEVE USDIN: And we're seeing it here. Just recently on the show, we had the chief medical officer of ASCO, the American Society of Clinical Oncology, who said that they're going to create a scorecard, a value scorecard, for physicians to use to determine whether they think that a drug is even is worth it, a cancer drug is worth it. And price is going to be one of the big components of that.
ERIN MCCALLISTER: That's right. And I think in cancer in particular is where we'll start to see that focus, because as more drugs come out, we're going to talk about cancer immunotherapies later possibly. The idea is with these immunotherapies is, they will be used in combination. So you'll be looking at $200,000.
ERIC PIERCE: Not a single therapy, but multiple therapies.
ERIN MCCALLISTER: You're looking at very large price tags.
STEVE USDIN: One of the things that Gilead is doing is, that they're making the drug available at very low costs in other countries. For example, in Egypt, a full course of therapy is $900, compared to $80,000 to $100,000 in the United States. Is there going to be pressure to say, well, what about poor people in the United States and Europe?
ERIN MCCALLISTER: Yeah, I think first of all, the Medicaid population, they get a 23% discount off the top. But Medicaid payers and providers have told us, told me that that's not enough. This drug is worth it at about 75% of a discount. So I think there will be pressure to lower it.
But I think broader, I think that we are going to see a lot more pressure, not just on Gilead, but just in general on pharma companies and biotech companies, justifying premium pricing and how you measure the benefit to the patient, the payer, and society.
ERIC PIERCE: This doesn't put the industry in a positive light, when you have an innovator company that's worked years on this drug. And they price it where they price it. How much of a knock on effect is this going to have?
ERIN MCCALLISTER: I think in Gilead's case, there may have been an opportunity to price it below where the other drugs were and come in as the hero, still made billions of dollars, because the market so large. I think that the knock on effect will continue to be for companies to delve more into what the real value of the drug is. What's the benefit to patients, and to provide that evidence up front, early, and consistently.
STEVE USDIN: One of the other things that's interesting that's happening is the so-called patent cliff, a lot of high price drugs, Lipitor and other drugs, going off patent. That's pretty much over now. So there isn't going to be a lot more room for new drugs to come in at high prices. How is that going to work?
You mentioned Medicaid. The state governments, they're already stretched as tight as they can get. Now, there's no room for any new drug. Even if it cost $2, if they come in, they're going to have to cut something else. How is that going to work?
ERIN MCCALLISTER: Companies are going to have to come in with a willingness to negotiate. And they're going to have to come in with the modeling -- the other part here is that a drug like the hepatitis C drug, you're talking about costs avoided. Liver transplant is half a million dollars.
But only a small percentage of patients get that. So you're going to have to do a lot more thought into what the savings to the system are for that drug, and demonstrate that through pharmacoeconomic analysis.
STEVE USDIN: And that's kind of disturbing, because you're going to have some situations, it seems to me, where you have a drug that really helps people. And it's a therapeutic advance. And maybe it doesn't actually save any money.
ERIN MCCALLISTER: Yeah, that's also another point. It shouldn't just be about money saved in a budgetary impact. It should also be about quality of life measures and other things that need to be factored in here. So I think that it will continue to be an issue.
STEVE USDIN: In a moment, we're going to come back in and discuss how musical chairs in Congress could impact the life sciences.
NARRATOR: Now, back to BioCentury This Week.
STEVE USDIN: This is the BioCentury Reporter's Round Table with my colleagues, Erin McCallister and Eric Pierce. I'm going to start out this round and say that one of the things I think that's really important that hasn't got a lot of attention is the fact that a lot of the Democrats in Congress who have the most experience with healthcare policy issues are leaving.
We had Henry Waxman on the show. We had an interview with him the recently. He's retiring.
John Dingell, who is probably the longest serving member of Congress, he's leaving. He had an intense interest in healthcare and FDA issues. Max Baucus in the Senate left and became ambassador to China. So we're going to have a different environment in Washington going forward.
ERIN MCCALLISTER: So who are the contenders, the next in line, so to speak? And what are their positions, all that?
STEVE USDIN: So one of things that's interesting that's happening is that there's a tussle over who's going to get to be the next ranking member of the Energy and Commerce committee. That's the key committee that has authority over FDA and lot of other healthcare issues. So if you just looked at seniority, then Frank Pallone from New Jersey would become the next ranking member of the committee.
But Anna Eshoo from California has made it clear that she wants to get the job. And now, there's a conflict that's going on. Because Nancy Pelosi has endorsed Anna Eshoo. So Steny Hoyer, her number two, has endorsed Pallone. So there's a conflict there.
ERIN MCCALLISTER: And how do they differ? You know, is one better for pharma than the others, the FDA, how is that all --?
STEVE USDIN: Well, they do have different views on things. Anna Eshoo got the BIO industry organization's Legislator of the Year award. I think it was in 2010. She basically is a hero for a certain segment of the biotech industry because she made it so that biologics get 12 years of exclusivity. And it protects them from competition from biosimilars.
And she's done some other things. She's been very supportive of the innovator side of the biotech industry. Pallone has been more, well, is more similar to Waxman's views -- tougher on industry, more supportive on generic issues.
ERIC PIERCE: Going forward, regardless of how the elections shake out, do you think that we're turning into having maybe a potential void for leadership?
STEVE USDIN: No. I don't think it's a void. I think it's a shifting.
For example, Max Baucus left the Finance committee in the Senate. And we've got Ron Wyden who came and took the chairmanship. He's got a longstanding interest in healthcare issues, back from when he was in the House.
And some of his positions are quite controversial. For example, he's made a big point in his career to try to get collaborations between NIH and industry to have pricing components in there. Basically to say that if government is collaborating with industry and it leads to the development of a drug, that NIH ought to have a say in what the pricing of that drug is.
ERIN MCCALLISTER: One of the other things that's been in the news recently is this debate over compassionate use and access to experimental drugs. Can you talk a little bit about that?
STEVE USDIN: Well, yeah. That has been the headlines. And really, there are a lot of issues. I don't think the media has done a very good job of covering it. To me, one of the --
ERIC PIERCE: The media never does a good job of covering breakthrough medicine and --
STEVE USDIN: Except for BioCentury. So the --
ERIC PIERCE: The lay media, right?
ERIN MCCALLISTER: Right.
STEVE USDIN: The thing that's really important there to me, I think, is the fact that the controversy was about a seven-year-old boy who wanted and needed access to an experimental therapy, and was denied it. And his parents launched a social media campaign, was on TV. And the company and the FDA worked together, and found a way to get him access to it. And a lot of media then just moved on, said, well, that's a great story.
To me, the problem is that it shows the inequities in compassionate access. There were hundreds of other kids who could have benefited from that drug who haven't gotten it. And the fact that the one who got it is the one that launched a social media campaign, well, anybody's parents would have done that if they could have done it. But there's something wrong with a system where somebody who has the sophistication to get on television, or they get a lot of people to sign a petition, or they get something to go viral on Twitter --
ERIC PIERCE: That's a great point.
STEVE USDIN: -- are the ones who get access.
ERIC PIERCE: So how do we fix that? So do we need better regulation? Do we need company CEOs who will make changes to who gets access to their drug? What's needed to fix it?
STEVE USDIN: It's more than we've got time to get into today. But personally, I believe that there needs to be a better system and a more transparent system for determining who gets access and what are the terms of getting early access to drugs before they're approved.
In a moment, we're going back with some predictions for the spring and beyond.
NARRATOR: Every month, BioCentury This Week will feature Profiles in Innovation, a special segment highlighting the stories of innovators whose work is improving lives and transforming the world of healthcare.
STEVE USDIN: We're back with the BioCentury Reporters Roundtable. Now, some predictions. Eric, can you start out with some predictions about the market -- what investors are looking for in the coming quarter?
ERIC PIERCE: The industry is very, very healthy, Steve. If you look at it from a milestone prospective going forward, there's a lot of really, really solid milestones that could be transformational, not only for the company, but also whether we bring more generalist investors back --
STEVE USDIN: So can you give some examples?
ERIC PIERCE: Well, so if you look at the biotech sector, the first time we tried to be a commercial sector, we really didn't launch drugs very well. It was more of an R&D based management. And then they really didn't understand how to launch drugs.
This last set of drug launches have just knocked the socks off -- blown through all the analysts' projections. So I think now the blush is coming back on the rose with commercial staged companies. So some of the key milestones that will be later stage, commercially driven -- InterMune, their launch of pirfenidone.
ERIN MCCALLISTER: Yeah, pirfenidone Yeah, they had some good, positive Phase III data they're going to re-submit to FDA and see if this will be the one that takes them over the hump.
STEVE USDIN: And the interesting thing there is that it was approved years ago in Europe, and there's a lot of controversy here about whether FDA should have approved it earlier.
ERIN MCCALLISTER: That's right. And we did -- we talked to some doctors and they said, yeah, it would've been great to have access to this drug. But in reality, it doesn't do a whole lot, and they're already looking at the next drugs coming down the pipeline, one of which is from Boehringer Ingelheim. So I think that it will be good for InterMune, but I think that we'll also be seeing more drugs in the --
STEVE USDIN: And it's for?
ERIN MCCALLISTER: It's for IPF.
ERIC PIERCE: Yeah. And the interesting thing, too, is -- we brought it up earlier in the show -- is these companies, their success basically just makes the next hurdle that much harder. So these companies are now really not launching products into markets where they don't have competition. A lot of times, now, we have biotech companies competing with other biotech companies and pharma in spaces.
And one area that's going to be really hot in the second half of the year is prostate cancer. There are a number of launches that will be new this year. There are also a number of drugs that were launched the past two years that we'll start to see some traction on.
ERIN MCCALLISTER: Right. Yeah. We'll see Xtandi, from Medivation and Astellas. It's already out there. It's on the market, but they're going to move -- they're hoping to move to front line, where Zytiga from J&J is already at. And there is a possibility that it gets good uptake because the Medivation drug doesn't have to be taken with prednisone.
I think another area that there's a lot of talk about -- and it's more on the pharma side -- is the PD-1 data. We're going to start to see data on PD-1.
STEVE USDIN: Explain what that is.
ERIN MCCALLISTER: And PD-1 is -- a tumor cell in the body, it let's off all kinds of signals. One of them is PD-1, which tells the body's immune system not to attack the tumor. Drugs out there in development that we're talking about, they bind to that PD-1, so that allows the immune system to fight the tumor.
ERIC PIERCE: Yeah.
STEVE USDIN: So there's basically -- there's a whole bunch of new cancer drugs that are based on this target.
ERIN MCCALLISTER: That's right.
STEVE USDIN: We've got just a little bit time left. Quickly -- we had a show recently about Medicare where they had their proposal to change the way that the drug benefit is delivered.
ERIN MCCALLISTER: Right.
STEVE USDIN: And the day after the show, they pulled that back.
ERIN MCCALLISTER: That's right. The changes to Part D -- right. It created a huge uproar. Patient community, payer community -- everyone thought it was a terrible idea.
STEVE USDIN: So are we done with this? We're not going to see it anymore?
ERIN MCCALLISTER: I think that we'll see some piecemeal changes over the course of the next few years.
STEVE USDIN: What kinds of changes?
ERIN MCCALLISTER: I think that we'll see some of the changes on the provider network side, in terms of preferred networks. We'll see some changes there. And I think we might see the reduction in plans available. I think they'll probably still go forward with that.
STEVE USDIN: And what about the cutting back on the protected classes? Because that's something they got the most attention.
ERIN MCCALLISTER: That got the most attention. I think that will be a tough road to hoe if CMS tries to go back down it, so --
ERIC PIERCE: And if I could if I just throw a prediction in. I think cancer immunotherapy is going to cool off, from a venture capital standpoint. I think the space has been a little bit overheated. A number of companies have been formed, raising hundreds of millions of dollars. And I don't think you can just straight line that and continue at that level.
STEVE USDIN: Well, we're going to have to leave it that. Thanks. That's this week's show.
I'd like to thank my colleagues Erin McCallister and Eric Pierce. Remember to share your thoughts about today's show on Twitter. Join the conversation by using the hashtag #BioCenturyTV. I'm Steve Usdin. Thanks for watching.