is the recent introduction of cures for Hepatitis C, a deadly, chronic liver infection. The $84,000 list price of sofosbuvir (Sovaldi, sold by Gilead Sciences (NASDAQ: [[ticker:GILD]]) has drawn a massive backlash, yet independent academic groups have noted that these treatments are, in fact, cost-effective, and that’s even before one takes into account that payers have been able to negotiate almost 50 percent discounts to the list price. Overall, published studies have shown that every $1 spent on advanced drugs cuts healthcare spending by between $2 and $6.
So where is the disconnect? Well, for one thing, the beneficiaries of reduced costs long-term are usually not the same as the entities that have to pay for the medicines in the short term. We must address the critical issues of value and access to new medicines—in this regard, BIO recently published a list of Principles, supported unanimously by the 100 or so CEOs on the Board. These principles commit us to doing our part to ensure that all patients who need the medicines we produce have access to them, and to engaging in good faith dialogue with other stakeholders in the healthcare system, particularly payers, government and regulatory entities, and patient groups, to develop new ways of paying for innovative medicines, including such ideas as outcome- and value-based contracting. We are challenging payers to do the same, given that insurers often are denying their subscribers access to medicines by imposing high co-pays and other restrictions. We also need government and regulators to help change certain laws and regulations that actually prevent us from having critical conversations that could lead to solutions.
X: Related to pricing in general, cancer treatment is almost certainly going to be about various cocktails of drugs. But given even one of them already costs six figures, how can we possibly afford them?
RC: There is no dispute that healthcare costs in the United States are high—and not just in oncology or biopharmaceuticals, but across the board—including hospitals, diagnostics, health care providers, and procedures. We are spending close to 20 percent of our GDP on healthcare costs, and drugs account for about 14 percent of healthcare spending. I believe it’s fair to point out that for cancer specifically, new pharmaceuticals are less than 1 percent of total healthcare spending.
But in my view, that is not the right conversation. The right conversation must take place among the various parties regarding how best to ensure value, desired outcomes, and patient access.
X: All this sounds like an admirable goal, but a critic might say it is punting the issue by suggesting something unlikely to happen. I’m not asking you to solve the issue. But is there a first step for this? Do we expect government to lead, or will drug companies, payers, and providers somehow come together and say, we are taking this into our own hands?
RC: It needs to be a collaboration among all of those groups. I’m encouraged that some biopharma companies and payers have already been working jointly on innovative risk-sharing and value-based pricing models. For example, the developer of a major new heart failure drug is collaborating with payers to measure outcomes such as reduced hospitalizations, and will be paid based on what outcomes are achieved. To accelerate such arrangements, government needs to change laws and regulations that currently inhibit implementation of these kinds of programs. For example, “best pricing” policies must change to allow development of creative payment plans without imposing undue penalties on drug innovators. Another example is regulations that prevent certain value-based conversations between drug innovators and payers, because they are not strictly “on-label.”
X: Let’s move to the fundraising and IPO climate. Private companies were raising large rounds and parading through the IPO queue from 2013 through most of last year, and many were rewarded with big valuations—even without human clinical data. That boom was fueled in part by sophisticated crossover investors giving private companies a boost into the public markets. Are they going to melt away now that the public markets have cooled?
RC: What we’re seeing now is consistent with the entire history of investment in the biopharma investing, which has been cyclical. Despite the recent market turmoil, I’m actually bullish on the overall prospects. Biopharma deal-making is likely to continue at a healthy rate this year, as investors sort out the uncertainties that exist across all markets, and also find opportunities in the reduced valuations on desirable assets, as well as the need for capital among innovative companies. Generalist investors may have been leaving the space; however, biotech fundamentals remain perhaps the strongest in history: traditional venture firms are still investing, as are sophisticated public life science investors. Where some see risk, others find opportunity.
X: You mentioned the FDA earlier. There have been several instances over the past few years when companies (Amicus, Esperion, Sarepta, etc.) put out releases setting expectations one way, based on meetings with the FDA, only to see them have gotten those interactions completely wrong and take huge hits to their stock and credibility. Some have said this speaks to a lack of transparency about the communications between drug companies and the FDA. Do you agree, and if so, what might be done about this?
RC: I can’t comment on specific interactions, but in general, I believe that the agency has been making continuous improvements in the way it communicates with industry. It is absolutely critical that Congress allocate to the FDA the funding it needs to hire the qualified personnel it needs to address an increasing flow of innovative new medicines. Providing appropriate resources, particularly in terms of staffing, allows the FDA and industry to work together effectively to get safe and effective medical advances to the public as quickly as possible.
X: The Pfizer-Allergan merger has brought new attention to the issue of U.S. companies moving “headquarters” offshore to pay lower taxes. What is the industry’s position on such inversions? Are there key issues that have been lost as people react to the headlines?
RC: BIO, and to my knowledge, PhRMA [the pharmaceutical industry’s trade association], do not have positions on inversions. I will say that as a biotech CEO, companies are looking at these kinds of transactions because the current U.S. tax structure puts us at a serious competitive disadvantage versus companies in every other country in the developed world. Congress needs to recall the adage that “it’s better to light a candle than to curse the darkness;” instead of vilifying companies that move their corporate headquarters outside the U.S., we would be better served addressing the underlying issues in the tax code. If we had a level playing field, why would anyone want to move?
X: What are the big issues for Acorda for the new year—what plans can you discuss for your own company?
RC: When I founded Acorda in 1995, my vision was to create a company that would restore function to people with devastating neurological conditions, such as spinal cord injury, multiple sclerosis, and Parkinson’s disease. The greatest thrill of my life—apart from the birth of my two daughters—was when we got our first therapy approved in 2010, after 15 years of trials and tribulations: that drug, Ampyra, is helping tens of thousands of people worldwide who have multiple sclerosis. Today, Acorda has five products in clinical trials and we kicked off 2016 by announcing the acquisition of Biotie Therapies, which will add three additional clinical products, two of them promising compounds for Parkinson’s disease. Coupled with our existing Phase 3 Parkinson’s program, CVT-301, this transaction has the potential to establish Acorda as a leader in Parkinson’s therapeutic development. We’ll be working over the next several months to complete the Biotie acquisition and integrate their team into Acorda. We’ll also continue to focus on advancing our pipeline. With Biotie, we expect to have four Phase 3 programs in Parkinson’s, epilepsy, and post-stroke walking deficits, and anticipate filing two NDAs in the first quarter of 2017. So our top priority for the year is execution on clinical trials and preparing regulatory filings.
