Policy and Medicine

PhRMA Report: Over 5400 Medicines in Development and 70% are First in Class

According to a report released by PhRMA, companies have more than 5,400 medicines in development globally, and more than 70% of therapies in the pipeline are potentially first-in-class and could offer patients new treatment options, and a notable number of potential therapies target diseases with limited treatment options such as ALS and rare diseases.  A breakdown of their report offers insight into the various medicines in development for different diseases and populations.   

Older Americans 

America’s biopharmaceutical research companies are developing 465 new medicines that target the 10 leading chronic conditions affecting seniors.  These medicines – all in human clinical trials or under review the U.S. Food and Drug Administration (FDA) – are diverse in scope.  They include: 

• 142 for diabetes, which affect 12.2 million Americans age 60 and older;
• 92 for rheumatoid arthritis and osteoarthritis, which affect 1.3 million Americans and up to 80 percent of people over age 80, respectively;
• 82 for Alzheimer’s disease, which could afflict 8 million people in the U.S. by 2030 unless a treatment or preventative measure is found;
• 48 for heart failure (affecting 5.7 million Americans) and ischemic heart disease; and
• 40 for chronic obstructive pulmonary disease, which impacts more than 13 million adults, with the highest prevalence rate in those over age 65. 

Similarly, many of the medicines in development for older Americans build on build on our growing knowledge and scientific progress to attack diseases in different ways. Among the potential medicines listed in the report are: 

• A treatment that aims to prevent or reverse progression of Alzheimer’s disease by using a human monoclonal antibody specifically designed to draw beta amyloid protein away from the brain through the blood system.
• A medication that combines two long-acting drugs, allowing for once-daily dosing in COPD.
• A potential first-in-class medicine to treat type 2 diabetes that increases insulin secretion without causing insulin to significantly lower blood sugar.
• A medicine that recruits a patients’ own neural stem cells to repair or protect against damage to the central nervous system from stress hormones, which can lead to depression 

Alzheimer’s 

There are more than five million Americans living with Alzheimer’s today, which costs the American health care system $200 billion a year. That number that could jump to 13.5 million by 2050, and the related costs of care would reach $447 billion.  A report released in December 2012, “Alzheimer’s Research: Setbacks and Stepping Stones,” found that between 1998 and 2011, 101 treatments have failed to reach patients.  In the same time period, three medicines have been approved to treat symptoms of the disease.  This 34 to one ratio of setbacks to successes underlines the difficulty of developing new medicines for Alzheimer’s. 

For patients with Alzheimer’s and other dementia, America’s biopharmaceutical research companies have 93 medicines in clinical trials or awaiting FDA approval.  The medicines in development – all in either clinical trials or under review by the Food and Drug Administration – include 81 for Alzheimer’s, 11 for cognition disorders and 2 for dementias.  Examples include: 

• An intranasal medicine that is able to penetrate the blood-brain barrier for mild cognitive impairment, a precursor to Alzheimer’s disease.
• A gene therapy for the treatment of Alzheimer’s disease.
• A synthetic vaccine that induces antibody production without creating a systemic immune response 

PhRMA provided a useful list of clinical trials and links to their ClinicalTrials.gov homepage.   

Arthritis 

Arthritis is the most common cause of disability in the United States. Each year, it is responsible for 44 million outpatient doctor visits, nearly 1 million hospitalizations, and nearly 10,000 deaths. And it costs the American economy nearly $128 billion annually in direct medical costs and indirect costs, such as lost wages and productivity.  By 2030, it is estimated that the number of Americans with some form of diagnosed arthritis will increase to more than 67 million. 

The gains that have been made over the past 20 years in the treatment of patients with rheumatoid arthritis (RA), a devastating autoimmune disease that causes progressive joint deterioration and pain, show the impact treatment advances over time can play in improving the lives of millions of patients.  A PhRMA-sponsored white paper authored by Boston Healthcare Associates, Inc., Recognizing the Value of Innovation in the Treatment of Rheumatoid Arthritis, explores the various ways in which additional clinical value — including improved outcomes and quality of life — has been realized over time for RA patients as our understanding of the underlying disease expands. 

America’s biopharmaceutical research companies are currently developing 198 medicines to help the more than 50 million Americans afflicted with at least one of the 100 different musculoskeletal disorders, including arthritis.  All of the medicines are either in clinical trials or awaiting review by the U.S. Food and Drug Administration.  They include: 

• 67 for rheumatoid arthritis that affects about 1.3 million American adults.
• 23 for osteoporosis that affects 10 million people, 80 percent of whom are women.
• 19 for lupus which affects an estimated 1.5 million Americans.
• 19 for osteoarthritis, the most common form of arthritis, affecting nearly 27 million Americans.
• 15 for musculoskeletal pain that affects the muscles, ligaments, tendons, and bones.
• 9 for fibromyalgia which affects 3 million to 6 million Americans. 

Examples of some medicines now being tested to treat musculoskeletal disorders include: 

• A new monoclonal antibody in development for lupus modulates B-cells that produce antibodies against the body’s own cells and tissue, causing the immune system to turn on itself.
• A medicine in development for rheumatoid arthritis (RA) that inhibits two types of an enzyme that are key components in signaling activation of cytokines and growth factors that are elevated in patients with RA.
• A potential first-in-class medicine in development for pain associated with osteoarthritis that is an inhibitor of a gene-encoding protein that plays a role in inflammatory pain. 

Asthma 

Asthma is a narrowing of the airways to the lungs caused by inflammation in the air passages, resulting from both genetic and environmental influences. Today, more than 24 million American adults and children suffer from asthma, with the prevalence increasing 12 percent in the last decade, according to the Centers for Disease Control and Prevention. Each day, 40,000 Americans miss school or work due to asthma, costing the U.S. economy an estimated $56 billion each year in direct and indirect costs. 

America’s biopharmaceutical research companies are working on 74 medicines to treat asthma, and PhRMA gave several examples.  

Biotechnology and Biologics 

America’s biopharmaceutical research companies are using biological processes to develop 907 medicines and vaccines targeting more than 100 diseases—including 352 for cancer, 188 for infectious diseases, 69 for autoimmune diseases, and 39 for AIDS/HIV and related conditions. Biologics are made from a variety of natural sources—human, animal or microorganisms. Like small-molecule drugs, some biologics are intended to treat diseases and medical conditions. Other biologics are used to prevent or diagnose disease.  The medicines and vaccines – all in human clinical trials or under review the U.S. Food and Drug Administration (FDA) – include 338 monoclonal antibodies, 250 vaccines, 93 recombinant proteins, 60 cell therapies, 46 gene therapies and 30 antisense medicines.  on biologics.   

Cancer 

America’s biopharmaceutical research companies are testing 981 medicines and vaccines to help in the fight against cancer.  These potential medicines, which are either in clinical trials or under review by the Food and Drug Administration, include 121 for lung cancer, 117 for lymphoma and 111 for breast cancer. 

More than 1.6 million new cases of cancer are expected in 2012. Researchers’ deep commitment to patients and advancing science is at the core of the remarkable progress made in fighting cancer.  Since 1980, life expectancy for cancer patients has increased by about three years, and 83 percent of those gains are attributable to new treatments.  According to the American Cancer Society, the cancer death rate fell 22% for men and 14% for women between 1990 and 2007, which translated to 898,000 fewer deaths from the disease in this period. 

In addition to the benefits for patients and their families, declines in cancer death rates have a tremendous economic impact.  The National Institutes of Health estimates overall costs for cancer in 2007 at $226.8 billion: $103.8 billion for direct medical costs (all health expenditures) and $123 billion for indirect mortality costs (cost of lost productivity due to premature death). According to recent research from the University of Chicago, reducing cancer death rates by 10 percent would be worth roughly $4.4 trillion in economic value to current and future generations. 

Children 

America’s biopharmaceutical companies are researching 316 medicines to help meet the unique health care needs of children and adolescents.  Thanks in part to major treatment advances, 82 percent of children diagnosed with cancer will survive five years or longer today, compared to 58 percent three decades ago, according to the American Cancer Society. 

Chronic Obstructive Pulmonary Disease (COPD) 

Approximately 13 million American adults suffer from COPD, which is a progressive lower respiratory disease that encompasses two main conditions–chronic bronchitis and emphysema.  In addition to those who have been diagnosed with the disease, 12 million Americans likely have COPD without knowing it.  Biopharmaceutical companies are working on 54 medicines to treat the disease. 

Diabetes 

Diabetes affects nearly 26 million Americans—8.3 percent of the U.S. population—and about one-quarter are unaware they have the disease.  One in 10 American adults has diabetes now and as many as one in three could face the disease by 2050 if current trends continue, according to the Centers for Disease Control and Prevention. In addition to the terrible human toll associated with these outcomes, the economic consequences of diabetes are enormous.  In 2007, the cost of diabetes in the United States was $174 billion. If the additional costs of undiagnosed diabetes ($18 billion), pre-diabetes ($25 billion) and gestational diabetes ($623 million) are factored, the total annual cost of diabetes in the U.S. amounts to $218 billion. 

There are currently 221 medicines in the pipeline to treat diabetes and related conditions, in either clinical trials or awaiting approval from the FDA.  These medicines in development – all in either clinical trials or under review by FDA – include 32 for type 1 diabetes, 130 for type 2 and 64 for diabetes-related conditions.  There are 439 clinical trials listed here include 298 that have not yet started recruiting patients or are just now seeking volunteers to participate and another 141 that are active, but not recruiting new  patients.  

Since 1990, six new classes of diabetes type 2 medicines have been approved by FDA, giving patients and providers powerful new tools to treat the condition. America’s biopharmaceutical research companies continue to explore many different approaches to battle diabetes. Examples of the potential innovations outlined in the report include: 

• A once-daily medicine that selectively inhibits the protein associated with glucose metabolism.
• A medicine designed to inhibit an enzyme linked to diabetic neuropathy.
• A medicine to treat type 2 diabetes that may allow for once-weekly dosing. 

A recent study in Health Affairs projected that improved adherence to diabetes medications could result in a reduction of more than one million emergency room visits and close to 620,000 hospitalizations annually, for a total potential savings of $8.3 billion annually. 

Heart Disease and Stroke 

The momentum of drug discovery helped cut deaths from heart disease and stroke by 31 percent between 1998 and 2008.  In 2008, stroke dropped to the fourth leading cause of death after being the third for more than 50 years.  According to the National Heart, Lung and Blood Institute (NHLBI), if death rates were the same as those of 30 years ago, 815,000 more Americans would die of heart disease annually and 250,000 more would die of stroke.  The cost of these diseases to American society is more than $503 billion a year. 

Much of the progress is due to the development of effective medicines to control both blood pressure and cholesterol, according to officials at the NHLBI. In addition, treatment of heart attacks has vastly improved. Twenty-five years ago, the treatment for heart attacks was simply bed rest. Today, doctors have medicines that can stop a heart attack in mid-stream, as well as other effective treatments.   

Maintaining that momentum, biopharmaceutical companies have developed 299 medicines for these diseases that are in clinical trials or awaiting approval by the FDA.  The medicines in development include 43 for lipid disorders, such as high cholesterol, 36 for heart failure, 27 for high blood pressure, 17 for heart attacks, and 27 for stroke. Many of the potential medicines use cutting-edge technologies and new scientific approaches. 

HIV/AIDS 

Since the approval of anti‐retroviral treatments (ART) in 1995, the AIDS death rate has dropped by more than 80 percent.  Testing for the disease also has advanced dramatically, enabling earlier treatment.  Instead of being a death sentence, HIV is now often a manageable chronic disease.  

Biopharmaceutical research companies are developing 73 medicines and vaccines, focusing on improved treatment regimens, more effective therapies and promising new preventative solutions.  The medicines in development – all in either clinical trials or under review by the FDA – include 40 antivirals, 25 vaccines, four cell or gene therapies, and four immunomodulators. Examples of potential innovations included in the report include: 

• An antisense gene therapy that uses genetic material derived from HIV-1 itself to remove disease-causing aspects of the virus.
• A transdermal vaccine comprised of DNA plasmids that helps suppress virus replication and destroys HIV-infected cells.
• A first-in-class medicine that is intended to prevent the HIV virus from attaching to new cells and breaking through the cell membrane. 

PhRMA provided a useful list of 137 clinical trials, including 51 that had not started recruiting or ar just now seeking volunteers, and another 86 that are active but not seeking new patients.  

Mental Illness 

The National Institute of Mental Health (NIMH) estimates that 1 in 4 American adults suffer from a diagnosable mental disorder.  According to the NIMH, serious mental illnesses cost the United States more than $317 billion annually in lost wages, health care expenditures, and disability benefits. 

Pharmaceutical research is targeting mental illnesses with nearly 200 medicines in clinical trials or awaiting approval by FDA.  This includes 26 medicines for addictive disorders; 20 for ADHD; 52 for depression; 36 for schizophrenia; 22 for sleep disorders; and 26 for anxiety disorders.  These medications are targeted at helping the more than 300 million people worldwide who suffer from some form of mental illness—from anxiety to depression and from schizophrenia to addictive disorders, such as dependence on alcohol or drugs.  Examples of some medicines now being tested to treat mental illnesses include: 

• A medicine to potentially treat the various symptoms associated with schizophrenia, with diminished side effects.
• An intranasal medicine for anxiety which has been shown to improve symptoms within several minutes of administration.
• A potential first-in-class medicine for the treatment of major depression that recruits the patients’ own neural stem cells to protect  the central nervous system against damage from chronic exposure to stress. 

Parkinson's Disease 

Each year, approximately 60,000 Americans are diagnosed with Parkinson’s disease, a motor system disorder resulting from the loss of dopamine-producing brain cells, and incidence increases with age.  The combined cost to the U.S. economy in direct and indirect expenses is nearly $25 billion a year, according to the Parkinson’s Disease Foundation. 

America’s biopharmaceutical research companies are currently developing 36 medicines to help the nearly 1 million Americans suffering from Parkinson’s.  All of the medicines are either in clinical trials or awaiting review by FDA.  They include: 

• Gene therapies that target specific areas in the brain.
• Cell therapy that uses a patient’s own cells to reverse effects of the disease.
• New delivery mechanisms of currently approved treatments, including a transdermal patch and an intranasal formulation.
• Medicines to treat a motor function disorder associated with Parkinson’s disease treatment 

Rare Diseases 

The National Institutes of Health estimates that there are approximately 7,000 rare diseases affecting 25-30 million Americans.  They are officially deemed “rare” because alone they each affect fewer than 200,000 people.  Sometimes, only a few hundred Americans are known to have a particular rare disease.  In the past, treatment options for such conditions have been nonexistent or limited, but since the passage of the Orphan Drug Act of 1983, more than 400 medicines have been approved to treat rare diseases compared to fewer than 10 in the 1970s. These include the first treatments for Crohn’s disease and Lou Gehrig’s disease (also called ALS) and five treatments for pulmonary hypertension.   

The 460 medicines for rare diseases currently in development are all in later stages of the pipeline, meaning in clinical trials or under review by the FDA. A major area of research involves rare cancers. Solid tumors of the liver and thyroid, cancer of the blood and melanoma, or skin cancer, account for more than one-third of all rare disease drugs under development. 

Other major areas of research include: genetic disorders, such as cystic fibrosis, with 67 medicines in development; neurologic disorders, such as multiple sclerosis and muscular dystrophy, with 37 medicines in development; infectious diseases, such as anthrax and West Nile virus, with 31 medicines in development. 

Skin Diseases 

Skin diseases, ranging from acne to psoriasis and from melanoma to infections, are more common than most people know and they come with not only a medical but also a financial burden.  According to a study by the Lewin Group, the total annual cost of skin diseases was estimated at $39.3 billion in 2005. 

America’s biopharmaceutical research companies currently are developing 277 medicines to help the more than 100 million Americans, one third of the U.S. population, that suffer from at least one skin disease.  They include: 

• 74 for skin cancers, including 63 for melanoma, which affects more than 68,000 Americans each year and is the most common form of cancer in the United States.
• 60 for skin and soft tissue infections, which account for nearly 14 million outpatient visits each year.  
• 41 for psoriasis, which affects about 7.5 million people in the United States, and is the most prevalent autoimmune disease in this country.
• 14 for dermatitis (eczema), where 90% of suffers get the disorder before the age of 5. Worldwide 10-20% of children have dermatitis.
• 9 for rosacea, which affects more than 14 million Americans. 

Vaccines 

For many years, vaccines have been used to successfully prevent diseases such as smallpox, measles, polio and other infectious diseases. But vaccines are not only for preventing infectious diseases, newer vaccines are proving protections against a wide array of other diseases, including cancer prevention.  America’s biopharmaceutical research companies are working on 295 vaccines for the prevention and treatment of a wide variety of diseases.  They include 170 for infectious diseases, 102 for cancers and eight for neurological disorders.  Vaccines currently in development include: 

• A genetically-modified vaccine for the treatment of pancreatic cancer.
• A therapeutic vaccine that increases the immune response against the HIV virus.
• A vaccine that protects infants against meningococcal disease, a leading cause of meningitis.
• An immunotherapeutic vaccine for the treatment of Alzheimer’s disease.
• A recombinant vaccine to prevent malaria. 

According to a recent study by the Centers for Disease Control and Prevention (CDC) in the U.S. there has been a greater than 90 percent decrease in incidence of nine infectious diseases, including smallpox and measles, for which vaccines have been recommended for decades. Reduction in mortality and morbidity by vaccination means less doctor’s visits and hospitalizations, which translates into healthcare cost savings, as well as fewer lost days at work, leading to improved productivity. 

Women 

Pharmaceutical researchers are developing more than 851 medicines for diseases that disproportionately affect women.  The medicines in the pipeline for women include: 

• 139 for cancers affecting women, including 91 for breast cancer, 49 for ovarian cancer and nine for cervical cancer
• 114 for arthritis/musculoskeletal disorders. Approximately 46 million Americans have some type of arthritis or related condition, and 60 percent of them are female.
• 64 for obstetric/gynecologic conditions.
• 110 for autoimmune diseases, which strike women three times more than men.
• 72 for depression and anxiety. Almost twice as many women as men suffer from these disorders.
• 83 for Alzheimer’s disease. Two-thirds (3.4 million) of the 5.4 million Americans living with Alzheimer’s today are women. 

Among the potential new medicines in development for women:  

• A medicine that uses nanotechnology to target a cytokine that plays a key role in the inflammatory process associated with rheumatoid arthritis.
• A first-in-class medicine in development for ovarian cancer that induces cell death and reduces cancer growth by inhibiting an enzyme responsible for cell division.
• A first-in-class medicine in development for migraine that selectively blocks transmission of pain signals to the brain.
• A new monoclonal antibody in development for lupus modulates B-cells that produce antibodies against the body’s own cells and tissue, causing the immune system to turn on itself.

 

 

DOJ to Target Pharma and Device Current Good Manufacturing Practices (cGMP) Violations

Over the last several years, we have written extensively about the ongoing government prosecution of pharmaceutical and medical device manufacturers involved in off-label promotion, misbranding, and other illegal marketing and promotional activities.  Much of the focus and resources of the federal government, including the US Department of Justice (DOJ), the Department of Health and Human Services (HHS), and the Office of the Inspector General (OIG) for HHS have been devoted to investigating and prosecuting such large-scale cases, including the largest in history—a $3 billion fine against GlaxoSmithKline. 

While the ongoing prosecution of these cases into the future likely will remain stable despite the U.S. Second Circuit’s decision in United States v. Caronia, DOJ recently announced in late January of this year, that compliance with current good manufacturing practices (cGMPs) will be one of the agency's “top areas of focus” in the coming year, “opening up new areas of uncertainty for those involved in compliance and regulatory activities for the pharmaceutical industry,” writes RAPS.

cGMP regulations are designed to assure that drugs meet safety, identity, and strength requirements and that they meet the quality and purity characteristics which they are represented to possess.  

In remarks made at the Pharmaceutical Compliance Congress (PCC) on 29 January 2012, Maame Ewusi-Mensah Frimpong, Deputy Assistant Attorney General (DAAG) for DOJ's Consumer Protection Branch (CPB), noted her division has long worked closely with the Food and Drug Administration (FDA) to promote the safety of pharmaceutical products.   

As Frimpong explained, the role of CPB is to protect “consumers, and our highest priority is to protect consumers where they are most vulnerable—where the harm to consumers is widespread and substantial or where consumers are at greatest risk of harm.”  CPB does so “through the prosecution and litigation of both civil and criminal matters in the areas of food, drugs, consumer goods, services, and financial fraud.” 

CPB is largely responsible for all of the cases involving off-label promotion, and works closely with other federal healthcare law enforcement officials such as OIG and the FBI.  

CPB led the charge in the GSK settlements, as well as the settlements with Abbott Laboratories and Merck, however, all three of those settlements focused on one thing: misbranding.  “In the area of misbranding, when companies make promotional claims that are not truthful and balanced, or when they do not disclose all relevant safety information to FDA and doctors, they place patients at great risk of harm because neither doctors nor patients can make informed choices about their drugs,” Frimpong said.  

She later summarized that each of these case involved “a company making misrepresentations regarding safety and placing patients at an unacceptably high risk of harm in the service of the bottom line.”  Accordingly, Frimpong explained that companies “will likely continue to see this as a theme of our Food, Drug, and Cosmetic Act prosecutions, and you should know that we will be taking an especially hard look whenever there are misrepresentations of safety.” 

Similarly, Frimpong noted that “when companies fail to follow current good manufacturing practices, they often place patients at great risk of harm that neither they nor their doctors have any way of mitigating or even recognizing.”  Further, she expounded that CPB will take “an especially hard look whenever patients are placed at an unacceptably high risk of harm by those violations of current good manufacturing practices.”   She acknowledged that “compliance is not easy given that safety is not a simple black and white issue” and noted that compliance “is a continuous process of assessing and eliminating or minimizing risks.” 

Nevertheless, she maintained that the cGMP regulations and guidance are “intended to guide you and your organizations in calibrating those risks.  Because it helps the industry to strike the appropriate balance between ensuring adequate safeguards for drug safety and optimizing efficiency in light of the dictates of science and the marketplace, companies disregard this regime at their peril and that of millions of Americans.”  Although companies may face enormous pressures to produce drugs more “quickly, cheaply, and efficiently,” Frimpong’s message was that companies “cannot sacrifice drug safety in service of these pressures.”   

She also recognized that many companies “have implemented strong compliance programs to detect and provide early warnings before misconduct develops into a criminal violation, and our enforcement priorities and approach are intended to recognize that in a meaningful way.” 

“This focus on cGMPs would mark a dramatic change in practice for the agency, remarked Scott Liebman, a principal at Porzio Bromberg & Newman and vice president of Porzio Life Sciences, in an interview with Regulatory Focus.”  “This is out of their normal zone of activity … and the direct focus on CGMPs is a shock.”  Liebman explained that Frimpong’s remarks raised a huge number of unanswered questions among those in attendance, including  

• whether the agency has the capacity to take on additional areas of focus while maintaining current levels of attention on misbranding issues,
• which areas will represent the 'low-hanging fruit' for initial agency actions, and
• where the majority of the agency's focus might eventually come to rest. 

RAPS cited to a “number of high-profile pharmaceutical compliance issues came to light in 2012, including a rash of drug shortages caused by CGMP issues in a number of facilities, including ones overseen by Genzyme and Ben Venue Laboratories, as well as pharmaceutical compounding problems seen at facilities large (Hospira) and small (New England Compounding Center). Many of those drugs were sterile injectable drug products, though Frimpong's remarks did not specify if those types of drugs would be of particular interest.” 

Advice for Industry 

Despite the uncertainty, Frimpong offered several factors and considerations companies and attorneys should consider with respect to cGMPs in order to understand what DOJ is looking for and to avoid U.S. Attorney’s knocking on their door.  Accordingly, Frimpong suggested that companies ask themselves five questions: 

1. Do we have the right people in place with the right training and expertise? 

She noted that companies “need people with the right training and expertise to recognize problems that can arise when manufacturing pharmaceuticals.  People are not fungible, especially when it comes to the complex and highly technical issues that arise in a pharmaceutical production line.”  For instance, in CPB’s recent civil resolution with Genzyme to resolve a number of GMP violations at their Massachusetts facility, “one issue was failure to use equipment constructed so that the surfaces contacting drugs or drug components were not reactive, additive, or absorptive.”  Clearly, “you need the right people to recognize such a risk and ensure that the right equipment is used.” 

2. Do our people have the right incentives to see problems, to report problems, and to fix problems?  

For this factor, Frimpong explained that CPB sometimes sees in cases that individuals in companies cut corners in order to meet production goals or to cut costs.  Companies “want to make sure that there are strong incentives that go the other way, incentives for people to see problems, report problems, and fix problems.  Internal communication—and systems to encourage that communication—are key.”  One thing that is notable in many of CPB’s “recent GMP resolutions, for instance, the civil consent decree against Ranbaxy, is that the investigation followed numerous early red flags within the company and warning letters from the FDA that were never adequately addressed.”  She explained that companies “want to ensure that the system of formal and informal incentives within your company compel and encourage prompt and fulsome responses to issues that arise.” 

3. Are regulatory and compliance people engaged and satisfied such that they are less likely to leave the company, leaving a vacuum of oversight? 

CPB’s “investigations have revealed that often the departure of key employees can be a crucial turning point for an organization.  It can be a red flag of existing problems or of problems to come, particularly if departures leave a vacuum in key positions or leave remaining employees overwhelmed and unable to meet the dictates of safety.”  For example, in the Cidra case in which SB Pharmco, a GSK subsidiary, was prosecuted for GMP violations at its plant in Cidra, Puerto Rico, “the departure of certain key employees with responsibility for drug safety led to many of the conduct supporting the criminal charges.”  Frimpong noted that “having a reputation as being fair and honest can enhance employee morale and aid in recruiting and retaining the best and brightest employees, and this can be critical in maintaining a seamless and airtight culture of compliance.” 

4. Are our people and policies working in harmony?  Put another way, do our policies acknowledge how real people work and what they are capable of?  

“Quality assurance processes that rely on unrealistic expectations are doomed to fail. Using the Cidra example again, some of the safety problems resulted from relying on a policy of 100% visual inspection of certain tablets when visual inspection could not actually reveal problems given the speed of the production line.” 

5. Do we personally have visibility into what our people are actually doing? 

“Avoiding knowledge of problems in your organization will not shield you from liability,” Frimpong explained—this is particularly true for executives of companies who may be prosecuted under the Park doctrine and also because FDA’s recent consent decree with Ben Venue listed corporate officers in the documents.  She noted that “many companies are increasingly doing independent audits or bringing experts in to examine their compliance in a rigorous way” and that “this is one way to make sure that your systems are not masking any problems that exist, and we encourage you to consider this approach.” 

Conclusion 

The key takeaway, Frimpong said, is to focus on the human element of the equation. “People are not fungible, especially when it comes to the complex and highly technical issues that arise in a pharmaceutical production line,” she added. 

Interestingly, Frimpong emphasized that the “GMP regime as we see it presents a great opportunity for partnership and cooperation between government and industry, especially when we are dealing with critical drugs.  Not only does the statute explicitly look to companies to determine the appropriate balance in the first instance, thereby making you partners with government, but also strong enforcement protects those companies that do follow the rules.”  

She noted that “Weak enforcement that encourages deviations from GMP and noncompliance in this area affects the entire industry, as it erodes the confidence of the American public in our drug system.”  She concluded by noting that “In a day and age where consumers are increasingly looking outside the regulated drug delivery system for their medication, such as to illegal online pharmacies, it is important that we maintain the rigorous standards we have in the regulated system.” 

Liebman told RAPs that companies would do best breaking “down regulatory and compliance silos to make sure people are more broadly educated about both CGMP and Prescription Drug Marketing Act (PMDA) requirements to be able to handle DOJ’s increased scope of interest, particularly in light of Frimpong's advice to break down barriers between segments.” 

Consequently, it is unclear what the effect of this speech will have on companies.  Largely, companies have been “willing to settle with DOJ over misbranding complaints, paying huge sums of money and agreeing to marketing-based corporate integrity agreements (CIAs) that are meant to improve internal compliance to prevent future deficiencies.”  However, these fines are mainly associated with marketing and promotional expenses, “while CGMP legal actions might distribute them differently,” RAPS notes. 

For example, RAPS pointed to the case of Johnson & Johnson manufacturing subsidiary Ben Venue Laboratories, where CGMP deficiencies caused its Bedford, Ohio plant to be shut down while the company spent nearly $300 million to upgrade the facility in addition to the cost of recalled products.  It eventually signed a consent agreement with FDA to resume limited operations, but is still not up to its full manufacturing capacity, even years after its initial shutdown.  

Liebman said this scenario illustrates that “the consequences are going to be different” for companies found to have severely violated CGMP regulations relative to those have severely violated branding or advertising regulations. “They could be more painful,” he added.

Industry, Academic, Foundation and Government Alliances Continue in Early 2013

As promised, we are continuing to provide coverage of newly announced or recently discovered collaborations between industry, academia, and other entities to highlight the importance of such relationships in furthering medical progress and improving patient care.   

Michael J. Fox Foundation and Parkinson’s

A recent opinion article published in Nature Medicine discussed how “Money without collaboration won’t bring cures.”  The piece, written by Todd B. Sherer, chief executive officer of The Michael J. Fox Foundation for Parkinson's Research, maintained that “It's up to stakeholders at every stage of therapeutic development—industry and academic researchers, policymakers, patient foundations and even patients themselves—to embrace the power of collaboration.  Only then will we enable translational research and push much-needed treatments to the clinic faster.” 

Sherer noted that he attended the inaugural meeting of NCATS, of which he is charter member. While noting the honor of serving on the council, he asserted that “government efforts to kickstart drug development will not be enough to bridge the divide between the basic research typically conducted by academic institutions and the large-scale clinical studies orchestrated by the pharmaceutical industry.”  

Rather, he recognized that “it is the shared responsibility of all of us involved in every stage of drug development—at any phase, in the public or private sector—to contribute to filling this gap.”  Using his experience at the Michael J. Fox Foundation (MJFF), Sherer said he has seen first hand “how this approach can pay off.”    

“We’ve seen how collaborations among academic and industry players are ignited when researchers share information in real time, how meeting scientists' needs for better research tools enables them to move toward breakthroughs faster and how investing in early promising therapeutic targets is crucial.  Despite the inherent risks involved in these efforts, the reward could be the cure that countless patients don’t have the time to wait for.” 

The foundation’s “exclusive mission is to accelerate the development of a cure for Parkinson’s disease, and over 90% of [their] funding is allocated to the translational and clinical research closest or most essential to patient relevance.”  Thus far, the foundation has approximately $300 million in research to date, something Sherer called “chump change in the context of the therapeutic development ecosystem.” 

Nevertheless, he noted that due to the foundation’s “strategic investments and untraditional collaborations with industry partners,” they have “seen seismic shifts in the Parkinson's therapeutic development landscape over the past decade, with major progress toward improved symptomatic and disease-modifying therapies alike.”   

Accordingly, Sherer asserted that “Strategic investments in translation and collaboration can pay off,” and the MJFF has seen firsthand how strategic investments in translation and collaboration can pay off.  For example, a new partnership between Vanderbilt University and Bristol-Myers Squibb (BMS) leverages investments MJFF has been making in Vanderbilt since 2005. The Tennessee-based institution’s Center for Neuroscience Drug Discovery, with MJFF’s funding, has been working to develop a new glutamate-based class of symptomatic treatment for Parkinson’s disease.  Following proof of concept in rodent models, this work has now ripened to readiness for major follow-on funding from BMS. It's a win for our foundation, Vanderbilt, BMS and, most importantly, patients with Parkinson’s. 

Sherer further explained his role in the US Presidential Council of Advisors on Science and Technology (PCAST) on the need for widespread, public-private collaboration to propel innovation in drug discovery and development and to be part of a panel discussion on implementing PCAST’s recommendations.  He also noted the formation of TransCelerate BioPharma, a nonprofit organization that means to take a collaborative, precompetitive approach to accelerate the development of new drugs.  

Given these announcements Sherer was “energized by the prospect of greater resources and a new framework for collaborations focused on problem-solving in the translational space, especially when today's scientists have so many promising new avenues for investigation, new targets for therapies and rapidly advancing technologies—crucial tools for progress that the field didn't know about, or that didn't exist, ten years ago.” 

The promise of collaboration goes beyond Parkinson’s.  For example, Sherer noted how the progress enabled by the Alzheimer’s Disease Neuroimaging Initiative (ADNI), a collaborative effort among multiple groups including government, drug companies, universities and nonprofits, “has galvanized drug development for that disease in relatively few years Alzheimer’s drugmakers have taken the proactive step of pooling data from those trials in an attempt at problem-solving and increasing the odds of better future results.”  The foundation’s “own Parkinson's Progression Markers Initiative, supported by 13 pharmaceutical funding partners, has benefited from having ADNI as a scientific precedent and a successful model of collaboration.” 

The Fox Foundation executive also highlighted the critical role patients are playing, for example, through the use of MJFF’s Fox Trial Finder, an online tool that combines matches volunteers to trials on the basis of several factors (including geography, treatment history and individual preference) and allows for anonymous two-way messaging between volunteers and clinical trial teams, has exploded since its launch by our foundation in April 2012.  More than 12,000 registrants have signed up to date.  

Despite all this success, Sherer acknowledged the need for more volunteers, and greater resources to educate patients and their loved ones about the vital part that only they can play to keep research moving forward.  Ultimately, he expressed his hope that through collaboration, “we can make cures inevitable.” 

Bayer Supports Innovative Drug Discovery in Europe  

In early February of this year, Bayer Healthcare announced that it would initiate and coordinate a newly founded pan-European consortium, named European Lead Factory, which has been launched to enhance early drug discovery addressing the need for innovative drugs.  The new five-year project will create an exceptional small molecule library collection allowing drug discovery on innovative and promising targets from pharma companies and academia.  

Bayer HealthCare and six other pharmaceutical companies, all members of the European Federation of Pharmaceutical Industries and Associations (EFPIA), will collectively contribute at least 300,000 substances to the European Lead Factory initiative.  The other 6 major drugmakers include AstraZeneca, Lundbeck, Janssen, Merck KGaA, Sanofi, and UCB Pharma.  Together the companies are pooling 196 million euros ($265 million) for this new collaboration.  Bayer said it will provide about 50,000 compounds. 

Additionally, a library of estimated 200,000 compounds will be newly developed jointly by academia and Small and Medium Enterprises (SMEs) in the course of the new initiative. Together, the two libraries will form a Joint European Compound Collection consisting of up to half a million compounds that will be accessible not only to all project partners, but also to public organizations and SMEs who are invited to introduce promising new targets for pharmacological screening. Target proposals will be selected through competitive calls. Thus, drug discovery using the Joint European Compound Collection will be performed on proposed targets from pharma companies as well as targets sourced from the public domain.

The consortium will also set up a state of the art European Screening Centre with compound logistics and High Throughput Screening (HTS) facilities which will be located in Scotland and The Netherlands respectively. The highly-automated process will allow researchers to rapidly screen the exceptional Joint European Compound Collection for molecules that could be a promising starting point in the development of new drugs.

“The European Lead Factory is an outstanding example of a project in which public-private partnerships enable collaborative drug discovery”, said Hanno Wild, Senior Vice President and Head of Candidate Generation & Exploration at Bayer HealthCare Global Drug Discovery. “The platform brings together academia and industry as well as Small and Medium Enterprises in a unique partnership aiming to discover innovative medicines. Bayer is committed to further develop this novel platform by providing decades of experience in drug development. The joint efforts of the consortium will support drug discovery and hopefully generate new therapies for patients.”

“It’s a big change for companies because their compound libraries have usually been kept very secret,” said Ton Rijnders to Reuters, scientific director of Dutch non-profit group TI Pharma, who is helping to run the project.  “They are doing this because it is cheaper than building ever larger libraries on their own - and partnering with academics gives them access to innovative ideas.”

The novel consortium is a public-private partnership supported by Europe’s Innovative Medicines Initiative (IMI), the world’s largest public-private partnership in health.  The Innovative Medicines Initiative currently supports 40 projects, many of which are already producing impressive results. The projects all address major bottlenecks in drug development, and so will accelerate the development of safer and more effective treatments for patients.

Michel Goldman, IMI Executive Director, said: “IMI is very excited by the launch of the European Lead Factory. This unique project is an excellent example of how a public-private partnership can transform the way in which the pharmaceutical sector identifies new medicines. For the first time, it will give European researchers unprecedented access to industry chemical collections and facilitate the translation of their findings into actual treatments for patients. This project will not only advance the chances of success in the discovery of new medicines by European researchers, but also add value by building research capacity in Europe.”

The European Lead Factory consists of 30 international partners, including pharmaceutical companies, SMEs and academia. This new public-private partnership has been initiated for a period of five years. Based on the proven success of the open innovation model, the European Screening Centre and the teams of SMEs and academic institutions aim for a sustainable role in drug discovery and the future growth of drug development in Europe after the initial funding period.  

The total budget for the project amounts to around €196 million. Up to €80 million comes from the European Commission’s Seventh Framework Programme for Research (FP7), and about €91 million is provided as in kind contributions from the participating EFPIA companies. The remaining €25 million comes from other contributions from the non-EFPIA participants. 

Avastin Significantly Improves Survival for patients with recurrent and metastatic cervical cancer 

In addition to the recent collaboration, NIH recently announced that “Patients with advanced, recurrent, or persistent cervical cancer that was not curable with standard treatment who received the drug bevacizumab (Avastin) lived 3.7 months longer than patients who did not receive the drug, according to an interim analysis of a large, randomized clinical trial.” 

It is estimated that over 12,000 women will be diagnosed with cervical cancer in the United States in 2013 and over 4,000 women will die of the disease.

The clinical trial, known as GOG240, was sponsored by the National Cancer Institute (NCI), part of the National Institutes of Health, and conducted by a network of researchers led by the Gynecological Oncology Group (GOG).  Genentech, Inc., South San Francisco, Calif., the drug manufacturer, provided support for the trial under the Cooperative Research and Development Agreement (CRADA) with NCI for the clinical development of bevacizumab.  

The data safety monitoring committee overseeing the trial recommended that the results of a recent interim analysis be made public because the study had met its primary endpoint of demonstrating improved overall survival in patients who received bevacizumab, which also means that it delayed the chance of dying from the disease.  

Patients who received bevacizumab got a dose of 15 milligrams per kilogram (mg/kg) of body weight administered in the vein with their chemotherapy treatment and continued with this dose one day every three weeks until disease progression or unacceptable toxicity occurred.  Those patients lived a median 3.7 months longer than those who did not receive bevacizumab. Patients treated with chemotherapy alone had a median survival of 13.3 months while those who received chemotherapy and bevacizumab had a median survival of 17 months. This survival difference was highly statistically significant. However, patients receiving bevacizumab experienced more side effects than those who did not. These side effects were consistent with side effects previously known to be associated with bevacizumab. 

“The findings in this clinical trial are important because they are likely to change clinical practice and provide an opportunity to improve outcome in patients with recurrent cervical cancer who have previously had very limited treatment options,” said GOG study chair Krishnansu S. Tewari, M.D. 

“This is welcome news as progress has been very difficult against this cancer, and GOG physicians and patients who participated have made an important contribution,” said Jeff Abrams, M.D., clinical director of NCI’s Division of Cancer Treatment and Diagnosis.  Full data has been submitted to the American Society of Clinical Oncology 2013 Annual Meeting. The trial is GOG240, Paclitaxel and Cisplatin or Topotecan With or Without Bevacizumab for Treating Patients With Stage IVB, Recurrent, or Persistent Cervical Cancer, clinical trial registry number NCT00803062. 

NCATS Calls for Regulatory Partners to Develop, Market Potential Rare Disease Treatment  

The National Center for Advancing Translational Sciences (NCATS), the newest addition to the National Institute of Health (NIH), recently announced in the Federal Register that in combination with NIH’s National Human Genome Research Institute (NHGRI), it is seeking out a partner to, “collaborate in the final stages of lead optimization, evaluation and preclinical development”of two new therapies; one for Gaucher disease and the other for the treatment of heart failure and fibrosis, reported RAPS. 

According to the article in RAPS, NCATS believes that a novel selective series of non-inhibitory chaperones of glucocerebrosidase (GCase) will be useful in treating Gaucher disease and other related diseases.  “Gaucher is a rare disease affecting just a few thousand people in the US, and is most commonly found in those in Ashkenazi Jews, most of whom hail from Eastern and Central Europe.” 

The disease is marked by a lack of the GCase enzyme, which causes substances to build up in the body's organs.  The severity of the disease depends on which of three types is inherited by the patient, but the disease is often fatal.  “NIH said it hopes its GCase chaperones will be able to guide the enzymes to lysomes after synthesis in the ribosome instead of accumulating in the endoplasmic reticulum.  This is more difficult than it seems, NIH wrote in its Federal Register announcement.” 

“The main challenge in the development of molecular chaperones for Gaucher disease is that chaperones are inhibitors of the enzyme. This complicates their clinical development, because it is difficult to generate an appropriate in vivo exposure at which a compound exhibits chaperone activity, but does not inhibit the enzyme's function.” 

“The good news, it said, is that high throughput screening has identified several small-molecules that do not inhibit the enzyme.”  “These lead molecules were found to increase the specific activity of the enzyme, promote the translocation of GCase to the lysosome in Gaucher fibroblasts and macrophages, reduce the accumulated substrate, and restore efferocytosis of these cells.”  NIH added that the compound could also come to be used as a treatment for Parkinson’s disease, which exhibits some genetic parallels with Gaucher disease, or more generally to “enhance the efficacy of enzyme replacement therapy.” 

Then, NCATS referenced recombinant relaxin hormone, which NIH said is already in Phase III trials for the treatment of acute heart failure.  Researchers wrote that the compound is “difficult to study in chronic settings due to the short half-life and the need for intravenous administration of the recombinant hormone.”  A new, recombinant version of the hormone—the likes of which NCATS has been studying—would hypothetically “have numerous benefits and will allow investigating additional therapeutic applications where chronic administration is required.” 

“As with the GCase Chaperones, NCATS said it has successfully identified a series of small-molecule agonists that it said are ‘potent, highly selective, easy to synthesize, and with reasonable metabolic and physical properties’ that display ‘similar efficacy as the natural hormone in several functional assays.’” 

“If successfully marketed, the product could mean big money for its sponsor.  Heart failure—the disease which NCATS thinks this product would be most successful at treating—affects millions of Americans and is understood by the American Heart Journal to be the leading cause of hospitalizations for those over the age of 65.” 

RAPS noted that these announcements from NCATS were somewhat unusual because it was “looking for a partner that already has a sense of the regulatory challenges ahead of it.”  They noted that the Cooperative Research and Development Agreement (CRADA) “scope will also include studies beyond candidate selection including all aspects of pre-clinical studies such as toxicity studies and chemistry good manufacturing practice (GMP) scale up of select compound(s) and manufacture of controls leading to a successful investigational new drug (IND) application.”  

While NIH routinely licenses technology to outside groups, it does so “usually without the preconditions that it be able to bring a drug to market using the technology or their history as a company.” 

“Not so with its CRADA,” RAPS wrote.  "”Collaborators should have experience in the pre-clinical development of small molecules and a track record of successful submission of IND applications to the FDA for rare and neglected diseases,” NCATS added.  The agency said it hopes the compound can be “expeditiously commercialized and brought to practical use.” 

“Though the compounds are still relatively early in the development cycle—NIH notes that it’s only undergone early-stage in vivo and in vitro testing to determine absorption, distribution, metabolism and elimination (ADME) and activity studies on human macrophages—it still represents a potential new pipeline for patients suffering from rare or neglected diseases, as well as a potential source of profit for companies whose own pipelines have been notoriously stagnant in recent years.”

More Industry Academic Alliances

We recently covered Twenty Industry-Academic Alliances in 2012.  In the past, we have also written extensively about other physician-industry and academic-industry collaborations.  After running our recent story, we came across several other alliances, discussed in further detail below, and will continue to cover such collaborations as they occur.   

GlaxoSmithKline and University of Texas, MD Anderson Cancer Center

GlaxoSmithKline (GSK) recently announced that it has gained rights to a preclinical program from the renowned MD Anderson Cancer Center, in a pact focused on antibodies that trigger immune attacks against cancer.  It’s the first major pharma deal for the center's Institute for Applied Cancer Science (IACS), which was set up last year to operate as a translational research unit that is akin to “a biotech embedded” in an academic setting, a spokesman for the center said in an email.

The prized antibodies in the deal act on OX40 receptors on T cells, helping the ninjas of the immune system recognize tumor cells as enemies in need of an ass kicking.  Like all preclinical programs, the merits of the therapies must pass some initial tests before they advance to human clinical studies.  MD Anderson’s immune-triggering antibodies emerged from the research of Yong-Jun Liu, M.D., Ph.D., and colleagues when he was professor and chair of MD Anderson's Department of Immunology.  He’s since moved on to become the chief scientist of the Baylor Research Institute in Dallas.

Malignant cells are an abnormality that usually attracts a response from the body’s immune system, yet cancer often survives by evading or thwarting anti-tumor immunity.  Consistently unleashing the power of the immune system against cancer would be a major step forward for cancer patients.

T cells are lymphocytes, a type of white blood cell produced by the thymus, equipped with receptors that recognize and bind to antigens, which may include abnormal cells.  “T cell recognition of a tumor antigen is not enough to activate the T cells against cancer cells, they need a secondary signal to tell them 'that antigen you have is a bad thing, you have to attack,’” said Liu.

OX40 is one of these secondary or co-stimulatory receptor proteins. Liu and colleagues found that when it’s activated, it enhances immune attack and blocks suppressors of immune response.  Liu and his MD Anderson colleagues generated and screened hundreds of antibodies that could potentially act as on switches for OX40 by mimicking its natural activator, OX40L, a molecule that binds to OX40. Years of research narrowed the candidates to a handful of activators, or agonists, which were tested in mice and then altered for human use.  Initial clinical trials will occur only after necessary preclinical drug development conducted under the agreement succeeds.

 “This agreement is not only a tribute to the ability of MD Anderson scientists to discover new targets and potential therapies against those targets for cancer patients, it's also a testament to the vision shared by GSK and MD Anderson that successful clinical development of oncology drugs requires seamless integration of drug development expertise and deep biological knowledge,” said Giulio Draetta, M.D., Ph.D., IACS director. “The IACS was formed to enable precisely such integration to expedite the accurate translation of great science into drugs.”

The overall potential value of the agreement to MD Anderson over the life of the agreement is estimated at more than $335 million. Under the terms of the agreement, MD Anderson will receive an upfront license payment and funding for IACS research collaboration activities, as well as payments for reaching development, regulatory and commercial milestones.  In addition, MD Anderson will also be entitled to royalties deriving from the commercial sales of products developed under the collaboration.

“We’re excited about this opportunity with GSK to improve cancer treatment,” Draetta said. “The IACS is a drug development engine with industry-seasoned scientists embedded in a comprehensive cancer center, and as such is ideally suited for this type of collaboration.”

The institute is a vital platform resource for MD Anderson’s recently announced and unprecedented Moon Shots Program, which focuses resources and diverse expertise to significantly reduce mortality in the short term and promote cures long term, beginning with eight inaugural cancers.  “It’s gratifying to see MD Anderson and GSK take this important step towards translating a basic science discovery into a potential new therapy that can proceed to clinical trial,” Liu said.

StemBANCC 

Roche and the Innovative Medicines Initiative (IMI) launched StemBANCC, a new academic–industry partnership that unites ten (10) pharmaceutical companies and 23 academic institutions. Initiated and coordinated by Roche and managed by Oxford University, StemBANCC aims to use human induced pluripotent stem cells as research tools for drug discovery with the goal of using this new technology to develop human disease models and enhance drug development. 

“The aim of StemBANCC is to generate and characterize 1,500 high quality human induced pluripotent stem cell lines derived from 500 patients that can be used by researchers to study a range of diseases including diabetes and dementia,” explained Martin Graf, head of the stem cell platform and coordinator of the project.  “The cell lines will help implement patient models that will facilitate the drug development process thanks to the possibility of reproducing the disease mechanism in vitro.”  The ten companies include: 

• F. Hoffmann-La Roche Ltd, Basel, Switzerland
• Abbott GmbH & Co KG, Wiesbaden-Delkenheim, Germany
• Boehringer Ingelheim International GmbH, Ingelheim, Germany
• Eli Lilly, Hampshire, United Kingdom
• Janssen Pharmaceutica NV, Beerse, Belgium
• Merck KGaA, Darmstadt, Germany
• Novo Nordisk A/S, Bagsværd, Denmark
• Orion Corporation, Espoo, Finland
• Pfizer Limited, Sandwich, UK
• Sanofi-Aventis Research and Development, Chilly-Mazarin, France 

The StemBANCC project will focus on peripheral nervous system disorders (especially pain), central nervous system disorders (dementias), neurodysfunctional diseases (migraine, autism, schizophrenia, and bipolar disorder), and diabetes. The project will also investigate the use of human induced pluripotent stem cells for identifying drug targets and biomarkers, screening potential drug treatments, and toxicology testing. 

The research resulting in the creation of the first induced pluripotent stem cells was a major scientific advance by scientists John Gurdon (Cambridge University) and Shinya Yamanaka (Kyoto University) who were awarded the 2012 Nobel Prize in Physiology or Medicine.  Most adult cells can only divide to produce other cells of the same type.  For example, skin cells can only make other skin cells, and liver cells can only make other liver cells.

However, in recent years researchers have developed a way of reprogramming ordinary adult cells to create stem cells that can be used to generate any kind of cell.  These induced pluripotent stem cells offer a supply of different kinds of human cell such as cardiomyocytes, endothelial cells, or neurons that can be used for a broad range of in vitro tests in research and early-stage drug development. 

Because these cell lines are derived directly from real patients, they include the genes that may be implicated in diseases of interest.  Moreover, such cell lines have the advantage of being developed from samples that have been obtained from accurately screened and defined groups of patients.  Having a solid database with numerous patients and accurate data on their disease is expected to enable a new level of insight into the disease mechanisms. 

Roche scientists recognized the potential of induced pluripotent stem cells more than three years ago.  Since then they have worked with partners at Harvard University, Massachusetts General Hospital, and Boston Children’s Hospital to create over 100 human induced pluripotent stem cell lines that can be used to model cardiovascular and neurological diseases. 

According to ReportsnReports.com, induced pluripotent stem cells (iPSCs) are now sold by 53.4% of U.S. research product companies and 38.7% of research product companies worldwide. Annual growth in the number of iPSC research products sold worldwide is growing at a rate of 14.7% per year.  In addition, 22% of all stem cell researchers now report having using iPSCs within a research project.  The 23 universities research organisations, public bodies, non-profit groups include: 

• University of Oxford, Oxford, UK
• Charité - Universitätsmedizin Berlin, Berlin, Germany
• Hebrew University of Jerusalem, Jerusalem, Israel
• Helmholtz Zentrum München - Deutsches Forschungszentrum für Gesundheit und Umwelt (GmbH). Neuherberg, Germany
• Institut National de la Santé et de la Recherche Médicale, Paris, France
• King’s College London, London, UK
• Linkopings Universitet, Linköping, Sweden
• Medical Research Council UK, Swindon, UK
• Medizinische Hochschule Hannover, Hannover, Germany
• Medizinische Universität Innsbruck, Innsbruck, Austria
• Naturwissenschaftliches und Medizinisches Institut an der Universität Tübingen, Reutlingen, Germany
• Region Hovedstaden - Capital Region of Denmark, Hillerød, Denmark
• Tel Aviv University, Tel Aviv, Israel
• Universitätsklinikum Schleswig-Holstein, Lübeck, Germany
• Université de Genève, Geneva, Switzerland
• Université de Lausanne, Lausanne, Switzerland
• Université de Technologie de Compiègne, Compiègne, France
• University College London, London, UK
• University of Birmingham, Birmingham, UK
• University of Cambridge, Cambridge, UK
• University of Edinburgh, Edinburgh, UK
• University of Lübeck, Lübeck, Germany
• University of Newcastle upon Tyne, Newcastle upon Tyne, UK 

Joslin Diabetes Center and Sanofi 

In addition, last spring, Joslin Diabetes Cente,r a teaching and research affiliate of Harvard Medical School, and Sanofi Aventis, announced a new collaboration to promote the development of new medicines for the treatment of diabetes and related disorders.  The collaboration was unveiled at the 2012 Bio International Convention in Boston, Mass. by Dr. Elias Zerhouni, President of Global R&D of Sanofi.  This broad alliance between Joslin and Sanofi spans four significant R&D areas of diabetes and complications aimed at new drug discovery and advancing treatment effectiveness in patients.  

Building on Joslin’s experience in diabetes research and care, the collaboration will focus on four key areas within diabetes and related metabolic disorders to identify potential new biologics or small drug candidates for the treatment of late complications of diabetes and new insulin analogs with more targeted efficacy.  Additionally, research will address the challenges of insulin resistance and personalized medicine, with the overall aim of improving the lives of people living with diabetes. 

Dr. Elias Zerhouni , President, Global R&D, Sanofi, commented: "This collaboration brings together two important forces in diabetes therapy – Sanofi Diabetes and Joslin Diabetes Center – which have the potential to define new pathways towards better understanding the nature of this disease and developing new treatments. This collaboration further demonstrates Sanofi's commitment to improving diabetes management and care through the development of innovative research strategies."

Under the terms of the agreement, Sanofi has options to commercialize the results of the research.  Both parties will have access to intellectual property for internal research use. 

C. Ronald Kahn , M.D., Mary K. Iacocca Professor of Medicine at Harvard Medical School and Chief Academic Officer of Joslin Diabetes Center, who will head the alliance team, added: "This opportunity brings together experts from the pharmaceutical industry with our team of scientists and clinicians, who are devoted to research and clinical care for diabetes and related metabolic disorders. The result should be a very exciting collaboration with great potential for innovative research that will participate to advance diabetes treatment and patient care."

The Supreme Court and "Pay for Delay:" The Potential Impact on Pharma

In early December of last year, the U.S. Supreme Court agreed to hear a case to decide whether agreements between brand-name pharmaceutical companies and generic makers to delay the entry of generic drugs to the market—so called “pay for delay” deals—violate antitrust laws.  “In a typical case, a generic rival challenges the patent of a brand-name competitor, which then pays the rival a sum of money to drop its challenge,” reported Reuters.  

Patents on drugs can last as long as 20 years and drug companies can sometimes extend the protection for their products by obtaining separate patents for a coating or a slightly different product that includes inactive ingredients. 

In 1984, Congress passed the Hatch-Waxman Act to help speed the introduction of low-cost generic drugs to market.”  The legislation encouraged generic makers to contest the extended patents for costly drugs because typically, “when a generic firm puts a copycat version on the market, the price for the drug immediately drops about 30%.  When more than one generic maker is competing for sales, the price of the original brand-name drug can fall as much as 90%.”  As a result, the maker of a brand-name drug has a huge incentive to try to preserve its monopoly as long as possible. 

Under the Act, the first company to win UFDA approval to sell a generic drug before the underlying patent expires has a 180-day exclusive right to market that product.  This incentive, however, has created “lengthy legal battles over the validity of a drug’s patents.”  Accordingly, lawyers for the brand-name makers got clever and “decided that it often made sense to settle the litigation by paying the generic firm not to enter the market for several months or years.” 

As the Los Angeles Times noted, several federal courts in the last decade “have upheld such agreements on the grounds that they are settlements of disputes over patents.”  The FTC case will be decided by an eight-member court.  Justice Samuel Alito recused himself, without giving a reason.  Oral arguments will be in the spring, with a decision expected by the end of June.  

The Federal Trade Commission (FTC), however, has been challenging these agreements as illegally stifling competition and preserving monopolies.  Last year, FTC said that 28 such deals were made, and between 127 of such arrangements were struck between 2005 and 2011, at an annual cost to consumers of $3.5 billion in artificially higher prices.  “When drug companies agree not to compete, consumers lose,” FTC Chairman Jon Leibowitz said.  FTC added that generic-drug makers in the 1990s and early 2000s won about 75 percent of the patent suits that have been litigated to final judgment.  

FTC and several other agencies have called on Congress to pass legislation that would prohibit or severely restrict such deals.  For example, in November 2011, the nonpartisan Congressional Budget Office (CBO) said a U.S. Senate bill to ban reverse payments would save the government $4.79 billion and lower U.S. spending on prescription drugs by $11 billion over a decade.  The bill – S.27: Preserve Access to Affordable Generics Act – would modify how FTC conducts enforcement proceedings against parties to an agreement to settle a claim of patent infringement in specific cases.  Under the bill, certain settlement agreements between drug companies would be presumed anti-competitive and unlawful; they would only be allowed if the parties can demonstrate by clear and convincing evidence that the pro-competitive benefits of the agreement outweigh the anti-competitive effects of the agreement.  

The agreements affected by the bill are ones in which the manufacturer of the generic version of the drug receives anything of value from the manufacturer of the brand-name drug and the generic drug manufacturer agrees to limit or forgo research, development, manufacturing, marketing, or sale of the generic drug for any period of time.  The bill, however, would permit a brand manufacturer to grant certain types of consideration to the manufacturer of the generic version of the drug under settlement agreements. Such exemptions include the right to market the generic drug before the expiration of patents or other statutory restrictions that aim to prevent such marketing. The legislation also would allow FTC to establish additional exemptions through rulemaking procedures. 

In addition, Attorneys general from 31 states have joined the FTC in urging the Supreme Court to review the legality of — and halt — generic and brand-drug makers’ pay-for-delay agreements by overturning an 11th Circuit Court’s decision that upheld the legality of reverse patent settlements.  The states said the court should take up the issue to resolve a lower-court split that has spurred industry uncertainty.  In addition, the American Medical Association took a different stance recently, voting at its semiannual policy-making meeting to back ending the practice of pay-for-delay settlements. 

“The federal antitrust laws flatly prohibit potential competitors from forming naked agreements not to compete,” the FTC said in a petition it filed with the Supreme Court.  The pharmaceutical industry has argued that “the patent settlements are good for competition because they allow generic drugs on the market before the patent expires on a branded drug, while removing the uncertainty of litigation for both sides,” the Wall Street Journal reported. 

 “At the most fundamental level, a patent owner has the right to defend a valid patent, and settlements are a tool that can allow this to happen without the burden of engaging in a costly, extensive legal battle,” said Matthew Bennett, vice president of the Pharmaceutical Research and Manufacturers of America (PhRMA). 

“The deals also are referred to as reverse-payment agreements because the patent holder pays the generic firm not to sell the generic version for a set period of time.  That’s the reverse of the typical situation in which a patent holder wins damages from the violator, either in court or in a settlement,” the LA Times noted. 

Politico reported that “Both the generic and name-brand pharmaceutical industries defend the settlements … [because] the deals are an efficient and, from a business perspective, predictable alternative to the uncertainty about expensive patent lawsuits fought to the bitter end.”  The drug industry argues that in all cases, “generics come on the market before the original patents expire and sometimes sooner than they would have even in the case of a successful patent challenge.” 

Generic drug makers say that the payments preserve a system that has saved American consumers hundreds of billions of dollars.  “This case could determine how an entire industry does business because it would dramatically affect the economics of each decision to introduce a new generic drug,” Ralph G. Neas, president of the Generic Pharmaceutical Association, said in a statement to the New York Times.  “The current industry paradigm of challenging patents on branded drugs in order to bring new generics to market as soon as possible has produced $1.06 trillion in savings over the past 10 years.” “The facts are clear. Patent settlements save. They are pro competition, pro-consumer and have saved consumers and taxpayers billions of dollars.” 

FTC v. Watson 

The Supreme Court said that it would rule early next year on whether a deal between the Abbott Laboratories unit Solvay Pharmaceuticals Inc. and Watson Pharmaceuticals Inc. could be challenged under federal antitrust laws.  FTC alleges that Solvay entered into anticompetitive patent settlements with Watson and generic-drug makers Par Pharmaceutical Cos. and Paddock Holdings Inc. to delay the introduction of a generic competitor to the testosterone-replacement drug AndroGel.  The court will also hear two similar cases.   

The drug generated nearly $875 million in sales last year.  Solvay agreed to pay more than $19 million a year to Watson to help market the drug in return for Watson’s promise not to introduce a competitive pill until 2015.  Solvay’s patent had expired.  Reuters reported that annual payments from Solvay ranged from $31 million to $42 million, and were intended to help Solvay preserve annual profits estimated at $125 million. 

The U.S. 11th Circuit Court of Appeals in Atlanta decided that the pay-for-delay agreement over AndroGel did not constitute an illegal restraint of trade.  The court ruled for the brand-name “drug makers, saying a patent is a government-granted monopoly that allows a drug company to exclude competitors from using the patented invention.”  This was the third time since 2003 a federal court has upheld such agreements—doing so “as long as the allegedly anticompetitive behavior that results — in this case, keeping the generic drug off the market — is the same thing that would take place if the brand-name company’s patent were upheld.”  The other cases were in the Federal Circuit and the Second Circuit. 

The generic-drug companies in 2003 asserted in filings with the Food and Drug Administration (FDA) that their proposed generic versions “wouldn’t infringe Solvay’s AndroGel patent and argued that the patent was invalid.  Patent-infringement litigation between the companies was pending in federal court when the sides agreed to the settlements in 2006,” WSJ reported. 

“The FTC said Solvay bought itself years of drug exclusivity by paying the generic-drug makers tens of millions of dollars annually to stay out of the market until 2015, by which time Solvay planned to shift patients to a new drug with no generic equivalent.”  The agency said that if the patent litigation hadn’t been settled, Solvay likely would have lost in court, which would have cleared the way for the generic-drug makers to move forward with less-expensive AndroGel copycats. 

“Solvay and the generic-drug makers said the 2015 market-entry date provided by the settlements was five years earlier than when the Solvay patent expired. The generic-drug companies said there was no guarantee that they would have won a court fight.  Solvay said the money it agreed to pay in the settlement was for marketing and manufacturing services provide by the generic-drug companies.” 

The FTC’s position “would have a tremendously detrimental impact on the availability of generic alternatives in the marketplace,” generic-drug maker Watson Pharmaceuticals Inc. said in a brief it filed with the court.  “Solvay agreed to less exclusion than it lawfully and realistically might have obtained in the exercise of its constitutionally protected right to assert its patent reasonably,” the Abbott unit argued in court papers reported by Bloomberg News.  The companies say the payments were compensation for services to be provided by the generic-drug makers, including Watson’s marketing of Androgel to urologists. 

The FTC says it has less concern about settlements that set a date for generic entry without involving a payment, accords the agency says may simply reflect the prospects of success in the infringement case.  A reverse payment, by contrast, “is most naturally understood as consideration for the generic manufacturer’s agreement to delay market entry,” the FTC said.  

Other “Pay for Delay” Cases  

Although the 11^th Circuit upheld the reverse payment agreement, the U.S. 3rd Circuit Court of Appeals in Philadelphia took the opposite view in a case involving K-Dur, a drug used to treat a potassium deficiency.  The court ruled in July 2012 that “drug-patent settlements are legally suspect unless the drug makers involved can show that such agreements are good for competition.  The decision revived a class-action antitrust lawsuit challenging an agreement between a Merck & Co. unit and a generic-drug maker that delayed a competing generic version.  Upsher-Smith Laboratories Inc was paid more than $60 million, court records show.   

A client alert from Arnold & Porter LLP gives an in-depth summary and analysis of the case.  According to the alert, the court held that “although such settlements are not illegal per se, they are presumptively unlawful under the rule of reason. In so doing it rejected the approach adopted by the Second, Eleventh, and Federal Circuits, all of which have held that a settlement that does not restrain trade beyond what would result if the patent holder won the litigation is not unlawful, regardless of the existence of a reverse payment. 

The Third Circuit rejected the drugmakers’ “scope of the patent test” argument in the case and said that any form of payment flowing from the patent holder to the challenger who agrees to delay market entry was an "unreasonable restraint of trade.”  Senator Charles E. Grassley, an Iowa Republican who co-sponsored the Senate bill noted above, which never came to the floor for a vote, praised the decision.  “The split between the circuits set the stage for the high court to intervene (FTC vs. Watson Pharmaceuticals),” the LA Times noted.  In August, Merck & Co. asked the Supreme Court to review that case. 

“This case presents one of the most significant unresolved legal questions currently affecting the pharmaceutical industry: what is the appropriate antitrust standard for evaluating settlements of patent litigation between brand manufacturers and generic manufacturers, where the settlement includes a payment from the brand manufacturer to the generic manufacturer?” Merck lawyers wrote at the time.  

“That question has been percolating in the lower courts for more than a decade. Until the decision in this case, the courts of appeals had consistently held that the federal antitrust laws generally permit a settlement that includes a payment from the brand manufacturer to the generic manufacturer, as long as the settlement does not exclude competition beyond the scope of the patent. The Third Circuit’s decision in this case dramatically departs from the prevailing view,” Merck lawyers wrote in their brief. 

In an amicus brief written by PhRMA, the trade group asserted that “By restricting the ability of innovator companies to manage risk and avoid the costs and uncertainty of litigation, the 3rd Circuit’s rule dramatically diminishes incentives for innovation and product development,” the trade group argued. 

A similar case is pending before the California Supreme Court.  The state attorney general’s office intervened in a lawsuit against Bayer over a deal to delay a generic version of its Cipro antibiotic drug.  "During its monopoly period, a single Cipro pill costs consumers upward of $5.30, while with generic competition, the same pill should have cost only $1.10,” the state said. 

Authorized Generic Deals 

Adding into the mix of pay for delay deals, a New Jersey court recently threw out an antitrust lawsuit against Teva and GlaxoSmithKline, “ruling that patent settlements that involve authorized generic (AG) agreements are not illegal.  An AG is a drug that is chemically identical to the branded drug but sold as a generic product.  As noted by a recent client alert from Arnold & Porter, the “FTC has devoted considerable effort to analyzing the competitive implications of AGs in the pharmaceutical industry,” including a multi-year study of the issue and releasing an extensive report of its findings in August 2011, concluding that the launching of AGs can reduce both retail and wholesale drug costs 

Authorized generic deals would not be considered “reverse payments” under the 3rd Circuit’s July K-Dur decision, says the district court, which falls under that circuit’s jurisdiction.  A post from the FDA Law Blog provided a good analysis of this case, which may find itself in the mix of pay for delay decisions. 

The New Jersey case was brought against GlaxoSmithKline (“GSK”) and Teva Pharmaceutical Pharmaceuticals, (“Teva”) by direct purchasers of certain anti-epileptic drug products containing the active ingredient lamotrigine and marketed by GSK as LAMICTAL.  “The direct purchaser plaintiffs allege that GSK and Teva violated Sections 1 and 2 of the Sherman Act when they entered into an agreement providing, among other thing, that GSK would not market an authorized generic version of Lamictal Tablets and Lamictal Chewables, and that such agreement was well beyond the exclusionary scope of a now-expired patent listed in the Orange Book for GSK’s lamotrigine drug products and constitutes a naked market allocation agreement.”  

According to the post, “GSK and Teva each filed a Motion to Dismiss the case arguing that there was no reverse payment, but only a negotiated early entry date for marketing the generic LAMICTAL drug products.  FTC, whose motion to file an amicus brief in the case was granted, took the position that a branded drug company’s commitment, as part of a drug patent settlement agreement, not to launch an authorized generic to compete with a generic version of the product approved under an ANDA – a “no-AG” agreement – constitutes a “payment” under the Third Circuit’s K-Dur decision.” 

In an unpublished decision handed down just one day before the U.S. Supreme Court decided to hear the ANDROGEL drug patent settlement agreement case, Senior District Judge William H. Walls granted GSK’s and Teva’s Motions to Dismiss the case on the basis that a “drug patent settlement agreement based on negotiated entry dates is not subject to antitrust scrutiny.”  “Judge Walls’ decision turned on the interpretation of what constitutes a “payment” under the Third Circuit’s K-Dur decision.  “The Court finds that the term ‘reverse payment’ is not sufficiently broad to encompass any benefit that may fall to Teva in a negotiated settlement.  The Third Circuit’s K-Dur opinion is directed towards settlements when a generic manufacturer is paid off with money, which is not the case here,” wrote Judge Walls.   

The FDA Law Blog explained how the opinion discussed four separate bases supporting his decision: “a careful reading of K-Dur shows that the Third Circuit contemplates a cash payment when it uses the term ‘reverse payment,’” the lack of any case in which a drug patent settlement agreement without a cash payment was subject to antitrust scrutiny, and that the lamotrigine agreement actually created generic competition sooner than otherwise would have occurred had Teva not challenged GSK’s patent. 

The lamotrigine case is the second case in which the FTC has expressed concern that a “no-AG” agreement constitutes a “payment” under the Third Circuit’s K-Dur decision.  In August, the FTC sought leave to file an amicus brief in private antitrust litigation pending in the U.S. District Court for the District of New Jersey before Judge Joel A. Pisano concerning Wyeth Pharmaceuticals Inc.’s anti-depressant drug EFFEXOR XR (venlafaxine HCl) Extended-release Tablets.  Judge Pisano denied the FTC’s motion for leave to file its  amicus brief.  The case has been stayed pending the conclusion of the proceedings in the U.S. Supreme Court in In re K-Dur Antitrust Litig.   

Another AG case was also announced last fall, in which the FTC has moved for leave to file an amicus brief in US District Court in New Jersey in In re Effexor XR Antitrust Litigation, arguing that a branded company’s commitment not to launch an AG in competition with a generic company (a “no-AG commitment”) as part of a patent settlement constitutes a “payment” for delayed generic entry under the Third Circuit’s decision in In re K-Dur Antitrust Litigation adopting the FTC’s position on the standard for antitrust review of pharmaceutical patent settlements.  The Arnold & Porter client alert noted above gives an in-depth analysis of this litigation and its potential impact. 

In the end, the law firm recommend that pharmaceutical companies “closely scrutinize the antitrust implications of proposed agreements involving patents” because “Patent licensing agreements may soon be subject to more inclusive rules requiring a larger number of such agreements to be considered asset acquisitions subject to the filing requirements of the HSR Act.” 

Moving Forward 

In light of the recent case law in this area, the law firm of Arnold & Porter wrote a detailed client advisory explaining some of the implications these cases and FTC action may have on the pharmaceutical industry.  For example, the advisory notes that on August 13, 2012, the FTC made public a proposed rule to amend the Hart-Scott Rodino (HSR) premerger notification rules that would increase the number of pharmaceutical patent licensing agreements that would be subject to pre-consummation filing and review. 

 The HSR Act and its implementing rules require that certain mergers and acquisitions be filed with the FTC and the Antitrust Division of the Justice Department and that the parties observe a waiting period prior to consummating the transaction.  Previously, the FTC stated in guidance that the grant of an “exclusive” patent license (that is exclusive against the licensor and all third parties, i.e., not subject to preexisting licenses) is a potentially reportable asset acquisition under the HSR Act and rules.  The FTC’s proposed revisions to the HSR rules, however, “would change this standard—though only for licenses relating to pharmaceutical patents.” 

Under the proposal, a transfer of “all commercially significant rights” to a pharmaceutical patent—defined as including biologics, in-vitro diagnostics, as well as pharmaceuticals9 —is reportable if it otherwise meets the HSR Act’s size-of-transaction and size-of-person thresholds.  The FTC defines “all commercially significant rights” as “the exclusive rights to a patent that allow only the recipient of the exclusive patent rights to use the patent in a particular therapeutic area (or specific indication within a therapeutic area. 

A transfer of “all commercially significant rights” occurs even if the patent holder retains the right to manufacture solely for the rights recipient (licensee) or retains rights to assist the recipient in developing and commercializing products covered by the patent (so-called “co-rights”).  “Thus, an agreement under which the patent holder grants an exclusive license to make and use products for cardiovascular use under a patent and retains the rights to manufacture such products solely for the licensee could be a reportable transaction (subject to satisfying other aspects of the HSR reportability test), even if the patent holder retains the right to manufacture products for third parties in other therapeutic areas.”

Update on IRS Medical Device Tax Final Rule

Section 1405(a) of the Health Care and Education Reconciliation Act (HCERA), which amended the Patient Protection and Affordable Care Act (PPACA), provides that any “manufacturer, producer, or importer” of taxable medical devices must pay a tax equal to 2.3 percent of the sales price of the device.  Over the past few years since the PPACA was enacted, the medical device industry has made numerous attempts to repeal the tax, and several legislative proposals have been introduced in Congress.   

In addition, dozens of reports from the medical device sector and other stakeholders have shown the significant affect this tax will have on medical device innovation and jobs.  Small device companies asserted that the tax would practically put them out of business.  The tax is expected to raise $29 billion in government revenues through 2022, reported Reuters.  

Nevertheless, the Obama administration and the Internal Revenue Service (IRS) moved forward with the implementation of the device tax by publishing final regulations in early December 2012.  Concurrently with the final regulations, the IRS also issued interim guidance (Notice 2012-77) dealing with certain pressing issues — including the determination of a manufacturer’s taxable sales price.  The tax applies to sales of taxable medical devices after Dec. 31, 2012. 

The government has defended the tax by noting that “medical device manufacturers and importers (who) will now have access to 30 million new customers due to the health care law,” Treasury Department spokeswoman Sabrina Siddiqui said in a statement.  However, the device tax “could cost upwards of $660 million annually in implementation costs alone.” 

The law firm of Arnold & Porter LLP provided an in-depth review of the final regulations and their impact on medical device manufacturers.  The IRS is requesting comments on the interim guidance (Notice 2012-77).  The comments are due by March 29, 2013. FierceMedicalDevices also provided a good summary of the IRS guidance. 

What is a “Taxable Medical Device”? 

A “taxable medical device” is any device defined under section 201(h) of the Federal Food, Drug, and Cosmetic Act (FFDCA) that is intended for humans.  For purposes of the medical device excise tax, the IRS final rule has adopted a listing system in which taxable devices that are “intended for humans” are those that are listed with the Food and Drug Administration (FDA) under section 510(j) of the FFDCA.  If a device is not listed with the FDA, but the FDA later determines that it should have been listed as a device, the device will be deemed listed as a device as of the date the FDA notifies the manufacturer in writing that such device should have been listed. 

The final rule also addresses biologics and combination products.  Biological products that are listed with the FDA under section 510(j) of the FFDCA are taxable medical devices; however, other biologics will not be considered taxable medical devices, including those listed under 21 C.F.R. part 607 (dealing with human blood products).   

Combination products — combining drugs, devices, and/or biological products — that are listed as a device with the FDA under section 510(j) also will be treated as taxable medical devices without exception.  Other combination products that are not listed under 510(j) as a device are not taxable under the new rules. 

Medical device excise tax and branded prescription drug fee.  

“Although public comments requested that manufacturers be exempt from the medical device excise tax in instances where a particular product is accounted for when computing the branded prescription drug fee enacted pursuant to PPACA, the IRS indicated that there is no statutory basis for doing so and that the health reform legislation did not provide for coordination between the two provisions,” the advisory said.  The IRS believes that “few, if any, combination products will be subject to both the medical device excise tax and the [branded prescription drug] fee.” 

Convenience kits.  

The IRS interim guidance also addresses the determination of the taxability of “convenience kits,” which are sets of two or more medical devices enclosed in a single package for the convenience of a health care professional or other end user.  For the moment, and until IRS and the Treasury Department issue further guidance, “no tax will be imposed upon the sale of a domestically produced convenience kit.  The medical device tax will still apply, however, upon the sale of a taxable medical device that goes into a domestically produced convenience kit.” 

Exclusions to the Tax 

Statutory exemptions.  There are specific statutory exemptions from the medical device excise tax for eyeglasses, contact lenses, and hearing aids. 

Retail exemption.  There is also an exemption for other devices that are “regularly available for purchase and use by individual consumers who are not medical professionals, and if the design of the device demonstrates that it is not primarily intended for use in a medical institution or office or by a medical professional.”  For purposes of this “retail exemption,” the IRS has adopted a “facts and circumstances approach” for evaluating whether a medical device is of a type that is generally purchased by the public at retail for individual use.   

The determination of whether a device is of a type that qualifies for the retail exemption is made based on the overall balance of factors relevant to the particular type of device. The fact that a device is of a type that requires a prescription is not a factor in the determination of whether or not the device falls under the retail exemption.  The factors for “regularly available” include: 

1. Whether consumers who are not medical professionals can purchase the device in person, over the telephone, or over the internet, through retail businesses such as drug stores, supermarkets, or medical supply stores and retailers that primarily sell devices (for example, specialty medical stores, durable medical equipment, prosthetics, orthotics, and supplies (DMEPOS) suppliers and similar vendors);
2. Whether consumers who are not medical professionals can use the device safely and effectively for its intended medical purpose with minimal or no training from a medical professional; and
3. Whether the device is classified by the FDA under Subpart D of 21 CFR part 890 (Physical Medicine Devices). 

The IRS factors for determining whether a device is designed primarily for use in a medical institution or office or by a medical professional include: 

1. Whether the device generally must be implanted, inserted, operated, or otherwise administered by a medical professional;
2. Whether the cost to acquire, maintain, and/or use the device requires a large initial investment and/or ongoing expenditure that is not affordable for the average individual consumer;
3. Whether the device is a Class III device under the FDA system of classification;
4. Whether the device is classified by the FDA under certain regulations (see p. 45)
5. Whether the device qualifies as durable medical equipment, prosthetics,orthotics, and supplies for which payment is available exclusively on a rental basis under the Medicare Part B payment rules, and is an “item requiring frequent and substantial servicing” as defined in 42 CFR 414.222. 

Safe Harbor 

The final regulations establish a safe harbor that identifies certain devices as exempt from the tax.  Specifically, the following devices are in the safe harbor: 

1. Devices that are included in the FDA’s online IVD Home Use Lab Tests (Over-the-Counter Tests) database
2. Devices that are described as “OTC” or “over the counter” devices in the relevant FDA classification regulation heading.
3. Devices that are described as “OTC” or “over the counter” devices in the FDA’s product code name, the FDA’s device classification name, or the “classification name” field in the FDA’s device registration and listing database
4. Devices that qualify as durable medical equipment, prosthetics, orthotics, and supplies, as described in Subpart C of 42 CFR part 414 (Parenteral and Enteral Nutrition) and Subpart D of 42 CFR part 414 (Durable Medical Equipment and Prosthetic and Orthotic Devices), for which payment is available on a purchase basis under Medicare Part B payment rules, and are—

1)    “Prosthetic and orthotic devices,” as defined in 42 CFR 414.202, that do not require implantation or insertion by a medical professional;

2)    “Parenteral and enteral nutrients, equipment, and supplies” as defined in 42 CFR 411.351 and described in 42 CFR 414.102(b);

3)    “Customized items,” as described in 42 CFR 414.224;

4)    “Therapeutic shoes,” as described in 42 CFR 414.228(c); or

5)    Supplies necessary for the effective use of durable medical equipment (DME), as described in section 110.3 of chapter 15 of the Medicare Benefit Policy Manual (Centers for Medicare and Medicaid Studies Publication 100-02). 

The guidance provides fifteen (15) examples of how the rules and factors IRS enumerated will be applied. 

Paying the Medical Device Excise Tax 

The interim guidance published by the IRS includes guidance for determining the constructive purchase price — based upon distribution chains — upon which the tax will be based.  The manufacturer or importer of a taxable medical device is responsible for filing Form 720, Quarterly Federal Excise Tax Return, and paying the tax to the IRS. Form 720 is filed with the IRS quarterly, and the first return to report the medical device excise tax will be due by April 30, 2013, for the quarterly period including January, February, and March 2013.   

Manufacturers and importers must, however, make semi-monthly deposits where the tax liability exceeds US $2,500 for the quarter.  Failure to file or pay the taxes due may result in penalties assessed by the IRS.  Under certain circumstances, these penalties may be abated.  The IRS has additional information about deadlines and payment on its website, in the form of frequently asked questions (FAQs). 

Discussion 

FierceMedicalDevices noted that while the IRS acquiesced to expanding its over-the-counter provision to include devices bought over the Internet or by telephone, but requests to better define "affordable," elaborate on "minimal or no training" and to exempt Class III devices were all spurned by the IRS.

 Mark Leahey, CEO of the Medical Device Manufacturers Association, said the final ruling does nothing to dull the blow the 2.3% tax will deliver to jobs and innovation in the industry.  “There is growing bipartisan support in Congress to repeal the medical device tax, and MDMA remains committed to working with elected officials to fix a policy that was a bad idea when it passed, and is proving to be more harmful than imagined to our economy and patient care as it gets closer to implementation,” Leahey said in a statement. 

Companies including Boston Scientific Corp, 3M Co and Kimberly-Clark Corp have been lobbying the U.S. Congress for a repeal of the tax.  A repeal bill passed the Republican-controlled U.S. House of Representatives in June, but it has not been voted on by the Democratic-controlled Senate.  Democratic Senator Kay Hagan (D-NC), however, “is looking to her state's business leaders to find a way to repeal the 2.3% medical device tax and make up for the make up for the $30 billion in revenue it's slated to raise to support healthcare reform,” reported MassDevice.com. 

In one potentially problematic aspect of the tax, companies selling dual-use products to medical and non-medical customers must pay the tax on those products, potentially putting them at a competitive disadvantage, said Lew Fernandez, a director at PricewaterhouseCoopers LLP and a former IRS official.  For example, it remains “an open question” when latex gloves come under the tax, he said.

Twenty Academic Industry Alliances of 2012

Over the past few years, we have written about the critical partnerships that the pharmaceutical and medical device industries have created with academic medical centers and medical schools.  Most recently, we wrote about a partnership between Novartis and the University of Pennsylvania to bring to market a new approach to fighting cancer that has shown promising results in early trials.

Previously, we wrote about a new drug research collaboration was announced between pharmaceutical giant Pfizer and the University of California San Diego, which could deliver up to $50 million to local scientists over the next five years, speed the delivery of promising therapies to patients and help refill the fast-depleting pipeline of the world’s largest pharmaceutical manufacturer.   

Earlier this year, Merck announced a collaboration to create the California Institute for Biomedical Research (Calibr), an independent, not-for-profit organization--501(c)(3).   We have also written several times about the University of California, San Francisco Chancellor Susan Desmond-Hellmann, who advocates for establishing closer relationships with industry in order to spark new ideas, fund research, access high-tech equipment and speed medical advances to patients.   

 Consequently, FierceBiotech recently ran a story describing 20 Major Pharma-Academic Alliances in 2012.  We located descriptions of most of these alliances and provided background and links.  It is interesting that many of the alliances are with institutions outside of the United States including Australia, Canada, Germany, Hong Kong, Singapore and the UK 

UCSF and Sanofi  

The University of California, San Francisco (UCSF) has signed an alliance with Sanofi to share expertise in diabetes research and identify drug targets that could lead to new therapies for both type 1 and type 2 diabetes.  The $3.1 million collaboration will bring together scientists in three UCSF labs with deep understanding of the biology of beta cells – insulin-producing cells that are destroyed in type 1 diabetes and often produce too little insulin in type 2 – with Sanofi researchers who are experienced in developing potential drug candidates into actual therapies. 

The alliance is the University’s third collaboration with Sanofi, alongside brain trauma and oncology research launched last year, since the two signed a master agreement in January 2011 to work together in translating academic science into potential new therapies. Master agreements lay out the fundamental terms of research collaborations, align with the University's academic mission including broad publication rights, and form part of a core strategy for the UCSF Office of Innovation, Technology and Alliances to expedite that “bench-to-bedside” research. 

The University of Queensland, Australia and Johnson & Johnson  

Johnson & Johnson and the University of Queensland will co-develop drugs using components of spider venom as a treatment for chronic pain.  The maker of Ultram painkillers will work with Queensland’s Institute of Molecular Bioscience drug development program, the university said in a statement. Financial terms of the 12-month project were not disclosed.  Spider venoms have peptides that may “substantially reduce or block the pain,” Richard Lewis, professor at the institute, said in a phone interview. 

The University of Hong Kong, National University of Singapore, Pfizer, Lilly and Merck 

Scientists at the Genome Institute of Singapore (GIS) have unraveled the mechanism that causes liver cancer (hepatocellular carcinoma, HCC), one of the most common solid tumors worldwide. This genome-wide research was done in collaboration with colleagues from the National University of Singapore (NUS), University of Hong Kong, Eli Lilly & Co. USA, Merck Research Laboratories USA, Pfizer Oncology USA and Beijing Genomics Institute China 

Novo Nordisk and the University of Oxford 

Departing from its core competence, diabetes, Danish insulin giant Novo Nordisk (NOV: N) and the Kennedy Institute of Rheumatology at Oxford University have entered into a new partnership to develop promising new drug candidates and identify novel biomarkers and treatment targets for rheumatoid arthritis and other autoimmune inflammatory diseases.  Novo Nordisk will fund 10 Oxford researchers at the Kennedy Institute of Rheumatology to work within the partnership. A Joint steering committee with members from both parties, including Per Falk and Prof Feldmann, will oversee the partnership and assess research proposals from scientists at both organizations. 

University of Oxford and UCB 

The University of Oxford and UCB have signed a partnership worth £3.6M to work together on cutting-edge pharmaceutical research projects. The new collaboration will see scientists from industry and academia working together to develop innovative medicines to treat serious diseases in the areas of immunology and neurology. 

Novo Nordisk and the Juvenile Diabetes Research Foundation (JDRF) 

To address the underlying autoimmune process that is central to type 1 diabetes (T1D), JDRF and Novo Nordisk are partnering to discover and develop novel immunotherapies to prevent, treat, and help cure the disease.  Type 1 diabetes occurs when the body's immune system attacks and destroys the glucose-responsive, insulin-secreting beta cells of the pancreas, resulting in a lifetime requirement of insulin replacement therapy.  The collaboration between JDRF and Novo Nordisk will focus on research originating from academia and biotechnology companies, as well as from internal research projects at Novo Nordisk. 

Bristol-Myers Squibb and Vanderbilt University 

Vanderbilt University and Bristol-Myers Squibb Company announced a collaboration agreement for the discovery, development and commercialization of novel therapies acting on the mGluR4 glutamate receptor, known as positive allosteric modulators or PAMs, for the treatment of Parkinson’s disease.  Under the collaboration, the Vanderbilt Center for Neuroscience Drug Discovery (VCNDD) will identify drug candidates from its existing program, which obtained major support from The Michael J. Fox Foundation for Parkinson’s Research (MJFF). Bristol-Myers Squibb will have the right to develop and commercialize products resulting from the collaborative research program.  

Under the terms of the agreement, Vanderbilt University will receive an upfront payment and multi-year research funding to continue to discover additional compounds. Vanderbilt is eligible to receive milestones and royalties based on developmental success and worldwide sales of the drugs emerging from the collaboration.  “The long-term commitment of and collaboration with the MJFF were critical to advancing this program to the stage where it is now perfectly positioned to work closely with Bristol-Myers Squibb for further development,” said P. Jeffrey Conn, Ph.D., VCNDD director and Lee E. Limbird, Chair in Pharmacology. “Partnering with Bristol-Myers Squibb is a real win for Vanderbilt and for Parkinson’s patients.”  

Novartis and the University of Pennsylvania 

See our story linked above in the introduction. 

Sanofi, Brigham and Women’s Hospital, and Harvard Medical School 

Sanofi SA, the French drug giant that bought Cambridge-based Genzyme Corp. for $20.1 billion last year, announced a new research collaboration with Brigham and Women’s Hospital, a teaching and research affiliate of Harvard Medical School.  The collaboration is focused on the immunology of type 1 diabetes.  Under the terms of the agreement, researchers from both organizations will undertake studies for a novel approach to treat type 1 diabetes. Sanofi has an option to exclusively license intellectual property emerging from this collaboration.  

Merck and California Institute for Biomedical Research 

Merck announced that it is putting $90 million over the next seven years into a new nonprofit biomedical research institute in San Diego called the California Institute for Biomedical Research (Calibr). The new institute will be led by Peter Schultz, the prominent chemist and biotech entrepreneur at The Scripps Research Institute, who previously ran The Genomics Institute of the Novartis Research Foundation.  The driving concept of the institute is different than just being a branch of Merck’s $8.5 billion global R&D enterprise. By remaining at arm’s length, the company can put in some of its own money, and allow researchers to amplify it with other grant support from academic collaborators. Once a project has reached “preclinical proof of concept,” Merck then has the option to swoop in to in-license drug candidates for further development. 

GlaxoSmithKline and Yale University  

GlaxoSmithKline (GSK) and Yale University will partner to design a new class of molecules to target disease-causing proteins.  This is the latest in a string of deals between Yale’s academic researchers and global pharmaceutical companies.  Under the agreement, the company is granted first chance to license promising protein-destroying drug candidates discovered in a research collaboration between GlaxoSmithKline and the laboratory of Craig Crews, the Lewis B. Cullman Professor of Molecular, Cellular, and Developmental Biology, and professor of chemistry and of pharmacology at Yale. 

The deal comes on the heels of other agreements signed by Yale with Gilead Sciences Inc., which is working with Yale to identify novel cancer therapeutics, and with Johnson & Johnson, which is also interested in drug candidates being developed at Yale’s West Campus. 

AstraZeneca and Broad Institute 

AstraZeneca and the Broad Institute in Cambridge, Massachusetts announced a collaboration to identify new chemical compounds targeting bacterial and viral infections that could speed the development of new antibacterial and antiviral drugs.  Under the agreement, screening and hit-to-lead chemistry will take place in the Broad’s Chemical Biology Platform and AstraZeneca will optimize, develop and commercialize potential compounds from identified, high-quality leads. 

Pfizer, AZ, Janssen, J&J, Boehringer Ingelheim, GSK, Merck, and the University of Dundee 

The five pharma’s will provide £14.4 ($23.1) million to fund a research consortium at the university for an additional four years.  The Division of Signal Transduction Therapy (DSTT) consortium, which was founded in 1998, is studying cell signaling and developing inhibitors of kinases and phosphatases to treat diseases such as cancer, arthritis and lupus. Pharmas share access to unpublished results, technology, reagents and first license to IP.  The DSTT includes 15 research teams based at the University of Dundee. Thirteen of the teams are based within the MRC Protein Phosphorylation Unit and Scottish Institute for Cell Signalling (SCILLS) at the College of Life Sciences. Together, consortium scientists will continue early-stage research in multiple areas, including cancer, arthritis, lupus, hypertension and Parkinson’s disease. 

Abbott, AZ, Lilly, Bayer, Sanofi, Merck, Texas A&M University, Cornell Medical School, and Bill & Melinda Gates Foundation 

Seven pharmaceutical companies have opened up compound libraries and agreed to share data with each other and the research institutions under the Gates Foundation's TB Drug Accelerator program. The program shifted last year to implementing assays and tools into a drug discovery effort from building the assays and tools. The foundation hopes to have proof-of-concept for a one-month, three-drug regimen within 10 years. The structures of lead compounds identified will be placed in the public domain. 

AZ, Genentech, Merck, and Washington University in St. Louis, School of Medicine 

Pfizer, Lilly, Roche, Servier, J&J, Janssen, and Kings College, London 

Five-year research project on autism to develop and validate translational research approaches for autism therapies and establish European clinical sites for autism trials. The project hopes to produce validated cellular assays, animal models, functional MRI (fMRI) methods, PET radioligands and biomarkers 

Accuray and Rupercht-Karls, Universitat Heidelberg 

Accuray Incorporated, the premier radiation oncology company, announced the signing of a multi-year master research and collaboration agreement with the University of Heidelberg, a luminary research institution located in Heidelberg, Germany that contributes to the city’s top international position in therapy, research and science. Accuray and the University of Heidelberg will collaborate on cutting-edge research in radiation oncology to advance treatment technology and provide health care professionals with the most advanced tools for treating patients. 

AZ, Washington University in St. Louis, School of Medicine, Cornell Medical School, The Feinstein Institute for Medical Research, and The University of British Columbia 

AstraZeneca and Dr. Steven Paul of Weill Cornell Medical College announced a first of its kind research alliance that brings four leading academic research laboratories together with AstraZeneca to study a major risk factor for Alzheimer’s disease, the apolipoprotein E4 genotype (ApoE). The newly established collaboration with AstraZeneca is called the A5 alliance.  The A5 alliance members represent a team of academic scientists with expertise in ApoE biology who will focus on identification, validation, and risk reduction of drug targets for treatment of Alzheimer’s disease.

New Medical Devices – Lowering Healthcare Costs

The increasing pressure on the healthcare industry to reduce costs, improve quality, and increase efficiency has created several debates about what is driving up healthcare costs.  One such debate has focused on the use of healthcare technology, such as medical devices. 

Some say that healthcare technology can increase costs, due to price and volume effects, both for medical technologies themselves and related services.  On the other hand, research has shown that returns on spending on medical technologies “can far exceed their costs, particularly when longer term benefits are measured in terms of productivity and reduced disability.” 

Consequently, a new AdvaMed report says that contrary to claims that medical devices are driving up health care costs, spending on these technologies rose from 5.3% to just 6.0% from 1989 to 2010, reported MassDevice.com.  “Medical devices are a relatively small and very slowly growing share of national health expenditures,” noted the report, which builds on a study released by AdvaMed released last year, which considered the period between 1989 and 2009.  Moreover, the report showed that medical device spending as a portion of U.S. national health expenditures increased less than 1% over the last 2 decades. 

A similar report released two years ago by Eli Lilly showed that despite suggestions that drugs were causing increased healthcare costs, medicines accounted for only 10% of healthcare expenditures. 

The news comes as AdvaMed and medical device advocates continue working to repeal the 2.3% medical device tax that is set to take effect at the beginning of next year.  The measure, contained in the Affordable Care Act, is expected to raise $30 billion over the next 10 years through a levy on domestic sales of medical devices. 

“The findings underscore the tremendous value medical technology provides to patients and the overall health care system,” AdvaMed payment & healthcare delivery policy executive vice president Anne-Marie Lynch said in prepared remarks.  “Unlike other areas of health care, the prices of medical devices have been growing much more slowly not only as compared to the Medical Consumer Price Index but also as compared to the CPI as a whole.” 

Medical device prices have also grown more slowly than average prices nationwide according to the report, which was conducted by Roland “Guy” King, the former chief actuary for what is now known as the Centers for Medicare & Medicaid Services.  

During the most recent 10-year period, ending in 2010, medical device prices increased at an average rate of 1%, the report concluded.  That compared with 4.1% for the overall Medicare Care Consumer Price Index and 2.4% for the general Consumer Price Index.  Medtech prices gained 0.1% from 2009 to 2010, the period between AdvaMed's last and latest report.  In 2010 medical device spending totaled $156.3 billion or 6.0 percent of total national health expenditures ($2.6 trillion).  

“In view of the conventional wisdom about the role of medical technology in driving up costs, it is surprising that the cost of medical devices has risen little as a share of total national health expenditures,” the researchers wrote.  “It is also striking that, unlike most other areas of medicine, the prices of medical devices have actually been growing more slowly not only than the MC-CPI but also the CPI as a whole.” 

The study included medical device and diagnostics pricing and spending over a 22 year period, excluding laboratory apparatus and furniture, dental equipment and supplies, dental laboratories and diagnostics substances, according to the report.  

The new study may help make some inroads by helping to dispel perceptions that the medical device industry is a prime driver of increased healthcare spending in the U.S. Earlier this year the Bipartisan Policy Center released a report concluding that overuse of expensive and unnecessary medtech innovations is among the primary sources of the skyrocketing cost of healthcare in the U.S. 

“We are proud of the value we deliver as an industry to patients worldwide and look forward to sharing the results of this new study with Members of Congress and other policymakers as they consider changes to the health care delivery and payment system in the United States,” AdvaMed's Lynch said

Pharmaceutical Development Slows Down In Search of New Products

Over the last month or so, there has been a series of reports and articles discussing the difficulty pharmaceutical companies are having with their drug pipelines—or so they say. 

For example, AstraZeneca Chairman Leif Johansson recently said that the company is planning “to replenish its pipeline of new drugs through external collaborations and by buying drugs in late stages of development from other drugmakers.”  In April, AZ paid $1.26 billion for Ardea BioSciences and more recently, agreed to spend $3.4 billion toward the purchase of Amylin Pharmaceuticals by Bristol-Myers Squibb. In doing so, AstraZeneca expanded its partnerships with Bristol-Myers to develop diabetes medications.  Recently AZ announced they were discontinuing their stock buyback program until further notice.  This move is perfectly in line with the need to conserve cash to buy new compounds and biologic products. 

Other companies have been following these steps over the past few months, including Pfizer and Novartis.  Additionally, French drug company Sanofi recently announced a new research collaboration with Brigham and Women’s Hospital, a teaching and research affiliate of Harvard Medical School.  The collaboration is focused on the immunology of type 1 diabetes. 

Under the terms of the agreement, researchers from both organizations will undertake studies for a novel approach to treat type 1 diabetes. Sanofi has an option to exclusively license intellectual property emerging from this collaboration.  

Johansson also noted the number of drugs going off patent, which the company needs to replace.  For example, AZ’s Seroquel antipsychotic lost patent protection this year, while the Nexium heartburn pill Nexium and Crestor cholesterol pill lose US patent protection in 2014 and 2016, respectively.  Nevertheless, he noted opportunities, such as the possibility of buying late-stage drugs, emerging markets and advances in science, including genome technology, which he touted as a way to learn how the human body works and possibly help find new drugs. 

His comments came shortly after AZ hired Pascal Soriot away from Roche as its new chief executive.  The move comes nearly three months after David Brennan abruptly retired from AZ.  His position will take effect October 1 of this year.  “No one is blind to the challenges that confront the pharmaceutical sector and this company, but the underlying strengths of AstraZeneca in delivering on its strategy are clear.  AstraZeneca will continue to make a positive difference to patients over the longer term and I’m looking forward to playing my part in shaping that future,” Soriot, 53, says in a statement.   

It is because of innovations that pharmaceutical companies are making, that “The life expectancy of people diagnosed with type 1 diabetes dramatically increased during the course of a 30-year, long-term prospective study, according to researchers at the University of Pittsburgh whose findings currently appear online in the journal Diabetes.  The life expectancy for participants diagnosed with type 1 diabetes between 1965 and 1980 was 68.8 years – a 15-year improvement, compared to those diagnosed between 1950 and 1964, according to the study.

Additionally, it is because of the drugs companies develop that people living with HIV in the U.S. may be doing better at getting treatment and controlling their virus.  The long-running North American AIDS Cohort Collaboration on Research and Design has seen significant increases in the proportion of patients who were on highly active antiretroviral therapy (HAART), according to Keri Althoff, PhD, of Johns Hopkins Bloomberg School of Public Health, and colleagues.  And there have also been increases in the proportion with a suppressed viral load from 2000 to 2008, Althoff and colleagues reported in the Sept. 4 issue of Annals of Internal Medicine. 

What is Causing Slow Drug Development? 

While companies maintain that regulatory burdens and other challenges affect their ability to produce new drugs, a recent study published in the British Medical Journal maintained that lagging drug development is occurring because drug companies are not really innovating.  The study, authored by Donald W. Light, PhD, of the University of Medicine and Dentistry of New Jersey in Cherry Hill, N.J., and Joel R. Lexchin, MD, of York University in Toronto, asserted that, “pharmaceutical research and development turns out mostly minor variations on existing drugs, and most new drugs are not superior on clinical measures.” 

The article disputed estimates from companies that it costs roughly $1.3 billion to develop a new chemical entity (NCE).  Instead, the authors said that of the purported $1.3 billion average, “half... comes from estimating how much profit would have been made if the money had been invested in an index fund of pharmaceutical companies that increased in value 11% a year, compounded over 15 years,” citing the research center at Tufts University in Boston that produced the estimate.  And, these estimates were based on the most expensive 20% of new drugs, they pointed out.  When the calculation was done on all NCEs, the average actual expenditure came down to $90 million. 

They also disputed the rate of approval of NCE’s.  They noted that recent annual rates of 15 to 25 NCE approvals are consistent with averages from 1955 into the early 1990s, Light and Lexchin indicated.  Nor has the percentage of approvals involving genuine medical advances -- as opposed to “me-too” products -- declined much.  They cited a 1991 analysis that found only 34% of drugs approved from 1974 to 1989 represented “important therapeutic gains.”  Meanwhile, between 2000 and 2001, new oncology drug approvals in the US outpaced European approvals by 33 percent, ccording to a new report from the Tufts Center for the Study of Drug Development. 

The authors also argued that while research and development costs have risen significantly for drug companies (by an estimated $34.2 billion between 1995 and 2010), revenues have risen faster (by $200.4 billion within that same time period).  “Companies exaggerate costs of development by focusing on their self reported increase in costs and by not mentioning this extraordinary revenue return,” write Light and Lexchin. “Net profits after taxes consistently remain substantially higher than profits for all other Fortune 500 companies.”

The real enemy of innovation, they suggested, is the industry's devotion to marketing and defense of existing blockbuster products, they claimed.  According to a published estimate by Lexchin and a different co-author, pharmaceutical companies spend only 1.3% of revenues on discovering NCEs versus 25% on promotion (PLoS Med 2008; 5:e1).  “This hidden business model for pharmaceutical research, sales, and profits has long depended less on the breakthrough research that executives emphasize than on rational actors exploiting ever broader and longer patents and other government protections against normal free market competition,” Light and Lexchin wrote in BMJ.

They argued that regulatory agencies should dramatically stiffen requirement for new drug approvals. 

“The low bars of being better than placebo, using surrogate endpoints instead of hard clinical outcomes, or being non-inferior to a comparator, allow approval of medicines that may even be less effective or less safe than existing ones,” they wrote.

More provocatively, they recommended that companies no longer be rewarded for innovation by being allowed to charge high prices for new products. 

Instead, Light and Lexchin backed a proposal by Sen. Bernard Sanders (I-Vt.) to give large taxpayer-funded cash prizes to companies that deliver real improvements in healthcare, but allowing generic competition to begin immediately in order to keep costs to patients and payers relatively low.  Under such a system, they argued, “innovators are rewarded quickly to innovate again,” while countries pay billions less in healthcare costs and patients' health and quality of life improve.   The problem with "Prizes" for improvement is, prizes are arranged to "please" the master state, not a workable model. Prizes are a Soviet and North Korean style of doing business and in the end no one can sustain a business based on prizes as seen first hand the successes of the Soviet Union.  In an investor note published by Pharmalot, Sanford Bernstein analyst Tim Anderson writes that data from KMR Group, reveals what he calls “several potentially disturbing” trends.  “Pipeline success rates across all phases of development have been slowly worsening or at best staying flat, depending on the phase.”  For instance, success rates for Phase III drugs went from 70 percent to 67 percent to 65 percent from 2003 through 2007; from 2005 through 2009, and from 2007 through 2011, respectively. 

For Phase II drugs, success rates fell from 34 percent to 25 percent to 22 percent during the same periods.  The number of preclinical drugs needed to yield one approved drug also rose. From 2003-2007, 12 preclinical drugs were required to yield one marketed drug, but then jumped to 24 from 2005 through 2009, and 30 between from 2007 through 2011.  

When you measure the time needed to go from preclinical to development to regulatory approval, so-called ‘cycle times’ have also risen.  From 1999 through 2001, it was 11.4 years and rose to 13.7 years between 2009 and 2011.  Between 2008 and 2010, cycle times increased to 13.6 years, Anderson notes.  However, the discovery segment remained fairly constant at an average of about 4.5 years, he adds, while the development portion rose from 7.1 years a decade ago to 9 years. 

Growth in Developing Markets 

To address investors concerns about blockbusters going off patent, companies have been pointing to growth in developing markets, like China and India as ways to replace lost revenue.  However, as reported by the Wall Street Journal, companies are not seeing such a fast response.  “Slowing economic growth, intense local competition and governments’ efforts to control health-care costs and bolster homegrown firms have damped the prospects for the top drug makers in so-called emerging markets.  And that threatens the lofty sales goals baked into many pharmaceutical stocks,” Jonathan Rockoff wrote.   

According to the article, “Drug sales in emerging markets will grow by $157 billion over the next five years, reaching at least $345 billion or about a third of the global drug spending, IMS Health predicts.  By contrast, the U.S. and European shares of world-wide drug spending are expected to fall as a result of patent expirations, cost cutting and anemic growth.”

Ten BioPharmaceutical Companies Launch TransCelerate BioPharm, Inc. to Accelerate Product Development

Ten leading biopharmaceutical companies announced that they had formed a non-profit organization to accelerate the development of new medicines. Abbott, AstraZeneca, Boehringer Ingelheim, Bristol-Myers Squibb, Eli Lilly and Company, GlaxoSmithKline, Johnson & Johnson, Pfizer, Genentech a member of the Roche Group, and Sanofi launched TransCelerate BioPharma Inc. ("TransCelerate") , the largest ever initiative of its kind, to identify and solve common drug development challenges with the end goals of improving the quality of clinical studies and bringing new medicines to patients faster. 

Each of these company’s should be applauded for their efforts to solve these very real problems.  As we noted last year, the “valley of death” for most companies developing drugs can be brutal.   

Through participation in TransCelerate , each of the ten founding companies will combine financial and other resources, including personnel, to solve industry-wide challenges in a collaborative environment.  Together, member companies have agreed to specific outcome-oriented objectives and established guidelines for sharing meaningful information and expertise to advance collaboration. 

“There is widespread alignment among the heads of R&D at major pharmaceutical companies that there is a critical need to substantially increase the number of innovative new medicines, while eliminating inefficiencies that drive up R&D costs,” said newly appointed acting CEO of TransCelerate BioPharma , Garry Neil, MD, Partner at Apple Tree Partners and formerly Corporate Vice President, Science & Technology, Johnson & Johnson. “Our mission at TransCelerate BioPharma is to work together across the global research and development community and share research and solutions that will simplify and accelerate the delivery of exciting new medicines for patients.” 

Other companies, including smaller ones, will be able to join, Mr. Neil said.  The companies will contribute money and personnel to work on the various projects.  While TransCelerate will have a headquarters in Philadelphia, the employees from different companies will not all work together at that location, instead meeting as necessary, Mr. Neil said. 

Members of TransCelerate have identified clinical study execution as the initiative's initial area of focus.  Five projects have been selected by the group for funding and development, including:  

1. Development of a shared user interface for investigator site portals,
2. Mutual recognition of study site qualification and training,
3. Development of risk-based site monitoring approach and standards,
4. Development of clinical data standards, and
5. Establishment of a comparator drug supply model. 

Forbes expanded on this list:

1. Creating clinical data standards, as with the case of notation of gender, so that all clinical trials note things like gender, changes in blood pressure, and such in the same way.
2. Standardizing the way that risk to patients is measured in studies, so that side effects are always handled in the same way.
3. Building a common Web site for doctors enrolling patients in clinical trials to use, so that each company isn’t running its own portal with a different look and feel.
4. Standardizing the process of training doctors and qualifying clinical trial sites, so that a physician doesn’t need to go through separate but similar training programs in order to work in clinical trials run by two companies.
5. Standardizing the process by which companies strike deals to do clinical trials that compare an experimental drug to a standard regimen made by another company. 

As shared solutions in clinical research and other areas are developed, TransCelerate will involve industry alliances including Clinical Data Interchange Standards Consortium (CDISC), Critical-Path Institute (C-Path), Clinical Trials Transformation Initiative (CTTI), Innovative Medicines Initiative (IMI), regulatory bodies including the US Food and Drug Administration (FDA) and European Medicines Agency (EMA), and Contract Research Organizations (CROs). 

Janet Woodcock, MD, director of FDA's Center for Drug Evaluation and Research, said, “We applaud the companies in TransCelerate BioPharma for joining forces to address a series of longstanding challenges in new drug development. This collaborative approach in the pre-competitive arena, utilizing the collective experience and resources of 10 leading drug companies and others to follow, has the promise to lead to new paradigms and cost savings in drug development, all of which would strengthen the industry and its ability to develop innovative and much-needed therapies for patients.” 

“These leading pharmaceutical companies are in a position to significantly influence changes in the way that clinical trials are done, so that better answers about the benefits and risks of drugs and other therapies are provided in a more efficient manner,” said Robert Califf, MD, Co-Chair of CTTI and Director of the Duke Translational Medicine Institute.  “This initiative is complementary to efforts of CTTI, and we look forward to working with TransCelerate BioPharma to improve the conduct of clinical trials.” 

TransCelerate BioPharma evolved from relationships fostered via the Hever Group, a forum for executive R&D leadership to discuss relevant issues facing the industry and solutions for addressing common challenges. TransCelerate was incorporated in early August 2012 and will file for non-profit status this fall. The Board of Directors includes R&D heads of ten member companies. Membership in TransCelerate is open to all pharmaceutical and biotechnology companies who can contribute to and benefit from these shared solutions. TransCelerate 's headquarters will be located in Philadelphia, PA.

Glen Giovannetti, Ernst & Young Global Biotechnology, Leader says today’s announcement encouraging because it is unique.  “We haven’t seen one quite like this before where 10 pharmaceutical companies paired up of sort of their own volition in a way,” he says. “They join other consortia. This seems to be more of a real commitment of their resources and their effort. I think it’s great. They’re going to concentrate on getting some standardization around the clinical trial process. Perhaps more important in the long term, how data is gathered and assembled it really could move toward greater standardization of data so that trial results downstream could be more easily pooled and shared and investigated for insights.”