Pharma Industry

Short of planting a mole, there are few better ways to look into an industry’s id than by reading its trade press. And according to those who track pharma most closely — at times almost sycophantically — one of the industry’s major preoccupations these days is… meetings.

Not just any meetings, though. Apparently drug-company get-togethers — which can range from sales training and “fire-up” gatherings to strategy planning sessions to clinical-trial review meetings –have no shortage of special needs, which of course requires special treatment by resorts and their support staffs. Two recent articles  in Pharmaceutical Executive describe the emergence of conference staffs who pride themselves on being “pharma fluent” and how Puerto Rico has emerged as a major destination for pharma forums.

“Pharma fluency,” as defined here, includes:

• Extensive training of everyone from managers to caterers on such matters as “the difference between an internal and external meeting, the history of the pharmaceutical industry, the structure and divisions of pharmaceutical companies, the unique terms and vocabulary of the industry, the trends in meeting consolidation, and the differences between pharmaceutical companies and other healthcare and biotech companies”
• Knowledge of the regulations that affect pharma companies, the most important being — get this — “the PhRMA Code of Interactions with Healthcare Professionals”
• Understanding drugmakers’ almost paranoid need for secrecy, which includes providing locking conference rooms, stocking them with shredders for on-the-spot document destruction, and returning any “materials” inadvertently left behind to the meeting sponsor
• Awareness of when resorts can bill the expenses of doctors to a pharma sponsor, and when they have to be billed separately (sorry, sports fans, the articles don’t go into much more detail than that)

Puerto Rico, meanwhile, is apparently a hot drugmaker destination these days not because it’s a lush tropical paradise, but because it’s a global pharmaceutical manufacturing hub with pharma-savvy conference resorts to match. Or, as PharmExec puts it:

It’s an island where 16 of the 20 top-selling pharmaceuticals are manufactured; where $30 billion worth of pharmaceutical products are shipped globally each year; where in four years more than $4 billion has been invested in biotechnology by such companies as Abbott, Lilly, and Amgen; where a $3 billion Knowledge Corridor, a flagship project that includes the new Puerto Rican Cancer Center, is in development.

So the weather, the beaches and a profusion of luxury resorts have nothing to do with it. Good to know.

It’s impossible to know how seriously to take any of this stuff, of course. But it’s hard to read these pieces without wondering what the industry would look like if it devoted half as much effort to producing novel medicines and ensuring they’re sold only to people who need them as it seems to spend ensuring there’s plenty of hand-holding available whenever its officials get together — strictly for business, of course.

Photo by Flickr user Mannequin-, CC 2.0

Welcome back from the weekend. Here’s a quick roundup of stories you may have overlooked over the past week:

1. Merck said it would cut 1,200 jobs following the FDA’s rejection of one cholesterol drug and a scandal that’s cuts sales of its combination drug Vytorin, which it sells with Schering-Plough. That’s on top of 8,100 jobs it planned to eliminate in a Dec. 2005 restructuring.
2. Embattled Amgen CEO Kevin Sharer told shareholders he’s felt “real economic pain” during the company’s recent travails, in which the FDA and Medicare have beaten up on the company’s core anemia drugs after they were linked to cancer and heart problems. Sharer still earned almost $13.2 million in compensation last year, although that represented a cut of almost 29 percent from his previous year’s paycheck.
3. A private biotech called Novalar Pharmaceuticals won approval for the first drug intended to reverse the effects of dental anesthesia, the NYT reports. The drug doesn’t counteract numbness directly, but does increase blood flow and thus “clears” the anesthetic from patients’ bodies faster. The drug may seem like a needless luxury, but Novalar insists it could be useful for children, who might bite their lips or tongue while numb, or in the cosmetic-dentistry market.
4. Bristol-Myers Squibb sold off a wound-care unit to a private-equity partnership, then said it wants to spin off 10 percent to 20 percent of its baby-formula business in an IPO. Observers are divided as to whether BMS is slimming down to make itself a more attractive acquisition target, or to regain its fighting weight in order to start buying other companies itself.
5. The FDA won’t require new clinical trials for a copycat version of Sanofi-Aventis‘ blood thinner Lovenox, although the generic-version backers –Novartis unit Sandoz and Momenta — still have o provide additional laboratory and animal tests.
6. Congress is once again making noises about banning, or at least dramatically scaling back direct-to-consumer (DTC) advertising for new drugs. Lawmakers probed the issue at a House subcommittee hearing last Thursday. New Zealand is the only other industrialized country that allows such ads, which studies have shown play a measureable role in swaying doctors to prescribe brand-name drugs.
7. New drug-industry user fees paid to the FDA will mostly subsidize FDA’s expansion of its own drug-monitoring and inspection system, according to the agency’s draft drug-safety plan.

Merrill Goozner, a former Chicago Tribune reporter turned public-health advocate (he heads up the Integrity in Science Project at the Center for Science in the Public Interest), notes an interesting and almost wholly overlooked Food and Drug Administration decision that may have the effect of subjecting clinical-trial volunteers in poor nations to unwarranted risks. Assuming his take is correct, I have to agree that it’s something of a scandal that the mainstream press, and even leading pharma bloggers, have so far failed to cover the story.

The gist is this: The FDA has formally abandoned a previous requirement that international drug trials must conform to the Helsinki Declaration, a human-rights accord that, among other things, requires clinical trials of new drugs to compare them to the best available existing therapy instead of a placebo — i.e., nothing. It sounds abstruse, but as Merrill writes, it may have a big impact on the risks run by trial participants in the Third World:

[T]o the U.S. Food and Drug Administration and the drug industry, to which it had grown increasingly close over the course of the 1990s, [the Helsinki Declaration] contradicted its longstanding policy of only requiring trials showing that a new drug was “better than nothing,” i.e., better than placebo, to win regulatory approval. If the drug industry were to closely adhere to the Helsinki Declaration, it would always have to run comparison trials if an effective drug were already available.

Rather than accede to international norms, the FDA and the U.S. government in the succeeding years lobbied hard to get the WMA to amend its rules. And it has, several times. For instance, it now allows use of placebo-controlled trials for less serious illnesses. But the basic guidelines protecting human trial subjects’ access to best available therapies remained intact.

Now that the FDA has officially repudiated that standard, however, drugmakers are free to test new drugs against placebo or an inferior “local” standard of care. Worse, Merrill argues that the new rule will push more trials overseas, where the FDA won’t be monitoring them by requiring their registration in a public database.

What will this mean for the concept of “informed consent” in a poor country? Imagine for a moment that you live on $2 a day in, say, Tanzania, and have high blood pressure. Since the disease isn’t life-threatening, you skip buying the available anti-hypertensives being sold in the village pharmacy because you can’t afford it. Now say you learn while visiting the village clinic that an international pharmaceutical company is recruiting patients for a clinical trial testing a new anti-hypertensive drug. If you join the trial, you may only get the placebo. But there’s a 50-50 chance you will get the new drug, which hasn’t been proven yet, but might work.

Are there risks associated with taking this new drug? Well, so far, none that the doctors think are serious enough to cancel the trial, but it says right on the form that something may turn up in the clinical trial in which you are being asked to participate. You sign up. After all, a 50-50 chance of getting a drug, that has a good chance of working (the drug industry wouldn’t be here testing it if it didn’t, right?) is better than no drug at all. And how much risk could it be, anyway?

Is that really non-coerced, informed consent?

Short answer: No, it’s not. And the approach here is bad news for anyone worried about drug safety, ethical research standards, or both.

The Vytorin scandal just got serious. Well, heck, it was already serious. Make this really serious:

Investigation and Inquiries.  Through the date of filing this 10-Q, Schering-Plough, the joint venture and/or its joint venture partner, Merck, have received a number of governmental inquiries and have been the subject of a number of investigations. These include several letters from Congress, including the House Committee on Energy and Commerce, the House Subcommittee on Oversight and Investigations, and the ranking minority member of the Senate Finance Committee, collectively seeking a combination of witness interviews, documents and information on a variety of issues related to the Merck/Schering-Plough cholesterol joint venture’s ENHANCE clinical trial, the companies’ sale and promotion of VYTORIN, as well as sales of stock by the companies’ corporate officers (including one executive of Schering-Plough who was named in one of the letters, Carrie Cox) since April 2006. These also include several subpoenas from state officials, including State Attorneys General, and requests for information from U.S. Attorneys seeking similar information and documents.

Emphasis added to this instructive excerpt from Schering-Plough’s latest 10-Q filing with the Securities and Exchange Commission. Of course, the congressional investigations have been anything but quiet. But the involvement of the Department of Justice, via federal prosecutors in unspecified U.S. Attorneys’ offices, is most definitely a new development. And not one that bodes well for the embattled drugmaker.

As Ed Silverman notes over at Pharmalot,  it’s unclear exactly what the feds are looking into at this point. Potential criminal securities violations might be one possibility, although Schering hasn’t disclosed any civil inquiries from the SEC, which usually (although not always) precede criminal investigations. Delaying release of Vytorin trial data that showed it to be largely ineffective might conceivably count as Medicare fraud, since Vytorin and its cousin drug Zetia were pulling in $5 billion in annual sales last year, much of that no doubt picked up by the Medicare prescription-drug benefit.

And, of course, there’s always the unexplained comments by Schering CEO Fred Hassan during the company’s last conference call, in which he denied the existence of any model that would project how the collapse in Vytorin and Zetia sales might affect Schering — even though the company’s Vytorin partner, Merck, had no trouble doing so itself.

Fans of Internet-detective work may also appreciate the contribution of “Condor,” the pseudonymous author of the Schearlings Got Plowed blog, whose visitor-log sleuthing turned up the apparent interest of Robert Kirsch, an Assistant U.S. Attorney in the Securities and Health Fraud Unit in Newark, N.J., in Schering’s recent activities. To add to the intrigue, Condor noted that he’d embargoed his item on the matter until yesterday afternoon — at the request of the U.S. Attorney’s office.

Oddly enough, Merck so far appears to be in the clear, at least insofar as anyone can tell from its SEC disclosures. More grist for the mystery, so to speak.

For sudden twists of fate, abrupt collapses and the occasional stunning revival, it’s hard to beat the biotech industry. Yesterday, for instance, the all-but-dead biotech VaxGen agreed to sell off its ailing anthrax vaccine to its East Coast rival Emergent BioSolutions –a company that spent much of this decade trying to lobby VaxGen out of existence.

Formerly known as BioPort, Emergent makes the anthrax vaccine currently used by the U.S. military, although that product is slow, inconvenient, and potentially prone to side effects. In 2004, the government awarded VaxGen a sole-source contract to product a new vaccine that would require fewer shots and work faster, agreeing to pay the company $877.5 million for the work. Emergent expressed its displeasure by spending millions on lobbyists to convince Congress to modify or void the VaxGen contract.

As it turned out, VaxGen had plenty of its own problems. Prior to its recreation as an anthrax-vaccine developer, the company was best known for an early AIDS vaccine that utterly failed to work in comprehensive testing earlier this decade. The company’s anthrax vaccine also proved problematic, and when VaxGen missed a 2006 deadline to start human tests, the federal government canceled its contract. VaxGen has been in a death spiral ever since, even yanking a planned merger with the private biotech Raven Biotechnologies because many shareholders preferred liquidation.

Now Emergent has decided that it likes VaxGen’s vaccine after all:

Meanwhile, Emergent’s competitive situation appeared to change in March when Annapolis firm PharmAthene bought the rights to a next-generation anthrax vaccine being developed by British company Avecia Biologics. That made PharmAthene a prime candidate to win an upcoming contract for 25 million doses of anthrax vaccine.

Emergent has newer vaccine candidates in development, but the research isn’t as far along as the VaxGen product. With the government’s request for proposals for the new contract due at the end of this month, the company settled on trying to turn around the vaccine, believing the problems have been fixed or are fixable.

And so Emergent ends up pinning its hopes on a product it once hoped to deep-six. It’s paying VaxGen $2 million for the vaccine, plus another $8 million in milestones if the development pans out. That’s not the most expensive U-turn in the world, but it may well be one of the sharpest.

It’s now a truism that the drug industry’s “blockbuster model” has pretty much had its day. Much of Big Pharma is having a terrible time winning approval for new drugs and even keeping up sales of existing blockbusters, in part because their underlying rationale — that pushing drugs into mass markets for chronic disease will yield a steady stream of lucrative sales — also makes it more likely that dangerous side effects or evidence that a drug may not actually work as advertised will eventually crop up.

Of course, no one really knows what might replace blockbusters, or how the drugmakers who grew fat on blockbuster profits will fare as those drugs begin to face generic competition. For a cautionary tale on this front, look no further than the plight of Valeant Pharmaceuticals, a former up-and-comer now in the process of radically scaling back plans to build itself into a global drug giant.

Founded in 1959 as ICN Pharmaceuticals, Valeant was a mid-sized Southern California drugmaker with outsized ambitions. By the 1990s, its controversial founder Milan Panic — a former prime minister of Yugoslavia — had expanded the company into an array of international markets with a bewildering hodgepodge of marketed drugs, many of them acquired or in-licensed from other companies. Valeant had 12,000 employees and 33 factories around the world.

But none of Valeant’s drugs ever became big sellers in their own right, no matter how hard the company pushed them, and adding more and more treatments to its portfolio didn’t do much to redress the balance. (In fact, it’s really difficult to tell just how many treatments Valeant currently sells; it has eleven “core” drugs for skin, neurological and other disorders, but also markets what appears to be another two dozen or so products under various names around the world.) Meanwhile, Panic came under fire for lining his pockets at the company’s expense — he picked up $33 million in bonus pay one year for spinning off a division of the company, and the resulting furor led to his resignation and the election of a new board six years ago.

The company, however, hasn’t been able to patch together a working strategy even in Panic’s absence, largely because of its continuing failure to produce novel drugs. Valeant’s 2007 revenue of $871.4 million, in fact, was only slightly higher than the $838 million it posted a decade earlier in 1998. Now Valeant is laying off nearly half its workers and selling foreign subsidiaries to get its house in order:

The maker of neurology and dermatology drugs said it would lay off 130 employees in the U.S. and Mexico and eliminate 1,250 additional jobs overseas. The company will divest many of its overseas operations in the coming months, Valeant said.

So while it’s a grim time to be holding blockbuster drugs whose monopolies are about to collapse, it’s also a grim time not to be holding any blockbusters at all. Which isn’t particularly good news for an industry beset by scientific and marketing scandals, drug-safety problems, criticism over high drug prices and a sputtering R&D engine.

Most pharmaceutical companies insist that high drug prices are a natural consequence of the risky business of drug discovery, and that huge profits on marketed drugs are necessary to cover the costs of the 5,000 to 10,000 experimental drugs that fail for every one that succeeds. In fact, there are pretty good reasons to think that drug pricing is more a matter of charging whatever the market — meaning, for the most part, insurers and the federal government — will bear.

Still, you don’t tend to hear drug-industry executives go much beyond the standard boilerplate on pricing, which is why it was so interesting to see former Merck CEO Roy Vagelos blast high drug prices last week at the annual meeting of the International Society for Medical Publication Professionals. CNBC’s Mike Huckman was there and blogged up Vagelos’ remarks:

In yesterday’s speech Dr. Vagelos said, “Most drugs are a terrific bargain.” And he believes that high prices are justified if the drug offers high value. But value, of course, can be subjective. Dr. Vagelos was diplomatic enough not to identify the company from behind the lectern–you can probably figure which well-known biotech he’s referring to–but he went on to say that he has a problem with the $50,000 price tag for a drug that adds four months of life.

“There is a shocking disparity between value and price and it’s not sustainable,” he said. “The industry will bring about government price controls which will be devastating for the industry,” Dr. Vagelos added. And if the feds don’t step in, he believes market forces will.

In answer to a question Dr. Vagelos said, “I don’t care what the cost is, it’s inappropriate. The industry has a black eye. And the market will correct that.” Drug and biotech companies, including the one he’s talking about, say they need to charge those prices to recoup their investment and to pay for research and development of something better.

In addition to lowering prices on certain drugs, Dr. Vagelos also thinks pharma needs to be even more philanthropic: “When important drugs are introduced companies will have to make arrangements to get them into the developing world.”

Besides saving lives he believes the humanitarian gesture will generate goodwill in countries and regions that in the not-too-distant future could become lucrative growth markets for the industry. It would also go a long way, Dr. Vagelos argued, toward recovering and restoring big pharma’s “credibility.”

The drug Vagelos highlighted is almost certainly Genentech’s blockbuster cancer treatment Avastin, which certainly isn’t the most expensive drug out there, although it is probably one of the most widely used treatments to be priced in that range. (I’m not sure why Vagelos felt he had to be coy on that point.)

While Vagelos’ comments were refreshing, I can’t imagine that they’ll have much effect on industry pricing practices. Price competition is virtually nonexistent in the pharmaceutical industry — in fact, it’s fairly common for new drugs to cost exactly what competing drugs sell for — and there’s little sign that it might break out any time soon. Instead, the industry is busying itself stomping on insurers who offer cash bonuses to doctors that prescribe fewer high-priced, brand-name drugs.

Price controls of some sort, meanwhile, strike me as a real possibility, particularly if healthcare reform remains a hot topic following the presidential election. Democrats in Congress are eager to get Medicare to “negotiate” lower prescription drug prices, which is kind of a back-door price control, although those efforts haven’t gone anywhere this year. Although the threat of controls is real and growing, it hasn’t yet had much impact on drugmaker behavior, especially since companies have been raising drug prices at a rapid clip for most of this decade.

Esperion Therapeutics, a biotech that Pfizer spent $1.3 billion acquiring in 2003, is free once more. And its founder, Roger Newton, is apparently putting the band back together.

Newton, in fact, has just pulled off one of the rarer and most complicated moves in biotechnology — the spinout-startup-restart. That’s when a major drugmaker or big biotech like Amgen acquires a biotech startup with a promising drug, then turns around and spins it out again, often with the same team in charge, but minus the drug or drugs of interest.

For Newton, it’s been a long five years. The former Parke-Davis chemist was an early champion of a neglected anti-cholesterol drug that went on to become Lipitor, the world’s best-selling medicine, after Pfizer acquired his company. He founded Esperion in 1998 specifically to search out new cholesterol treatments, and by the time Pfizer came knocking, Esperion held a potential winner — a drug it called ETC-216, a synthetic form of HDL, the “good” cholesterol that helps clear away the fatty gunk that otherwise collects in arteries and puts people at risk of heart attacks. (Forbes hailed ETC-216 as “artery Drano” back in 2003.)

Pfizer, however, moved with something less than alacrity once it swallowed Esperion. Three years later, it told analysts that the drug was ready to begin mid-stage, phase II trials — one of which, in fact, Esperion had completed prior to the acquisition. News on ETC-216 has been scarce ever since; the most recent mention I could find was a passing reference in a Heartwire article from early 2007 that mostly focused on the failure of a different Pfizer cholesterol drug. (UPDATE: Forbes now says Pfizer discontinued all the drugs Esperion discovered because of “manufacturing and other difficulties.)

Newton, meanwhile, has apparently been planning Esperion’s rebirth for some time. He stuck around in Ann Arbor, Mich. — Esperion’s one-time home  — when Pfizer closed its facility there in early 2007 and laid off 2,100 employees. (That restructuring basically swept away the last traces of Esperion within Pfizer.) Early last year, Newton told the local chamber of commerce that he planned to start another company using intellectual property licensed from Pfizer. Earlier this month, the Ann Arbor Business Times reported that Newton was looking into renting the same facility Esperion had previously used.

As part of the spinout, Esperion has just raised $22.8 million in venture capital. Newton will run the resurrected company, which is still part-owned by Pfizer. As a sort of going-away present, Esperion retains one of its former drugs — an unidentified small-molecule inhibitor of fatty-acid and cholesterol synthesis that appears to be ESP 31015, at least going by this old Esperion press release. The drug should be in human tests by now as well, although once again, news appears to be kind of scarce.

Whatever else you might think about this spinout, it doesn’t exactly represent a huge vote of confidence in Pfizer’s drug-development capabilities. At least Pfizer seems to realize its shortcomings in that regard, as it presumably has the right to take back control of ESP 31015 (or whatever) whenever it wants. Or, of course, it could just re-acquire Esperion at some point down the road, and start the whole cycle over again.

Postscript: Spinout-startup-restarts have been growing more common recently, although they usually take place on a more compressed timescale than Esperion’s five-year hiatus — and frequently involve halfway-clever renamings as well. Last October, for instance, Amgen disgorged Relypsa, a reborn version of the biotech Ilypsa that Amgen had acquired four months earlier.

Other examples include Sequel Pharmaceuticals, launched as a restart of NovaCardia after its acquisition by Merck, and Cerexa Pharmaceuticals, a second-generation version of Peninsula Pharmaceuticals. It’s as if some of Cisco’s “catch and release” acquisition lessons have started to rub off on the drug industry.

Image at top from Flickr user Francois Schnell, CC 2.0