Aligning value proposition: From Preclinical to Market for Medical Devices

Tim Pelura, CEO, Surpass Preclinical CRO talked on how medical device companies can align their strategy, from preclinical to market, with a focus on the value proposition, at www.bio2devicegroup.org event.

We are operating under a new reality now where power has shifted to the payers and the providers, said Pelura.  Medical device companies are evaluated based on safety and procedural efficacy as well as cost and value.  Increasingly heightened regulatory scrutiny and tightening FDA regulations have led to increase in audits (which were up 40% in the last year) and warning letters are (which were up 24% over the last 2 years).  Due to regulatory and reimbursement challenges, medical device companies are focusing their R&D efforts on improving already approved devices, rather than developing innovative new products.  Meanwhile startups are finding the landscape challenging due to funding challenges and increasing costs of bringing new products to market.

Healthcare Infostep (Photo credit: Wikipedia)

Inkeeping with the reality of pressures on payers that are transmitted down, new healthcare delivery models are emerging, and therefore, patient pathways are being modified to obtain to obtain better outcomes, with less cost.  Medical device companies will need to work with new business models, that solve significant problems and reduce overall costs.  Companies seeking growth will need to expand their offerings to target underserved populations and lower socioeconomic classes.

In essence, it is about the value proposition offered by the new product or service, “what benefit you provide for who and how you do it uniquely well”, said Pelura.  He advised, these “must-haves” in a business pitch, “describe your target buyer, the problem you are seeking to solve, and why you do it better than the alternative”.

Pelura walked the audience through the process of arriving at the value proposition.  First, companies must define the problem they are seeking to solve and identify correctly the need to solve the problem.  Next, they should try to go after obvious problems, rather than aspirational or “good to solve” problems.  And finally, they should try to address acute or critical problems.

In defining a solution, they should try to generate many ideas and then measure the viability of customer adoption of each idea using gain/pain ratio; what the customer stands to gain versus the cost of adoption of the new solution.  The best solutions are those that offer game-changing benefits, with minimal modifications to the existing process or environments, said Pelura.  Go for “Disruptive Innovations, that are Non-Disruptive to Adopt”, advised Pelura.   Medical device companies must visualize the entire process or patient pathway to ensure that the new solution would cause minimal disruptions, in the whole process.

While new technologies often emerge with a focus on engineering and progress to bench testing and then plan preclinical, and clinical strategies and only then consider navigating regulatory, market, and reimbursement challenges; in actuality, they should invert the process.  They should begin with considering reimbursement challenges, analyze the competitive landscape, study the market opportunity, give thoughtful consideration to the regulatory challenges, then consider clinical and preclinical strategy, before embarking on prototype and bench testing.  Because if the value proposition is wrong then a company can end up with a product that no one wants or needs, resulting in considerable waste of precious innovation dollars and time, said Pelura.

Speaking of Surpass, Pelura shared that preclinical Contract Research Organization, Surpass is doing things differently.  While having deep expertise as a preclinical CRO in helping medical device companies with their preclinical in vivo and human cadaveric studies, Surpass also seeks to impact the system, by probing and assisting their clients with questions that go to the value proposition.  Surpass assists the clients in designing the most translatable preclinical study by understanding issues of clinical end points, product’s desired features and characteristics, all the while keeping in mind who would be operating the device, studies and activities that might need to be completed to demonstrate the products, performance, safety, and efficacy, as well as data that would be required to drive reimbursement and more.  This novel process ensures that any preclinical testing performed is aligned to the new product’s value proposition, hence helping save valuable healthcare innovation dollars.  

The session was followed by Q&A.

 

Enabling Physician Adoption of new Medical Technologies

Dr. Akhil Saklecha, General Partner at Artiman Ventures talked about understanding the challenges of physician adoption of new technologies and discussed ways of overcoming resistance and enable adoption of new medical and heatlhcare technologies by physicians, at www.bio2devicegroup.org event. (See below, at the end of the article, more info on bio2devicegroup, EPPICon, TiEcon, & HTF conf.)

Entrepreneurs in the health technology sector, must first understand physicians, the environment they work in, and the nature of the work flow.  Physicians have to be patient advocates, they often control the purse strings and make decisions on allocation of scare resources, and there is a potential to impact their adoption of new technologies by exercising influence upon them.  Physicians generally have competitive, type A personalities and they do not want to lag behind in adoption of useful technologies, said Saklecha.

So what are drivers for adoption of new technologies?  Technologies that solve problems that drive doctors crazy, get their attention.  Entrepreneurs with “must have” technology, will find it easier to get it adopted.  Entrepreneurs must focus on solving their problems, said Saklecha.  In addition to understanding physician’s work challenges, it is also important to understand every single stakeholder, in the healthcare setting.  For instance, Saklecha said he has seen some GI tools that solve a smaller problem but take up additional time of the scrub technician, general nurse, and GI nurse.  All this would add to the expenses and if the technology does not offset the cost, it will be rejected.  In fact, there is an early shift towards disposable colonoscopy devices because it saves set up and clean up time.

When it comes to money, “ignore it at your own peril”, said Saklecha.  His advice was that entrepreneurs must map out the flow of money, very early on.  They should get an understanding of where the revenue is generated and who makes the money and who loses the money.  Given the tremendous pressure to save costs, it is extremely important that new technology does not add costs to the system, unless it is a huge value add in terms of quality of health.  Entrepreneurs must know the flow of the money, direct and indirect costs and savings and they should understand CPT codes and reimbursement rules.  Obtaining CPT code does not necessarily translate into reimbursement, warned Saklecha.

Entrepreneurs must focus on enhancing quality and patient safety, said Saklecha.  Quality drives revenues and safety keeps patients alive and providers’ revenues are increasingly tied to performance.  A thorough understanding of work flow and how it impacts all various service providers including nurses, physicians, clerks etc. is very important.

One of the valuable advice Saklecha gave was with regard to timing and specific point of insertion of new technology.  Find a point of least friction for insertion of new techology, said Saklecha.  With regards to timing, it is important to keep in mind that no benefits will be seen during the first month, and instead there may be adverse effects.  Most inefficiencies will dissipate in the following 3-6 months and only then will the benefits begin to appear.  So this may be a time to keenly observe and understand the impact and every little nuance of the new technology on the work flow.  In the past decade, electronic medical records or EMR has been all the rage.  However, data entry and management takes physicians’ time away from patient care.  This is a challenge that is not yet effectively tackled, said Saklecha.   Voice recognition and scribes are used but the both have challenges of cost and errors.

Saklecha gave examples of several medical technologies and how they overcame physician adoption challenge by solving their key pressure point.  For instance, iRhythm cardiac monitoring device allows for remote monitoring of minimally “at risk” patients and it enables ER doctors to read the data and generate revenues.  Insurance companies also like it because instead of sending the patients over for hospital stays, they can be sent home and patients enjoy the convenience.  Minimally invasive blood test offered by Cardio Dx replaces cardiac stress test and it was a great improvement in saving costs.  The company directly marketed it to primary care physicians.  However, they misjudged and found that these doctors were slow to adopt because they were looking for validation from the cardiologists.  That was an important lesson in physician adoption of new technologies.  Now the company has pivoted and changed their marketing strategy and they are finding traction.

Another example is GI Dynamics which has a medical device that targets obesity.  Bariatric surgery is complex and there is high morbidity population.  The company has a fairly simple procedure that was found to simultaneously solve issues around hypertension and diabetes, while treating obesity.  GI physicians loved the technology since it offered them a whole new class of patients.  Just like GI physicians, cardiologists are also a competitive and procedure driven specialty, and they are quickly adopting new technologies in cardiac stents and percutaneous valves.  The talk was highly interactive and generated lot of discussion.
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Please mark 3 great conferences focused on life science, medtech, & healthcare, in the next two months, in San Francisco Bay Area, on your calendar, & see info on life science networking group that meets every week.

www.eppicglobal.org EPPICon annual conference is on March, 29, at Westin, SF and it features a panel on “Neglected & Rare Diseases” http://bit.ly/1c1vvTR, on “Point of Care”, on “Innovations in Clinical Development of Novel Agents” and more. Excellent event to network with VCs, panelists, speakers & other professionals.

www.tiecon.org is on May 16 & 17 at Santa Clara Convention Center.  On day 2, May 17th, it will feature a Life Science track with keynote and a distinguished panel on “Disruptions in Healthcare”. Great to network with entrepreneurs working inside and on the boundaries of various disciplines.

www.healthtechnologyforum.com  annual conference is on May, 20 at Parc 55, Wyndham, SF and it has excellent lineup of speakers and panels with a broad focus on “pathways to sustainable health”. More specific panels will focus on patient engagement, medical ethics, IoT, health apps, building resilient communities and more. Excellent to network with physicians, non profits & other entrepreneurs.

www.bio2devicegroup.org meets every Tuesday & covers a broad range of topics pertaining to biotech, medical device and pharmaceutical industries. On Tuesday, March 22, at 8:30am Johannes Schweizer, Arbor Vita will talk on OncoE6™ Cervical Test that Predicts Development of Cervical Cancer www.bio2devicegroup.org – Free event, all are welcome. Become a member and network with diverse range of life science industry professionals.
           

How to take a Biotech company from Idea to Exit

Mahendra Shah, Partner with Vivo Ventures & Ravi Mistry, President of EPPICGLOBAL (www.eppicglobal.org) talked about how to take a biotech company from idea to launch, at www.bio2devicegroup.org event.  Here is some of the comments made by Shah and Mistry.

Entrepreneurs starting a biotech company must start with a disease target, said Shah.  First and foremost there should have a good understanding of the disease and at which stage in the disease progression is the biotech seeking to interfere.  Second, one should have a good understanding of the market opportunity and about existing treatments.  Entrepreneurs need to ask the hard question regarding “clinical meaningfulness”; and whether or not the possible treatment developed by the biotech will lead to significant enhancement in patient care.  Payers will not pay for little improvements, said Shah.  Companies need to identify gaps in the treatment, and find a niche market.  Patients need to be identified for who the prescribed treatments do not work well and that could be a niche market for entrepreneurs, said Shah.  Shah said that during his career, he found such niche markets through repurposing, taking old drugs and finding new indications.  He also cautioned about the importance of ensuring secure Intellectual Property to protect the proposed solution.  With currently available internet tools and database resources, that is not hard to do.  Even speed browsing on Google can give you a quick idea of who owns the IP and if there are ways to get around it, said Shah.  Biotechs based on developing Orphan drugs are a great opportunity for a new startup, because once approved, you cannot have competition for up to 7 years in the US, and up to 10 years in Europe.

In terms of drug development, one needs to also get clarity on development pathway to determine whether it will require 10 thousand patients or few hundred, since that can make a huge difference in the amount of financial capital that will be required to bring the product to market.  Companies need to identify how quickly one can progress to phase 2 and bring it to a meaningful endpoint.  Also it is important to get an understanding if the endpoint is subjective or objective.  A subjective endpoint will have significant placebo effect and will require much higher number of patients, said Shah.  In order to do successful fund raising, companies need to have approximate idea of time and costs of bringing the product opportunity to a meaningful endpoint.  Companies also need to have clarity on the various product development milestones and inflection points.  Finally, an experienced Team is extremely important to bring the idea to fruition.  However in this, two members of the team are particularly important; the CEO and the Medical Director.  Other members of the management team can be hired as consultants but these two team members of the team need to be identified early and brought on board and should be people one can trust and those who feel passionate about the technology and who buy into it.

A biotechnology company requires significant money for its operations, so it is important to make sure that the first time investors have deep pockets, very sane advice from Shah.  He told the budding entrepreneurs to be careful and make sure they have synergy with the investors.  “Some of the investors’ money is not good, it will give you ulcers”, warned Shah, since money can have many strings attached to its return on investment.  Referring to reimbursement, Shah emphasized that the payer is very important and entrepreneurs should do a quick survey of physicians and Key Opinion and Thought Leaders and get a clear idea about existing and current modes of treatment and who will be paying for the new product opportunity.

Mistry shared some statistics on activity in the life science space.  2013 has been a banner year for life science IPOs.  Out of a total of 82 total IPOs in 2013, 46 were in the life science industry.  Life science industry also enjoyed a substantial investment of dollars.  The increase was certainly more significant in biotechnology, while medical device industry actually saw fewer dollars invested.  Mistry talked about how to prepare for an M&A exit and provided some advice to entrepreneurs to keep diligent documentation with respect to company’s IP.  He also commented that when it comes to negotiation, there is no “one size fits all” and best deals can be made if entrepreneurs remain can remain flexible throughout the process.

At the start of the talk Mistry put in a plug for EPPICGlobal and their upcoming annual conference, on March 29, 2014.  The conference has an exciting lineup of speakers and panels addressing neglected and rare diseases, point of care diagnostics, and innovations in clinical development of novel agents.  The talk ended with Shah sharing information on exciting speed pitch session, at the EPPIC conference, where entrepreneurs will have an opportunity to pitch their company to a panel of VCs and receive real-time feedback.

I would encourage my readers to attend the EPPICon 2014 conference, and avail of the opportunity to listen to various industry renowned speakers.  To register for the conference and/or register for the speed pitch, please go to www.eppicglobal.org.
            

 

 

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Regenerative Medicine and Aesthetic Applications

Gail Naughton, Chairman and CEO of Histogen talked about regenerative medicine at www.bio2devicegroup.org event.

Naughton began by sharing the history of regenerative medicine.  So what is regenerative medicine?  It is the process of replacing or regenerating human cells, tissues or organs to restore or establish normal function and it holds promise for regenerating damaged tissues and organs.  It was an exciting discovery earlier that if you grow cells in a 3D environment, instead of a plastic cup then they become tissues and form functional epidermis, said Naughton.  This would require tremendous cross-functional effort between bio-engineers and surgeons.

Earlier technology was based on allogenic fibroblasts obtained from neonatal foreskins, from routine circumcisions.  The focus was on wound healing because of fewer complications due to topical applications.  The stem cell technology responded to wound environment and secreted numerous growth factors.  One of the first companies in this space was TransCyte that focused first on facial burns and then on diabetic foot ulcers.  It showed excellent and persistent wound healing and was very exciting.  However, cool technology does not translate into reimbursement.  At the time, wound healing was a low paid proposition.  Ischemic wounds occur as a result of blocked blood flow to medium and small vascular beds in the body.  It was found that stem cells cure ischemia and restore blood vessels.  Between 1996 and 2000, there were various companies targeting ischemic wound healing, including Integra, TransCyte, Apligraf, and Dermagraft.  There was a lot of hype but still not much success in getting reimbursement.  Additionally, these products had low shelf life and required to be stored in freezers.  It took several years before the realization that cost of amputations and other procedures far outweighed the cost of these technologies.

During that time, Advanced Tissue Sciences licensed NouriCel product line to SkinMedica for skin care applications.  Then Inamed licensed rights for human collagen product applications from Advanced Tissue Sciences.  The company was later bought by Allergan for $375 million.  Increased collagen secretion, even when topically applied, had positive effect on decreasing anti oxidants.  One of the lessons learned was, that the path to generating revenues was through cosmetic and aesthetic applications.  Skin care was an exploding market and consumers were willing to pay.

Allogenic stem cell technology, particularly from neonatal foreskins was making way for many skincare options.  Next to come was autologus stem cell technology with cells derived from person’s own blood, to reduce major complications due to body’s immune response.  Recombinant proteins derived from the expression of recombinant DNA within living cells, offered further options.  Cytori Therapeutics Celution System had a proprietary centrifuge device that enabled access to adult adipose-derived stem and regenerative cells (often from liposuction and other procedures) for later cosmetic use.  Cytori technology automated and standardized the extraction, washing, and concentration of the patient’s ADRCs for present and future clinical use.

Australia based Avita offered point of care cell treatment with great application for burns.  Avita’s ReCell Spray-on Skin is a rapid, autologous cell harvesting, processing, and deliver technology that allows surgeons to treat burns and other skin problems using patient’s own cells.  This real time technology accelerates healing, minimizes scar formations, eliminates tissue rejection, and reintroduces pigmentation to the skin.  Again it becomes apparent that revenue generation is easier for aesthetic applications.   Fibrocell Science is another exciting company with autologus fibroblast technology.  Fibroblast cells that are responsible for production of collagen, a protein that gives the skin its strength and elasticity and extracellular matrix proteins, are most common cells of connective tissue.  Autologous fibroblast cells derived from individual’s body are used for variety of aesthetic applications.  Regardless of the fact that people may or may not need autologous technology for wrinkle removal, the marketing is working, said Naughton.  People are happy to get a jar or “customized” skin cream for almost $500.

Naughton’s company Histogen is also currently focusing on aesthetic applications, particularly on skin and hair growth.  Conditions that make the embryonic environment special was a moment of major insight and excitement, said Naughton.  Histogen has proprietary technology that mimics the low oxygen, low gravity embryonic environment.  These hypoxic human dermal fibroblasts HDFs are derived from similar embryonic conditions that lead to production of vital proteins and growth factors.  From this process, Histogen extracts two products, a soluble human cell conditioned media (CCM) and an insoluble human extracellular matrix (hECM).  With one technology, two formulations, Histogen sees ahead a variety of applications to address a broad range of markets, said Naughton.  Before and after pictures of wrinkles and hair growth showed clearly the impact of Histogen technology and raised tremendous excitement among the attendants.  Histogen raised $10M in Series A round and is currently raising Series B, to support upcoming clinical trials and scaled up manufacturing.

Tissue Engineering and Regenerative Medicine International Society (Photo credit: Wikipedia)

OneMedForum SF 2013 – Healthcare & Finance Conference Highlights

The 6th Annual OneMedForum http://www.onemedplace.com/forum/ conference featured a theme “Profiting from Distuptive Changes in Healthcare and Finance” and ran concurrently with the JP Morgan Healthcare conference, in San Francisco, CA. It was a gathering of some leading investors and the rest management of promising emerging life science companies in Asia and North America. Through panels, workshops, and up-close programming with top industry leaders, attendees explored strategies for company growth.

Overall, there was a palpable focus at this conference on how best to navigate the turbulent market changes and challenges. During individual company presentations, I saw and heard some cool technologies.  But during almost all the panels, one cannot avoid noticing that these are challenging times for medical device industry. Panels explored bootstrapping and non-traditional approaches to navigate the companies in the environment of limited resources, little VC funding, uncertain regulatory and reimbursement climate, and looming tax changes.  The attendees walked away from the panels with excellent advice, resources, and tools that could help them better steer their companies during this time.  See highlights below from some of the panels.

 
China Forum

The conference began with China Forum on January, 7. The objective in first two panels was to educate attendees on challenges and opportunities for emerging healthcare companies for doing business in China, while panel 3 aimed at providing tactical approach to innovate joint venture structures.

In his opening remarks, Bin Li, Managing Director & Senior Research Analyst for China Healthcare, Morgan Stanley Research, gave an overview of China’s healthcare landscape. China market is primarily pharma market and not a device market and is the 3rd largest market, right after US and Japan. China’s pharma / biotech market cap is at $200B, with chem/drugs being the biggest sub-sactor. Medical device industry is relatively small in China and hospital and services is an even smaller industry but is the most exciting sector to watch, in the next ten years, said Li. Hong Kong market is a big piece of the pie. China market is heavily regulated and is expected to grow 15-20% for the next 5 years. There are 3 major insurance programs and are sponsored by the Government. Almost entire population (97%) has some kind of coverage and it ensures that everyone in the value chain receives some benefits. Hospital patient traffic volume has now reached historical highs. Some of the challenges of the China pharma industry are; it is a highly fragmented market, it is too tightly controlled, there are price control issues, and there is fierce competition in the low end generic market. Some of the challenges of China medical device industry are; while it is the fastest growing sector, it is not well regulated yet, and there are price control issues.

China Case Study Panels

Several important points were made, during the first panel session, focused on entering the China market, moderated by David Chen, Managing Director with BFC Group. The panelists included, Alan Paau, VP & ED at Cornell Center for Technology Enterprise & Commercialization, Jay Dong, GM with Asia Pacific Region, Cell Signaling Technology & Vice Chairman of BayHelix, Mark Xu, GM at Trout Group, Shanghi and Peter Luo, Founder & CEO of Adagene. China has had success in innovative products and while it continues to grow and there are some first in class drugs, most drugs are “me too-s”. China had 7 NDAs approved in 2011, in comparison to 30 in US. Approval times have greatly shortened in China. In China, similar to US, the primary focus is in oncology, followed by CNS. Many panelists talked about the importance of building trust, in order to do business in China, but cautioned against blind trust and instead advised “trust but verify”.

The next panel focused on operational issues, once a company is on ground, in China. Panelists in the next panel included, Landon Lack, CEO of China MedConnect, Tony Zhang, Chair of BayHelix & Sr. Research Fello, Eli Lilly, Jimmy Zhang, Managing Director, MSD Early Investment, Greater China at Merck, and Jie Liu, Corporate VP of BD & Corp Communications and President of Simcere of America. One issue debated extensively was whether a company should find one credible, trustworthy distributor and hand over issues to them or find several regional distributors. The panelists suggested various other options that are in between the two extremes. Other options that were suggested include, setting up a small commercial team that does not take up a lot of capital; instead of a distributor, find a local company in the similar area and partner with them; and explore how a medical device US company can grow with pharma distributors in China. The panelists suggested frequent travel with extended stays, cautioning that flying visits were not enough. It was also strongly advised that a company entering China market get IP protection, both in US and in China, else few Chinese potential partners would be interested. It was also advised to prescreen potential partners, establish a firm control over the brand and market, go through regulatory process upfront and have a clear understanding of how the deal is structured and its tax implications.

 
“Connected Health” Panel

Connected Health panel discussed recent trends, implications, challenges and opportunities in technologies that provide patients with ways to monitor their own health. Whether through iPhone apps or through chips implanted in a patient’s body, these technologies are aimed at improving the quality of life. But are they making a big enough difference that payors will pay and investors will invest? These and other issues were discussed in this panel, moderated by Andrew Colbert, Senior VP at Ziegler. The panelists included, Jack Young, Director of Qualcomm Life Fund, Qualcomm Ventures; Peter Neupert, Operating Partner at Growth Buyout Fund, Health Evolution Partners; and Dirk Lammerts, Managing Director at Digital Health, Burrill & Company.

According to Neupert, the whole area of connected Health is growing mature from delivery standpoint, with efficient and accessible technologies. However, the challenge is about inducing change. Additionally, lots of capabilities can generate a great deal of data but the industry has not matured enough to put this data to good use. They are weary of investing in this field. According to Young, however, this is the time to stay ahead of the curve and their fund has invested 50% or $1.4B of capital into digital health. This is invested into six sub segments; wellness & fitness, change driven management, transition care, aging in place, clinical trials, and primary care. There is a need for better data aggregation, said Young. According to Lammerts, the important question is; “what problem is a specific technology solving”? Its is not about cool engineering, but about identifying specific problem that is addressed.

In response to the question, if the area will develop as a payor provided or consumer engaged area, Lammerts said, it has to be consumer engaged, where the consumer is empowered with tools to better manage their health. According to Neupert, it is not about who pays but who has the skin in the game and if there is alignment of interest between physician, patients and provider. According to Neupert, budle payment model with pull adoptions may be the key to induce behavior change. In the end, the usefulness of growing wave of digital health technologies will materialize only through large scale adoption by consumers, and it seems, no one has yet unraveled the key to lasting behavior change.

“CEOs Unplugged” Panel

In a panel session moderated by Stephen Ubi, President & CEO of Advamed, the panelists, David Dvorak, President & CEO at Zimmer, Virginia Rybski, President, CEO, and Director at Regenesis, and Peer Schatz, Managing Director & CEO at QIAGEN, discussed some of the medical technology sector’s most critical issues with a great deal of initial focus on alternative sources of funding and cost containment in development, given the current paucity of VC funding.

Rybski shared that their company was cash positive but it required a lot of focus and instead of the VCs, they raised $15M over 10 years, from Angels. They are now looking into crowd funding opportunities. Also, if the product is for export then a company can get money from the Government to develop, said Rybski. According to Schatz, on the diagnostic side, even if there is clear value proposition, if the mechanism of reimbursement is not clear then it would be hard to get funding from any source. Dvorak shared that they contained costs through improving outcomes, helping hospitals better manage the inventory, and through better communication between the company, hospitals, and customers. “We have been more proactive at increasing operational efficiencies in all areas of our business”, said Dvorak. Rybski also shared that given the intense focus on cost containment, while they were not laying people off, they were also not hiring and not focusing on innovation but solely on sales.

The panelists discussed the importance of key partnerships as key source of information and sharing resources, to help navigate through the current challenges.

Bootstrapping: Bringing Medical Devices to Market with Limited Resources

Christian Haller, VP of Product Development at MPR Associates, moderated this panel and panelists included, Thom Rasche, Partner in Earlybird Ventures, Vicki Anastasi, Senior VP, Medical Devices at Aptiv Solutions and Ashley Wallin, VP of the Emerging Growth Company Council at AdvaMed.

FDA continues to be at the top of the challenge list for small companies. However, according to Wallin, FDA wants to support more innovation through various initiatives such as the Entrepreneurs in Residence program. Sequestration remains a threat, however, which has the potential to result in understaffing at FDA. Additionally, companies struggle with obtaining coverage and payment, and are even losing coverage they once had. Wallin suggested that companies look into reimbursement strategies, early on. Also companies need to keep track of what’s changing in terms of the Physician Payment Sunshine Act, OUS regulations and so on. One example of a strategy companies use to bootstrap is to first commercialize lower class and consumer devices to get to revenue more quickly, which in turn supports commercialization of more complex devices downstream, said Wallin. Also, there are a number of free resources to be leveraged; in addition, a tax break for exported products can be leveraged.

“Don’t worry about reimbursement”, said Rasche. If a company has technology that would improve patients’ lives, then it will get reimbursed, he assured. The goal should not be to get in the US first, but eventually. And it would be hard to tell what reimbursement scenario would look like in next 5 years. Digital health technologies may have an easier regulatory path but would not be easy to get reimbursement. A company can get CE mark easily and get to proof of concept. However, funding situation in Europe is as challenging, as in the US, he cautioned. He noted that private pay models,would have looming challenges of commercialization and test marketing and even bigger challenge would be clinical adoption.  However, if the technology offers the opportunity to find a private pay model in which patients and physicians are aligned then the company should pursue this strongly, said Rasche.

He suggested, companies try to outsource what they can and if they find a vendor willing to share the risk then it also looks good to the VCs. The path he suggested was, get regulatory approval in Europe, then tap into Asia market, and then come to US.

According to Anastasi, commercialization path would depend on the technology.  For a technology to have faster approval process, it has to have fewer safety issues, preferably a single use with valid predicate. While entry into Europe can be easier, each market in Europe is different and one needs to be knowledgeable about the markets. And the same holds true of Asia, advised Anastasi.

Cancer Pathways, Evidence Based Medicine & What it Means for BioPharma Industry

 

Ellen Licking, writer and analyst for Real Endpoints, a start-up focused on providing objective information about product reimbursement, discussed “what cancer pathways mean for biopharma industry at http://www.bio2devicegroup.org.

Cost containment in healthcare has emerged as a significant issue and the payers are looking at big cost diseases like oncology to find more effective care options. The use of cancer care pathways is emerging as a strategy to focus on providing efficient care, while also containing costs. Results from existing “cancer pathway” pilots underway at national and regional insurers are becoming available in 2012 and are shedding light on the use of evidence-based medicine to improve outcomes and lower costs. In Europe, they discuss rationing of care. But in the US, it is a more complex issue, given the diversity of stake holders and the necessity for implementing politically appropriate language and behaviors.

Cancer pathways provide an evidence based-approach to care that is based on efficacy (how well the treatment works), toxicity (how toxic is the treatment), and cost. In the event that two drugs provide similar efficacy and toxicity, then the choice comes down to cost. Clear winners for reimbursement, in this approach, are efficacious drugs; for products that are as good, the choice is made based on price. First and foremost, this approach is designed to reduce the existing wide variation in care. Second, it aims to improve outcomes with focus on treatments that provide the greatest survival benefit and the lowest toxicity. Third, these care pathways would contain cost, based on scientific evidence of best care.

These pathways are not commandments in that payers are not mandating providers adopt a certain pathway. To get buy in from physicians, payers are considering waiving the right to prior authorization and programs that allow doctors to share in any financial savings. In one study, the data indicated 35% cost savings for on-pathways patients compared to those not on pathways, while showing no difference in survival outcomes. Real world cost savings, at least initially, are expected to be more modest in the 10-15% range. However, even these savings would greatly contain costs. Cancer pathways are small but growing quickly. Currently, there are an estimated 29 programs in place from a variety of payers. One concern has been that the pathway approach may change how oncologists are paid. Most oncologists are paid in relation to the amount and cost of drugs they prescribe. If payer savings translate into dramatic pay cut for oncologists then it would become challenging to get their buy in. Besides pathways, a few payers are experimenting with episode-of-care, which pays oncologists a single payment for treating patients during a specified treatment period.

What ARE the implications of these changes for THE biopharma industry? Given the dreaded oncology diseases, the treatment programs have traditionally been treated with kid gloves. But under this strategy, there will be clear winners and losers and treatments that are not efficacious will be dropped to make room for possible newer treatment options. While finding winning oncology drugs have always been challenging and will continue to be challenging, in the pathway driven world, it will also be more difficult to establish best in class drugs. Licking offered the recommended options for biopharma industry that include, maintaining focus on first in class drugs given the advantage to first to market, redefine meaning of best in class based on not just clinical efficiency but based on endpoints important to payers, in consideration of efficacy, to focus on price in addition to quality of life issues, and consider risk-sharing schemes that are tied to adherence medtrics or provide clear cost information such as Astrzeneca’s single payment scheme for Iressa. The talk generated a great deal of interest and discussion and was followed by Q&A. Ellen Licking can be contacted at ellen.licking@realendpoints.com; You can learn more about Real Endpoints at http://www.valueandinnovation.com .

 

Life Science focus at TiEcon, 2012

There were several panels that focused on Life Sciences and the mood was different at each of these sessions.  On day 1, a panel moderated by Mudit Jain focused on trends, challenges, and opportunities in this industry.  Almost all of the speakers, Dana Mead, Investment Partner, Kleiner Perkins Caufield & Byers, Renee Compton Ryan, Vice President, Venture Investments, Johnson & Johnson Development Corporation, Tom Fogarty, Founder, FogartyinstituteofInnovationand Katie Szyman, President, Medtronic Diabetes, painted a very bleak picture for this industry, in the years ahead.  The overarching tone was that the regulatory model is broken, regulatory hurdles are undefined and there is much higher unpredictability and risks in funding companies in the life sciences arena.  Until this model is fixed, the panel members stressed there would be fewer VCs willing to make sizeable investment in this space.  Various emerging markets seem to be more attractive and seem to be bigger growth sectors.

 

The panel on day 2, moderated by Halle Tecco, Co-Founder & CEO of RockHealth was more upbeat and discussed mobile health opportunities.  Panelist Alex De Winter, Partner at Life Sciences, Mohr Davidow shared that there was a lot of excitement regarding their portfolio companies mobile apps, driven by increased interest in wellness and staggering statistics around diabetes and obesity.  For instance, Aza Raskin’s company Massive Health is generating tremendous interest around its downloadable app that helps people eat healthier.  Technology is also often geography agnostic.  Mobile apps can originate anywhere and easily can be adapted for other geographies, said Winter.  In the opinion of Michael Nichols, Chief Privacy Officer at HealthTap, the landscape is also changing around the core theme of greater access to information and efficiency in healthcare.  Clive Smith founder of digital stethoscope, shared about the challenges posed by physicians in adopting new technologies on account of deeply entrenched old habits.  Jack Young, Lead Investment Manager at Qualcomm Life Fund, Qualcomm Ventures talked about the opportunities that exist in gamification with incentives to get people to adopt healthier lifestyle, which the insurance companies would find very attractive from reimbursement perspective.