New Pharma Models for a new Healthcare Era

When Google in November 2018 hired David Feinberg to head up its healthcare efforts, it was just the latest sign of the tech giant’s ambitions in the sector. Feinberg was previously president and CEO of Geisinger, among the US’ largest and most forward-looking health service providers. Feinberg was already talking about using technology to transform healthcare delivery and costs before he left Geisinger. At Google, he’ll be well-placed to accelerate some of those ideas into reality.

Pharma has been slow to recognise the tech-threat. Some executives felt that the highly-regulated nature of the pharma industry would mean most technology firms would play outside the fence, sticking with fitness apps, wrist-worn heart rate monitors and online appointment-booking. Tech firms might make healthcare more convenient for consumers to access, the thinking went, but they wouldn’t fundamentally change its nature.

 

That thinking was off. Technology giants including Google, Apple and Amazon are not just hiring top-end healthcare innovators and regulatory experts (Amazon’s new hires include surgeon, author, and healthcare innovator Atul Gawande, who will lead the company’s joint venture with Berkshire Hathaway and JP Morgan Chase). They’re also cosying up to providers and payers – pharma’s key customers – with customer-facing apps and other data-driven tools to help better match patients to care, encourage preventative care, and measure outcomes. And they’re vying for position – via the smartphone – as the doorkeepers who determine how and where individuals’ access their healthcare. (Both Apple and Google’s parent Alphabet are trying to help consumers gain access to their medical information, currently scattered piecemeal across multiple systems.)

 

Beyond generating and controlling unprecedented volumes of consumer data, technology groups are coming to FDA with medical-device grade diagnostics and ‘digital therapeutics’ – an entirely new treatment modality that may, in future, impact care pathways in some therapy areas.

 

The regulators are playing ball. The FDA in September 2018 cleared an electrocardiogram measuring device within the Apple Watch. This, together with an app to detect irregular heart rhythms, may help millions of people to diagnose health issues much earlier, before they become dangerous – and expensive. A couple of months later, the Agency approved Pear Therapeutics’ app-based cognitive behavioural therapy, reSET-O, for opioid use disorder – the first FDA-authorized prescription digital therapeutic, according to the company (partnered with Novartis’ Sandoz). Scott Gottlieb, FDA commissioner, appears committed to ensuring regulations do not inappropriately hold back the momentum towards a “universal digital future in healthcare” and the “re-imagining of healthcare delivery.” He talked in September 2018 about a “modern, flexible, risk-based approach to regulation in this area […] to reduce the time and cost of market entry […] while ensuring patient safeguards are in place” (FDA, 2018).

With regulations no longer an insurmountable hurdle for sector-outsiders, and with technology already transforming most other aspects of our lives, pharma must start considering where and how digital therapeutics will fit within their portfolios.

 

Digital approaches will not replace conventional therapies. Yet they may complement them, for example as precursors to pharmacological treatment, especially in areas like cognitive disorders or other chronic conditions where drugs on their own are insufficient – or intolerable. Digital therapeutics provide a consumer-friendly angle that conventional pharmaceuticals lack. And, last but not least, their built-in data capture offers insights into customer behavior and needs, informing R&D and providing the foundation for outcomes-based deals.

 

FDA (2018) Statement from FDA Commissioner Scott Gottlieb on agency efforts to work with tech industry to spur innovation in digital health. September 12, 2018. Available at: https://www.fda.gov/NewsEvents/Newsroom/PressAnnouncements/ucm620246.htm [Accessed January 8, 2019]

Is January’s M&A a flash in the pan, or does it signal sustained dealmaking heat

2019 started with a bang for pharma M&A: by January 7, $82 billion worth of shopping had been announced. Bristol Myers Squibb’s $74 billion cash and stock offer for Celgene on New Year’s day is the fourth-largest deal ever. It was followed days later by Eli Lilly’s $8 billion purchase of Loxo Oncology.

To put that $82 billion into context: 2018’s tally of $1billion-plus pharma acquisitions was about $115 billion, according to Informa’s Strategic Transactions. To achieve more than three quarters of that in the very first week of January is remarkable, even if 2018’s M&A activity ended up being relatively lacklustre.

 

Indeed, January shopping splurges do not always last. In the first month of 2018, four deals clocked up about $27 billion worth of M&A (including Sanofi’s acquisitions of Bioverativ and Ablynx, for $11.6 billion and $5.1 billion respectively). Celgene itself was also among the early buyers, paying a whopping $9 billion for CAR-T company Juno, and $1.1 billion up-front for Impact BioMedicines (billions more are due if Impact’s myelofibrosis candidate, fedratinib, is approved). Reporting on the Juno deal in January 2018, Bloomberg reporters speculated that “dealmaking activity may be picking up, after a sluggish 2017.”

 

Despite US tax cuts that left many pharma giants flush with cash, and continued pressures on prices, pipelines and patents, the anticipated M&A wave did not come. Takeda’s pained, fifth-time-lucky acquisition of Shire, in May 2018, made the biggest splash, at $61.2 billion.

 

This year, with biotech valuations lower than they have been for months, executives at the annual JP Morgan event in San Francisco are all talking about M&A. Gilead Sciences’ CFO said mergers were the group’s “primary focus”. Merck & Co. chief Ken Frazier says they’ve been trying to buy.

 

But a growing number of pharma CEOs have been downplaying mega-mergers over the last 12-18 months, and those voices are still there. Pfizer CEO Albert Bourla has shunned larger deals in favor of smaller ones, and continued to warn at JPM 2019 against a “destructive” transaction. Few pharma mega-mergers over the decades have created value. They might have plugged some short-term revenue holes, but these complex, messy transactions have more often stalled than re-invigorated R&D. Integrating large teams of scientists and commercial operations can take years. “Historically, big deals have not worked out,” said Novartis CEO Vas Narasimhan at JPM 2019.

 

Innovation is increasingly widely spread across the globe. Technology progresses faster and faster. These dynamics call for broad, flexible, externalised R&D networks and partnerships, rather than for ever-larger in-house activities. They call for pharmaceutical firms that are more agile and more digital, not bigger.

 

M&A won’t go away. But more focused, smaller deals may be the ones that build sustainable value tomorrow, even if they don’t catch the headlines today.

2019: The Year of the Digital Pharma?

Mergers and acquisitions (M&A) used to be the most disruptive force affecting pharma. Mega-deals continue: Takeda’s $59 billion deal for Shire in 2018, a record-breaker, has just been surpassed in early 2019 by Bristol Myers Squibb’s surprise $74 billion cash and stock deal for Celgene.

But digital technologies are changing pharma more profoundly than even the largest mega-deal. And while several Big Pharma CEOs have said they’re now avoiding large M&A, the digital shift will doubtless continue in 2019, as technology’s potential to improve drug industry productivity becomes clearer – and as pharma’s need grows.

 

New tools and capabilities, including back-office data capture and analysis, artificial-intelligence-based algorithms to accelerate drug discovery and development, virtual clinical trial platforms, wearables and smartphone-based therapeutics are impacting every business function. “Digital” isn’t a single department or skillset. “Going digital” – establishing a robust digital infrastructure and user-friendly tools that can help improve efficiency and output – requires people from across the entire organisation to engage with new kinds of systems and ways of working. It requires a change in culture.

 

Changing culture is the hardest part. The workings of AI-based algorithms and data analytics tools may be complicated. Using them effectively does not usually require a deep understanding of those workings, though: we all use smartphones and GPS in our cars. We need to want to use them. We need to be convinced that they can help us get to where we want to be – rather than see them as a threat.

 

Hence leadership in digital transformation must come from the top. Yet turning digital into a core capability also requires support and expertise at all levels. It also involves partnering with new kinds of organisations – from Google or Amazon to tiny digital start-ups and technology-makers – with entirely different cultures and far more rapid innovation cycles than in the highly-regulated pharmaceutical industry.

 

After a slow start, many pharma firms are well underway in their digital transformation. These transformations vary widely in their speed and focus. Few initiatives are made public – although those that are give a sense of the scope of change. Novartis claims it is already seeing results from huge, CEO-led digital initiatives such as its ‘mission control’ centre for clinical trials, and from its Digital Cortex data analysis and simulation program in discovery. Otsuka Pharmaceuticals in late 2017 achieved FDA approval of its schizophrenia pill, Abilify (aripiprazole) combined with a tiny ingestible sensor, made by Proteus Digital Health. The combination – a data-collecting pill — is designed to track adherence among patients with CNS disorders. Roche says it is using data from high quality electronic health records (EHR) as a surrogate for standard-of-care control arms in cancer trials.

 

That data came from Roche’s $1.9 billion purchase of oncology-focused Flatiron in February 2018.  This new kind of pharma M&A  – accessing data, not just pipeline or products –will likely increase in 2019 and beyond, as the era of Digital Pharma begins.

‘Tis the Season to be Vaccinated

The influenza season illustrates the value of preventative medicine, and how pricing dynamics and vaccination strategies can influence population health.

Preventing ‘flu and the complications that can arise from ‘flu-related infections, especially among the elderly and vulnerable, can save significant health system costs. That is critical as such systems come under increasing pressure, including from ageing populations and the approval of new, high-priced medicines.

 

In mid-December 2018, ‘flu rates were still low across most of the European Union. The virus doesn’t usually show itself fully until about that time, peaking in January and February before declining in March and April. But the European Centre for Disease Control and Prevention is warning nevertheless that few countries are achieving the 75% vaccine coverage target set by the European Union.

 

Key variables affecting vaccine uptake are the incentives used to promote vaccination, and the type of vaccine used. Intra-nasally-delivered vaccines generally go down better than injectable, particularly with young children. Vaccines covering a broader range of influenza strains have the best chance of beating off the pathogen happens to prevail that particular season.

 

Flu vaccine purchasing and vaccination strategies have a massive impact on how well protected the population is. In the UK, the government buys an intranasal flu vaccine for children directly from manufacturers. It is administered to children in schools. This ensures that a maximum number of children are protected. And protecting children has a knock-on effect on the rest of the population, according to a UK physician and key opinion leader interviewed by Datamonitor. “We showed in a pilot that when children aged 5-10 years were vaccinated at school, not only was ‘flu reduced among them, as judged by doctor visits, but the same happened to everyone over 18 – people at work, parents, the elderly.” Kids spread bugs – that’s familiar to many parents with school-aged children. So protecting them, first and foremost, makes sense.

 

For the rest of the population – in particular the elderly and those with chronic conditions like COPD or other respiratory diseases – vaccination needs to be as easy and cheap as possible. Incentivizing the vaccinators is the best approach to ensuring maximum coverage, according to the UK KOL. In the UK, doctors’ practices buy the vaccine (for adults) from the manufacturer, often with a discount, and are reimbursed at the list price, plus a fee for each successful vaccination within at-risk groups. So it is in their financial as well as their professional interest to vaccinate as many patients as possible. They will call patients in, and remind them as many times as it takes.

 

The result: the UK percentage coverage is in the high 70s – one of the few European countries that appears to meet the ECDCP’s target. (Another implication of this system for manufacturers is that lower-priced vaccines don’t necessarily mean greater uptake: doctors’ practices make less money by getting a discounted price for a cheaper vaccine than a more expensive one.)

 

In countries where vaccinators are not incentivized, but instead have the medicine available to those who want it (or in countries where patients have to buy the vaccines themselves), then “your vaccination rate would be very low,” warns the KOL.

 

Quadrivalent vaccines (covering four important ‘flu strains) are now used in the UK, after the 2017-18 season saw the spread of an important influenza B strain that was not covered in the prior trivalent vaccine. Other aspects of vaccine technology are advancing, but influenza vaccines are still far from perfect. “If you are lucky [the ‘flu vaccine] will be 50% effective, depending on your age, the year and the mismatch of the virus that is circulating,” says the UK KOL.

 

For more details on the progress in vaccine coverage, technology, and vaccination policies and incentives in the UK, Europe and the US, please see the related content links below.