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Video Transcript: One-on-one with Oncology Business Review: Examining the Present and Future of Cancer Care

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Gina: Clinical pathways in oncology. Quality of cancer care. Innovation in product development. How can manufacturers meet these issues head-on amid ongoing economic pressures? Join us to find out. “In the Know” starts now.

Hello and welcome to “In the Know,” your source for insight and analysis on the issues that matter to specialty pharma. I’m your host, Gina Clark.

Today we turn our attention to the state of the oncology market. We’ll look at economic and legislative challenges facing manufacturers and oncologists. We’ll also discuss the issues of cost versus value and the future of oncology R&D.

Here to provide a true observer’s perspective on all this is Don Sharpe, founder and publisher of Oncology Business Review—the three-year-old publication and online resource dedicated exclusively to the business of oncology.

Don, thanks for joining us.

Don: Thank you Gina, it’s a pleasure to be here.

Don, you obviously spend a bit of time monitoring the oncology industry from a macro perspective. From what you see, what are the some of the trends that manufacturers should be reminded of?

Don: It may not feel like it all the time, but this is still a big $48 billion industry making terrific advances in the understanding of the biology of cancer and clinical development of novel therapeutics and diagnostics. There are several ways to measure our industry, so to name a few:
The stock market, including huge companies like Pfizer and Novartis and our own Tumor Ticker, finished the year up in spite of the difficult economic times we’re living through right now. Q1 09 was pretty bad but I think everyone was surprised by the rebound in the second half of 09. And while the stock market indexes are indicative of the broader economy, those gains/losses also represent to some degree the health of our own industry too.

Investment in the clinical development of cancer products continues to grow, and as a result the number of products in development is trending upward.
We had 8 new products approved in 09 including Afinitor, Votrient, Folotyn, and Arzerra, plus we had significant label expansions for Alimta and especially Avastin.
Importantly, we saw some very promising clinical trial results in 09 from commercial products like Erbitux (H&N) and Alimta (maintenance NSCLC), and development stage products like Dendreon’s Provenge, the OncoGenex product for prostate cancer, the Sanofi-Aventis/BiPar product for triple negative breast cancer, T-DM1, and Onyx/Proteolix’s carfilzomib.

So those are the positives. What’s on the flip side—the negatives from this past year that we need to be aware of as we move forward in 2010?

Don: Of course there was, and on the other hand there have been some recent high profile clinical setbacks such as Avastin’s failure in adjuvant colorectal cancer, or Poniard’s picoplatin, Pfizer’s figitumumab in NSCLC, and Synta’s elescomol. Speaking of which, metastatic melanoma is one tumor type that had plenty of opportunity for clinical advances in ’09 but we did not realize the gains we were hoping for. And as we all feel, the economic and legislative environment has deteriorated significantly in the last few years.

But speaking generally, in spite of all the bad news for oncologists in 09, pharma’s customers are still operating and using their drugs, meaning that in spite of all the concerns over the state of cancer care, and some pharma companies had a tough time with their commercial operations in 09, overall the industry still had a good year in and is projected to continue to grow for the next several years.

Economic and legislative concerns are certainly taking high priority in the minds of the entire business community. In what ways do you see these issues impacting the oncology industry?

Don: True. And those concerns are real. The economics in the industry are shifting dramatically, and the single biggest indicator of the troubled system, in my mind, is that in some cases patients are not seeking therapy for their cancer, or are seeking but not able to afford treatment, in this environment. There are a host of other troubling indicators, what with oncologists working harder and making less, practices struggling to stay afloat, and the ripple effect where oncology companies shrink or merge to improve their finances. A once robust economy, I call it our on-conomy, is shrinking and that has the potential to lessen the quality of cancer care, cause jobs to dry up, and snowball downward into less investment into product and clinical development. If all the world’s health care systems were modeled after the NICE system, there wouldn’t be drug companies and all the sub-industries associated with the healthcare system the way there are today.

What do you see as the chief concern of the oncology market in 2009 and coming this year?

Don: In my mind the chief concern is that people speak with their actions, and we’re starting to see more patients walk away from the cancer care system. This to me is a harbinger of markets that are in grave danger, making the #1 concern for the health of the oncology industry allowing patients to gain access to the drugs. I spoke to one oncologist recently and he didn’t point the finger at the manufacturers, he simply said “The problem is that everything is too expensive.”

Let’s dig a little deeper then: What are some of the environmental trends that are causing turmoil in the oncology segment?

Don: As I mentioned earlier, the patient is at the center of the storm, but the oncologist still has the power of the pen, so it is important to talk about these two stakeholders together. I like to place these environmental trends into buckets that are internal and external to the oncology practice. Internally, practices have spent the last few years adjusting to the new financial model brought on by MMA and ASP. Overall they are adjusting through consolidation, operating efficiencies, and offering new services with some casualties along the way.

But the problem is that cost of therapy is entering the physician/patient discussion more often. And as long as that is happening, you can expect the choice of whether to receive therapy, or which therapies to use, to be in a state of uncertainty. From there the change in the drug reimbursement model, which they are dependent on to run their small businesses, has caused them to become more dependent on the ASP model offered by private insurers because they can’t survive on the CMS ASP model. So now they have to worry about their contracts with private insurers much more than they used to, and suddenly everybody is concerned with oncology cost containment strategies coming from the payer. But I love the way markets work, and it is encouraging to hear a potential solution or compromise, clinical pathways, being discussed and bantered about in more and more places. If pathways see broad acceptance, we just may see a model where physicians have some autonomy, payers feel the cost of therapy is somewhat manageable, and the manufacturers can still see usage of their products. In their current model, pathways will only work in certain markets, but they represent a good evolutionary step.

What about outside the practice? What external issues continue to impact the oncology market?
Don: Externally of course healthcare reform is a major factor and while it is a moving target, it is safe to say that further cuts are likely with CMS eliminating or reducing payments for codes relating to cancer care, which will further impact on usage of cancer drugs. But I think the real concern for pharma is the intense scrutiny on value. When oncologists publish that “the magnitude of cost exceeds the magnitude of benefit” (from JCO regarding colorectal cancer) then I think there is a troubling trend amongst us. We see it in the Wall Street Journal and NY Times all the time: stories of patients not being able to afford cancer therapy, recently referring to cancer drug pricing as a bubble. In fact, some predict the healthcare system is a bubble which will burst like the housing market. It has to be the most difficult discussion in the entire healthcare topic, but there is no denying that oncologists, patients, insurers, the media, everyone is questioning the value returned from the incremental gains, measured in months, from cancer drugs. How much are we willing to pay for an extra 3 months of life is extremely difficult to discuss let alone quantify, but we’re getting closer to it. We did some research recently showing that oncologists were split on whether a NICE-like system of cost control was necessary, and it will be interesting to see if this changes or stays the same in 10.

This moves us into the “cost vs. quality” debate, and in that debate it seems like the term “value” enters into every discussion. What are your thoughts there?

Don: Yes it does and that is likelybecause the term value can be applied in so many ways and because it has layers of intricacies. There is the value that is measured in terms of outcomes such as progression free survival and overall survival, but there’s also value as measured in terms of the products and services pharma is offering oncologists and payers. And of course pricing has to be commensurate with value as in any case. Don’t forget that there was a time when Apple was at the bottom of the computer industry because there wasn’t any reason to pay the premium for their products, but now they have an established value proposition that people are willing to pay a premium for.

What is it then that manufacturers can do to increase value?

Don: And that brings me to innovation. The innovations at Apple are what lead to the recent commercial success, and I dare say that physicians and patients see and feel the value in breakthrough products like Rituxan, Herceptin, Avastin, and Gleevec. These products have raised expectations, and all the stakeholders want more of these types of innovations without recognizing that research in this area is complex, slow, and expensive, especially when comparing to phones and the internet where the cost of computing keeps coming down. I feel like today’s attention spans don’t allow for the patience needed in making incremental gains against cancer.
So to me innovation is the beating heart of the pharma industry, and it scares me when they start consolidating or downsizing due to economics forcing them to make difficult choices to keep innovation alive. And it isn’t just pharma. The NCI finally received more federal funding in 09 after several consecutive years of declining funding (not keeping up with inflation) because of the stimulus money. Innovation requires sufficient investment, in fact more investment than other industries, and there are two main sources of money – the government and pharma.

So from your perspective, pharma must continue to invest in research and innovation to drive market growth and advance cancer care. Does that sound about right?

Don: Yes, innovative products, innovative approaches, and innovative clinical and product development. That can’t be sacrificed. Favorable (and speedy) outcomes make all the difference. Manufacturers can silence the value debate from patients, payers, and physicians with outcomes that exceed cost in terms of value. But then again that is a very challenging thing to do in a morbid disease like cancer.

While we’re on it, another external force that concerns me is all this discussion in the media about conflict of interest. As everyone backs away from each other because the Wall Street Journal may report that there was money exchanged between drug companies and researchers, the entire system of R&D collaboration and innovation is threatened.

There are great examples, very recently, of collaboration between industry and academia, which have lead or could lead to quicker clinical trial results of therapeutics and/or therapeutics coupled with companion biomarkers. Take a look at the I-SPY trial in breast cancer as an example. And it concerns me to think that media scrutiny over conflict of interest, which is warranted in some cases, could inadvertently lead to fewer examples of collaboration in the future.

Practically speaking, what does innovation look like in the future?

Don: I don’t think I’m saying anything new here and I’m generalizing too, but there is a huge new opportunity out there with personalization of cancer treatments which can and will lead to more effective commercial strategies for manufacturers too. As genetic signatures and biomarkers become part of the treatment pathways, every stakeholder is happy: patients have a better outcome, providers deliver better treatments, insurers pay only for effective medicines, and manufacturers deliver better value. Today pharma is concerned about shrinking and limited access but it is not hard to envision a day when companion biomarkers are helping deliver better outcomes for patients and the segmenting of tumor types is creating so-called nichebusters making drug companies happy with outcomes too, delivering value across all stakeholders and opening more doors to collaboration.

What else can manufacturers do to improve their situation with their customers, the oncologists?

Don: I think the main thing is to put yourself in their shoes and truly understand the stresses the oncologists are under, all the influences pulling them in directions they haven’t had to before. The oncologist is traditionally, like any doctor, trained in healing to help patients, and hasn’t had to cope with all these internal and external forces.
Once you understand all these forces, it is easier to find opportunities to help and become more of a partner. Providing therapies is one form of partnership, but being a bigger piece of the solution through diversification can lead to a broader partnership and increased business opportunities.

Don, thanks for letting us turn the tables today and interview the interviewer.

[Gina and guest discuss pharma issues.]

[Wide shot on Gina and guest as Gina does first part of outro.]

Don, it looks like we’ve run out of time for today’s discussion. Thanks again for your thoughts on these issues.

[Cut to close-up of Gina as she concludes outro addressing the camera.]

And thank you for joining us—we’ll be back soon with another, all-new webisode. Until then, if it’s on your mind, it’s In the Know.

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