BioPharm Executive: 5 Reasons To Hate Biotech
Published: Oct 29, 2014
October 29, 2014
By Karl Thiel for BioSpace.com
Haters are gonna hate, and October gave them plenty of reasons. Some months just don't go the way you'd like, and biotech has had a tough time staying on message and putting its best foot forward over the past severall weeks.
1. "Financial Toxicity."
The drug industry has been getting criticisms about drug pricing since forever, but scrutiny reached a new fever pitch in October following a 60 Minutes piece. In a way, there wasn't much new to the segment—which was part of the problem, as we watched the CEO of lobbying group PhRMA go through the tired motions of delivering the same old justifications about how drug prices have to reflect the cost of R&D. Except...that's not how it works for any other industry. Where else does having an inefficient development structure justify jacking up prices? Competition from more efficient organizations, or ones willing to take a leaner profit margin, would put you out of business—except market forces don't really work in the pharma industry. PhRMA head John Castellani managed to undermine the industry's message by sticking to this trope. And BIO, the biotech trade group, didn't help much by subsequently piling on to say that we should really blame insurance companies for trying to pass more of the cost on to consumers.
One doesn't often get a chance to defend insurance companies, but you can make the argument that they, at least, are doing something to make this more of a functioning market by making costs more transparent to patients. As a spokesperson for America’s Health Insurance Plans said, "Blaming anyone else for the prices that they alone are choosing is just disingenuous distortion." In the segment, Leonard Saltz of Memorial Sloan Kettering Cancer Center used the phrase "financial toxicity" when discussing the "unreasonable, unsustainable and...immoral" pricing of drugs, creating a soundbite that has had some legs since airing.
The fact that Gilead just priced Harvoni at $94,500 for a 12-week course of treatment—or $1,125 a pill--just added fuel to the fire.
• Gilead's Sovaldi may be barred from U.K.'s National Health Service
• France uses taxes to put pressure on hepatitis C drug prices
• Doctors Without Borders encourages India to stand firm on patent policy and affordable drugs
2. Ebola and Ugly Capitalism.
There was certainly something unseemly about watching stocks of certain companies spike when Ebola patient Thomas Eric Duncan died in Texas, or when news of the first infected nurse broke. Perhaps worse was the decline in "Ebola" stocks as quarantines ended without incident.
Despite the ghoulishness of this, it does reflect the market at work—allocating capital to the companies most likely to make a meaningful impact. Another cynical market reality, of course, is that Ebola is now getting a lot more attention—from existing players and from companies now entering the field—despite the fact that the disease has been a scourge for centuries. While I haven't seen biotech companies crassly playing up their work for a short-term stock gain, they certainly see an opportunity when it comes along.
And it's not just ugly capitalism—don't forget about ugly politics. The finger pointing between Democrats and Republicans has been ridiculous, as have some of the loonier right-wing theories (Jihadists self-infected with Ebola sneaking across the porous U.S.-Mexico border, anyone?). And then there's the reminder that drug development is itself kind of an ugly process. The gruesome fact is that the outbreak provides the means to gather data and do experiments previously impossible. With luck, that will lead more quickly to a real treatment—but it seldom plays well for the image of the drug industry when it has to explain about control groups, or rationing of medicine, or any other difficult realities that happen on the ground.
• Chimerix stock slips as Ebola patient dies.
• As Ebola spreads, drug stocks surge.
• America’s Fears of Immigration, Terrorism, and Ebola Are Combining Into a Supercluster of Anxiety.
• Ebola: an opportunity for a clinical trial?
3. Snubbed By Sweden.
Nobel prizes went out in October and, as usual, they went to academic and government researchers. This year's laureates were all deserving, of course, but biotech was again overlooked. Craig Venter arguably deserves the prize not just for his groundbreaking work in speeding the decoding of the human genome—paving the way for today's molecular diagnostics—but also his other early sequencing efforts.
Other Nobel-worthy biotech innovations to have been passed over by the Nobel committee include James Rothman's and Randy Schekman's work in cell membrane fusion—how proteins and other materials are transported within and between cells—and the work of Arthur Horwich and Ulrich Hartl in discovering chaperonins and the mechanisms of protein folding. (Horwich and Hartl added serious new scientific understanding to the last Nobel in protein folding—Christian Afinsen in 1972.)
Also, it stings a little that the prize in Chemistry went to a group of physicists.
• Eric Betzig is not a chemist, but does it matter?
• Father of the LED snubbed by Nobel committee
4. Following The Money Is Now Easier.
The Center for Medicaid and Medicare Services (CMS) has launched its Open Payments database, making it simple to parse the flow of money from drug and device companies to hospitals and doctors. Now you can see which companies are the biggest spenders, and who are the biggest recipients, and what—at least in broad categories--the money is being spent on. But there have been a few problems with the data or the interpretation thereof, leading to some finger-pointing between doctors, the companies that pay them, and CMS. Some individual doctors were assigned all the money received by a given firm—like the doctor at Louisiana State University who proclaimed he couldn't have possibly eaten the $10,640 in free food and beverage provided by Baxano Surgical.
Others simply don't like the disclosure, like the doctor at the Saint Louis University School of Medicine who received $41,320 in speaking fees from Gilead Sciences but took umbrage at the idea that the financial ties would influence his treatment decisions. A new level of transparency or a new tool for the haters? You decide.
• The American Medical Association called on CMS to delay the Open Payments database until physicians have time to review the data.
• There are almost no women among the medical industry's top-paid speakers.
5. Say No To Tax Evaders.
The Obama Administration has made its displeasure with tax inversion clear. After trying and failing to get Congress to do something, it decided to act on its own through administrative process. The U.S. Department of the Treasury decided to hate on AbbVie in particular, reinterpreting tax law to take away the benefits of inversion from its proposed merger with Shire. All that talk from AbbVie about how this was about more than a tax address? Yeah, not so much. The company quickly gave up, confirming what everyone already knew about the motives behind these deals, but not before hurling back a little invective of its own. Shire gets a $1.6 billion break-up fee, reflecting some extra pain put on AbbVie. But there's a silver lining—AbbVie can write it off their taxes!
• Pfizer thinks its chances at tax inversion may improve after the midterm elections.
• New Irish tax rules won't strip many biotechs of tax inversion benefits
But hey, it's not all bad news! This past month has seen five new chemical entity approvals, some promising clinical results, more capital flowing into the sector, and some intriguing alliances. Read below for more!
Read the BioPharm Executive online newsletter October 29, 2014.
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