You could feel Herman Cain’s presence last week on the biotech beat. And there was a lot of grousing about it.
Cain, the Republican presidential candidate known for his simple 9-9-9 tax plan and some dubious extra-curricular activities, didn’t attend the Personalized Medicine Conference at Harvard Medical School. But a former advisor to President Obama, Ezekiel Emanuel, was there channeling his inner Cain, delivering a simple, blunt message to top biomedical researchers, business executives, and investors.
The word from Emanuel, the University of Pennsylvania bioethicist and player in the landmark healthcare reform law of 2010, boiled down to this: Personalized medicine is a lot of hype, it will add costs to the healthcare system, and we can’t afford it. What personalized medicine ought to offer, he said, is a “1-100-0” plan. That means treatments that are truly tailored for a single individual; almost 100 percent effective; and have almost zero side effects.
That’s fantasy, of course, which Emanuel knows quite well. He was being purposefully provocative, and said so. In a roomful of like-minded people having a garden party, he was happily playing the role of the skunk.
Personally, I thought Emanuel gave a brutally honest message that a lot of these people need to hear. It could have been perceived as a rallying cry to come up with new innovations for health that truly reduce, instead of add, costs to the system.
But that’s not how the message was perceived. Everywhere I went the rest of the two-day meeting, people were grumbling about the nerve of this guy. One prominent executive complained that Emanuel shouldn’t have been invited. Emanuel’s not an economist, what does he know? He’s relying on faulty data! What about innovations that improve patient outcomes, helping people live longer and better lives? Isn’t that worth it?
“There seems to be a lot of angst about what’s going on here, but these are still early days,” said Brook Byers, the champion for personalized medicine at Kleiner Perkins Caufield & Byers, during a moderated chat later in the day. “These things take a while. I’ve been doing this long enough to have been through a lot of things in computation, healthcare, and biotech. But personalized medicine is a way of thinking.” And then he made a vague reference to Emanuel that everyone got. “I think the day got started off a little weird,” he said.
And with that, the room burst out with a round of supportive laughter. It felt to me like a group hug, as if the crowd were saying, “Right On. Tell Him How It Is, Brook.”
Byers didn’t directly attack anything Emanuel said earlier in the day, and he did stress how important it is for entrepreneurs to work closely with payers on measuring the value of new products. But if the crowd of several hundred people in a comfy Harvard auditorium really wants to make a difference in creating innovations for personalized medicine, I’d suggest they’d listen carefully to Emanuel, and a number of health economists who are making basically the same point. The U.S. healthcare system is badly broken, and it can’t go on paying for all these wonderful life science innovations the same way it has for the past 30 years.
As I said in this space a couple weeks ago, I’m inspired by some outstanding personalized medicines that have been approved by the FDA for cancer patients in the past few months. These are superbly effective drugs for small, genetically distinct populations of patients that are worth the hefty price tags they are commanding. These treatments are paving an important road scientifically, and with regulators, which other drugs ought to be able to follow for years to come.
But these innovations need to be taken in context. The U.S. now spends $2.6 trillion a year on healthcare, and that number increases by $100 billion a year, as Emanuel pointed out in one of his recent New York Times columns. That means the U.S. healthcare sector, by itself, is roughly equal in size to the economy of France—the fifth largest economic power in the world. To shave even 1 percent of U.S. healthcare spending per year, you need to subtract $26 billion. That’s a scary amount of money in an industry where the largest biotech company, Amgen, generated about $15 billion in revenue last year.
The biotech business model, shaky as it is, has long depended on charging sky-high prices for the few products good enough to navigate the long cycle of product development. Words like “cost-effectiveness” or “comparative effectiveness” are scary terms that sound like price controls, in an industry that depends on there being no price controls.
I understand that creating new healthcare products takes a lot of time and money, and involves a lot of risk of FDA rejection. Some investors are walking away. Biotech is in trouble, so I understand why people get defensive when some guy says your products have to be safe and effective AND cheaper?
Emanuel’s message may be simple, and easy to dismiss, especially the “1-100-0” part. But that would be missing the larger point. The reality is that healthcare spending can’t go up forever. The prices of new technologies aren’t going to go up forever. Instead of scoffing about the skunk at the garden party, everyone in that room would have been better off listening, and thinking about how to adapt to the new reality.
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