What’s Ahead for Biotech in 2016: Q&A With BIO Chair Ron Cohen

Xconomy New York — 

Biotechnology is a tricky business. We all know the trials and tribulations—and costs—of bringing novel drugs to market. In the past six months or so, a new round of drug pricing upheaval (think Martin Shkreli) and corporate tax “inversions” (think Pfizer-Allergan merger with new headquarters in Ireland) have ignited public debate.

Ron Cohen has been on the front lines of all this—wearing a couple of different hats. One is as CEO of Acorda Therapeutics (NASDAQ: ACOR), a biotech company based in Ardsley, NY, that made its name with a drug for multiple sclerosis. The other is as the chairman of BIO, the biotechnology industry association. In January, Acorda announced the acquisition of Biotie Therapies, which enhances Acorda’s push into treatments for Parkinson’s as part of a several-years-long effort to diversity past its MS drug, dalfampridine (Ampyra). Also in January, during the JP Morgan biotechnology conference in San Francisco, Cohen took part in a panel on drug pricing and vigorously defended the industry, later mixing it up on Twitter with several journalists, including Xconomy’s Alex Lash.

But complex issues such as drug pricing don’t mesh well with the Twittersphere. I reached out to Cohen to learn more about his views on these issues and others facing the biotechnology industry—the FDA, the patent system, inversions, and more—as well as a bit about his plans for Acorda. We had a far-ranging exchange via e-mail. Not too surprisingly, a lot of it centered on drug pricing. Cohen says the industry has done a “miserably poor job” discussing this volatile issue with the public. But he remains firm in his conviction that the solution to this tough issue involves a wider discussion with everyone involved in the healthcare value chain—drug makers, yes, but also hospitals, insurance companies, and others.

Below is our edited exchange.

Xconomy: What do you feel are the big issues for biotechnology for 2016 and beyond? What has you most excited, and what are you most concerned about?

Ron Cohen: The mining of data from the human genome, coupled with powerful new technologies, such as RNAi, Car-T, and CRSPR, are launching an era of unprecedented medical innovation. When the human genome was being sequenced in the 1990s and completed in 2003, many had the unrealistic expectation that there would be an immediate surge in biopharmaceutical productivity. The reality is that it takes decades to fully realize the potential of such major scientific breakthroughs, but the breakthroughs do come. This was true of such advances as recombinant DNA, which launched the biotechnology revolution, and of monoclonal antibody technology, which initially resulted in major failures but ultimately gave rise to the single most impactful class of medicines we have today. Now, more than a decade following the sequencing of the human genome, we are poised to see a surge of remarkable breakthroughs that will dramatically improve patients’ lives, and in many cases cure previously incurable diseases. Recent examples include the introduction of cures for Hepatitis C and immunotherapies that are achieving dramatic remissions of virulent cancers such as metastatic melanoma (as for, respectively, Pamela Anderson and Jimmy Carter).

The biggest challenge I see in 2016 is the increasingly politicized, and often poorly informed, debate around drug pricing. The rhetoric around this issue has reached a decibel level that threatens to drown out rational dialogue and, most dangerously, to retard development of the innovative medicines that we all want and need. The biopharma industry excels at innovation; what we have not done well is to convey clearly what is needed to produce medical breakthroughs, how they should be valued, and how we help to ensure that no one is denied access to medicines they need on the basis of cost. Also tied to the pricing discussion is how drug costs fit into the bigger picture of overall healthcare costs in the U.S., about 85 percent of which are imposed by other factors, such as hospitals, providers, procedures, and insurance industry costs.

I’d like to see a more honest dialogue about the cost of our healthcare system—one that includes all the players that are needed to help improve it, including in addition to biopharmaceutical companies, the payers, regulators, legislators, healthcare professionals, employers, and patient advocacy groups. Our shared goal should be to design an economically sustainable system that ensures patient access and promotes a strong future for healthcare innovation.

X: We will come back to this later, but first one more question on the big picture. You are the current board chair of BIO until June 2017. What does that role entail and what are your goals for the coming year?

RC: As chair of BIO, I work closely with our CEO, Jim Greenwood, the BIO staff, and our Board of Directors to help create an environment that allows our members to innovate as effectively and rapidly as possible. While BIO is often associated with our members who develop novel medicines, it’s important to note that we also have companies producing remarkable advances in agriculture, and industrial and environmental science. Collectively, BIO members are transforming how we heal, fuel, and feed the world. But to do this, we need to educate society’s stakeholders about what we do and the about what is critically needed if we are to benefit from these innovations.

We are in a particularly challenging time in this regard: to name some of the most prominent, there is great concern, even anger, about the costs of medicines that is being directed at biopharma companies; the integrity of the patent system, which we need to attract the huge investments required to develop innovative medicines, is being undermined by new patent challenge processes such as IPR [inter partes review]; and we are negotiating with FDA to implement PDUFA VI and working with Congress on the 21st Century Cures initiative. [Editor’s Note: PDUFA is the Prescription Drug User Fee Act, which allows the FDA to collect fees from drug companies to fund a large portion of its new drug approval process: the current, fifth iteration, will expire in September 2017. The 21st Century Cures Act was passed last year by the House of Representatives in an usual display of bipartisan support and is being considered in the Senate. Its goal is to further improve and speed up the drug development and approval process—but it is not without its skeptics.]

X: Let’s talk about pricing. Do you feel that a new approach or balance is needed? Are there innovations in pricing models that might hold some promise?

RC: I’ll note at the outset that we, as biopharmaceutical developers, have done an amazing job of applying cutting edge science to create greatly needed new therapies that society desperately needs, and we’ve done a miserably poor job of communicating what is needed for this innovation to thrive and continue. For years, we’ve collectively said that “it costs a lot to make a new medicine.” Yes, it does. But there is not a direct line from the costs to develop an individual drug and the price of that drug.  As a result, some government bodies are now trying to force biopharma companies to disclose the costs of their individual R&D programs. These efforts are actually useless in addressing the pricing issues.

The key issue is this: new medicine development occurs in an “innovation ecosystem” that requires massive amounts of high-risk, long-term investment. Most investors will lose their investment because most drugs fail during development; 9 out of 10 drugs that reach clinical testing fail. In fact, when one looks at the return on invested capital for the entire industry over its 35-year-or-so lifetime, the returns to date are close to zero. The only way to ensure that these investments continue to be made is to have larger than average returns for the few successes. That means that the few fortunate successes “win big.” And that win already has a limit—these high returns only occur for a limited exclusivity period, usually 7 to 12 years or so, after which the drug goes generic or, as is now increasingly the case, biosimilars are approved. The innovation is then available to all future generations at a much-reduced cost. Most people don’t realize how well this system has actually worked –about 90 percent of prescriptions written today are for generics, up from about 15 percent 30 years ago. And during the exclusivity period, the company with the drug has to invest in new, better innovations or it will lose its business when the exclusivity runs out. Given that it takes 10 to 15 years on average to develop a drug successfully, this is a major deal. There has been a lot of discussion around a small number of outliers in our industry who are aggressive in their pricing practices but don’t invest in innovation—think Valeant or Turing. But this model is not representative of the vast majority of biopharma companies, which invest hugely to develop new therapies that improve people’s lives.

It’s also important to note that, although drugs comprise only about 14 percent of total healthcare costs, they are the only part of the healthcare system that actually reduces costs elsewhere. Many drugs can result in fewer or shorter hospitalizations, avoidance of surgical procedures, and increased productivity at work and at home. A great example … Next Page »

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