WisBusiness: Prospect of reform changes outlook for medical companies

By Brian E. Clark

For WisBusiness.com

MIDDLETON — The push to reform health care is already forcing drug, device and diagnostic companies to make changes in how they do business, a panel of experts said Wednesday at the 2009 Biotech Vision Summit held in Middleton.

The theme of the event, appropriately, was “thriving in turbulent times.” It was hosted by BioForward, the Madison-based biotechnology association.

No longer can firms simply “launch and hope,” products, said David Lee, head of Health Economics in the Americas for GE Healthcare, a company with $17 billion in annual sales.

Now, he said, they must be able show that what they are developing has a market, has the potential to make money and can produce positive outcomes for patients.

While that might help keep costs down, it could also mean there will be less breakthrough innovation, he predicted.   

Another fear is that health care managers might discourage the use of medical technology to save money, said Christine Jackson, a senior manager with the Medtronic device company.

And Andrew Morgan, a Middleton-based vice president for the Genzyme biotech company, said drug companies that want to make money in the future will need to focus more on niche, gene-based products and working closely with regulatory bodies and the medical community.

David Parker, a vice president of Boston Healthcare, moderated the panel. He said the health care reform movement may force “sea changes” in how companies do business.

“You know the Chinese curse of ‘May you live in interesting times’?” he asked. “Well, then, health care is thoroughly cursed. During the next five to 10 years, we may see the greatest changes since the advent of managed care.”

Lee told his audience at the Marriott Madison West that payers such as the Centers for Medicare and Medicaid Services, will demand a high level of evidence of value before they pay for drugs, diagnostics or devices.

“Value will be defined by the level of available evidence” show that these products are effective and produce positive outcomes, he said.

And that, he noted, could hurt diagnostics developers who create products that don’t necessarily cure patients, but provide valuable information that improves their lives.

But that doesn’t mean companies won’t continue to innovate, said Jackson. It will, however, mean firms such as hers will be more focused on helping health care providers be more efficient.

There will be a heightened emphasis on reducing hospital re-admissions, infections and other complications, she said.  It will also mean her company will be more selective about programs in which it invests and what companies it acquires.

Lee, who said he is skeptical about whether health care will change the dominant fee-for-service model, said GE is already trimming fees by reducing product launch costs by 15 percent.

“We are turning the ship,” he said.

Genzyme’s Morgan said companies of all sizes may have to invest more in thorough and well thought-out clinical studies to make sure their products are successful.

“Evidence-based reimbursement (payment) will be the way of the future,” he said.

Lee gave the example of CMS rejecting payments earlier this year for virtual colonoscopies because the clinical evidence didn’t focus on patients over 65.  That might have been avoided, the panelists suggested, by a better defined study.

Moreover, they said, there will be continued pressure on companies to develop drugs and products that save money.

Trevor Twose, CEO of  Madison-base Mithridion, Inc., said some investors might be reluctant to invest in start-up firms if government agencies reject some treatments as too expensive. That, he said, is already happening in Great Britain.  

But he said his company is in good shape because it is developing a drug to improve memory and cognition in Alzheimer’s patients.    

“The costs for Medicare patients with Alzheimer’s are three times as high than for those who don’t have the disease,” he said. “So our drug (which recently completed a successful Phase 1 study) will create enormous value.”