What's Next, House Calls?

A story on the front page of yesterday's Wall Street Journal describes a physician in Rochester N.Y. who started up a solo practice with just an office and a computer. After working as a staff doctor in the local hospital for eight years, Dr. Gordon Moore figured it took 19 separate actions and 253 feet of walking just to order a prescription refill. With his new software he can order a refill with a few clicks and zero feet of walking. What's wrong with this picture?

The implementation of EMRs in clinical environments is often met with anxiety, resistance or ambivalence. Due to compelling economic pressures on large hospitals they are placed in situations where they are obligated to implement the systems, often at high expense and risk. Smaller practices take a wait and see approach; the economic need is not seen as so compelling as to off set the risk and the pain of implementing the new systems. As I explained in an earlier blog, some of these practices have needed significant subsidies to get their systems up and running.

But when you have an important medical service, such as primary-care healthcare, saved from dwindling numbers of care providers by the implementation of technology, the benefits are undeniable. The key is to find the right combination of systems to fit the current and near-term needs. This may be easier in a solo practice than one with multiple physicians with conflicting needs or perceptions.

Turning Software into Drugs

Typical software revenue models include licensing, support and maintenance, subscription and advertising but what sets software for the biopharmaceutical market apart is that the technology can be used to develop a very lucrative product. Software that may be licensed for $500,000 per year could help in producing a product that brings in revenues of $1 billion per year. True, it may be difficult to determine exactly the contribution the software had in bringing the drug to market and therefore assigning an accurate ROI to the software investment may be sketchy, but even reducing the development time by one day will bring in an extra $2.7 million. And time to market is everything in the pharmaceutical business. Since the clock on the patent is ticking from the time the patent is filed, not when the drug goes on the market, the faster a drug gets to market the more time it's generating profits.

For this reason valuable technologies are often bought up by the pharmaceutical companies as a way of providing them with a competitive advantage. But sometimes it may be more advantageous for a pharmaceutical manufacturer to license a product, pay a software company to build a proprietary product or even partner with a software developer on a drug. This last scenario has often been cited by software companies as a potential source of revenue but in actuality has rarely been agreed to by the drug companies. As biosoftware has advanced technically, the software companies have brought more value to the deals.

Entelos has announced their second ownership position in a drug technology with Johnson & Johnson. Entelos is a modeling and simulation software company that builds computer models of biological systems, called PhysioLabs, in order to test new therapies. In the J&J deal Entelos has received an option to an exclusive worldwide license to develop selective progesterone-receptor modulators for a range of indications. Entelos has no plans to become a fully integrated pharma right now, but having the ability to tap into potential drug revenues will surely enhance their future profitability.

Public Policy on Genetic Tests

A story by Denise Caruso in today's New York Times highlights the wild west nature of genetic testing pitting companies that have invested millions in developing an accurate test against companies "with a couple of genes it ran on 30 samples." She reports that over the last six years there have been "numerous calls by government advisory bodies and expert committees... to develop special rules for labs conducting genetic tests" but none have been made. Last September, the Genetics and Public Policy Center at the Johns Hopkins University filed a citizens' petition with Public Citizen's Health Research Group and Genetic Alliance against the Centers for Medicare and Medicaid Services (CMS) citing the CMS's refusal to address the issue violates the law.

The GPPC comes down strongly on the side of the FDA citing that the Federal Food, Drug and Cosmetic Act (FD&C Act) grants them the authority to regulate genetic tests. According to the GPPC's analysis, the public already has the perception that genetic tests are regulated. The GPPC is advocating three components to ensure the safety and quality of genetic tests:

1. the laboratories that conduct the tests must have quality control and personnel standards in place to prevent mistakes.


2. the tests themselves must be valid and reliable - that is, detect genes that are actually related to disease or disease risk accurately over time.


3. health care providers must understand when to order the tests, how to in interpret them, and what to do with the results.

ARCA Discovery and LabCorp

Early stage PGx company ARCA Discovery and mega-lab LabCorp have announced a deal to develop and commercialize a genetic test to aid in prescribing bucindolol, a drug now under development at ARCA. As a pharmacogenomic drug, bucindolol will be prescribed only to a select patient sub-group who have shown a benefit from using the drug. Although bucindolol has yet to receive FDA approval, such an approval will be contingent upon both the efficacy of the drug in the selected patient sub-group and the ability of the diagnostic test to select those patients. Bucindolol has already undergone extensive phase III trails where was shown to be ineffective over an unfiltered patient population. However, in a subsequent substudy it was shown that patients with certain genetic variations showed significant improvement on the drug.

It's interesting to see the progression of this idea from the universities where it was first discovered, to a start-up company where its commercial potential was analyzed and promoted and now to a large diagnostic company where its commercial potential will (hopefully) be realized. It is a classic example of technology transfer and how it can be done.

PGx Industry vs FDA: Round 1

Apparently things weren't quite as sanguine at the FDA's public hearing on IVDMIAs as they had hoped. The pharmacogenomic industry turned out to roundly criticize the FDA's draft guidance document. Comments seemed to focus on the fact that this is a fledgling industry and requires some leeway in order to grow, leeway that may be restricted should the FDA require the diagnostic tests go through a regulatory process. On the one hand, the FDA claims that although the components of the tests may all be approved, they have not been approved as a system and thus are considered a new devise. Because the tests cannot be analyzed outside of their proprietary kit, the results cannot be evaluated independently and thus are essentially black boxes; the consumer or physician using the test must rely completely on the authority of the manufacturer.

The PGx industry sees their costs sky rocketing if the FDA gets involved not to mention increasing time to market. Along with rising costs come rising risks; not only will the regulatory process cost more, there is an increased chance that the test will not be approved at the end of the process.

Some of this risk could be reduced if the FDA could streamline their process. This is a very dynamic field that could be of great help in both improving health and lowering costs in healthcare. This comes straight up against a government bureaucracy and the fear is that progress will be slowed to a crawl. The FDA has been charged with protecting the public's health but could they be hurting it in the process?

The Machine is Us/ing Us

This is quite an inspiring video that captures the essence of Web 2.0. We are undergoing a continuously increasing level of connectivity which is translating into a communal information pool. But this is just the beginning, the beginning of collective intelligence.

21st Century Medicine

On the eve of the FDA's public hearing on their draft guidance on in vitro diagnostic multivariate index assays (IVDMIAs) a group comprised of molecular diagnostic companies and investors known as The Coalition for 21st Century Medicine has asked the FDA to follow a more formal process in determining the future of this promising technology. What is being considered here is whether IVDMIAs may be subject to FDA regulation and if so, which ones and how much. Added regulation means added resources, resources that could be spent on further research and development and expansion of technologies that are still very much in a nascent stage. These are the early days of personalized medicine, a time in the life cycle of a technology where a significant investment is required to make headway. The added burden of regulation may present a set back to the industry just when businesses were beginning to show some returns.

Although regulation of IVDMIAs is inevitable, requiring the FDA to go through a more formal process before initiating regulation will buy some time, time to bring more products into the market, gain more credibility with the insurance companies and bring a greater return to investors before the added costs of regulation come into play.

FDA Approves Breast Cancer Test

As I was writing yesterday's blog, the FDA announced the approval of a genetic prognostic test for breast cancer recurrence. The test MammaPrint was developed by the Dutch company Agendia and is the first in vitro diagnostic multivariate index assay (IVDMIA) device to be cleared by the FDA.

MammaPrint uses a microarray chip to measure the activity of a set of 70 genes the pattern of which will predict whether the cancer will metastasize. Many women who have their tumors removed undergo chemotherapy on the theory that it will reduce their chances of recurrence. Studies have shown however, that most will not experience recurrence and don't need the chemo. However, it was unclear as to which patients would benefit from chemo and which would not forcing many women to needlessly undergo the treatment and its painful side effects. This test promises to make the decision easier and has shown to be 96.7% accurate.

Genomic Health also markets a genetic breast cancer prognosis test called Oncotype DX. Oncotype DX profiles 21 genes using RT-PCR technology. Both tests run between $3,200 and $3,500 and health insurers and Medicare are initiated coverage of Oncotype DX.

The FDA will hold a public meeting tomorrow to discuss its draft guidance describing its regulatory approach to this type of test.

Regulating Genetic Testing

Although there are around a thousand genetic diagnostic tests available in the U.S., only six are approved by the FDA. So if you want to know if you have a gene for susceptibility to a bacteria living in hot-tubs you can submit your genetic material to any one of a number of labs and have them run a test. Of course there's no guarantee of the results, either that the genes tested for are markers to indicate susceptibility or the algorithms matching the expression profiles to susceptibility are correct. Even after testing negative for the genes you may still get the dreaded hot-tub bug. For this reason, the FDA has recently announced that it will begin the public comment period regarding genetic tests. David Ewing Duncan has written an article in Technology Review on this impending arrival of personalized medicine.

Flat NIH Budget

A front page article in today's Denver Post Scientists fight for research funding describes the situation at research labs dependent upon National Institutes of Health grants to fund basic research. How this made it onto the front page is baffling to me since the story is a couple years old (see Fewer Grants Force Younger Scientists to Leave Academia, WSJ, July 27, 2004). Although research capacity has been growing rapidly over the past few years, the NIH budget has been flat since 2004 creating greater competition for NIH grants.

Dr. Elias A. Zerhouni, director of the National Institutes of Health, explained the situation last September and has offered strategies. Funding of basic research has actually increased by 2% in the overall NIH budget since 1998 (54% to 56%) and applied research has increased by 1% (40% to 41%) with infrastructure decreasing by 3% (6% to 3%).

With growth stagnant in the overall NIH budget, funding of new projects and new scientists will decrease just at a time when many scientists in training through the high growth years are coming on-line. If, as the Post article suggests, there is sufficient need in the private sector, young scientists will migrate over. However, given the rigid requirements of an academic career, it is doubtful that they will return when funding levels resume.