Risk versus Promise of Healthcare in Transition: 2024 Financial Times US Pharma Summit Highlights

In a tumultuous year with unprecedented demand and potential for innovation yet rising supply chain pressure, confusion, shortage, increasing economic deficit, and an upcoming election, the healthcare industry finds itself in a major transition. On May 16, the 2024 Financial Times U.S. Pharma and Biotech Summit gathered executive decision-makers among manufacturers, investors, scientists, non-profit organizations, and policy-makers to candidly debate the following underlying drivers that may shape how healthcare evolves over the next few years, summarized in this latest issue of "InWeekend":

1. FDA priorities in evaluating AI / ML models used to accelerate and improve drug development
2. Industry-wide frustration with misaligned incentives among current supply chain or payment systems, and policies
3. Critical shifts in demand and consumerism among patients
4. Generational gaps among employees within the industry
5. Largest areas of advancement and potential among therapeutics in development
6. Promise of investments in disease prevention and health span extension
7. Anticipated legal milestones and election consequences

1. FDA policy on evaluating AI / ML in drug development

As our excitement grows about AI / ML capabilities of accelerating time to drug candidate identification, clinical phase initiation, repositioning or repurposing, new questions are arising about the ambiguity of methods used, potential for toxicity, and responsible use in general. Tala Fakhouri shared FDA's increasing adaptabililty and ramped up internal training of evaluating drug applications that utilize AI throughout their development.

• Since 2016, FDA has received over 300 drug applications that include an AI/ML component
• There are about 800 AI-assisted Medical Devices for which post-market surveillance using AI makes this technology powerful, but also requires its life cycle maintenance
• FDA is focused on ensuring that the data from the models are credible but is absolutely open to considering various technologies and applications that are not limited to large language models (LLMs).
• Largest use case for AI is in clinical research, including site selection, and identification of patients, but EHR phenotyping, AI-enabled digital health technologies to measure different biomarkers or endpoints, identification of dosing escalation, stratification include other uses in which FDA is interested
• In March 2024, FDA released a joint publication on behalf of its Center for Biologics Evaluation and Research (CBER), Center for Drug Evaluation and Research (CDER), Center for Devices and Radiological Health (CDRH), and Office of Combination Products (OCP) reviewing four areas (figure from the publication below) of the agency where it is actively working on enhancing the development and responsible use of AI. All of the focus areas are geared towards improving AI Life Cycle Management, standardization and Model Performance across all stages of drug development.

Fakhouri shared critical, surprising insight into the research FDA has collected so far comparing performance quality of AI models in R & D - there is an apparent trade-off between transparency and explainability as many unexplainable models perform better than those that are explainable, however the FDA is prioritizing transparency over explainability. Such an approach in my opinion is very promising because it enables the industry to take advantage of the potential of technology earlier and improve it over time.

• The training data and outputs change quickly even after a given AI model is deployed. AI application for post-marketing surveillance of drugs and devices makes the models powerful. When outputs are different, the impact must be weight-adjusted, ranked and considered to continuously improve the algorithms and assumptions on which the models are built.
• As the numbers of AI-enabled drug and device applications are increasing rapidly, the FDA is taking measures to implement AI to handle them and to upskill talent that has "mul3i-fluency" or expertise in multiple types of AI models, skills in data science or domain expertise in clinical research.

What does the FDA's current perspective mean for pharma or drug device companies considering whether or not to use AI models to reduce time in discovery? The FDA is in the process of publishing a new guidance to provide more clarity and currently advises that it will make an appropriate recommendation based on the level of "model influence" or dependence of such companies have on the technology for the output and what may happen if the model they use is inaccurate - increase in drug toxicity, for example. Those that use AI to reduce or refine certain processes carry lower risk, so the business decisions ultimately reflect the level of risk versus reward and transparency of the model they are willing to consider.

2. Misaligned incentives in pharma supply chain, payment systems, and policies

The variables that determine whether the right patient is able to access the most appropriate treatment on time, where they prefer, and at a price that is affordable are nuances that few patients or even those who work in the healthcare industry completely understand or address directly.

• The price patients pay at the pharmacy for their medications reflect the billed price and not the allowed amount and therefore do not reflect the price of manufacturing the medication.
• List prices do not decrease when drugs compete and payers tell pharma that they have to pay a larger rebate in exchange for a more favorable or preferred position on their plan's formulary.

Thus Sarah Emond , President and CEO of the Institute for Clinical and Economic Review noted that the payment system has unintended consequences for patients and "perverse incentives" in which more than 50% of the prescription price goes to someone other than those who make the medicine.

When the makers of the revolutionary PCSK9 inhibitor injection treatments to lower cholesterol lowered the prices of their drug some of the Medicare Part D insurance plans no longer paid for the lost list price and low rebate version which led to patients of familial hypercholesterolemia patients to protest to the government.

• In the expensive biologic market, the middlemen in the supply chain and payers prefer higher prices for patients and therefore do not incentivize any functional market for cheaper biosimilar alternatives.

Thus, the FT Pharma and Biotech US Summit featured heated, lively debate that ultimately called for more accountability primarily among Pharmacy Benefit Managers (PBM)s, and in many regards payers, drug and device manufacturers as leaders who set the price and decide access decisions.

Emond pleaded PBMs, pharma and payers to stop the "arms race of higher prices and bigger rebates". Three PBMs currently control the market and who gets what medicine. United Healthcare owns PBMs, funcitons as a pharmacy as well as the largest employer of physicians, and is currently being investigated by the government. She made intriguing recommendation to pharma and device companies to 1) stop paying rebates and go public, and 2) proactively use independent analysis to make pricing decisions fairly.

John O'Brien , President and CEO of the National Pharmaceutical Council described how the current system is designed to compromise or slow down access to innovation as it takes a company 7 years to get a new indication after its drug's initial approval. Due to the current IRA legislation the government is likely to set the price at 9 years, which incentivizes manufacturers to consider an alternative: to wait until they have more indications until they launch the product. This incentivized delay is a disadvantage and threat to patients' lives.

• In addition, a half of U.S. hospitals participate in the 340B care program initially intended for heavily discount pricing for indigent, disadvantaged populations, however, half of hospitals now participate in it as it has grown disproportionately to become the 2nd biggest drug program. Unfortunately, the program has become a profit center for hospitals, and the savings of the program are not reaching patients and require reform.
• U.S. is the only country in which healthcare services become more expensive because the drug is more expensive. Thus "it is critical to de-link drugs from services and pass through the savings all the way to the patient."

Unfortunately, at the moment, our current supply chain is designed for its self-interest and masks the savings to the patient, and while the U.S. has long held the position of a global leader in in pharma, O'Brien expressed his fears of chasing the industry away from the U.S.

3. Rise in Patient Consumerism

As patients are paying more out of pocket for their healthcare and their insurance company benefits become more confusing, it follows that they are becoming more selective. Patient consumerism is rising, according to Amy West Head of US Digital Transformation and Innovation at Novo Nordisk and the industry is adapting quickly in response.

Eden Wells Chief Insights and Decision Science Officer at Novartis U.S. highlighted consumer technology and data stack used to build a program that works in the back end to deliver health services to patients the way they want them. An increasing proportion of companies are launching direct to consumer platforms. For example, Lilly had recently launched Lilly Direct program in obesity medicine. Such programs are critical in chronic diseases with a particularly difficult patient and diagnosis journey, such as obesity. Zachariah Reitano , CEO of Ro , a direct-to-consumer healthcare platform and the only company in the U.S. to integrate nationwide telemedicine, pharmacy, and lab services, emphasized the global impact of GLP1 agonists on our healthcare system as these agents are no longer going to be prescribed for weight loss alone because most Americans are indicated to receive them and will benefit for their multiple pleiotropic benefits (about 140 million Americans qualify for GLP1 agonists according to the Chief Medical Officer of knownwell and Past President of the Obesity Medicine Association Angela Fitch MD, FACP, FOMA, Dipl. ABOM , which have quadrupled the number of patients expected to lose 20% of their weight compared to previous treatments - click for the full latest episode from her interview on the Alloutcoach podcast )

As more innovative treatments, mutations, genetic variables, and conditions are discovered thanks to our advances, patients are becoming more diverse and widespread geographically. Thus their access to care and patient experience is influenced by more than just drugs on the market but many other socio-economic and environmental factors. Therefore, all pharma and biotech companies and payers must critically consider analyzing patients' social determinants of health.

4. Generational gaps among employees within the industry

An internal look into the composition of the healthcare industry expected to meet the increasing demands of patient consumers indicates the emergence of a new digital-native generation alpha. Carmen Villar , Vice President, Health Equity and ESG at Gilead, painted a real-world picture of the generational gap she believes we must address by becoming more open to inviting difference of opinion and inclusion.

• Allisa Brown, Head of Organizational Capability and Transformation, Specialty Care at Sanofi described ways in which AI solutions are being democratized for everyone at her organization to see continously in real-time, not only the dashboard for executives to see every 6 months.
• Carmen Villar: When we recruit both sides must be more transparent because it is no longer realistic to retain employees for many years. Instead, it is thus plausible to openly assess what new skills or experiences candidates bring to the organization and how long they plan to stay.

The pharma and biotech industry relies on vast, deep expertise as a result of which most employees tend to over-specialize in one area but be disconnected from various parts of its organization through communication, lack of upskilling or career transition opportunities.

Andrew Cammon, co-President, Stern Healthcare Association, and MBA-candidate at NYU Stern School of Business, pointed out the power of de-risking lateral moves for the young generation alpha entering the industry. He advocated for increased opportunities for lateral job transitions across or within functions.

• Cammon's remarks were notable as he spoke on behalf of generation alpha. Thus, he suggested creating "more playgrounds for people" if there is an opportunity such as internal incubators.

While the industry is so complex that it requires tremendous level of mastery in some areas which may move slower than others, Allison Brown raised a provocative and timely question - "How does the company not lose that mastery through technology rather than people?"

5. Largest areas of advancements and therapeutics in development

James Sabry , Global Head of Partnering at Roche pointed out that "the future belongs to the innovators not because of the innovation, but you have to innovate now. Our health system today can no longer afford a “me-too” drug copy." Clearly, cell and gene therapy continue to be the hottest emerging areas of research investments, which offer both cure as well as prevention of disease, precision and cost-effectiveness of health utilization, ultimately. Neurodegeneration, immunology and oncology continue to be the other areas where extensive innovation is expected.

Sabry provided a global, forward-looking breakdown of all medications into 3 categories:

• 1) those that affect the biology, target a specific target in disease, Protein Kinase 3 for example which work until the disease destroys the tissue,
• 2) medicines that regenerate cells destroyed by tissue. Stem cells in non-human primates can totally cure type 1 diabetes because they reform cells that die in pancreas in type 1 diabetes. Research is enabling us to regenerate pancreatic cells, retinal epithelial cells, disease-non specific, organ-specific or tissue-specific, developmental biology, and
• 3) in the future, there will be a class of diseases for which we design drugs that will remodel tissue.

Sabry argued that payers must adapt a view of gene therapy as "genetic surgery" to cover its costs because though a treatment may cost $4 million and the patient is likely to change health insurance plans in a year, it is curative and necessary like surgery.

Sabry and Ken Keller , CEO and Chairman of the Board, Daiichi Sankyo and Christopher Viehbacher CEO of Biogen agreed about the importance of pharma companies in not limiting themselves to owning one therapeutic area but diversifying disease conditions to de-risk their pipelines financially as well as partnering more with biotech, where most innovation is derived.

David Chang President and CEO, Allogene Therapeutics reviewed the concept of synthetic biology, genetically engineering a cell to do something it may not have been designed to do. He emphasized that CURE is the defining characteristic of cell therapy.

• Cell Therapy needs to move earlier in line as possible. The best benefit / opportunity is to treat the patient earlier in b cell malignancy, or other conditions, as well as preventing disease, especially cancer – NSLC, Gastric Cancer, H-Pylori. Treating disease early on, with CAR-T therapy works better when the disease volume is lower.
• Prevention of recurrent disease should be the next focus of transforming cell therapy. There are 30% of patients among those who respond well who will recur allogeneic CAR-T therapy, so Allogene is studying genetic risk of recurrence.
• Cell therapy is individualized as one treatment is manufactured per one patient. Chang stressed the priority to make the treatment in time, and advance allogenetic therapy so that we do not have to make one treatment per patient and precisely treat those patients who need it.
• Innovations in reducing manufacturing costs of cell therapy are critical.
• Eslie Dennis , Senior Vice President, Kyowa Kirin, discussed the need to improve access and reimbursement for genetic and newborn screening in underdiagnosed and underserved patients, as in rare, and particularly ultrarare children's diseases it takes 7 years to make diagnosis. She mentioned that though the Orphan Drug Act was last passed in 1983, we have sequenced the human genome since then and need to "harmonize international regulations as science is advancing much more quickly than our policies and infrastructure."
• The volume of patients with neurodegenerative, CNS (central nervous system) conditions is extremely high in addition to the cost of goods for advanced treatments. Thus, treatment capacity must be expanded for both surgical and suite time. This may be an impediment to treating as many patients as possible.
• CRISPR technology is curing devastating diseases yet the payment system is not catching up to enable payment for a one-time treatment for a lifetime solution.

6. Investing in Prevention, Healthspan Extension and Public Health

One of the most self-reflective discussions at the FT Pharma summit reviewed the life expectancy crisis, role of public health investments, and preventive medicine in adding years of good health, not only years of life in the future. Linda Fried Dean and DeLamar Professor of Public Health fervently argued for a drastic change in public health strategy and investments. The U.S. has added 30 years of life expectancy over the last 100 years - 75% of this trend is attributed to public health initiatives, education, and poverty alleviations. However, life expectancy has been decreasing due to gun violence, cardiovascular disease and mortality in younger people, with 1/3 of children who are overweight and have obesity, exacerbated by Covid, and disinvestment in public health to avoid 50% of preventable conditions or cancers.

• We have disinvested in the systems that would deliver preventive healthcare by at least 14-fold. This is the necessary investment for innovation to pay off.
• We have disinvested in what other countries tell us work and pay 2.5 fold more compared to the rest of the world with equivalent if not worse quality of care
• Since 1970's we have disinvested in 70% of health promotion or prevention that comes from public health. U.S. invests less than 3% of its health dollars into public health.
• Only 10-20% of a population’s health comes from medical care, 70% comes from the conditions we create in communities that enable people to know things to do that enable health, and to enable the context that amplify health and resilience.

It is much more difficult for patients to adhere to taking multiple medicaitons than to prevent disease. Thus, Fried believes the opportunity in extending life and health span is to first democratize those conditions that amplify or extend people's health span in children's schools, diets, education for example, and second increase development and access of preventive medications so that the young generation is able to reach achieve their desire to live to 80 to 100 under the condition that they are healthy, not just living.

Fortunately, advances in research may soon allow us to add decades to our life expectancy and change those genes that revert our cells to a more youthful state as we age, according to Jacob Kimmel , Co-Founder and Head of Research, NewLimit.

He discussed how epigenetic reprogramming allows us to manipulate transcription factors which tell other genes when to turn on and off. There is an exponential, vast number of transcription factors in a genome which makes it impossible to carry out all experiments to test their interactions and configuration changes.

Kimmel referenced a 1962 frog egg experiment by John B. Gurdon who proved that mature cells may be reprogrammed to grow into any cell type in the body and that unlike the prevailing belief, specialization of cells is reversible. In this classic experiment, Gurdon had replaced the immature cell nucleus in an egg cell of a frog with the nucleus from a mature intestinal cell of a tadpole, and the modified egg cell developed into a normal tadpole. More recently, Shinya Yamanaka showed that you can reprogram old cells to revert them into a youthful state with just four transcription factors, for which he won the 2012 Nobel Prize jointly with John Gurdon to revolutionize stem cell research and regenerative medicine.

After decades of problems many of which were cost-prohibitive, Machine Learning allows us to deploy, search and run those studies and make more accurate prediction and recommendation for the best, next experiment.

Immunology and metabolism represent the first few therapeutic areas of opportunity to possibly address which intervention has pleiotropic benefits on multiple conditions and address common underlying pathologies, for example.

Many patients are already taking drugs with these benefits such as statins, GLP1 agonists, all of which are preventive treatments that expand our health span, and according to Kimmel will drive down costs due to technology. and demand that will improve supply over time. Epigenetic reprogramming is particularly well-positioned today as mRNA technology allows us to deploy medicines in a way that is accessible and relatively safe from PK/PD control perspective.

7. Anticipated Legal Milestones and U.S. Election Implications

As 40% of American patients do not seek healthcare due to costs, the healthcare system is on the brink of falling apart according to many experts.

• The Federal Trade Commision (FTC)'s report that scrutinizes fees, reimbursement, and rebate practices of PBMs is expected to be published this summer of 2024. Terri Stewart , SVP Head of Global Healthcare Government and Public Affairs, EMD Serono pointed out her enthusiasm in seeing FTC devote just as much time and effort to investigating PBMs as the pharma industry.

• Elizabeth Dole Act is currently being reviewed in Congress as a bipartisan effort to improve certain benefits for Department of Veteran Affairs home and community based services for veterans
• FT Pharma speakers agreed in supporting making telehealth flexibility subsidies permanent in the 2023 Consolidated Appropriations Act

Extensive discussions at the summit revolved around the implications of the 2024 U.S. Presidential elections on pharma and biotech. Due to continuous geopolitical unrest globally, the priority of the IRA to lower drug pricing power of pharma is unknown. In the event of Trump's / Republican party's victory, some variation of international drug reference pricing may be expected and return to his previous discussions of "pass through cost savings" to the patients. The $35 out-of-pocket maximum cost for insulin was initiated during the Trump campaign and is now being discussed by the Biden administration. Emphasis on the IRA and price-setting is likely if Biden were to be re-elected and possibly if Trump as well, but regardless of the outcome FT panelists on this topic agreed that we will be likely to see a split administration across Congress with many of the same issues contested extensively.

Yet the drug shortages overall and for GLP1 agonists and how the supply chain evolves for drugs and devices will be one of the more critical problems to solve.

In addition, due to the growing East-West divide, the business relationship with China to ensure continuous access to people and suppliers which may not be stopped during clinical trials will be extremely important to cultivate.

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Tim Mikhelashvili, CEO & Co-Founder Amedea Pharma , Host Alloutcoach podcast

Amedea Pharma is a life science analytics agency that started a movement several years ago towards a more accurate, objective, and radically transparent view of performance in our industry. We believe that to raise new standards in healthcare quality, the metrics and competitions we use should improve the critical decisions we make in our organizations and communities of learners and leaders we create. Stay tuned with more news and connect with us in the following few weeks and months ahead as we prepare to launch a new SaaS Performance Decision Assistant platform called ANCORA in early Q3. Arrange a discovery meeting with us in person by clicking on this automated up to date calendar :

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