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From Idea to IPO UCSF February 7, 2011 REIMBURSEMENT AND REGULATORY STRATEGIES. Bruce Quinn MD MBA Foley Hoag LLP bquinn@foleyhoag.com 323 839 8637. Burrill, January 11, 2010, page 138. Jain, January 25, 2010, page 16. You (In Your Mirror). You (In Your Mirror). Viewpoint of Investor.
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From Idea to IPOUCSF February 7, 2011REIMBURSEMENT AND REGULATORY STRATEGIES Bruce Quinn MD MBA Foley Hoag LLP bquinn@foleyhoag.com 323 839 8637
You (In Your Mirror) Viewpoint of Investor
Who Am I? Why Am I Here? Originally MD PhD Stanford Pathologist Medical School Professor
Originally MD PhD Stanford Neuropathologist Medical School Professor MBA (2000) Physician Executive with Global Firm (Accenture)
Originally MD PhD Stanford Neuropathologist Medical School Professor MBA (2000) Physician Executive with Global Firm (Accenture) Medicare Medical Director Through 2008
Originally MD PhD Stanford Neuropathologist Medical School Professor MBA (2000) Physician Executive with Global Firm (Accenture) Medicare Medical Director Through 2008 Focused Strategy Consulting: Integrated into Law Firm (Foley Hoag LLP) CMS & FDA issues Based in LA; Frequently in DC, SF
Drugs, Devices, Diagnostics Different products raise: • Very different regulatory and reimbursement issues • Very different roles for Medicare • Tonight: • Use Case Studies regularly to “make it real” • Hit all the high points – parts of FDA; payment codes; etc, but: • Substantial “why and how” content, not just lists of facts
Our product replaces surgery • Currently, Condition X is treated by surgery • The charges for this surgery are $30,000 • Our product avoids the surgery for most patients, it’s a physician office procedure • We’re efficient, based on a disposable of $1000 and capital equipment of $25,000 • A fair price for our service is $5000 paid to MD • We have more data than our competitors and should be paid more • Thanks for your attention
New Tracer for Alzheimer Disease JAMA (2011) 305_275
Barriers to Entry? REGULATORY • Voted down by FDA advisory panel (1/19/11) • Likely to require additional reader accuracy studies • Never required for CT, MRI, PET • FDA treats tracer synthesis like “mfgr” as of 2012 • F18 PET tracer: 2 hr half life; Mfgr’d in each city
Barriers to Entry? REGULATORY • Voted down by FDA advisory panel (1/19/11) • Likely to require additional reader accuracy studies • Never required for CT, MRI, PET • FDA treats tracer synthesis like “mfgr” as of 2012 REIMBURSEMENT • Dementia population nearly 100% Medicare • Requires NEW national coverage decision • PET covered only for cancer, and a VERY restricted FDG PET brain indication • “Clinical Utility” • Existing Study: hospice patients + 25 year olds. • Technology assessment will…”point this out” • What would “clinical utility” study be? • Comparative effectiveness? Generic tracer? Blood test? MRI scan alone? • Acquisition $300M (+ $500M milestones) • Guess: Wants $2B revenue at 2k/dose = 1M patients => 200K pts/year x 5 years • Patent life finite • Current PET dementia = 3k patients/year • Possible Timeline: FDA Dec 2011; CMS NCD during 2012; May need more data; Studies 2013; CMS review again during 2014. • Will CMS allow local MD to order? • CMS Bundles “tracer” to cost of “PET” currently paying $1200 total to hospitals
Regulatory II • FDA recently (last week) approved a brand of iPAD radiology software for diagnosis • FDA pursues digital microscopy companies vending for digital pathology w/o FDA approval
Regulatory III • FDA recently (last week) approved iPAD radiology software for diagnosis • FDA pursues digital microscopy companies vending for digital pathology w/o FDA approval • IF it was pathology, it would require BOTH “FDA” software clearance AND “CLIA” laboratory site (!)
HHS Hill FDA CMS Law • CDER • CBER • CDRH • Coverage • Policy (coding, pricing)
PCORI MEDPAC NIH AHRQ FDA CMS IPAB IOM • CDER • CBER • CDRH • OIVD • “Regulatory Science” • Coverage • Policy (coding, pricing) • Center for Innovation • Activist Director
ACO (Accountable Care Organization) PCORI MEDPAC NIH AHRQ FDA CMS IPAB IOM • CDER • CBER • CDRH • OIVD • “Regulatory Science” • Coverage • Policy (coding, pricing) • Center for Innovation • Activist Director
FDA CMS • CDER • CBER • CDRH • Coverage • Policy (coding, pricing)
FDA Approval Payor Coverage
Regulatory = FDA FDA CDER CBER CDRH drugs biologicals OTHER OIVD diagnostics “devices” Phase 1,2,3 (…FOBs) generics 510K or PMA
Phase 1,2,3 Phase 1 Phase 2 Phase 3 • First in man • Animal safety shown first • (And would not bother w/o animal efficacy) • Basic kinetics • No big, big surprises
Phase 1,2,3 Phase 1 Phase 2 Phase 3 • First in man • Animal safety shown first • (Would not bother w/o animal efficacy) • Basic kinetics • No big, big surprises • “Pivotal” trials • Enrollment determined by expected size of effect • Entrance criteria tightly defined • Outcome measures tightly defined • Stopping rules for toxicity, clinical failure, or unexpectedly large positive results • Size also determined by safety concerns • Duration determined by future clinical setting (a bit) • Active vs placebo control group
Phase 1,2,3 Phase 1 Phase 2 Phase 3 • First in man • Animal safety shown first • (Would not bother w/o animal efficacy) • Basic kinetics • No big, big surprises • “Pivotal” trials • Enrollment determined by expected size of effect • Entrance criteria tightly defined • Outcome measures tightly defined • Stopping rules for toxicity, clinical failure, or unexpectedly large positive results • Size also determined by safety concerns • Duration determined by future clinical setting (a bit) • Active vs placebo control group • Serves both economic and safety purposes • Place before Phase III because: • Economic: • Don’t spend $200M for a flop drug • Ethics: • Don’t expose 1000 people unless drug is likely to work • Scientific • Dose ranging, biomarkers, etc.
Damned if you do, if you don’t… • Study may be heavily criticized because it used “only” a placebo control • Sure, anything is better than placebo • Study may be heavily criticized because it used “only” an active control • Critic may be unsure either drug in the trial was any better than placebo • You’ve shown you’re non-inferior to ‘zip’ • Outcome measures: Cancer: “time to progression” versus “Survival”…?
Damned if you do, if you don’t… • Study may be heavily criticized because it used “only” a placebo control • Sure, anything is better than placebo • Study may be heavily criticized because it used “only” an active control • Critic may be unsure either drug in the trial was any better than placebo • You’ve shown you’re non-inferior to ‘zip’ • Outcome measures: Cancer: “time to progression” versus “Survival”…? • Survival usually considered “gold standard” but heavily criticized at November CMS meeting (Provenge) because patients diverge after treatment…can’t be controlled any more…
Increasingly authority for REMS • Risk Evaluation and Mitigation Strategies • Post-marketing requirements for education and monitoring • May rise as high as a formal patient registry • Control of drug distribution (only doctors of type X can prescribe drug) • http://www.fdalawblog.net/fda_law_blog_hyman_phelps/2009/03/introducing-the-fda-law-blog-rems-tracker.html
Fast TrackandAccelerated Approval • Sound alike, but not hard to distinguish • Fast Track • Accept materials on rolling basis • Priority review • Final approval is “regular” approval, but faster • Accelerated Approval • Get on market faster • More requirements for stuff you still have to do • Somewhat like a “provisional” approval* *They wouldn’t say that. See: PhD thesis, Univ. Edinborough, D. Messner, “Fast Track”, 2008
Clinical Trial End Points • FDA has high standards • Payors may have even higher standards • You are at risk if next competitor uses “better” end points in their trial • Biomarkers as end points • Must be highly validated: T-count in HIV • Biomarkers for patient selection • Only patients with Tumor Gene X enter the trial • Reduce trial size & improve relative effectiveness • Recent topics like Bayesian/Adaptive trials • Reduce net trial size • Especially hot controversy over oncology endpoints • PFS versus OS: • Progression Free Survival versus Overall Survival • Tiny PFS without OS annoys FDA, public, payors • Yet PFS could be important – if it’s substantial – so it depends • Did the study FAIL to show OS, or is it a question of study duration & power (OS is noisy)
Devices • 510k • Device has a predicate device before 1976 • There are very artful and legalistic ways to argue this • See an FDA lawyer • Example labeling: MRI, PET; Colonoscopy, Pillcam • 510k Reform: 2010, 2011, 2012 • PMA (pre-market approval) • Device is higher risk • Requires clinical trial AND other rules • Note the hurdle: Payors will look to the ACTUAL clinical data
FDA: OIVD • Office of In Vitro Devices • Genomics revolution: Much larger companies, with much more specialized tests • Genomic Health, Redwood City, 21-gene breast cancer test, $500M market cap • FDA announces intent to regulate some LDTs in 2007 • Holds public meetings on plans in 2010 • Announces initial plan to appear in by March 31, 2011 Traditionally Did Not Regulate LDT: Laboratory Developed Tests; These were “services” and “practice of medicine” Traditionally Regulated: Clinical Chemistry Lab Equipment (Kits, Cartridges)
Clinical Policy Bulletin: • Colorectal Cancer Screening • Aetna considers any of the following colorectal cancer screening tests medically necessary …Colonoscopy….. • No current guidelines of leading medical professional organizations or Federal public health agencies recommend the following. • Aetna considers colorectal cancer screening of stool using molecular genetic techniques experimental and investigational. • Aetna considers colorectal cancer screening using methylated Septin 9 (ColoVantage) as experimental and investigational.
Why don’t we see cost-saving innovation in health care? Five years Same size Same price 1000X better 2002 2007
Why don’t we see cost-saving innovation in health care? Five years Same size Same price 1000X better 2002 2007 Fifty years 10,000X price Not sure it’s better
Here are a few of the innovation problems we are STUCK WITH in healthcare technology • Human subjects research • Locked-in timelines for outcomes are longer than consumer goods – 1,2,3 year trials; the cycle of iteration is long • Regulatory hurdles • Incentives for quality + cost-savings are lacking • Indirect payment • Assymetric information (K. Arrow) • Very complex information But let’s think further about what the payer system does to us.
A Regular Industry $$ Book Venture Capital Amazon.com Consumer $$ $$ $$ Book Publisher
A Regular Industry Gets Simpler $$ Info Venture Capital Amazon.com Consumer $$ $$ $$ Info Publisher