City of Paris

The annual meeting of the American Association of Clinical Chemistry (AACC), held in Chicago last week, is arguably the biggest annual gathering of laboratory diagnostics practitioners and vendors. As I attended the symposia and various presentations at exhibit booths, I couldn’t help but notice the focus on quality and, even more so, the cost of patient care and how laboratory diagnostics can help drive costs down. In particular, cost savings enabled by automation and information technology was a much-repeated theme as laboratory managers from hospitals reeled off statistics about how they are able to get better results to doctors faster and with fewer personnel. What is interesting is that there seems little resistance to this labor reduction, and managers can talk about attrition with little concern about people losing their jobs. The reason: a continuing shortage of qualified laboratory personnel.

The fact that laboratory medicine is able to drive labor costs down (and improve quality and service) is of course a direct result of technological advancements. Just as important is the fact that this industry does not have to contend with the consequences of job losses faced by the manufacturing sector—the auto industry being a prime example—where gains in productivity are often seen as a threat to livelihood. On the other hand, I cannot help but wonder about the reason for the lack of trained personnel. Surely, lack of incentive must be one, and I am reminded, once again, that laboratory medicine is surely one of the most undervalued components of healthcare, and that when it comes to healthcare costs, laboratory medicine gets a disproportionate amount of scrutiny as compared to imaging or therapeutics.

Perhaps this is an opportunity for an industry-academic collaboration, where IVD companies can team up with their customers in the medical centers to quantify the value of clinical diagnostics in healthcare.

“How to Avoid Agency Growing Pains,” published in the June 17 online edition of Advertising Age, is surely one of the finest business articles I have come across recently. Sharon Napier, CEO of Partners & Napier, offers fresh, smart advice in simple English. While the article is directed at agency managers, there are good takeaways for clients as well. What business cannot benefit from focus, passion, culture and an eye to financial performance? But read it for yourself to experience how Napier frames these issues. I was particularly struck by her paragraph titled “Build the plane while flying it.” To me, this is a call to action for those of us who find ourselves with fewer resources than we believe we need to get the job done, or who wonder why our competition is able to capitalize on the same great ideas we had but failed to execute. It is a reminder that sometimes “ready, fire, aim” may work better after all.

As legislative debate on healthcare reform intensifies, and as the powerful American Medical Association (AMA) voices its opposition to the government-sponsored insurance plan, I find it instructive (and reassuring) to consider the different perspectives offered by a recent series of editorials in The New England Journal of Medicine. For example, in an online editorial entitled “Achieving Health Care Reform—How Physicians Can Help,” Elliot Fisher et al. suggest that “perhaps we can shift our focus from the conflict over whether a new public plan should be created to a more constructive insistence that all health plans, whether public or private, focus on the development of professionally led, integrated systems.” The authors build on a report from the Institute of Medicine, “Crossing the Quality Chasm,” to implore physicians to build a shared vision that embraces “a new world of coordinated, sensible, outcome-oriented care” and, just as importantly, suggest that a 1.5-percentage-point reduction in annual spending growth is eminently achievable.

Two editorials propose different, but not mutually exclusive, approaches to funding universal health insurance. In “Finding Money for Health Care Reform — Rooting Out Waste, Fraud, and Abuse,” John J. Igelhart cites astounding statistics (e.g., $72 billion or 4 percent of total spending in “improper payments,” of which 50 percent went to providers, suppliers and other Medicare and Medicaid vendors) and warns that this is due at least in part to inadequate funding to combat waste, fraud and abuse. He also warns that there has been a recent increase in organized crime in the healthcare sector due to (a) relatively less severe penalties for healthcare crimes, (b) a lower barrier to entry, (c) easily replicable schemes and (d) a perceived lower risk of detection.

Jonathan Gruber’s “A Win-Win Approach to Financing Health Care Reform,” in which he proposes excluding elimination or limitation of the income-tax exclusion on employer-sponsored insurance, including several approaches to tailoring the program to varying income levels and insurance costs, will no doubt receive a mixed bag of responses.

Arnold Milstein’s “Ending Extra Payment for ‘Never Events’—Strong Incentives for Patients’ Safety” calls our attention to unthinkable negligence and a broken reward system, and makes an effective argument for the inextricable link between safety risks for patients and financial risks for the health system.

Not surprisingly, in “A Strategy for Health Care Reform—Toward a Value-Based System,” Michael E. Porter articulates a vision for “a true national health care strategy centered on value.” He argues that a fundamental flaw in today’s health insurance competition is the zero-sum approach preoccupied with shifting costs (e.g., selecting healthier patients and negotiating discounts) rather than one that competes on value. Porter advocates a continuing role for the employer as a stakeholder in promoting wellness and for the employer’s ability to foster competition more effectively than government can. He also suggests that the current system of tax deductions for health insurance is inequitable. His strategies for reducing insurance costs include spreading the risk through pooling, fostering value-based competition, and a reinsurance system to mitigate the cost of insuring high-risk individuals. He also suggests income-based subsidies to help lower-income people, and bringing in new revenues (and thus reducing premiums) by mandating insurance for younger and healthier people.

Even more important is a restructuring of the delivery system. “This is where most of the value is created and most of the costs are incurred.” The logical beginning is outcome measurement, which Porter suggests should be mandatory, should emphasize the full cycle of care for a medical condition and not episodic intervention and should be multidimensional—going beyond survival to degree of recovery, time needed for recovery and sustainability of recovery, as well as the discomfort of care. Such outcome measures should replace process measures (e.g., compliance with practice guidelines). He points out the inadequacies and inequities around prevention, wellness, screening and routine health maintenance services. He too calls for integration of services around the patient’s needs, “over the full cycle of care for each medical condition.” This focus on value to the patient must be reflected in the reimbursement system and provide the basis for competition for patients. Along these lines, rather than simply automating current practices, electronic medical records must support integrated care and outcome measurement if they are to bring real value. The final component is consumer involvement and in particular patients taking individual responsibility for their own health, which will improve with the emergence of the new, integrated and value-driven delivery system.

Can medicine, science and business overcome the resistance to change to bring their collective ideas and shared vision to fruition? Or will the AMA set the tone for the next few months or weeks?

Solving the Puzzle: Living Longer, Living Well and Reversing the Epidemic of Alzheimer’s and Related Disorders was the title of a lively panel discussion that launched Penn Medicine Advances, a seminar series hosted by the University of Pennsylvania School of Medicine (Penn), last week. The topic is timely—note the publicity generated by the unveiling of the strategic plan by the Alzheimer’s Study Group and the Study Group’s vocal co-chair Newt Gingrich.

NIH’s announcement on an important step in biomarker testing for Alzheimer’s disease, based on levels of amyloid beta42 peptide and tau protein, sparked discussion about the value of testing when today’s Alzheimer’s therapeutics are limited largely to symptomatic relief. Virginia Lee, PhD, director, Center for Neurodegenerative Disease Research at Penn, pointed out that while there are many drugs for Alzheimer’s disease in clinical trials today, biomarkers for assessing disease progress and therapeutic effectiveness are glaringly missing. Biomarkers also have a role in studies to identify risk factors, in particular life style-related risk factors such as obesity and metabolic syndromes, both of which have been implicated in Alzheimer’s disease.

Jason Karlawish, MD, associate professor of Medicine and Medical Ethics, suggested that Alzheimer’s disease may have a different name a few years from now, as medicine increasingly thinks of cognitive impairment or decline as a disability and one that does not have to progress to disease and sequelae. Karlawish used hypertension as an example, where the standard of care today is to treat hypertension rather than wait until progression to kidney failure. But, he also cautioned that while early diagnosis and preventive care are important, they have to be considered “in a way that respects the cost.” This is especially important due to the rising prevalence and societal burden of Alzheimer’s disease. Steve Arnold, MD, director of Penn Memory Center, added that there are several drugs in late phase clinical trials targeting the pathology (e.g., amyloids and tau proteins), and animal studies suggest that early diagnosis and early treatment, ideally before disease onset, will prove the most beneficial. John Trojanowski, MD, director of Penn’s Institute On Aging, noted that pharmacoeconomic models project that a five to seven-year delay of disease onset in the high-risk age groups can dramatically reduce prevalence and thus associated costs—another reminder of the importance of identifying and educating the public about the impact of lifestyle on the disease.

The discussion turned to an emerging model of academia-industry collaboration, where pharmaceutical companies contribute funding for drug discovery programs at Penn in exchange for early access and rights of refusal to discoveries. In many ways, academia offers more research continuity within a naturally multidisciplinary environment and the ability to draw from rich experience and diverse models. Arnold spoke of Penn’s vertical integration from basic research to clinical practice and ethics and societal issues. And, indeed, judging from the audience in the room, with representatives from academia, industry, media and the community, integration is inherent to a disease that touches on so many facets of society.

If you are interested, HBO has a new series, The Alzheimer’s Project: Momentum in Science. Part 1 will air Monday, May 11th at 8pm ET/PT; Part 2 will air on Tuesday, May 12, also at 8pm ET/PT.

I was in the audience last week when Brook Byers shared his 30-plus years of experience as a venture investor at the UCSF Center for BioEntrepreneurship (CBE). As his host and moderator, G. Steven Burrill, pointed out, it was a rare opportunity to hear Byers’ soft-spoken yet authoritative musings in a somewhat informal setting for two uninterrupted hours. The room was full of bright scientists and tomorrow’s entrepreneurs, eager to learn how innovation can be translated into commercial success. The conversation, which consisted largely of Byers’ remarks punctuated by Burrill’s gentle but persistent probes, covered two major areas: What are the hallmarks of a successful venture? And how does a venture investor separate the wheat from the chaff in making investment decisions? Along the way, Byers offered practical tips as well as glimpses into his philosophy and outlook on business.

Focus early money and attention on the white-hot risk. New ventures are built on innovations and by definition untested ideas and hypotheses. Byers suggested that the entrepreneurial team work on a thorough assessment of the risks and identify that white-hot risk—the one around which the business can fail— and focus early money and attention to address it. In drug development, for example, the white-hot risk is often wrapped around the biology. “Most people want to postpone the experiment,” he noted, but in fact this early focus on the white-hot risk equates with efficient use of capital. By concentrating early resources on the white-hot risk, a business can emerge in a much stronger position to secure the next (and more substantive) round. A corollary is that early failure translates into less costly lessons that can propel new ideas.

Spend more time on fieldwork than on the writing of the business plan. Byers emphasized the importance of talking to people—30 or so—and seeking their input, as part of the process for developing the business plan. In his view, entrepreneurs should spend more time on fieldwork than on writing, but this part of the process, which is often difficult and intimidating, is easy to overlook. Not surprisingly, he suggested tapping one’s network during this fieldwork phase and, importantly, writing notes after each conversation to make the best use of the input.

Be sure you have a solid knowledge of the adoption process. Byers noted that the rate of adoption is almost always underestimated. This in turn adversely affects the accuracy of the projected revenue ramp and creates the potential for companies to get carried away and build infrastructure and spend money too fast. He walked the audience through the process: the clinical trials, the submission of data to peer-reviewed journals, the time to publication, then the adoption by key opinion leaders and ultimately their recommendation to include a product in the clinical pathway. “There is just no way to front-run that,” said Byers. And don’t forget pricing and reimbursement. He reminded the audience that doctors are notoriously slow adopters, and understandably so, because they are making decisions that affect lives. Similarly, he urged the audience to think through the challenges to distribution and clearly understand the economic incentives needed for every point on the distribution chain.

One (good) product at a time. As the conversation turned to platform vs. products, Byers noted that it is challenging for a platform company to develop more than one vertical (product/market) at a time. The key, he said, is “to pursue products in an orderly sequence” and be very clear in the business plan about what the family of products will be. He pointed out that Myriad Genetics, with the famed BRCA1 and BRCA2 tests for genetic predisposition to cancer, has been a one-product company for a long time. The same goes for Genomic Health with Oncotype Dx, which by any definition is a success story in the world of molecular diagnostics. By the way, Byers noted that he “loves” molecular diagnostics.

Always leave a little on the table. The subject turned to today’s economic climate and the companies that are trying to raise the next round following an earlier, very favorable round two years ago (e.g., $20 million raised, $80 million post money). For many of these companies, the starting point today is, at best, a flat round, but more investors are opening the negotiation with “30 percent off” as Burrill pointed out. Byers counseled a more measured, judicious approach when it comes to valuation. He went on to suggest that valuation should not be the sole or key criterion in deciding on an investor. “Think about who you want to be in the foxhole with when times get tough.”

There are more great ideas than good teams. Byers listed the idea, the business, people and capital efficiency as key ingredients of a promising venture. He spoke of the great athlete—an exemplary CEO with a track record of prior successes—but felt that the great athlete is an exception. Instead, he looks for people who are smart, credible, thoughtful and flexible about letting venture investors help round out the team. The team has to be “authentic” but does not necessarily have to be complete during the early stages. Byers also emphasized the importance of the right mix, and conflict as “the only way to get objectivity.” As Burrill probed persistently about the role of culture, Byers spoke of culture as something that evolves, and cited Jeff Bezos’ ability to empower Amazon.com employees and get them to believe that they were going to change the world as a positive example of how culture drives a business.

It’s all about relationships. Looking at the eager faces in the room, Byers noted that scientists tend to pay attention to “things,” but urged them to remember that while ideas have a finite life, relationships endure. He suggested that they spend the time to cultivate relationships—those with mentors, coworkers, collaborators—and invest the effort to stay in touch.

A book you must read. Byers strongly recommended High Output Management by Andy Grove which, written in 1983, is still relevant today.

Building companies is ambiguous and messy. Byers offered these words of wisdom almost as soon as he sat down and this seems to be a good encapsulation of the process. This is where I believe scientists have an edge over businesspeople, because scientists are trained to deal with ambiguity and complex, interacting variables on a day-to-day basis. And they have to learn to accept and thrive on interdependency with their colleagues who may be competitors trying to beat them to the finish line.

In the increasingly challenging environment of healthcare marketing, diagnostic marketers need to take a page from the pharmaceutical industry—no, not to learn from their excesses and extravagances, but for insights into how they work to understand the way doctors make decisions and adopt new technology. It may seem obvious, but I have watched too many clinical diagnostic marketers fail to realize the market potential of their offerings by not putting into practice what they need to do if they expect their innovations to move more quickly into clinics. I have long been intrigued by the low value assigned to diagnostics by the healthcare system, and I have been looking for tangible, actionable ideas I can give to my clients in the diagnostics space. Here is the beginning of a short list, which I hope to build with the help of colleagues and visitors to our website.

I was in the audience at the Burrill Personalized Medicine Meeting recently when Alberto Gutierrez, PhD, an official from the FDA’s Office of In Vitro Diagnostics, was interviewed. Dr. Gutierrez must have said at least three times that the FDA “doesn’t look at clinical utility” when it comes to IVD clearance. This fact is well known by regulatory specialists and embraced in their filing strategies. Yet many marketers do not seem to realize that marketing’s work begins, not ends, with FDA clearance, unless the product is truly a me-too version with a well-established place in clinical practice. Most diagnostic marketers I know can produce a respectably thick binder of published studies demonstrating the analytical performance of their products, including studies comparing their products with traditional methods and showcasing superior results. Then, months to years after launch, the same marketers are surprised to learn that doctors continue to use these other methods even though they take longer and provide incomplete and/or inaccurate results, and even though reimbursement is available for the new and improved test.

So, rule number one: Don’t equate performance with utility. Proving that the performance of a new diagnostic test has been demonstrated through properly designed, robust trials, and getting FDA clearance must be paralleled by an equally arduous effort to work with clinicians in understanding and demonstrating clinical utility—what is the relevance of the test results in the clinical setting, how will it influence patient care (e.g., where in the clinical pathway does the test fit, what action should be taken based on the result) and how all of this will improve outcome. Working with clinicians, conducting the studies, publishing the findings and communicating them to the target market are just a few of the necessary steps toward adoption.