I’ve been attending BIO for about five years now, but the 2011 conference in Washington, D.C. last week was more subdued than I’d seen it. There was no sign of Bono, Elton John, movie stars or NBA players on the show floor, no media circus of the kind generated by Arnold Schwarzenegger a few years ago. I missed Tony Blair’s presentation on Day 1, but the keynote on Day 2, with the mayor of Boston and governor of Massachusetts in attendance, and a panel discussion on health care reform’s potential impact, was rather low key. In fact, this was a welcome relief, as people seemed to be getting down to business after a few very difficult years.
On Wednesday, some of the most interesting technical presentations took place on the exhibition floor, at Genetic Engineering News and Bioprocess International’s booths. Samsung Biologics, which burst onto the biopharma scene recently, is learning from Big Pharma and Biopharm right now, said a senior vice president, although he did hint at some novel process analytical technology (PAT) the company may employ.
Eric Langer of BioPlan Associates has launched a ranking of the top 1,000 biopharma facilities, based on rigorous metrics (more on that soon).
For celebrity watchers, and those concerned about economic conditions and intensifying competition, one of the highlights at this year’s BIO was a discussion of the globalization of innovation, moderated by media star, Newsweek editor and host of the program, Fareed Zakaria, whose book, The Post-American World (Version 2.0), has recently been updated.
Introducing the panel, BIO chair James Greenwood mentioned the fact that his organization has already branched out into conferences in India, and will host its first conference in China this year. He introduced Mr. Zakaria in the customary way, although he may have gone a tiny bit too far, considering some of the high-powered female thinkers in the audience. Using the time-honored technique common to speakers of both sexes, of joking at the expense of the absent spouse, he mentioned how his wife was disappointed not to be meeting Fareed ... and how Mr. Zakaria was not only an incisive thinker, but “cute.” Why else would women tune in . . . but I digress.
The springboard for this year’s discussion was the Biotech Scorecard, and a summary of the third World View Report, conducted by Scientific American, BIO, and Amgen. One of the key questions posed by panelists was: How will the U.S. continue to innovate in a world where others also innovate well? We’ll publish details from the report separately, but here is a brief recap of the discussion: One of its most interesting threads involved the concept of jugaad, a phrase that’s become popular in business circles for the past few years. It’s the kind of “workaround” innovation that has allowed Indian entrepreneurs to think outside of the box, and find new uses for existing technologies. The example mentioned was that of Indian companies using front-loading washing machines to make the yoghurt drink, lassi. This spirit of innovation led Indian manufacturers like Cipla to manufacture generic HIV therapies using simpler manufacturing processes, rather than the complex and expensive methods used by name-brand pharma companies, reducing costs to patients from over $12,000 per year to $300.
Let’s forget questions of intellectual property protection for a moment and consider the ingenuity involved in re-engineering processes to use fewer steps and simpler equipment. At a time when supplies of critical generic therapies are so short, shouldn’t pharma, in every country, be adopting jugaad? The results could only be less expensive therapies, and more sustainable manufacturing and R&D.
As Girish Malhotra, consultant and occasional contributor has pointed out, India does not have a monopoly on jugaad, and everyone in every industry has done it at some point or another. But its time has clearly come, in pharma and in biopharma. The question is: Will Big Pharma, and Big Biopharma, adopt more of its principles? As Zakaria, said, examining the Scorecard, the landscape for innovation is shifting around the world, on a per capita and even an absolute basis. He then moved to an interesting analysis of U.S. innovation within the past few decades.
Immigration and U.S. Innovation
Leaving out such native talent as Henry Ford, Thomas Edison et al, he traced the influx of immigrants to the U.S. as a key reason why the U.S. has dominated global innovation for so long. “It was the U.S.' good fortune that Germany went crazy in the 30’s and 40’s,” he said, resulting in a mass migration of intellectuals and raising the nation’s GDP to 55% of the world’s total in 1945. He noted a second European emigration wave in the 50’s followed by Asian immigration in the 60’s. “The best and the brightest from all over the world were funneling themselves into the U.S. at a time when the Cold War was going on, and there were major concerns about the very existence of the U.S. and its security.”
During that time, he said, the U.S. established its state university system, the NHS, NSF, and provided massive funding for science, basic research and nascent industries. Today, if it is to sustain its innovative edge, Zakaria said, the U.S. has to move up the value chain, and also needs to think of innovation in a different sense, for example, in terms of business models. As an example, he pointed to Apple, in the IT field. Often ranked most innovative of the IT companies, it ranks 82nd in R&D spending of the S&P 500, spending in roughly one decade what Microsoft spends in a year on R&D.
Another innovator was Singer, whose sewing machine business took off because he recognized that women would be a key market for the product, and also offered an installment payment plan. Zakaria also praised the much maligned U.S. educational system. "Everyone wants to be a Tiger Mom,” he said. “But the U.S. system, at its best, does something that is very difficult to do.” He quoted Singapore’s minister of education, “Our and other systems teach people to take tests well, yours teaches people to think.” If this, too, is an ‘open source app,’ do we end up with the best of both worlds, a system where those with excellent training in science and math, then take that further and learn to think and innovate? A quick look at the number of graduate students from outside the country specializing in math and science within the U.S. suggests the future. It is a future that we shouldn’t be afraid of, panelists stressed, as innovation shouldn’t be viewed as “national competition.”
However, these trends do threaten to drive many established pharma and even biopharm companies out of business over the next few decades unless things change. Nobody brought this up in the rather tame Q&A session following the discussion.
China Leads in Healthcare Reform and Cost-Cutting Efforts
China may lead the rest of the world in changing the pharma and biopharma manufacturing and innovation paradigm. "We tend to focus on China in a backward-looking way," said panelist George Baeder, Life Sciences Practice Leader for the Monitor Group, "worrying about low cost manufacturing and pricing. I’m struck by how the Chinese are trying to move up the value chain with aggressive investment in education and health,” he said.
He mentioned China’s aggressive healthcare reform program designed to make medicine accessible to many more people. “They are demanding a level of pricing that will be the most incredible driver in manufacturing that the world has ever seen,” he said. “They will force the world to change.”
“Frugal innovation” was mentioned by Jay Siegel, J&J’s Chief Biotechnology Officer and head of global pharmaceutical regulatory affairs, who gave as an example J&J’s affordable biologics program in China, and the fact that some Indian medical device manufacturers have developed some devices for one tenth the cost in the west. “We need an ecosystem based on reducing costs innovatively,” Baeder said. The question is: can this be done while maintaining the standards of safety and quality required?
Zakaria asked panelists about the U.S. regulatory climate and whether it has become more difficult to innovate in the environment set by FDA. Siegel, who formerly worked for the Agency, mentioned the constant media and political criticism of FDA here in the U.S., which was seen even before Vioxx, which has resulted not only in risk aversion, but also anxiety within the Agency, and people who work for FDA afraid of appearing too close to industry.
Societal Views of Risk
For the regulatory environment, the question boils down to one of intrinsic risk. “There needs to be more societal discussion of what risk ought to be,” said Anula Jayasuriya, Managing Director of the Evolvence India Life Science Fund. “In Europe,” she said, “there is a much greater understanding of risk and responsibility among individuals. Here, there is a perception that FDA should remove all risk, but it’s much more complex than that.”
In addressing the issue of regulation outside of the U.S., panelists mentioned the need to fix China’s SFDA, but the reality of scarce resources. “There are 350 biologics reviewers in FDA, and 10 in China,” Baeder said. They agreed that reinventing FDA, rather than replicating it elsewhere, would be key to sustaining global innovation. Progressive approval was mentioned as a good potential solution, and panelists suggested that it could happen much faster in China than here. “You need electronic medical records and physicians comfortable with electronic systems. I can see it happening much faster in China than in the U.S.,” said Baeder.
Zakaria asked Jayasuriya about India’s "dysfunctional" state structure and its impact on innovation. “Paradoxically, it can improve the outcome, since, from Day One you’re trying to navigate and innovate your way through the system,” she said. She mentioned that Indian companies generally try to get drugs approved in Europe first, then move to the U.S. Offsetting hierarchical structure is India’s entrepreneurialism. “It’s almost genetically programmed. One out of every 26 people in India has the title chairman or president,” she said.
The acceptance of failure is key to establishing a climate of innovation, she said. So is greater appreciation for the opportunities gained by working with multinationals. When Ranbaxy was acquired, she said, there was an outpouring of criticism as people accused the company of taking an Indian icon and selling it. “They were not moved by the argument that the company’s founders were now building a new hospital empire.”
Zakaria asked panelists when China might develop the next livesaving blockbuster. “In terms of discovery it’s easily 15 years away,” said Baeder, “but the impact [of innovation in other areas] will come much sooner than that.”