Sean Tunis, Former Medicare Guru, on What Biotechies Gotta Do the Next Five Years

4/26/11Follow @xconomy

There are a lot of biotech entrepreneurs out there who are living by yesterday’s rules. The idea was you really had to design and execute a bang-up clinical trial for your new drug or device, win FDA approval, market the heck out of it, and count the money.

If that sounds like your idea of how the life sciences industry works, or ought to work, then Sean Tunis is about to burst your bubble. Proving that a new medical technology is safe and effective is no longer good enough in the coming era of healthcare cost constraints. Tunis knows something about how payers think: He’s the former chief medical officer at the Centers for Medicare and Medicaid Services, which provides health coverage to 100 million senior citizens and poor people. Tunis, who left that post in 2005, now runs the Center for Medical Technology Policy in Baltimore, MD, where he advises companies on how to generate really valuable medical evidence that payers want to see.

Tunis, along with Mitchell Higashi, the chief economist of GE Healthcare, will be one of the featured speakers at an event tomorrow morning in Seattle that’s being organized by the Washington Biotechnology & Biomedical Association. I spoke briefly with Tunis a few days ago about how the landscape for healthcare reimbursement is changing, and how this is going to affect biotech entrepreneurs for years to come.

Here are the highlights of the conversation, edited as always for length and clarity.

Xconomy: What kind of clients do you work with, and what kind of work do you do now?

Sean Tunis: We are funded by government and foundations, as well as health plans, and drug and device companies to really do collaborative work to improve quality and relevant clinical research. It’s mainly by bringing in perspective of patients, practicing clinicians, and payers. There’s been a historic dilemma that a lot of clinical research that’s done is not optimally designed or aligned with what people who make important clinical decisions actually want to know. So we try to take care of that.

Sean Tunis

For example, if you have early stage prostate cancer, there’s almost no research comparing the different treatment alternatives—surgery, radiation, leaving it alone. None of those studies get done. So our center tries to identify where there are gaps in knowledge and try to get those studies done.

X: Is that largely because most trials are conducted by sponsors that are running trials because they want regulatory approval for a new product, or an extension of an existing product, and aren’t really that interested in the key medical questions a doctor faces?

ST: Exactly. They are aiming for regulatory approval, and most regulatory approvals don’t require comparative studies. In many cases for devices and procedures, they don’t actually have to show the device works. Or that it improves clinical outcome.

X: There’s been a lot of talk lately about cost-effectiveness—biotech, device companies, Big Pharma, they are all hearing it. In the wake of healthcare reform, we keep hearing that they have to show that their products do something to take cost out of the system, or delivers some kind of greater value, rather than just showing safety and effectiveness. Is that really the environment we are in now?

ST: I think it’s the environment we are almost certainly entering. I don’t think we are quite there yet. Over the next three to five years, we really will be there. It’s exactly as you describe. It’s not about being cost-effective. That’s not the target. The target is to achieve better outcomes at lower cost. If you can’t find a way to do that, you’re not going to succeed.

X: Is there something in the healthcare reform that passed last year that really mandates this, or is it just a matter of common sense, that when you increase access to 40 million people, cost will have to come down at some point?

ST: There’s partly a common sense aspect to that. When you add 40 million people, it will put more pressure on affordability. It’s partly about what you see when you look at the spending trends. They are literally unsustainable. It’s not rhetorical. It’s real. There’s no way we’re going to spend 100 percent of our GDP on healthcare, and that’s what the healthcare spending trends say. One way or another, there will have to be changes that remove cost from the system. Once you have eliminated the simplicity of the past—barring poor people from the system, which is how we used to do it—presumably that part is now being fixed. So we have to get more efficient.

In terms of what’s actually in the healthcare bill, they don’t exist yet, but there’s a preliminary movement for payment reform through accountable care organizations. They are going to put clinicians and other providers into a situation where their compensation will depend on how efficiently they practice medicine. When you put providers in that kind of situation, they will want the industry to give them options to improve care and lower costs. That’s what the marketplace will demand.

X: Do you think the Big Pharma, biotech, and device companies really get this? Are they incorporating this realization into their clinical development plans?

ST: They are genuinely trying to do that. It’s not easy to actually make something better and cheaper. If it were easy, people would have been doing it. But from what I can see, most of the major pharma companies have gotten the message that right from Phase I, and through their portfolio management decisions, it all needs to be informed by an emerging recognition of the new marketplace.

X: How does this work in practice? If you’re the CEO of a biotech startup or the chief scientist at a bigger company, how do you alter your clinical trials now so that they yield kind of information that people will want to see five years from now?

ST: Depending where you are in the clinical process, it can depend on things like how you select a comparator. In the old approach, the assumption was that you’d use a placebo comparison. Now we’re looking at active comparators in Phase II. You will actually have to show that you’re better than something, not better than nothing.

There’s a lot more attention being paid of patient-reported outcomes, and quality-of-life metrics. The FDA may not be interested in it, but the payers definitely are. There’s some interest in looking at trials that incorporate biomarkers, and being able to identify populations that have particularly favorable responses, or high risk of toxicity that you want to eliminate. There’s a lot of attention being paid to potentially responsive subpopulations.

X: It’s interesting you raise biomarkers. A lot of scientists are skeptical of it, the work hasn’t borne as much fruit as people would like, in terms of being able to really stratify patient populations. Do you think the new economic reality is really going to drive a more intensified focus on personalized medicine?

ST: I do. Up until very recently, the economics of the pharmaceutical industry have made them not very interested in subpopulations. Financially, you do better with the largest possible patient population. That was correct as an economic assessment. It’s not correct now for a product that’s three to five years from the marketplace. The ability to improve outcomes at lower cost will depend on biomarkers and subpopulations. I think the science will advance more quickly once the incentives are really there to advance it more quickly.

X: Are there any other kinds of products that you think will flourish in this new environment, besides drugs and devices? Maybe health IT or wireless applications, things that provide real-time data streams between patients and doctors?

ST: There’s a lot of technology that will be supportive of care outside the hospital, home-based care, remote-monitoring stuff. More real-time, continuous communications between patients and physician offices that could, particularly with chronically ill patients, flag important developments that suggest a clinical issue arising. Chronic disease management supportive technology has a lot of promise.

X: Is there a certain field of technology you think is really poised to grow, given the way we’re going to pay for health innovation?

ST: I definitely think the molecular diagnostics for sure, and diagnostics in general. Nuclear imaging is poised for growth. There will be more spending on diagnostics when the value proposition shows it can really reduce costly interventions later. The IT stuff in the cardiovascular disease space, in terms of remote monitoring, there’s room to grow there. Anything in the diabetes area, particularly anything that helps with early identification of patients who are at risk for getting diabetes. The whole Alzheimer’s diagnostics and therapeutics area has a lot of potential.

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  • Darren

    Tunis is a fraud who was fired from the Bush administration for falsifying documents and then disobeying subpeonas. He gets his funding from health insurers with the goal of restricting new technology. His whole motive is to control medicine as a beltway bandit.

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