Money Matters

A chance of rehabilitation

Money Matters
By Web Desk
Mon, 11, 20

It has taken just 10 months, in UK prime minister Boris Johnson’s flamboyant assessment, for “the scientific cavalry” to arrive.

It has taken just 10 months, in UK prime minister Boris Johnson’s flamboyant assessment, for “the scientific cavalry” to arrive.

When three groups announced in quick succession this month that the vaccines they had developed against Covid-19 had proved highly effective in clinical trials, the news offered not only a blazing ray of hope for a pandemic-bound world, but a moment of vindication for a beleaguered pharmaceutical industry.

In recent years, the industry has more often been assailed for its alleged price-gouging than praised for its panaceas. Only this week, in a dismal counterpoint to the stunning vaccines news, came a fresh reminder of its role in America’s opioid addiction crisis, when Purdue Pharma pleaded guilty to criminal charges over sales of its painkiller OxyContin.

Dan Mahony, a leading UK life sciences investor, argues the industry has provided a riposte to critics of its pricing strategies, with its record-breaking pace — from the sequencing of the novel coronavirus in January to vaccines submitted for regulatory approval in November — and efficacy levels that exceeded the expectations of politicians, medics and markets.

“The argument of the industry for a long time has been ‘we’re innovative, you’ve got to pay up for innovation’. That premise has been put to the test this year and the industry has over-delivered,” says Mahony, who is co-head of healthcare for Polar Capital, which has an investment in AstraZeneca.

But even as it basks in global plaudits, there are signs that its rehabilitation is conditional. A gathering row over the presentation of data by Oxford university and AstraZeneca about the performance of their vaccine has illustrated the perils of such relentless public and political scrutiny.

The claim that their vaccine was 90 percent effective when using a particular dosing regime turned out to be based on people aged 55 or younger, rather than older ages at higher risk from the disease. Neither the company nor the university disclosed that detail, prompting criticism from some scientists and analysts when it was revealed by Moncef Slaoui, the head of Operation Warp Speed, the US government’s funding programme for vaccine development.

The Oxford/AstraZeneca vaccine’s cheap price and the fact that, unlike Pfizer’s version, it does not have to be stored at ultra-low temperatures, make it particularly well-suited to the developing world, an advantage that is likely to outweigh any controversy.

Beyond that dispute, reputational risk lies in wait for the wider industry. Any evidence that deep-pocketed nations are being favoured over poorer ones to receive consignments of one of the vaccines, or even a simple malfunctioning of manufacturing or distribution chains, could spark a backlash as big as the hopes invested in any immunisation programme.

Nor can the sector look forward to a complete easing of political hostilities under a Joe Biden administration; reform of the pharmaceutical industry is a rare area of bipartisan consensus. Last week Donald Trump, US president, coupled an announcement of drug pricing reforms with an attack on Pfizer — whose vaccine has proved 95 percent effective — alleging that it had delayed the release of its positive data until after his defeat in the November 3 presidential election as part of a “corrupt game”.

Jeremy Levin, chair of the US biotech trade association BIO, says Trump was “seemingly vindictive”, trying to harm the entire sector. “It was a broad-base shotgun, but it was aimed at the industry at exactly the time that the industry is innovating.”

The incoming administration looks set to persist with plans for significant reforms, despite any vaccine afterglow, but could take a more conciliatory approach. Geoffrey Porges, an analyst at SVB Leerink, an investment bank focused on healthcare, says Trump clearly had “grievances” with Big Pharma but expects the Biden administration to pursue more “palatable” attempts at reducing drug prices, which he believes the industry is prepared for.

Jack Scannell, an expert on the economics of drug research and development, cautions against handing too rapturous a report card to the industry, pointing to the large sums governments have committed to underwrite clinical trials, support manufacturing and place advance orders.

“Before we pat the drug industry on the back too much, one has to recognise it got involved in this partly because the whole thing has been de-risked by government,” he says.

Virginia Acha, head of global regulatory policy at MSD, the name by which the US group Merck is known in the UK, disputes that it took the lure of government cash to persuade the industry to enter the Covid fight. “Quite a number of the investments under way happened before [government schemes] were even announced and some have not necessarily been availing themselves of those funds so I don’t think that is the rationale for why companies acted.”

Acha, whose company has two vaccines in early-stage studies, and an antiviral medicine in more advanced trials, says it was not simply a question of money “but of having the capabilities and capacity to get that work done”, crediting “a phenomenal response from across the industry, where companies have put all other work or planning aside to focus on the pandemic, to get to an answer”.

The success of the vaccines could finally help the industry to silence criticism that it is too slow to bring novel medicines to market. Mahony suggests this is an outdated view, tied to a time when many companies were facing a “patent cliff” as their rights to once-lucrative medicines expired, tanking their share prices.

“In 2009-10, pharma companies were priced as if they were going to go out of business, as if they were never going to have a [new] drug again,” he says. “Investors were scared; they couldn’t see where the growth was coming from.”

However, even during the bleakest years, he adds, the industry as a whole never ceased to innovate: activity simply switched from big pharmaceutical groups to agile, cutting-edge biotechnology companies, which often went on to be acquired by, or partner with, traditional companies.

This David versus Goliath narrative has been prominently on display in the vaccines saga: two biotech companies, Germany’s BioNTech and Boston-based Moderna, have played starring roles bringing a more nimble approach.

The question now is whether that turn of pace, which has so impressed the world, can deliver a lasting boost to the industry’s long-stagnant productivity levels.

The blueprint developed in recent months to fight coronavirus could have a durable impact on how the industry works, says Richard Torbett, chief executive of the Association of the British Pharmaceutical Industry. “There has been the most extraordinary global effort: collaboration like we’ve never seen before, redeployment of resources we’ve never seen before and sharing of data.”

Scannell acknowledges “some great case studies of how things can be done quicker. It may be that regulators and governments learn from that.” But the main reason development has moved so fast, he claims, is “a complete imperviousness to financial risks”, helped by government support “and probably more tolerance of risk in the clinical trials”. Volunteers had entered late-stage trials with less information than is usual from early stage trials, because of the compressed timetable.

There is no suggestion that the phase 3 trials themselves have been other than robust, but “going so fast to phase 3 would not be acceptable outside a public health emergency”, he adds.

Acha hopes one legacy will be a willingness, on the part of companies, governments and academia, to continue the co-operation that has led to corporate rivals working together in recent months. “It would be great if we could form the same kinds of collaborations to tackle big issues like [anti-microbial resistance] or rare diseases or cancer,” she says.

Reflecting on the questions raised by the Oxford-AstraZeneca furore, she adds the fast pace of development in the pandemic means companies are releasing data about their drugs and vaccines at far earlier stages than they normally would, to satisfy the appetite for knowledge of regulators as well as the public.

She adds: “I think for any company, that’s a difficult challenge. Everyone’s trying to be very transparent but we don’t have everything done and dusted, so it’s about working with us on a real-time basis to understand interim data and that will take some getting used to.” Such debates could be a good thing, she argues, providing the public with insights about how the drug development process works.

Scannell remains sceptical that the crisis will deliver any lasting change to the way the industry is regarded. But he adds: “For me the big test will be around access. If we find the poor parts of the world are vaccinated pretty quickly and at low cost, that will possibly change some views.”

Robin Feldman, a law professor and the author of Drugs, Money, and Secret Handshakes: The Unstoppable Growth of Prescription Drug Prices, says that in the US, government money has come with few strings attached on price or intellectual property. “That could come back to haunt both pharma and the government if prices [for other drugs] continue to soar when Covid-19 is behind us.”

For now, says Acha, the vaccine will provide the only litmus test that counts for trust in the industry, as each citizen grapples with the decision of whether or not to take it. “We need the support of the public and society at large,” she says. “What we’re doing has to make sense at every step of the process and at every level of society.”

The Financial Times Limited 2020