Biotech Drugs May Save Day for Pharmaceuticals
A massive scientific study recently found that Genentech’s $2,200-a-dose heart drug, TPA, is more effective at saving lives than its older, $200-a-dose rival, Streptokinase--and that’s a significant finding.
Both drugs prevent potentially fatal blood clots in heart attack patients, but TPA does it a bit better, said the study of 41,000 patients, which will have an influence on medical practice worldwide. TPA will be administered more readily, and San Francisco-based Genentech will be encouraged to develop dosages for other conditions, such as blood clots in the legs.
But most important, the study confirmed that effectiveness--not price alone--will be a standard for judging drugs. That’s critical for the new products of biotechnology and the hundreds of small companies that make up the biotech industry, because pressure for discounts from pharmaceutical companies and other providers of medical care is about to become intense. Drug discounting under pressure from medical cost containment firms is already well developed. Group discounts on ulcer drugs such as Tagamet and Zantach run to 15% and more these days.
And that pattern will be reinforced as the Clinton Administration’s medical care program, due next month, sets up regional purchasing authorities. “The intent is to have 1 million participants--companies, institutions, individuals--in each of those purchasing authorities,” said Dr. Schumarry Chao, a physician who is medical director of Aetna Life & Casualty Co. “A corporation with 40,000 employees has considerable purchasing leverage now; the new health authorities will totally reposition buyers and sellers in the marketplace.”
Major pharmaceutical firms are prepared for the change. Two years ago, Chairman Roy Vagelos of Merck & Co. told financial analysts that profits would be harder to come by as drug companies sold to hard-bargaining group purchasers rather than individual doctors.
But medical and financial experts worry that price pressures could stunt development of biotech companies. Drug research and the lengthy process of getting Food and Drug Administration approvals are very costly. A young company needs high profit to recover those costs and to develop other products.
“Any indication that biotech companies--risky to begin with--would have trouble making good profits would chill their chances on Wall Street,” said Robert Teitelman, author of “Gene Dreams” and other books on technology and finance.
A lot is at stake. The biotech industry is not just a bunch of companies with funny names producing odd new substances. It is an industry that in this decade could produce cures for cancer and AIDS, heart disease and stroke, and grow into a $50-billion business--with U.S. firms maintaining global leadership.
That’s why the Genentech finding is so promising. It means that “science-driven, cost-effective drugs will have no real problems,” said Viren Metha, co-founder of Mehta & Isaly, a New York research firm that studies 400 pharmaceutical and biotech companies worldwide.
By “cost effective” he referred to the ability of biotech drugs to make expensive surgery unnecessary--Genentech’s clot-dissolving TPA, for example--or to make treatment possible--Amgen’s products that curb anemia in dialysis patients or boost the white blood cell count, and thus preserve the immune system, in cancer patients receiving chemotherapy.
That doesn’t mean easy street. Amgen found that out with its chemotherapy drug neupogen. Hospitals and purchasers recognized neupogen’s effectiveness, but wanted to save money by using smaller dosages. So neupogen sales and profits did not grow as fast as analysts had predicted--and they dumped Amgen stock.
So investors must adjust expectations as Amgen adjusted dosages. The company’s future in developing other uses for a drug that fights infection with the body’s natural defenders, white blood cells, still could be great.
And such is the hope for all biotech drugs, which, unlike most traditional medicines, deal with the roots of disease rather than symptoms.
For example, BioWhittaker, a former division of the Los Angeles defense firm Whittaker, has a test for h pylori, the gene that causes ulcers. Chairman Noel Buterbaugh explains that the $6 test may not only make $1,100 endoscopies unnecessary, but lead to elimination of the ulcer.
Many such products are being worked on in hundreds of small firms--and at better known companies, such as Genentech itself. “Genentech has some impressive new products waiting for approval,” said analyst Wayne Johnson of H. G. Wellington, a brokerage firm.
That’s why, at a time of drug industry fear over Clinton’s program, biotech stocks generally are recovering and the only cloud analyst Denise Gilbert of Smith Barney can see is a possibility that “we’ll restrict what we spend on the last years of life.” That was a reference to expensive treatments for cancer, Alzheimer’s disease, AIDS and stroke that eat up medical budgets.
Yet it is what we learn from the dying that creates better compounds for the living. And with populations aging worldwide over the next 20 years, biotechnology seems more than ever an industry for the future.
