Category Archives: Business of Medicine

Do Mylan shareholders want the CEO to keep raising the price of the EpiPen?

Do Mylan shareholders want the CEO to keep raising the price of the EpiPen? We don’t know yet.

Investors like a company to deliver positive earning results and increased guidance, and the recent negative public opinion has given investors a reason to sell, which was what happened. Currently $MYL is in “oversold” territory.

Mylan 1 year and 5 year trends:
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Keep in mind that 68% of Mylan is institutionally owned. Thus the market makers’ decisions will determine whether “shareholders” truly want the CEO to keep raising prices of the EpiPen. Retail (individual) investors’ outrage makes little difference to $MYL stock price, unless you happen to be an individual who owns millions of shares of $MYL.

I suspect that there is a sweet spot that is not being discussed, which is, the institutional investors want to ensure that the EpiPen continues to dominate the market (which is temporarily the case, given the set backs of potential major competitors) but also not be priced to the point where backlash from the reimbursement side triggers costly events.

If $600 is too much for public opinion to stomach, what about $500? $400? It’s not so much about what the “real” price ends up being on the consumer-side, but the publicity around the price itself, as well as the defense of the price by a CEO who hasn’t been successful pitching the coupon/assistance angle. That’s about as effective as a U.S. private university saying, “Sure, our tuition is $65,000 a year, but our students almost never pay full price!!!”

SOMEONE is absorbing the escalating cost of a life-saving product, and we’ve been around the block long enough to know that at the end of the convoluted cost justification conveyor belt, we consumers will end up getting bitten on the butt.

Entities investing in businesses can claim an interest in public good, but only based on the extent that the cost/risks from actual (lawsuits, sanctions, blacklists) or perceived (bad PR) harm not exceed the revenues earned from pushing-moral-envelope decisions.

Once that risk begins to overshadow the rewards, you will see major shareholders send a message by selling $MYL shares. Then we can say for sure whether shareholders want the CEO to keep raising prices. Even Turing and Valeant had their glory days of astronomical stock prices, so you can’t say that shareholders aren’t enamored by questionable business practices, at least in the short term.

It’s all about risk:reward.

Update 8/29/2016

Within a week of the public outrage, Mylan will Launch Cheaper Generic EpiPen Alternative. Sounds like a good response, until you consider the fact that Mylan’s ability to launch this generic version in “several weeks after labeling revisions” means Mylan has always had within its capacity to offer a more affordable product (keep in mind, the generic version is still a 300% price hike from the original $100 tag). When was Mylan ever going public with this generic?

Also in question is 1) the growing public awareness of the CEO’s 600%+ hike in compensation that is being linked to the company’s pricing “strategy” and 2) less public awareness of the CEO selling 100,2000 shares of company stock at $50/share for a gross $5,010,000 after the earnings report, but before the price hike frenzy (SEC FORM 4). You can’t convince me that any executive shrewd enough to get to a C-level position can’t foresee the possible public backlash to a 600% price hike of a cheap drug delivered in the medical device that is really the main “product”.

The fact that Mylan did this in response to negative publicity reinforces the public perception that the pharmaceutical industry does indeed have “affordable alternatives” but chooses to withhold them to the public to rake in more profits. Even though reality is what Bruce Booth wrote in Forbes (Innovators vs Exploiters: Drug Pricing And The Future Of Pharmaforbes.com), where differential pricing exists for the industry to offset the steep discounts in other countries by making “countries that can pay”, pay much, much more.

The average consumer is not going to care to understand the complex pharma industry supply chain or convoluted regulatory maneuvers. The consumer knows that healthcare is at a tipping point that somehow hasn’t been tipping in the right direction, and industries like pharma spending a lot of money lobbying and advertising. More and more, social media is enabling consumers to coalesce into groups and transform into activist voices that can change how companies make decisions.

This means the pharmaceutical industry should start paying attention to actually educating consumers on the brutal realities of opaque drug pricing versus perennially showcasing the bloating belly of “cost of discovering and bringing drugs to market.” Let’s face it, that argument has not convinced the public on why drugs cost so much, and it’s a failed strategy. The industry needs to spend money on what actually works to engage consumers, not on new versions of the same graphs that had thus far convinced few and far between.

Theranos’ AACC Presentation: Not the Reboot We Were Hoping For

Move over, Edison: here comes miniLab.

And yet: “Every piece of technology they presented has been known for many years, and exists in other platforms largely in the same configuration, or in some cases in much more compact form in competitor’s platforms.” ~ associate professor in U. Washington’s dept of laboratory medicine.

Data has not been independently verified.

Holmes did not clarify that the 11 tests she presented would require at least 3-4 pricks if each prick yields only 160-uL amounts.

https://www.wsj.com/articles/theranos-founder-elizabeth-holmes-introduces-new-blood-testing-device-1470089582

https://www.wired.com/2016/08/theranos-chance-clear-name-instead-tried-pivot/

How Antibiotics Work

Antibiotics work according to the mechanism of action (what the drug “targets” in microbes or how the drug “works” in the microbe) that is driven by the drug’s distinguishing chemical structure.

Chemical structures also define the “classification” of antibiotics. If you hear doctors talk about “macrolides” versus “quinolones”, they are talking about families of drugs (not “one” specific drug) and they are referring to the way each family of drugs targets microbes.

When you hear about “generations” of an antibiotic, this means the chemical structure of the current drug has been modified (changed) somehow. These changes are designed to improve the action of the drug, especially when the bacteria have evolved to resist the original drug.

A well known example is Penicillin resistance. Overuse of penicillin resulted in widespread bacterial resistance to this drug. If I went to the doctor today and the doctor decided that a beta-lactam based antibiotic was appropriate, the doctor may prescribe amoxicillin or one of the newer generation cephalosporins versus the original penicillin. That’s because the doctor is thinking the bacteria in my body will probably laugh at penicillin and a “newer” penicillin (like amoxicillin) may be needed.

Why We must complete the ENTIRE course of antibiotic therapy

One of the biggest problems in antibiotic resistance, besides antibiotics being over-prescribed, is patients stopping their medication as soon as they start feeling better instead of finishing their entire course (taking ALL pills prescribed by the doctor).

Imagine your body is a kingdom and your immune system as a fortress/defense system. Your kingdom has undergone an invasion. Taking antibiotics is similar to giving your immune system a much needed weapon to defeat the invaders.

A full course of antibiotic therapy aims to kill off as many invaders that have infiltrated your kingdom within as short amount of time as possible, so that your defense system can take care of the rest, and to ensure that ALL the invaders are killed.

People sometimes stop taking the antibiotic when they start feeling better (“Oh, I’m already feeling better”) or for another reason (“hey, maybe I should save these couple of pills, just in case, for next time”). The problem is that there may be a few invaders that have thus far evaded the antibiotic response, and these will be the invaders who will come back with a vengeance, literally.

Your feeling better has do to with most of the invaders being killed off, but the few that have escaped being killed are buying time to adapt and evolve… to become smarter against your defenses.

Antibiotic resistance arises from the ones that have been allowed to escape because the host (you) decided “All is well, call off the troops!” and giving the invaders time to learn how to better take you down the next time there is an opportunity.

Based on the way each antibiotic family targets microbes, the drugs in that antibiotic family may either kill (bactericidal) or stall the growth of (bacteriostatic) microbes.

This is where we get into the specifics of “how” an antibiotic works. Antibiotics aim to kill by:

  • Targeting a specific feature of bacteria
  • Targeting the reproductive process of bacteria
  • Targeting a critical chemical pathway in bacteria (especially protein synthesis)
  • Overcoming bacteria’s evolved mechanisms of resistance (for example, bacteria that have evolved pumps in their membranes to “pump out” drugs)

Targeting a Specific Feature of Bacteria, Reproduction, or critical process (typically making proteins or “protein synthesis)

Antibiotics that target gram positive bacteria will disrupt the chemical process critical to making the thick peptidoglycan wall (the thick wall is what holds the “gram stain” that allows us to visually identify the “gram positive” bacterial strain).

However, if the bacteria has a thin peptidoglycan wall (this then won’t show up as bright violet stains on the gram stain, making this bacteria a “gram negative” type), then an antibiotic that targets that wall won’t do much damage.

Instead, you’d need an antibiotic that targets a specific feature of gram negative bacteria or target a critical process like protein synthesis. For example, the antibiotic can cross the gram negative bacteria’s cell wall (but are blocked by gram positive bacteria’s peptidoglycan layer) to stop protein synthesis, which stops many critical machinery in bacteria.

Antibiotics that target the bacterial reproduction prevents new bacteria from being produced. This gives your body a fighting chance to go over the existing microbes.

Theranos’ Elizabeth Holmes is Not a Liar

(Via Quora’s Is Elizabeth Holmes a liar?)

The Theranos story has gone from bad to worse, first from the Wall Street Journal “expose” that Holmes during a live blogging event equated to “tabloid” journalism, then from a series of very public disengagements with partner corporations, and now — complying with a Herculean FDA request. This is causing some in the public to ask whether Holmes is a mastermind in a fairytale of scientific triumph.

No. Holmes is not a liar.

Holmes made bad business decisions and painted herself into a corner.

Holmes is in the class of executives that are technologist founders, which combines subject matter STEM expertise with the vision and strategy typical of C-level executives. The challenge with this class of executives is that they often do not excel in all aspects required in each role. There are incredible business chiefs that cannot do the job of their company’s top subject matter experts (SME). There are genius technologists who can rapidly run businesses of any size to the ground. It is rare to combine both SME and business acumen at the highest levels in one person.

In the case of Theranos, she was extremely effective in the beginning, when she needed to create excitement and inspire others to support her vision. She fulfilled an important role for a chief executive. She brought the technology into development, which fulfilled an important role for a technical subject matter expert, although I am less “sold” on how cutting edge her technology is given the lack of data, thus I hold her less credible on the SME role compared with the CEO role.

Companies must exist beyond initial honeymoons, and especially must weather and survive crises that are part of business cycle/life. Add to this, the “healthcare business”, where we now involve the quality and quantity of people’s lives, and we can see the level of shit-storms that can happen. In the healthcare business, I have come to believe that the question is never about “if” a shit-storm will happen to a life science company, but “when” and “how bad” a shit-storm will happen.

This is where Holmes began making a series of bad calls that snowballed into bad decisions, which became bad publicity that she made worse by more bad decisions. Now we’re at the point where we may want to believe but we harbor more doubt because of Holmes’ cumulative actions resulting from the original points of doubt.

But has Holmes fared worse in her CEO actions than other CEOs who have been embroiled in scandals? Has she behaved in a way that shows greater opacity or concealment than other CEOs under fire from public scrutiny?

I don’t think so. Holmes is acting exactly as other CEOs had to act in this situation: as directed by company lawyers, to ensure her actions are in the best interest of Theranos at this point. Even if she was the one who caused great harm the credibility and public image of the venture that has become her entire identity.

The Theranos Problem in One WSJ Graphic

Now that Theranos is allegedly/denying-trying to raise money, speculations continue as to whether it could survive the Wall Street Journal article, Hot Startup Theranos Has Struggled With Its Blood-Test Technology, or whether a big industry player may swoop down to acquire the company.

In terms of “who would be audacious (to use a polite word) enough to possibly merge/acquire Theranos”, I think a diagnostic company would be more a likely candidate… you know, one of the big players that Theranos was meant to “disrupt” the business of.

The short sighted assumption from many people thus far, is that Theranos was the only company that had the “foresight” to reduce sample volume required for blood based assays.

Can we actually believe that NONE of the big players NEVER considered the competitive advantage of reducing sample volume required from patients and human subjects? Are we saying that all these years no one had ever realized how many people hated needles, and the kind market leadership position one may gain if one creates an assay method that enables accurate sampling of mere drops of blood versus vials of blood?

When we look at Theranos’s “accuracy” compared with hospital results, most scientists familiar with the assay process can deduce the magnitude of what needs disrupting:

The best performance in the graphic from Theranos in terms of “accuracy” compared with a hospital result “standard”, is the glucose test.

This is nothing to be impressed about: getting the glucose reading right is no newer than the finger prick glucose draw available from today’s diabetes management devices. It only shows Theranos got their tech as right as what is already available in terms of a finger prick blood sugar test.

Perhaps someone can use current glucose monitoring technology, modify it so it could assay for Herpes (simplex type1), and see if the same “tech” transfers readily to accurately test for Herpes. This would offer an interesting data point to show just how novel the “Edison portfolio of technology” is.

This one graphic sums up the Theranos problem: the most accurate comparison is in a variable for which cheap and accessible diagnostic is available (glucose), and not for any variables for which wide clinical use are expected (liver function tests, which are critical for a variety of medications affecting liver function).

Theranos’s results are consistently “false positive” compared with hospital standard: if a clinician believes in the Theranos result, the clinician may order the patient to stop taking medications that the patient needed and was doing well on, but should no longer be taking because the results show that liver was being negatively affected, or the clinician could switch to another less effective medication for the patient out of concern for liver function. Either case, if the Theranos test was inaccurate, this would cause harm to the patient by unnecessarily disrupting treatment regimen that was otherwise appropriate.

This is not the kind of “disruption” healthcare providers want.

From a business perspective, Theranos’s FDA approved use for its product has a very narrow indication (Herpes), yet the test is commercially available without authorization from a licensed healthcare practitioner. This is great for the company’s bottom line, because the (federal) agency will have a tough time identifying which kits have been purchased for “approved” use and which kits are actually used “off-label”. The pricing advantage allows Theranos to reduce dependence on CMS reimbursement, by going straight to consumers. Liability becomes a matter of personal injury, which may be skirted when the consumers assume entire risk by “inappropriately using” the kit.

However, this is not great from a consumer protection standpoint.

We may subscribe to a conspiracy theory about major diagnostic and device companies colluding to keep an oligopoly on expensive assay machines and profit margins for assay kits, but from a business competition standpoint, the market dominance/leadership would be too attractive for a major player to ignore in the name of market oligopoly.