The Rx For Dx Leadership At Roche
By Wayne Koberstein, contributing editor
Dr. James Creeden, chief medical officer of Roche Professional Diagnostics, shares his views from inside the world’s top-rated diagnostics business and a leader in drug-diagnostic combinations.
What is a perfect drug but one that fits a perfect diagnosis? And in reverse, what is a perfect diagnosis but one that fits the drug — or any other treatment — to the condition? That being said, of course, nothing is perfect. But the standard steadily rises toward perfection, thanks to current scientific, engineering, and business initiatives in the diagnostics space. And arguably, at the head of companies in that space is Roche Diagnostics (RD), which claims 20% of the world’s in vitro diagnostics (IVD) market outright, almost twice the share of its nearest competitor, Abbott. RD also topped the list of innovators in a 2011 report by the United Kingdom consultancy Diaceutics on companies pioneering personalized medicine with drug-diagnostic combinations.
Dr. James Creeden is the chief medical officer (CMO) of Roche Professional Diagnostics (RPD), the largest business unit within the Roche Diagnostics division, accounting for about half of the division’s 10 billion Swiss Francs in annual revenue. Creeden offers valuable insights into the diagnostics industry, especially the development of drug-diagnostic combinations.
“My role as CMO of Roche Professional Diagnostics is twofold,” he says. “I sit at the head of the department that’s responsible for medical strategy and clinical development. We guide the decisions to develop and target certain disease areas which are the biomarkers in early development, and we also oversee the clinical development strategy and all clinical trials that are run later in development for all of the diagnostic tests that come through our business.”
The bridge between diagnosis and treatment is medicine, in its largest sense — the understanding of healthy and diseased states, interpreted into models of disease mechanisms. In the business world, medicine also bridges the precommercial and commercial stages of the product life cycle. A Roche business-unit CMO like Creeden is charged with maintaining the medical bridge, keeping product development on the path to market acceptance by anticipating how the product will be used in actual medical practice.
Thus, Creeden shares not only the strategizing and decision making inside RPD, but also how the unit looks at the outside world, from professional and patient needs to payer concerns, regulatory challenges, and the competitive landscape. RPD’s bread and butter is still in standard lab tests, but increasingly it leads in the introduction of drug-diagnostic combinations. It therefore offers some rich lessons and benchmarks for any company or team developing products in the same or a related space.
“Diagnostics are only about 2% of overall healthcare spend, but they determine about 70% of all clinical decision making,” says Creeden. “If you look at the improvement in the number of tests in recent decades, innovation has brought a number of new biomarkers and vast quantities of useful data, both of which are not yet being recognized by reimbursement and regulatory systems. They are still treating most diagnostic testing as a routine cost when a test right now can be lifesaving and indicate which drug is going to work for a patient.”
Commodification, the tendency for customers to regard and value diagnostics as low-margin commodities, is common, especially with RPD’s predominant serum-testing products. Nevertheless, Roche Diagnostics continues to adhere to its strategy of “increasing testing efficiency and improving medical value,” according to Creeden.
“The reimbursement environment doesn’t always recognize products that deliver more value. Payers don’t consistently reward value creation for the healthcare system, for example from screening methods that reduce disease later in life. They essentially treat diagnostic technologies as cost-based commodities, and that is a real challenge to us as we try to develop innovative products and justify the significant clinical research investments behind the new products.”
DX IS CORE, NOT COROLLARY
Yet diagnostics are no longer just a side business to Roche’s historically dominant pharmaceutical division. CEO Severin Schwan has made it clear that personalized medicine is on the way to becoming a core strategy for the company, with plans to match more than 60% of the drugs in its pipeline with companion diagnostics. The movement has gained momentum with the impending loss of patent on the drug that helped initiate it: Herceptin (trastuzumab). It is Herceptin’s success with its companion diagnostic for HER2 that Roche aims to duplicate with most of its drugs.
In June 2012, the company announced a $300 million investment in new facilities at its diagnostics site in Indianapolis. It has also entered into a long-range collaboration with Merck to apply Roche’s array and immunohistochemical (IHC/ISH), along with its investigational AmpliChip p53 technologies, in Merck’s clinical development in cancer.
If diagnostics is an area of great expectations, however, it is also one of exceptional risk — today’s acquisition target may become tomorrow’s old news. In January 2012, Roche tendered a $6.7 billion bid for Illumina, only to drop the bid four months later. Although successful acquisitions in the Dx space are also common, such pullbacks are telling; the huge uncertainties about advanced diagnostic technologies add volatility to the acquisition strategy.
Creeden and his peers in the diagnostics division stand at the epicenter of expertise inside Roche, charged with guiding the evaluation and selection of emerging technologies. As novel biomarkers, assays, platforms, and products continuously bubble up from the cauldron of science and engineering, they must find a rational path to informed decisions at every level of the global business.
MATRIX MANIFESTS TEAMWORK
You might guess that the sheer pace of change inside Roche, brought on by the expansion of diagnostics, could cause some headaches. And you’d be right — though it might not be natural for an insider like Creeden to put it in those terms.
“Our biggest challenge internally is also one of our greatest assets as a large international company,” he explains. “We’re a well-organized matrix, so when we identify an opportunity to collaborate across the diagnostics units or between diagnostics and biotech or pharma, we can quickly set up subteams to begin discussions and see whether there’s any ‘meat to the bone’ there. We give them a lot of latitude to make decisions according to the goals and the priorities of the overall organization.”
Translation: It’s great being global, but it’s a big deal to manage. The trick, implies Creeden, is to decentralize decision making but employ corporate resources as needed — something that requires a more formal system.
“We’ve recently introduced the concept of life cycle management for diagnostics that helps add a bit more structure to this matrix process and helps drive the individual strategies for our products and solutions,” says Creeden.
Life cycle management incorporates the time lines, evolving market intelligence, customer feedback, and other pieces of postmarket development — literally driving by force and direction the strategies for each product. The full range of development-team members, from the investigator to the corporate levels, participate in the strategy making, following the principle of decision making at the lowest possible level.
Thus, not all medical-strategy decisions must come across his desk, Creeden says. “My global medical leaders, together with their business partners in the life cycle teams, are empowered to make medical strategy decisions as appropriate.” If researchers on the pharmaceutical side want to discuss a biomarker hypothesis early in development, he says, the diagnostics side will assign one of its R&D scientists to advise the pharma team on critical aspects of biomarker development as early as possible. “This really helps them shape their thinking around the biomarker hypothesis and can strongly influence the drug-development thinking at a very early stage.”
As the drug project matures, Creeden says the relevant life cycle team will assign more diagnostics product managers or late-stage developers to the life cycle team on the pharma side. It may also set up a corresponding team on the diagnostics side to make sure that the commercialization goals for the diagnostic products are also met.
PUSH FOR FAIR VALUE
Looking out from the inside, Creeden sees even more daunting obstacles for IVDs and Rx/Dx combos, especially in the regulatory and reimbursement spheres. The FDA regulates diagnostics as devices, but in a two-tiered structure that he and others say creates advantages for small companies making laboratory-developed tests (LDTs), which are regulated under CLIA (clinical laboratory improvement amendments) and not by the FDA. Similar potential “loopholes” for LDTs exist in Europe and elsewhere.
“The challenge we have is that the regulatory framework for diagnostics that exists today is not a level playing field,” Creeden says, echoing the words of several FDA presenters in recent times. “We have one classification applied to large manufacturers, where we are expected to adhere to very high-quality manufacturing standards, and another applied to smaller laboratories, which essentially don’t have to meet the same quality standards as we do.”
LDTs have some possible benefits, according to regulators: They are available for small populations, allow rapid test development and deployment, and may save money for healthcare systems. Objectively, however, they may do harm: patients and physicians relying on what may be useless tests, labs overestimating their validation ability, and companies that run the full gamut of Dx development — from design to manufacturing — left with a much higher regulatory burden.
Without a structural solution at hand, the only recourse is communication, says Creeden. “We communicate a great deal with the regulators. We recently had some great discussions with the FDA as part of their Experiential Learning Program (ELP), where we had an opportunity to teach them about our newest platforms and gave them an opportunity to come in and kick the tires and see how things work. Such exchanges make a big difference in improving the transparency between our people and the regulators. We’ve made our position and our challenges known to the agency, and it has made great progress in clarifying its position and plans for clarifying the regulatory environment, particularly with regard to LDTs. Thankfully, the European authorities are also taking note of the LDT situation and starting to take action, too. Clarity is extremely important to ensure that we can continue to make investments here.”
Diagnostics struggle against low-value perceptions by payers as well, says Creeden. Today, the reimbursement environment doesn’t recognize products brought to the market with a higher level of diagnostic-utility or clinical-utility evidence. It’s essentially an open market for anyone who wants to bring a new technology on board. Nevertheless, he says, “It’s good news for us that payers increasingly want to reward value creation; they want to reward products that come more fully supported by good evidence packages around them, so we’re having a lot of discussions with them about the best ways to measure that value.”
Creeden says his company has a duty to challenge the traditional cost-based perceptions with evidence-based arguments for recognizing the greater value of new Dx technologies. “We have a certain responsibility as an industry leader to take the first step, so we’re taking that first step, a leap of faith, to make the large investments in clinical trials that other companies are not making. We believe that if we demonstrate the clinical value of our tests, the reimbursement authorities will start to reward that, and the regulatory authorities will start to recognize there are two different classes of products here.”
Clinical value includes cost-effectiveness, Creeden acknowledges. The trade-off for higher pricing and reimbursement is lower treatment costs. “The key word is effectiveness — that is exactly the challenge for the diagnostics industry. Tests by themselves are not an intervention. So, setting up clinical trials that actually can demonstrate the effectiveness of tests can be challenging, and often as complex, if not more complex, than a lot of drug trials. They can also be very large, which means a significant investment.”
FUTURE BLEND
Roche Professional Diagnostics (RPD), like its industry peers, focuses most of its products on large disease areas such as cancer, diabetes, and infection. How may the disease-area focus of RPDs change over time? Its Chief Medical Officer James Creeden answers:
“The interesting thing about diagnostics — particularly the central laboratories and point-of-care testing sectors that Roche Professional Diagnostics serve — is that we can never retire products. We need to provide all of the tests that physicians grew up using 10 or 20 years ago, as well as everything that’s new. So our primary goal is to provide as broad a menu as possible. Regarding new products, it is definitely the responsibility of my group and the medical and scientific affairs organizations in our other business units to identify the disease areas where new diagnostics can actually add value. We’ve looked at a number of different areas and stratified them according to where new diagnostic tests are really needed, and we are actively steering our R&D efforts toward those. Although the industry as a whole has had a lot of success with oncology and inflammatory disease, we see continued success and growth in metabolic disease and cardiovascular disease. We also see a lot of work going on now in diseases that have been underserved in previous decades; here preeclampsia is a great example. It is relatively prevalent, a disease of otherwise healthy pregnant women, and there have been no advances in this field in two decades or so, and now we’re starting to see a lot more progress. We also see a lot of work coming in Alzheimer’s disease and brain injury. We focus on where there is an unmet need that diagnostic technology can really fill.”