October 14-16, 2013; Cleveland, Ohio Day #2 Highlights - Draft

Executive Highlights

Day #2 of the Cleveland Clinic Medical Innovation Summit provided some of the most unique learning experiences we have had the opportunity to explore – we have highlighted our top 10 most memorable moments from the day below. The morning began on a healthy note with “Just Walk with a Doc,” with Cleveland Clinic’s Chief Wellness Officer Dr. Michael Roizen leading early bird attendees on a 1.5 mile walk through downtown Cleveland. The incredible presentations we witnessed throughout the rest of the day ranged from live surgical demonstrations of metabolic surgery techniques on real patients to an impassioned speech by Aetna Chairman and CEO, Mark Bertolini – his remarks were the topic of conversation for the rest of the day. The kind of initiatives discussed by Mr. Bertolini (see below) can have a very meaningful impact on society; we are thrilled to have Mr. Bertolini in the ecosystem as an increasingly influential leader who is turning on its head the traditional characterizations of executives at major payers.

The day featured a great deal of discourse on health reform and health policy, with both Mr. Bertolini and former director of the Office of Management and Budget for the Obama Administration, Dr. Peter Orszag, heavily emphasizing the need for shifting to fee-for-outcomes models of care. The meeting switched gears at the end of the day when we attended concurrent sessions on the relationship between Alzheimer’s disease and metabolic disorders (it was really sobering to hear even more discussion on how closely diabetes and Alzheimer’s disease may be linked) and a fascinating session on future applications for IBM’s Watson in healthcare (Watson is the artificial intelligence system that analyzes natural language processes and, in its most famous application, won Jeopardy in 2011).

On the obesity front, we also heard from Vivus, Arena, Eisai, and Orexigen – notably, Eisai announced that it was doubling its Belviq sales force. Interestingly, a poll of the audience found that a plurality of voters (39%) thought that the obesity drug market would eventually exceed $20 billion and 37% thought it would exceed $10 billion.

Our top 10 highlights from Day #2 are enumerated below.

• Aetna Chairman and CEO Mark Bertolini (Hartford, CT) delivered the most memorable address of the day (other speakers and attendees raved about it throughout the entire afternoon); he drew strong attention to two barriers the US faces to a better healthcare system: 1) fee for service payment models and 2) poor coordinated care for the sickest Americans and preventative efforts for the rest. First, Mr. Bertolini championed the need for economic incentives to be aligned between payers and providers via a fee for quality model. Mr. Bertolini underscored, however, that Medicare must take the lead on such an initiative, since only Medicare has a large enough market share to drive the change. Mr. Bertolini assured that if Medicare made such a change “[Aetna] will follow.” Second, he stressed the need to look at the long-term payout for preventative services and coordinated care. Framing the problem, he cited that the most expensive 5% of Medicare enrollees drive 43% of the program’s $550 billion worth of annual spending. Half of this subpopulation is over 85 years old with cardiac problems and half are under 65 years old with renal failure. Mr. Bertolini believes none were cared for in a coordinated manner – those with renal failure should receive a transplant (which he says is more cost-effective in the long-run) and congestive heart failure should be better addressed. Additionally, he pressed that the rest of Americans require wellness and preventative programs, even though the return on investment might not be seen for several decades. Mr. Bertolini explained that if half of the healthcare system’s waste (totaling ~$750 billion a year) could be eliminated through such strategies, the US could pay back half of its debt in ten years – if just 20% of the waste were eliminated, the nation could afford the Affordable Care Act without increasing taxes.

  • Mr. Bertolini also recounted the deeply moving story of how fighting to save his son from an initially incurable cancer, including donating him a kidney, provided him with a patient perspective to bring to the table during insurance policy discussions. Mr. Bertolini was particularly frustrated with the restraints imposed by traditional hospice, including that a patient acknowledge he or she will die within six months and stop seeking curative care. Due to these stipulations, Mr. Bertolini was forced to move his son out of hospice and into an expensive hospital when a new treatment option became available. Seeing the financial cost of these regulations, he had them removed at Aetna. Following this change in policy, Mr. Bertolini reported that Aetna actually saw end of life costs drop 80% (presumably because more patients were willing to move from the extremely expensive ICU to hospice care). Given that end of life care accounts for a huge proportion of overall healthcare spending, this was so valuable to hear as a focus.

• The slew of powerful speakers continued at lunch when Dr. Peter Orszag, Vice Chairman of Corporate and Investment Banking at Citigroup and former director of the Office of Management and Budget for the Obama Administration, took the stage to discuss the current healthcare challenges facing Washington. When asked about the ongoing efforts to shift from fee-for-service models (volume-based) to fee-for-outcomes models (quality-based), Dr. Orszag shared his expectation for a dramatic shift in reimbursement. He forecast that by 2020, over 50% of hospitals’ revenue will be quality-based. Additionally, he sees this new paradigm as blurring the distinction between HCPs and payers, since HCPs will be controlling who receives what treatment and hospitals will take on the responsibility of managing finances. A poll of the audience found that about one-third of audience members agreed with Dr. Orszag that more than half of hospital revenue will be collected in a quality-based manner by 2020.

  • Dr. Orszag also presented a striking model showing that if the cost per Medicare beneficiary continues behaving the way it has for the past five years, there could be no increase in Medicare spending as a percentage of GDP through 2085, despite the aging of the baby boomer generation (in contrast to expectations that costs will balloon). Medicare spending has declined and then largely leveled out over the past five years, which Dr. Orszag found to be a “phenomenally good” trend. He pointed out that it seems to be a true reduction in Medicare spending, as the stall was not correlated with macroeconomic factors, suggesting that cost-saving strategies have been implemented. However, as Dr. Orszag said, we are only at “mile three of a 26.2-mile marathon.”

• Given the overall level of uncertainty surrounding healthcare reform at this meeting, we have been slightly surprised that the one thing speakers have seemed to find consensus on is that the pharmaceutical products and devices will not themselves ever be the source of innovation in the coming years. Rather, it is all about systems and delivery. During a panel on the how the fight against obesity can be good for business – both in protecting employer’s bottom lines by decreasing absentee- and presenteeism, and in creating new revenue opportunities – the speakers repeatedly emphasized that innovation would occur in health IT, healthcare delivery, and lifestyle intervention. The moderator, Ms. Shannon Pettypiece (Healthcare Reporter, Bloomberg News, New York, NY) synthesized panelists’ remarks saying, “It seems like we need some un-innovation…this is probably discouraging for the innovators out there.” She and other panelists described a paradigm in which the “innovation” lies in getting more people to live a healthy lifestyle rather than in providing a novel agent. For example, Dr. Dean Ornish (President, Preventive Medicine Research Institute, Sausalito, CA) pressed:

  • “Everyone wants to know the high tech device that they can put their money behind. But I think medicine is going back to low tech options…If I am an inventor, I am going to say, ‘Who is enabling people to change their lifestyles to get cost outcomes?’” Mr. Peter Orszag (Vice Chairman, Corporate and Investment Banking, Citigroup, New York City, NY) stated that while society needs to encourage technological innovation, new technologies need to have improved value, which has previously not been the case. We believe that the pressure is mounting further on drug and device manufacturers to continue to work on improved systems and healthcare delivery (with a major focus on patient experience) surrounding their therapies in order to improve adherence and thereby prove cost-effectiveness.  We don’t think this is a surprise to industry – indeed, many have already been working on related initiatives for some time. Big picture, we still believe breakout drugs can be blockbusters; J&J’s Invokana is one in the making, for example, and certainly the $8 billion DPP-4 inhibitor market would represent another.

  • That said, successful device development is appearing to focus more on either integrated systems (e.g., bionic pancreas/artificial pancreas, CGM-integrated pumps, remote monitoring of BGM/CGM data) or dramatically improved ease of use that itself is improving adherence. For example, insulin delivery technologies like Valeritas, Calibra, and Insulet that are super easy are very attractive – ease of use continues to be very in demand by patients and HCPs, and as long as the value can be demonstrated through cost-effectiveness trials, we are very optimistic about further development and growth. There are other examples where ease-of-use improvements are exciting: 1) insulin delivery systems that integrate CGM, such as J&J’s Animas Vibe and Medtronic’s Veo (both are doing very well in Europe and we believe will be popular in the US); and 2) Novo Nordisk’s IDegLira, a highly-awaited combination product of the GLP-1 agonist Victoza and the basal insulin Tresiba [degludec]. While the latter is not a “system”, per se, the focus on creating something that is much easier for patients to use (broader therapeutic window, etc.) is high.

• Day #2’s panel discussion on investment strategies for metabolic disorders was disheartening, as most speakers came to the conclusion that current regulatory and reimbursement environments globally (CVOTs in the US and EU were mentioned more than once – though it was acknowledged that the data will be of value) makes investments in metabolic therapeutics pretty risky business, particularly given what investors characterized as a move to an increasingly risk averse Big Pharma community. Mr. Brian Dovey (Partner, Domain Associates, Princeton, NJ) even remarked that if he could go back in time, he would have not invested in Orexigen (given the surprise need for the pre-approval CVOT), although he hastened to say he was glad that his firm did and certainly expressed optimism about Orexigen’s prospects. The VCs themselves, from our view, seem to be suffering from limited investment partners that they themselves may not have adequately “prepped” on the increasingly challenging environment. Mr. Dovey opined that although there is a huge unmet need for obesity drugs, the requirement for CVOTs are “unreasonable and unnecessary.” He believes that CVOT trials could be done in phase 4, particularly in conjunction with REMS. Big picture, Brad Vale from J&J Development Corp. was extremely insightful about investments that had been most valuable over the last decade; we learned significantly from his remarks (our final report will have more detail). 

• After a panel discussion with leaders from leading obesity drug companies (Vivus, Arena, Eisai, and Orexigen), a poll of the audience found that the plurality of voters (39%) thought that the obesity drug market would eventually exceed $20 billion and 37% thought it would exceed $10 billion.

  • Notably, Eisai announced that it was doubling its Belviq sales force to 400 reps, and Eisai’s Chief Medical Officer and VP of Medical Affairs, Dr. Gary Palmer, commented that Eisai did this in response to the lack of education amongst patients and physicians about new obesity agents. In particular, he remarked, Eisai is looking to increase its detailing of general practitioners, since they are treating obese patients before they develop comorbidities requiring specialty care. The move will allow Eisai to provide information on the efficacy and safety of the drug to approximately 65,000 healthcare professionals in the United States.

• Early on in day #2, Dr. Philip Schauer (Cleveland Clinic, Cleveland, OH) moderated live video streams of bariatric surgeries being conducted at the Cleveland Clinic: a sleeve gastrectomy, a Roux-en-Y gastric bypass, and the placement of an EndoBarrier (the Cleveland Clinic is participating in GI Dynamic’s US study of the device). The vivid (and graphic) displays woke us up during the early morning session and caused our jaw to drop in amazement of how these procedures are actually conducted. We were particularly impressed seeing one surgeon use the Da Vinci robotic surgical system – a capability the Cleveland Clinic has which was well advertised during the session. Even in surgery, it’s all about the move toward automation, which appears to be related to greater safety.  

• The afternoon panel discussion on the connection between diet, obesity, and Alzheimer’s Disease (AD) demonstrated to us that the connection between metabolic disorders and AD is becoming increasingly accepted as quite tangible. We heard more about several diabetes drugs are under investigation for AD. First, we learned from Dr. Jeff Cummings (Director of the Cleveland Clinic Ruvo Center for Brain Health) that pioglitazone (Takeda’s PPAR-gamma agonist, Actos) is actively being studied as an Alzheimer’s prevention agent in the TOMORROW study. Furthermore, the SNIFF study (headed by Wake Forest University’s Suzanne Craft), is investigating the use of inhaled insulin for AD – the rationale is that if insulin resistance is an underlying factor of AD, and since inhaled insulin is better at crossing the blood-brain barrier than injected insulin, that inhaled insulin may help correct a relative insulin deficiency in the brain (preliminary results of smaller studies suggest this to be the case). Dr. Cummings noted that metformin and GLP-1 agonists are also in clinical trials for AD. Dr. Cummings also presented striking data suggesting that high levels of physical activity could normalize risk of AD for people at high genetic risk (APOE E4 carriers), although the physical activity levels in the study he presented were self-reported and AD risk was estimated rather than calculated based on outcomes. Dr. John Gunstad (Kent State University, Kent, OH), whose research efforts are attempting to characterize the role of obesity in AD, has found that cognitive function improves after bariatric surgery (as early as 12 weeks after surgery with improvements persisting as long as three years). As has been somewhat of a theme at this meeting, Dr. Stephen Rao (Director of the Schey Center for Cognitive Neuroimaging at Cleveland Clinic) emphasized the importance of identifying effective biomarkers and the profound impact this could have on accelerating drug development and encouraging investment in traditionally risky disease areas. His research focuses on applying advanced neuroimaging techniques to understand changes occurring in the brain prior to the onset of AD symptoms.

• Dr. Eric Brown (IBM Research, Yorktown Heights, NY) demonstrated how the fascinating artificial intelligence IBM Watson project could help increase physician efficiency and knowledge by synthesizing and analyzing information. IBM Watson is an artificial intelligence system that uses algorithms to harness natural language processing in order to more aptly interact in a real-world setting (the most famous example of a Watson application is the computer that won Jeopardy against Ken Jennings in 2011). IBM researchers have created two new Watson tools to improve healthcare: EMRA and WatsonPaths. EMRA, Dr. Brown explained, will use Watson intelligence to analyze electronic medical records for important pieces of information from physicians’ descriptive notes. The output of this analysis will be an organized form that shows the patients’ medications, conditions, and test results; when the physician selects a condition, relevant tests and medications will also come up – very cool, in our opinion, and such organization could be extremely helpful when treating complex, chronic disorders such as diabetes and obesity. Given limited provider time and contact with patients, the automation should also be very welcomed in healthcare settings around the country. The second of the innovations, WatsonPaths, is a collaborative learning tool that helps physicians find connections between inputs and diagnoses; the program uses algorithms to determine the most likely diagnosis based on clinical tests and lab values. What we find especially valuable about the program is that it has a “find evidence” function whereby with one click, clinicians can ask the program for additional information and receive a list of literature abstracts that support the diagnosis. We believe a program like this could have great benefits for patients – physicians would be more efficient in their research, and WatsonPaths may suggest diagnoses that the physician did not consider. Indeed, Dr. James Stoller (Cleveland Clinic, Cleveland, OH) called Watson a “game-changer… a diagnostic helper to diagnose information and create a probabilistic list of diagnosis and efficacy of treatment.”

-- by Hannah Deming, Jessica Dong, Hannah Martin, and Kelly Close