In Praise of Independence: Q&A with Roche's Dan Zabrowski - Pharmaceutical Executive

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In Praise of Independence: Q&A with Roche's Dan Zabrowski
Roche has always gone its own way: investing in biologics, championing personalized medicine, and checking its ego at the door when doing deals. Now that the rest of Big Pharma has caught on, can a new generation of leaders keep the Swiss giant ahead of its time?


Pharmaceutical Executive





In fact, it isn't competition from rolling-with-dough large-caps that keeps Zabrowski up at night. After all, Roche has its own Fabergé nest egg. "In pharma, the bigger impact is shareholder activism," he says. "They buy a large percentage of a company and then pressure management to change its operations or strategy. Companies that we may be trying to acquire may instead choose to remain independence."

Is it ironic that Roche, which seems to value independence and an independent spirit above all else, might be wrestling with the likes of Carl Icahn to possess a biotech's own independence? Business is business.

PERSONALIZED MEDICINE IS HERE, SORT OF

Roche's ambitions aren't limited to novel drugs and market share, however. "If you look at our business structure and innovation strategy, it is all about personalized medicine," says Zabrowski. "You need both the drugs and the diagnostics."

Unique among Big Pharmas, the Swiss firm was an early enthusiast of personalized medicine. Since it didn't sell many mass-market products, it had nothing to lose from giving "the appropriate drug, at the appropriate dose, to the appropriate patient, at the appropriate time." And its partnership with Genentech opened a window on the revolutionary potential of genetic engineering to diagnose disease and develop drugs. In 1997, in its single major merger, Roche paid $11 billion for Boehringer Mannheim, a large German maker of diagnostics.

Over the next decade, personalized medicine materialized as the wave of the future, and Roche was riding it. "Roche has paved the way," says Mohamed Muhsin, ticking off a range of genetic tests tailored to treatments for cancer, HIV, and hepatitis, as well as clinical tests and other biomarkers measuring drug benefits and side effects.

When Roche first got involved in personalized medicine, its primary payoff was thought to be clinical benefit. But at a time when both public and private payers are refusing to cover high-priced innovative treatments, cost-effectiveness is an equal incentive.

And nowhere is the incentive greater than in oncology, where six-figure treatment costs are hitting a ceiling.

With Ventana in its corner, Roche will soon be rolling out a model of personalized medicine: the HER2 gene screening test to identify Herceptin patients.

And not a moment too soon. Critics are no longer wide-eyed about personalized medicine, noting that after 15 years, all Roche and Genentech have to show is a handful of test-and-treatments. Some cynics even suggest that it's mostly smoke and mirrors to impress Wall Street.

Zabrowski is clearly a little tired of all the naysaying. "People keep wanting us to point to other examples of personalized medicine," he says. "Personalized medicine will take many years to be validated as a commercial reality. In some cases, we'll have genetic markers to help predict outcome. In other cases, we'll have empirical things to help predict outcome over time. And I think we live that today."

Another vexing angle is economics. Says Michael Russo, a partner at the Bruckner Group: "Without careful planning, the payer environment into which these very important innovations will launch may not be so favorable. Insurers are willing to incorporate personalized treatments—after all, they should bring safety and efficacy advantages—but pharma will have to prove their worth. In the extreme, they have to be careful not to butt up against basic affordability. How personalized can medicine get before its treating a handful of people at a cost of millions per year each? No one wants to be caught on the wrong side of that very fine line."

Zabrowski says he's not authorized to discuss economics, but he can state what is clearly the Roche credo. "Personalized medicine is too great an advance in patient care to get bogged down in the economics," he says. "It's our view that it's our ethical responsibility to pursue this."

As pharma looks for its next business model, Roche, with its portfolio of biologics, its entrepreneurial partnering, and its synergies between diagnostics and drug development, is obviously a potential prototype for other companies to imitate. But is that practical? After all, it took Roche two decades to get where it is today.

How are the giants of the industry going to be able to make such a radical change before it's too late?

"They're not. Because it already is too late," Zabrowski said. "And we've already done it."


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