October 6, 2025
Welcome to Perspectives, a signature podcast series from The Leerink Center for Pharmacoeconomics. Hosted by Dr. Mel Whittington, a health economist and Head of the Center for Pharmacoeconomics, we will be hearing from individuals across the industry to better understand and appreciate the societal impact of healthcare innovations.
Mel Whittington: Today, I get to sit down and talk with someone who spent their career working to develop new cancer drugs. And in the words of my nine-year-old, cancer sucks. And cancer’s hit our family really hard over the last few years, as sadly it has many other families. And so being able to sit down and talk to someone who literally goes to work to fight cancer and to make it so that things that scare me hopefully don’t scare my children is my equivalent of sitting down with my hero. So today we’re talking to no one other than Steve Potts. Steve, thanks for being here.
Steve Potts, PhD, MBA: It’s great to be here. I’ve really become a real fan of your podcast series. So, this is, really an honor to be on it.
Mel Whittington: Oh my gosh, well I appreciate you. First, can you tell me a little bit about what made you choose cancer drug development for a career?
Steve Potts, PhD, MBA: I look backwards. I wish it was a super clear path, but you know, just briefly an undergrad in physics and then a PhD in bioengineering at UC Davis. And I’ve been always just hated cancer and never really understood it. I actually ask when we build companies, I asked new employees two questions. I say, number one, you know, “what was your earliest experience with cancer?” And, know, it could be a dog could be, you know, and we all have those stories. Then I asked kind of who who’s going to motivate you as you work and go through the really hard times of drug development because this is getting a drug in the market is really hard. And so, I think we all have, and I do too, those early stories of, kind of hating this cancer, whether it was in a pet or a dog or a grandparent. But after Davis, I was really fortunate to join an amazing team of drug hunters in the Bay area. And this is 2000 and there was one in particular, Tony Allison that had invented CellCept, which is still small molecule and still the best small molecule for transplantation. It’s gone generic and it’s used everywhere to transform transplantation. But he was a drug hunter, South African, MD, PhD, and just watching him work and just being like, what is a drug hunter and how do these guys do this? And so, I think that the dual hatred of cancer and then just the addicting aspect of just how interesting and fascinating drug development is.
Mel Whittington: In addition to you developing new cancer drugs, you also have some interesting hobbies. I first heard you speak at a House subcommittee hearing during which you testified on the drug price negotiation provisions within the Inflation Reduction Act. You’re a cancer drug developer. Why did you start providing testimony and speaking out about health policy?
Steve Potts, PhD, MBA: Yeah, there’s about a three-year awareness on my end, actually, on the policy side. I only got into it because of how devastating the IRA small molecule penalty was to funding for small molecule programs, especially anything that really affects the elderly. And I was living it. And so, when you are the science experiment, it’s hard to understand what’s actually going on, but this would really hurt early-stage drug development investments. And it took me a while to really kind of understand that. We can walk through some of that. But I was really honored to be asked to testify. And I think I kind of joke, the only reason that I was asked to testify in the house was because I make drug development look hard. It is hard. I’ve been working on cancer for 25 years about the first half of my career in diagnostics, developing cancer tests, and then the second half on drug development. And I’ve touched two drugs that have gone all the way and been successful and are given to patients today. But I’m halfway through my career, I’ve got about two decades left of work probably. And sadly, that’s a pretty good track record, being involved in just a couple of drugs that make it all the way. So, I think I got pulled in to testify because I do, I think represent how hard this is. And that’s usually the story I try to tell people, just convey how competitive this industry is and how hard it is.
Mel Whittington: Yeah, and I appreciate your testimony. I learned a lot from your testimony. There’s many things that I hear today that I’m like, “huh, Steve talked about that in his testimony more than two years ago before all of this.” And so, I’m sure glad that you accepted that invitation and did that. In addition to your testimony, you also had one of the earliest data points in a survey you conducted in early 2023, I think it was, on the emerging consequences of the Inflation Reduction Act on innovation. And we’ll spend a lot of time here in a little bit talking about what are the drug pricing provisions within the Inflation Reduction Act? What is the pill penalty? What is a small molecule? But I want to talk about this survey you conducted a little bit. So, we’ll have to add survey analysis researcher to your list of hobbies as well as testifying in front of Congress. I should introduce you to golf, Steve. It’s really great. But all jokes aside, what did your early data from this survey show and I think it was 2023.
Steve Potts, PhD, MBA: Yeah, I had been fundraising for a small molecule that probably typically would have gotten funded in a normal environment, but it hit just exactly the IRA small molecule penalty. And I was engaged with some very savvy venture capital biotech investors that had been doing this for 10, 20 years. And I was trying to kind of like formulate a strategy that would give them the adequate return they need with this nine-year penalty that we’ll talk about. And it was just clear that there was no easy fix, you know, and we went through a few ideas, and I was just wondering, you know, is my experience kind of an N of one? I joke kind of when I talk to the laypeople that drug development and fundraising is like shark tank for nerds. You know, you have to, it’s typically like a year, you better be ready to have a hundred nos. You talk about your program, and you have a minute to hour to really kind of convey that and then really good firms will spend weeks really evaluating your plan and how you want to do it. But it was a much bigger uphill battle than I’d seen before. So, to kind of satisfy myself that I wasn’t just an N of one, I put out a survey to about 100 biotech venture capital and some biotech CEOs and asked two questions. One is, is small molecules riskier or less risky than biologics? And the second question was, you know, has the recent IRA changed your funding and your interest in funding small molecule drug development? And interestingly enough, so out of those 100, 87 out of 100 said it had had a strong impact on investing in these small molecules, especially for elderly population, Medicare population. So that was pretty jaw-dropping, think about it. 87 out of 100. I mean it’s rare to get venture capitalists all agree on one thing, but they were certainly agreeing on that. And then BioCentury to their credit, did another really good survey, like mine, different methodology. And they’re a real professional firm doing it. And they saw the same thing. So, we both were seeing that. And I like to explain this to people. It’s kind of like a cancer drug trial where what we had was like your first in human 1A, 1B datasets where you’re just trying to understand what the drug does, what the dosing is, and kind of some early readouts of efficacy and talk. So, my study and the BioCentury study were really like these early, like a 1A readout of like, huh, what is this going to look like? And now, you know 2025, we have what you would call like phase two datasets. I mean, we clearly have seen 70% hit on funding for small molecules that are Medicare impacted, it impacts 50% cut on secondary indications, which again, this is all rational and this is basically investors behaving as they’re being incentivized to behave under the IRA.
Mel Whittington: You know, just this morning I saw a new peer-reviewed publication, it’s in Health Affairs Scholar, from researchers at the National Pharmaceutical Council that provided evidence for the IRA was associated with the decline in industry-funded post-approval oncology trials. And since the IRA, small molecule oncology drugs have experienced a disproportionately greater reduction in post-approval clinical trial initiations as compared with biologic drugs. And I’m bringing this publication up in particular because one, it’s sitting in my inbox right now and also because I’m talking to you and it’s related to small molecule oncology products. But this is just one of the now many peer-reviewed publications of original research showing these unintended consequences. And I got to tell you, every time I see something like this, I think back to your testimony again, and I think it was what, 2023, where I’m like, Steve was right.
Steve Potts, PhD, MBA: Well, it’s encouraging. It wasn’t just a bad fundraiser. That was sort of encouraging, but it was very discouraging to know that, wow, this is in impacting the whole industry and it’s doing exactly what, if the word inflation, you didn’t want to do, which was to discourage what is the best functioning piece of really drug development, which is the small molecule programs and how well they go generic and how, from our view, how quickly they go generic. You know, it just, it was doing exactly what you don’t want to do. But yeah, there’s another survey. I think half of all small molecule indications have historically been on follow on indications. 35% of small molecules in cancer are the initial approval, you know, so you get it approved for multi myeloma small indication and then 65% in general in cancer small molecules are then a new use. You know, which is amazing. I mean, that’s what’s so fun and fascinating and frankly addictive about cancer drug development in particular is that you start in these small indications and you kind of verify if it works. And then you look at other cancers and see if you can have an impact there as well. So yeah, you probably couldn’t have written a bill that could have done a better job of upending how we have, you know, approached cancer drug development.
Mel Whittington: So, I want to dig into some of the concepts we’ve introduced because we’ve talked about small molecules and biologics and the Inflation Reduction Act and drug price negotiation and pill penalty. And for many people in our industry, these are all common language, things we absolutely understand. But one concept that I’ve learned from you and I’ve stolen from you a lot and I use it probably every single day when I’m writing for my work, and that is this concept of speaking to American living rooms. Can you explain this concept?
Steve Potts, PhD, MBA: Yeah, I mean, the terminology I use might be new, but obviously there’s people that have been doing this really well for many years and I really admire what they’ve done. But it’s just that are we talking to our family and our friends and our coworkers who don’t do drug development? Are we clearly explaining what we do? And let me just use an example of, I had a great conversation with my father who is 89 years old, PhD in electrical engineering, super bright but knows no biology and no chemistry. He said, “hey, what is this with all these? Why are drugs priced so expensive?” So in talking with my father or any kind of living room conversation, it’s interesting how much, if you just talk with your own family about drug pricing and why drugs are expensive, and what they do, you have a much better conversation and you’re able to help like elderly population understand that what they really voted for with the IRA is not getting new osteoporosis drugs. And I don’t think that came across when it was the focus is on, this is all good, we’re just gonna lower cost of drug development.
Mel Whittington: And I’ve had similar conversations with family members of mine too and everything is more complicated than it seems, right? And understanding incentives for innovation and market dynamics, these are not things that are broadly talked about, especially not to the lay audience or to the American living room audience. And so, it is going to take a lot of people speaking to the American living room, speaking to the lay people to make sure that we understand policy and understand trade-offs because these things are complicated. In the spirit of speaking to American living rooms, can you explain the drug price negotiation provisions within the Inflation Reduction Act in just simple American living room language? Because I’m not gonna lie, drug price negotiation provisions doesn’t really roll off the tongue.
Steve Potts, PhD, MBA: The approach I take is I say, look, you know, in order for an investor to invest in developing a new drug, we may all want a new drug, but a new drug costs billion plus dollars or more. And that is money that has to come from investors if you’re going to do that, the way I try to explain it is that we want all drugs to go generic. So ideally a drug gets invented, it has a patent life. That patent life has been about 20 years from the invention, but it’s typically around 15, 16 years from the time it actually gets marketed. And in that time, you can have the sales to basically make the investment worthwhile. And then it goes generic and it’s a benefit to the world after that. And what the IRA did in a very good way is actually say, look, we do not want people doing patent tickets. All drugs should go generic or be priced equivalent generic. So, we are going to enforce and have a negotiation with Medicare at 13 years for biologics and at nine years for small molecules. I wish it had been 14 or 15 years, but I think what we’re seeing is we can probably live with that. But when you have it nine years, what happens is if you have a small molecule, half of your sales come from year nine to year 13. So, if you’re an investor and you’re looking at two options, one is a small molecule and one is a biologic, you’re going to naturally make your investment decision toward the biologic or get out of the space. So, if you were investing in small molecules, you might simply just leave the space and go into AI or something that is not going to necessarily improve health directly. So, it was just the difference between the nine-year treatment for small molecules and the 13-year treatment for biologics.
Mel Whittington: Got it. I want to come back to those kind of different time clocks in just a second. But before I get there, I just want to ask about negotiation. Because drug price negotiation, I think, sounds like a 100% reasonable thing to do. Negotiation is central to any time you really have a seller and a buyer. There’s some form of negotiation that happens. We negotiate lots of things. Commercial insurers negotiate. And hearing the story from your dad, thinking about negotiation is a good thing, this sounds like a good thing. So why is this negotiation part of the Inflation Reduction Act, why is that different than something commercial insurers do or other negotiations we have with things we buy?
Steve Potts, PhD, MBA: The way it’s working right now is that you do all of this work to get the drug approved and sold. And then at seven years, the drugs been on the market. You have this really tough situation where you sit down with Medicare, and you offer a price and they come back and it really isn’t a negotiation. It’s a take it or leave it. They say, well, if you don’t like the price we’re gonna mandate, then the penalties they inflict are so bad, you basically, would have no profits. It’s kind of astonishing how it was written in there. And so, it’s not really a negotiation in that sense, but that starts at seven years, and it goes till nine. And the thing that’s really hard and difficult is that, you know, anyone who’s an investor knows that you have to take a long horizon in investing, especially in drug development. So, I’m making a pitch to an investor to say, look, we have a really good team of drug hunters. We’re going to get this drug developed. And then you have to have stability for the investors to know what kind of pricing you’re going to have, you know, from five years to the next 15 years. And what’s even harder about this negotiation is its politics influenced. So, it was a lower price reduction that was done in the last year election just because we didn’t want to see that front and center. But now new politics and different sets of pricing discussions come in. So, not only are investors having to take on the risk of a long drug development cycle, but now they’re gonna be at the mercy of basically politics and that go up and down, swing left and right when the drug is actually on the market.
Mel Whittington: Got it and one thing, Darius Lakdawalla has a nice op-ed out about is there’s no floor price. There’s a ceiling, there’s no floor to how far that negotiated price could go down. And so, there’s a lot of uncertainty there. We talked already about these kind of different time clocks, like small molecules, that negotiated price can come in at nine years, but then it’s selected for negotiation at seven years. But before we get to those time clocks, and the interest of speaking to the American living room. Like small molecule, biologic, those aren’t things that I talk about in my living room. So, what are these? Why are they important? Why are they different?
Steve Potts, PhD, MBA: Yeah, use the osteoporosis example. Are you happy with going in twice a year, you know, for a shot or monthly for a shot or would a pill be better? And could a pill you could monitor it more easily and be lower cost. And you can look at that across so many diseases where patients would much prefer pills. Pills are also much more inexpensive to administer. You probably know this exactly, but the hospital prices for the top 37 infused cancer drugs, so that’s a biologic, 86% higher than in physicians’ offices. And so of course a pill is even less having to go in and have all the administration costs as well. So, there’s cost reduction, but when I talk with laypeople in American living room, it’s easy, they get it. Of course you’d wanna have pills versus an injectable.
Mel Whittington: Even beyond that kind of route of administration, there are some conditions that are just treated better with a small molecule, right, versus a biologic. Not only is it just a preference for a route of administration where that could be kind of seen as like, okay, we’re getting the same drug, it’s just maybe ease, but there are some conditions that are just better treated with a small molecule.
Steve Potts, PhD, MBA: I really try to stay in my lane, which is cancer drug development and really earlier stage cancer drug development. And so, I stay with cancer and I’m working with some great drug developers, drug hunters that are incredible small molecule drug developers. And what we can do with small molecules these days is amazing. And just look at brain cancer. So, brain cancer is really two things. It’s primary brain and people know about GPM and just how lethal these primary brain tumors are. But brain cancer is also brain metastases where the cancer starts somewhere else in the body and then it metes to the brain. And that’s usually kind of the end death sentence. You do not want that if you’re a breast cancer patient, you’d much rather have bone metastasis. If you’re a thyroid cancer patient, you’d much rather have lung metastasis, which ironically in that disease can be fairly indolent for a number of years. But typically, when any of these cancers that show up anywhere in the body, when they metastasize to the brain, you typically don’t have very long. And what penetrates the brain the best? Small molecules. So, both for primary brain tumors and for these brain metastases, the last thing you would want to do is disincentivize small molecules. And there’s even a case where if you have a, some really great biologics drugs that will hit the cancer throughout the body, but they don’t penetrate the brain. So, then you have this kind of cancer preserve up in the brain where you get the tumors. it just screams for more small molecule development so that’s what I use as an example, but you can also look in the neurosciences area, Alzheimer’s, Parkinson’s. I mean, of course, a pill would be so much better than trying to do something complicated with direct infusion into the brain or a biologic, that typically doesn’t cross the blood-brain barrier.
Mel Whittington: Okay, so now let’s kind of go to this time clock. Small molecules, now that we understand what they are, small molecules selected for this IRA negotiation seven years after initial market entry. I know there’s some nuances there, but let’s not get into those nuances. With the negotiated price coming in at nine years, and then for biologics selected 11 years, and then with the negotiated price going in 13 years after kind of that initial market entry. Now this shorter time clock, for small molecules. That’s what’s been referred to this IRA pill penalty. And you’ve already spoken to your experience as a cancer drug developer having harder times fundraising for small molecule oncology products. But can you just explain in real clear simple language this IRA pill penalty in simple American living room language?
Steve Potts, PhD, MBA: Yeah, if you want to develop a pill that I can just take orally, I’m going to basically get half the investment opportunity as if I make an infusion that you have to take in a hospital or a doctor’s office. The reason I say half is because it’s nine years versus 13 years. And the last four years is where really half of your profits come from for that pill.
Mel Whittington: Got it. So right now, at the 13 years for biologics, it disincentivizes, evidence now has shown, it disincentivizes certain things related to small molecule development and might be shifting some of those investment dollars to biologics or outside the sector.
Steve Potts, PhD, MBA: Yeah, and it’s for the Medicare population currently. So, there are exceptions where small molecules are doing great, but for small molecule programs for the elderly, that’s why I use osteoporosis as a great example, but Parkinson’s, Alzheimer’s, they’re just not seeing the investment they did. The other thing that I think helps when you talk in an American living room is everyone knows how slowly medicine changes. I mean, how doctors’ practices, they change slowly. I mean, doctors are conservative by nature. Things change slowly. So, when you say, look, if you have 13 years to sell a product and you cut off the last four and you’re in an industry where things change slowly, I don’t care how great your drug is, it takes a long time to have it really be used by a lot of patients. And in cancer, it usually starts like a much later line when patients, should have used it very beginning, but they’re using it much later. And it takes years before the community of oncologists really will fully embrace the benefits of a new therapy. So, it isn’t like day one hits and you’re suddenly just selling and you’re optimized your sales. You’ve got a long time for that builds up. And those last four years are, that’s why they represent at least half of your sales.
Mel Whittington: And then that time frame that we already talked about at the beginning of the episode was that time frame, particularly in oncology, is when a lot of post-approval research is done because there has to be time enough to do that research and to have that potential new indication and generate revenue from that to make the investment in that post-approval research worth it. And so, when that time clock cuts, it’s not only cutting the revenue for that initial indication but reducing incentives for that post-approval work.
Steve Potts, PhD, MBA: Yeah, and that’s so many of our successful drugs have been you, especially the precision medicine matched drugs. And what I mean by that is that you, we genome sequence a patient’s tumor and we’re looking for weaknesses. We’re looking for some, some interesting defect in that, that’s characteristic of the tumor that’s not characteristic of the normal patient. And we develop drugs for that. And so, the whole premise of this, you know, new precision medicine, where we match a drug to a patient’s cancer genome, it all starts with you find a small subset of patients that have a mutation you can hit with this drug. And it may be so small, it’s not economically viable on its own, but you prove the drug. And so, you have a small, you start small, and you see how it does, and then you build from there. And so many of our drugs have started in one indication and then have shown to have the most benefit in cancer in another one. You know, again, 65% of all new small molecules in oncology were a new use and 35% were their initial use.
Mel Whittington: Now, one critique I hear arguing against the pill penalty saying that there isn’t this pill penalty with the different time clocks of drug pricing provisions within the Inflation Reduction Act is that for small molecules and biologics, there has already been this difference in time clock for data exclusivity. What would you say to that and why is it different?
Steve Potts, PhD, MBA: I actually, I was trying to sort this out myself you know three years ago, trying to understand why was there a difference? You know I live in Arizona. I talked with the staff and Kyrsten Sinema and actually both our senators and their policy groups. Like, where did this come from? And the difference has no rational reason, but it, I think it started from the idea that in the orphan exceptions and it goes back to Hatch-Waxman, there was additional years given to biologics. And so that’s where it came from, but it’s a complete nonsensical differentiation. It wasn’t based on any scientific rationale.
Mel Whittington: And then like when you’re out fundraising for new drugs, was this previous provision around data exclusivity, was that something that gets talked about or that didn’t seem to be as big of a concern related to revenue?
Steve Potts, PhD, MBA: Not at all. Not at all.
Mel Whittington: I want to pivot a little bit and add to your concept of speaking to American living rooms, which I love, and I’d also suggest we also need to improve the lives of the people living in those American living rooms during a time when it’s really hard to find agreements on anything, I actually think nearly everybody would agree with three things, and that’s one. We want to reduce out-of-pocket costs to patients. I think we are all devastated thinking about somebody going to a pharmacy counter and not being able to afford their medicine. I think we all find that unfair and something we shouldn’t, we should have a system that doesn’t do that. We also want to get the most bang for our buck. Like we know things are expensive. We want to use our resources efficiently. I do think that is kind of common knowledge and a common goal. It’s like, hey, here’s money. How can we use this wisely? And then I think the third thing is I think we do all want new drugs. You talked about this with your dad a little bit of we don’t have all of the solutions to all of our health problems, and we do want them. And so, I really do think nearly everyone would agree on those things. We’ve got to reduce costs to patients. We need to use resources efficiently and we want new drugs. And so, I would think we agree on all of these things. I think many people in our industry are working to achieve those things but we’re using different approaches or we’re arguing for different approaches. And this is where I think we absolutely need to look for and prioritize evidence around which of these approaches that we’re arguing for can actually achieve these goals and minimize any unintended consequences or these trade-offs that happen. So one, we have to have that evidence. We need to be able to have good evidence to inform our approaches and inform our decisions. But we also have to be willing to kind of adapt our approach with new evidence that we can’t stay too firm grounded in one approach. We have to allow that to evolve as new evidence comes. And so, we often hear two different arguments or two different approaches that are argued to achieve those goals. I think one is this market-based approach, like let the US market figure it out. Free market, it’ll figure it all out. And then I think on the other side of the coin is this government intervention approach that we have to have government intervene to achieve these things. And those two things are quite separate. But then there’s also this middle ground that you discussed in your testimony, and that’s kind of this concept of government intervention after X years. So, what is that middle ground that you talked about, and why do you think that is the evidence-based approach?
Steve Potts, PhD, MBA: Yeah. And it goes back to, the IRA did a couple of really good things. One was out of pocket. I mean, no one freeloads chemo, even if it’s free, I’m not going to go take it. Same thing with, you know, type one diabetes drugs, but so the out of pocket was really good. The IRA did. But the other thing that IRA did that I commend them for is really going after this patent thicket type approaches, there had been abuses where drugs that should have gone generic and almost all of them are biologics in the time that patent was over, continue to have for a decade longer high pricing and that was another provision that you know with the again I wish it was 13 13 really, really solves this instead of 13 9 that was done and it’s a balance Mel like you said between let’s make sure that the money goes into new innovative therapies and then make sure drugs go generic or a price generic equivalent after the patent expires so I really applaud the IRA for trying to create that balance, but it should have been at 13 13, not at 9 13. And I think you can look at these areas and ask yourself, “you know, is this legislation helping me be the best drug developer I can be and helping our industry be the best industry it can be?” If you’re an investor in drug development, it is far less risky to try to figure out how to take a biologic that is hitting the end of its patent life and figure out how to keep that price high. That is a far less risky thing and involves lawyers rather than PhDs, scientists. But that is a far less risky thing than to try to fund someone like me and my colleagues that are saying, look, new, brand-new drug, doctors have never heard of it, but it’s gonna be amazing. It’s gonna have a huge impact, fund us. So, does the legislation encourage the front-end innovation and encourage investors to put their money in the front-end innovation, this patent period, or is the legislation encouraging a patent ticket type abuses that the IRA was really designed to prevent? So, is the legislation helping us be the best version of ourselves as investors and as drug developers?
Mel Whittington: So, when you propose this kind of government intervention at 13 years for small molecules and 13 years for biologics, that’s one, creating this parity between small molecules and biologics so we don’t have these odd disincentives against one and a greater interest in another one. But it’s also aligning the timing more closely with that kind of effective patent life or that expected time that the drug was going to be in the market for market-based pricing.
Steve Potts, PhD, MBA: And again, I think there’s been a lot of discussion. There’s some great people that are working on the, it’s called the Epic Act, which is really to make from nine to 313, make it 13 13. And there’s discussions on how to pay for that. I mean, nothing is free and having a little higher discount to compensate. But again, you think about that, it’s money at the tail end of the drug, which is I’m all for. I mean, in some ways, this is another concept I try to talk a lot about, even start with this concept in American living rooms, which is just look, of a dollar that is spent in American healthcare, only 9% of it is pharmaceutical drugs. And 90% of those are actually generics. But we have basically 9% to work with and we’re not addressing the 30%, which is hospital costs, the another 20%, which is physician offices. So, 50% of the cost of healthcare wasn’t even discussed in IRA. We’ve suddenly just zoomed right on this 9% prescription drugs. But I do think the environment we’re living in as a pharmaceutical industry, we have to realize that our cheese has moved. I mean, and I do think there’s other people who said this too, this IRA is probably gonna be one of the most, it’s the biggest impact on our industry. When you come back 10 years from now, look back on 2023, 24, 25, so we have to be much more aware of how we are justifying the economics of our drugs. And the IRA is the first step in that. So I super applaud, and I’d love to talk to you about this with the CIA and some of your cost-effectiveness analysis approaches, but the cheese has moved and we have to be, as we are developing drugs, thinking about the cost-effectiveness of these drugs and making sure that we are adequately prescribing the benefits that drugs actually get because the days are over when you can have a less risky investment path by just figuring out how to keep a biologic high price past its patent life.
Mel Whittington: Well, I would love to talk about pharmacoeconomics and cost effectiveness analysis and value demonstration. So, I kind of want to take this opportunity to pivot to a little bit of the work that I do. How I like to explain it is evaluating and communicating the impacts of healthcare innovation on different stakeholders, patients, caregivers, the health system, and society. I want to hear your perspective on this. Because I’m obviously a health economist, pharmacoeconomist. I think this stuff is so fun and can inform decision makers. But I’m not like someone who’s on the grounds doing the work, building new companies, developing new drugs, trying to get them into the market and paid for. That’s you. And so, I would love to hear from you how you think about the societal impacts of a drug or the health system impacts of a drug or just like the value of a drug. And when I say value, I don’t mean only to investors or to the company, but really to society to payers, so how do you think about that?
Steve Potts, PhD, MBA: Yeah. And again, I am, I am not a policy person, but I’ve become much more aware that I need to even early on in describing with investors why you should invest in this to speak beyond only the immediate, you know, this drug does this to this cancer and there’s this many patients. And I think the way I sort of American living room language would try to pardon me if I oversimplify your work is you have the CEA, which is just basically cost effectiveness analysis. What I love that you guys have done is you’ve added this generalized, which is saying, look, the value of a drug isn’t just in exactly how many months and years it buys a patient, but more generally the generalized CEA, what additional benefits are there that this drug does that are not getting captured in our kind of, you know, bean counting X number of patients, X number of years equals X amount of dollars. And I think that’s kind of how I think of it. But, it’s been very helpful for me when I, you know, think about a bladder cancer drug, you can say, well, there’s this many patients with bladder cancer and this is my drug and this is economically what it would do to lower this, you know, surgeries, et cetera. But bladder cancer is one of the most expensive, costly areas of cancer because patients ultimately get their bladder out and then they have a number of years they have to live with no bladder and you add up all of the cost of not having a bladder and having to deal with that plus all the caregiving and everything else around that. It isn’t just the, you know, go in and get the bladder removed, which can be hundreds of thousands of dollars, but it’s all the other parts of the generalized other costs that are being saved by, you know, this drug that prolongs or eliminates the need to have that bladder taken out. So, I think that’s how I think of it is just more general effects of the drug? I could, I mean, I live this with the last drug that we got approved, seeing benefits that I never would have expected for this drug. It was never in the pitch. It was never in the investment thesis, but it frankly changed. It really helped transform the industry with the last drug I worked on. I can talk to that if you’d like.
Mel Whittington: I think what I think about cost effectiveness analysis or economic modeling or pharmacoeconomics, I always say extrapolate, synthesize, communicate. Where we’re essentially saying, OK, here’s this trial that shows some primary endpoint from a phase three trial. But what does that actually mean? What is it actually doing for patients, caregivers, the health system, society? And so economic models, cost effectiveness analyses can do that for you. It can tell you this awesome story about what outcomes for your drug. Now there are a lot of decisions that are made in a cost effectiveness analysis. You can decide, hey, I only want to look at health system costs or patient health benefits, or I want to take a more generalized approach and think about caregivers and societal outcomes. And so, I do want to go back to the bladder cancer example and the example of drugs that you’ve worked on. What are some of these kind of surprising benefits from a drug that you’ve been involved with?
Steve Potts, PhD, MBA: Let me tell the one using, so there was a, there was two drugs that were approved in 2018, and they’re called TRK. You can Google, just think of Star Trek, TRK and that’s a fusion. was known in 1982 and two companies went after it in about 2012. We went head to head and it was an incredible experience. But that drug is amazing and it can be curative. And then we had a pediatric trial. had an adult trial. And the good news is, you know, it can be a curative level drug. I mean, just shocking impact efficacy wise. I had a doctor at Barrow Institute in Phoenix who approached me in the hall and said, “Steve, your drug has shrunk tumors in this GBM patient that had this rare TRK fusion. I’ve never seen that in my career.” And that’s kind of thing that keeps you addicted to drug development, just hearing that once. But that’s the good news. The bad news is it’s super rare. It’s in only one out of maybe 200 patients. And the other bad news is that at that time, around 2014, 15 timeframe, the only real molecular testing that was kind of next, this next gen testing, we test the whole cancer genome, which you had to do in order to find these TRK fusions was lung cancer. And in lung cancer, it’s about one out of every 200 patients. So, you have to go there with a new diagnostic test and get a doctor to test 200 patients to find this lottery ticket, amazing fusion to then give the drug. So, I got on board with a company called Ignita and my job really was like, how do you solve that problem? And what’s interesting, I think about this GCEA is I think you can predict ahead of time what benefits you’re gonna have for the drug by looking at what things in the current system outside of the drug are preventing that drug from being used. And what I mean by that is, so we looked at that and we said, look, we have got to find these TRK patients. And we tested 30,000 patients in two years in 16 countries. I had 16 MSLs going to pathologists, oncologists. We got massive adoption of new next gen testing, and it was all outside of lung cancer. So, I wasn’t thinking about, wouldn’t it be great if the whole world outside of lung cancer did comprehensive molecular testing? I wanted to say I had a problem, which is this drug is never going to be used widely unless somehow, magically, the cancer community all starts doing next-gen testing more broadly than just lung cancer. So, we did all this work. And again, this is expensive. I mean, just my program to do this was probably $20 million or more just to just to try to get this many, you imagine 30,000 patients, 1600 being tested. So, we did it, we got our drug approved. We were at a pediatric and adult trial simultaneously, which also was a huge risk. Our competitors did as well, both drugs got approved. They’re now given by two different pharma companies, and they continue to have incredible results. But I had a conversation with David Gandara, who’s a wonderful oncologist at UC Davis. Inside the industry, we call him the great Gandara. And, you know, and we talked about the TRK and he said, “yeah, you know, we don’t see that many TRK patients.” I said, “yeah, I know. I wish we saw more,” but we both agreed. said, what these TRK drugs did over a period of years made the whole cancer community start doing next gen sequencing. So, if I tried to do it, this, your generalized CEA flower, I would never have put a little leaf that said, going to transform the whole cancer industry and have them all next gen test outside of lung cancer. I mean, it never would have entered my mind. I don’t even know how I would have put that down as a dollar amount, but absolutely when sarcoma patients, when colorectal, when a number of these childhood diseases, when they know there’s a possible opportunity to find a fusion that you can give a drug that works this well, they suddenly start wanting to test more patients. And then what happened is after that, a whole bunch of other, targets started to really be focused on and you start to build out the opportunity of more and more targets that have drugs. But that whole area only happened because of that totally unexpected upside value to society, frankly, of just getting the cancer communities to start doing this next-gen testing. As an economist, I have no clue how you put that into your value flower.
Mel Whittington: Yeah, most economists don’t know either. I don’t either. We often have this petal called scientific spillovers. And so, I’d probably buck it in there, but to be honest, in a recent initiative that 12 health economists were involved in, No Patient Left Behind was helpful in organizing the efforts. We created this best practice report of all these different kind of value flower elements. And scientific spillover was the one value element we didn’t have a good way to quantify yet. And so, I think it’s important to remember that the methods that I do, think are extremely, and not just me, I should say the methods that pharmacoeconomists do, can be really informative tools, but they are still models. They’re not perfect. We should report them transparently. We should talk about our assumptions, and we should realize that not everything can be quantified. But they still can be really powerful tools. Well, Steve, you have been so gracious with your time. I have kept you far longer than I told you I was going to keep you. So, I want to take this opportunity to thank you. And I hope to talk to you soon.
Steve Potts, PhD, MBA: Thanks Mel, really appreciate it. And I really appreciate the work. This is the getting the pharmaeconomics models rights is such a key part of this.
Mel Whittington: I love it. Well, thank you so much. I’ll talk to you soon.
Thank you for listening to this episode of Perspectives. If you’re interested in participating in future podcasts or would like to learn more about the Leerink Center for Pharmacoeconomics, please email cpe@medacorp.com.
