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"Schering-Plough CEO Calls for Four-Pronged Approach To Improving Current Health Care Environment"
Fred Hassan
Chairman and Chief Executive Officer
Schering-Plough Corporation
Remarks from Global Cardiology Summit
Sponsored by Schering-Plough in Advance of
American Heart Association's Annual Scientific Sessions
Fall 2007
Orlando, Fla.
November 2, 2007
I deeply appreciate this honor from the American Heart Association. I am pleased to accept it on behalf of all the people of Schering-Plough Corporation.
The AHA is a powerful force for good. It is a powerful force in combating the death and destruction of cardiovascular disease. The AHA does great things for prevention and treatment today. And the AHA does great things to help advance the science of cardiovascular care for the future.
The people of Schering-Plough are proud of our support of the AHA. We are proud to be partners with the AHA.
I am also honored - once again - to be with all of you, for our fourth Cardiovascular Summit. Once again, I am very impressed by the medical science leadership in this room!
I make a special effort to participate in these summits. In fact, I have been to all four to date! Each time, I gain further insights into how we can do more to support your work and, ultimately, do more for the patients. Very importantly - we take back what we learn, and we turn the learnings into actions. I personally benefit greatly from your ideas. Together, we can feel good about the good things we are doing for the patients.
This morning, I would like to begin with some remarks, and then we can have a dialogue. First, I would like to comment on the progress - and challenges - in cardiovascular care. Second, I would like to share with you an update on our progress at Schering-Plough as we continue our exciting journey of transformation. Finally, I will give you my perspective on some broader public health issues - issues in which we all have a stake.
Progress and New Frontiers in Cardiovascular Care
So first: about the progress in cardiovascular care. This summer, The New England Journal of Medicine published the results of an important study. It was about the dramatic decrease in deaths from coronary heart disease. The study found that, from 1980 through 2000, the age-adjusted death rate for coronary heart disease in the United States fell by 50 percent or more. That is truly astounding. The study investigated the causes of this remarkable drop. It found that approximately 47 percent of this decrease was attributable to medical and surgical treatments applied after the onset of coronary heart disease. And about 44 percent was attributable to changes in risk factors, such as reductions in total cholesterol, reductions in blood pressure and smoking, and also increases in physical activity.
What is clear is that this revolution in cardiovascular care came through innovation on many fronts. Innovations in improving patient's health literacy and modifying patient behaviors. Innovations that have improved the quality of care, such as the Crusade registry that has improved acute care. Innovations in imaging diagnostics. Innovations in devices, such as stents - and implantable defibrillators. And innovations in biologics and pharmaceuticals.
So as we look at the transformation that has been achieved in cardiovascular care in the past decades, it is clear that we are all engaged in one of the great revolutions in the history of medicine.
As we look ahead, however, we can see that the unmet needs in cardiovascular disease remain vast. The same New England Journal of Medicine study also points to the alarming rise in obesity and diabetes. And we still have work to do in other areas - for example, in getting patients to goal in cholesterol care.
So as we look to the future, there is a clear need for further advances in prevention and also further advances in treatment. There is a lot more for all of us to do!
Schering-Plough Update
Now, let me turn to talk for a moment about Schering-Plough. Four-and-a-half years ago, at the time I joined this company, we set a six- to eight-year Action Agenda. This is our agenda to transform Schering-Plough into a high-performance competitor for the long term. We are delivering on that Action Agenda. We have transformed this company, and we keep transforming it.
At past Cardiovascular Summits, we have kept you updated on our progress. We updated you on the launch of our Turnaround phase in the fall of '05. We updated you about the completion of the Turnaround just one year later in the fall of '06 and the launch of our current Build the Base phase.
We recognize that our right to exist as a company lies in our capability to drive a continuing flow of important new medical innovations. Over those four-and-a-half years, we have transformed Schering-Plough from one of the lower investors in R&D in our industry, to one of the highest for our size. Most important, we transformed R&D by betting on the people. We put talented and passionate champions behind our projects. We had the courage to invest in the molecules we believed in.
Now we are beginning to see all that work, all that investment, bear fruit. For example, our thrombin receptor antagonist, TRA - an innovation from our own labs. TRA has recently advanced into massive, global Phase III trials - with some 30,000 patients. This is a very large investment for a company of our size, but the Phase II trial data has convinced us to go for it.
A big bet like this, of course, has risks. But we have the hope that we will see a high reward for the patients.
As you know, TRA has the potential to be a transformative treatment for atherothrombosis. Used on top of the current standard of care, it has the potential to save millions of lives. We hope that we can bring TRA to practitioners and their patients around 2010 to 2011, so we have a long-term and very large commitment to continuing innovation in cardiovascular care. We are in this for the long haul.
We are also committed for the long term in the cholesterol area. This is the area where we first set out to build Schering-Plough into a serious force in cardiovascular care. We have become a force!
When we look at where evolving medical science is going, it is clear that LDL-cholesterol lowering continues to be the standard for cholesterol care. And the goals keep getting lower. The big challenge is to get the patients to the lower and lower goals, and to keep them there. Today, only around 12 percent of the people in the United States who are candidates for treatment are getting effective treatment! So we will continue to be deeply committed to improving those numbers for LDL-cholesterol control. And at the same time, we will stay on top of the new frontiers. Meantime, we are also building strength across R&D and across the entire company.
Organon BioSciences
As you may be aware, we are working on the acquisition of Organon BioSciences of The Netherlands. We expect to complete this by the end of this year. Through this deal, we will be growing stronger, and growing better, in every part of our company - especially in R&D.
With Organon, we bring in a strong research and development platform, with strong people - a team that has created a strong pipeline. With Organon's five late-stage compounds, we will now have a total of 12 compounds in Phase III. We have a late-stage bulge!
We also expand our areas of therapeutic focus. In addition to our existing areas of cardiovascular care, respiratory care, immunology and oncology, we will enter two new and important areas through Organon - CNS and women's health.
We are excited about the promise of this combination. It can help boost our science, boost our R&D and boost our company.
One thing that will NOT change as we go forward is the vision we set out more than four years ago: To Earn Trust, Every Day. At the center of our vision is to be true champions for doctors and for their patients. This means not only strengthening our company and our innovation flow. It also means engaging in the health care environment and seeking to make a difference.
Public Health Imperatives
Before we move to a Q&A, I would like to talk about four critical areas of opportunity to improve the health care environment. By acting on these opportunities, we can make a big difference in public health.
First: Transform the quality of care;
Second: Transform our industry's innovation engines;
Third: Support a strong FDA; and
Fourth: Improve access and affordability for the patients.
Let's start with the first critical opportunity - to transform the quality of care. Here in the United States - and around the world - we are seeing a disturbing trend toward short-term cost containment. Yet we all know that the focus should be on cost-effective care for the long term!
Last year I spoke with you about an approach I had proposed to address this challenge. I am pleased to see it is beginning to gain traction. The approach I have proposed is about transparency and accountability. It is about transparent health metric scorecards.
The concept is simple. We should provide individual patients with a transparent scorecard. A scorecard of how a managed care organization - or other provider organization - is delivering on key health metrics for its enrollee populations. The same scorecard would be available to other users of health care, such as corporations. Enrollees and other users will then be able to choose the organizations that deliver high performance on those metrics. The better organizations will have strong scorecards and will keep improving. They will attract and retain enrollees. Those with weaker scorecards will need to respond - or lose customers. They will have powerful incentives to improve their scorecards.
I propose score-carding on basic metrics such as reduction in obesity, smoking avoidance and smoking cessation, and increasing exercise. Also, there would be metrics on the percent of enrollees who are at contemporary, medically validated goals for blood pressure, HbA1C and LDL cholesterol. And I would include key metrics on asthma control and immunizations based on contemporary standards.
This scorecard approach would achieve many good things. It would increase patients' health literacy. It would increase patients' accountability for their own health. Scorecards would give incentives to provider organizations to do what is right and cost-effective for the long term. And scorecards would significantly strengthen the central role of the practitioner in his or her relationship with the patient - to do what is best for the patient for the long term.
So that is the first critical opportunity I see - improving the quality of care.
The second critical opportunity is to transform the innovation engines of biopharma - and incentivize them for the future.
Today, our entire industry faces a critical challenge in product flow. The number of new molecular entities gaining FDA approval is down dramatically from a decade ago, while the cost of the R&D to produce a new drug has gone up dramatically - up around 50 percent just since 2001, by some estimates.
These convergent negative trends must be reversed - or they will strangle the innovation flow.
One area that needs transformational change is the innovation process within biopharma companies. The burning issue is the expensive, late-stage failures of compounds. This is the main cause of the high attrition rates.
We need to crack the code on improving R&D productivity. One part of the answer is to treat R&D as a central driver for the company, rather than having it as a sequestered division. At Schering-Plough, we have put R&D at the center. It has my direct engagement, as CEO.
Also, there must be ruthless decisions to kill projects early to avoid expensive late-stage failures later. To avoid even more catastrophic post-marketing withdrawals.
And we must gain a better understanding of the biology of disease. We are still very early in the evolution of this critical knowledge today. An understanding of disease biology will help us target better. Then we can decide whether we go for a biologic approach or a small-molecule approach.
R&D investment will need to rise as a proportion of total spending for companies because the big unmet needs are in very tough areas - such as Alzheimer's and cancer. This is why robust intellectual property protection is so critical to continued biopharmaceutical innovation.
We must give investors the incentives to invest in big bets on new medicines - or the investors will do something else with their money.
This leads to the third critical opportunity: to support a strong FDA.
The reauthorization of PDUFA was difficult and politically charged. Fortunately, FDA layoffs were avoided - narrowly. Layoffs would have been bad for everyone - especially for the patients.
But much more needs to be done. Shorter-term political pressures on the FDA have had their effects on employee morale. These pressures have also been tilting the necessary balance between efficacy and safety toward a preoccupation with safety. This has been a major factor slowing product flow. It drives further enormous R&D costs, with demands for bigger and bigger clinical trials.
Our society - especially, political leaders - needs to assure that the FDA has the headroom, the resources and the independence to do its job.
The fourth - and final - critical opportunity that I want to talk about is transforming access and affordability.
The success of the Medicare drug benefit has been a historic accomplishment for this country. Despite many doubters, the reality is that this benefit has given millions of seniors affordable access to medicine. More than 30 percent of U.S. seniors lacked drug coverage of any kind in 2005. With the introduction of the Medicare drug benefit, coverage jumped to more than 90 percent of seniors. Premiums came in lower than projected through competitive private plans that continue to have wide formularies. The Congressional Budget Office estimates savings of some $265 billion over 10 years, and there is around an 80 percent satisfaction level among enrollees.
Now we also need to work to expand affordable access to others. For example, by finding the right way to bring under- and uninsured people into coverage. But we must do this in the right way. We must preserve a free market environment and incentives for innovation. Otherwise, patients will be gaining access only to older drugs and not get the innovations that they need.
We must incentivize intermediaries to do the right things for the practitioners and for their patients for the longer term. We must protect intellectual property. We must support a strong FDA. And we must promote health literacy and responsibility among citizens for their own health.
Let me close by saying that we feel privileged to be with you today. Your advice and counsel has direct and deep benefit for our efforts. It further advances our science. It makes us even better partners and collaborators in cardiovascular care.
On the bigger stage: Your work is advancing the noble cause of improving cardiovascular care in societies around the world. As champions for the patients, you are at the cutting edge of the further advances that they need and deserve. We admire you for your work.
To do what is right - for the patients.
And now I look forward to our dialogue.
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