Embracing the Promise of Patient-Centered Biotechnology

James Geraghty has had an up-close view of the rise of the rare disease drug industry as an entrepreneur, investor, and executive. Now he’s added the additional title of “author” with his new book “Inside the Orphan Drug Revolution.” Geraghty looks back through the past 40 years of his career starting with the passage of the Orphan Drug Act in 1983. We spoke to Geraghty about the catalysts that gave rise to the orphan drug industry, his concerns about the changing rare disease policy landscape, and why he believes it’s essential for companies to take a patient-centric approach to drug development.

Daniel Levine: James, thanks for joining us.

James Geraghty: Thank you, Danny.

Daniel Levine: James, congratulations on the new book, Inside the Orphan Drug Revolution, the Promise of Patient-Centered Drug Development.

James Geraghty: Thank you. It’s been a pleasure writing.

Daniel Levine: Talk about your book, your visibility into 40 years of the orphan drug industry and what needs to be done to ensure scientific innovation can result in new therapies that benefit patients. I’d like to start with your own entry into the world of rare diseases. You say you stumbled into it unexpectedly. Can you explain what happened?

James Geraghty: Sure.  Like a lot of the young people, early in my career I was looking for some way to make a contribution. You start by getting trained, and I was trained as a lawyer and then I joined a strategy consulting firm and they gave me great training in analysis and then thinking about value creation and company building. But I found that most of the clients that I was working with were primarily interested in making money and that was intellectually interesting in some ways, but not really that satisfying or rewarding. And then one of the clients that I began working with was a client that had a very different culture and a very different set of values, quite honestly. And that was a company that was early on in the orphan drug revolution, working with patients with rare genetic diseases. And I came to see the impact, the value that those drugs, those therapies could have on those patients. I came to see the commitment to science and medicine that the people working in that company, working on those drugs with the patients and the families that they were working with. And it was very powerful and it became very kind of appealing. And ultimately I oriented my entire career toward working with people and companies like that.

Daniel Levine: Well, you’ve certainly had a long and sweeping career much of which has been involved in rare disease as either an entrepreneur in residence with Third Rock Ventures, a CEO, a board member, or chairman. What is it about rare disease in particular that has attracted you to this work?

James Geraghty: You know, there’s a sense of responsibility. My longtime mentor in this field was Henry Termeer, whose often considered by many people the father of the orphan drug revolution, who started his career back where he was my client when I was with Baxter Company, as I was describing earlier. And then Henry went on to effectively found Genzyme Corporation, which was a longtime leader in the orphan drug community. And Henry had a tremendous sense of, you could say, personal responsibility. And what he always used to say was when you met patients and families with a rare genetic disease and you saw the suffering and the challenges that they lived with, and then you met these brilliant, talented scientists and physician scientists working on innovative therapies that had tremendous promise, it needed a company. Drugs can only be brought through the FDA and ultimately marketed—brought to patients around the world—by a company. And Henry felt a tremendous sense of responsibility that we had to do whatever we could to get those drugs from those scientists through the FDA to those patients. And that was very powerful, very moving. And that became really the motivation for the rest of my career.

Daniel Levine: You talk about a number of catalysts that have enabled the emergence of an orphan drug industry. The first is the Orphan Drug Act. Can you explain how this transformed the landscape for rare disease drug development?

James Geraghty: Sure. It goes back to really the way the pharmaceutical industry was oriented in the 1970s. In those years, the pharma industry, which had, as it had passed from early founder, entrepreneur scientists, become large companies passed into the hands of large corporations and financially oriented managers. It had become very profit driven and it had become focused on this quest for blockbuster billion dollar drugs that could be taken by a large number of people, and it had left behind some of its original mission around very severe, very debilitating diseases, but diseases that often affected only a small number of patients. So those diseases were abandoned, orphaned by the pharmaceutical industry. And it was only when a group of patients got motivated when they were upset, even angry about the fact that pharma was not addressing their diseases, their family member’s diseases that they want the Congress and after over a two year period of really building awareness and mobilizing support, they were able to get support for the Orphan Drug Act, passed exactly 40 years ago. Now that provided incentives for companies to focus on these rare diseases and that was enough of the catalyst. It raised awareness and it provided some financial incentives so that companies began working on those drugs, Genzyme being one of the pioneers. Some of those were very successful and that has transformed the industry to the point where some of these drugs for rare genetic diseases are among the most important drugs in the biopharmaceutical, biotech and pharma, communities today.

Daniel Levine: You also talk about the AIDS epidemic. I think listeners may think of the AIDS epidemic in the context of patient advocacy and its impact there, but there was a direct impact on rare disease patients like Ryan White, the teenager who had hemophilia contracted aids from contaminated factor VIII. What impact did this have on the development of an orphan drug industry?

James Geraghty: It had a huge impact, as I talk about in the book hemophilia, which is one of the most widely known of all rare genetic diseases, sometimes called the Royal disease. As many people know histories of hemophilia and royal families, Queen Victoria’s family and the Russian Royal family, a well-known disease, highly visible, and one of the larger patient communities for rare genetic diseases. And in the late 1970s, the hemophilia community was on a high; things were going very well. New therapies, Baxter, the company that I was working with Henry Termeer at, other companies, had developed new forms of so-called concentrated factors that were safe, convenient, provided the best care that had ever been seen in hemophilia and life expectancies had improved, quality of life had improved dramatically. But it turned out, there’s a dark side or an underside to every new technology. Those drugs, those therapies have been made available by pooling large quantities of human plasma. When people would donate their plasma, it would be collected and then these factors for treating hemophilia would be precipitated out of that blood, out of that plasma. And unfortunately, as the AIDS epidemic swept the country, it was not recognized at the time that many donors, many of whom were often poor and came from under privileged communities in which the AIDS virus, the HIV virus, was even more prevalent. It turned out that almost all of that blood that was being pooled had some HIV contamination. And the way that contamination works is if even one donor has HIV and 20,000 donors are pooled to make large lots for treating thousands of patients that it will all be infected with HIV. And as a result, many hemophiliacs, many persons with hemophilia came down with HIV, many died, and all of the advances of the earlier years were reversed. Life expectancies dropped sharply. And as a result, the hemophilia community became highly activated, like the AIDS community, agitating for faster reviews of drugs by the FDA, more support for access to and the push for better therapies. Now, all hemophilia patients have been transitioned from plasma-derived factor to recombinant or genetically engineered products that don’t have that risk of viral transmission. And that drove much of the genetic engineering revolution that has underpinned many new orphan drugs for many other rare diseases. And it also triggered a wave of patient awareness and patient activism that continues today to be an important force in providing support for therapies going through the FDA and regulatory authorities around the world.

Daniel Levine: You talk about the emergence of the biotechnology industry. How did that change the way people thought about rare diseases and conceived of therapies?

James Geraghty: They were very linked. You know, the traditional pharmaceutical industry came out of a heritage of chemistry, and most of the original pharmaceutical companies were chemical companies and they made drugs by synthesizing small chemicals. But the genetic diseases, as more was being learned about genetic diseases, it was learned that they were primarily, you know, genes code for proteins. And so, when a genetic disease or defect occurs, it’s a protein that is defective and small molecules are not very effective at treating proteins, but it turned out that through the miracle of DNA, Watson and Crick discovering the double helix and then scientists learning how to use genetic engineering to recombine products to make new products, to make these proteins, like the factors for hemophilia—factor VIII, they could be made in living biosystems. And those are the products. Those were the recombinant proteins that were needed to treat hemophilia disease, Gaucher disease, Fabry disease. Most of the products, most of the diseases in the early phases of the orphan drug revolution, and it was only through that miracle of biotechnology that those diseases were actually able to be treat effectively.

Daniel Levine: We’ve seen biotechnology take us from these enzyme replacement therapies and protein therapeutics to an era of really genetic medicine, whether it’s antisense, oligonucleotides, or gene therapies, and now gene editing. Where do you see the biggest challenges in realizing the potential of these therapies? Are they scientific, business, policy?

James Geraghty: Yeah, they really are a combination of those. Science and policy, in particular, are necessary to enable successful companies. The science is making tremendous progress and as you say, the next wave now. The first wave of advances was from these chemically synthesized products and plasma derived products to recombinant proteins, which had tremendous value and great safety, but valuable and life changing and wonderful as they are, they require chronic lifetime administration. They have a half-life and most patients with those genetic diseases need to go in to have an IV infusion to get their drugs administered every week, sometimes two weeks, at most every four weeks, for a multi-hour infusion, usually in a hospital. So that’s obviously a great inconvenience and has great burdens on the healthcare system and the families as well as patients. The next generation of therapies are so called one time therapies, genetic therapies, where instead of administering the protein, to take one example and as I said earlier, DNA genes code for proteins, instead of delivering the protein, we are now delivering the gene, the DNA directly to the patient. And the difference there is that integrates into the patient’s own DNA in such a way that it produces the protein for the rest of the patient’s life. The science definitely needs to be improved. We are finding new so-called vectors, new delivery vehicles to make these products safer, and that progress is happening rapidly. The policy progress is lagging, quite honestly. And a big challenge there is that the healthcare system, the reimbursement systems, insurance systems, haven’t caught up with the fact that these one-time therapies are so valuable to patients and so valuable to the healthcare system. But insurers haven’t learned and the healthcare systems haven’t learned how to reimburse therapy. So, a system today would pay a lot more for a drug that a patient had to come in and take every month for 10, 20, 30 years. The insurance companies would pay for that drug to be reimbursed for each one of those administrations, but they won’t pay something similar or an equivalent amount for the one time administration. As a result, even today as we speak, a kind of a chill has set in on the world of genetic medicine. Many investors have pulled back and many companies are now having to suspend or terminate work on these programs because investors today are struggling to see how reimbursement economics can provide a sufficient return on the investment required.

Daniel Levine: Your book is subtitled, The Promise of Patient Centered Biotechnology. I’ve never met a company that didn’t describe itself as science driven and patient focused. What do you think makes a drug company patient focused? And what does that matter?

James Geraghty: It matters a lot. It matters in terms of the fundamental way that companies think about going about developing drugs and think about doing it right for the long term. Yeah, you’re right, every company developing drugs says it’s patient centered, but you have to be, you have to get to know the companies to understand the difference. And every company has a culture and the culture tends to come from the people who founded the companies and where the companies came from and patients and physicians and scientists and even investors and employees. You can tell from the inside, there are some companies that put patients first, that try to do things right for the long term, that put the work in to understanding the patient journey, the unmet need and how to develop the therapy that will really have a significant impact. There are other companies that give some lip service to that and look to get a product to market quickly and cut corners. And those generally don’t tend to work. So, the good news is that because these therapies are so complex and they take so many people developing them, usually the only companies that survive and thrive really are the companies, particularly in terms of developing the drugs, which are more the small biotech companies, the companies that really do engage closely with patients and have that patient mission truly close to the heart of their own company mission.

Daniel Levine: Is there an example from your experience that you would point to that you think demonstrates how being patient centric paid off, how it improved the drug development process or the end product?

James Geraghty: Well, there are many companies doing that today. I think many of them would point to Genzyme’s Henry Termeer, who passed away a few years ago.  When Henry started at Genzyme, people told him he was crazy, that nobody, no investor would support companies developing drugs to these rare diseases. And indeed, it was very difficult to raise money to support Genzyme in the early years. It took many years and a lot of creative financing to have the company survive all the difficulties and delays inherently involved in developing drugs. Genzyme became ultimately very successful, became one of the most successful companies in biotechnology, not only in developing therapies for rare diseases, but in developing a whole way of relating to patients, of actually bringing patients drugs directly, not licensing them out to pharma companies, but being there in the market with patients so that you could understand how to improve them and how to develop next generation versions. And there are many companies today, Vertex, Alnylam, Amicus, Ultragenyx who are following that tradition and most of them credit Genzyme as being the role model for the companies they are building today.

Daniel Levine: Drug development remains an expensive and risky venture. We’ve seen some erosion to the Orphan Drug Act. One of the things you write about is the need for further policy innovation, particularly with regards to ultra-orphan disease therapies. I’d like to walk through a few of those points and have you make the case. The first is the need for regulatory flexibility. Can you explain?

James Geraghty: Sure. The FDA and EMA, it’s equivalent in Europe, and their counterparts in Japan and obviously many countries, all countries around the world, they’re extremely high quality organizations and I have tremendous respect for them. And most people who work in biotechnology have great appreciation and admiration for the people work at the FDA, they’re first class. The FDA had to learn, as orphan drugs came along, how to adapt its practices and that’s part of what the Orphan Drug Act was so helpful, in review times and consultation and in part working in more of a partnership with companies—because these diseases are so rare—with patients to understand how to develop a drug, how to support the successful enablement of a drug today. Most of the 7,000 genetic diseases that are out there are actually what will be called ultra-orphan. They have few fewer patients than Gaucher disease, Fabry disease, Pompe disease, hemophilia, other diseases that are the muscular dystrophy, cystic fibrosis, for which drugs have been successfully developed. And as a result, it’s much more difficult to do trials, and it’s much more difficult to develop manufacturing systems and validate the manufacturing processes. And the FDA, which like any large organization, can become bureaucratic. The people at the top of the FDA, I think they really understand and appreciate this and they try to help and they try to be supportive. But when these programs come into what you might call the bureaucracy, the reviewing divisions, unfortunately, a lot of people there, there’s a kind of a classic bureaucratic mentality about this. These are the rules and these rules have to be followed. And so today there’s some legislation being proposed to further adapt regulatory guidelines to ultra-orphan diseases, even rarer diseases. And I think the FDA itself is trying to find ways to adapt its review processes so that it maintains the same standards of quality for safety and efficacy. But it takes advantage of these policies that have been widely used that allow for an accelerated approval of a drug based on certain what you might call preliminary so-called biomarker kinds of indications, and then continued monitoring of the drug over time to ensure that remains safe and effective. We need to further develop the ability to do that in a systematic way to allow these other 7,000 diseases to actually have a chance of having therapies come to life.

Daniel Levine: You also talk about making priority review vouchers for rare pediatric diseases permanent. These are vouchers that are awarded to companies who successfully bring a qualified, rare pediatric disease therapy to market to shorten the review time for any drug. These vouchers are particularly valuable because they can be sold. What would you like to see happen?

James Geraghty: Well, those pediatric review vouchers have had tremendous impact because they do have significant value. And I’m with companies all the time in boardrooms where companies are trying to decide, you know, can they continue to support investment in therapy? Companies, board members, executives in publicly traded companies have a fiduciary duty to their shareholders to ensure that they’re investing those funds in a responsible way and they can see a return on that investment. And often these ultra-rare diseases, the number of patients is so small and the reimbursement issues I talked about earlier are so significant that it’s very difficult to see an attractive return on an investment. The ability to sell a pediatric review voucher at least allows a company to think it can recoup its expenses or most of its expenses, and at least break even. And that’s a valuable. That allows it then to make a valuable contribution and to develop other drugs. Hopefully they can be more valuable and support the company while bringing this product to market in a way that works for patients, and at least allows the company to survive. The challenge is that those vouchers have been continually subject to a sunset provision where they expire every two to four years. Congress has extended those expiration dates on a regular basis. But as companies are sitting in a board meeting today saying, can we make this investment? They’re looking at that PRV sunset provision. And they’re saying, well, right now, this is scheduled to expire in two years. And if we make this investment, it may take three to five years for our drug to be approved and there may not be a voucher available. So, some companies are making the decision not to make those investments because they can’t be confident that there will be a mechanism there that will at least allow them to offset the cost of doing that.

Daniel Levine: You also talk about the need for additional incentives for ultra-rare disease therapies. How are you defining ultra-rare populations and what might these incentives look like?

James Geraghty: Yeah. Ultra-rare populations are somewhat informally defined today, although they’re becoming more formally defined in various countries. In the United States, as many people know, a so-called orphan drug or orphan disease as defined in the Orphan Drug Act is a disease which afflicts fewer than 200,000 people in the United States. Ultra-orphan diseases are often looked at as diseases that have only a couple of thousand patients, maybe 5,000 patients might be a common number. And as I said before, most of the 7,000 genetic diseases that still lack treatments are in that ultra-orphan category, fewer than 5,000, often fewer than 1000. Today, because of the success of Genzyme and other companies, many companies would develop drugs for a disease with 200,000 or even 100,000 patients. But when there are only 1000 patients, it’s much more difficult, much more difficult to make the economics work. And so, we need further engagement around reimbursement mechanisms. We need other mechanisms like the kind that the Orphan Drug Act initially instituted to reduce the costs of filing with the FDA, to reduce, in particular, the complexity of trials and the complexity of reviews. I think with these diseases, which may only have a few hundred patients, it’s only when a set of reviews calibrated to the size of an ultra-orphan drug population are widely available, that all of those diseases will have a chance of seeing therapies developed.

Daniel Levine: I should note you not only talk about the need for scientific innovation and regulatory innovation, but also innovation around reimbursement. Can you explain that?

James Geraghty: Yeah. There’s been a number of discussions about that. They haven’t yet gotten much traction, but for example, take a disease for which today a patient needs to take chronic therapy. Those therapies can often cost, as many people know for these orphan diseases, several hundred thousand a year. And so, over the course of a patient’s living 30 to 40 to 50 years, the cost of therapy for that patient to take that drug can be $10, $15, $20, $30 million over the course of a lifetime. But today, a genetic therapy that’s being developed might only need to be administered once, and today, for understandable reasons, there’s a kind of a sticker shock quality that people can’t see paying more than something like $2 million for that. And that’s certainly understandable. Many companies are saying we don’t want $2 million. We want to get paid on an ongoing basis, but only if our drug works. Insurers and healthcare systems have often said to the pharmaceutical industry, we only want to pay for performance. We only want to reimburse a drug if it works. And these gene therapy companies are now saying, that’s what we want. We don’t want to be paid a couple million dollars on day one. We want to deliver the therapy. Then we want to work with the health system to ensure that the therapy delivers benefit on an ongoing basis. And if it does, but only if it does, it should be reimbursed on an annual basis, the same way that these replacement therapies that need to be administered chronically are being reimbursed today.

Daniel Levine: As you think about the next 40 years, what do you see as the potential to change what it means to be born with a rare disease and what do you see as the biggest threat to realizing that?

James Geraghty: Well, the book ends with a look forward, the next 10 years and beyond. Of course, the one thing we know is that the future is difficult to predict and it’s changing rapidly. There are a couple of things that are possible. One is, of course, the ultimate goal of medicine is always prevention of disease. There are some technologies emerging that offer the possibility of screening for genetic diseases and offer the possibility of allowing parents to have a pregnancy without a risk of a genetic disease. That’s a complex process, and it raises some ethical issues, but there are ways that that can be more fully integrated into the system. Newborn screening is a critical priority. Many of these therapies, if a child or an infant is diagnosed with a disease soon after birth, a genetic therapy can allow them to live with a full unimpaired quality of life. That same therapy, if the child is only diagnosed several years later, can have a positive impact, but usually can’t reverse much of the damage that was caused in the early years. So, allowing more diseases to be identified at newborn screening, and patients to be treated immediately after birth, will have a huge impact for patients who are still sadly born with those diseases, going forward.

Daniel Levine: The book is Inside the Orphan Drug Revolution. If you’d like to hear Jim or get a chance to meet him, he’ll be featured at the Global Genes Rare Patient Advocacy Summit in San Diego, September 12^th to the 14^th. Jim Garrity, entrepreneur. Investor. executive, and author.  Jim, thanks so much for your time today.

James Geraghty: It was a pleasure.

This transcript has been edited for clarity and readability.