Science Business: The Promise, the Reality, and the Future of Biotech

Summary: Why has the biotechnology industry failed to perform up to expectations - despite all its promise? In Science Business, Gary P. Pisano, Ph.D. answers this question by providing an incisive critique of the industry. Dr. Pisano not only reveals the underlying causes of biotech's problems; he offers the most sophisticated analysis yet on how the industry works. And he provides clear prescriptions for companies, investors, and policymakers seeking ways to improve the industry's performance. According to Dr. Pisano, the biotech industry's problems stem from its special character as a science-based business. This character poses three unique business challenges: (1) how to finance highly risky investments under profound uncertainty and long time horizons for R&D, (2) how to learn rapidly enough to keep pace with advances in drug science knowledge, and (3) how to integrate capabilities across a broad spectrum of scientific and technological knowledge bases.

The Business of Healthcare Innovation

Summary: Robert Lawton Burns, Ph.D., MBA focuses on the key role of the 'producers' as the main source of innovation in this wide-ranging analysis of business trends in the manufacturing branch of the health care industry. Written by industry academics and executives, the book provides a detailed overview of the pharmaceutical, biotechnology, genomics / proteomics, medical device, and information technology sectors. Most importantly, it describes the growing convergence between these sectors and the need for executives in one sector to increasingly draw upon trends in the others.

Overdose: How Excessive Government Regulation Stifles Pharmaceutical Innovation

Summary: This book is the first to offer a comprehensive examination of the pharmaceutical industry by following the tortuous course of a new drug as it progresses from early development to final delivery. Richard A. Epstein looks closely at the regulatory framework that surrounds all aspects of making pharmaceutical products today, and he assesses which current legal and regulatory practices make sense and which have gone awry. While critics of pharmaceutical companies call for ever more stringent controls on virtually every aspect of drug development and approval, Professor Epstein cautions that the effect of such an approach will be to stifle pharmaceutical innovation and slow the delivery of beneficial treatments to the patients who need them.

The New Medicines: How Drugs are Created, Approved, Marketed, and Sold

Today, most people use prescription medications. Every year, the multi-billion dollar pharmaceutical industry produces new medicines that treat everything from arthritis to AIDS, from high cholesterol to depression. But, despite recent controversies regarding the safety of drugs, consumers know little about the medications that they ingest and inject. How are these new medicines invented? How do consumers know that drugs are safe and effective? How are they tested? Who regulates their production - and who watches the regulators? How do drug companies produce the vast quantities needed for the marketplace, and why do they market their drugs as they do? The New Medicines (by Bernice Schacter, Ph.D.) leads the reader through the maze of the modern drug industry - from bench to bedside - and provides consumers with a step-by-step understanding of how new medicines are created, approved, marketed, and sold.

Inside the FDA: The Business and Politics Behind the Drugs We Take and the Food We Eat

Because of the importance of what it regulates, the FDA comes under tremendous political, industry, and consumer pressure. But the pressure goes far beyond the ordinary lobbying of Washington trade groups. Its mandate - one quarter of the national economy - brings the FDA into the middle of some of the most important and contentious issues of modern society. From "designer" babies and abortion to the price of prescription drugs and the role of government itself, Inside the FDA takes readers on an intriguing journey into the world of today's most powerful consumer agency. In a time when companies continue to accuse the FDA of nitpicking and needlessly delaying needed new drugs, and consumers are convinced that the agency bends to industry pressure by rushing unsafe drugs to market, Inside the FDA digs deep to reveal the truth. Through scores of interviews and real-world stories, author Fran Hawthorne (senior contributing editor of Institutional Investor) also shows how and why the agency makes some of its most controversial decisions as well as how its recent reaction to certain issues - including the revolutionary cancer drug Erbitux, stem cell research, and bioengineering of food - may jeopardize its ability to keep up with future scientific developments.

More Excellent Books on Pharma and Biotech:

For additional reading on the pharmaceutical industry, biotechnology, and prescription drug issues, please check out my recommended reading lists:

Best Blog on FDA and Pharma Industry Communications:

For insightful, industry-savvy advice on the FDA, drug regulation, and pharma strategic communications, please visit Eye on FDA - the excellent blog by my friend and colleague Mark Senak, JD, senior vice president at Fleishman-Hillard.

When asked about health care innovations, especially practices directed at controlling costs, most policymakers and wonks point to private sector solutions, such as the cost-constraining effects of HMOs in the 1990's or today's ideation of consumer-directed health plans. But is this conventional wisdom wrong? What about public sector health policies, most notably in Medicare or Medicaid?

In a fascinating new book, two top thought leaders show how a powerful and complex Medicare payment formula led to fundamental changes across the health care system, facilitating a dramatic power shift from providers (hospitals and physicians) to buyers (Medicare, Medicaid, and employers).

Influence of Medicare PPS on U.S. Health System:

In Medicare Prospective Payment and the Shaping of U.S. Health Care, Rick Mayes, Ph.D. and Robert A. Berenson, M.D. describe how Medicare's transformation from retrospective, cost-based payment methods to prospective payment systems (PPS) "both initiated and repeatedly intensified the economic restructuring of the U.S. health care system." In addition to providing a thoughtful history of Medicare PPS from a research concept to the single most powerful financial driver in health care, Drs. Mayes and Berenson make the case that the public sector has been the major innovator.

In building their case and exploring how PPS works in the real world, they interviewed 65 health financing experts, including several former CMS administrators. Bob Berenson and Rick Mayes do a nice job challenging conventional wisdom, which in health policy is always a good thing.

Earlier in my career, I cut my teeth on PPS at the White House Office of Management and Budget, where my scope included Medicare Part A and hospital reimbursement policy. Therefore, for me, Medicare Prospective Payment and the Shaping of U.S. Health Care made for a particularly intriguing read. But you don't need to be a Medicare wonk to understand and benefit from this crisp, well-written book.

Prospective Payment Systems in a Nutshell:

Old style cost-based or retrospective systems are inherently inflationary, reward inefficient providers, and reimburse largely for factors unrelated to the patient. In a nutshell, prospective payment is based on reimbursing health care providers for factors outside their control - notably the diagnosis and other relevant characteristics of the patient and outside, industry-wide factors like inflation and geographic variation in wage rates.

Under a prospective payment system (PPS), a provider receives a fixed payment to cover an episode of care during a period of time. The payment formulas are highly complex, with many adjustments to address everything from outliers, teaching-related costs, and uncompensated care to more purely political issues. The idea is to set the bundled, prospective payment on what it costs an efficient provider to serve the patient. The efficient players make money; the inefficient lose money.

Every year, rates are modified to reflect inflation or technical refinements. However, annual increases are often driven by federal budget constraints or attempts to moderate provider profit margins. Also, because PPS is about promoting economic efficiency, payments have little to do with quality of care or patient safety - hence, recent interest in adding elements of Pay for Performance (P4P) into the system.

Medicare began using the PPS approach for inpatient hospital services in 1983-84. Through a series of Congressional changes, PPS-based approaches are now used in Medicare to pay outpatient hospital services, skilled nursing facilities, home health agencies, and hospice organizations. While each provider type has its own kind of prospective payment method, the concept is the same. Prospective payment is also used heavily by state Medicaid programs and employer-sponsored health plans.

Medicare is a study in contrasts. In its financing, the program is modeled as what health wonks call "social insurance," which in reality is a euphemism for a politically effective but fiscally troubling mix of social welfare, health insurance, and cross-generational income transfers. Limited in coverage, slow to add coverage of new technologies, and often high in cost sharing, Medicare often cost-shifts to state Medicaid programs. While relatively cheap for the government to administer, Medicare is astonishingly complex, placing providers, supplies, health plans, and patients under a mountain of red tape.

In Medicare: A Policy Primer, Dr. Marilyn Moon - a respected researcher, former Medicare trustee, and one of the nation's leading Medicare policy gurus - "explains what Medicare is, how it works, and where is it headed." In this excellent introduction, Dr. Moon outlines the history of Medicare, taking readers from the program's origins in 1965 and the Great Society to today. The Medicare primer also walks readers through how the massive $370 billion program works in relation to the rest of the U.S. health care system and other federal programs.

While Dr. Moon is an unrepentant fan of Medicare and takes a decidedly Liberal, pro-entitlement approach to health policy, she takes pains to provide a thoughtful, balanced discussion of Medicare's key strengths and failings. She also debunks some lingering myths and assesses several of the more popular Medicare reform options.

Marilyn Moon, Ph.D. is currently vice president and director of the health program at the American Institutes for Research.

Published by Urban Institute Press, Medicare: A Policy Primer is available on Amazon.com here or direct from Urban Institute Press.

To learn more about Medicare, please check out my list of recommended Medicare books.

The world's leading guru of competitive strategy, Michael Porter, Ph.D., has turned his sights on explaining the fundamental cause of high costs, poor quality, consumer dissatisfaction, uneven access, and skyrocketing premiums in American health care.

In Redefining Health Care, Porter and innovation expert Elizabeth Teisberg, Ph.D. provide a thoughtful, groundbreaking framework to use competition to drive dramatic increases in quality and efficiency.

Unlike many wonks who foolishly believe that health care is not a market, Drs. Porter and Teisberg see competition " of a sort " in operation. They show us that the current competitive environment in health care is designed to "shift costs, accumulate bargaining power, and restrict services." That is, what we have now is dysfunctional, zero-sum competition serving to limit, even reduce value for patients. And they see all this taking place "...at the wrong level-among health plans, networks, and hospitals " rather than where it matters most, in the diagnosis, treatment, and prevention of specific health conditions."

Focusing on how to move American health care to positive-sum competition based on economic and clinical value for patients, Redefining Health Care provides a series of specific recommendations for the key players " including physicians, hospitals, health plans, employers, Medicare, and Medicaid.

Medical errors are rampant in American health care, particularly in physician and hospitals services. The human and economic costs are extraordinary. And because these mistakes are virtually 100 percent avoidable, so are the deaths, injuries, pain, and cost.

A diverse range of players - policy makers, thought leaders, researchers, consumer groups, purchasers, and clinicians - are working to reduce error rates and promote the use of safer systems and practices. However, reformers continue to hit the great blue wall of medical secrecy. Physicians, hospital administrators, and other health professionals are extremely reluctant to disclose or discuss a harm-causing mistake.

This is not surprising, of course. No one likes to talk about his or her mistakes, especially mistakes that result in injury or death. These conversations are awkward and painful for all concerned. What's more, disclosuring the truth can lead to lawsuits, disciplinary action, embarrassment, self-doubt, and diminished status in society and among peers. But ethically, all this is beside the point. Patients and their surviving family have a right to the unvarnished truth, something they rarely get absent costly and protracted lawsuits. And the health care system cannot fix what it cannot see.

Medical Errors and Medical Narcissism - a groundbreaking book by John Banja, PhD, assistant director of health services and clinical ethics at Emory University - examines the concept of "medical narcissism." Specifically, Dr. Banja explains why a health professional's need to preserve his or her self-esteem often robs patients and their families of the truth and perpetuates high-error medicine. He describes the "common psychological reactions of healthcare professionals to the commission of a serious harm-causing error and the variety of obstacles that can compromise ethically sound, truthful disclosure."

In Medical Errors and Medical Narcissism, Dr. Banja explains how and why talented, hard working medical professionals often fall into narcissistic traps. Living in a world of intense stress, long hours, and high, often unfair expectations, the "medical narcissist" works hard to maintain the respect of patients and colleagues. As Dr. Banja says:

When a medical error occurs, that world of competence, adequacy, and ability is turned upside-down. It is no wonder that even when such persons want to do the right thing and disclose error, they might do it clumsily and make an already bad situation worse.

This fascinating, thoughtfully researched book includes detailed recommendations, including advice on how to:

The market dynamics, business models, and corporate strategies of pharma, biotech, genomics, medical device development, and health care information technology are converging. And you better get ready.

Written by business gurus at the Wharton School and health industry executives, The Business of Healthcare Innovation provides an invaluable analysis of key business trends in the manufacturing side of health care. Editor Lawton R. Burns, Ph.D. and contributors focus on the producer side of health care and demonstrate how manufacturers serve as the principal drivers of health care innovation.

Specifically, The Business of Healthcare Innovation:

· Provides an insightful, detailed overview of the most influential players - namely, the pharmaceutical, biotechnology, genomics/proteomics, medical device, and information technology sectors.

· Describes and assesses the market structures, business models, and corporate strategies of each of these six sectors.

· Shows how the six sectors are converging, drawing increasingly on the trends, tools, and solutions of each other.

A compelling, business-savvy look at the manufacturing side of health care, The Business of Healthcare Innovation is highly recommended for executives, policy makers, investors, and consultants to business and government decision makers.

The health care sector is poised for more mergers and acquisitions, particularly in health plan and biotechnology segments. UnitedHealth Group's deal PacifiCare is only the beginning of a hot M&A season the next couple years.

Mergers and acquisitions (M&A) are often essential to a company's growth and viability. However, a staggering 70 percent of mergers fail, often with devastating consequences for all concerned. For healthcare executives contemplating a deal, Mastering the Merger is filled with excellent, actionable advice. It is written in a tight, compelling way that business leaders will find quite useful.

Mastering the Merger focuses on the importance of due diligence well before targets are identified and M&A decisions are made. Specifically, it describes:

1. The most important questions prospective acquirers must ask before consummating any deal, regardless of size. Here the authors show executives how to ask and answer the big questions.

2. Strategies and tactics to effectively target acquisitions and close deals.

3. How to decide which aspects of a newly acquired business to leave independent and which to integrate. The authors focus here on how to integrate quickly but where it matters.

4. How to anticipate and deal with contingencies. The emphasis is on how to predict and manage the unexpected.

Authors David Harding and Sam Rovit are partners at Bain and Company and write often for the Harvard Business Review. Bain and Company is an elite business consulting firm that specializes in increasing the underlying market value of companies. Because successful mergers are a key method of increasing a company's value, Harding and Rovit are in an excellent position to share what works and what does not.

Inside the FDA: The Business and Politics Behind the Drugs We Take and the Food We Eat is a thoughtful, balanced, and well-researched look inside controversial and troubled Food and Drug Administration.

Author Fran Hawthorne is an experienced business journalist and her skills are evident here. Digging into the FDA�s complex and conflicting world, the book provides an informative picture of FDA�s bureaucratic, political, and scientific drivers. Ms. Hawthorne does a nice job of laying out what the FDA is suppose to do, what is really does, and where and why it fails.

Inside the FDA helps us understand the recent raft of problems surrounding the over- and mis-regulation of prescription drugs. It makes for a great read. To read a excerpt, click here.

In an excellent new piece for HealthLeaders, E. Preston Gee asks an fascinating question with wide ranging implications for health care: "What if the mass merchandising giants like Wal-Mart or Target got into the healthcare delivery business in a big way?"

Highly efficient, consumer friendly, and tech-savvy companies like Wal-Mart and Target stand in sharp contrast to health care delivery. Many health strategists, including myself, have noodled on what it would take for hospitals and clinics to adopt consumer-focused, competitor-savvy practices of high performing industries like these "big box" retailers.

As Mr. Gee notes, the big retailers may never enter health care but that is beside the point. Health care providers must adapt to the new market realities. Employers and other demand-side players expect an end to the inefficiency, poor quality, and high error rates that plague much of health care delivery. After providing thoughtful advice on how they can adapt, Mr. Gee calls on health care executives to "lead their organizations into and through this new era of heightened expectations and emerging market-driven dynamics."

Preston Gee has written widely on market-driven, consumer-oriented strategies in health care. His latest book is Service Line Success: Eight Essential Rules. It shows how provider execs can apply the principles of service line management to meet tough market challenges. Service line / product line management is proven and often profitable in other sectors but rare in health care.

There is ample evidence America has a serious problem with poor quality health care and high rates of preventable medical mistakes.

Thankfully, there is no shortage of caring professionals motivated to improve care and the problems are solvable. As with any effort to improve performance, measurement is the first step to improving care and reducing medical mistakes. As I often remind clients and colleagues: you can't fix what you can't see.

However, measuring hospital and physician quality is complex. And too often efforts to measure quality get bogged down - perfect becomes the enemy of good and analysis becomes the enemy of action.

Quality Health Care: A Guide to Developing and Using Indicators serves as an excellent, up-to-date guide on how to design and implement an effective quality measurement program, particularly in hospitals. While paying close attention to the importance of clinically sound measurement, this guide focuses on providing practical and actionable advice. Specifically, the book provides:

1. Helpful overview on quality measurement, the increasing demands of consumers and purchasers for public disclosure of provider quality, and the information consumers find most valuable in their decision making.

2. Practical advice on how to select quality indicators, collect and organize data, and create a dashboard to monitor progress.

3. Technical guidance on how to analyze data effectively, including how and when to accept limitations and variations.

4. Cases studies on how to use quality measurement to improve both clinical and operational performance.

The author, Robert Lloyd, PhD, is executive director of performance improvement at the Institute for Healthcare Improvement and a highly regarded expert in quality measurement.

Escape Fire is collection of compelling speeches by one of America's leading crusaders for health care quality and patient safety - Don Berwick, MD, founder and president of the Boston-based Institute for Healthcare Improvement.

Each year, IHI hosts the National Forum on Quality Improvement in Health Care. The influential annual event draws 4,000 health care leaders from around the world in person and 6,000 via satellite.

In many ways, Dr. Berwick's keynote lectures set the tone for quality improvement efforts across the US. With an effective blend of common sense, real-life stories, persuasive metaphors, and out-of-the-box thinking, Dr. Berwick's presentations make for fascinating reading for anyone interested in improving America's $1.7 trillion health care system.

For example, in his 1999 keynote, Dr. Berwick recounts the 1949 Montana wildfire that killed thirteen young men and applies lessons learned from the catastrophe to today's health care system.

In Consumer-Driven Health Care, Regina E. Herzlinger, a leading health care thought leader and a professor at the Harvard Business School, provides a thought-provoking look inside a new, powerful force transforming America's dysfunctional health care industry. Consumer-Driven Health Care builds on her popular 1997 book Market-Driven Health Care: Who Wins, Who Loses in the Transformation of America's Largest Service Industry.

In the first part of her new 900-page book, Dr. Herzlinger makes a convincing case about how and why health care is broken and why market-based solutions - which empower consumers - are best. She restates the case she made in Market-Driven Health Care for putting consumers directly in charge of their own decisions (picking insurance plans, making medical decisions).

Through transparency of information, a realignment of incentives, and new tools to support decision-making, the consumer-driven model gives individuals a clear stake in their own health care. While not unique to other parts of the US economy, the approach is a radical departure for the $1.7 trillion health care market. As Dr. Herzlinger makes clear in her energetic analysis, the absence of these proven market-based tools goes a long to explain how health care became our most inefficient, outdated, and error-prone industry.

The second part – 80 percent of the book - is a collection of 73 think pieces written by 92 other experts. With short introductions by Dr. Herzlinger, these articles serve as a useful initial knowledge base for a growing field with an uncertain future.

Consumer-Driven Health Care has its limitations. For example, Dr. Herzlinger's case for the consumer-driven model fails to address the Medicare and Medicaid systems. It also leaves a variety of practical transition and execution issues unaddressed, although these are beyond the purpose of this volume. Because articles were written several years ago as part of a conference and most of the writers lack purchaser-side experience, the book also does not deal with the growing list of market-based reforms underway by large employers and innovative health plans.

In addition, since the field is still in its infancy, Dr. Herzlinger is a business researcher, and the contributors are largely wide-eyed entrepreneurs, the book will likely frustrate health policy wonks and others stuck in the technical minutia and ideological fights that characterize most health care discussions. But then, that’s just as well. Too often analysts forget that health care is a business and operates as a market, albeit a flawed one insulated from tools proven to drive quality and efficiency.

Dr. Herzlinger also has her detractors. It reminds me of the old joke that there are two kinds of people in the world – people who like Wayne Newton and people who don’t. Well, it seems that health care wonkdom is divided by those who like Reggie Herzlinger’s ideas and those who don’t. However, given the massive problems in American health care, her contributions remain as useful as they are provocative.

For a primer on consumer-driven health care, I recommend Let's Put Consumers in Charge of Health Care, a concise article by Dr. Herzlinger in Harvard Business Review (July 2002 issue).

"The way I see it, being dead is not terribly far off from being on a cruise ship. Most of your time is spent lying on your back."

So begins Stiff: The Curious Lives of Human Cadavers, the hillarious, fascinating, and, yes, sometimes gross new book by Mary Roach.

As Ms. Roach wisely points out, "By and large, the dead aren't very talented. They can't play water polo, or lace up their boots, or maximize market share. They can't tell a joke, and they can't dance for beans." Fortunately dead bodies have many productive (though often quite bizarre) uses.