The trend toward disease management is forging alliances between device manufacturers and pharmaceutical houses that may ultimately benefit both the patient and the corporate bottom line. The strategy underlying these partnerships makes use of diagnostic products to increase demand for drug treatments.
Last summer, U.S. drug manufacturer Merck (West Point, PA) embarked on a program to support the broad distribution of x-ray bone densitometers made by Lunar Corp. (Madison, WI) and Hologic, Inc. (Waltham, MA), instruments used in the diagnosis of osteoporosis. Just weeks after those agreements were cut, Merck licensed bone densitometry technology from CompuMed (Manhattan Beach, CA). The drug company wants to make bone measurement tests as widely available as possible prior to the release of its osteoporosis drug, Fosamax, which has been recommended for approval by an FDA advisory committee.
Once the drug is commercialized, the more physicians who are capable of reliably diagnosing osteoporosis, the more prescriptions for Fosamax are likely to be written. While other therapies exist for osteoporosis, Merck's Fosamax will be the first nonhormonal drug to enter the market. The company wants to maximize sales upon its introduction, since competing nonhormonal therapies are expected to follow quickly.
The agreements with Lunar and Hologic call for Merck to pay a subsidy to the equipment companies for each bone densitometer placed with "high-risk" customers - small hospitals or group practices that have previously resisted buying or leasing these instruments because of uncertain patient demand. Merck's subsidies are intended to help offset that risk, allowing the two companies to provide more attractive terms to potential customers.
"We have agreed to place machines with qualified practices on a test basis, where the site is not committed to buying or leasing the machine over the long term," says Robert Beckman, Lunar's vice president of finance. At the end of one year, the sites would have the option to buy, lease, or enter into a fee-per-scan arrangement.
Unlike Hologic and Lunar, CompuMed does not make bone scanners. Instead, its product is a wedge of bonelike material. When placed in a standard x-ray, this material serves as a standard against which bones in the hand of the patient are compared to determine bone density. CompuMed's chief financial officer, De Vere Pollom, is excited about the deal because the device company "is not going to do the selling; Merck will do the selling." The wedges, he explains, will be distributed by drug retailers to physicians who might prescribe Fosamax if they could diagnose osteoporosis. Merck will pay a licensing fee and royalties to CompuMed for exclusive rights to use the technology for the next five years.
The deals pairing Merck with Hologic, Lunar, and CompuMed are the most recent, but not the only, agreements between drug companies and device manufacturers. Last winter, Astra Merck (Wayne, PA) cut an agreement with ChemTrak, Inc. (Sunnyvale, CA), to obtain exclusive U.S. marketing rights to ChemTrak's in vitro test for Helicobactor pylori, a bacterium that has been associated with duodenal and gastric ulcers. Although it has yet to receive approval from FDA, the finger-stick test promises a quick, easy way to diagnose the presence of H. pylori, which can be treated with Astra Merck's prescription drug Prilosec. Alene Holzman, ChemTrak's vice president in charge of sales, marketing, and business development, says that cutting such deals is part of the company's strategy: "As a company, we have had a philosophy of developing diagnostic products that marry well with therapeutics to provide overall disease management."
The availability of a simple diagnostic test might ultimately increase demand for ulcer drug therapy by putting the means for diagnosing H. pylori within the reach of not only every physician but virtually every patient. Astra Merck will not be the only vendor to benefit, but as the market leader, it has the most to gain from rising demand.
Whereas Merck plans to use established devices to generate demand for a drug that has yet to pass FDA review, the reverse is true for Astra Merck, which is banking on a technology that has not yet been submitted to FDA to increase demand for a drug it already has on the market. Making the AccuMeter test for H. pylori commonplace could grease the wheels for the market to adopt this novel device once it is approved.
In the case of drug company OncoRx (New Haven, CT) and device maker Response Biomedical Corp. (Vancouver, British Columbia), neither company has a product ready for sale. But that has not stopped OncoRx from entering into a sales and distribution agreement for a handheld diagnostic device from Response Biomedical that promises to offer a simple, cost-effective, point-of-care test for determining counts of white blood cells known as granulocytes. Oncologists would like to monitor these blood cell counts in cancer patients to ensure that the production of the granulocytes has recovered enough between doses of chemotherapy, which reduces the ability of bone marrow to make granulocytes.
At present, oncologists often forego the costly and time-consuming laboratory tests that are needed to determine these granulocyte counts and simply prescribe colony-stimulating factors (CSFs) to restore white blood cells - which has led some clinicians to suggest that CSFs are being overprescribed. A simple, disposable test could lead to more effective management of the rising costs of cancer treatment, according to William Radvak, president and CEO of Response Biomedical. "What we are trying to do is totally different from anybody else out there," he says.
The unusual approach, while distinguishing the company, also scared off some potential partners. "We couldn't get the big companies to team up with us," Radvak says. "They wanted to wait until the product proves itself in the market." OncoRx was not frightened away, however. The company agreed not only to usher the product through FDA clearance, but also to make milestone payments to Response Biomedical as the review process proceeds.
The two companies hope the diagnostic product will be ready for market in early 1997. OncoRx, which is focusing on products for the treatment of cancer, will have exclusive rights to sell and distribute the diagnostic device in North America. Because the firm completed an initial public offering in midsummer, corporate officers were unable to comment at press time on the strategy underlying the deal.
But the device technology does not have to be novel to benefit from the support of drug companies. In describing the benefits of the alliance Merck has formed with Hologic and Lunar, Joel Weinstein, HologicÕs vice president for marketing, says, "This program will make a big impact in reaching folks who otherwise would be reluctant to embrace a new modality and give it a fair chance to show what this technology is capable of doing for them."
More such deals can be expected from other companies in the medical device industry. In the past, diagnosis and therapy were two of the many different and often isolated components of health care. But the dawn of health-care reform and the growing popularity of managed care are forcing providers and vendors to recognize not only that these various components are related, but that they must be integrated.
- Greg Freiherr
(This article originally appeared in the November 1995 issue of Medical Device & Diagnostic Industry. © 1995 CanonCommunications, Inc. All rights reserved.)