Ken Frazier Remarks
Parliamentary Friends of Medicine Lunch
Parliament House, Mural Hall
Canberra, Australia
Wednesday, June 17, 2015
12:15 – 1:45 PM
Thank you John for that wonderful introduction and good afternoon
everybody.
I would like to start by acknowledging the traditional owners of the land
where we are meeting – the Ngunnawal and Ngambree people – and
by paying respect to the elders, past and present, of all Australia’s
Indigenous people.
I also want to thank John Alexander, David Gillespie, Senator Claire
Moore, Senator Richard Dee-Na-taa-lee and other members of the
Parliamentary Friends of Medicines group for hosting us together with
Medicines Australia, and all the members of Parliament, senators,
parliamentary staff and industry leaders that have joined us here today.
As John mentioned, I am the CEO of Merck, which is headquartered in
the U.S. and known as MSD here in Australia, and the rest of the world.
I am also the current Chair of the U.S.-based pharmaceutical industry
group PhRMA. MSD is a leading global biopharmaceutical company. We
have a long history of developing new medicines and vaccines that
improve health and well-being around the world. We employ 70,000
people around the world, including more than 600 people here in
Australia, and spend over $6.5 billion dollars annually on research and
development.
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Although this is my first visit, MSD has operated here continuously since
1952. We recognize and respect the importance of Australia both as a
highly sophisticated market and as a source of new discoveries.
To illustrate this, I’d like to remind you about the story of penicillin, a
transformational medicine perhaps unrivalled in its impact.
Nine miles from where we stand is a suburb named in honor of the great
Australian scientist, Howard Florey. As you probably know, Florey
received the 1945 Nobel Prize for medicine for the discovery of
penicillin, together with Alexander Fleming and Ernst Chain.
Penicillin revolutionized modern society, saving millions of lives while in
the process, setting our expectations of what modern medicine – and the
pharmaceutical industry – is capable of delivering.
You may also recall that Alexander Fleming famously discovered
penicillin by accident. It was while sorting through his lab equipment
after the holidays in 1928, that he found that mold had contaminated a
bacteria-filled petri dish. He also observed that a clear halo had formed
around the mold which appeared to be secreting a substance he
ultimately – and correctly – surmised was inhibiting bacterial growth. By
accident coupled with careful observations, he had discovered penicillin.
Yet, Fleming’s discovery would have remained a mere laboratory
curiosity without the scientific and collaborative genius of Howard Florey
and Ernst Chain. Working at Oxford University, Florey was able to grow
the vast quantities of mold required for Chain and his fellow chemists to
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purify into penicillin. And, although only minute quantities were
generated, this was enough to show penicillin’s incredible potential as a
life-saving antibiotic.
Florey and Chain’s laboratory could not, however, produce the quantity
of penicillin needed for proper human trials or treatment.
So in 1941, with British industry pre-occupied with the war, Florey and
colleague Norman Heatley flew to the United States in search of
American companies that could produce penicillin at scale. What
followed was a remarkable series of collaborations with government
scientists, academics and industry, which resulted in vast improvements
to the penicillin production process.
These collaborations culminated in a meeting that included George W.
Merck, one of the early CEOs of Merck & Co. of the United States.
During this crucial meeting, the industry committed to investing in
industrial scale production.
Florey’s colleague Heatley went on to spend several months with
research scientists at our company, which by 1942 had produced
enough penicillin for use in human trials. We then worked with a number
of other companies and government institutes to develop a new
production method that delivered the billions of units of penicillin needed
for the war.
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Florey and his team’s expertise and collaborative spirit galvanized an
entire industry and provided the foundations for the development of all
future antibiotic therapies, which have prevented untold suffering.
This story holds a number of important lessons for all of us:
• It underscores the uncertain and sometimes serendipitous nature
of scientific discovery. Above all, science is unpredictable. And,
there remain many mysteries to be explored and unlocked within
the human body.
• It illustrates the vast resources required to turn scientific
discoveries into clinically meaningful medical breakthroughs.
Innovation doesn’t move in a straight line. And, on average, it
costs upwards of US$2.6 billion—and takes an average of 10 to 15
years—to carry a new medicine from the laboratory bench to the
hospital or home medicine cabinet.
• It also reinforces the indispensable, collaborative roles played by
all stakeholders, including government, industry and academia,
who can, only when acting together, successfully realize the
immense societal benefit afforded by scientific advancements.
• And, most importantly, it reminds us of our ultimate purpose: to
bring hope to people.
Fifteen years after we helped bring penicillin to the world, CEO George
Merck, in speaking to a group of aspiring healthcare professionals,
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reminded them that nothing is more important than serving those with
unmet medical needs. He left them with a simple charge: “… to
remember that medicine is for the patient… it is not for the profits.”
To this day, I believe the wisdom of these words still holds true. Over the
years, this imperative of inventing and innovating with the patient in mind
has come to define the company I have the privilege to lead. We have a
central purpose: to help people live longer, healthier, and more
productive lives.
Today, the biopharmaceutical industry is poised to translate the most
promising scientific breakthroughs into meaningful treatments capable of
tackling the most urgent and vexing medical challenges of our times.
This commitment to discovery, invention and innovation, always keeping
the patient first and foremost, is what has come to embody our industry
at its finest.
Patients, in Australia and throughout the world, are waiting for the next
breakthrough medicines that will help them live longer, healthier and
more productive lives. Our mission as an industry is to deliver what they
need – promptly and safely.
Cancer immunotherapy is an important example of a breakthrough that
holds tremendous hope for patients in the greatest need. MSD is
advancing a broad and fast-growing clinical development program for
our own immunotherapy medicine, KEYTRUDA, which works by
unleashing the immune system against cancer.
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Few people understand the promise and potential of a medicine such as
KEYTRUDA like Ron Walker, a business leader and former Lord Mayor
of Melbourne, who three years ago was diagnosed with late-stage
melanoma.
After some initial setbacks during his early treatment, Ron was able to
participate in one of our KEYTRUDA clinical trials in the United States.
Once we commenced clinical trials here in Australia, he was able to
enroll and obtain treatment locally. Thankfully, Ron responded well to
KEYTRUDA treatment, and I am happy to say is here in the audience
with us today.
Ron’s story is but one of a growing number of success stories that
reinforce the power that is today being unleashed by immuno-oncology.
Three years later, we’re studying KEYTRUDA in 30 different tumor
types and have 20 KEYTRUDA trials underway in Australia covering
melanoma, lung, bladder, gastric, breast and head and neck cancer,
Hodgkin’s Lymphoma, mesothelioma and other cancers. 600
Australians have been treated to date through these trials, and 600 more
have received free treatment in our compassionate access programs.
The success of KEYTRUDA is as much about regulatory innovation and
agility as it is about scientific innovation.
As you may know, earlier this year we secured regulatory approval for
KEYTRUDA in Australia in record time. This extraordinary achievement
was made possible by two critical factors:
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• MSD’s recognition of KEYTRUDA’s importance given the
extremely high burden that melanoma places on Australia's
population and our commitment to do everything possible to
commence the approval process as rapidly as possible, and
• The willingness and commitment of the Therapeutic Goods
Administration to work tirelessly to complete the registration
process as quickly as possible.
The result of our shared alignment and commitment to meeting this
critical unmet medical need in Australia also led to this country becoming
the first in the world to register KEYTRUDA as a first-line therapy for
melanoma – an accomplishment both welcome and unprecedented.
We also secured a first-time positive recommendation for KEYTRUDA
from the Pharmaceutical Benefits Advisory Committee, despite having
only early trial data. Again, this would not have been possible without
the strong collaboration between MSD and the PBAC secretariat.
The good news for patients is that KEYTRUDA is just one of many
potential cancer breakthroughs currently being developed by our
industry. At the same time, the biopharmaceutical industry is also
making remarkable progress against other, extremely burdensome
diseases, including hepatitis C and Alzheimer’s disease, each of which
afflicts over a quarter of a million Australians.
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Our industry has been committed to the development of hepatitis C
medicines for many years. MSD, together with other companies, has
discovered antivirals that have the potential to treat and potentially cure
hepatitis C reliably, quickly and with few-side effects. These medicines
have the potential to deliver a significant health dividend in a number of
ways:
• By substantially reducing the incidence of liver failure and liver
cancer,
• By saving billions of dollars in hospital care costs,
• And, by providing hepatitis C sufferers new hope for normal, more
productive lives.
Alzheimer’s disease, a condition that afflicts more than 36 million people
globally – a number projected to double almost every 20 years,
skyrocketing to more than 115 million people by 2050 – imposes a
terrible burden on patients, their families, caregivers and society.
We’re currently in late-stage clinical studies with our investigational
BACE inhibitor therapy to determine if we can slow or halt the progress
of this horrible disease. Our work in each of these key diseases
demonstrates MSD’s continuing commitment to playing a major role in
addressing critical areas of growing, global unmet medical need.
Across the industry, 80 other medicines are also under development,
with the hope that we can one day slow and even stop the disease’s
progression.
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A leading Australian oncologist recently called the development of
immunotherapies a “penicillin moment” for cancer treatment. As I have
tried to illustrate, the biopharmaceutical industry could be on the cusp of
many penicillin moments across multiple disease areas. However,
achieving these moments will require significant R&D investment.
Of course, as is often the case with breakthrough innovations in our
industry, there is an ongoing debate in the United States and elsewhere
about the cost of new medicines, particularly in the disease areas I
mentioned before.
I firmly believe that medicines and vaccines must be assessed by the
overall value that they deliver to individual patients, their families and
society at large, rather than solely upon their cost. That said, I also
firmly believe that we must work together with all stakeholders in the
healthcare ecosystem and beyond, to create broad access. All people
should have the opportunity to benefit from medicines and vaccines that
can improve and extend their lives. And, we must create a policy
environment that is conducive to building sustainable, value-driven
healthcare systems that serve all of us.
Hepatitis C, for example, imposes massive costs on the health system
and robs patients of decades of productive life. Despite the significant
short-term budgetary impacts that newer hepatitis C medicines – which
for nearly all patients represent a "cure" – are having around the world,
there is little doubt that these new therapies are cost effective, when
viewed in the context of the longer-term implications of this disease... if
left untreated.
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Likewise, some cancer immunotherapies are showing durable
responses in a significant proportion of patients who previously had very
few effective treatment options. It is critical that these and other similarly
innovative products be evaluated holistically based on the benefit/value
they provide to patients, payers, the healthcare system and to society.
Fortunately, in many ways, Australia has been ahead of the curve
globally in assessing the value of medicines. For instance, the
Pharmaceutical Benefits Advisory Committee has been using costeffectiveness to evaluate medicines for decades. What has been
concerning of late is the PBAC’s shift in focus from the holistic value of
innovative medicines to the impact of their costs on the budget.
The short-term consequence of this has been that Australian patients
have had to wait much longer than patients in other countries to get
access to new medicines. A recent report showed that Australia ranks
18th out of 20 OECD countries for access to new medicines.
The long-term impact is more troubling. Australia often pays
substantially less than other developed countries for new medicines.
This has serious consequences on companies’ incentive to innovate.
Payers in the United States, Japan and other developed markets
shoulder a disproportionate share of the cost of these important
therapies. If all markets followed Australia’s example, it is quite possible
that many new medicines simply would not be developed.
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I will try to illustrate this using another great example of Australian
innovation, GARDASIL, the cervical cancer vaccine.
Dr. Ian Frazer from the University of Queensland University completed
much of the basic research that made GARDASIL possible; his work
was licensed to CSL and then to MSD.
Australia has achieved one of the highest coverage rates in the world
with GARDASIL, which has already brought tremendous benefits. A
recent study showed that in the five years after GARDASIL was added
to the national immunisation program in Australia, the occurrence of
genital warts in women under 21 fell by 93%. That’s quite a benefit.
While the University of Queensland owns a substantial portion of
GARDASIL’s intellectual property, MSD developed the product,
completing trials in nearly 30,000 people. We have spent more than a
billion dollars on GARDASIL development to date, excluding royalties.
If GARDASIL had to be commercialized globally on the basis of what the
government pays in Australia, it may not have been developed at all.
My broader point here is that translating scientific breakthroughs into
clinically meaningful treatments is a costly endeavor and one that
requires sustained – and sustainable – investment. In the health care
ecosystem, no single entity can shoulder this burden alone. We must
work together to ensure that the spirit of curiosity and discovery that
animated Alexander Fleming and his petri dish remains thriving, vital in
part by being appropriately incentivized.
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The budgetary concerns of government are, of course, very real, and I
believe industry has an obligation to work with government to help
address them. One of the most successful examples of this in the United
States was the 1984 Drug Price Competition and Patent Term
Restoration Act, which led to dramatic reductions in the prices of offpatent generic medicines and delivered enormous savings for American
patients and payers.
Australia implemented its own highly successful generic savings policy
in 2007 through reforms to the Pharmaceutical Benefits Scheme. These
reforms were developed in consultation with industry and it is anticipated
that they will deliver savings of $20 billion over ten years.
Despite these significant, ongoing savings, the recent Federal Budget
process identified an additional $6 billion in funding cuts to the
pharmaceutical sector. This included policies to cut the pricing of newer,
innovative, on-patent medicines and others that could undermine the
appropriate use of biological medicines.
These measures are concerning. In Australia, no new medicine is listed
on the PBS unless it is proven to be cost-effective, so it is hard to
understand why these same medicines should bear the brunt of further
budget-savings measures when many other areas of public spending in
health and elsewhere deliver far lower value for taxpayers’ money.
Likewise, Australia has a rigorous and independent means of assessing
the safety and efficacy of biological medicines through the TGA. So
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again, I have difficulty understanding why the budget measures position
the PBS as the body best placed to determine the substitutability of
biologics, rather than the TGA.
I am aware that Medicines Australia and the government are in
discussions on this point as they negotiate a broader Strategic
Agreement. It is my hope that these discussions will introduce some
stability and balance after what has been a very difficult few months for
the industry.
I urge everyone involved in policy discussions around medicines to think
carefully about the importance of collaboration and the many examples
of how partnerships between industry and government have helped
Australia realize strong advances in health care.
Policies that are forced through without consultation can have negative
unintended consequences, not only through short-term disruptions, but
also by undermining the trust and collaboration essential to tackling
health challenges, both now and in the future.
I’d like to conclude by reminding us all that innovation, or as I prefer to
say, invention, remains a cornerstone and foundation upon which a
sustainable, value-driven healthcare system can thrive. Our industry is
on the cusp of some of the greatest medical breakthroughs in decades;
breakthroughs that were unimaginable only a few years ago;
breakthroughs that will transform not only patients’ lives, but that have
the potential to help transform the economic productivity of nations –
including Australia – and around the world. It is critical that policy and
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regulatory approaches keep pace with this new era of rapid scientific
advancement.
Together, with the Australian Government, I am confident that we will
create and maintain the right conditions to ensure that our industry can
bring the newest and most innovative medicines to Australian patients in
a timely fashion, that we can draw on the incredible science that exists in
Australia in the biopharmaceutical area, and that we can work with
Australian colleagues to ensure the industry in Australia remains world
class.
Pause
We must never lose sight of the purpose for which our medicines and
vaccines are intended – to improve the lives and livelihoods of the
millions of people here in Australia and around the globe who are
counting on us to succeed.
Thank you for your attention.
(Q&A Moderated by Tim James)
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