Health care veteran tries to upend the system and bring drug prices down
The U.S. health system could get some relief from rising drug prices from an unlikely source: a venture capitalist starting a new company to try to make medicines less expensive.
Alexis Borisy, 47, is a fixture in Boston biotech, known for his striking felt fedoras. He co-founded Foundation Medicine and Blueprint Medicines, both of them based in Cambridge, Mass., and focused, in different ways, on using genetics to treat cancer — the kind of approach that has produced remarkable outcomes but also driven up the price of drugs. His next company, called EQRx and being launched Monday, seeks to bring them down. He will serve as both CEO and chairman.
“I’ve spent the last 25 years creating breakthrough new medicines,” Borisy said in an interview. “We’ve ratcheted up the prices on them ever higher, frankly, because we can,” he said. “And the reality is we can create a lot of these great new medicines, and turn that into a viable business charging a lot less for them. This is not fantasy world. This is something that can be done.”
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Using current methods of inventing drugs, Borisy believes it will be possible to create new medicines that mimic the effects of existing big sellers, and bring them to market in a matter of years. Then EQRx will sell them to insurers and large hospital systems at a discount, displacing the innovators. Because its medicines will be cheaper to develop, EQRx will be able to make a handy profit despite these lower prices. The key question is whether health insurers and giant hospital systems have gotten desperate enough to want to shake up the system.
Quite simply, Borisy is going to invent and develop new drugs, and sell them for less money than the competition. He calls this “a radical proposition.” In any other sector, it would just be called “business.”
But the branded drug business is different, in part for structural reasons but also because people and doctors tend to be reticent to switch to a new medicine just because it’s cheaper. That has helped lead to dramatically higher prices.
Why, Borisy asks, have prices of, for instance, cancer drugs gone up eightfold over 20 years if the technology to make new medicines is steadily improving, and if we are, in fact, as he says, in “a golden age of biotech and pharmaceutical innovation”?
EQRx is his antidote. On Monday morning, the company is also announcing that it has raised $200 million from a bevy of top tech and biotech investors.
Over the next 10 years, Borisy said, he’d like for EQRx to start developing somewhere in the ballpark of 50 different experimental medicines. He wants the company to come out with its first medicine in five years, and to have 10 drugs within a decade.
The main reason supporters believe it might work is his deep experience in starting drug and biotechnology companies. Already, he’s bridging different worlds. His co-founders and advisers include Dr. Peter Bach of Memorial Sloan Kettering, who has advocated for restraint in cancer drug pricing, and Dr. Sandra Horning, who was until recently the chief medical officer of the drug giant Roche.
“It’s just like Nixon going to China, I guess,” said Dr. Steven Pearson, founder and president of the Institute for Clinical and Economic Review, an organization that tries to determine if new medicines are fairly priced. “People figure he knows what he’s doing. He’s seen the landscape, he knows how to bring drugs from zero to 60.” Adds Dr. Scott Gottlieb, a former commissioner of the Food and Drug Administration and now a board member of and investor in drug companies. “If anyone can do this, he can do it.”
Borisy started out in the drug industry as a consultant in the late 1990s. One of his first projects was to help a pharmaceutical company price its cancer drug. He remembered pricing the medicine at a premium to a competitor over which it had slight advantages. At the time, a course of the medicine cost $20,000. Now, he said, a cancer drug would be more likely to cost $200,000.
Gleevec, the Novartis cancer drug, was approved in 2001 and turned a form of leukemia into a chronic disease. It initially cost $24,000 a year, but the list price reached $100,000 a year by the time it went generic in 2016. The first drug approved from Blueprint Medicines, where Borisy was once CEO, costs $382,000 per year.
For a drug company executive, Borisy said, the goal is to invent new medicines and get them to market. But prices can still get too high, and some have gone “beyond the frontier of common sense.”
“Look, somebody can criticize me, they can come straight at me and say, your companies have done this, and the answer is yes because we can, and because we can, it’s the right thing to do for our shareholders,” he said. “That’s what companies do, and actually have a fiduciary responsibility to do, but that doesn’t mean that it feels right from a virtuous person’s perspective, or what is the right thing to do in a society.”
Borisy founded his first company, CombinatoRx, when he was still in his 20s. After that fizzled and merged with another drug firm, he became a partner at Third Rock Ventures, the Cambridge, Mass.-based venture capital firm in 2010.
His first project was Foundation Medicine, a company that aimed to make widespread the genetic testing of tumors using new DNA sequencing technologies. He served as its first CEO. He also became a board member of Blueprint, and was the company’s interim CEO in 2013 and 2014. He also served as an interim CEO at Warp Drive Bio, and was involved in founding startups including Editas Medicine, one of the first companies focused on the gene editing tool CRISPR, and other firms including Celsius Therapeutics, Relay Therapeutics, and Tango Therapeutics, all of them drug developers.
This past June, Borisy announced that he’d decided to leave Third Rock to try to found different types of companies. His goal, he said, was to hang out at his house in Woods Hole, Mass., on Cape Cod (he calls it “the science geeky part of the Cape, which is, like, perfect”), taking his kids to the beach, and going to lectures at the academic scientific laboratories that are based there. But he said he became obsessed with the EQRx idea, and began to invite friends and colleagues to come stay at his house to discuss the idea.
One was Melanie Nallicheri, the former chief business officer at Foundation. She had previously worked as a senior vice president at McKesson, the drug distributor. She is now EQRx’s president and chief operating officer. She said in an interview that she was struck by the fact that legislative solutions on drug pricing will be blunt instruments. A market-based solution, by contrast, “is one of the most sophisticated solutions to solve anything,” she said. But one didn’t exist.
There are multiple reasons creating a company like EQRx will be difficult. The idea of creating a “fast-follower” — a new drug that is much like an existing one — is anything but new. In fact, it has yielded some of the pharmaceutical industry’s biggest sellers. Lipitor followed several other cholesterol medicines to market, but became the best-selling drug in the world in the 2000s. Rheumatoid arthritis treatment Humira, the industry’s current best-seller, was introduced after two similar medicines, Remicade and Enbrel, were already on the market.
But fast-followers do not compete on price, because lowering price has not historically resulted in selling more units of a drug. Instead, the least successful medicine in a category will sometimes raise its price to make up for lost market share, and the best-sellers will often follow, raising their own prices.
Borisy imagines his medicines will be something new — he calls them equivalars. They’ll be medicines designed to be like an existing blockbuster with their own intellectual property. They will not violate the patents of the drugs they are challenging, and they will be protected by their own patents. They will be less expensive than most drugs to develop, because they will be following on previously trod ground. But at least one big factor in this plan is not entirely in EQRx’s control: Someone has to buy the equivalar instead of the blockbuster it copied precisely because it is cheaper.
Faith that this will happen is one of the reasons investors are backing Borisy. Robert Nelsen, of ARCH Venture Partners, said he invested because “I think it’s really cool and I like throwing rocks into the pond.” But he also thinks insurers and pharmacy benefit managers, known as payers in health care, are getting ready to act. “I think that payers are going to want this,” he said. “I think that there’s a lot of incentive for payers to get creative with them.” Other big venture firms, including GV, a16z, Casdin Capital, Section 32, Nextech, and Arboretum Ventures, have also signed on.
That’s a big part of Borisy’s plan, too. Drug companies like to quote statistics that prescription drugs represent only a tenth of medical costs. But Borisy said that in private conversations, executives who run insurance plans have told him that, including new, expensive medicines like cancer drugs that are given in hospitals, medicine can account for 20% or even 30% of what they spend.
“The reality is that this has become a significant pressure point to these systems,” Borisy said. “Which again goes to the point of simply saying that there is a business opportunity where they are willing to fundamentally engage to say from a strategic partnership perspective, how do we do this better?”
Bach, Borisy’s co-founder and adviser, said that he was drawn to the difficulty of the problem EQRx will face. “If this could be done and you could enter the market with an equally good drug that with a meaningful discount, can the problem with the current problems in the distribution system be tackled, can it be that this market can be made to function like a normal market?” Bach asks. “Or are the obstacles and entrenched interests or whatever problematic incentives, et cetera, so sizable that they can’t be reasonably overcome at scale on a reasonable time frame?”
Bach won’t even offer an answer. EQRx will take years to provide one. The next steps will be beginning to decide which existing drugs to target with equivalars, and to start partnering with insurance companies. The entire health care sector will be watching.
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