Inside the Business in California's $70 Million Alpha Stem Cell Clinic Proposal

Want to know more about the business aspects of a $70 million proposal to create a chain of “Alpha” stem cell clinics in California?

More details can be found in a report from the California stem cell agency titled “Alpha Stem Cell Clinics: Delivering a New Kind of Medicine.”

Among other things, the 23-page report discusses how the plan would guide efforts to build profits into stem cell therapies and to develop strategies to attract investors and philanthropists. Not all of the business questions are answered. However, the report does paint a more complete picture of how the clinics would lead to actual production and marketing of a therapy. Overall, the proposal is aimed at creating a sturdy foundation for the stem cell industry in California, one that surpasses anything found elsewhere in the world.

The stem cell agency's governing board is set to move forward on the Alpha clinics at its meeting on Thursday. This week's action involves approval of the concept with an RFA coming in October. Awards to six recipients could be made as early as July of next year.

The business aspects of the proposal are critical because without a clear pathway to profits no stem cell therapies will be available on anything approaching a significant scale. 

CIRM President Alan Trounson first advanced the Alpha concept two years ago. Last fall the $3 billion agency brought together 70 folks from the stem cell world to ponder the idea and to make suggestions. CIRM's report on the discussions at the workshop served as the basis for the proposal to be considered by its governing board this week. Here are excerpts from the report.

“Workshop participants...emphasized the need for engaged experts who can consider and implement strategies for reimbursement (i.e.generating profits) for stem cell therapies, and to gather evidence for their value and effectiveness that will be important for coverage by payers. Having clear pathways in place will help in building financially sustainable clinics as stem cell therapies gain approval and are implemented as standard medical practice. The Alpha Coordinating Center (funded at $15 million) would work with Accountable Care Organizations (funding gouprs that tie performance to payment) and multi-stakeholder collaborations to generate evidence for informing coverage and payment policies.”

“Incentivizing company sponsors of clinical trials to participate in data sharing will be challenging, and it will be important to protect their interests as appropriate, by respecting confidentiality of proprietary information, while at the same time requiring an appropriate degree of data sharing to advance the mission of the Alpha Stem Cell Clinics Network(five clinics funded at $11 million each). It is interesting to note that at this time, the landscape of disclosing clinical trial results is in flux, and there is increasing international pressure for companies to disclose information on safety and efficacy to the research and medical communities.”

“Alpha Stem Cell Clinics will create unique models for assessing the financial viability of stem cell therapies in a clinical setting. Cost and revenue data may serve as the basis for developing reimbursement options among the public and private sector as therapies accumulate. Identification of reimbursement options can reduce investor uncertainties and encourage further investment by pharmaceutical companies, investors, funding agencies and philanthropists.
“The elements of the Alpha Stem Cell Clinics Network, namely the clinical sites and central coordinating center, will interact with external entities to generate revenue streams that would ultimately ensure financial sustainability independent of CIRM funding (Figure 3).”

“The Coordinating and Information Management Center could develop a fee for service model for its consulting services, and operate like a CRO. Sponsors could choose whether to use the consulting services and whether to use the Alpha Stem Cell Clinics Sites. The Alpha Stem Cell Clinics Sites would generate operating revenue by running the clinical trials and could perhaps support the Center with revenues, as the volume of trials grows and the Network builds steam.

“In a second model, clinical trial sponsors would all contract with the Coordinating and Information Management Center, which would then set prices according to services needed. From this revenue, the Center would pay the Alpha Stem Cell Clinics Sites for costs associated with the clinical trials.

“By the time the CIRM seed money is depleted, the clinics should have established a strong track record and brand for excellence in conducting clinical trials in stem cell therapies, which would attract more clinical trial sponsors, including companies. To have the largest possible impact on healthcare, it will be desirable to increase industry involvement for cell therapies. However engaging corporate involvement could be challenging, given that many cell therapies are not considered patentable, and many of the ongoing trials are conducted in academic settings. It was suggested that the Alpha Stem Cell Clinics Network align as much as possible with corporate “mentality” to maximize corporate participation.

“Overall, the Alpha Stem Cell Clinics Network will help companies increase their 'bandwidth' and run stem cell therapy clinical trials more effectively and successfully. Many companies will already have sufficient in-house expertise for administration and regulatory guidance, and may not need to engage the Center’s consulting services. They would be attracted to the Alpha Stem Cell Clinics Network because of advantages for clinical trials such as benefiting from the collective databases, know-how and experience of the 'brain trust,' positive interactions and lines of communication with the FDA and regulatory experts, positive branding, quality control, accreditation for their trials, access to patient registries for outreach and patient recruitment and, through its clinical trial management resources, help with enrollment.

“Workshop participants also emphasized that attaining reimbursement for stem cell therapies will be necessary for delivering approved therapies into medical practice. It is likely that the business models for at least some of the clinics will resemble bone marrow/HSC transplant clinics, where for stem cell therapies that are proven superior to the standard of care, the clinic will directly receive reimbursement from insurers for the procedure and follow-up care.

“Reaching this point will require advance advocacy and preparation, and the engagement with the CMS at an early stage of product development. It was recommended that the Alpha Stem Cell Clinics Coordinating and Information Management Center should employ experts in reimbursement methodologies to facilitate entry of approved products into healthcare delivery. One workshop participant, Jeff Sheehy(a stem cell agency board member), suggested that early engagement with Accountable Care Organizations (ACOs) could be helpful, given that stem cell therapies offer the promise of cures, which in the long run will offer high value and effectiveness, albeit with ' high front end costs and the necessity of developing the appropriate infrastructure for delivering complex cell based procedures.' Consortiums such as the Green Park Collaborative are being established to develop methodological standards to demonstrate the effectiveness and value of new technologies. These data could be used to inform healthcare payers of the overall benefits of cell therapies and their long-term value, as compared with existing therapies."

“In 2016 and beyond, CIRM will initiate the 'Delivery' phase, in which priorities will be 'facilitating commercialization (and non-commercial adoption, where appropriate) of therapies, advancing therapies to patients, and enabling business models for stem cell-based therapies.' Connecting this network to other networks and centers with a similar mission outside of California will further accelerate the development and delivery of stem cell therapies, through the global exchange of information and expertise. International testing of experimental therapies developed in California will be essential for ensuring their sustainability, as regulatory approval and widespread delivery of these products in major markets throughout the world will ensure commercial viability and sustainability of companies and universities that produce them, which will in turn help deliver returns to investors. Ultimately, establishing a solid foundation for investor engagement will ensure the viability of stem cell therapies as they move into clinical practice.'”