Medical Research Companies: Private Equity Takes Notice

After finding success in more visibly lucrative areas of American medicine, such as surgical facilities and dermatological practises, private equity firms and medical research companies have aggressively invaded the industry’s more esoteric sectors: Clinical medicine research is getting billions of dollars in financing.

The FDA requires pharmaceutical firms to do extensive studies to demonstrate a new drug’s safety and efficacy, which may be expensive and time-consuming to carry out in accordance with the agency’s criteria. The manufacturer may gain millions of dollars by bringing a drug to market several months sooner and at a lower cost than usual.

A private equity-backed corporation like Headlands Research spotted an opportunity to develop a network of trial sites and boost business efficiency in order to hasten the completion of this critical scientific work. And why, despite the fact that it was formed in 2018 by the enormous investment company KKR, Moderna, Pfizer, Biogen, and other pharmaceutical industry heavyweights are eager to hire it.

Headlands said in July 2020 that it has been awarded lucrative contracts to undertake covid-19 vaccine clinical investigations, including injections for AstraZeneca, Johnson & Johnson,
Moderna, and Pfizer.

Headlands marketed its services by claiming that it sought to “profoundly impact” clinical research by recruiting participation from historically underrepresented racial and ethnic minorities.

COVID-19 research will be made accessible to the ethnically diverse communities represented at our sites, according to CEO Mark Blumling. Blumling, a pharmaceutical industry veteran with skills in venture capital and private equity, told KHN that KKR helped him begin the company, which has since grown by acquiring existing trial sites and founding new ones.

According to Johns Hopkins University researchers, the typical cost of clinical trials for new medications is $19 million. According to Dr. Marcella Alsan, a public policy professor at Harvard Kennedy School and a specialist on varied representation in clinical trials, finding and enrolling patients is typically the most costly and time-consuming element of studies.

Before the epidemic began, Headlands purchased research facilities in McAllen, Texas, Houston, metro Atlanta, and Lake Charles, Louisiana, claiming that these locations would aid in increasing patient recruitment of people of colour, which was a top priority during the pandemic when researching vaccines to fend off a disease that killed a disproportionate number of Black, Hispanic, and Native Americans.

Headlands’ websites also carried clinical studies on remedies for ailments such as Type 2 diabetes, postpartum depression, asthma, liver sickness, migraines, and endometriosis, according to a review of website archives and the government website Several of Headlands’ enticing assertions, however, would be proven false within two years.

According to Blumling, the decision to close Headlands’ offices in Houston, one of the country’s largest metro areas and home to important medical facilities and research universities, and Lake Charles in September was motivated by difficulties in locating “experienced, highly qualified staff” to carry out the difficult and highly specialised work of clinical research. Headlands will no longer accept new research as it relocates operations to another South Texas location it co-founded with Pfizer.

What effect did their places have? Blumling declined to comment on whether recruitment targets for the COVID immunisation trials, including those based on race and ethnicity, were met in those locations due to confidentiality issues. After the study, the only entity that has access to the data at each site is the drug company that funded the experiment. He emphasised that data for any one study is pooled across all sites.

Private equity, which often consolidates sectors by joining enterprises, has prioritised the fragmented clinical trials market for investment. However, the history of Headlands demonstrates the risks of seeking to consolidate distinct locations in order to optimise efficiency in research that will affect the health of millions of people.

According to Yashaswini Singh, a health economist at Johns Hopkins who has studied private equity acquisitions of medical practises, consolidation may have consequences. According to Singh and her colleagues’ study on dermatology, gastroenterology, and ophthalmology acquisitions published in September, physician practices—a sector with parallels to the clinical trial industry—began charging more after the purchase.

“We’ve seen reduced market competition associated with price increases, reductions in access and choice for patients, and so on,” Singh continued. “Therefore, it’s a fine balance.”

Private equity involvement in clinical trials is “concerning,” according to Dr. Aaron Kesselheim of Harvard Medical School.

To retain “protections about the privacy of the data,” he added, “we need to make sure that patients” are competent enough to offer “adequate, informed consent.”

We don’t want such things to be disregarded in favour of financial goals, he said.

Blumling said that the trial sites purchased by Headlands are not charging any more than they did before. He said that “privacy is one of our top priorities.” Headlands is adamant on preserving the finest standards.

Whether they are effective or not, data shows that clinical trials in the private equity business have increased dramatically.

According to KHN data, 11 of the top 25 private equity companies investing in the health care industry as monitored by PitchBook have bought stakes in clinical research organisations. These companies have participated in studies ranging from cancer vaccines to Parkinson’s, Alzheimer’s, and ovarian cancer treatments.

In order to expedite the release of new drugs, contracted firms analyse patient data and give documents to regulatory organisations. And here’s a big one for investors: Investing in medical research companies is less risky than investing in pharmaceutical companies since they make money whether or not a treatment is effective.

By late November of this year, there were over 434,000 registered clinical studies, more than quadrupling the number from 10 years earlier.

Nonetheless, according to a presentation by Boston-based investment firm Provident Healthcare Partners, the bulk of trial venues are medical practises that seldom conduct studies.

Linda Moore Schipani, CEO of Clinical Research Associates, a Nashville-based firm that worked on covid vaccine trials for AstraZeneca, Novavax, and Pfizer, says, “Independent sites are being purchased by private equity, and they’re moving into larger site groups of 30, 40, and their game plan is to roll that up into a business and then sell it again.” “That’s sort of the goal,” Headlands is an excellent example. It announced in November 2019 that it would purchase six sites in the United States and Canada, including three Centex Studies locations in Texas and Louisiana, in order to enhance participation among Hispanics and African Americans.

Since then, it has made more acquisitions and opened new outlets in areas with “extremely limited trial options,” which, according to Blumling, distinguishes his company.

“I’m not a private equity advocate,” Blumling said.You won’t find KKR’s willingness to invest in anything with a three- to five-year return against a one- to two-year return anyplace else.”

It is cooperating with Pfizer at a number of research centres to promote patient diversity, including one in Brownsville, Texas, where 95% of the population is Hispanic or Latino and is close to the Mexican border.

To attract patients, Headlands, according to Blumling, “is really going beyond what a lot of sites do, which is social media.” “It involves going to churches, community fairs, and really reaching out to the larger community as much as possible.”

Blumling said that due to personnel problems, Headlands closed down the Houston and Lake Charles facilities and finished or moved their research there. The decision to close such locations, according to Blumling, “had nothing to do with the speed of trials.”

Similarly, he added, Headlands is moving operations from McAllen to Brownsville “because it had a larger population of trained personnel.”

According to Blumling, “we want to keep expanding our sites and producing excellent content.”It makes no sense to preserve those locations if we can’t find the personnel to do it at the level of quality that we need.”

The phrase “The Writing Was on the Wall” Devora Torrence co-founded Centex Studies in 2006, referring to it as “my little mom and pop business” in a podcast about women in scientific entrepreneurship from 2021. According to her, private equity companies got particularly interested around the end of 2018. The appeal was obvious: pharmaceutical businesses relied on larger networks of clinical trials.

“The issue is getting it to market quickly.” “You get that speed by having a larger network,” Torrence said on the programme. “The writing was on the wall for me,” he said, “that either I get some outside investment and scale up myself, or I kind of listen to these guys and see if maybe now would be the right time to exit.”

It was beneficial for her to join Headlands during the outbreak because she could “lean on” its other institutions that had already undertaken immunisation trials. “We might not have been here if we hadn’t gotten those,” Torrence continued.

Torrence did not respond to KHN’s demands, despite the fact that her LinkedIn profile states that she left the company in 2021.

According to Lyndon Fullen, a former Centex employee and health care consultant, private equity provides funding that allows firms to expand study sites.

“I wholeheartedly support it,” he stated. “It’s obviously better to have larger groups with that funding if it’s about reaching that large patient population.”

Contract research opportunities in Long Covid Organisation The covid pandemic offered Parexel with an opportunity since millions of people were developing long-term covid after infection and there were few, if any, viable therapy options.

The company employs over 19,000 people and was bought for $8.5 billion in 2021 by EQT Private Equity and Goldman Sachs’ private equity arm. In 2017, Pamplona Capital Management paid $4.5 billion to take Parexel private.

Long-term covid has been connected to an increasing corpus of studies documenting its debilitating implications, including a recent study of tens of thousands of patients in Scotland, where more than half of them were still having symptoms months later. However, developing root-cause-focused treatments may take years. Dr. Nathalie Sohier, who manages Parexel’s infectious diseases and vaccines business, said, “It’s a huge number of people.”

There is a critical need.

Long Covid represents the risk and possibility of drug development work: Despite the fact that millions of patients offer a potentially lucrative market for medical research companies, academics and industry insiders say they are unwilling to engage. One reason for this is because “it’s not a well-defined disease, and that really makes it highly risky for companies to invest in research,” according to Cecil Nick, vice president of Parexel.

“How will we show the FDA that our medication is safe and effective?” According to Dr. Steven Deeks, a professor at the University of California, San Francisco who is doing observational study on patients with long-term diseases, the number of people who died or were hospitalised cannot be tallied.

Only 304 of the almost 4,400 covid research published as of August dealt with long covid. One-third of them, according to Sohier, were related to pharmaceutical research.

Sohier asserted in its extensive covid plan that “there are few” firms. Despite this, Parexel continues to present itself as the ideal partner to steer new drugs, particularly by managing regulatory processes and employing remote technology to maintain patients in trials. According to Parexel spokesperson Danaka Williams, the company has contributed to about 300 covid-related studies in over 50 countries.

According to Michael Fenne, research and campaign coordinator for the Private Equity Stakeholder Project, Parexel and other contract research organisations are extending their data storage capacities. The objective is to have more patient data.

According to Fenne, it has something to do with patient access and management. “Technology makes it easier to access patients and have more accurate information about them.”

This article was also contributed to by Megan Kalata and Fred Schulte, a senior writer for KHN.

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