News Article | October 27, 2015
A Cost Measurement Pharma Can Live With (CROs/CMOs, Too) By Louis Garguilo, Executive Editor, Outsourced Pharma Follow Me On Twitter @Louis_Garguilo Sometimes one finds help in unusual places. This might be one of those times for Pharma, and the unusual place could be AdverseEvents. The company says it has the first methodology to identify the total costs of adverse drug reactions (ADRs) associated with FDA-approved drugs. “We started with somewhat of a love-hate relationship with Pharma,” says Brian Overstreet, founder and president of AdverseEvents. “Since we are now used extensively by the managed care organizations, Pharma is figuring out how to work with us, and we with them.” Pharma might also get some help in more usual places. CROs/CMOs may be able to increase their value … by positively influencing what AdverseEvents measures. We’ll start with an open discussion with CEO Overstreet, and then double back to the role service providers can play. These bullets from recent weeks pile onto the narratives developed throughout the year: The common denominator in these items and the entire enflamed debate on new-drug and healthcare costs is the need for more, and more accurate, measurements. AdverseEvents, according to Overstreet, has developed a platform to collect and correlate “the missing data link” on all ADRs, and place a value on the data to help the healthcare system make better decisions. Which immediately begs the question: If this data has been missing, on what basis have formularies that often dictate what drugs patients can or cannot be given, been created? “That’s how we got in this business in the first place,” says Overstreet. “When we came across this data, we figured everybody was using it. However, basically nobody was because it was maintained so poorly. This was a business opportunity, and a patient safety issue: People were not tracking post-approval safety data.” In other words, those deciding the drugs to include in a formulary list were looking at the cost of medications, and safety and efficacy from clinical trials, but had much less insight into what happens post-commercialization. According to Overstreet, every drug from the costliest to the cheapest causes side effects. To understand the true costs – and cost benefits – to the healthcare system, was impossible without this illuminating data. “Until we could quantify what those costs are, we couldn’t make those decisions.” On the surface, it sounds like AdverseEvents is targeting Pharma’s new-drug pricing, in effect saying these medicines incur costs instead of offering savings. And that has to be a major concern. On the other hand, Pharma could embrace the measurement, use it as a way to better understand its own drugs and make them better for patients ... and for promotion. “In some cases Pharma will see that the stars all align,” says Overstreet. “For example, from my perspective and everything AdverseEvents has written about the new Hepatitis C drugs, we are big fans. The data shows these drugs are much safer and cause fewer side effects, lowering costs when compared to drugs previously on the market. These results then add to the fact that these drugs are actually curative on the efficacy side.” This, in fact, is the type of systemic, down-steam measurement and assignment of value that many, including this editor, have been calling for to replace single-dimensional determinations that drugs are “expensive.” And Overstreet understands the limitations of his data. “We have dedicated a business to addressing this one piece of the puzzle. While we think it is vitally important, we never present it as the total-sum conclusion,” he says. “But by plugging in this piece, it adds value to the decision making process.” The bulk of the data AdverseEvents draws its value conclusions from resides with the FDA, which has been collecting it for over 20 years. The problem has been in the collection, which has been more like throwing items in a cluttered closet than inputting into a developed database. “The data at the FDA is basically a huge, messy ASCI file. The database was improperly structured, and more importantly, there is no control over the data input. So if somebody misspells a drug name, or inputs data into the wrong field, it simply goes in the record like that. When you have that situation across millions of records and hundreds of millions of data points, it becomes a disaster.” The first few years of AdverseEvents were devoted to developing an algorithm, going through every field to access and reassign classifications and ontology structures, and then learning to run reliable analytics on the data. “A lot of people went through the data and said it is not worth killing themselves over … but we figured it was,” says Overstreet. Once the more technical issues were resolved, the company developed a user interface for client access. “We are seeing quick customer uptake,” says Overstreet. “It really is filling an information void that had always been there.” Some of those customers made public by AdverseEvents are University of Utah Health Care, Lundbeck, and Memorial Herman. “Our first goal is to see this deployed at every major payor and provider system in the U.S, and we are well on the way,” says Overstreet. The customer he wants most now? “Pharma. We’ve started to work with market access and health outcomes groups at Pharma and expect that aspect of our business to grow significantly in the months ahead. Helping Pharma to understand and interpret these data is going to be critical in the early years after a new drug launch, especially since the payors and providers are already integrating it into their decision making processes.” How Can Service Providers Help? The answer to this question is pretty straightforward. As pharmaceutical outsourcing continues to grow, and the down-stream value of drugs to patients and the healthcare systems is more accurately measured, then the expertise and services CROs/CMOs can provide to increase quality, safety, efficacy, and assist in lessening ADRs, the better for all involved. A CRO wanting to gather more biological data or a few more months of medicinal chemistry efforts; CMO recommending more incremental steps in the scale up process to collect additional analytical data; a formulations provider advocating for more experimentation and development; or a clinical trial manager lobbying for certain procedures and protocols; these should be looked at by Pharma less as cost additives, and more as value additions to a final product and its long-term outcomes. Overstreet makes a good point when he says: “If the systems and payors see a costing element out of line with what they pay on a pill price, they’ll ask the manufacturers for help on the cost. However, the reality is that in these cases where there are clear disparities, it will almost always relate to patient safety, so it won’t be just a cost discussion. These will mostly be issues Pharma will want to address to reduce adverse outcomes and their associated costs.” Pharma service provides have to be an important piece of that puzzle. Next, Overstreet will lead us to where he sees major cost inefficiencies and a real lack of value in the drug industry: our system of clinical trials.
News Article | April 16, 2014
Overstreet, Winner in Startup Tax Battle, Gets $2M for AdverseEvents When patients have bad reactions to prescription drugs, doctors can voluntarily submit reports about such “adverse events” to the Food and Drug Administration. The FDA gets at least 500,000 such reports a year, meaning it has lots of data that could be useful to pharmaceutical companies hoping to spot early warning signs of dangerous drugs—and thereby avoid Vioxx-scale liability. So you might think that a startup specializing in cleaning up, analyzing, and repackaging this data would be very popular with drug makers. AdverseEvents, a Santa Rosa, CA-based startup that came out of stealth mode in late 2011, discovered that pharmaceutical companies were not only uninterested in better statistical data on bad drug reactions, but actively ran away from it. “They didn’t want to see this data, and they certainly didn’t want to pay for it,” says Brian Overstreet, AdverseEvents’ founder and CEO. “It took us a little while to figure out that that was not where our market was going to be.” But it turned out that there was another, perhaps even larger customer base for the drug reaction data: health insurers, managed care providers, hospitals, and other organizations that have to consider all the costs when deciding which drugs to buy for their patients. “They don’t have a way of figuring out if Drug A is going to cause side effects and hospital readmissons and end up costing thousands of dollars extra over Drug B,” Overstreet says. AdverseEvents’ database “gives them a much better view of what’s happening in the real world with these drugs.” Since rebuilding its data services to serve managed-care clients late last year, AdverseEvents has been growing fast. The company recently opened a four-employee sales office in Cambridge, MA, and today it announced that it has raised $2 million in Series A financing from Evaluate, a London- and Boston-based provider of market intelligence for the life science industry, and a group of individual investors. “AdverseEvents has identified a major gap in healthcare information and has built a lasting solution that will have far-reaching implications for all of the industry’s participants,” Evaluate founder and CEO Jonathan de Pass said in a statement about the funding round. Other backers include Trevor Fenwick, founder and executive chairman of global information publisher Euromonitor International, and Michael Tansey, former president and CEO of healthcare information provider Jobson. “They are not typical Silicon Valley VC folks,” Overstreet says of his new investors. “They are tried-and-true investors and operators in the health information space, guys who understand the value of what we’re doing.” Even drug companies will eventually be forced to acknowledge that value, Overstreet predicts. But before he could start to prove that point, Overstreet had to put another political battle behind him: the fight to prevent the State of California from imposing a retroactive tax on small-business investors. Last year, Xconomy exhaustively covered Overstreet’s campaign to prevent the Franchise Tax Board—California’s version of the IRS—from collecting millions of dollars in back taxes from investors who’d profited from the sale of stock in California-based small businesses. The board’s move came after a state appeals court struck down a law designed to encourage small-business investment by allowing these taxpayers to exclude part of their gains from their taxable income. Overstreet himself was in line for a big tax bill, having sold his previous company, enterprise data startup Sagient Research Systems, in 2012. California Business Defense, a lobbying group formed by Overstreet and other small-business owners, argued that the tax board’s plan to make investors pay taxes on the formerly excluded income all the way back to 2008 was unfair, even unconstitutional. Sympathetic legislators pushed a relief bill through Sacramento, and Governor Jerry Brown signed it into law in October, sparing investors some $120 million in back payments. The demands of the lobbying effort forced Overstreet to put off plans to raise financing for AdverseEvents. “The multiple trips to Sacramento, being on the phone with different legislators, and managing the group of affected taxpayers sucked up a lot of time,” he says. “At the time I wanted to think that I was juggling all the balls at once, but in retrospect that is not how it worked. I’ve gotten more done since October than in the previous year or two combined.” The first step at AdverseEvents was acknowledging that there was a flaw in the company’s original business plan. The company’s core activity is to gather post-FDA-approval drug safety data from the FDA itself—which is “a disaster,” in that it’s riddled with spelling errors, duplicate entries, and other inconsistencies, Overstreet says—and clean it up so that it can be properly searched and analyzed. Originally, Overstreet thought drug companies would pay the startup for access to the cleaned-up data, which could help them track the effects of prescription medications, a $1 trillion business around the world. Instead, manufacturers saw the data as a potential source of liability—a hornet’s nest that they didn’t want to kick. “Their initial reaction was ‘Go away,’” Overstreet says. “When they realized we weren’t going away, they tried to discredit us. When they couldn’t pull that off, now they are just fighting us.” Today, in fact, AdverseEvents plans to release a report on comparing the safety of various medications for Type 2 diabetes, including brand-name drugs like exenatide (Bydureon) from Amylin Pharmaceuticals and AstraZeneca, and alygliptin (Nesina) from Takeda. The bottom line: Bydureon may be the safest choice within its class of GLP-1 inhibitors, while Nesina and other so-called DPP-4 inhibitors may be “linked to more serious side effects than is widely believed,” in the language of the report. “I guarantee you that within five minutes of that report coming out, there will be a statement from the manufacturers saying, ‘You can’t use this data, it’s not reliable, blah blah blah,'” Overstreet says. “They will have a list of reasons for why that is. But we have … Next Page »
News Article | January 24, 2013
A major tax incentive designed to encourage investors to back startups and other small businesses in California has just evaporated. If you sold stock in a so-called “qualifying small business” (QSB) in 2012, you won’t be able to exclude or defer any of your gains when you fill out your state income tax return this spring, as you formerly could under California law. That may sound like a relatively minor matter, especially if you don’t own startup shares or aren’t an active investor. And in light of California’s financial woes, it would certainly be intellectually understandable if the state had decided to drop the exemption going forward. But the changes don’t stop there. Under the California Franchise Tax Board’s interpretation of a 2012 state Court of Appeals ruling, which found part of the tax law to be unconstitutional, anyone who acted in good faith to claim the now-deceased QSB incentive on their 2011 California return owes the state back taxes on the excluded or deferred income. And the same goes for 2010. And 2009. And 2008. And, what’s more, these taxpayers will also be hit with back interest and possible penalties. If you’re unsettled by the idea of owing additional taxes, interest, and maybe penalties on a completely legitimate return you submitted four years ago, you aren’t alone. “These taxpayers followed the law when they filed their tax returns,” says Gina Rodriquez, vice president of tax policy at the California Taxpayers Association, a non-profit advisory organization in Sacramento. “For [the Franchise Tax Board] to come out four or five years later and say, ‘You followed the law, but it was unconstitutional, and now we are going to hit you with back taxes and interest’—and the interest can be huge—that is just not fair tax policy.” The retroactive nature of the tax change, which was announced by the Franchise Tax Board on the eve of the Christmas holiday, has taken plenty of California taxpayers by surprise. In fact, the changes went largely unremarked outside a small community of accountants and tax attorneys until Xconomy published a guest editorial about the FTB notice by Brian Overstreet, the co-founder of drug safety monitoring startup AdverseEvents.com, on Jan. 15. Since that article appeared, the FTB’s retroactive clawback decision has begun to generate national press coverage, not to mention pained outcries from many other California entrepreneurs and investors. It’s unclear exactly how many taxpayers will ultimately be affected: the FTB puts the number at just 500 people per tax year, or as many as 2,500 altogether, who might owe a cumulative $150 million in back taxes, while Los Angeles law firm Manatt, Phelps & Phillips says the impact could be much larger, affecting “countless taxpayers” who have claimed the QSB exclusions since 2008. But regardless of the exact number of people now in line to receive tax bills from the FTB, the change is sparking angry protest from critics who say the tax board overreacted to the Court of Appeals ruling and didn’t need to make the remedy retroactive. Moreover, observers in the tax and investing communities say the reversal of the QSB incentive—coming on the heels of big income tax increases imposed by Proposition 30, which voters approved in November—could erode the state’s image as a haven for innovators, ultimately driving investors and entrepreneurs to take their money and their talent to other states with lower income tax rates. “Whether it’s the QSB stuff, or whether it’s Proposition 30, all of it is part of a pattern, and the cumulative impact is chilling,” says Bob Ackerman, founder of San Francisco-based venture firm Allegis Capital. “I have had conversations with a number of entrepreneurs as well as a number of venture firms who have indicated that they are seriously rethinking where they invest and where they build companies.” In the court case that prompted the change, the FTB argued that California has the prerogative to use tax incentives to encourage in-state investing. (The specific issue in the case was whether the incentives were set up in a way that discriminated against taxpayers who invested in multi-state businesses.) Observers say it’s ironic that the board has now gone to the opposite extreme—not just nullifying the QSB incentives for 2012 and future tax years, but penalizing taxpayers who took advantage of them before 2012. But there may be an even bigger irony in the episode: the plaintiffs who originally argued that the tax incentives were unconstitutional—and who persuaded the Court of Appeals to agree—say the FTB’s response is the opposite of what they’d hoped for. “It’s throwing the baby out with the bathwater,” says Marty Dakessian, an attorney at law firm ReedSmith who represented private investor Frank Cutler in the decade-long case. “We thought the appellate court decision would be a big win for taxpayers. By ending the discriminatory nature of the incentive, it should have expanded the pool of startups and small businesses that qualified for the benefits. But we were taken aback by the FTB’s approach. You would have hoped that they would recognize the intent of the legislation, which was to encourage investment and foster the entrepreneurial spirit and innovation in the private sector—all the things that people in Sacramento love to talk about.” In interviews with investors, entrepreneurs, lawyers, and tax policy analysts, Xconomy has reconstructed the complex history of Cutler v. Franchise Tax Board and the FTB’s response to the appellate court decision. We asked sources what other options might have been available to the FTB after the ruling; what ripples the decision is likely to send through California’s innovation ecosystem; and whether opposition to the new policy might snowball into some kind of organized political response. For the details, read on. A tax change that could end up costing technology investors hundreds of millions of dollars began 15 years ago when one man, Newport Beach resident Frank Cutler, sold some of his stock in a high-flying Silicon Valley startup, US Web. One of the first big Web design, marketing, and hosting companies, US Web went public in December 1997. In 1998, Cutler, an early investor and board member at the company, sold shares worth about $2.3 million. (This and other details of the case are spelled out in the Aug. 28 ruling by the California Second District Court of Appeal, which was written by Associate Justice Elizabeth Grimes.) Cutler rolled some of the money from the stock sale into three other small businesses, and on his 1998 state income tax return, he deferred that portion of the gain—that is, he didn’t report it as income. California’s tax code provided for just such a scenario: individuals were allowed to … Next Page »
News Article | June 2, 2015
LONDON & BOSTON & TOKYO--(BUSINESS WIRE)--Life science market intelligence firm, Evaluate Ltd, has partnered with AdverseEvents, Inc. (AEI), a leading healthcare informatics company focused on drug safety data, to fill a critical gap in commercial insight by enabling detailed FDA post-approval drug safety analysis. Historically, pharmaceutical professionals have lacked convenient, accurate and timely access to the FDA’s Adverse Event Reporting System (FAERS), a key set of over 5 million post-approval adverse event reports for marketed drugs across all demographic groups. The FDA uses FAERS analyses to make post-marketing regulatory decisions such as the issuance of label warnings/changes or market withdrawals. AEI has developed a rigorous proprietary method to standardize and analyse FAERS post-marketing safety data to provide accessible, actionable, and predictive drug safety measures derived from real-world, patient populations. Its proprietary analytics determine a drug’s potential risk to a patient, identify future safety alerts/labeling changes by the FDA, and enable the determination of a drug’s total medical cost and the long-term economic impact of prescribing a particular drug. The integration of adverse event analyses within EvaluatePharma® empowers the industry with new drug safety and healthcare economic insights to support strategic and operational decision-making. Examples of some of the standard propriety analyses available in EvaluatePharma include: “The AdverseEvents module in EvaluatePharma reveals the evolving adverse event profile on new FDA approved drugs. This insight can finally be leveraged in commercial assessments, licensing/M&A, competitive positioning and safety monitoring,” said Anthony Raeside, Head of Research at Evaluate. A new series of reports by Evaluate demonstrates how the data can be applied by clinical, business development, and launch teams to gain competitive advantage: To download Part I of the report series, please visit: www.evaluategroup.com/AdverseEvents. For more information or a demo, please contact the Evaluate team. Evaluate is the trusted source for life science market intelligence and analysis with exclusive consensus forecasts to 2020. Our services include EvaluatePharma, EvaluateClinical Trials and EvaluateMedTech. Our award-winning editorial team, EP Vantage, leverages our strategic analysis to cut through the noise, giving you daily opinion and insights. The Evaluate services enable the life science community to make sound business decisions about value and opportunity. For more information please visit www.evaluate.com. On Twitter: @evaluatepharma, @evaluatemedtech, @evaluateJP @epclinicaltrial, @epvantage. AdverseEvents is a California-based healthcare informatics company that improves patient safety and reduces systemic healthcare costs through the comprehensive analysis of post-marketing drug side effect data. Utilizing data-mining and analysis technology, through its proprietary RxSuite™ of analytics, AEI makes post-marketing drug safety data accessible, actionable, and predictable. For more information please visit www.adverseevents.com. On Twitter: @adverseevent
News Article | October 7, 2013
Taxes aren’t usually the stuff of high drama. But a story that began last year when a California state appeals court unexpectedly struck down an old tax incentive for small-business investors—and that unfolded, in part, here in the pages of Xconomy—has, after numerous twists and turns, reached its end. On Friday California Governor Jerry Brown signed a bill quashing the state tax board’s move to levy up to $120 million in back taxes and penalties on entrepreneurs who’d taken advantage of the investment incentive in past tax years. “The sense of relief is indescribable,” Brian Overstreet, co-founder of a group lobbying for the bill, said in a statement released Sunday. Members of Overstreet’s group, California Business Defense, spent much of 2013 in Sacramento, meeting with lawmakers to find a way to undo the Franchise Tax Board’s plan. “We thank the Governor for reassuring the state’s innovators and risk-takers that California is still the place where the companies of tomorrow should be built,” Overstreet said. In a commentary published today on Xconomy, Overstreet says Governor Brown’s office called him at 1:15 pm on Friday to tell him Brown had signed Assembly Bill 1412, a bill hastily carved together to reverse the tax board’s plan after lawmakers introduced amendments that watered down a similar measure, Senate Bill 209. Brown had to choose which of the two bills to sign; in the end, he endorsed the one providing full relief. In the commentary, Overstreet shares the behind-the-scenes story of the lobbying efforts leading up to the signing. “In short, we succeeded by doing what we do best: being entrepreneurial,” Overstreet writes. California Business Defense organized a coalition of entrepreneurs, friendly lawmakers, and attorneys familiar with the ways of Sacramento, then approached the effort to reverse the tax ruling as a sales campaign, Overstreet says. “In countless trips to Sacramento, we met with over 50 legislators and other government officials. In each meeting, we identified the problem, presented our solution, elicited feedback, and overcame objections.” It was Overstreet who first brought the retroactive tax plan to widespread notice, in an op-ed published on Xconomy on Jan. 15. After selling his previous business in 2012, Overstreet had noticed a little-publicized announcement from the Franchise Tax Board, the state’s equivalent of the IRS. In a lawsuit decided last August, a state appeals court had ruled unconstitutional a portion of the state tax code that allowed investors selling stock in California-based small businesses such as startups to exclude 50 percent of their gains when computing their taxable income. The tax board’s interpretation of the ruling was that taxpayers who claimed the benefit would have to pay taxes on the formerly excluded income, retroactive to 2008. (Xconomy detailed the complex history of the tax board’s move in a Jan. 24 news analysis.) That meant entrepreneurs and other investors who had sold their interest in small businesses in the state would soon get bills totaling an estimated $120 million. The tax board refused to revise its ruling, but said in February that it would delay collection of the back taxes, giving California Business Defense time to seek a legislative solution. The group turned to lawmakers for help, notably Senator Ted Lieu, a Democrat from Torrance, CA. Lieu’s bill, SB209, temporarily restored the income exclusion in a way that wouldn’t run afoul of the Constitution. But after attracting early support, the bill ran into a snag this summer, when members of the Senate Appropriations Committee expressed concern that it might oblige the state to pay retroactive refunds to some taxpayers. To cover those potential costs, committee members introduced amendments to SB209 that reduced the 50 percent exclusion to 38 percent, meaning investors would still be on the hook for partial retroactive payments. “With technical snafus and political pressure weighing down SB209, we worked with legislators [including Assembly member Raul Bocanegra, Democrat of Los Angeles] to gut an unrelated bill, AB1412, insert our desired language, and push that through both the Senate and Assembly,” Overstreet recounts in his commentary. Both bills passed by large margins in the Senate and the Assembly, leaving the Governor to decide which one to approve. Brown’s office had remained silent on the issue throughout the year, leaving Overstreet and his coalition members uncertain about the governor’s intentions. But on Friday he signed AB1412, along with 17 other bills designed to boost economic development in the state. Under AB1412, the restored 50 percent exclusion is only effective through 2016. So investors and legislators may have to revisit the issue within a few years, or find different ways to encourage investment in California small businesses. For now, Overstreet says he’s relieved to be able to get back to his real job, as CEO of drug safety startup AdverseEvents, and hopeful that the episode has demonstrated to entrepreneurs that they can have a voice in state politics. “As entrepreneurs we’ve accumulated unique, transferable skills from starting and running successful businesses,” Overstreet writes today. “Let’s do more than just denigrate our government in clever 140-character missives. Let’s actually work to influence policy and re-craft the institutions and mindset of our government from within.”
News Article | February 27, 2014
Thousands of times each day, the U.S. Food and Drug Administration receives reports about unwanted side effects of the prescription and over-the-counter medications it oversees. They stream in from patients and doctors—and from drugmakers, which are required to relay accounts of problems. This data, cataloging reactions as mild as rashes and headaches and as serious as internal bleeding and death, help the agency monitor drug safety. With millions of records created since the system began in 1998, it’s the world’s most extensive record of how drugs interact with the human body. It’s also almost impossible for anyone outside the agency to use. The FDA publishes quarterly bulk files—the most recent one covers to the end of 2012—but they’re a blizzard of cryptic information that can only be deciphered with expertise and complicated software. Patients or doctors who want to see a report on a specific drug have to file a Freedom of Information Act request with the government. “If you’re someone who’s trying to make an informed decision about which drug should I take … it’s not well-formulated that way,” says Dr. Taha Kass-Hout, the FDA’s chief health informatics officer. In January the agency quietly unveiled plans to make these records, known as adverse event reports, more widely available through a project called openFDA. Instead of simply publishing unwieldy quarterly files, openFDA will let software makers tap directly into the data to build user-friendly and easily searchable programs for doctors and consumers. The agency is also opening up records of product recalls and drug labels. More transparency could make it easier to detect problems in cases like Vioxx, the painkiller that Merck (MRK) pulled from the market in 2004 because of heart risks. A handful of entrepreneurs have struggled to translate the FDA’s current stockpile of drug information. AdverseEvents, a startup in Santa Rosa, Calif., sells reports based on the agency’s bulk data releases to insurers and hospitals trying to figure out which drugs have lower rates of complications. President Brian Overstreet says the files are full of duplicate records and misspelled drug names. Patients and physicians trying to use the FDA’s database on their own are in the wilderness, he says. “You don’t know whether Lipitor or Crestor is safer for you,” Overstreet says, “and neither does your doctor, frankly.” Two medical researchers in Virginia, Alex Mayers and Dan Murphy, used the FDA’s archives to create DrugCite, a website that lets users search for side effects by medication. Since each file from the FDA covers three months, creating a complete record of problems associated with a particular drug over a period of years means deciphering and piecing together dozens of monster files. “Right now the data’s kind of locked up,” Mayers says. Launched in 2011, the site gets thousands of hits a day. “It’s obvious that this data is wanted just by the response we’ve gotten,” says Murphy. Once the information is easier to use, the FDA’s Kass-Hout predicts that many other Web and software developers will step in to meet the public’s demand for drug information. He envisions mobile apps that let consumers compare over-the-counter drugs while they shop in the pharmacy, and software to immediately alert pharmacists when a company issues a recall. The pharmaceutical industry is cautiously supportive. More informed doctors and patients “have to be a good thing,” says Jeff Francer, senior counsel at the Pharmaceutical Research and Manufacturers of America. But he says reports about side effects need context: “We wouldn’t want patients to be scared by just receiving adverse event information in absence of a more full discussion of both the benefits and the risks of a medicine.” Kass-Hout, a physician, is looking for ways to improve the reliability of information the FDA collects. His background is in monitoring infectious diseases. Previously at the Centers for Disease Control and Prevention, he tracked emergency room visits related to the H1N1 flu outbreak in 2009; finding problems with medications involves similar public health detective work. The FDA is also considering skimming tweets and Facebook (FB) posts that might signal problems with drugs, though he calls the idea exploratory. “You’ve got to look at this as a mosaic,” he says. “All these pieces are telling you something, and it’s just a matter of how you can stitch it together.”
News Article | April 16, 2014
AdverseEvents Inc., a Santa Rosa, CA-based healthcare informatics company focused on drug safety and side effects, closed $2M in Series A financing. The round was led by Evaluate Ltd., with participation from Trevor Fenwick, founder and Executive Chairman of Euromonitor International, and Michael Tansey, former president and CEO of Jobson, and former CEO of the Scientific and Healthcare group at Thomson Reuters, the global information provider. In conjunction with the financing, Jonathan de Pass, the founder and CEO of Evaluate and Michael Tansey will be joining AdverseEvents’ board of directors. The company intends to use the funds to expand its sales force and analyst teams, and to continue to build its marketing presence among health insurers, health systems and hospitals. Led by CEO Brian Overstreet, AdverseEvents provides managed care organizations with a comprehensive technology, analytics, and product platform for post-marketing drug side effect data. In addition, the company publishes comparative drug studies, industry white papers, topical special reports, and platform validating research papers in academic journals and provides services to enterprise markets including the pharmaceutical industry and financial institutions.
News Article | April 17, 2014
AdverseEvents is a California-based healthcare informatics company that improves patient safety and reduces systemic healthcare costs through the comprehensive analysis of post-marketing drug side effect data. The company intends to use the funds to expand its sales force and analyst teams, and to continue to build its marketing presence among health insurers, health systems and hospitals.
News Article | February 28, 2013
[Updated 3/6/13, see below] In a bitter contest over tax changes that could hit California investors with bills for up to $120 million in unpaid taxes dating back to 2008, one side has stopped the clock. Under pressure from the office of California Gov. Jerry Brown, the state’s Franchise Tax Board indicated today that it will refrain, for now, from trying to collect income taxes that it believes thousands of taxpayers now owe under a 2012 court ruling that invalidated an important tax incentive for small-business investors. Taxpayers and lobbyists opposed to the retroactive assessments are greeting the change with relief. “This is certainly not a victory at all for our position, but it takes the time pressure off, and it takes the immediate financial hit that a lot of people were looking at off the table,” says Brian Overstreet, the Healdsburg entrepreneur who first sounded the alarm about the FTB’s retroactive tax in an Xconomy column in mid-January. Overstreet and several other California businessmen are behind a group called California Business Defense that has spent the last three weeks petitioning Brown’s office to stop the FTB from sending the bills. “I feel very grateful to the governor’s office, which, I think, has been instrumental in making this happen,” says Overstreet (pictured above right). “They certainly could have told us they had other things to deal with. It feels great, after spending way too much of my time on this for the last few weeks, to actually have something to show for it.” What Overstreet’s group has won is a temporary reprieve, rather than a concrete change in the FTB’s position. Now Overstreet’s group and legislators opposed to the FTB’s plan say they’ll seek an administrative or legislative fix that restores the original tax incentive in some form or, at a minimum, prevents the FTB from issuing the retroactive assessments. As we detailed in a January 24 analysis, the tax dispute has a long and twisted history. In the early 1990s, California legislators created a tax incentive designed to encourage investors to put their money into California-based small businesses. The so-called qualified small business stock (QSBS) incentive allowed investors to exclude 50 percent of their gains on the sale of small-business stock from their taxable income. If they rolled the money into another small business within 60 days, they could exclude 100 percent of the gains. One key requirement was that the qualifying small businesses maintain 80 percent of their assets and payroll in California. In other words, the incentive wasn’t available to people who invested in multi-state companies—and in a case decided last August, a state court of appeals ruled that this part of the tax statute violated the Commerce Clause of the U.S. Constitution. In a notice issued on the final business day of December, 2012, the FTB declared that under its interpretation of the case, known as Cutler v. California Franchise Tax Board, the entire incentive statute was void. The FTB said everyone who had taken advantage of the QSBS incentive since 2008—the oldest tax year still open to new assessments—would have to pay taxes on the income they’d previously excluded. To get in under the statute of limitations, the FTB said it would be forced to issue the first retroactive assessments by April 15, 2013. And in fact, it has already sent letters to some 2,000 taxpayers, warning them that a tax bill is on the way. But today the FTB posted a set of changes to an online FAQ about QSBS gains, indicating that it won’t send a tax assessment to affected 2008 taxpayers for now, as long as they sign an agreement waiving the statute of limitations. The FTB didn’t make clear how long the postponement would last. But it said taxpayers protesting their bills would have the “option to request that the protest be held pending legislative action.” In effect, that stops the countdown on the 2008 assessments—and creates a lot more breathing room for taxpayers who were facing big retroactive increases in their 2009, 2010, 2011, or 2012 tax bills. The approaching April 15 deadline was “a major issue” for opponents of the FTB’s policy, according to Overstreet, because “once those bills go out the state starts thinking about how it is going to spend the money, and then we are in a fight against much bigger organizations about … Next Page »
News Article | January 15, 2013
California is a great place to live and work, but it is not a particularly friendly place to start and run a small business. In 1999, I co-founded Sagient Research Systems, an enterprise-focused data company in San Diego. Over the ensuing 13 years we tinkered, triumphed, failed, and even tempted bankruptcy. But through it all, we worked hard, we worked fairly, and we grew. Slowly, we evolved into a successful business employing nearly 40 people, all in California. In mid-2012, we sold Sagient Research in a transaction that was a good exit for everyone involved. One of the very few benefits entrepreneurs and early-stage investors can look forward to in California is the partial state income tax exclusion on sales of stock of a Qualified Small Business (“QSB”). This exclusion incentivizes people to start businesses in California and to keep them here. As the law was written, founders and early investors in QSBs can exclude 50 percent of the taxable gain on the sale of their stock—meaning that they pay only half the regular California tax rate on the gain (about 4.5 percent instead of 9 percent). While the QSB exclusion did not play a role in our decision to start Sagient Research, it justified our decision to stay in California. Although California taxes stock sales at nearly 10 percent (now nearly 13 percent due to Prop 30), we knew as a qualifying QSB, we’d only pay half that amount. Without the QSB provision, we might have decamped to a more tax- and business-friendly state. After we completed the sale, I paid both my federal and state estimated taxes computed with the QSB exclusion. I thought I was clear until April 2013. Then in late December, the FTB decided to cancel the QSB tax benefits and RETROACTIVELY deny the benefits for the past five years. How is that even possible? It turns out that a few years ago, someone sued the Franchise Tax Board over being denied the right to claim the QSB benefit [Cutler v. Franchise Tax Bd., 208 Cal. App. 4th 1247 (2012)]. The company at issue in that lawsuit did not meet one of the QSB requirements—that it maintain 80 percent of its employees and assets in California. In August of 2012, the California Court of Appeals sided with the plaintiff, ruling that denying him the QSB exclusion based on the “80 percent requirement” was an unconstitutional violation of the interstate commerce clause. Since the FTB lost the case, you might think that they would strike the unconstitutional requirement and keep the rest of QSB statute intact. Not a chance. What the FTB did instead was to take their ball and go home. They decided that since they could not impose the “80 percent requirement,” no one would be entitled to the QSB exclusion. They put out an announcement terminating the Qualified Small Business exclusion and retroactively disqualifying all exclusions and deferrals going all the way back to 2008. What does this mean for you? 1. If you are a business founder or early investor who sold stock since 2008 and took the QSB exclusion: Surprise! You are going to get a bill from the FTB for the 50 percent of the taxes you excluded plus interest plus possible penalties. 2. If you are a business founder or early investor and have not yet sold stock: Rethink your business and tax planning strategies. Consider whether it’s fiscally prudent to stay in California. 3. If you a contemplating starting or investing in a California business: Think long and hard. Consider out-of-state alternatives. Here’s the real kicker. Just at the moment when California is retroactively taxing entrepreneurs, the federal government is extending the federal QSB benefit. Per amendments in the new “fiscal cliff” law, if you started or invested in a QSB between September 28, 2010 and January 1, 2013 and ultimately sell stock under the federal QSB provisions, you’ll pay no federal capital gains tax, and in some states, no state taxes. But not California—we’ll pay up to 13 percent! Why in the world would any smart business person start or invest in a new California company facing that kind of penalty? I’m not ungrateful or unrealistic. I fully understand the scope of the economic problems at both the state and federal level and the need for everyone to pay their fair share. And as a product of California’s public university system, I fully appreciate the opportunities afforded to me by living and working in the great state of California. But in this instance California changed the rules after the fact, and that’s just not right. More importantly, the FTB’s radical action is going to send a terrifying message that will have the unintended consequence of driving young, growing businesses to friendlier environments. That’s the last thing that the state of California needs right now. The FTB’s retroactive sucker punch isn’t just about me. It’s about everyone in the startup community. It’s going to be a very painful time for entrepreneurs and investors in California over the next few months as these potentially debilitating tax bills start showing up in mailboxes all across the state. My company was not a big, faceless corporation. We were good corporate citizens with a small but vibrant, local workforce. We were the epitome of a Qualified Small Business. And we just got screwed. And so did you. Brian Overstreet is the co-founder and president of AdverseEvents and the former CEO of Sagient Research Systems. Follow @BrianOverstreet