20 Billion Lifestyle Market Immune to Costly Regulations says Alphaeon CEO

You can’t defraud the government if you aren’t handling its money, explains Robert Grant, CEO of Alphaeon, a lifestyle healthcare company. Pharma free-market advocates take note.

If you no longer had to worry about the Anti-Kickback Statute, Stark Law or the Sunshine Act, would your professional marketing strategy change? Probably, if you like making money.

Robert Grant, CEO, Alphaeon

By focusing exclusively on products and services not covered by government health plans, Alphaeon is side-stepping key provisions of the False Claims Act and other regulatory strictures, and engaging physicians in ways Big Pharma cannot. “We spent millions of dollars on legal research; I brought in the top healthcare compliance law firms in the country,” says Alphaeon CEO Robert Grant, a former executive at Bausch & Lomb and Allergan. “By never taking a dollar from the government, you get to operate outside of all those things.”

Alphaeon’s focus on the “self-pay lifestyle sector,” says Grant, puts the company in a position to outfox Grant’s past employers, as well as cash pay businesses housed in other organizations like Abbott Medical Optics and Novartis. That’s because companies like Allergan and Novartis – due to new regulations like the Sunshine Act, and a strengthening of the False Claims Act – have to treat their cash pay businesses the same way they treat reimbursed products (from a compliance standpoint), since both product types are housed under the same parent company.

Instead of ratcheting up compliance efforts and wearing kid gloves when promoting products to physicians, Alphaeon has gone in the opposite direction; Grant formed Strathspey Crown, a growth equity firm, and brought doctors together to “create a funding pool as a buying group, and to give [physicians] the opportunity to actually decide which products and technologies” Alphaeon will sell, says Grant.

By bringing practicing physicians into the fold – Strathspey Crown produced a documentary titled “Of Doctors, For Patients” – Alphaeon is attempting to build an active customer base directly into its product line. The company launched an app – ShoutMD – which serves as a “crowd intelligence platform” to facilitate sharing of insights among physicians, and to “suggest ideas, and collaborate with peers to directly impact [Alphaeon’s] strategic direction,” according to the app’s description on various download sites (the app wasn’t accessible in the US iTunes store at press time). Alphaeon is handing product decisions entirely over to physicians, according to Grant: “I don’t even get a vote on which products we get to have…I purposely left myself and the company 100 percent out of it.”

What kinds of doctors are participating in this new model? “They’re the most credible leaders in their fields…and they want to take the practice of medicine back in this second tier of personal choice medicine,” says Grant. Alphaeon has partnered with the American Society of Plastic Surgeons, and is essentially hoping to expand its base to include a “group of doctors who represent a large chunk of the market.” That’s possible, says Grant, because the cash pay market is small in terms of practitioners, but not in terms of dollars. The lifestyle sector of healthcare is worth $20 billion today, says Grant, and will grow to $30 billion by 2016. But in plastic surgery, only around 3,000 physicians in the US are cash pay; in ophthalmology it’s 2,000; in dentistry it’s five or six thousand.

Grant notes that the American Jobs Act enables his company to have 2,000 shareholders, and he hopes to populate that group with well-heeled physicians interested in owning the products they use, and who would also like to bypass some of the same reimbursement pressures drug companies are facing. “If you got a few hundred thousand dollars from 2,000 shareholders, you could have a multi-million dollar fund,” says Grant.

Alphaeon was established in July, so it’s too soon to know if the model will work. On August 2, the company announced its first products via an exclusive US license for Geneva-based Teoxane Laboratories’ full portfolio of dermal fillers and cosmeceutical products. Grant describes his primary “consumer patient” population in the US as being women in their early forties – “soccer moms” – with household incomes exceeding $70,000. “This group of people wants to be able to go to doctors that provide more of a high-end experience,” says Grant. “It’s not only about the [health] outcome, but also about the experience.”

The idea of physicians collaborating on product development and owning an equity stake in a company selling the drugs they prescribe, without government involvement – laissez-faire medicine, if you will – may sound worrisome on its face, but those worries are mitigated in part by two words: medical necessity, or a lack thereof. Alphaeon’s products will still have to meet muster at the FDA, in terms of safety and efficacy. But defining unmet need in the lifestyle sector is a lot different than it is in oncology, for example, where people are literally dying for new therapies. Alphaeon’s products are elective and not medically necessary, so questions of value and access are fundamentally different. For a patient in this space, it’s more about want than need, and whether or not she can pay. Alphaeon will offer financing plans for patients to pay for procedures, says Grant.