The 21st Century Cures Act aims to ignite innovation with perks to biopharma and medical device makers that could increase drug and device development, shrink regulation, and accelerate how quickly new treatments make it to market. Will the 21st Century Cure Act be a boon to investors in drug and medical device stocks?

In this episode of the Motley Fool's Industry Focus: Healthcare podcast, analyst Kristine Harjes is joined by contributor Todd Campbell to discuss how the 21st Century Cures Act could fuel industry innovation and investors' portfolios.

Also, the duo weighs in on plans by Kite Pharma (NASDAQ:KITE) and Novartis (NYSE:NVS) to pitch CAR-T therapies to the FDA in 2017 that could reshape how doctors treat cancer.

A full transcript follows the video.

This podcast was recorded on Dec. 7, 2016.

Kristine Harjes: Welcome to Industry Focus, the podcast that dives into a different sector of the stock market every day. It is December 7th. I'm your host, Kristine Harjes, and I have Motley Fool Healthcare writer Todd Campbell on the line. How's it going, Todd?

Todd Campbell: Hi, Kristine! How are you?

Harjes: I'm good, I feel like I haven't talked to you on the show for a while.

Campbell: I know. And it feels like the times that we have talked, we've talked about not the best of news for investors. So, it'll be nice to talk about a couple positives today.

Harjes: Right, even the show you did last week with Michael Douglass was kind of a bunch of bummer news items.

Campbell: Yeah, exactly. We have to get into the spirit, the holiday spirit, talk about some things that are positive going into the end of the year.

Harjes: Exactly! 'Tis the season to be merry. Alright, let's do it. We're going to talk about the 21st Century Cures Act, which I think is very exciting and good merry news. But first, before we get to that, we're going to talk a little bit about a very important meeting that happened in the healthcare world earlier this week. It is the annual meeting of the American Society of Hematology, so, blood and blood cancer. It's ASH, you'll hear us call it. This was out in San Diego. It was from December 3rd through 6th. Essentially, what this is, is all the biggest names in biotech that work in this space get together, they release their data, they announce new drugs, and everybody gets to rub elbows and share research and results, and it's very exciting for scientists and patients, and also for investors.

Campbell: Yeah. Some years it's not as exciting for investors, it's more of a blase event, but this year is not the case. We have some really interesting data that got presented this year, that is impacting and moving stocks, and could impact and move stocks in 2017 and into 2018. In looking through all of the data, especially given the fact that last week, Michael and I were talking about Juno's stumbles in developing a new class of drugs called CAR-Ts, I thought it might be nice to talk about some positive things that are happening in CAR-T development.

Harjes: Sounds good. CAR-Ts were certainly front and center at this conference. I think that probably received the most attention of any other topic there. And there were a handful of companies that presented data, and it seemed like it was all pretty good data.

Campbell: Yeah. It was pretty positive data. There were two companies that stood out to me, only because they presented data from registration-ready or pivotal trials that could allow them to obtain FDA-accelerated approval in 2017. So, it's not necessarily just, "Hey, we have some really interesting early stage data." It's, "We have some early stage data plus a chance at commercialization in relatively short order." Just to go back in history for a second, and remind any new listeners what we're talking about with CAR-Ts, it's an entirely new way to battle back against cancer. It's a process that involves removing T cells from patient's bloodstream, re-engineering them so that they can better find and destroy cancer, and then reinserting them back into the patient. It's a very new approach, it's a targeted type approach, toward getting rid of cancer, specifically blood cancer, which seems to be very amenable to this type of approach. Two of the companies that are in the leadership position in this CAR-T space are Kite Pharma and the goliath, Novartis.

Harjes: Right. Kite is a really interesting story, here. It seems to me like they will probably be the first one to cross the finish line of the CAR-T race, if things continue to go well. Reported really positive data on Tuesday at the conference. The drug is called KTE-C19. The trial that it was going through is called ZUMA-1.

Campbell: Yeah. This is an awesome advance, potentially, for a very tough-to-treat group of patients who are diagnosed with something called diffuse large B-cell lymphoma.

Harjes: Which is the most common type of Non-Hodgkin's lymphoma.

Campbell: Exactly, the most common type, about 35% of Non-Hodgkin's lymphoma. Specifically, this drug would be used in patients who failed to respond or saw their disease return after current standard treatments. So, this would not be a front-line use -- at least initially. It would be used in the toughest-to-treat patients. Historically, that patient subgroup has not had a good prognosis.

Harjes: However, really good trial results. 76% of the patients that were being studied experienced an objective response, and 47% of them went into complete remission -- which, just to emphasize the point about these patients not receiving their first-line drugs, they have already been through therapy, and it has failed. So, these are patients who have a really strong need. So, to see numbers like this is pretty incredible.

Campbell: Yeah. Kite went back and did a retroactive analysis study to try and see what has happened with this patient subset in the past, prior to developing this CAR-T. What they found is the response rate is typically only about 26%, and the complete responder rate is only around 8%. It's very low. So, theoretically, this is a major advance for...it's not a huge patient population, but, a patient population that, theoretically, if this drug gets approval, could still be worth a pretty good amount of revenue to investors, starting as early as late next year.

Harjes: Very cool. We also mentioned Novartis a little bit. Novartis is definitely not a pure CAR-T play in the way that Kite is, but they do have a really interesting CAR-T program. The drug is called CTL019, and that had, also, some really awesome data coming out of this conference.

Campbell: I know! 82% complete response rate within pediatric patients diagnosed with acute lymphoblastic leukemia. You're talking about, wow, what a potentially great advance in treatment, again, for a tough-to-treat group of patients that don't have a tremendous number of other treatment options available to them.

Harjes: And this AL is the most common cancer diagnosed in children.

Campbell: Right, about 2,500 cases in the United States annually in children. Interestingly enough, this drug, CTL019, it targets the same protein that's expressed on the cancer cells targeted by Kite's drug and Juno's drug. I don't know why Juno's drug is delivering such safety concerns, necessarily. But one thing that's interesting is Novartis' drug appears to be much safer, but the trial that Novartis conducted was in children, whereas Juno's trial was in adults. Obviously, there could be some differences associated with that. Regardless, this drug's performance in trials so far is good enough that Novartis expects to be able to file for FDA approval on an accelerated pathway next year. So, Kite's already filed a rolling submission that they're going to complete in early Q1. Novartis thinks that they're going to be able to file for approval at some point next year. Both of these drugs, conceivably, could be on the market and bringing in revenue for these companies in 2018, at least.

Harjes: This is a type of therapy that we have been watching for quite a while. So, to be getting this close to the applications and the potential approvals, that's pretty exciting.

Campbell: Yeah, especially how quickly it happened. I think Kite's research into CAR-Ts, through a collaboration with the National Cancer Institute, began in like 2012. From start to finish, you're talking only a few years to be able to get a drug potentially in the hands -- we have to say potentially. We always have to remind everybody who is listening that anything can happen from here. These drugs are not approved yet. They still have to pass the FDA's gauntlet. But it's still pretty impressive, that we could potentially have these drugs on the market within such a short period of time.

Harjes: And there are certainly black swans that could happen, as you mentioned. These drugs are a little bit infamous for having adverse affects and events associated with them. Definitely something to keep an eye on, maybe don't bet the ranch on them, but it's looking pretty good for the CAR-T space.

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So, Todd, the second topic that we wanted to talk about today is also a very exciting one. This is the 21st Century Cures Act, which as of yesterday, Tuesday, has been passed by both houses of Congress and is on its way to Obama for a signature.

Campbell: Normally, with regulation and policy, this year, Kristine, we've been talking about what's happening with drug pricing, and pushback, and all that. We haven't focused a lot on what Washington could do to boost innovation in drug development as a source of growth for the industry. That makes this act really important for investors to know about, because it does exactly that. It provides a series of, we'll call them perks, I don't know how else to call them, to the industry and to regulatory bodies, that are designed to increase the amount of money that's available to research new drugs and medical devices, to speed them more quickly to the FDA, to accelerate the timeline for review of those drugs and devices by the FDA. Essentially, to get these things on the market more quickly so they can start helping patients.

Harjes: Right. The premise here is that the FDA was stuck in the past and was not equipped for the modern era of medicine. You can even see that in the name of this thing -- it's the 21st Century Cures Act. This is meant to bring the entire drug discovery and approval process into the 21st century. I feel like I'm still doing the Rocket Mortgage ad when I say that [laughs]. It's a $6.3 billion piece of legislation. A lot of that money is going directly into medical research. $4.8 billion will go to the NIH. This will fund things like the Moonshot Cancer Program, the Brain Initiative, the Precision Medicine Initiative. This is research that's going into things like cancer and Alzheimer's, really important and often underserved indications.

Campbell: Right. You have $4.8 billion over 10 years going to the NIH. You have another $500 million over a 10-year period that's heading to the FDA to boost hiring and wages. You have another $1 billion over two years going to help support programs to combat opioid abuse. There's a lot of money that is being put into the system, with the concept of doing exactly what we outlined, which is developing more drugs more quickly and getting them into patient hands faster. The 21st Century Cures Act is not a small bill. It's almost 1,000 pages long. It was very heavily lobbied by both the pharmaceutical and medical device industries--

Harjes: 1,300 lobbyists.

Campbell: Yeah. This was a long bill coming. As a result, there is some debate that it may favor the industry more than it should. However, we'll leave that debate to others and instead focus on what kind of things, specifically, does this act do to help get those drugs and products into patient hands? There's a number of different sections in this act that address everything from deregulation to changing the way that the regulatory body evaluates whether or not to approve a drug or device.

Harjes: Right. What is going to be required for the FDA to green-light a drug is going to change a little bit. The FDA is now going to consider what's called "real-world" evidence, so, outside of just clinical trials. There's also a little bit of a notion of what sort of data from trials can be considered. Now, these randomized trials that we're used to can be supplemented with more information, such as genetic subgroups of patients. Again, all of this is with the intention to speed this process along, to make it more efficient, more cost-effective for the drug-developing companies, to get their drugs into the hands of the FDA, and then hopefully, eventually, onto the market shelves.

Campbell: Right. You have section 3021, which is encouraging new novel trial design. You have section 3011, which is establishing a review pathway for the use of biomarkets or surrogate endpoints that could help speed along drug development. You have section 3001, which, we talked about, elevating the importance of patient experience data in the review process. You have other things in there as well, including the extension of the Pediatric Voucher system, which is a system that provides a relatively high-value voucher for companies that develop drugs for rare diseases that affect children. You have a lot of different pieces to this puzzle. I encourage investors to spend a little bit of time going through the nuts and bolts of it, because there are some things I think will help boost innovation, and in an environment where pricing is going to be more highly scrutinized, innovation is going to become the primary source of revenue and profit growth throughout the industry. That's important.

Harjes: Absolutely. And this is, without a doubt, a win for drug developers. It seems, at least from what we've said so far, that this is a win all around, but I will point out that there are some parts to it that are a little bit more contentious. The bill passed by a huge margin. It was 392 to 26 votes. But, just to give a little bit of an idea of what those 26 are talking about to complain about this act, one of the items in it allows for the promotion of off-label use -- off-label is when you use a drug for something other than its approved indication. Say it's approved for one thing, and there's a little bit of theory that it might also work for something else -- it's using it for that something else, that's the off-label use. This bill will allow for the promotion of off-label use to insurance companies.

The argument here is that many of the people that are actually making these prescribing decisions are your insurers; it's your formulary committees, rather than the actual physicians themselves. In that case, shouldn't payers be allowed to receive information from the pharmaceuticals? The opposition there is saying this is pretty much fraud, to take a drug that's approved for one thing, and there is no evidence of its efficacy in the other indication, but you're going to market it that anyway to these payers. Not to give my own personal take on that too much, but you can see how that's a little bit of a contentious point.

Campbell: Yeah, without a doubt. If you read through the bill, there are a lot of points where it says, "We are not diminishing the requirements of safety and efficacy in order to win FDA approval." They continue to hammer that home. Yet, you're right, there are parts in there where they're seemingly making it easier for drug companies to advance drugs that you could argue won't be as highly vetted as maybe they had been in the past. Who knows what kind of unintended consequences could result from that? It's something that shouldn't be ignored.

Harjes: Right. I have seen opinion articles stating that the phrase "FDA approval" could come to mean less. So, you have your ups and downs, here, of course, as with everything.

Campbell: Yeah, absolutely. The other drawback, I suppose, would be that this is a fully funded bill, and when you fully fund something, something else has to be a loser, you have to cut back somewhere else. And some of the money that's being used to fund this is actually coming out of preventative programs and programs that are associated with the ACA. So, there's a little bit of a debate on that as far as, what is the unintended consequence of shifting money from these preventative programs to these programs that are going to be developing devices and drugs instead?

Harjes: That's really interesting. I am personally a huge proponent of preventive care, so, eh, not sure how I feel about that one. Just to give a more comprehensive picture of this act, because we have really only talked about the medical research and the FDA part of it, there's also money going to fight the opioid epidemic. This is enormous, if you guys haven't seen it in the news. The CDC says that more people died from drug overdoses in 2014 than any other year on record, and a lot of these are related to opioids. These are your prescription painkillers, heroin. Since 1999, I read that the number of opioid-related overdoses have quadrupled. So, this is an enormous problem, and something that's going to be addressed with $1 billion going to the states for more treatment, education, and enforcement to try to battle this epidemic. 

The other part of this act that I feel like [is] worth mentioning is that there's also a lot toward mental healthcare -- this is an issue that has just recently come to national attention -- particularly for veterans. It's something that is wrapped into the 21st Century Cures Act, that, "Hey, we should pay a little bit more attention to mental healthcare."

Campbell: Yeah, that was a relatively late edition, and I think it's a welcome addition. It's an important addition, because we can and we should do more to improve mental health in our country.

Harjes: I completely agree. Is there any other part of the act that we missed, before we wrap up?

Campbell: [Laughs] I'm sure there is! It's literally a thousand pages long, Kristine!

Harjes: [Laughs] Dumb question. Any major part that you're just dying to get out?

Campbell: No, we've hit on all the important parts. I'm sure there's going to be plenty of content coming to The Motley Fool website. Stay tuned.

Harjes: Absolutely. Listeners, if you take a look at the act, and you find anything that stands out to you that we didn't cover, shoot me an email. Our email is industryfocus@fool.com. We absolutely love hearing from you guys. Todd, thank you so much. Listeners, thank you for tuning in with us.

As always, people on the program may have interests in this stocks that they talk about, and The Motley Fool may have formal recommendations for or against, so don't buy or sell stocks based solely on what you hear. For Todd Campbell, I'm Kristine Harjes. Thanks so much for listening and Fool on!

Kristine Harjes owns shares of Juno Therapeutics. Todd Campbell has no position in any stocks mentioned. The Motley Fool recommends Juno Therapeutics. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.