The Big Red Biotech Blog

Comparative Effectiveness Research May Alter Care Standards in US Too

The Tufts Center for the Study of Drug Development (CSDD) just a published a report assessing the probable effects that Comparative Effectiveness Research will have in the future of the US drug industry. Increasingly, new drugs will have to show proven benefits in relation to their costs to gain 3rd party payer and goverment reimbursement approvals.  It likely will no longer be enough to get your drug through the licensing process with FDA, EMEA, etc. - you also have to prove its cost effectiveness.

In comparing the access to oncology drugs in the US versus Australia, the CSDD study found that regulatory approval in Australia was not synonymous with reimbursement.  Only cost-effective drugs (under their criteria) received reimbursement status.  However, the following features of the Australian system were noted:

• Oncology drug prices were about 30% lower than the US
• 100% of drugs in Australia were designated with prior authorization whereas the comparable US figure was only 60%
• Australian patient cost sharing was lower and more evenly spread, where in the US the average co-insurance rate per cover drug was 35%

So in Australia, the use of cost-effectiveness standards led to lower prices and more affordability for approved medications.  As compared to the US, drugs not seen as cost effective had their access severely limited.

It will be interesting to see what occurs - as the US system generally has allowed patients to immediate access drugs more or less on demand (comparatively).  But, under an increasing cost-conscious and under cost pressure system, will the US also find itself moving much more into a more critical cost-effectiveness based standard that will make drugs put up?  Is Provenge an early case where this type of standard my first be applied?  The Medicare reimbursement decision on that drug will be interesting to watch.

Posted by Bruce Lehr July 11th 2010.

Follow Up Provenge Doom - US Insurers Views

I'm following up to the Provenge post I did a couple days ago.  That was a summary of a Seeking alpha analysis of the issues Provenge would face in the reiombursement arena. The conclusion was that Provenge was very very expensive versus the ultimate benefit delivered - at least by standard methods for estimating QALY (quality of life year).  The Seeking Alpha analysis concluded that be using even charitable assumptions in estimating QALY - best case would yield $282,000 per QALY. It noted that the UK's NHS rarely funded a QALY in excess of $60,000.

What Insurers Say About The Provenge Vaccine // Pharmalot.

In the Pharmalot post above, US insurers indicate that Provenge likely will score a QALY in range of $300,000 under best case calculations.  An unnamed participant in the analysis was quoted as saying "Provenge is an extremely expensive treatment and will probably be limited to as small a niche as possible. The price ($93,000 per patient) is not justified by the incremental survival (average 4 months)."

Most 3rd party payers will place restrictions on this drug's reimbursement, and up to 65% may restrict patient access.  They all foresee its usage based strictly on the label.

Posted by Bruce Lehr July 9th 2010.

Doom for Provenge-type Drug in Managed Environment?

Here's a thought-provoking post by Douglas Krohn in Seeking Alpha.  In it he asks, What would be the prospects of Provenge being accepted by the UK's National Health Service (NHS) based on its perceived cost-efficacy?

Good question to ponder. Provenge, as reminder, is a newly approved innovative approach to treat late stage metastatic prostate cancer.  In clinical trials, it was able to extend life by an average of 4 months as compared to a placebo. It is expected to cost an average of $93,000 per treatment course. Medicare last week indicated that it would initiate a coverage determination on the new drug - a process expected to last a year. Dendreon's stock dropped rather precipitously last week on the initial news.

Applying the NHS' National Institute for Health and Clinical Excellence (NICE) criteria for quality-adjusted life year (QALY) to Provenge results in an estimated cost lying between $282 K and $547 K per year.  That is to say the NHS and NICE formula would estimate Provenge costs that much to buy those 4 extra months. As a practical matter, the NHS rarely if ever funds a treatment with a QALY greater than $60 K. So Provenge would never be covered there.  And likely, not in most other Western European countries.

If the US ever goes to a UK type system, what does that say about new Provenge-type therapies?  What do you think about Provenges chances now in its Medicare review under a new healthcare doctrine?

Posted by Bruce Lehr July 7th 2010.  

US And European Prices Aren’t So Different After All

Are drug prices significantly different between the US and Europe?  If so, does this difference lead to less product innovation ?  PhRMA argues that European price controls do lower prices in the EU or OECD countries as compared to the US and that this does lower innovation, makes investors less likely to invest.

Novartis recently commissioned a study from the European School of Management and Technology in Berlin. This group concluded that there is a "direct link between strict price regulation and low innovation".

However, in the post below from the Pharmalot blog, a study conducted by the London School of Economics disputes the former findings.  The LSE study found that the previous study comparisons were flawed.  They compared 68 "market basket" brand-name drugs and found US prices are a maxium of 25% higher than the Europena ones.  This in marked contrast to a GAO study citing one and half times price differences.

US And European Prices Aren’t So Different After All // Pharmalot.

The LSE study confirms data presented recently by AZ and GSK that shows drug profits in Europe are only marginally less than those seen in the US.  Europe therefore remains a fairly attractive market based on price and volume -- despite price cuts by some governments recently.

Posted by Bruce Lehr July 6th 2010.

New Law - Delay May No Longer Pay?

The Financial Times reports on FT.com that the US Congress is about to close the door on so called "pay for delay" deals between brand name drug producers and their generic rivals.  Under "pay for delay" schemes (and that's the right word), the brand name producer pays its rival to keep the generic competitive drug off the market for a period of time to extend its exclusivity and money making potential - at the expense of consumers. One top regulator, Jon Lebowitz of the FTC, terms the practice the "most corrupt" in the healthcare industry and "blatantly anti-competitve"

Legislation passed the House on Thursday night as a rider to an Afghanistan War funding bill.  It is known to have bipartisan Senate support, including from Charles Grassley and Olympia Snowe on the republican side.  The CBO has estimated the legislation will save Medicare about $2.4 B over the next 10 years. The FTC says it will save consumers $35 B over those 10 years.

The law is known as the "Preserve Access to Generics Act".  Saints Preserve Us All.

Posted by Bruce Lehr July 2nd 2010.

FDA Oversight - A Difficult Balance

This from the PharmTech talk blog yesterday is a follow up on the HHS report on foreign clinical trials that was discussed here on June 23rd.   

PharmTech Talk » A Difficult Balance.

The PharmTech post asks if it makes sense to force the FDA increase its scrutiny of clinical trials in foreign countries, not conducted by INDs, given the global nature of the pharma business now. Or should a different regulatory model be developed?  Should a different set of rules apply to drugs than to other consumer products?

It is noted that the FDA has limited oversight and financial resources to oversee trials in other countries.  Should drugs destined for the US market be required to be clinically tested or manufactured locally?  In effect, placing a safety/regulatory driver ahead of perhaps an economic one.  Free trade anyone?

As a safety move, the FDA has added offices in China, India, etc. to increase oversight capability. But, does this encourage off-shoring even more clinical trials? I never thought of that. It's a chicken-egg question.  I tend to think the economic factors motivate this behavior but does having FDA resources outside the US actually further encourage more activity outside the US?  Interesting perspective.  Is that something the US Govt (ie. taxpayer) really wishes to support?  Are we pitting increased public safety vs decreased domestic jobs?

Upon reflection, I think we're better off supporting a global economy.  It makes sense to me to allow development, trials and manufacturing go where it makes most sense economically rather than force the issue with regulatory edicts for domestic manufacture or tariff barriers -- assuming there is relativley open access for all to all markets.

But I also think it makes sense for the US Govt to put favorable policies (i.e. carrots in the form of tax incentives, R&D credits, science infrastructure investment, immigration policy) in place that would entice manufacturers to want to stay in the US and make it more economically feasible to do so.

Then maybe 80% of all drugs won't have clinical trial work from outside the US.

Posted by Bruce Lehr June 30th 2010.

Big Pharma Gets Chance to Sandbag after Qtr 1?

As a sales and marketing person, there is nothing more exciting than getting a chance to play in the sand!

 With the advent of Healthcare Reform (specifically changes in Medicaid reimbursment provisions), many Big Pharma groups are taking full advantage of the opportunity to dampen future earnings estimates as reported in Seeking Alpha.  This despite a seeming positive turn in the economic environment and the fact that the sector as a whole beat industry analyst estimates by 3% on sales and a more impressive 10% on EPS.

However, given the clear immediate term impact of changes in Medicaid discount rates from 15.1% to 23.1%, it is a great time for Big Pharma to restate earnings estimates for the balance of this year and next.  This is also an opportunity to set the bar at a target that can be more easily hit!  At least 1/2 dozen major companies have done just that in the past couple of weeks.

Katherine Hobson of the WSJ Health blog has been keeping a nice running total of companies who have downgraded their revenue and earnings estimates for the balance of 2010 and 2011. 

With any luck, these Companies should be able to beat these estimates & look like heroes.  Let the sandbagging begin!

Posted by Bruce Lehr  May 12th 2010.

Wanna Play Hardball over Jobs with Big Pharma?

Maybe we're starting to see a mini-trend with Big Pharma.  It would seem that Big Pharma is not afraid to threaten and/or follow through with job cuts in countries that enact policies they feel are unacceptable.  Witness the following examples:

• On April 13th, In the Pipeline reported that both Novartis and Roche senior executives met with UK government ministers behind closed doors to inform them in blunt terms that they were prepared to cut R&D jobs and close sites if proposed pricing and clinical trial regulations were enacted as contemplated. The two Pharma giants have about 5000 employees in the UK. Government officials were said to be scrambling to "play nice".
• Sanofi-Aventis in Canada just cut 70 jobs as part of a reorganization blamed on loss of patent exclusivity. Further, the company took the opportunity to take the Canadian goverment to task for weakening patent protections and "favoring generics" - even while patents are still in effect.  Sanofi says it will curtail R&D investments, capital expenditures and job creation in such an environment.

Thus Big Pharma has some clout to bring to bear when it comes to policy, pricing, and regulatory rules it cannot abide.  It can pick up its bat and ball and move to another field.  It will be interesting to see how often this type of strategy will show itself in the coming months and years - particularly in the slower growing, more regulated Western economies (ballparks).

It will also be interesting to see how various World governments choose to deal with such a tactic beyond grovelling of course - which I don't think is wise or sustainable. It also may not be in the long-term interest of the governed as well. You know all us believers in capitalism and free markets.  How can we weigh the job losses of the few against the price cuts for the many?  Only politicians can say for sure.

Posted by Bruce Lehr May 10th 2010.

Pharma Industry Must Plot New Path Forward

In a new white paper entitled, The Future of Life Sciences Industries: Aftermath of the global recession, Deloitte and their collaborators at the Economist posit that the recession of 2008-2009 will forever change the biopharm industry.

Interviews conducted with 281 leaders from pharmaceutical, medical device biotechnology, and CROs paint a changed future coming.  Respondents (44%) felt that from 20-40% of existing biotechnology companies would disappear in the next 5 yrs. Senior execs (68%) from biotech were even more certain that the 20-40% figure was likley to occur. More than 65% of these stated the economy had already negatively affected their company.  In 2009, 14% of biotech companies closed but this was far short of the 20-33% that had been predicted by some industry analysts.

Many of these companies have reacted as you might predict.  More than 43% have reduced R&D expenses and staff - and 32% predicted this downward trend to continue in the future. This despite the fact that the same executives said "innovation"  - yes the dreaded "i' word - was their most likely salvation.  I still get the feeling there is some street peddler out there selling "innovation business plans" out on the street corner.

Despite the call for innovation, most of these companies have shifted toward R&D projects/products that offer an expectation of a near term payoff. To further support this line of thinking, a panel of venture capitalists, speaking at BIO last week, urged companies to be as efficient as possible with capital and learn to "fail fast".   In other words, don't waste money on potentially innovative projects in phase II or III that don't show a clear avenue for success.  No one can afford these failures any more. 

Plus, it is not enough to get approved - you need to also show a differential advantage over competition and comparative effectiveness.  This will be needed to get justify the value of these new products to 3rd party payers and to earn reimbursement.  Reimbursement approval may be as or even more important than initial regulatory approval in the future.   

Capital markets are less available to small biotechs.  The VCs urge companies to look at non-traditional funding mechanisms - inlcuding non-dilutive financing and ones that pursue creative collaborations.  More outsourcing is needed as well as risk sharing. Virtual models may become more attractive. More mergers are also expected as Big Pharma continues to cherry-pick the best clinical candidates.

Despite some of the negatives, biotech as an industry did earn a profit last year. In coming years, the industry will become more global.  It is clear the growth opportunities lie in pharmerging markets - like the BRIC countries.  Most MNCs are making significant moves into this space.

The emerging markets are also attractive to the growing generics industry.  Even in the US, 76% of all prescriptions written in 2009 were for generics. This trend will continue with Healthcare Reform and with more than $60 B worth of drugs reaching their patent expiration within the next two years.  Thus, you will see continued investment by significant portions of Big Pharma in generic companies.

The market will continue to evolve and companies will need to adjust their strategies and chart a new path in order to meet these challenging circumstances.

Posted by Bruce Lehr May 9th 2010

Follow On Biologics Conference

The Patent Docs blog is promoting a conference on Follow on Biologics in NYC from June 21-22. The conference will present sessions covering topics such as:

 

• impact of the 12 yr exclusivity period
• methods for demonstrating or disproving similarity
• determine safety data and technical support needed
• maximize biologic patent life
• alternative methods for approval
• overview history of US biosimilar legislation
• current FDA position on biosimilars
• lessons learned from biosimilars in international markets

This is obviously a hot area with passage of the Healthcare Reform bill.  It will likely only get hotter as biosimilars take on even greater importance with the Big Pharma pipelines drying up and their moving into the biosimilar space.  Biosimilars will of course have great impact on the growth of the World pharmaceutical market, especially in pharmerging markets.  As such, I thought it was worth passing on the information regarding this conference.

Posted by Bruce Lehr May 1st 2010.

Medicaid Discounts Drop Big Pharma Short Term Revenues

Several Big Pharma companies have revised revenue/earnings estimates for latter quarters in 2010 and the year 2011 as reported in the WSJ Health blog due to new requirements that the industry pay bigger rebates to Medicare.

Companies weighing in with reduced earnings estimates are:

Abbott indicated that it will cut its earnings estimate for 2010 by about $0.07 per share to $4.13 to $4.18. Revenues are estimated to be down by $230 M in 2010 and $200 in 2011.

Johnson & Johnson expects 2010 earnings to be reduced by a nickel per share and revenues to drop between $400 - $500 M.

Lilly cut its 2010 earnings estimate by $0.30 to $0.35 per share. It expects revenue to fall by $350 M to $400 M in 2010 and by $600 M to $700 M in 2011. 

According to analysts, not all companies will be affected alike.  It depends heavily on product mix.  BMS purportedly has the highest potential Medicaid bill with 10-15% of its revenues covered under the program. AstraZeneca looks a lot like Lilly.

Another unknown, rebate rates vary for managed Medicaid plans and fee-for-service plans.  So a Company's mix here too makes a difference. The price details of the two forms have not been spelled out yet under the reform bill.

Pfizer and Merck appear to be the lucky ones with lowest Medicaid exposure.  Maybe they can worry about patent cliffs instead.

Again, we're seeing significant changes in the enviroment that will only further spur the industry to changes its business and development models.  One can expect the industry to continue to shake-out and consolidate as pharma and biopharma coalesces.

Posted by Bruce Lehr April 22nd 2010