Monday, September 29, 2008

Cephalon Learns Some Old Tricks to Protect Old Products

You can’t teach an old dog a new trick. But some recent product lifecycle management strategies by Cephalon suggest that you can teach a maturing company some old tricks to save old products.

It is probably a sign of Cephalon’s advancing age (passing the 20-year milestone in 2007) that the company is now at the stage where strategies to combat loss of exclusivity are as important as new product development.

It is employing some clever strategies: not exactly new but aggressively executed.

The first strategy uses pricing to create niches for new products and to lengthen the tail of a franchise. Specifically, Cephalon is using high, pre-expiration price hikes to create attractive slots for follow-on compounds and, intriguingly, for its own generics. (See here).

Two examples demonstrate Cephalon’s approach: Provigil (modafinil), the company’s current flagship product heading toward loss of exclusivity in April 2012; and Actiq, which began facing generic competition in the third quarter of 2006.

Cephalon has begun taking big price increases on Provigil (12% in August). The company’s investor relations VP, Chip Merritt, told an investment meeting earlier this month that that increase is just the start. “You should expect that we will raise Provigil prices to try to create an incentive for the reimbursers to preferentially” move to the next generation product, Nuvigil (armodafinil), which has been approved by FDA but not yet launched.

Similar price increases on Actiq in the two quarters prior to the start of generic competition for the fentanyl lozenge created room for another oral dosage form, Fentora.

But it also, created an opportunity for Cephalon to introduce its own "authorized" generic at a price that the company found attractive. Having three products in the oral fentanyl field (Actiq, Fentora and a generic) has permitted Cephalon to maintain a franchise at about $120 million per quarter since Actiq lost exclusivity. That’s higher than the quarterly sales that the company had from Actiq alone prior to its pre-expiration price hikes.

The second strategy of Cephalon’s young adult period is to find alternative exclusivity protections for a recently introduced product. That may, technically, be more of a product development strategy than protection of an aging product, but in Cephalon’s case, it was a way to take an old product (with thirty years of experience in Europe) and make it a new product with five to seven years of exclusivity (See "Wacky World of Generics: Treanda Edition").

The product is Treanda (bendamustine). Approved earlier this year for the first time in the US, the product treats an orphan indication (chronic lyphocytic leukemia – 15,000 new cases per year). The orphan indication gives it seven years of exclusivity for that use. But Cephalon has other plans for the product, so the company has found another form of exclusivity – and this is the clever part. As an old compound, it does not have a listed patent in FDA’s Orange Book. That means that there is nothing for companies who want to challenge the patent to challenge. That could lead to up to six and a half years of effective protection for the product.

Cephalon is performing its tricks well. The company just needs to pay attention to the patients using its products and regulators and payers who may develop an attitude towards the company that could come back to haunt it. When the company took the aggressive Actiq price increases, the web began to fill up with plaintive accounts of cancer patients trying to afford the medication. Too much of that and it won’t matter how long the company is able to stretch the life of products.


Anonymous said...

Sorry, but I don't understand the "cleverness" for the non-orphan use of Treanda. If Cephalon gets a non-orphan indication approved, they get 3 years HW, and then the product goes generic (Treanda will be on formulary and can be cross-prescribed into CLL). Also, we should note that lack of a patent in the OB simply means that one files a paragraph I or II certification. Filing such a certification does not in any way block FDA from fully approving an ANDA containing that certification.

In short, can you please explain yourself more completely?

Anonymous said...

Would agree with the first comment; please clarify the clever part.

Cole Werble said...

Response to "Anonymouse" from the original blogger.

Thanks for raising the two points about Cephalon's attempt to create a several-layered cocoon around Treanda.

(1) I agree that the orphan drug exclusivity would be affected by approval for a non-orphan indication. The original blog was supposed to suggest that; you made it clearer.

(2) The de facto length of the protection against ANDAs will be just as long for Paragraph I and II challenges as for a Paragraph IV challenge.

Thanks again for writing.

Anonymous said...

After reading through the comments, I still don't understand the "clever" or "trick" or "another form of exclusivity" or "six and a half years" parts. I do see 7 years with a narrow label. Please expand, as this appears to be an important topic.