Deals of the Week Looks at Ultra-Orphan Drug Pricing

In the first half of 2013, two drugs will have launched in the US priced at $250,000 per patient annually: Both address serious, ultra-rare diseases and are backed by KOLs and patients. But the similarities stop there. Three months into its launch, one is encountering minimal resistance among payers. Although it’s too early to know how payers will cover the other drug, the expectation is that it will face a hard road.

The received wisdom about ultra-high priced drugs for ultra-rare conditions is that they’re a blip on payers’ radar screens. The idea that payers are attuned to blips on radar screens is laughable. Many don’t have the basic IT capability to track drug utilization, physician prescription patterns, or therapeutic outcomes.

But payers are waking up to high-price drugs. What’s getting their attention is not so much the impact of a particular drug and its price tag, but rather the aggregate of rare diseases, and the drugs that treat them, represented in their plans. Over the past decade FDA has approved 27 drugs for rare diseases.

Some big pharmas, like Pfizer Inc. and GlaxoSmithKline PLC, have recently started rare disease initiatives, while others, like Roche, believe rare disease R&D is a specialist’s game. Pfizer has had its share of disappointments, most notably with Vyndaqel (tafamidis meglumine) for transthyretin amyloid polyneuropathy, which it acquired along with FoldRx in 2010. The drug received a complete response letter in June 2012 after a mixed advisory committee review.

And GSK has recently retreated somewhat from its focus on rare diseases, preferring to invest its R&D dollars in “sound opportunities in major markets,” according to CEO Andrew Witty. Its head of rare diseases, Marc Dunoyer, bailed a few weeks ago to sign on with AstraZeneca PLC as EVP global portfolio and product strategy. (AstraZeneca isn’t a rare-diseases powerhouse and the company tells Deals of the Week that Dunoyer’s appointment shouldn’t be taken as a sign that its rare disease ambitions have changed.)

But with some 7,000 rare diseases still to be investigated, and with new orphan disease start-ups being minted every week, the rate of rare disease drug approvals is set to accelerate.

How payers respond to the stratospheric prices for rare disease drugs has to do with many factors whose weights are constantly changing, including the gravity of the condition, presence of existing drugs in the category, Phase III data, the age of the population, and the tenacity and resources of the disease foundation.

Aegerion Pharmaceuticals Inc.’s Juxtapid (lomitapide) launched in January 2013. The drug controls LDL cholesterol in patients with homozygous familial hypercholesterolemia (HoFH), a disease that causes premature and progressive atherosclerosis in approximately 3,000 patients in the U.S. It is priced at what amounts to $235,000 per patient per year for initiation, rising to $295,000 per patient per year for maintenance. The existing treatment for HoFH, diet and LDL apheresis, is inadequate to control LDL levels.

On an April 30th first quarter earnings call, Aegerion CEO Marc Beer said the drug was seeing an accelerating uptake among cardiologists and lipidologists. His national accounts team was calling on over 100 payers. “The prior auth process is on or slightly better than plan from a timing standpoint. We do see appeals – you see this in the ultra orphan space – it’s just the way insurance companies manage their business. We’re working through them effectively. I don’t see an access problem right now.”

Raptor Pharmaceutical Corp.’s Procysbi (cysteamine delayed release) was approved on the day of Aegerion’s earnings call. Raptor expects to launch it in six to eight weeks to a US population of about 500 people. The drug acts against nephropathic cystinosis, a lysosomal storage disease that leads to progressive irreversible tissue damage and organ failure, particularly of the kidneys.  Its price will be based on each patient’s weight and dose; Raptor expects the average annual cost per patient to be around $250,000.

Now here’s the thing. Procysbi is a delayed release formulation of an existing drug, Cystagon (cysteamine bitartrate), sold by Mylan Inc. for $9,000/patient/year. Its chief benefit over Cystagon is its 12 hour dosing schedule, a significant convenience over Cystagon’s six hour dosing schedule, which is particularly burdensome for children and leads to poor compliance.

The FDA label for Procysbi states that it is non-inferior to immediate release cysteamine, but does not indicate that it improves compliance or kidney function over the standard of care.

So, the drug is no more effective than the standard of care in controlling the disease, it brings a dosing convenience, and it costs a whopping $250K/patient.

Gary Owens, chair of Tower & Watson Rx Collaborative P&T Committee, said that Procysbi will surely be excluded from closed formulary plans, or only covered under exception. About 20%-25% of plans are closed formulary. He does not envision that new patients will be started on Procysbi, unless they have trouble tolerating Cystagon. And he expects use of the drug to be hemmed in by clinical edits to verify that it isn’t being wrongly prescribed or a patient being controlled on Cystagon isn’t requesting Procysbi for what the plan considers a trivial reason.

The U.S. has prided itself on its relative freedom to price drugs. But pride, goes the proverb, hath a fall. Richard Pops, CEO of Alkermes PLC, recently said at BIO 2013 that treatment of orphan and ultra-orphan diseases won’t significantly impact health care costs. “The country isn’t going to go bankrupt because of diseases like cystic fibrosis.” But it’s not about a few diseases and a few drugs. It’s about 7,000 diseases like cystic fibrosis. (Vertex Pharmaceuticals Inc.’s Kalydeco launched last year to a population of 1,200 CF patients in the U.S. who harbor a specific gene mutation, at an annual per patient price of $294,000.)

Forces new and old are at work that will push down the pricing of orphan drugs. They include the glacial move from fee-for-service to bundled services and outcomes-driven payment. The increasing competition in rare disease categories driven by the gathering stream of approvals. New stakeholder pressures, like the hundred-plus oncologists from around the world who charged the industry with “profiteering” through high drug pricing in a recent issue of the journal Blood. The head of the National Organization for Rare Disorders, Peter Saltonstall, said that he expects Congress to start engaging with NORD about the cost of drugs. “It’s going to be an issue that we’re going to have to start to deal with in one fashion or another.” NORD advocates for millions of rare disease patients.

Ben Bonifant, of consultancy Bonifant Insights Group, comes at the pricing issue from another angle. “You look five years out, and [analysts] are still putting annual price increases into their U.S. models, but flat pricing in Europe and declining pricing in Japan”. He projects that we’re heading for an unsupportable separation in revenue per patient between the U.S. and Europe.

Things will really start getting interesting when researchers, harnessing massively parallel sequencing, start parsing large-population diseases into tiny, high-value sub-populations based on somatic mutations, methylation patterns, DNA copy number, etc.--Mike Goodman

Maybe the brave new world we’re hurtling toward will be one where precision medicine and rational drug prices co-exist? Until that happy day, kick back and enjoy this week's cavalcade of deals in . . .

Celgene/Forma: Drug discovery play Forma Therapeutics Inc. has intentionally, with each Big Biotech or Big Pharma deal it signs, moved further down the road toward becoming an integrated R&D company. With this week’s Celgene Corp. deal it may for the first time find itself playing the role of development partner. And importantly for its long-term ambitions to remain an independent and fully integrated company, Forma has hung onto U.S. rights to programs that emerge from the alliance.

The small, Watertown, MA-based biotech now has seven strategic alliances that it expects to generate $350 million in partnership revenue through 2017. This latest effort, focused on the intriguing but nascent field of protein homeostasis, “is the largest deal we’ve done, in terms of scale, but also in terms of capabilities and responsibilities for Forma,” CEO Steven Tregay said in an interview with “The Pink Sheet” DAILY.

The alliance will tap Forma’s translational development capabilities secured through a strategic relationship with Translational Drug Development (TD2), the oncology development group run by Daniel Von Hoff out of the Translational Genomics Research Institute. Forma, with TD2, will be responsible for the first time for early clinical development of the compounds it discovers for a partner, handing off potential drugs to Celgene after Phase I. Forma receives an undisclosed upfront payment and is eligible to gain up to $200 million in research and early development payments from Celgene, which will be responsible for full global development for each candidate it options at Phase I. Milestone payments – including payments for hitting certain sales targets – range from $315 million (for the first selected asset) to a maximum of $430 million per program.

Forma also will get undisclosed royalties on ex-U.S. sales and further milestone payments based on pre-defined cumulative development and sales objectives for projects in the partnership.--Chris Morrison

Bayer/Conceptus: Bayer AG is adding to its women’s health unit with the $1.1 billion acquisition of contraceptive device maker Conceptus Inc. Bayer is paying $31 per share for the California-based company and its nonsurgical, permanent contraceptive solution for women, Essure. The deal is expected to close by mid-year. Essure was approved by FDA in 2002. It is the only surgery-free, hormone-free permanent birth control option available to women in the U.S. Conceptus had net sales of $141 million in 2012 – Essure is its only marketed product. The company is currently developing a follow-on product that works to block the fallopian tubes immediately. Essure is not effective until three months after it has been implanted.

“Both Bayer and Conceptus are focusing on innovative solutions to advance women's healthcare. Essure completes Bayer’s portfolio of long-acting intrauterine systems and short-acting oral contraceptives. Our experience in the field of gynecology combined with our sales and distribution expertise will help to further develop Conceptus’ business,” said Andreas Fibig, President of Bayer HealthCare Pharmaceuticals, in a statement.

The deal comes on the heels of Bayer facing scrutiny for its own birth control products. The German company has faced a slew of lawsuits related to its failure to inadequately inform patients about the risks of thrombosis related to its Yaz franchise. Yaz and Yasmin have both lost patent protection and face generic competition.--Lisa LaMotta

Soligenix/Intrexon: Princeton, N.J.-based Soligenix Inc. has partnered with synthetic biology specialist Intrexon Corp. to develop treatments for melioidosis, a bacterial infection prevalent in Southeast Asia. In lieu of an up-front cash payment, Intrexon received 1.03 million shares of Soligenix stock, representing 8.5% of its total shares outstanding after the deal. Soligenix also owes Intrexon milestone payments and royalties, while Intrexon received the right to take more Soligenix shares in future public offerings or other transactions. The biopharma, traded over-the-counter, receives access to Intrexon’s antibody discovery and manufacturing technologies; Soligenix will also pay for pre-clinical and development of products discovered as part of their collaboration.

Backed by billionaire chairman Randal Kirk, Intrexon has raised at least $509 million as of mid-2011, and has taken equity in similar partnerships with Oragenics Inc., Ziopharm Oncology Inc., and AmpliPhi BioSciences Corp.  Melioidosis is caused by aerosol forms of Burkholderia pseudomallei, which the U.S. Department of Health & Human Services considers a potential bioterror agent; Soligenix has previously developed vaccines against ricin and anthrax.--Paul Bonanos

Auxilium/Actient: Auxilium Pharmaceuticals Inc. is buying – not selling. In a move intended to diversify beyond its leading Testim testosterone gel product, the company announced April 29 it has acquired Actient Holdings LLC for $585 million upfront plus contingency payments. The company said the deal will create a leading urology company and add nine commercial products to Auxilium’s portfolio, which also includes Xiaflex (collagenase clostridium histolyticum) for Dupuytren’s contracture. Actient generated $125 million in revenues in 2012 and EBITDA of $61 million, sales and earnings that will help pad Auxilium’s top- and bottom-line as it looks for ways to grow amid increasing headwinds. Testim, which accounted for 78% of Auxilium’s 2012 sales, will face generic competition in 2015.

But some Auxilium investors may have been hoping for a sale of the company rather than an expensive acquisition, as sales of the company’s own products are slowing. CEO Adrian Adams, who joined the company in December 2011, has the closing of several sales on his resume: the acquisition of Inspire Pharmaceuticals Inc. by Merck & Co. Inc., the sale of Sepracor Inc. to Dainippon Sumitomo Pharma Co. Ltd., and Abbott Laboratories Inc.’s buyout of Kos Pharmaceuticals in 2006. Actient was founded in 2009 by the private equity firm GTCR, which put up $200 million to build the company through acquisitions. The bulk of the company’s products were acquired from UCB Pharma SA in July 2010.--Jess Merrill

Selexis/Ligand Pharmaceuticals: San Diego-based Ligand Pharmaceuticals Inc., which focuses on the acquisition of royalty-generating products, bought out on April 30 the potential milestone and royalty payments for more than 15 biologic products in development at Selexis. Deal terms were not disclosed.

Based in Geneva, Selexis SA is a clinical-stage biotech that uses its proprietary SUREtechnology platform, which uses novel DNA-based elements that control the organization of chromatin in all mammalian cells, for drug discovery and cell-line development in the creation of new therapeutic protein drugs. Programs and indications also were not disclosed but the related product candidates are in various stages of preclinical and clinical development, Selexis said.

The biotech, which retains earn-out rights to another 14 biologics in development, said it will use the funds from Ligand to cover R&D expenses around the next generation of candidates to emerge from the SUREtechnology platform. During a 14-month span beginning in late 2009, Ligand built its portfolio through acquisitions of Neurogen, Metabasis and CyDex. Each of those transactions were structured to include contingent-value rights going back to investors in the acquired firms.--Joe Haas

Merck/Abide Therapeutics: Just a week after announcing its tie-up in the diabetes space with Pfizer Inc., Merck & Co. Inc. has signed another diabetes collaboration with San Diego-based biotech Abide Therapeutics.

Merck will potentially pay $430 million in upfront, milestone and research funding. Abide is also eligible to receive royalty payments. Further financial details were not disclosed. The collaboration is around three novel targets involved in metabolic diseases. Abide develops drugs using serine hydrolases, an enzyme class that plays a key role in regulatory processes like metabolism, signaling, and digestion.

The deal comes just days after Merck announced it had signed a collaboration with Pfizer to develop and commercialize ertugliflozin, a Phase III sodium glucose co-transporter 2 (SGLT-2) inhibitor. Merck has already paid $60 million in upfront and milestone payments to Pfizer, but would not reveal the total deal value.

Merck currently only has one diabetes franchise, the dipeptidyl peptidase-4 (DPP-4) inhibitor Januvia (sitagliptin) and products that use Januvia in combination. Januvia sales came in shy during the first quarter at $884 million, prompting worry from investors and analysts.--LL

Regeneron/Sanofi: Regeneron Pharmaceuticals Inc. has acquired full exclusive rights to two antibody programs invented at Regeneron and included in the biotech’s fruitful, longstanding antibody alliance with Sanofi. The assets are both in preclinical development for ophthalmology and have potential in other indications. In exchange for $10 million upfront and up to $40 million in development milestones, as well as royalties on sales, the biotech announced on May 3 that it is taking control of the entire platelet-derived growth factor (PDGF) program. It is making another $10 million upfront payment to Sanofi, and offering a $5 million development milestone, as well as sales royalties for rights to ophthalmology indications for antibodies targeting the angiopoietin2 (ANG2) receptor and ligand. The partners continue to work jointly on development of ANG2 antibodies in other indications, and have an ANG2 antibody in Phase 1 in combination with their jointly developed oncology drug Zaltrap (ziv-aflibercept), which is already on the market.

On a quarterly earnings call, also on May 3, president of Regeneron Research Labs George Yancopoulos explained that both pathways appear to play an important role in angiogenesis and therefore the antibodies could be used in combination with the company’s lead drug Eylea (aflibercept), an anti-VEGF therapy. Sanofi has an ophthalmology business, Fovea. But the partners believe it makes sense for Regeneron to take over the programs, given Eylea’s success and the potential for combining the antibodies with Eylea to create best-in-class anti-VEGF, ANG2 and PDGF therapies, Yancopoulos said.

Regeneron plans to submit an IND to develop the ANG2 antibody target in an ophthalmic study later this year, and to submit another IND for a combination trial of the PDGF receptor antibody with Eylea in second half of year.--Wendy Diller

Bristol-Myers Squibb/Ambrx: In its third collaboration with Bristol-Myers Squibb Co., Ambrx Inc. will team again with the pharma to discover and develop next-generation antibody-drug conjugate (ADC) products for oncology indications. Under the deal announced May 3, Ambrx will receive $15 million upfront, as well as R&D funding and potential development, regulatory and sales-based milestones that could reach $97 million. Bristol obtains worldwide rights to develop and commercialize candidates, to be generated using Ambrx’s protein medicinal chemistry platform, from the collaboration, with the biotech holding rights to potential sales royalties.

Previously, in 2010, Ambrx signed a pair of agreements with Bristol to develop biologic therapies for type 2 diabetes and for heart failure. Those two candidates now are in development at Bristol. With a proprietary long-acting growth hormone in Phase IIb, Ambrx also partnered last month with Astellas Pharma Inc. on the development of ADCs and in 2012 with Merck on biologic drugs against undisclosed targets.--JH

GSK's DPU Scoreboard: Three Fewer, Four More -- But That Misses The Point

It wasn't a bad pass rate for GSK's biotech-like discovery performance units: 35 out of 38 survived their three-year investment review cycle, completed before Christmas last year. Of those, six got increased funding (20%), and five got less -- they must be on a watch-list.

But overall this process wasn't, apparently, about culling DPUs. Sure, three may have fallen by the wayside, but four new ones were born. And yet all the cost and efficiency goals for R&D are nevertheless being met, claimed CEO Andrew Witty on a webcast annoucing full-year 2011 results. The overall discovery budget is unchanged. The company's cost-per-asset is falling, its R&D rate of return is expected to reach 12%, up from 11% in 2010, and, yes, you guessed it, the pipeline is 'unrivalled'.

Indeed, Witty was keen to draw attention away from the DPU scoreboard ("it's not the story," he told us) and instead onto something far less satisfyingly quantitative: culture. "The story is a new culture created within GSK." All about individual accountability, greater capacity for scientists to communicate with each other, including across disciplines (so increasing the chance of that 'eureka' moment) and more opportunities for researchers to fulfil their potential.

So came the oh-so-human story of Andrew Benowitz, promoted from bench chemist to DPU chief within four months. He was one of those who pitched an idea to the DPU investment board (referred to internally as the Dragon's Den) and not only got it funded, but also got to lead the new DPU that now houses it. (No, we don't know what the idea is, yet: there's a DPU deep-dive for analysts on March 29.)

Good for him. And good for GSK, frankly, which, alongside its major efforts to diversify away from selling branded pharmaceuticals to western payers, reminded us today that R&D is the "core value-creator of the company", one it's aiming to "bring back to life".

The resurrection won't, it seems, benefit Europe. Pricing pressures and access delays mean UK-headquartered GSK won't be designing new drugs specifically for Europe "in the way we used to do," said Witty during Q&A. "We’ll still register drugs for Europe," conceded Witty (who is also president of EFPIA, the European industry association). But GSK's decisions on which comparator to use and where to do trials "will be driven more by those markets that appear to want the product," Witty declared.

Are you listening, European policymakers? Or do you just want another Sandwich?

image courtesy of flickrer's Jinx!

Insulin Pricing: Let The Battles Begin

In the same week that Novo Nordisk filed its latest-generation insulins, ultra-long-acting Degludec and the DegludecPlus combo, in Europe and the US, the drug makers says it won't be seeking the highest price it feels its new offerings could command.

"We could probably justify a higher price premium [for Degludec] than in reality we can ask for," acknowledged EVP & CSO Mads Krogsgaard Thomsen in a Sept. 28 phone call. He alluded to a host of health economic outcomes research the Danish group has carried out on its new products from Phase II onwards, but admitted that "the financial crisis and the focus on short-term financial optimization rather than long-term societal costs" means Novo won't push its luck.

You bet it won't. Even without the financial crisis, insulin pricing is becoming a hot issue as governments and payers try to cut down on the costs of a disease that's spreading fast. Never mind that insulin's value-proposition is still significantly better than that of many cancer drugs. Never mind the argument about long-term cost-savings from effectively controlling diabetes. The bottom line is that older insulins are cheaper, and not that much less effective, at least according to this BMJ Open article published Sept. 22 . That piece went on to declare that the U.K. NHS could have saved over £600 million between 2000 and 2009 if it had prescribed human instead of analog insulins. (The Germans reached a similar conclusion years before).

Now as with any analysis, the BMJ study wasn't perfect. Many would dispute the size and value of analogs' advantages over the human version. But by underscoring the high overall cost of insulin treatment, it comes to a conclusion that "should scare the daylights out of the major insulin companies," according to Diabetic Investor publisher David Kliff.

Indeed, NICE, the cost-watchdog for England and Wales, was quick to jump on the bandwagon, issuing a release Sept. 26 to remind the world that it recommends using human insulin treatment as first-line, and that had those guidelines been followed, those millions would have been saved.

If some payers aren't even convinced about the relative value of so-called 'modern' insulins (now 15 years old) and still recommend versions first introduced in the 1980s, what hope for the positively futuristic Degludec, a next-next-next generation version of this hormone first discovered in 1921?

Novo management itself hinted in this IN VIVO feature from 2007 that Degludec may represent the last innovation round in injectable insulin -- in other words, we're reaching the point where it can't get any better. The remaining challenges are education, adherence, convenience, delivery -- which, along with lack of new products, explains Sanofi's integrated service strategy.

Still, Degludec is better, Novo argues. But the company will have to work hard to prove it. A decrease in night-time hypoglycemic events may not be enough to convince all, though flexible dosing ("at any time of day, on any day"), a Lantus-beating half-life and a nice device will help.

Novo's remarks on pricing arguably represent its opening hand in payer-negotiations that will occur against a backdrop of already-raging pricing battles in the ranks of less-innovative insulins. Lilly in particular is attempting to squeeze whatever it can from a dwindling, market-trailing franchise that lacks new products: when Novo (prematurely, as it turned out) withdrew its human insulins in the UK in 2010, Lilly lowered the price of its human insulins to secure Novo's patients.

Meanwhile, Lantus goes off patent in 2015, after which time biosimilars (including one from Lilly) could start to pull down the price not just of Lantus, but of other basal insulins including Novo's own Levemir (though admittedly, biosimilar insulin isn't the most attractive target for large-molecule copycats).

In sum, we're not surprised Novo's saying it won't be greedy. The question is, will it get anything at all? And as regards the BMJ paper: "I expect there will be a reaction from leading diabetologists," predicted Thomsen.

In other words, keeping watching this space. There will be more to come.

image by flickrer james.gordon6108 used under creative commons

It's Not About Life-Cycle Management. Really.

Here's the latest fuel for pharma industry critics' fire: Axanum. This drug, a fixed-dose combination of AZ's PPI Nexium (esomeprazole) and low-dose aspirin, received positive agreement for approval Aug. 2 via Europe's de-centralized procedure. By trying to tag Nexium, which loses exclusivity in 2014, onto the back of widely-used low-dose aspirin, AZ, critics may say, risks falling foul of industry's (and its own) claims to be delivering innovation and value-for-money.

Shame on you AstraZeneca, we were going to say. But then we thought, fair enough. The company's under pressure right now, with 80% of its global revenues at risk over the next five years. Meanwhile the more honourably (and obviously) innovative Brilinta, a better-than-Plavix heart drug approved by FDA in July, may be held back by another kind of relationship with aspirin: Brilinta works less well when used in conjunction with high-doses of the drug.

Still, it may be a bit rich to suggest that this drug isn't about protecting the Nexium patent and franchise. Instead, Axanum will fulfill "a clear unmet need for patients that who require low-dose ASA (posh word for aspirin) to prevent CV events, but who risk discontinuing their treatment due to low-dose ASA-related upper GI problems," says the company.

FDA didn't buy it. They bought Vimovo, a Nexium-naproxen cocktail developed with Pozen for osteoarthritis, in 2010, but Axanum got slapped that same year with a Complete Response Letter, as did AZ's attempt to expand Nexium's label to include reducing the risk of low-dose-aspirin-associated peptic ulcers (same ends, different means).

Europe offers drugmakers an alternative route-to-market when the centralized European Medicines Agency path looks risky, though – or when medicines don't qualify for it. Biotech, orphan drugs, gene therapies and those falling into one of six TAs (not including CV or GI) have to go through EMA; those outside these groups can choose to only if they offer "significant therapeutic, scientific or technical innovation".

AZ says it filed Axanum via the decentralized process in 2009 to "reflect markets' interest", but whatever the reason (choose from above), it allowed the Big Pharma to select a reference state (Germany) to approve the product, which other countries could then follow (or not). Apparently 22 European countries, plus Norway, have followed, agreeing to approve Axanum for prevention of CV events in patients taking daily low-dose aspirin who are also at risk of gastric ulcers.

The company claims about a third of high-risk CV patients are also at increased risk of stomach ulcers, and that GI problems are the main reason for stopping low-dose aspirin. "Axanum is the only medicine that ensures every single pill of low-dose ASA comes with built-in protection against gastric ulcers," says the release.

Patients could just take aspirin with some Nexium, though (or, dare we suggest, a bit of generic omeprazole?) AZ claims that, although taking the monotherapies separately "has been demonstrated to be effective," in high-risk CV patients, the CV treatment can't be compromised, and that current adherence to PPIs is poor among low-dose aspirin patients (patients aren't taking enough Nexium, in other words).

"The combination is based on valid therapeutic principles such as simplification of dual therapies," asserts the company.

Improving compliance is an important – and potentially cost-saving – health care benefit. So good luck to AZ in its ongoing pricing discussions with European reimbursement authorities. But with generic PPIs floating about, don't let's hold our breath for a premium. Vimovo's hardly flying off U.S shelves -- and we hear that Pozen thinks it's because AZ tried to push the price too high.

image by flickrer Will Norris used under creative commons

Live From ASCO: Time To Cool Down?

It's day three of ASCO and the meeting is at a fever pitch, as the National Cancer Institute's Antonio Tito Fojo wryly observed during a panel on designing randomized controlled trials to achieve meaningful benefits. Not that it's an unusual state for the world's largest meeting on the largest field of drug development.

There is the typical fervor surrounding promising early data, a few major advances to report (for instance, the melanoma data from Roche and BMS covered by among others, the NYT, WSJ, Reuters, and, of course, "The Pink Sheet" Daily), and the meeting halls are packed with clinicians, investors, and journos. (Saturday's clinical science symposium on ovarian cancer had such throngs waiting for it to start that McCormick Place called in bouncers, from "Armageddon Security," nonetheless. And if you weren't in the initial crush, you probably got diverted to an overflow room. Or the second overflow room.)

Still, compared to other years, analysts aren't finding much to write home about. And, increasingly, the importance of the data being presented before packed meeting halls is being questioned. "We need to get away from things that add cost but not value," UnitedHealthcare's Lee Newcomer noted during a panel on health care reform.

Defining what value means, however, is a trickier subject.

Most clinical trials don't mean much for clinical practice, Ralph Meyer of Queen's University asserted at the plenary on randomized clinical trials. With all the controls and standardization, they represent the ideal – not real world practice. And registration studies are intended for that purpose.

In a talk called "Raising the Bar for Efficacy In Cancer Therapeutics," Alberto Sobrero, Head of the Medical Oncology Unit at Italy's Ospedale San Martino, took on whether or not those trials produce clinically meaningful data, or just go after statistical significance. Looking at the 15 pivotal Phase III trials for 9 biologics covering 8 different cancers approved over a 5-year period, he found that the hazard ratios (a statistical metric for calculating risk reduction) for progression-free survival and overall survival looked good at (respectively) 0.57 and 0.73. But when you considered the absolute gains of 2.7 and 2 months, the data were far less clear. Or as Sobrero put it, "Hmmm."

It's a complicated situation, he acknowledged. In an aggressive cancer like metastatic melanoma, a 0.8 HR would mean a 1.5 month gain – not really meaningful. But in breast cancer, that same 0.8 HR becomes worthwhile with a 6 month gain. So, both hazard ratios and absolute gain need to be considered --as well as the context of the specific tumor type-- when making a value judgement about a clinical benefit.

NCI's Fojo also questioned the significance of statistical significance. Paraphrasing an earlier researcher, he noted that if you torture data long enough, you can get it to confess to significance. Fojo found much of the clinical benefit shown in studies has marginal value. By definition, clinical benefit rate (CBR) is what you get when you add stable disease to partial and complete responses. Or, as Fojo put it, it's what you report when you have a drug that underperforms. It's "the corruption of an endpoint," he said.

Shrinking a tumor is good, he agreed, but unless it correlates with survival, stable disease does not mean anything. In prostate cancer, for instance, where some novel drugs have been reporting CBR, objective response rate (PR+CR) correlates highly with overall survival. But when you include patients that met stable disease criteria, the average benefit drops by more than half. "Because you're adding a parameter that has no value at all," Fojo said.

Of course, part of the concern is that these absolute gains aren't coming without costs. It's one thing for a drug to provide 2 months of life, quite another if it costs thousands of dollars and comes with toxicities. And given the proliferation of oncology drugs, there's more room for payers to actively manage the disease, benchmarking more expensive newer agents against cheaper, older ones, and using the ultimate metric --survival -- as the measuring stick. That's playing out at ASCO too, as Newcomer's comments indicate.

Unlike in the past, the skepticism of therapeutic value outlined in posters and abstracts isn't limited to the back corridors or the marginal sessions on clinical trial design and practice issues -- it's coming from the podium at scientific sessions. For instance, a review of recent Phase III trials in upper GI malignancies was organized around the theme of whether the findings were clinically meaningful or just statistically significant, and included a talk about the health care economics of treatment. (Hint: It wasn't pretty.)

It's all part of a larger trend toward more concentration on value, cost and payer issues as IN VIVO covered recently in the May 2011 issue.

It's great to see researchers and industry execs coming out of the convention with excitement about promising new pathways and the potential for combinations. But they should also start thinking harder about raising the bar. Otherwise climate change (of a reimbursement and/or regulatory nature) could spark a cool down in one of the hottest therapeutic areas of the industry.

Image courtesy of flickrer Joe Seggiola through a creative commons license.

Branded Drug Prices on the Up and Up

Branded drug prices increased in 2010, according to a recent report by Barclays Capital. While most Americans will not be shocked by this information, analysts from Barclays added that the consumer is not directly affected by Big Pharma’s bump in drug prices. Shock and awe ensue!

Branded drug price increases, which are strictly wholesale list prices, mostly affect the middlemen between Big Pharma and the drug counter – leaving consumers to pay normal co-pays and not feel the sting of the higher prices. (One might argue that consumers get hit with these costs elsewhere in the health care schematic through insurance premiums and other costs – but that is fodder for a different blog post.) “For branded manufacturers this [new price point] is a starting point to negotiate with large buyers of the drugs,” says the report's author, Barclays analyst Lawrence Marsh.

According to Barclays, which got its numbers from the kind folks at First DataBank, there were 181 price increases in 2010 at an average increase of 6.9%, compared with 185 price increases in 2009 at an average rate of 6.6%. While the year-to-year comparison is itty bitty, the 2010 numbers are up precipitously from just four years ago when companies increased prices of 158 drugs by an average of 6.2%. This data is based on the top 130 branded drugs by sales.

Marsh says we can expect the upward trend to continue in 2011 and possibly beyond. Why? Mostly because Big Pharma is facing a huge patent cliff and is trying to squeeze every penny from their blockbusters before generic competition floods the market. According to Barclays, prescriptions written for branded drugs were down by 8% to 9% in 2010 – so the drug companies are already feeling the effects of generic drug purchases. Merck made the top 10 list for increases in 2010 with its soon-to-expire antibiotic Avelox (moxifloxacin), bumping up the price 11.9% in September.

According to Marsh, the trend also reflects the shift toward niche markets with few competitors. There is little to stop a company from hiking its drug prices when its unique product is the only drug on the playing field. (Tsk Tsk!)

Drug companies aren’t totally evil – most of the increases don’t trickle down to their bottom lines. The additional funds are partly used to help offset the costs of rebates and prescription assistance programs.

Price increases tend to only happen once a year – usually in January, although companies have been known to hike the price a second time – usually in July. In 2010, Galderma led the pack for price increases with an increase of 20% in June to its acne cream Differin (adapalene) – that’s on top of the 14% increase it enacted in January. Others on the top ten list included AstraZeneca raised prices for Pulmicort Respules (budesonide inhalation suspension) by 10.1% and Seroquel (quetiapine) by 12%, Novo Nordisk raised the price of insulin Novolog Mix 70/30 by 14.5% and Daiichi Sankyo bumped up Benicar (olmesartan) by 11%.

~Lisa LaMotta

image by flickr user richard holden used under a creative commons license

Sex, Payers & Product Development

OK – the title is a bit of a come-on, I’ll admit. Still, there’s a certain logic to it, if you’ll just bear with me.

To start with the sex part: I read in The Atlantic that men are doing a great job of making themselves irrelevant while women, economically speaking, are fast making up for lost time.

One big problem for the guys, says Hannah Rosin, the author of The End of Men: they aren’t willing to retrain when they have to.

Maybe she’s right; maybe women are more willing to learn new stuff. But it seems to me both sexes fail on that front. And particularly in that little niche of presumed intellectual flexibility, venture capital and the broader start-up world.

Like the broader economy, the health-care business is undergoing a vast economic disruption. And as the giant pharmas and device companies and insurers twist this way and that to figure out just how they’re going to continue to make money in an outcomes-focused economy, start-ups and their VC supporters are among the tiny creatures getting shmushed.

One has to be sympathetic given just how much work a start-up has to do. God knows the clinical and regulatory worlds are complicated enough to exhaust any mere mortal’s brain – and expensive enough to exhaust most wallets, too. Particularly because Big Pharma is asking for later-stage data before they’re willing to pony up significant purchase and licensing fees for a piece of one of those start-ups.

And yet the further a start-up goes down the development path, the more it’s making reimbursement choices – even if it doesn’t recognize it’s doing so. Because just as Big Pharma is learning: the data gathered in clinical trials is not necessarily the data payers want.

Ask Lilly after their huge Phase III Effient trial. Or Merck (or perhaps more appropriately, Schering-Plough) for both Saphris and Bridion. Or Bristol-Myers Squibb and AstraZeneca for Onglyza. All of those drugs passed muster with regulators (in Bridion’s case, European regulators) but payers have simply turned up their noses.

The inattention to payer-focused endpoints is not just a pharmaceutical problem. My bet is that discovery-intensive diagnostic companies like Genomic Health, CardioDx, and XDx would have seen success far earlier had they accelerated their efforts to jibe clinical and reimbursement endpoints.

Managed care increasingly wants to see drugs developed and proven for patients that can’t be served by generics – where PBMs, at least, make most of their money.

(And with PBMs staring out at the very visible end of the big series of patent expirations – which has been almost as lucrative for them as it’s been disastrous for Pharma – they’re trying to figure out innovative ways of using generics in place of proprietary drugs. Medco’s trial comparing Effient just to the 70% of people who respond well to Plavix is a case in point: Medco is looking forward to the genericization in 2012 of Plavix and didn’t want doctors switching willy-nilly to Effient, which had proven modest superiority to Plavix, at least in part because it was comparing itself to a population in which 30% of patients didn’t fully metabolize Plavix). I’m also curious to see how Medco uses its developing pharmacogenomic understanding of warfarin dosing and response as Boehringer Ingelheim’s Pradaxa and the Xa inhibitors that follow it come to market. But I digress.)

Those development decisions need to be made early – and making them requires an understanding of both what managed care wants and how it works. Certainly it’s possible to come to market having proven a drug, as pharmas by and large are wont to do, basically comparable in a broad population to an existing brand. But then gaining market share with such a product, which is to say displacing the Tier 2 player, will require heavy rebating. And then companies should be asking: could they have spent less on a smaller trial showing dramatic benefit for an underserved targeted population, doubled or tripled the price to reflect the value, and ended up with a higher NPV?

In this new world -- our world today – physicians have been demoted from key decision-maker to stakeholder while payers have gone from stakeholder to key decision-maker.

The implications for start-up financing and exits are significant. Because they’ve got the money, and because they see that regulatory risk continues to rise, Big Pharma is requiring more than mere clinical proof-of-concept for the products they in-license or buy from start-ups. But because Big Pharma is also getting the message about payers (increasingly hard to ignore it after having been hit over the head with the formulary problems of their most important launches over the last two years) they also are beginning to ask for proof of reimbursability. They know that gathering that pharmacoeonomic data after approval, and waiting for insurers to make their own judgments, eats away at the economics of the product – which lowers its value.

Start-ups still by and large don’t spend a lot of time worrying about what payers might want from a clinical trial. Understandably. Their managers and investors have spent their professional lives learning how to prove discovery and clinical value to pharmas, and developing an extensive network of scientific and medical contacts to help them do so. Now they have to learn a brand new language, understand the dynamics of a new business, and develop a new set of contacts?

Oh, there’s plenty of lip service paid to the importance of payers. All the VCs and start-up execs I talk with tell me they know their products have to prove value to payers. And yet when I probe just a teeny bit deeper, virtually none of them know anything about how formularies work, which formularies matter, which non-traditional endpoints (both clinical and non-clinical) matter most to the most influential payers. Or seem to be doing much to figure it out. As one VC admitted to me: he knows five people to call when it comes to assessing a Phase II diabetes drug – but nobody when it comes to judging the criteria likely to win that same drug Tier 2 status or the implications if it gets Tier 3 but with no restrictions on its use…or Tier 3 with step-edits, prior authorization, and quantity limits.

From my conversations with them, most VCs and senior start-up executives still haven’t met more than a few medical directors from payers, let alone pharmacy directors (whose variable comp often depends on how well they manage the formulary budgets, which itself depends on how well they negotiate what goes onto the formularies in the first place).

I’ve also heard that while a deep understanding of payers might be important for companies developing me-too products, it’s unnecessary for those coming out with breakthroughs. Payers will have to pay for them. And that’s probably true. But the definitions of breakthroughs are getting tighter (my guess is that Effient would have been a breakthrough had it come out in 2005). And in any event, breakthroughs are rarer than hens’ teeth. Particularly breakthroughs that remain breakthroughs long enough to capture the full value of their development (the first-generation protease inhibitors against Hep C will certainly be breakthroughs when they arrive next year – but not after the next-gen protease inhibitors or the nucleoside polymerase inhibitors arrive in the definitely foreseeable future).

I’m not saying that any of this is easy. Or will guarantee results. Like regulators, payers can change their minds later (“I might have told you back then to prove such-and-such, but now, in order to pay for this, I want you to prove something else.”) But unlike regulators, there is no single reimbursement reviewer – a payer willing to pay for a cost-effective drug or device should attract additional business. And just as I don’t think it’s sensible to dismiss the regulators’ development advice just because they might change their minds later, I’d argue it’s probably not sensible to ignore – or forgo soliciting – payers’ advice because their requirements might change down the road.

Certainly, proving reimbursability makes everything more expensive (trial sites will have to gather more data, case-report forms will grow longer and more complex, and on and on and on). I don’t doubt that fewer companies will get started.

But there are a whole host of start-ups going now. And if we don’t want all that investment thrown away, then it’s time for the boys to go back to school. And any of the girls who want to play with them.

Roger Longman, a founder of Windhover and later head of the pharma group at its acquirer, Elsevier Business Intelligence, is CEO of Real Endpoints LLC, a new company focused on helping payers and drug and device companies create greater value from new and existing products in an outcomes-focused health-care economy.

image from flickr user truthout.org used under a creative commons license

NICE Death Reports Exaggerated, Says Dillon

"Reports of the institution's death have been greatly exaggerated," declared NICE chief executive Andrew Dillon at the FT Pharmaceutical and Biotechnology Conference in London today. Of course, it's clear from the cost-watchdog's latest spate of assessments that NICE is still going strong today.

Dillon's invocation of Twain refers to the fate of NICE post-2013, when a new value-based pricing system in the UK will necessarily change the institute's role. Lord Howe, Parliamentary Under Secretary of State in the Department of Health, recently declared that NICE's decisions on whether a new medicine should be reimbursed by the National Health Service will be "somewhat redundant". That's what prompted the death reports.

Ok, so they weren't really death reports, they were "NICE will soon have significantly less sharp teeth" reports.

And we stand by them (ours, anyway). No-one (not even Dillon) knows precisely what NICE's role will be in the UK's new value-based vision of health care provision, since the government's consultation report isn't out yet. (It's due before year-end, though, so watch this space).

Still, "what I do know is that NICE will continue to assess clinical and cost-effectiveness of new pharmaceuticals," Dillon explained. "But it seems we won't be asked to formally recommend, in the terms we have used to date, how a new drug should be used" (in other words, whether it is reimbursed or not).

So NICE's cost-effectiveness assessments of individual drugs, while still likely to happen, won't lead to stark 'yes' or 'no' recommendations. Instead, "we will articulate the outcome of our assessment in a way that makes clear the optimal use of the product," Dillon explained.

NICE will still express the output of its assessment in terms of cost-per-QALY (quality-adjusted life year), or in terms of a cost-per-QALY range, Dillon clarified to your blogger later. "But we will not be asked to say whether this cost-per-QALY is acceptable or not, as we do now."

Bye-bye the controversial £30,000 cost-per-QALY threshold for determining whether a drug will get reimbursement, in other words (although NICE tends to deny that such a cut-off exists anyway). That's the crux of it. That's the trigger for the death reports.

Instead, Dillon continued, "someone else" will decide whether that cost-per-QALY is acceptable or not, "since the drug price will be driven by someone else in the system," he continues, pointing to the UK's forthcoming value-based pricing set-up. Details of who or what that someone else is, and how they decide whether and how a new drug should be used, remain to be agreed. Formal discussions between industry and the department of health are due to begin next year.

ABPI director general Richard Barker is confident that these talks "won't be too protracted", and speaks positively about a "collaborative approach" where industry has a real say.

It seems unlikely, though, that it will be NICE which takes into account in its assessments the broader factors – including societal impact, treatment support & carer costs – which are to be included in the UK government's vision of value-based pricing and a health care system defined by "value-based pathways", as the catch-phrase appears to be.

Instead NICE will probably do broadly what it did before – and will do so in an equally transparently and consultative fashion, emphasized Dillon – but that this will be just one ingredient that's put into a bigger, as-yet-to-be-defined 'value-based' machine that will determine product usage. "I don't know for sure, though," qualified Dillon (although he did add that there are few if any concrete measures used, to date, to quantify the broader societal benefits of a particular drug…).

More important to Dillon right now is ensuring that his empire does remain a key influence on health care provision. "I want NICE to provide a point of reference on how an intervention should be used," he says."This is very important, and I expect will be expressed in the government's consultation document."

Being a 'point of reference' is somewhat different to being a key decider, as NICE is now.

So from industry's perspective, things probably look good, as far as NICE is concerned. Barker says he doesn't really care at what point these broader, less easily quantifiable elements are blended into decisions on drug usage – whether it happens within the NICE process or afterward. "We're not hung up on what institution does it." As long as it's in there, making it less likely that his members' innovative drugs are tripped up at the starting line.

OK then, NICE isn't dying. In fact it's taking on a broader remit; from 2012 NICE will look at social care, too, as well as maintaining and developing role in promoting optimal public health via general treatment guidelines. "This is a real opportunity for NICE to re-invent itself," and to make sure health care provision is value-focused and outcomes-focused, and to ensure it adequately encompasses social care, too, insists Dillon.

A NICE with a broader remit is a NICE that's spread thinner, though, with less weight in specific areas – like single drug reimbursement assessments.

No More NICE by 2013?

Any drug developer who showed up at the Royal Society of Medicine in London this morning could have been forgiven for thinking Christmas has come early. By 2013, NICE probably won't be doing cost-effectiveness analyses of individual drugs anymore, according to Lord Howe, Parliamentary Under Secretary of State in the Department of Health.

Speaking at the joint ABPI/BIA conference entitled "Our Vision for a New Decade" (where a few other worthy initiatives were announced), Howe declared that those highly visible, and controversial, opinions delivered by NICE on whether a particular new medicine should be reimbursed by the UK National Health Service "will probably be somewhat redundant" in a few years' time.

Don't get too excited: it's not that cost-effectiveness assessments are going away. It's just that, according to Howe's plan, by then the UK will have a spanking new value-based pricing system which will see a drug's value assessed and quantified during pricing discussions. That system will replace the current PPRS (Pharmaceutical Price Regulation Scheme, which caps companies' profits rather than drug prices directly) which expires at the end of 2013.

According to Howe, the new set-up will see "the price of a drug reflecting everybody's agreed perspective on the value it provides". We were unable to establish exactly who 'everybody' is, and how they might 'agree' on such a matter. But despite scant details, it appears that companies may in future discuss value with pricing authorities directly rather than have NICE--usually post hoc--impose its judgment on a drug's cost-effectiveness.

So it's not quite Christmas. But it seems the industry associations have done a good job lobbying for greater influence in pricing and value decisions, and for NICE's teeth to be blunted somewhat. (Perhaps the writing was on the wall in 2009 after Sir Ian Kennedy published his report on NICE's methodologies.) Plus a system wherein value is discussed at the same time as pricing is, arguably, simpler, and "anything that's simpler is better," says Roch Doliveux, CEO of UCB and a significant investor in the UK (largely courtesy of the 2004 Celltech acquisition).

No-one will admit outright that NICE is about to take a back-seat in cost-effectiveness decisions. Universities and Science Minister David Willetts was quick to refute that there will be a "lesser" role for NICE, saying instead it would be a "changing role". A more "advisory" role. NICE will move away from single technology assessments (drug assessments) towards setting quality standards more broadly for public health and for care within the NHS, including in social care.

Here's the Department of Health's summary of where NICE will fit in:

"We respect the expert independence of NICE, and believe that it must be allowed to continue to issue guidance free from political interference. However, we believe that there are fundamental failings within the wider system for drug pricing and access. We are determined to address this and are clear that NICE plays a vital advisory role."

Vital its advisory role in establishing a new drug pricing system may be, but a NICE focused on setting quality standards for public health will certainly be less controversial than in its existing form. And less powerful. Today, a NICE decision can--and quite often does--shatter a drug's commercial prospects in the UK. That power looks uncertain post-2013.

The End of Free Drug Pricing in Germany?

According to local press, Germany's health minister Philipp Roesler is about to open fire against the branded drug industry with a proposal to break the sector's so-called 'price monopoly' and force them to negotiate lower prices directly with insurers.

Until now, Germany has been one of Europe's last bastions of "free" upfront drug pricing. Sure, the hurdles come afterwards, but both there and in the UK drug firms have--until now--been allowed to set more or less the price they like for new drugs.

"Focus" magazine reported on Saturday that Roesler would impose upon the branded sector fixed price ceilings for their products, should they not come to an agreement with the insurers. Either way, he's gunning for annual health care cost savings of €2 billion.

Direct price negotiations between insurers and drug firms have been legal since 2007. Unsurprisingly though, few if any branded companies have engaged in price-centric dealmaking (or indeed any dealmaking). Most prefer instead to focus on providing other benefits such as supporting compliance.

Meanwhile, as we reported in-depth last year in IN VIVO, the country's largest insurers have already squeezed out over €500 million in savings from the generics sector through inviting best-deal bids for two-year 'preferred supplier' contracts. That trend looks set to continue as firms compete for the next round of contracts.


This is also very likely what's prompting Roesler to try twist the branded sector's arm into likewise negotiating more competitive deals with insurers. We can't imagine that Christopher Hermann, chief negotiator and deputy CEO at the country's largest insurer, will have much to complain about. Frustrated up until now by the branded sector's reluctance to negotiate on price, he nevertheless appeared to see this coming when, back in early 2009, he told us: "I expect contracts around on-patent drugs to become more numerous, as in the next months and years there will be more contracts between health insurance funds and independent doctors' associations in Germany."

His point: insurance funds' negotiating clout is increasing as they wield more and more influence over precisely what drugs doctors prescribe (even though they're not allowed to dictate what drugs are prescribed, as they are in the case of generics).


Lesser of Two Evils?


If Roesler's plan is put into action, drug firms are unlikely to be able to afford to resist, given the alternative: imposed price ceilings that could impact prices not only in Germany, Europe's largest market, but also more broadly across Europe given that Germany service as a reference price market in several other (fixed-price) countries. Negotiating with sick funds may offer industry a little squeeze-room, for instance to provide or fund supplementary services. Such agreements also exempt them from an assessment by IQWiG, Germany's cost-benefit watchdog.

Indeed, another element of Roesler's plan--due to be presented this Wednesday--will allegedly require drug firms to submit, in parallel with a new drug application, a benefit-assessment study of their product, showing which patients the product will serve and which comparator drugs, if any, are already available.

None of this is particularly surprising in today's era of government spending cuts and (continued) targeting of drug manufacturers to make their quick-wins. But whilst it tastes bitter, it may also be an (the last?) opportunity for firms to avoid government-imposed price cuts.

Indeed, Novo Nordisk's CEO Germany, Willi Schnorpfeil , told us in mid-2009 that he would like to see a de-regulated market in Germany with price negotiations between drug firms and payors permitted from day one, as soon as a drug is authorized. Such a system—replacing the current set-up of free up-front pricing with complex rebate solutions and, potentially, centrally determined cost-benefit assessments slapped on thereafter--would allow faster market access to be a negotiating factor, too, he argued.

image by flickrer finlaystewart used under a creative commons license

While You Were Eating Beignets...

It's the first weekend in December and that means it's time once again for the American Society of Hematology meeting. This year, reps from biotech and pharma travel to N'awlins to make news--or at least issue press releases--before the last year of the first decade of the 21st century comes to a close.

And for the foodies/cultural mavens in the industry, how can you blame them? Where else can you indulge in chicory coffee, beignets (essentially fried dough, but the French makes it sounds waaaay better), and gumbo, while also soaking up the music scene?

If you weren't at ASH, you were likely debating the merits of football's popularity contest, aka the Bowl Championship Series, or Tim Tebow's oscar-winning performance after the Gators lost to Alabama. Or maybe you were engaged in that annual ritual now closely tied with propping up the national economy...filling recycled, reusable bags with unnecessary plastic items manufactured in China.

Away from food, footballs and rituals: this week's dealmaking got off to a healthy start, with Celgene announcing it was buying private firm Gloucester Pharmaceuticals for $340 million in cash, plus up to $300 million in future US and international regulatory milestones. The deal further strengthens Celgene's cancer franchise--more specifically, its blood cancer franchise--as Gloucester's romidepsin (Istodax), a histone deacetylase inhibitor, was approved by FDA in November for cutaneous T-cell lymphoma.

Not that Celgene's early Monday morning shopping should overshadow our hand-picked selection of the weekend events that happened while you were searching in vain for a $10 Zhu Zhu hamster... (Fuhgedabout it!)

New Yorker's Atul Gawande analyzes the current health care reform bill under review in the Senate. The fact that there is no grand master plan for curbing costs is actually a good thing, he argues. (If you haven't read Gawande's latest, you should. He's required reading in the West Wing.)

The WSJ reports Obama went to the Hill to urge the Dems to stay united as the Senate debated a proposed compromise option to the public plan. Meanwhile NYT's Prescriptions Health Blog outlines the advantages of a hybrid plan, the Federal Employees Health benefits Program.

There's lots for Sharfstein and Hamburg, the FDA's dynamic duo, to keep an eye on as they promote their safety first agenda. This weekend news surfaced that a Fresno, CA-based company recalled 22,723 ounds of ground beef potentially linked to salmonellosis; and then there was the NYT article on the safety of plasma products.

Also in the NYT this weekend, a story on the outsized pricing of cancer med Folotyn. The article is sure to spark renewed debate from payers about reimbursement for high priced meds that add just a few months of life. That's bad news for pharmas looking to cash-in on this specialty market.

ASH-related headlines: Cell Therapeutic's pixantrone increases median survival by 3.3 months in patients with relapsed/refractory NHL; Onyx/Proteolix presented updated Phase IIb data from studies of their next-generation proteosome inhibitor, carflizomib; privately-held Gloucester Pharmaceuticals presents additional data on newly approved ISTODAX in cutaneous T-cell lymphoma.

It wasn't just cancer at ASH; new data about next-generation blood thinners from Johnson & Johnson and Boehringer Ingelheim were reported at the meeting in conjunction with an article in the NEJM.

(Image by flickrer and[w] used with permission through a creative commons license.)

NICE and the Definition of Innovation

What 'innovation' means to NICE--or at least, how it takes innovation into account in its cost-effectiveness assessments--may yet become a little clearer. Tomorrow the National Institute of Clinical Excellence will hold one of its regular public board meetings and item 7 on the agenda is the agency's response to the Ian Kennedy report.

In case you'd forgotten (it was before the summer holidays, after all): Sir Ian Kennedy published a report in July proposing, among other things, how NICE should take into account the 'innovative' nature of medicines. We summarized it here, noting that industry was particularly peeved about Kennedy's support for the controversial QALY measure which NICE uses to judge cost-effectiveness.

Innovation is a tricky one. Kennedy had a shot at defining it, including criteria such as that a drug should 'substantially and significantly improve the way that a current need is met'. NICE argues that it already 'has flexibility in supporting the use of technologies' whose cost-per-QALY exceeds the £30,000 threshold (the cut-off point as to whether a drug will be reimbursed or not), including 'where the intervention is an innovation that adds substantial, distinct and demonstrable benefits that may not have been adequately captured in the measurement of health gain'. The agency also points to recently-introduced guidance which allows it to raise the threshold for treatments which extend life at the end of life (from which several drugs have already benefited) and the even-newer "Innovation Pass" notion foisted upon it by the UK government in its bid to kick-start the sector.

Still, recognizing its role in supporting innovation (and in particular the UK government's fresh call for it to do so), NICE is proposing two measures that, if not exactly radically change the way the agency values and assesses innovation, certainly try to make the process clearer and thus make the agency more accountable.

Firstly, if a company claims its product is 'innovative' and that this confers specific benefits upon it, scoping workshop meetings (prior to assessment) will be used to explore those 'unique characteristics [of the drug or technology] which support this proposition, and the data sources through which the Appraisal Committee will be able to validate it'. In other words, NICE is saying, we'll explicitly lay out, up-front, the company's claim to innovation and how we can validate it.

But clearly, NICE must establish whether a supposedly 'innovative' product in fact has a substantial impact on health-related benefits and improves the way a current need is met (above and beyond best supportive care). Innovation for its own sake isn't much help.

Thus in its second measure, the agency states that where the Appraisal Committee is satisfied that a product represents a 'step change'--noting that it's up to the Committee to decide what 'step change' means--it will have to demonstrate that these innovative characteristics have been taken into account (and, one presumes, how they've been taken into account) in the QALY calculation of health-related quality of life. If they haven't directly been factored into that calculation, the Committee will have to describe how it has evaluated their impact (if at all) on its overall judgment of the drug's cost-effectiveness.

Basically, then, NICE's committees are going to have to better explain themselves and their evaluation processes, and pinpoint how and where they factor in innovative value, rather than just claiming that they do. "We're going to be more systematic in cataloging those [innovative] features and in tracking our assessments of those features through the appraisal process, all the way through to the final guidance," explains NICE's CEO Andrew Dillon.

At the end of the day, though, the exercise isn't going to get any easier. "We have to convert a proposition that a drug or technology is innovative into a measurable assessment of patient benefit," Dillon continues. "We have to unpick the proposition and find out in what way a product's innovativeness can benefit patients. Then we factor that into the value of a drug."

Drug companies, are you paying attention? Don't just go in and say your drug is 'innovative'.

(NICE's proposals, if agreed at the meeting tomorrow, will be open for consultation.)

Vivus Can Teach Old Drugs New Tricks, But Does It Have a Bidil Problem?

A lot has been said and written over the past week about Vivus' obesity drug candidate Qnexa, which is a combination of two older, approved products. Its Phase III data was surely quite impressive, as impressive perhaps as the obesity market has been intractable.

But setting aside questions about safety and efficacy--lets assume the company is on to a winner in those respects--and likewise ignoring the not-so-successful track record of existing drugs approved to treat obesity (two recent posts by our friends at Bnet make each of those points well, here and here), there are some complicating and inconvenient factors for Qnexa that aren't getting much play.

First some background. On September 9 the company announced spectacular weight-loss data from two Phase III trials; one study showed an average of 37lbs (14.7%) weight loss for patients on the drug for 56 weeks. The news, which sent Vivus shares up a whopping 70%, also put pressure on late-stage rivals Arena and Orexigen.

(As an aside, the fact that there are three Phase III obesity drug candidates out there, each showing a little extra leg for eligible pharma partners and each surpassing FDA's 5%-weight-loss hurdle guideline for obesity drugs, is a drug-journo's dream, so expect lots more stories on these candidates from your favorite news outlets.)

Arena is developing the serotonin activator lorcaserin (a first Phase III was successful, showing average 5.8% weight loss; a second Phase III trial is expected to report out any day now) and Orexigen is developing Contrave, a combination of the antidepressant bupropion (aka Wellbutrin) and a sustained release form of naltrexone, a an opioid blocker marketed to treat various addictions. Contrave's Phase III data in July was also solid, showing an average 6.1% and 6.4% weight loss in two trials.

Each company even managed to take advantage of their good data and investors' returning appetite for biotech: Arena raised more than $52 million and Orexigen netted $81.6mm in a FOPO on the backs of their respective news. Vivus has yet to pull the trigger on a stock offering (it had just over $144mm in cash and equivalents at mid-2009).

OK. So far, so good for Vivus: it has shown the most impressive results and could therefore ink a successful partnership and have a leg up on its rivals for share in tomorrow's obesity-drug-marketplace. Perhaps! But Qnexa is, like Contrave, a combination of two generic drugs: the stimulant phentermine and the epilepsy and migraine treatment topiramate. Vivus' explanation for how the drugs work together is here.

Now we are aware that this isn't exactly the same scenario, but Qnexa reminds us of another generic-generic combination that was destined for blockbuster-status (only to fall very flat): Nitromed's Bidil. And why did Bidil hit the skids so spectacularly? One word: Pricing.

It's by no means a perfect comparator, but the similarities are there. Bidil is a fixed-dose combination of the generics isosorbide dinitrate and hydralazine hydrochloride used to treat heart failure in black patients. The drug showed stunning results in this population, FDA approved it in June 2005, and then Nitromed priced it at $1.80 per pill--or about $5.40 per day (up to as much as $10.80/day depending on a patient's dose).

That price was four times the retail cost of the combined generics and much higher than even industry analysts thought Nitromed would go. FDA said yes on safety and efficacy, but would doctors prescribe it at that price? Would payors foot the bill? See this IN VIVO feature from a few months post-launch for all the details.

Suffice it to say, although the company had blockbuster dreams, Bidil never took off, at least in part because of its price relative to generics (though the company surely tried to nip generic prescribing in the bud, going as far to file a Citizen's Petition to get FDA to reiterate that there was no generic substitute for Bidil; FDA complied). Did Nitromed strike out while swinging for the fences, when it could have settled for a nice double?

Now, again, Qnexa isn't Bidil, and the circumstances aren't identical. The components of Qnexa aren't available commercially right now in the exact doses that Vivus has tested in combo. And Qnexa's formulation involves controlled release, minimizing certain side effects like tingling, which is related to topiramate. Doctors also "won't take on liability of prescribing off-label when there is a drug approved by FDA," Vivus COO Peter Tam told our colleagues at 'The Pink Sheet' DAILY last week, adding "we are not concerned about generic substitution." (Orexigen execs are similarly sanguine about generics.)

But a highly priced Qnexa may still face some of the same hurdles as Nitromed's Bidil. Off-label prescribing may become a factor. Payors that universally prefer behavioral changes--diet and exercise--in this kind of market may balk at reimbursement for all but the most intractable of patients, limiting Qnexa's market.

Orexigen has in fact said that they planned to price Contrave roughly in line with or even lower than the total cost of its component generics, though at about $8 per day for bupropion and naltrexone generics (a price quoted by Orexigen execs during a presentation in January) that isn't exactly a low ceiling. Topiramate and phentermine cost considerably less, under $1/pill for 100mg topiramate and just over $1/pill for 15 mg phentermine at drugstore.com, for example. (Qnexa's highest dose in Phase III--the one that achieved the best results--was 92mg of topiramate plus 15 mg of phentermine, once a day.)

Now, another potential difference between Bidil and--should either drug make it to market--Qnexa and Contrave: Nitromed tried to sell Bidil itself, without a partner. Both Orexigen and Vivus are out pounding the pavement, in search of pharmaceutical partnerships, or perhaps acquirers, to provide the necessary commercial infrastructure for selling a mass market obesity drug.

We won't be surprised to see either company land a deal, though we have our doubts--because of the pricing problem described above--that either drug will land the kind of blockbuster alliance or acquisition that each company is surely hoping for. What are we expecting: lots of risk-sharing stuff like sales milestones, lower-than-typical-Phase III upfronts.

In short, maybe a nice double.