VOI News

Specialty drugs drive outsized U.S. pharma growth – but is it sustainable?

Not long ago, gloom and doom was predicted for the pharma industry as blockbuster drugs ran out of patent protection, taking their historic profits with them. The patent cliff, a several-year span in which Lipitor, Diovan, Singulair, Plavix, Lovenox, Nexium, and Cymbalta (just to name a few) faced generic competition with limited options for replacement in the pipeline, was seen as heralding a period of long-term difficulty for innovative drug makers.

Based on information from IMS Health’s newly published Medicine Use and Spending Shifts: A Review of the Use of Medicines in the U.S. in 2014, however, it may be time to change the tune. Domestic drug spending last year reached $374 billion, exceeding forecasts and achieving the highest annual increase (13.1%) since the early 2000s. While fewer patent expirations and an increase in brand prices get some of the credit for the upswing, the real growth driver was specialty drugs.

Of the $20.2 billion increase in spending on new brands, 78% was from this category, defined by IMS as “products that are often injectable, high-cost, biologics or require cold-chain distribution … are mostly used by specialists … and include treatment for cancer and other serious chronic conditions. “ More than half of the new brand sales growth ($11.3 billion) comes from recent launches of new hepatitis C drugs while new cancer and multiple sclerosis medicines were respectively responsible for $1.6 billion and $2.0 billion. Overall, according to IMS, the $54 billion in increased specialty medicine spending over the last five years makes up 73% of  growth across all categories in that period.

These trends have given specialty drugs a firm foothold in the market, making up 33% of all drug spending last year. And it looks like this will continue for the next few years, as 42% of late-stage-pipeline drugs are currently in this category.

Bright and shiny topline growth numbers aren’t everything though: at some point, we’ll get around to posting an analysis of how these phenomenal revenue figures are really derived from a handful of extremely successful drugs rather than a broad-based industry turnaround. The plateau in drug utilization, which we evaluated in-depth in a 2013 whitepaper, provides further reason for skepticism regarding the sustainability of the current rally.

It has also been said that everything carries within itself the seeds of its own destruction – this was true in the late 1990s/early 2000s when the last period of outsized growth was eventually contained through Paragraph IV challenges, higher copays, aggressive formulary management, and pro-generic policies. Considering that specialty drug prices have already sparked backlash among physicians and pharmacy benefits managers and that we’ve just recently seen the advent of biosimilars which promise to exert pricing pressure on biologics, it is not too difficult to predict that counterforces will eventually curtail the latest round of growth as well.

Webinar on Probabilistic Modeling in Pharmaceutical Development

VOI Consulting is a big proponent of applying probabilistic forecasting techniques such as Monte Carlo analysis (MCA) to pharmaceutical industry decision making. In the last year alone we’ve used MCA to evaluate pipeline opportunities, find an optimal price for a new drug with multiple segments and price sensitivities, develop a wholesale bidding strategy for a generic manufacturer, establish the likelihood of competitors reaching market by certain dates, select clinical trial sites, and determine distributions of Medicare DRG payments based on hospital and patient characteristics.

Unfortunately, probabilistic forecasting is not nearly as widely known (or used) as it should be. Most likely the name implies a headache-inducing level math that most busy pharmaceutical executives simply don’t want to tackle. It’s actually much easier than that mainly because we are only asking clients to be intelligent consumers of the analytical results and this requires little more than the ability to understand a probability distribution chart or statements like “there’s an 85% chance of generating positive ROI on this marketing initiative.” It’s so much easier than people expect and so much more powerful than standard spreadsheet modeling that after reviewing the results of a Monte Carlo analysis on a recent pipeline licensing opportunity, one of our C-level clients stated, “I wish someone had explained this approach to me 20 years ago.”

With this in mind, we’re always glad to see Monte Carlo analysis promoted for pharmaceutical industry applications. One such instance is a webinar from Palisade Software, the makers of the @Risk suite of probabilistic modeling tools who recently hosted “Using @RISK in Evaluating Full (late stage) Compound Development in the Pharmaceutical Industry” by Venkat Raman of VR Advisors LLC. An archived version is available here.

Pharma Moving towards Biologics in the Lab and the Market

An interesting article from the April 9, 2012 issue of Genetic Engineering & Biotechnology News summarizes two studies that confirm an industry shift towards biologics over small molecule drugs. Specifically:

[The UK law firm, Withers & Rogers finds that] biologics accounted for 60% of the patents filed by the top 10 pharma companies in 2009…The number of biologic patent applications in ’09 increased by 14.5% from two years earlier, even though ’09 saw 31.5% fewer overall patent filings than ’07.

Further, this trend is paying off at the commercial level. Per KMR Group’s Pharmaceutical Benchmarking Forum:Biologics hold better prospects than traditional small molecules of advancing all the way from the lab to the clinic to the market…more than 25% of large molecules in Phase II between 2006 and 2010 reached the market compared to about 10% of small molecules…12% of biologics were calculated to advance from preclinical to clinical studies, compared with just 2% of small molecule drugs. The biologics percentage clearing each successive clinical review hurdle grows to 17% at Phase I, 27% at Phase II, leaping to 58% at Phase III, and 82% at the registration phase. For small molecule drugs, according to KMR, success was calculated to be 4% at Phase I, 9% at Phase II, 44% at Phase III, and 78% at registration.

Control Types and Arms in Pivotal Cancer Trials: 2005-2011

This is the fifth in a series of blog posts VOI Consulting will publish based on high-level examination of the company’s new insiteinvestigator™ database. This article specifically addresses the selection of control types in the comparison arm for cancer drugs gaining approval during the 2005 to 2011 period.

Control Types

Selecting a comparison arm for cancer trials is generally more challenging than in other types of drug development. On the one hand, there is a desire to demonstrate the treatment’s effect as clearly as possible, something that is best done with a placebo control. On the other hand, review boards are often very reluctant to approve these types of trials as there are serious ethical issues involved in featuring a placebo arm with patients suffering from a potentially fatal disease. Instead, common practice calls for using an active control (usually the existing standard-of-care regimen) in the control arm with the investigational agent used either in combination with the standard-of-care or, in cases where more data is available, as monotherapy.

In Figure 1 we see how these general rules are applied in practice. If we ignore single arm trials in hematologic malignancies for the moment, active controls do in fact serve as the most common type of comparison arm for both cancer types. There are also, however, a fair number of placebo controlled pivotal trials, particularly in the solid tumor area. Usually, these were for patients who had failed earlier lines of therapy but this was not always the case as two trials (both in renal cell carcinoma) achieved first-line indications via placebo-controlled trials. Placebo controlled trials were substantially more likely to be used in monotherapy (82%) than in combination therapy trials (18%). This is somewhat surprising given the aversion to giving cancer patients placebo-only treatment but may, at least in part, be reflective of the fact that there are no existing standards-of-care for certain advanced cancers.

Figure 1 - Control Types and Arms in Pivotal Cancer Trials: 2005-2011

Insiteinvestigator is VOI’s proprietary database containing detailed information on design, endpoints, populations, size, placement, timelines, efficacy outcomes, and safety results for every pivotal trial supporting a cancer drug approved by the U.S. FDA from 2005 through 2011.

Multiple vs. Single Arm Pivotal Cancer Trials

This, the forth in a series of blog posts VOI Consulting will publish based on high-level examination of the company’s new insiteinvestigator™ database addresses multiple versus single arm trials as it relates to FDA approval of oncology drugs.

Number of Arms

Figure 1 shows the frequency of multiple and single arm trials in cancer pivotal trials. Two arm trials dominate the solid tumor category with 84% of all studies falling into this category with the remainder being split equally between single and double arm trials. The picture is quite different in hematologic malignancies, however, where single arm trials account for 49% of all hematologic pivotal studies and are as common in these cancers as two arm trials. It is important to note that the data in Figure 1 is based on individual pivotal trials and, as we have seen, indications are often approved on the basis of more than one trial. However, there were eight approvals in our time period that were made on the basis of a sole, single arm trial. Most were for hematologic cancers and these applications tended to be for conditions with small populations or for use in second line or later patients.

Also of interest is the 5% of trials in the dataset that featured three arms, all but one of which were in the solid tumor category. Three arms were used to test different doses of the investigational drug or in cases where the agent was included in both monotherapy and combination regimens. In each of these instances, a single arm received approval, a fact that suggests more extensive testing at an earlier phase might have allowed for cost savings through the elimination of the third arm. Of course, this must be weighed against the additional time required to conduct further research before moving into the pivotal study. However, three arm trials also slow the process by diverting scarce patients into an arm that will ultimately be discarded. Data on recruitment times and accrual rates, discussed later in this article, may assist planners in evaluating the time trade-off between conducting additional small studies or moving directly into the pivotal trial with a three arm study.

Figure 1 - Number of Arms in Cancer Pivotal Trials 2005-2011

Insiteinvestigator is VOI’s proprietary database containing detailed information on design, endpoints, populations, size, placement, timelines, efficacy outcomes, and safety results for every pivotal trial supporting a cancer drug approved by the U.S. FDA from 2005 through 2011.

Cancer Drug Approval Trends 2005 - 2011


This is the first in a series of blog posts VOI Consulting will publish based on high-level examination of the company’s new insiteinvestigator database which contains information on design, endpoints, populations, size, placement, timelines, efficacy outcomes, and safety results for every pivotal trial supporting a cancer drug approved by the U.S. FDA from 2005 through 2011. Each article will examine a specific topic to include: cancer drug approval trends, approval requirements, pivotal trial design, size, location, and key timing elements such recruitment periods and patient accrual per site within specific cancer types.

Cancer Drug Approval Trends

From the start of 2005 through the end of 2011, 48 different drugs were approved by the FDA for 83 different indications, of which 38 were new and 45 were supplemental. One hundred pivotal trials supported these approvals, an average of 1.2 trials per indication. (Note that there is some latitude in what constitutes a pivotal trial. For our purposes, we have defined a pivotal trial as a study that was extensively relied on by the agency for approval purposes. This means extensive discussion in regulatory materials surrounding the approval and, generally, inclusion on the approved prescribing label.) As shown in Figure 1, 60% percent of approved indications were for solid tumors while the remaining 40% were for hematologic malignancies. Of 22 different conditions with approvals, leukemia, breast cancer, and Non-Hodgkin lymphoma saw the highest level of activity; together, these three cancers represented over one-third of all drugs approved during the period. Forty-one percent of all approvals had previously received orphan drug designation. Although more approvals were for solid tumors, the majority of orphan drug indications were for hematologic malignancies.

Figure 1- Cancer Drug Approvals by Cancer Type 2005-2011

The rapid advance in cancer research is clearly evident in Figure 2. As shown, traditional anti-cancer agents such as chemotherapeutics and hormonal drugs accounted for two-thirds of approvals in 2005. By 2011 this had shrunk to less than 15% as new generation treatments such as biologics, targeted oral drugs, and vaccines have come to dominate the field. Although not shown on the chart, the trend towards new generation therapies has been driven mostly by the kinase inhibitor class. The first of these therapies, imatinib, was approved just a little over ten years ago but the category, which also includes erlotinib, nilotinib, sutininib, and several others, accounted for one-third of all approved indications over our total time period and reached 50% of all approvals in 2011.

Figure 2 - Approvals by Drug Type 2005-2011

2011 – Highest Level of FDA New Drug Approval since 2004

The just published annual FDA review from Nature Reviews Drug Discovery finds a rebound in new drug approvals. With 24 new molecular entities and six new biologics receiving first-time marketing clearance, 2011 was the most active year since 2004 when 31 NMEs and five biologics were approved. The trend towards narrowly-focused therapeutic categories continued with 11 of the new drugs being designated as orphan drugs. Cancer was the single largest area of activity, representing 35% of approvals, the majority of these were also orphan drugs. Nonetheless, the fading blockbuster categories also showed some life as hypertension, major depressive disorder, and Type 2 diabetes each saw a single new approval.In part, the 2011 upswing is attributed to a higher success rate for applications. The FDA has approved half of applications in recent years but last year the rate improved to over 80%. It seems likely that there will be some reversion to the mean in 2012 but one can hope that improvements in trial design, submissions, and perhaps also in regulatory attitudes might sustain the trend to some degree going forward.