VOI News

Study looks at vial size and cost of left over cancer drugs

To estimate costs associated with infused drugs discarded because they are left over after administration to a patient, Peter Bach of the Center for Health Policy and Outcomes at Memorial Sloan Kettering Cancer Center and colleagues looked at 20 infused cancer agents with single-vial packaging and weight-based dosing. In the January 20, 2016 issue of BMJ, they report a range of 1% to 33% in the amount of drug left over following administration. After accounting for differences in drug price, they found that the value of products that would not be received by a patient under recommended dosing scenarios equals $1.8 billion or 10% of the combined 2016 sales for these drugs. Roughly $1 billion more is paid to hospitals, clinics, and other providers in the form of “buy and bill” markups for left over portions.

In most other settings, it would be a simple matter to set aside the left over product and use if for the next “customer” but, as is usually the case, the rules and practices governing pharmaceuticals are not so straightforward. The CDC states that single-use vials “should only be used for a single patient” because “these medications typically lack antimicrobial preservatives and can become contaminated.” Although the FDA’s position is not as clear cut as the CDC’s, it also cites microbial contamination along with medication errors as factors that “may” cause problems. CMS’ position, however, is that “it is permissible for healthcare personnel to administer repackaged doses derived from [single-dose vials] to multiple patients, provided that each repackaged dose is used for a single patient in accordance with applicable storage and handling requirements.” Meanwhile, the US Pharmacopeial Convention allows sharing only if the remaining drug is used within six hours and handled by specialized pharmacies.

Physician Groups More Vocal in Drug Pricing Debates

While the U.S. remains far from having an officially-sanctioned health economics and outcomes research agency like the National Institute for Health and Care Excellence (NICE) in the U.K. (or any number of similar agencies authorized in other countries over the past decade), some high-visibility (read, pricey) drug categories are receiving similar attention from prominent physician groups.

For example, a joint panel of the American Association for the Study of Liver Diseases and Infectious Diseases Society of America has recommended that new hepatitis-C drugs from Gilead Sciences and AbbVie are cost-effective for certain early-stage patients who are currently denied coverage by most providers. But the group based its findings on an important caveat: the “cost” in “cost-effective” is based on prices 40 to 60 percent below current levels.

That comes on the heels of a draft framework issued by a task force from the American Society of Clinical Oncologists (ASCO) that proposes a methodology for determining the cost-benefit ratio of cancer treatments. As with the hep-C drugs, new cancer therapies, which can cost from $10,000 to $30,000 per month, have spurred the oncologists into action.

The task force has already used the framework to analyze metastatic lung cancer, advanced multiple myeloma, metastatic prostate cancer, and adjuvant therapy for HER2-positive breast cancer. While some treatments scored higher than their older counterparts, others showed negligible improvement, a finding that makes their higher price tags harder to justify in the eyes of payers.

As we discussed here recently, last-year’s hefty growth rates may be somewhat short-lived. While it is too early to determine the accuracy of that prediction, there appears to a gathering of forces that will exert pressure to keep prices down. Most notably, due to mergers announced in the last few months, pharma will face the challenge of increased negotiating leverage from ever-larger insurance companies. Now, physician groups, who have enormous credibility and influence with the public, media, and policy makers, are stepping into the health economics debate in a more organized fashion.

Public attitudes towards drug prices: not as bad as you might think(?)

Public attitudes towards drug prices: not as bad as you might think(?)

A recent Kaiser Family Foundation survey finds that 73% of respondents believe drug prices are “unreasonable,” with no statistical difference in those who take prescription meds and those who do not. The survey received some media coverage, mostly in stories addressing other facets of the drug price debate but, digging deeper, we find that the industry’s reputation may have actually improved a bit over the past decade.

For example, Kaiser queried respondents on what they believe is driving drug prices. The top factors and the percentage of people identifying them as major contributors were:
• Profits – 77%
• Medical Research – 64%
• Marketing and Advertising – 54%
• Cost of Lawsuits – 49%

When Kaiser did this same survey ten years ago, 70% of respondents said profits were the industry’s top concern, so not much change here. Back then, however, less than a quarter of respondents identified “saving lives and improving quality of life” as a leading industry concern. If we can roughly equate “saving lives and improving quality of life” with R&D spending, it suggests that industry PR campaigns to educate the public on the cost of drug development are getting through, albeit not in a way that supplants the perception that drug manufacturers are primarily profit-driven.

The 2005 survey also found 65% approval for government regulations to limit drug prices, but support for additional measures of this type fell to 53% this year. Declining support for price controls is interesting in that, due to dramatically higher government spending via Medicare Part D and components of the Affordable Care Act, such controls are actually politically more feasible now than in 2005. It’s another example of the cognitive disconnect between consumers (patients) and purchasers that distinguishes health care from most other areas of the economy.

So there’s a bit of good news from a public perception angle here, but pharma executives would do well to maintain some discipline in the pricing arena. After all, the flipside of the health-sector disconnect between consumers and purchasers is that consumers are most definitely not the final decision-makers in these matters. Had Kaiser surveyed lawmakers, PBM managers, or even doctors, i.e. the people who are actually in a position to do something about drug prices, trending attitudes towards the subject would likely be quite different.

Reverse Payments: Federal Courts Playing “Words with Friends”

It seems the only certainty in the long-running legal battle over generic pay-to-delay (aka reverse-payment) arrangements is … more litigation.
Opponents of the settlements were cheered two years ago when the Supreme Court ruled in FTC v Actavis that such arrangements could run afoul of anti-trust laws. The practice of patent holders giving incentives to Paragraph IV challengers in exchange for dropping patent challenges or delaying market entry had long been in the sights of consumer activists, members of Congress, and more notably the Federal Trade Commission. They argued that the deals amount to protecting monopoly prices by preventing competition, thus violating the Sherman Anti-Trust Act.
However, the actual decision was not nearly the death-knell for reverse payments that headlines at the time would lead most to believe. In a partial victory for patent-holders, the Supreme Court left quite a bit of gray area in their decision, which serves more as guidance to the judiciary than a bright-line ruling. For one, the court did not outright say the arrangements are unlawful, but rather that judges could allow for that possibility when deciding whether to allow cases to go to trial. Second, it stated that “large” and “unjustified” payments to patent challengers are the red flags that may indicate anti-competitive behavior. Broad terms indeed.
Most importantly, the court did not define what a “payment” is, leading to much speculation in the legal community and a flurry of court briefs. Many district courts have taken an extremely narrow view of the term, saying FTC v Actavis only applies when a cash transaction has taken place. Others have relied on the common English definition of “payment,” which covers both money and things of value. The result has been uncertainty (and yet more litigation) for companies engaging in patent challenge settlements, especially when looking for creative, non-cash incentives.
Some clarity may be on the way in the form of a higher court decision last month regarding a settlement between GSK and Teva over the blockbuster anti-seizure drug Lamictal. Teva, the first filer, agreed to drop its patent challenges after winning the first of two in court. In exchange, GSK granted Teva early entry into the chewable-form market and a guarantee not to offer an authorized generic of the tablet form during Teva’s 180-day exclusivity period after patent expiry. A lower court dismissed an anti-trust suit brought by two direct purchasers on the grounds that, since no cash had exchanged hands, the Actavis standards did not apply.
However, the Appeals Court for the Third Circuit has now reversed that ruling, saying that the settlement amounts to a “transfer of considerable value from the patentee to the alleged infringer and may therefore give rise to the inference that it is a payment to eliminate the risk of competition.” In essence, the court found that Teva’s profits from having 180 days of the generic market all to itself is the same as an outright cash payment from GSK.
While the Third Circuit ruling does add weight to arguments claiming the term “payment” covers all things of value, other courts are not bound by it. The eventual result may be a circuit-split (two or more Appeals Courts issuing contradictory rulings), which could trigger another Supreme Court review to ensure consistency in every jurisdiction. Ironically, this is exactly the sort of situation a decision from the nation’s highest court is supposed to settle, not create.
That means, for now, companies entering into patent settlements involving any kind of incentives to delay generic competition can add large litigation fees to the cost, as the validity of Sherman Act suits may depend on which precedent and/or dictionary a judge decides to follow.

Biotech Hiring on the Rise – A sign of Growth or Zero Sum Game?

As noted here recently
, biologics, especially high-cost innovative treatments such as Humira and Sovaldi, have lived up to their commercial promise, playing a large role in turning around the fortunes of the drug industry.This shows that the decade-long trend of investment in the sector may be have been the smart choice.

Employment figures seem to indicate hiring trends are following the money. A report by The Philadelphia Inquirer that made the rounds of industry news websites shows an overall gain in biotech jobs of just more than 5% in biotech from 2007 to 2013. Over the same period time, pharma shed nearly 5.5% of its employees.

Compared to the US as a whole, which saw a 2.1% drop in employment in those six years, biotech would seem to be faring better than most while pharma lags behind.

Recruiters have noticed as well. A quick search for biotech employment turns up volumes of advice on where to look, how to apply, resume advice, etc., including the FiercePhama article “Want a raise, pharma reps? Get into biotech sales instead,” which states that moving from one sector to the other can result in a 50% pay increase.

However, anyone (again) declaring the demise of Big Pharma might want to avoid relying excessively on these employment numbers. First, the figures above were taken from the US Bureau of Labor Statistics, which relies on categories in the rigid and somewhat arcane North American Industry Classification System (NAICS). Using these definitions, the pharma jobs numbers are in manufacturing, marketing, distribution, and other post-approval functions. The biotech figures are limited to research and development. Not exactly comparing apples to apples.

Even if taken at face value, the numbers only count in-house employees and do not reflect the industry’s increasing emphasis on outsourcing.

It is also important to note that traditional drugmakers have invested heavily (through acquisitions and underwriting R&D) in biotech. They saw change coming and adjusted accordingly. The companies with distribution systems in place and the facilities for high-volume manufacturing are buying (or leasing) innovation. The job numbers, therefore, do not show one sector losing and another gaining so much as they reflect the natural shift of resources toward newer, more promising product lines.

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.

Generic drug sales forecasting published in Journal of Generic Medicines

VOI Consulting is pleased to announce that Probability-based forecasting for U.S. generic drug sales, an original article by VOI’s President, Todd Clark, has been published in the Journal of Generic Medicines: The Business Journal for the Generic Medicines Sector. The article abstract is below:

Probability-based forecasting for U.S. generic drug sales
Todd D Clark, Value of Insight Consulting, Inc.
Journal of Generic Medicines, September 2014

Most sales forecasts, including those in the generic drug industry, are based on an implicit assumption that the market can be represented as a continuous variable, an approach that works only when activity consists of many independent, incremental customer buying decisions, each of which is too small to substantially affect total sales. These conditions are generally true in branded pharmaceutical markets but they do not reflect the reality of the US generic drug industry where decisions regarding which company’s product is dispensed at the pharmacy are primarily a function of a limited number of binary (yes/no) decisions from drug wholesaling companies, the largest of which control access to one-fourth of the market or more. Unfortunately, binary situations are difficult to model in standard spreadsheet forecasts due to the extremely high number of permutations that are possible even with a small number of variables. In this paper, we explore the binary nature of the US multi-source industry from a single, hypothetical, generic company’s perspective and discuss a probability-based sales forecasting technique that offers a more accurate approach to modeling based on the number of wholesaler contracts available and the degree of generic competition present. The forecast is derived from actual wholesaler market share data and, based on extensive industry experience, the parameters used are believed to be reasonably representative of the US generic market, meaning that the results can be scaled to determine approximate probabilities of achieving certain revenue levels in real-world situations.

The article will be published in the September 2014 print version of the Journal of Generic Medicines. It is currently available online.