The Wacky World of Generics: Risperdal Edition

They don't call them atypical antipsychotics for nothing.

Here are two things that keep Big Pharma CEOs up at night: (1) the growing power of payors—actively encouraged by the Medicare program—to drive therapeutic substitution in blockbuster product classes; and (2) the potential for government run comparative effectiveness studies to undermine the market position of newer medicines.

However, if two of the biggest players in the atypical antipsychotic market are to be believed, the impact of the first major patent expiration in that class will stand those fears on their head.

Johnson & Johnson’s risperidone (Risperdal) goes off-patent in June and generics are lining up to enter the market. That will clearly be a big hit for J&J to absorb: Risperdal sales in the US were about $2 billion in 2007.

In other blockbuster classes, a major patent expiration has meant big headaches for other brands in the class. Think of how Lipitor has seen its market share erode and discounts soar since Zocor went generic.

So Lilly’s $2.2 billion olanzapine (Zyprexa) and AstraZeneca’s nearly $3 billion quetiapine (Seroquel) are in big trouble, right?

Not so, say those two companies.

First off, the Medicare program’s overall generics-first emphasis is more than offset by the Centers for Medicare & Medicaid Services requirements that managed care plans cover all products in the atypical antipsychotic class (and five other protected classes). So plans will be free to switch Risperdal patients to the generic, but will find it difficult if not impossible to drive therapeutic substitution from other brands, as we wrote here.

Or, as AZ CEO David Brennan put it during the company’s January 31 earnings call, “the antipsychotic market is quite unique. A product is a product. There is not a history of therapeutic substitution in that area, and we expect to continue to grow our Seroquel franchise.”

Lilly CEO-designate John Lechleiter took it one step farther, telling investors during a January 29 earnings call that Lilly plans to “retain the broadest possible access for Zyprexa” by emphasizing the “superior efficacy evident in CATIE the longer the duration of therapy.”

You remember CATIE, right? That is the government run comparative trial completed in 2005, with headlines at the time declaring it showed that older off-patent antipsychotics are just as good as the atypicals.

That interpretation, needless to say, has not won out in the marketplace, since Lilly, AstraZeneca and the other companies in the market astutely anticipated the negative headlines and worked diligently to develop alternative interpretations.

How successful were they? Well, less than three years later Lilly will be using CATIE to help support continued use of Zyprexa over a generic from the atypical class itself.

And there is nothing typical about that.

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Botox, Friday Afternoon Press Calls and the Nissen Effect

Blaming the media will never go out of fashion, at least not when it comes to drug safety scares.

Here is Schering-Plough EVP Carrie Cox, summarizing the battle to rebuild Vytorin after the ENHANCE debacle during its earnings call February 12: "Physicians ... understand that the furor around ENHANCE is largely a media driven event."

And GlaxoSmithKline’s recap of the Avandia meltdown of 2007: it resulted from a “distortion of the media” about the risk profile seen with the Type 2 diabetes drug, outgoing CEO JP Garnier said February 7.

There is no question that front-page headlines and national news broadcasts can do immediate and lasting damage to even the most well-established brands, damage that may go far beyond any appropriate medical response to new data.

But that only begs the question: what prompts some safety scares (or, in the case of ENHANCE, a failed efficacy trial) to create a media feeding frenzy, while others seem to pass with barely a ripple?

One answer, to borrow a phrase from religious themed bumper stickers, could be WWSNS: What Will Steve Nissen Say? There certainly does seem to be a strong correlation between the Cleveland Clinic cardiologist’s reaction to new data and the amount of play it gets in the media.

Wall Street seems to believe in the Nissen effect. In a February 11 note, Wachovia’s Larry Biegelsen argued that investors over-reacted to an “early communication” about a potential safety issue involving Allergan’s Botox. The issue, announced by FDA February 8, involved serious adverse events primarily associated with off-label use of Botox in children with cerebral palsy. Investors worried that a safety scare could significantly impact Botox widespread cosmetic use.

Not to worry, says Biegelsen. An “ENHANCE-like impact” on Botox use is “unlikely in our view.” Why? Well, for one thing, “Dr. Steve Nissen has not spoken out against Botox,” the way he did against Vytorin.

Talk about a case where silence is golden.

Biegelsen, of course, knows it isn’t quite as simple as that. Nissen’s silence is one of four factors the Wachovia analyst sees as reassuring differences between the Botox safety issues and the ENHANCE fallout. Only one is under the control of the sponsor: “There does not appear to have been any delay in the reporting of the serious adverse events.”

The other three involve reactions by external parties who have no formal regulatory role: (1) Nissen’s silence; (2) “Congress has not started an investigation into the handling of the Botox data”; and (3) The media coverage of Botox is more benign than the coverage of the ENHANCE data.

How so? “We couldn’t find a story in the print version of the New York Times on Saturday, whereas ENHANCE was front page news the day after the results were released.”

Of course, that last point is not entirely good fortune for Allergan. As we pointed out, FDA issued the “early communication” about Botox on Friday afternoon—part of what is becoming a pattern at the agency. (A safety update on Pfizer’s emerging blockbuster Chantix came out the week before Botox, and FDA’s first response to ENHANCE came the week before that.)

It so happens that Friday afternoon is the time least likely to generate significant news coverage. FDA swears there is no deliberate strategy to bury drug safety events. (At least, they assured Pharmalot of that—you can read more here.)

It certainly is plausible that FDA didn’t get all its ducks in a row to issue the early communications until Friday afternoon. We’ve talked to media savvy FDAers over the years (both in the press office and elsewhere) who routinely lament the review divisions’ habit of issuing approval letters at or after the close of business, often on Fridays, thereby all but assuring that even the most important new drug approvals would not be covered in the national news broadcasts, and sometimes even receive scant notice in newspapers.

The fact is that if FDA is not taking the news cycle into account when making safety announcements, it should be. Overblown safety scares do not serve the public health, so FDA certainly could justify Friday afternoon announcements as a way to better ensure that important new information gets into the public sphere in a more measured fashion.

On the other hand, the news media is the best way to amplify an urgent safety message. If that is the goal, the agency is better served by getting the news out early in the day and early in the week whenever possible.

In fact, that’s what FDA did on Monday February 11, when it announced that Baxter is suspending production of heparin due to severe adverse events--an announcement with urgent public health implications.

As far as we know, Dr. Nissen didn't weigh in on that one...

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AZ Makes Its Move in GI

Back in November we broke the news that AstraZeneca may be spinning out its gastrointestinal R&D. (Those news outlets that only read the Swedish papers caught up on the news this week.)

Well we can report now that the Big Pharma has made its move, though it's not the move that some reports were salivating after. In fact, it's quite modest in scope compared to most rumors, even if it is a strategic leap for AstraZeneca.

AZ has teamed with Nomura Phase4 Ventures to create a new Swedish biotech, Albireo, around one clinical and an undisclosed number of preclinical GI assets from AZ. David Chiswell, a founder of Cambridge Antibody Technology and a man who knows his way around the European biotech scene, is the firm's executive chairman.

AZ is hanging onto a significant minority interest in the newco, which has raised $27 million out of a planned total $40 million Series A from Nomura, TVM Capital, and Scottish Widows Investment Partnership. AZ retains its GERD franchise (namely the blockbuster Nexium) and reflux R&D.

As we said at the time: AZ is simply too big to manage the internal research it’s got – let alone depend on the notion that it can afford big bets on areas unlikely to generate big advances in medical care. (For an in-depth discussion of GI R&D strategies, see this story in the November IN VIVO).

It isn't the first pharma to spin off its GI assets--Movetis took a handful of Johnson & Johnson projects when it spun out backed by €49 million from Sofinnova et al. back in early 2007. But this is the first such move in any therapeutic area from AZ--a taste of what's to come?

image from flickr user red5standingby used under a creative commons license

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Nektar Takes A Deep Breath

Deep breath in. Deep breath out. Nektar execs, have you found your quiet place, yet?

It's been a stressful few months for Nektar employees. The company's 13-year marriage with Pfizer soured last October when the pharma unexpectedly decided to stop selling its inhaled insulin Exubera. True, Pfizer did cough up a hefty divorce settlement--a $135 million forgive-me gift, plus a promise to help with insulin supply and on-going clinical trials. (For more on the future of inhaled insulin, see here.)

Yesterday came the news that Nektar is eliminating approximately 150 positions--110 existing jobs plus 40 unfilled openings--as it restructures the company to "transition form a drug delivery service provider to a therapuetics drug development organization." In addition, the company announced that Hoyoung Huh, the company's COO and head of its pegylation business unit, is leaving to become CEO of BiPar Sciences, an up-and-coming biotech developing oncology therapies.

We've said it before. (No doubt, we'll say it again.) It's a terrible time to be in drug delivery. Making money in this space has always been tough--it's not enough anymore to take an existing molecule and dress it up with a PEG molecule to extend its shelf-life or aerosolize it for delivery to the lungs. Payers and physicians want proof that a new formulation isn't just convenient, but that it's superior to existing available medicines. As David Steinberg, an analyst with Deutsche Bank, told START UP in December: "The old model of drug delivery is completely broken down. To be successful you have to think far more innovatively."

Thing is, it takes a lot of money--and risk--to engineer a delivery system robust enough to deliver a real therapeutic advantage. Look at the field's lone success story in recent years--XenoPort. The company's share price has increased more than six-fold since its 2005 IPO, thanks to the success of its gabapentin pro-drug, XP13512, for restless leg syndrome and neuropathic pain. Last February GlaxoSmithKline agreed to fork over $75 million in cash and another $500 million in development, regulatory, and sales milestones for the compound. (Just for the record, Xenoport raised approximately $270 million in equity capital and another $160 million from partners to get enough data to convince the pharma of XP13512's value.)

So, the big lesson from XenoPort's success? Delivery technology ain't enough. XenoPort was only able to sign this monster deal with GSK because XP13512 is a new chemical entity with hard-to-duplicate molecular advantages. (The nifty formulation technology is an added bonus to investors -- a key part of its discovery platform.)

Of course, there is a corollary to this lesson (This IS a Windhover publication.) To be successful in drug delivery today means spending research dollars on two fronts: not only do you have to spend money to engineer the delivery system, but you also have to spend money to discover and develop novel, first-in-class or best-in-class compounds. Which leads this IN VIVO blogger to wonder, why even bother with the delivery piece of the puzzle?

Seem's like Nektar's board and CEO, Howard Robin, have been asking the same question. As part of the company's restructuring, Robin noted in a press release that "We are transforming Nektar into a world-class drug development company."

My friends and colleagues know I'm a big believer in the "I think I can" strategy. But it's tough to see how Nektar's transformation will occur near term. True, the company's inhaled amikacin, which is being co-developed with Bayer AG, is expected to enter Phase III clinical trials later this year, and its two leading PEGylated small molecule programs, PEG-irinotecan and oral PEG-naloxol, just entered Phase II clinical trials. But will there be the leadership to push these two products through development now that Nektar's PEG champion and resident brainiac, Hoyoung Huh, is jumping ship to take the helm of BiPar Sciences?

Maybe "the decision to step down as COO was a difficult one," as Huh asserts in another press release issued today. After all, he hasn't severed ties with the company completely. He'll be serving on the company's Board of Directors until 2009 or until a replacement has been identified according to SEC documents. Or maybe, Huh, whose CV lists an MD, a PhD, and a stint as a McKinsey partner, saw the darkening skies and approaching stormy seas and left for the relatively calmer waters of private biotech.

February 27 should be an interesting day. That's when Nektar will release results for the fourth quarter and full year of 2007. Meantime, Nektar employees, remember: deep breath in; deep breath out.

Photo courtesy of Flickr user Transguyjay through a creative commons license.

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Sanofi Aventis: Sign of the Big Pharma Times?

Sanofi-Aventis’ 2007 results presentation on Tuesday provides a nice little snapshot of Big Pharma circa early 2008.

The company reported rather paltry sales growth (you can see all the numbers here), but boasted about its cost- and head-count cuts and its shareholder-sweetening dividend payouts (how else do you keep your investors, with top drugs going off patent and new ones not coming through fast enough?).

It also provided pointlessly hypothetical? useful? information such as what pharmaceutical sales growth in 2007 would have looked like (up 6.4%) excluding the impact of generic Ambien IR in the US, and Eloxatine in Europe (as if to day, “it’s not our fault; we weren’t expecting it.”).

More significantly, perhaps, Sanofi provided numbers to back up the growing importance of vaccines to the group’s current and future growth. Rarely before have so many of Big Pharma's slides been devoted to this once-unfashionable category. Vaccines sales were up 14.5% in 2007—over double even the buffed-up pharmaceutical growth figure--and now account for 10% of group revenues, the largest among any of the Big Five. (And these numbers aren’t thanks to the cutting-edge cancer vaccine Gardasil, marketed in Europe by the Merck/Sanofi JV SPMSD, since Sanofi doesn’t consolidate SPMSD’s sales. They’re driven by more pedestrian things: seasonal flu, pneumonia, travel vaccines…)

So, we’re reminded, vaccines are no longer a backwater, they’re a “strategic pole.” At Sanofi, they’re the only segment where headcount’s going up, not down, and they saw by far the largest growth in R&D spend at the French group in 2007 (and are unlikely to be the target of this year’s R&D budget freeze).

Elsewhere, entire slides were devoted to developing markets China and Brazil—another sign of the times. In China, sales were up 36% (including vaccines), and the company has certainly joined most other Big Pharma in its China investments, whose value we discuss in the February issue of START UP. Who used to care about Brazil? Never mind; the market will be worth over €11 billion in 2011 and Sanofi claims to be the number one international company there.

More telling perhaps is Sanofi’s highlighted new franchise in Brazil: Generics. Copycat drugs are no longer the domain of generics groups; Big Pharma is playing in this field too, even though to do so often blatantly contradicts all the talk of innovation and R&D investments. (It’s also playing in the large-molecule equivalent of generics, as you'll read in February's IN VIVO.) Indeed, authorized generics and price-adjustments in response to generics was the first example that EVP Pharmaceutical Operations Hanspeter Spek provided to illustrate how Sanofi is “anticipating and adapting to the increasingly complex pharma landscape.”

As for where Sanofi’s focusing its innovator efforts: Diabetes. Move over metabolic syndrome, then—since fat-buster Zimulti’s high-profile flop at the US regulators, the French group, it seems, is sticking to diseases that it can define. But since Sanofi doesn’t have an innovative new diabetes drug to highlight just yet, it stuck with an old favourite: insulin. Sales of long-acting Lantus, launched in the US in 2001, surpassed €2 billion in 2007 (and Sanofi is surely still gloating over its decision to sell its share of blighted Exubera for a cool $1.3 billion).

And to our last sign of the times message: Sanofi talked as much about life-cycle management for Lantus (earlier insulin usage and various combinations), manufacturing improvements and emerging market opportunities as it did about exciting new compounds. Still, waiting in the wings are a GLP-1 agonist (entering Phase III; not the first), an SGLT-2 inhibitor (still in Phase II), and, you guessed it….rimonabant.

We've seen that last one before, haven't we? The drug that’s still looking for its disease.

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The Blockbuster Model is Dead, Sort Of

The numbers are in, and it’s not a pretty picture.

No, we’re not talking about today’s Potomac presidential primary. We’re referring to the latest IMS Health figures on the state of the pharmaceutical industry, and as Diana Conmy, corporate director of market insights put it, they are “sobering and possibly a little alarming.” Conmy was kind enough to preview the 2007 numbers for the Health Industry Group Purchasing Organization’s National Pharmacy Forum; the official data won’t be released for a couple more weeks.

Unfortunately for industry, Conmy’s numbers don’t leave much to cheer about. The US market growth for pharmaceuticals and biotech products slowed to 3.8% in 2007—the worst growth rate since 1961.

Part of that is a result of tough comparisons against the big pay-off pharma received from Medicare Part D in 2006. But a lot is simply due to a general market slowdown for the drug industry. While some of the latter months of 2006 saw market growth approaching 12%, by December 2007, month-over-month growth was in the negative range, Conmy reported.

And if you’re thinking the next big launch will turn around that trajectory, think again. New chemical entities aren’t contributing as much to market growth as they have in the past. In fact, if you look at the average launch curves for the top 10 new chemical entities over the past several years, 2007 had the weakest results since 2003. “Fewer of these NCEs are top-performing, contributing much less to growth,” Conmy said.

So what does this mean for the blockbuster model? Well, as Conmy put it—and Windhover publisher Roger Longman keeps driving into our heads—“the blockbuster model isn’t dead, but perhaps the primary care-driven market is.”

And it sure seems that way: 2007 marked the first time that industry saw a decline in the number of primary care blockbusters (29 in 2007 versus 33 in 2006), IMS data show. At the same time, there was an increase in specialty care blockbusters (30 in 2007 versus 25 in 2006).

That’s evidenced by the fact that the primary care market declined over the last seven months of 2007, contributing a negative 18% to overall market growth for the year, while specialty care contributed a positive 118%. The growth rates per therapeutic area tell the same story: specialty care grew 10.5%, while “branded products” grew 2.9%--a rate almost a full percentage point below the total market.

In fact, of the four launches for 2008 that Conmy believes have blockbuster potential, three are specialty products: UCB’s certolizumab (Cimzia) for Crohn’s disease, Bristol-Myers Squibb’s ipilimumab for melanoma and Wyeth’s desvenlafaxine (Pristiq) for depression. (The fourth potential blockbuster on Conmy’s list is MedImmune’s respiratory syncytial virus antibody Numax.)

So is there any good news in all these doom and gloom? Luckily for pharma, there are lessons to be learned. Here’s the bottom line: specialty care is increasingly where pharma needs to be. And given the generally slower uptake of specialty care products, executives may have to adjust their expectations when it comes to launch curves.

That kind of “slow and low” attitude has another benefit in today’s increasingly risk-averse environment. “You might hear manufacturers say that ‘our strategy is more lower octane, so we can have a more controlled environment, we can make sure it’s safe, and we don’t have any major incidents,’” Conmy says.

That’s quite a departure from the “fast and furious” model of the DTC-infused primary care market. My, how far we’ve come.

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Starring Role for Follow-On Biologics

You have to hand it to the players in the follow-on biologics debate: they are pulling out all the stops. Just when you thought you thought you had seen everything, it shows up on YouTube.

The Richmond, Va.-based biotech company Insmed Inc. posted a video (below) on YouTube starring Mike Coleman, an Insmed scientist who exhorts the values of follow-on proteins, and encourages others to post their thoughts on the issue as well. The video, "Follow-On Biologics--Tell your Story," has been viewed about 1,000 since Insmed posted it on February 8.

Insmed already markets the insulin-like growth factor mecasermin (IPLEX), and wants to position itself as the first US marketer of follow-on biologics--when and if Congress gives the Food & Drug Administration the green light to establish a regulatory pathway.

The issue died down after Congress failed to attach a measure to the FDA Amendments Act last year, but was back in media reports last week after President Bush mentioned follow-on biologics in his FY 2009 budget request.

That annoucement had its own YouTube-like quality when Jim Dyer, the agency's operations chief, had to correct statements that FDA would be forwarding legislation to Congress on a regulatory pathway this year. Instead, the agency will continue helping Congress develop a bill--and the budget request is only intended to express the Administration's eagerness to see the legislation enacted this year.

We're not sure how many congressmen watch YouTube, but their staffers are sure to be clued in. Will the Internet ad be just a fun cocktail party story? Or will it prod Congress back into action? Check back to find out.

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While You Were Settling

Well, it was an interesting weekend: the writers' strike may have been settled, Obama swept (and won a Grammy), and there was an unusual amount of blood spilled around the NHL (Lets Go Flyers!). But what happened in your world?

• First up: AstraZeneca is considering sale of some GI research projects, according to a Swedish newspaper (via Reuters). Perhaps Dagens Industri reads IN VIVO: we reported this news back in November!


• The NYT reviews the options for those of you who want to do a little personal genome spelunking. In other consumer genomics news, deCODE announced on Sunday the launch of a genomic test to identify individuals with a higher risk of prostate cancer.
  
• Newron announced early Monday that it was buying the private CNS-focused biotech Hunter-Fleming, for €8 million in stock plus a potential €17 million in earnouts (also in shares).


• “Generally I am very brave…only today I happen to have a headache.”
  
• Sorry, but we have to be firm on this one: Atonement should not have won best film at the BAFTAs last night (we loved the book, but...). And riddle us this: how does it lose in the 'best British film' category yet win 'best film'?

photo by Flickr user Here in Van Nuys used under a Creative Commons license

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Reputation Counts

Merck has fallen a long way from the days when its CEOs adorned the front cover of Time magazine as respected business leaders (George Merck in the 1950’s) and icons of cutting edge scientific research like the (Roy Vagelos in the 1980s and 1990s).

The image of Merck as the “moral corporation,” the respected leader in innovative pharmaceuticals and research, has suffered blow after blow in the past four years. The most recent hit is a non-admission settlement with the Justice Department and state authorities of charges that the company abused the Medicaid best price rebates and marketing practices. "Non-admission" meaning, "We'll pay the fines, agree to give the government extensive future rights to oversee pricing documents and marketing practices--but we will not admit wrong-doing."

The accumulating financial costs of the bad news events keeps rising: the loss of the $2.5 billion Vioxx franchise; a $4.85 billion agreement to settle liability claims from that product; an 8% drop in total prescriptions in the Vytorin/Zetia group due to the failed ENHANCE trial; and now $670 million in payments to the feds and states to settle the Medicaid case.

But the real cost may be in the future, when Merck takes this new public image with it into efforts to get approval for drugs like the weight loss product, taranabant.

Merck has made some smart hires along the way to prepare for a careful review of the cannabinoid compound including a former senior officials from the FDA review group that will look at taranabant, Robert Meyer, (see here) and the former top FDA drug safety manager, Peter Honig. Their experience should help inform Merck’s handling of the application for the obesity drug and provide solid, knowledgeable advice on ways to assure FDA that the company knows how to address the psychiatric side effects that derailed Sanofi-Aventis’ Zimulti (rimonabant) application.

One of the likely prerequisites for getting an anti-obesity product through FDA, however, is for the sponsor to convince the agency that it will control use of the product carefully and find a patient population for whom the benefits clearly outweigh the risks.

Here is where Merck’s new reputation of pushing in every way it can to extend the market for its products will work against it.

When Merck commanded a high-road image, the company treated its reputation as a corporate asset, a strength that it could use for ambitious but trusted efforts to open new drug categories. The company may have given up some of that strength.

Merck used to have PR people assigned to watch and protect its long-term reputation, paying attention to more than the short-term news cycle and the liability wars. One of those execs, John Doorley, currently the director of NYU’s masters program in public relations, literally wrote the book on “Reputation Management”.

Maybe Merck needs to get a new copy of the book and pay some more attention to rebuilding the trust of the public and regulators before heading into promising but perilous new drug categories.

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Friday Night Lowlights: Don't Leave Town Early

The Food & Drug Administration has apparently decided that "early communications" are best delivered late in the week.

Today its Botox.

Last week was Chantix.

Two weeks ago, it was Vytorin and ENHANCE.

Keep your Friday afternoons open.

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FDA-CMS Parallel Reviews: A Mixed Bag

Parallel reviews by the Food & Drug Administration and the Centers for Medicare & Medicaid Services may be just around the corner.

According to a research note put out by Stanford Group’s David Blaszczak, Greg Frykman and Jan Wald earlier this week, the agencies are close to issuing a Federal Register notice that will solicit comments on a voluntary program that would allow a manufacturer to receive an approval from FDA and a national coverage decision from CMS at approximately the same time.

The idea for a parallel review process was first proposed after Mark McClellan left his post as commissioner of FDA to become administrator of CMS in 2004. Given his experience at the heads of both agencies, it seemed natural that McClellan would be interested in a closer relationship between FDA and CMS, but plans for a demonstration project were eventually scrapped.

Questions about whether the agencies were starting to work more closely together resurfaced during the erythropoietin safety debate. Rather than wait for FDA to conclude its safety review of EPO, CMS conducted a simultaneous assessment and issued a national coverage decision before FDA had reached a final conclusion on restricted labeling. We have covered that story extensively in The RPM Report; subscribers can click here and here to read all about it.

So what would parallel reviews mean for industry? The majority of manufacturers certainly won’t be pleased about the potential for FDA and CMS to work more closely together: the Stanford team notes that drug and biologic sponsors are likely to complain about a more extensive FDA review process, which could slow down drug approvals. Confidentiality is also likely to be a top complaint.

But industry’s queasiness also stems from a fear that parallel reviews could blur the line between two agencies with two very different missions: FDA’s review of safety and efficacy, and CMS’ determination of whether coverage is “reasonable and necessary.” Inevitably, the conversation turns to whether cost would start to become a factor in either decision—the same reason that most of industry remains uneasy about a national center on comparative effectiveness.

Since the proposed process would be voluntary, it’s likely most manufacturers won’t take advantage of it. But Stanford believes that “forward-thinking” companies should consider it, under the following circumstances:

• they have a potentially successful product anticipated for, or in registrational development,
• that is likely to cause a paradigm shift in the management of one or more serious and life-threatening diseases and;
• for which premium pricing is under internal consideration.

If nothing else, the proposal should serve as a reminder that sponsors should avoid waiting until after FDA approval to open coverage discussions with CMS. On the contrary, that exchange needs to take place early and often.

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Deals of the Week: Winter of Our Discontent

Seems like many folks in pharma land are channeling Richard the Third this week. (Alas, there is no son of York to make winter's discontent glorious summer.)

Certainly staffers at both AstraZeneca and Sanofi-Aventis are less than happy: both companies announced more job cuts this week. (AZ will lay-off some 300 R&D employees from its Alderly Park site while Sanofi plans to reduce its German sales staff by 380.) And, pity the poor VCs. The Star Ledger is reporting that VCs are accepting smaller returns on smaller deals and waiting longer to cash-out as a result of the global credit crunch and the flagging IPO market.

Finally, remember Trimeris? Back in December that company put its R&D activities on hold to review its strategic options. But management isn't moving fast enough for the company's largest shareholder, HealthCor. On Feb. 1, HealthCor officials wrote a letter to Trimeris executives asking for two board seats, stating: "We are not in favor of strategic transactions other than those involving a sale of the business." (Hmm. Maybe the HealthCor folks are actually channeling Carl Icahn...)

If you, too, are suffering the winter blues, fear not. The IN VIVO Blog has a cure. (WARNING: Side-effects may include motivational deficiency disorder, sudden on-set of snarkiness syndrome (SOSS), maniacal laughter, and IN VIVO Blog addiction. Hey, there are worse things...) You guessed it. It's that time again.

• Dynogen/Apex Bioventures Acquisition Corp.: On Wednesday, Dynogen and Apex Bioventures announced they have signed a definitive agreement that will allow Dynogen to become public through a merger with one of Apex Bioventure's subsidiaries. (In case you don't know, Apex Bioventures is a special purpose acquisition company--or SPAC--that raises money for the sole purpose of buying another entity. The key thing is the SPAC can't say whom its acquiring--or even considering acquiring--before it raises the money. SPACs have enjoyed a resurgence in popularity in the life sciences in recent years as an alternative to the IPO market or a reverse merger.) The move gives Dynogen plenty of cash--the press release says the company should have up to $65 million at the deal's closing. Dynogen will certainly need it. It's currently developing two Phase II-stage drugs for gastrointestinal disorders, including irritable bowel syndrome. And given pharma's own R&D heartburn in the space, Dynogen may need the additional data before a partner with deep-pockets will assume some of the development risk. In the past, SPACs have favored companies with a shorter runway to commercialization like Alsius and Precision Therapeutics so this combination will be interesting to watch.
  
• Amgen/Takeda: Hit by declining sales of its EPO franchise and growing competition, Amgen announced a monster two-part deal with Takeda this week. In Part I, Takeda gets Japanese rights to 12 of Amgen's pipeline assets in exchange for $200 million up-front, up to $340 million in development costs, and potentially $363 million in sales-linked milestones and royalties. The Japanese firm will also buy Amgen’s Japanese subsidiary for an undisclosed sum. In Part II, Takeda takes on worldwide rights to Phase III motesanib, a small molecule angiogenesis inhibitor for cancer, for another $100 million up-front and $175 million in additional success-based milestones. The deal embodies two major trends we’ve talked about: the need to cut unnecessary infrastructure and the importance of risk-sharing in the vein of Bristol-Myers Squibb's deals with AstraZeneca and Pfizer. (For a more in-depth look at the deal, see here and here.)
  
• GE Healthcare/ Whatman: On Monday, GE Healthcare announced it was buying Whatman, a global supplier of filtration products and technologies for approximately $713 million. That's a lot of money for a research tools business, even if Whatman posted 2007 revenues of more than $225 million. Still it's a far cry from the $8 billion GE planned to plunk down for Abbott's point-of-care and diagnostics businesses, a deal that was eventually scuppered. It's likely GE has realized it must resort to a serial acquisition strategy if it's to challenge Siemens for the title of global leader in IVD. And Whatman's filtration and sample prep technologies could play a key role in building better protein and DNA-based tests, an area in which GE is interested in bulking up. Meanwhile, we continue to ponder the fundamental connections between tool and test companies, something we wrote about here.
  
• GlaxoSmithKline/ Amira: Also on Monday, GSK and Amira teamed up to develop Amira's 5-lipoxygenase activating protein (FLAP) inhibitors in a deal that could be worth up to $425 million for the biotech. (But only if it meets all potential development and regulatory milestones. Makes you wonder what the up-front payment was, doesn't it?) Most of the flap...sorry, we couldn't resist...is about Amira's lead product, AM103, a once-daily, non-steroidal asthma treatment that just completed Phase I trials in November. This isn't the first monster deal Amira has inked. Back in 2006 it signed a deal with Roche worth up to $287 million to develop three anti-inflammatory candidates.

"West," by Flickr user Dreamer7112, used under a creative commons license.

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Beijing Boost for Japanese Encephalitis Vaccine

China has been preparing feverishly for the Beijing Olympics for years to showcase its new world position and economic power.


China's cool new National Swim Center

At the same time, there’s an interesting product development race in the vaccine field that relates directly to the safety of increased travel to Asia from the West. After a long ten-year effort, the race to develop a new Japanese encephalitis virus vaccine is into its final stretch.

Vienna, Austria-based Intercell AG has a BLA (biologics) application pending at FDA for a new inactivated JEV vaccine. Intercell filed its application with FDA at the end of December,
within weeks after filing for a similar marketing authorization application in Europe.

The vaccine, developed over a decade in conjunction with the Walter Reed Army Institute of Research, will be marketed and distributed for Intercell in the US by Novartis. Intercell will manufacture the tissue culture based product in Scotland. The vaccine (IC51) is the Intercell’s leading product candidate.

A preliminary discussion of the vaccine will take place at the Centers for Disease Control and Prevention’s Advisory Committee on Immunization Practices (ACIP) meeting on Feb. 27-28.

The chairman of the ACIP committee, Dale Morse, MD, Director of the Office of Science and Public Health at the New York State Department of Health, said that the discussion of the JEV vaccine will be one of the interesting topics for the upcoming meeting. Morse told the Feb. 6 meeting of the National Vaccine Advisory Committee that “the current vaccine is in limited supply” and “there may be increased demand around the Olympics for that vaccine.” The US Army has noted the shortage of the current vaccine from Biken due to a halt in production.

Intercell acknowledges that it would take an unusually rapid review of the product by the FDA to have it available for the Olympics in late summer. A spokesperson for Intercell, Lucia Malfent, says: “We do expect licensure for our product in 2008 but most likely the full process of market authorization will not be completed before the Olympics. Therefore, the vaccine will not be available in time for travelers to the summer Olympics in Beijing.” JE vaccinations are not routinely recommended for travelers to Chinese urban areas; the mosquito borne disease is more prevlaent in rural areas.

Intercell IC51 is not on the agenda for FDA’s next Vaccines and Related Biological Products Advisory Committee Meeting (Feb. 20-21). There is one tentative date for VRBPAC in late may before the summer Olympics. The product review for the February VRBPAC meeting is GlaxoSmithKline’s Rotarix (rotavirus vaccine).

Acambis is also working on a JE vaccine, ChimeriVax-JE. The company reported results from Phase III safety and efficacy trials in the first quarter of 2007. Acambis has not reported filing an application for marketing yet.

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Carl Icahn vs. Evil Corporate Governance

Don’t get us wrong. We think corporate governance, as a general, rule, stinks. We never understood how Pfizer could have gotten itself into the position of paying Hank McKinnell $180 million in retirement benefits – the man who presided over the deletion of tens of billions in the company’s market value.

Or, in an act of proportionately greater idiocy, how the board of Cell Therapeutics, that reliably subpar performer, could in 2006 pay its CEO James Bianco some $1.1 million in cash (and a ton of underperforming stock) along with, among other perks, $220,000 in the use of chartered aircraft.

Chancellor, Sith School of Corporate Governance

The charters must have been some compensation for the loss of Air Cell Therapeutics (the corporate jet) – which the board, in a short-lived fit of financial responsibility – sold at the end of 2005.

So philosophically we’re on board with Carl Icahn’s idea of taking lax corporate governance to task in his new blog (http://icahnreport.com/), still post-less as of this morning. "I may do something to finally focus on more than making money," Icahn told Dow Jones.

We’re sure Carl gives generously to all sorts of charitable organizations (there are, after all, the Carl C. Icahn Foundation and The Icahn Charitable Foundation). But forgive us for a certain skepticism re. icahnreport. Oh, we’re sure those widows and orphans will benefit as board members get religion and really start corporately governing. And we’re also sure that when they do, our economy will just pull itself up by its bootstraps instead of whining for more bailouts.

But we also figure that the more Carl can whip up support for board-bashing, the more likely he’ll be to get additional board seats at Biogen Idec. Then, with that malign group finally paying attention to the shareholders, they'll finally force the deal to allow Carl to off-load his Biogen shares.

He bought them, remember, figuring that Big Pharmas had such poor corporate governance that they'd be begging like dogs at the Thanksgiving table to overpay for an acquisition. (For our take on that ongoing affair, see here and here).

They didn’t? Hmm. Maybe there is some real corporate governance out there after all.

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FDA’s Search for a Drug Chief Not Going Well: An Internal Candidate Emerges

We know all of you have been passing the time following the Presidential Primaries when the race you’re really interested in is who the next head of FDA’s drug center will be, right? Right.

A number of agency watchers and former officials agree that the longer the search goes on, the more likely FDA will be forced to look inside for a replacement. We talked to one former high-ranking FDA official with some knowledge of the search and here are some of the things we found out.

First, FDA Commissioner Andrew von Eschenbach is “concerned” that the recruitment for a director of the agency’s Center for Drug Evaluation & Research is taking so long and “not looking fruitful.” FDA chief medical officer Janet Woodcock is temporarily overseeing the center’s day-to-day operations until a permanent replacement is named. The absence of a CDER director has been magnified by the vacant director position at the Center for Food Safety and Applied Nutrition.

“He didn’t want the two largest centers without permanent leaders for a long time,” the former official says.

That’s why von Eschenbach made filling the CFSAN vacancy a priority. On January 4, FDA announced Center for Veterinary Medicine director Steven Sundloff would take over the food center.

There’s been some serious difficulty getting a large number of qualified external candidates, the ex-FDAer maintains, since the October 2007 departure of former CDER director Steve Galson due to his appointment as acting US Surgeon General. That’s understandable, according to the individual: “Who’d want a job when you won't know who your boss will be a few months out, where public perception is on the down slope, there’s little likelihood of getting substantial new appropriations, and you won't even be allowed to say you need more resources.”

That’s a convincing argument against wanting the job, wouldn’t you agree? When the search began in October 2007, an outsider taking over the drug center appeared to be a slam dunk. But now, as the French would say, c’est pas tout a fait evident. (Note: Washington Redskins fans are a little more cultured than the Eagles fans who occasionally write for this blog. We speak multiple languages, go to art museums, climb mountains…oh and we win Super Bowls.)

It appears that a serious internal candidate has, in fact, emerged.

We don’t know who it is, but we can speculate can’t we? Sure we can.

1) Center for Biologics Evaluation & Research Director Jesse Goodman:

As we noted in our earlier CDER search story, Goodman was the only FDA insider garnering serious consideration for the job at the outset. Goodman, a virologist, was named CBER director at the end of 2002, replacing Kathy Zoon, who moved to the National Cancer Institute.

The CBER head came to FDA in 1998, originally in the Office of the Commissioner directing the US Interagency Task Force on Antimicrobial Resistance. He later moved to CBER, where he worked on bioterrorism preparedness and blood and vaccine safety, eventually becoming deputy director before taking over for Zoon.

Most importantly for Goodman’s chances, he’s shown that he can run a large center within the agency’s organizational structure that operates in a similar fashion to CDER.

Odds: 3 to 1

2) CDER Deputy Director Douglas Throckmorton:

Time and time again, when the CDER search is brought up to FDA observers and former agency officials, I hear: “Why not Throckmorton?” Well, why not? Throckmorton would appear to be the obvious choice considering he has been the center’s number two for the last two and a half years. He served in an acting capacity for a year prior to that.

Before his promotion to deputy director, Throckmorton headed up the cardio-renal drugs division—a very high profile review group within FDA.

He also serves as chair of FDA’s Drug Safety Oversight Board, CDER’s liaison to the agency’s human subjects’ research review board, and chair of the center’s research coordinating committee.

Throckmorton has been involved in some interesting FDA meetings as of late. On January 9, “acting for” Woodcock, Throckmorton made a presentation to students and faculty at Duke University’s Fuqua School of Business along with Office of Medical Policy director Robert Temple. We know, we know, not the strongest evidence that he’s next, but still.

On January 17, the CDER deputy was involved in a senior CDER management meeting with PhRMA board representatives, including soon-to-be-retired Eli Lilly CEO Sidney Taurel, Lilly VP-global regulatory affairs, and PhRMA deputy VP for scientific and regulatory affairs Alan Goldhammer.

Meetings aside, Throckmorton has been viewed as somewhat of a rising star at FDA. He joined the cardio-renal drugs group in 1997 as a medical reviewer. Three years later, he was named deputy director of the division, and director two years after that.

So what’s the problem? One theory is that Throckmorton is too young. That seems a bit dubious considering all of his current responsibilities and fast rise up the career ladder. But if FDA were going to name Throckmorton as Galson’s replacement, they would have done it by now. After all, they passed on giving him the “acting” title altogether in favor of Woodcock, who previously ran the drug center.

Despite initially getting passed over, I still think he’s a very strong candidate and running right behind Goodman.

Odds: 5 to 1

3) Office of New Drugs Director John Jenkins:

Okay, we admit we are a bit in the tank for Jenkins. He recently took the time to speak at length with The RPM Report about the state of new drug approvals (aka the drug approval drought), drug safety, and the new drug reform regulations under the FDA Amendments Act. You can read it here if you haven’t already.

Before the interview, we thought Jenkins was a smart thinker and effective spokesman on regulatory issues. We are more convinced than ever afterwards.

Jenkins’ position alone as FDA’s top drug reviewer is enough for him to warrant consideration. He oversees 17 drug divisions and a number of important office-level groups within CDER. To see them all, click here.

You could argue that Jenkins’ ability to keep drug review times in check—actually reducing priority and standard review times in 2006—while reviewers are spread increasingly thin under a climate of poor morale makes him the most prepared to take over the drug center.

Case in point, FDA/Sponsor meetings have more than doubled over the last five years and Jenkins has calculated in the past that drug reviewers have nine industry meetings every working day of the year. In addition, new drug applications have increased in the 10% range while FDA’s budget has remained flat.

Publicly, Jenkins has been even more impressive. During a June House Oversight & Government Reform Committee hearing looking into the handling of heart risks linked to Avandia, Jenkins performed admirably before a host of Congressional lawmakers looking for blood.

He was equally impressive during a media briefing on January 25 to discuss how FDA planned on handling data from Schering-Plough/Merck’s ENHANCE study on the statin Vytorin. Click here to read our take on FDA’s response to questions about the Zocor/Zetia combination.

Jenkins is also an FDA veteran with 16 years under his belt, six as the head of the Office of New Drugs, and considered to be one of Woodcock’s “people.” One thing that could preclude him from getting the job is that the whole Vioxx debacle occurred while he was in charge of OND. But if that’s the case, none of the internal candidates listed here stand a chance of getting the CDER job.

Odds: 7 to 1

4) Office of Medical Policy Deputy Director Rachel Behrman:

Ah, the Dark Horse. There’s always a dark horse candidate. When you flip through the obvious internal candidates, Behrman doesn’t come to mind. However, one former FDA official says Behrman could be the most serious internal candidate.

Behrman was picked by Woodcock to head the Office of Critical Path Initiatives in the Commissioner's Office--an important priority for the agency in general and Woodcock in particular. That is in addition to her role as second-in-command to the dean of drug development Robert Temple in the medical policy office. And in her spare time, Behrman also serves as Director of the Cross-Centers Initiatives Task Force. That’s just the kind of collaborative position FDA Commissioner Andrew von Eschenbach has tried to promote within the agency.

Behrman joined FDA in 1989 and has some experience in the spotlight that the CDER director operates under. For instance, she testified before the Senate Special Committee on Aging regarding in 2005 regarding the impact of direct-to-consumer advertising on seniors. The full testimony is right here. The fact that the Division for Drug Marketing and Communication reports into the Office of Medical Policy probably serves as an advantage as DTC continues to remain a public and political focus.

Behrman’s obvious drawback as a candidate is that she has less direct experience with product reviews than the other candidates. Of course, if FDA's first choice would be an outsider, that drawback could actually be a selling point to the search committee.

Odds: 15 to 1

Place your bets.

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The Wacky World of Generics: Fosamax Edition

Today, Merck bids a fond farewell to its Fosamax franchise, as the first generic versions enter the market.

Three generic firms are entering the market: Barr and Teva with approved ANDAs, and Watson with an "authorized" generic supplied by Merck. Next up will be generic versions of the Fosamax D formulation (expected in April) and then numerous additional generics in August when the 180-day generic exclusivity period awarded to Barr and Teva expires.

Authorized generic launches are hardly surprising anymore, as brand firms are committed to maximizing the value of their brands through the patent expiry period. What is surprising is the unusual lengths Merck went to to give Fosamax a send-off in style.

The company ran a promotional campaign in the final months before patent expiration highlighting the upcoming Fosamax generic launches, and even created a website called GoingGeneric.com to promote Fosamax. Merck drove traffic to the site via links on its main Fosamax website as well as through a "multi-channel physician campaign" that included direct mail and journal ads.

We would love to show you the site, which featured a neat animated video of a Fosamax patient on the beach, but Merck has taken it down. The site "served its purpose," a spokesman says. Here is Google's cached version of the page, which has no graphics but at least shows the basic messages Merck was pushing.

The overall theme: Fosamax allows patients to "Save Now and Save Later." In other words, starting new patients on Fosamax rather than a competitor like Boniva or Actonel meant lower copays right away (since most managed care plans had Fosamax on tier 2) and then even lower copays now that generics are available.

In other words, Merck did everything in its power to build a bigger market for the generics that launched today.

What's going on here? Does anyone else remember the good old days when Big Pharma companies would simply shift resources away from brands in their final quarters of exclusivity, jack up the price, and concentrate on new products?

Well, those days are obviously over. "Maximizing the value of the brand" (or, perhaps, milking every drop from a cash cow) is critical business for big pharma at a time when new product launches have slowed to a trickle and cost cutting is the order of the day. At a time when hitting profit targets is a quarter to quarter war of attrition, every penny counts.

That is why Merck not only ran the campaign, but also highlighted it to investors during its December 4 analysts day. "We are prepared for a number of different potential scenarios to insure that we maximize the value of the Fosamax franchise," CFO Peter Kellogg said, and then discussed GoingGeneric.com as an example.

Merck says it expects Fosamax revenues in the range of $1.1 billion to $1.4 billion worldwide in 2008 (down from $3 billion in 2007). That's a big drop no matter what, but the difference between the high and low ends of the range is $300 million. You can bet Merck would love to have that in revenues rather than make it up in job cuts or other efficiency initiatives.

So, if the going generic campaign helped drive higher brand sales in the first six weeks of the year (and then higher sales of the authorized generic during the spring and summer) it would be a big deal for Merck.

Did it work? Its hard to say. Fosamax revenues increased 1% in the fourth quarter to $522 million. That is not exactly spectacular growth, but it reversed a downward trend in sales throughout the year, and helped Merck hit its goal of $3 billion in global revenue for the brand in 2007.

During Merck's fourth quarter call in January, Kellogg credited Fosamax's strong showing to its favorable formulary position in anticipation of generic entry, but did not specifically comment on whether the Going Generic campaign made a difference. And a Merck spokesman declined to provide any additional details about the performance of the campaign, saying the company didn't want to share any lessons learned with the competition.

Whether or not the campaign itself worked, the idea is here to stay. In today's world, Big Pharma has not choice but to drive sales growth of all its brands through every means possible--even if it means building up the market for its generic competitors.

That may be a sign of desperation for Merck, but it is a nice treat for Barr and Teva who unequivocally benefit from anything Merck did to increase the size of the Fosamax market over the past few months.

Our only question: when will Teva and Barr be launching GoneGeneric.com?

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FDA’s Budget: “Maintain Momentum” or “Inadequate Resources”?

Welcome to the battle of the budget numbers.

To hear it from the Bush Administration, the president’s fiscal 2009 budget request for FDA is quite generous. The $2.4 billion request is a 5.7% increase over the previous year—a nice little boost in an otherwise tight budget environment. And it really looks good when you compare it to the 3% budget reduction the president is recommending for the Department of Health & Human Services overall.

As FDA chief operating officer Jim Dyer put it yesterday, the president’s budget request will “maintain momentum” over 2008 funding levels, allowing FDA to “target the critical areas that have been identified by the Commissioner and the Secretary.” The increase, he said, “gives us a real good start and lays the groundwork of where we need to go.”

Others would dispute that analysis. The Alliance for a Stronger FDA, which has been advocating for greater funding for the agency, notes that the Administration’s budget is an increase of just 2.9% in appropriated funding (from $1.72 billion to $1.77 billion). The balance comes from user fees paid to FDA by industry, which would increase 14.4%.

“FDA is in critical need of significant new resources,” William Hubbard, a former deputy commissioner and Alliance member said. “The amount in the Administration’s proposed budget is not only inadequate, it is barely half of what FDA needs just to keep pace with inflation.” What FDA really needs, the Alliance says, is an additional $380 million in appropriations, or seven times the Administration’s request.

The battle over funding for FDA was previewed during a House Oversight & Investigations subcommittee hearing last week. The topic was an FDA Science Board report that found the agency to be so deficient in its scientific and technological capacities that it is unable to meet its regulatory responsibilities. You can find our earlier post on that here.

And money is the biggest obstacle: while FDA has received generous raises in user fees over the years for activities like new drug reviews, other areas—like drug safety, information technology and guidance development—have largely been funded by appropriated dollars, which haven’t kept up with inflation.

Last week’s House hearing demonstrated the conundrum FDA faces. Congress loves to beat up on FDA for not asking for more money, but then doesn’t actually give the agency any more money to do its job. It’s a vicious cycle: the agency can’t do its job without more money, and it can’t get more money because it’s not doing its job. Once the dust clears, that’s an awful lot of time and money spent on getting nowhere.

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White House Tries to Jump-Start Follow-On Biologics

The Bush Administration seems to think it’s time for FDA and Congress to get back to work on developing a follow-on biologics approval pathway.

The president’s $2.4 billion fiscal year 2009 budget request for FDA lays out an agenda for an abbreviated approval process on follow-on, or “generic,” biologics. “The budget proposes a new authority for FDA to approve follow-on protein products through a new regulatory pathway that protects patient safety, promotes innovation, and includes a financing structure to cover the costs of this activity through user fees,” the request says.

During a conference call, FDA deputy commissioner for operations Jim Dyer said the agency would work with Congress to submit legislation authorizing an abbreviated pathway for follow-on biologics. That’s not really news; the agency has been in discussions with Capitol Hill and industry stakeholders for some time, and has testified in congressional hearings that it has the scientific expertise to support an approval process.

Legislation authorizing a follow-on biologics pathway came close to being attached to the drug safety/user fee bill last year, but was pulled at the 11th hour. For more coverage on the bipartisan negotiations—and what the final deal looked like—click here and here. Subscribers to The RPM Report can read the content for free, or you can sign up for a 30-day free trial.

Practically speaking, the mention of follow-on biologics in the budget request won’t result in much. Finalizing something as controversial as an abbreviated approval process for follow-on biologics during an election year is more than a little optimistic; any real work probably won’t get underway until there is a new president in the White House in 2009.

But the budget request does set the president’s agenda for FDA for the next fiscal year, and lays out what the White House hopes to see the agency accomplish. At the very least, the mention of follow-on biologic user fees will trigger a score from the Congressional Budget Office, which, should it demonstrate savings to the health care system, would be handy during the next round of negotiations.

The request also includes a call to revive user fees for pre-reviews of direct-to-consumer advertising television commercials. A program was enacted as part of the FDA Amendments Act, but Congress killed it off by refusing to fund it in the omnibus appropriations bill. (For more analysis of that story, click here.)

So the Administration, at least, hasn’t given up on that program. Of course, we already knew FDA and industry were eager to make it work—it is Congress that has been of two minds on the DTC program—enacting it in September and killing it in December.

So don’t get too excited about follow-on biologics or DTC user fees. The President’s budget keeps hope alive for action on each this year. But it doesn’t change the basic truth that both issues depend primarily on the priorities of a Democratic Congress in an election year—not the final budget from the outgoing Administration.

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Why Big Pharma Should Vote Democratic

This Super Tuesday, pharmaceutical CEOs should ask themselves one question before they decide which way they will vote in 2008 if they are indeed single-issue voters:

Are you in favor of an expansion of the government subsidy to almost 50 million Americans to buy your products or would you prefer a drastic curtailing of the government subsidy under the popular Medicare Part D drug benefit?

If you’re in favor of the former, you should punch the Democratic ticket in November. If the latter is your desired outcome, then hop on the McCain Straight Talk Express.

The prospect of a Democratic administration with a Democratic-controlled House and a split Senate has a number of drug industry stakeholders nervous about the next four years. After all, the centerpieces of Senators Hillary Clinton’s (NY) and Barack Obama’s (IL) domestic policy agendas are universal health care proposals. And when Big Pharma hears “universal health care” it tends to be synonymous with national, government-run, single-payor system aka price controls.

But here’s something Big Pharma should keep in mind: neither Clinton nor Obama are proposing a single-formulary system. What they are proposing, though, is providing health care coverage for the 47 million and counting Americans without it.

In case you missed it, here was my first take on the Clinton and Obama health care proposals. Clinton has explicitly stated that buying coverage would be mandatory under her plan; Obama says he will wait to analyze affordability of a coverage proposal before mandating that individuals buy insurance.

“This should not be scary,” Clinton senior health policy advisor Chris Jennings told Wall Street investors at the Stanford Group health care conference in January. “This should be viewed as an incredible opportunity.” Obama health advisor Gregg Bloche echoed Jennings’ remarks at the meeting saying, “companies that innovate are going to thrive in the environment under the Democratic plans.”

There’s little doubt that under a universal, government-administered coverage system, there will be downward pressure on pricing, whether it’s through market competition or government “tinkering.” But Jennings and Bloche say whatever drug companies give up in margin, they’ll more than make up for in a jump in market share.

It would be hard to argue that the drug industry hasn’t reaped a windfall from providing roughly 40 million seniors with drug coverage under the Part D program. A universal coverage program would roughly double the number of Americans receiving some form of a drug benefit who previously were not.

Some senior company executives clearly see the advantages of working together with Democrats—should they win the White House—on health reforms. “It is really going to take a bipartisan view to be able to accomplish [universal health care],” Merck CEO Richard Clark said during the Morgan Stanley Pharmaceutical CEOs Unplugged conference in January. “I hope we are able to provide some recommendations, particularly around the uninsured and how that should be solved, just as we provided recommendations around Medicare” and the creation of the prescription drug benefit.

Eli Lilly SVP for corporate affairs and communications Alex Azar is urging the biopharmaceutical leadership to rally around a united position that preserves core industry business principles under more direct involvement by the government in health care. “We have to show that we’re willing to engage and to propose constructive alternatives,” the former HHS deputy secretary told attendees at The RPM Report’s FDA/CMS Summit in December. “Our industry brings some credibility to this discussion.”

For the most part, Republicans are looking at incremental improvements in health care that go hand-in-hand with the free-market principles underlying Part D ie. competitive insurance plans and allowing individuals to cross state lines to buy insurance from different providers if they don’t like the deal they’re getting locally.

Not too scary.

But under a Republican administration, the odds of a Medicare reform bill would be a near-certainty as the government looks for savings to fix the looming physician reimbursement cuts. In that climate, drug prices under Part D would be a tempting target for savings.

Moreover, the presumptive Republican nominee, Senator John McCain (AZ) does not look eager to become best friends with the pharmaceutical industry. During a New Hampshire debate before the primary in January, for example, McCain cast the industry in a not-so-flattering light while discussing why Americans can’t import drug from Canada. Former Massachusetts Governor and Presidential candidate Mitt Romney jumped in, “Don't turn the pharmaceutical companies into the big bad guys.” McCain responded: “They are.”

The drug industry is clearly reading the bi-partisan tea leaves. The pharmaceutical industry has given $4.6 million to Democrats thus far in 2008 compared to $4.5 million for Republicans, a 51-49 split, according to the Center for Responsive Politics. During the last election cycle in 2006, donations to Democrats totaled $6.1 million compared to $13.2 million, a 31% to 67% difference (independent donations make up the remaining 2%). The last Presidential election in 2004 saw the pharmaceutical industry give two-thirds of their donations to Republicans ($12 million) compared to one-third ($6.1 million) to Democrats.

You get the picture.

For all of the undecided In Vivo Blog readers, maybe the HealthCentral.com political PoliGraph will help you choose where you stand. Try it, it’s fun.

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The Wacky World of Generics: Protonix Edition

Here is a headscratcher.

Wyeth decided January 30 to launch an authorized generic version of its blockbuster proton pump inhibitor pantoprazole (Protonix). The launch comes a month after generic manufacturer Teva shocked Wyeth by launching its own version at risk. Teva quickly halted shipments under a standstill agreement with Wyeth, and the company's investors assumed (prayed?) that a settlement would follow.

Apparently not. Wyeth decided to launch its own generic under a license to Prasco (more on them later). The announcement came the day before the standstill agreement with Teva was set to expire.

Wyeth's announcement was followed by a generic launch from a third company, Sun Pharmaceuticals, which under the complex rules governing these things shares six-months of generic exclusivity with Teva. Sun had not launched previously, presumably since it feared the potential for steep damages should it eventually lose the underlying patent litigation.

However, with two prior launches (Teva's in December and Wyeth/Prasco's the day before), Sun decided to take the chance.

And then Teva announced that it has no plans to relaunch its own.

Huh?

Did Wyeth really just finish off its biggest brand in response to a non-existent threat that Teva would re-enter the market for good? And why on earth is Teva sitting back and watching one of the biggest generic opportunities in history wither away?

Welcome to the wacky world of generics.

Believe it or not, there is a way in which this bizarre series of circumstances might make sense for all the players involved.

Bernstein Research's Ronny Gal and Tim Anderson suggested one possibility in a note sent Friday. Teva's decision not to launch reflects the fact that it already has significant inventory in the trade, so it has nothing to gain from contributing to a price war that would affect the selling price it can realize on the product already in distribution. And, by waiting until after Sun enters the market this time, Teva further minimizes the potential size of any damages it might owe down the road if it loses the underlying case.

If that is the case, expect Teva to launch sometime in the next quarter or so, once trade inventories of its product are depleted and it can come in at a new, more deeply discounted price.

There is another option, the Bernstein analysts say: that Teva gambled and lost. The at-risk launch was a bad gamble by Teva, intended to extort a settlement from Wyeth in litigation the generic company believes it will lose. In that case, Wyeth is calling Teva's bluff and will ultimately prevail in court, recouping at least some of its losses on the generic.

In theory, Teva could be on the hook for treble damages. However, because Wyeth has already lost a preliminary injunction ruling in the case, it is extremely unlikely that it would be awarded any damages above the actual losses incurred to Teva's product.

Bernstein believes Wyeth is pursuing the right course in either case: it is impossible to put the genie back in the bottle now that Teva's product is in distribution, and an authorized generic launch helps Wyeth hold on to a bigger share of pantoprozole revenues for longer. If the company wins the litigation and gets a bit more money back, so much the better.

The big winners in all this, however, are not the battling companies. Instead, they are the payors who will probably reap the biggest benefit, as generic competition in the PPI class intensifies. With Protonix once a $2.5 billion brand, there is plenty of savings to be had. But the opportunity is even bigger since it is sure to increase pressure on AstraZeneca to further discount esomeprazole (Nexium).

In fact, that pressure may already be showing. AZ reported last week that Nexium experienced a net price decline of about 8% in the US last year--but that came almost entirely in the fourth quarter. The company said US sales of the brand fell 18% in the last three months of the year, despite about a 2% increase in volume. Yes, its discounts really are that deep and getting deeper.

Oh, and then there is Prasco. In case you've never heard of them, they are a relatively new start-up (formed in 2002) by former Duramed CEO Thomas Arington to focus on--you guessed it--authorized generics. Duramed, incidentally, once took on Wyeth over the course of a decade in an unsuccessful battle to market a generic version of conjugated estrogens (Premarin).

If you can't beat 'em, join 'em.

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