While You Were Hanging Your Stockings By the Chimney with Care

"It's a major award!"

Not many creatures stirring this pre-holiday weekend, but we couldn't resist keeping up our weekly roundups of what you might have missed anyway. Basically, not much. We guess it isn't a surprise that you won't find us keeping up the not-quite-rigorous blogging pace this week and the beginning of next, though surely we'll pop up from time to time to amuse those of you hard at work. For the rest of you, bundled up on the couch watching "A Christmas Story," be careful not to shoot your eyes out this week.

• Winner: IMS Health: Maine's state law that restricts access by medical-data companies to doctors' prescription information is unconstitutional, says a Federal Judge, according to an AP report in today's WSJ. You could have seen this one coming if you a) thought a previous ruling in New Hampshire pointed toward a similar result in Maine or b) you read about this on Friday (hey we told you it was a slow weekend).
• The Boston Globe ran a Q&A with CMS boss Kerry Weems on Sunday. Weems is on the road encouraging consumers to shop around for the best medicare plans.
• The Times profiles Renovo CEO Mark Ferguson, whose career has taken him from "dentist to alligator biologist to pharmaceutical chief executive eyeing an estimated £6 billion virgin blockbuster market."
• Ben Goldacre's Bad Science reminds us that particularly around the holidays, some health studies are too good to be true.

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Pfizer Supply Deal Ups Pressure on UK Price Cuts

UK drug pricing reform was on the books anyway. The Office of Fair Trading in February 2007 recommended a switch from the traditional PPRS system whereby companies are free to set prices as they wish, within broad profit constraints, to a “value-based” approach whereby drug prices are cut and capped according to a product’s perceived therapeutic benefit.

Now the OFT’s just gathered some more fodder in its call for an end to one of Europe’s friendliest national pricing schemes—from their review of the direct-to-pharmacy drug supply arrangement initiated by Pfizer in March, with several other Big Pharma following suit.

Pfizer decided to cut out the wholesaler and sell its drugs directly to pharmacists. It still uses a wholesaler, UniChem, to do so, but UniChem in this case is simply a logistics provider, receiving a fee-for-service rather than buying the drugs outright and taking a margin from selling them on to pharmacists itself.

Pfizer had plenty of reasons to embrace DTP, which you can read about in more detail in this IN VIVO feature. One of them is that it gets to control individual drug discounts. In the traditional model, manufacturers sell to wholesalers at a 12.5% discount to list price, wholesalers compete to offer pharmacies the most attractive price and typically pass on about 10.5% of that discount. The National Health Service reimburses the pharmacies at list price, but then claws back some of the profits they make from the discounting.

The OFT has concluded from its investigation that there is a “significant risk” that DTP schemes will result in higher costs to the NHS (despite Pfizer’s assurances otherwise). So, it says in a release issued today, since the PPRS scheme is under review anyway (the current plans runs from 2005-2010), here’s another reason to switch to a pricing system that ensures that pharmacists’ discounts are safeguarded.

The OFT’s helpful suggestions:

1) reduce list prices in the PPRS framework by an amount equivalent to the average pharmacy discount

2) force pharma firms to offer a minimum list price discount to pharmacies

The bit of good news: Pfizer and others are free to pursue the DTP set-up (“manufacturers should be free to choose the distribution method they consider to be most efficient,” says the OFT).

A somewhat Pyrrhic victory, though. As far as drug prices are concerned, whatever freedom there was will now certainly soon come to an end.

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DTC User Fees: Will This Program Fly?

A new program to allow prescription drug advertisers to pay for a pre-review of TV spot by the Food & Drug Administration is struggling to get off the ground.

With about a week to go before the first critical deadline to create DTC user fees, FDA has gotten commitments from industry to submit 47 ads. That is about 20 short of the absolute minimum necessary to get the new review system up and running—and way short of the 150 ads used as the benchmark in creating the plan.

The new user fees were created by the FDA Amendments Act signed into law September 27. The program allows advertisers to buy a pre-review from the agency; sponsors are free to advertise without paying the fee, but if they want the agency’s feedback before the ad airs, then they have to participate.

The logistics of the program are a bit convoluted. Because the fee is voluntary, the agency first needs a commitment from sponsors to participate; then it calculates the fees and sends out invoices. Sponsors are supposed pay up front; they can change their minds later and pay a penalty to participate.

But if everyone waits, the entire program will shut down. The law stipulates that FDA must collect at least $11.25 million to get the program up and running by January 25. Since there is a cap set on the fee, that means FDA must get commitments from industry for 68 ads in order for the program to take off.

Time is tight. The program was designed with the hopes that everything would be in place ahead of the start of the fiscal year on October 1. That obviously went out the window when FDAAA--which includes groundbreaking drug safety provisions--took most of the summer to complete.

In October, FDA published a notice seeking commitments from sponsors by November 26. During a Food & Drug Law Institute meeting on FDAAA implementation November 16, Division of Drug Marketing Advertising & Communications director Tom Abrams provided an update.

First the good news: FDA is already doing the ad reviews and meeting the goal of responding within 45 days. Abrams says FDA has already gotten 12 ads under the program, and has provided feedback on 4. The agency is comfortable it will answer the next eight within 45 days as well.

But there is reason for concern. The agency has commitments for 47 ads so far, Abrams said. The division director is confident that sponsors are interested in making it happen; he said he understands that the challenge is getting sign off within corporations to make the commitment to participate.

But, he stressed, time is running out. FDA needs answers by November 26 so it can calculate the fee and collect the money.

WilmerHale attorney Scott Lassman, who helped negotiate the new user fee program on behalf of the Pharmaceutical Research & Manufacturers of America, underscored that concern. The new user fee “is in some jeopardy,” he told FDLI.

Assuming companies are able to turn around their commitment notices in time, there will still be some nervous weeks ahead, Lassman pointed out. That is because the deadline for FDA to collect the money is firm: January 25. It is not good enough for the agency to have commitments or even to have invoices out. The law says it must “receive” a total of $11.25 million by then -- or shut down the program.

Oh, and one other thing. Even if FDA does collect the money for the pre-reviews, it can’t actually spend it unless or until Congress passes an appropriations bill for the agency for 2008. FDA is currently operating under a continuing resolution—an issue that hangs over every aspect of implementing FDAAA.

There is a silver lining. As Lassman points out, lower than expected participation should mean faster reviews. Assuming FDA collects enough money to meet the January trigger point--and assuming Congress finishes an appropriation bill in some reasonable timeframe--FDA will be able to hire 27 new staffers just for TV ad reviews. The goals set in the program were based on having 150 ads to review; if the agency only has to review half that many, it should be able to do virtually all of them within 45 days.

The stakes are high, Lassman says. “This is industry’s opportunity to show a voluntary program works,” he told FDLI, noting that there was a big push in Congress for a blanket moratorium on ads for new drugs. Still, he acknowledged, “there are legitimate reasons to deliberate.”

The betting here is that industry will come forward and make it work. Why? Because the “voluntary” user fee program sure looks a lot better than the alternative. As we discussed in The RPM Report last month, the new law also gives FDA the authority to require pre-review of DTC ads whenever it chooses. And, more importantly, it gives FDA the power to impose fines on ads it deems violative.

Anyone who obtains a pre-review from FDA (and makes all the changes requested by the agency) is protected from fines. FDA can still change its mind about an ad, but it must give the sponsor a chance to change the ads before it can levy fines. So the pre-review is really a form of insurance, and one that looks relatively cheap.

So if you plan to run TV ads in 2008, it probably makes sense to get that notice in to FDA before heading out for the Thanksgiving holiday. It may seem odd to be thankful for the chance to pay more money to FDA, but given the alternatives that is probably the right spirit.

Now, who gets the wishbone?

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Can a Sleep Drug Awaken Demand from European Consumers?

Superficially, it’s paradoxical.

Sepracor wouldn’t sell US marketing rights to its sleep drug Lunesta, even though it could probably have gotten a great deal. And then last week it goes and sells European rights to GSK for just $20 million upfront and another $135 million in milestones?

OK, that’s by no means a true yawner. But it’s hardly a wake-up call in this age of colossal licensing fees and milestones. VX950, the barely post-proof-of-concept hepatitis C candidate from Vertex, fetched $165 million upfront, and $380 million in pre-commercial milestones for merely European rights. Why didn’t Lunesta, with US sales approaching $600 million, do at least the equivalent?

Because the comparison isn’t at all fair. Hep C is a life-threatening disease currently treated with a couple of inadequate, problematic therapies. Insomnia is probably just as big a market -- but is less important to doctors than it is to patients (for some background on the insomnia markets and related dealmaking, see our coverage here and here).

And that’s precisely the challenge. In the US, Sepracor sets its own price and then can spend hundreds of millions of dollars getting its message out to consumers. In Europe and Japan it can do neither.

Which means that Lunesta will have a lot more commercial risk outside the US than something like VX950. GSK’s $20 million bet on the product isn’t exactly trivial, but it isn’t a huge vote of confidence that European insomniacs and their doctors will clamor for Lunivia (European for Lunesta) in the face of a host of generics like racemic zopiclone, Ambien, and a number of benzodiazepines.

And it’s why so much of the deal’s $135 million in milestones apparently depends not merely on getting a centralized approval, but on getting reasonable levels of pricing from various European countries. Sepracor could still make plenty of money: we estimate that it’s getting what might, on a blended basis, work out to a 15% royalty (the rate increases with sales) plus another 10-15% profit on selling the material to GSK. But Sepracor will only make money if the drug is successful.

Thus the $20 million upfront fee represents a cautious gamble that Lunesta’s data package will not only pass muster with the EMEA, but will convince the national reimbursement groups that they should pay a premium for a drug that can be used chronically and which comes with a host of data showing its beneficial effects on insomnia-associated co-morbidities, like depression.

Same thing in Japan, where a pricing milestone on Lunesta is also a key part of the value in the deal Sepracor signed in July with Eisai. The upfront in that deal was probably considerably smaller than what GSK paid: not only is the market about half the size of Europe, the product has to jump through more clinical hoops before it can be approved. In any event, the Eisai terms were undisclosed, which means they weren’t material.

Financially material that is. Sepracor is certainly hoping they’ll be seen as strategically material. The company has recently been a punching bag for investors, taking particularly heavy punishment when new CEO Adrian Adams lowered revenue expectations for 2007 during the company’s July earnings call.

Thus the biggest value to the deals may yet be validation for Sepracor’s ability to take a product developed in the US and convince leading CNS companies they can rely on the company’s US clinical and marketplace work to win approval for, and successfully commercialize, a consumer-driven product in markets where consumers don’t rule.

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While You Weren't Working

For those of you in the US, we hope you had a relaxing three-day weekend. Here are a few items you may have missed while sparing a thought for the Noble and Holy Order of the Knights of Labor and/or enjoying a cocktail. Not everyone took the weekend off ...

• Merck & Co said on Sunday at the European Society of Cardiology congress in Vienna that Cordaptive, it's extended-release Niacin plus flushing inhibitor, was effective at lowering LDL cholesterol while raising HDL. Reuters has the full story.
• The Observer takes a look at investor unrest at GlaxoSmithKline, and in particular institutions attempts to get their points across to the company's as-yet unchosen new CEO, who will take the reigns when JP Garnier retires in May 2008. You might recall the Telegraph running something along these lines back in May (and our comments at the time on succession speculation). We'll have more to say on this later in the week.
• The Philadelphia Inquirer weighs in on the state of drug marketing, and finds that drug samples and TV ads help drive uptake of medicines.
• Eli Lilly's new schizophrenia drug may offer safety and efficacy improvements over existing antipsychotics, according to results of a 200-patient Phase II trial. From Nature, via the New York Times.
• Acambis has received FDA approval of its ACAM2000 smallpox vaccine

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Who's Afraid of REMS Marketing Limitations?

Some coincidences can be very instructive and tell you a lot about the future.

RiskMAPs & black boxes don't necessarily spell doom

If Genentech’s current experience with its omalizumab (Xolair) allergic asthma therapy is any model, FDA's new risk minimization action plan (RiskMAP) authorities don’t look like necessarily a bad thing.

The safety issues facing the drug--an expensive therapy at the root of Genentech's recent acquisition of partner Tanox--were troubling, and resulted in a black box warning proposed in February by FDA and updated earlier this month.

Almost to the minute as the House of Representatives wrapped up its version of the FDA revitalization act (user fee reauthorization and drug safety reforms) last Wednesday evening, Genentech was explaining to a small group of financial analysts that one of the prominent, new regulatory powers being granted to FDA by Congress may actually be a boon to a threatened Genentech brand:

11 July, 6:00 PM at the Capitol: The House halts its truncated debate on the FDA Amendments (HR 2900), only one representative (New York Democrat Maurice Hinchey) speaks out against the well-managed bill. A final one-sided roll-call (403-16) passed the bill at 8:29 PM.

3:00 PM in South San Francisco: Genentech product development president Susan Desmond-Hellmann (right) tells a conference call on Genentech’s second quarter results that the company’s adoption of a new RiskMAP for Xolair will be a stabilizing event for the product and good for its continued growth. (Indeed the product's sales have been growing since the initial FDA warning anyway: Xolair sales were up 17% to $111 million in the first quarter when the safety alert was announced and up 14% in the second quarter to $120 million while Genentech and FDA were working out the specifics of the RiskMAP. The accepted plan was announced on July 2.)

Asked to comment on the commercial impact of the RiskMAP, Desmond-Hellmann characterized the company’s dealings with FDA and creation of a new safety program as a very positive effort. She said that the RiskMAP would help Genentech balance the needs of a very sick patient population with “a wish to protect them from adverse events.”

But RiskMAPs or REMS (as they are being called in the new legislation) have been signaled out by critics of the new legislation as one of the more threatening aspects of FDA’s new safety armentarium. An informal short-hand for describing the new authorities has already developed in pharma circles: the RiskMAPs allow FDA to “inform, nag and nudge, and impose limits.”

Not to Desmond-Hellmann or Genentech. Noting that many of the analysts might not be familiar with the procedures “because they are relatively new,” she portrayed the RiskMAP as a good way to work with FDA to supplement traditional labeling and provide more guidance to the medical community.

Both the Senate and House drug safety bills will make REMS more prominent by giving FDA more explicit authority to require extensive programs to alert doctors and patients to problems with new or already-marketed drugs. That authority includes requiring special messages to the medical community and patients, safety messages in ads, limited access restrictions, and follow-up surveys, registries and closer product surveillance.

Lets break down the elements of Xolair's RiskMAP:

Black Box Warning: The most onerous part of program is the box warning at the top of Xolair’s professional labeling.
Patient Medication Guide: Pateints are to be given a brochure starting with a direct mention of the analphylaxis risk before each injection.
Patient observation after injection: The RiskMAP stresses that physicians should keep patients in their offices for an adequate period of time after administration of the shot to watch for a reaction. FDA doesn't specify a waiting time but patients generally wait about two hours already, according to a 2005 study by Genentech's Xolair marketing partner Novartis.
Follow-up surveys: Genentech will follow-up with doctors administering the drug (mostly allergists and pulmonologists) and with patients to find out how the educational materials are working. In effect, the surveys just act to keep Genentech and Novartis more closely in front of the doctor and tied to the patient.
Two post-marketing studies: One will look for a skin test for use with Xolair to try to address the unpredictable nature of the side effect. This is an obvious step that the company would have likely undertaken on its own at the first sign of the increased rate of anaphylaxis. The second test is a version of closer product surveillance through an creation of an observational repository of cases of hypersensitivity reactions associated with Xolair and appropriate control cases. Again, this is a reasonable portective move to assure that the company will not be left at the mercy of FDA’s adverse event reports in the future.

Overall, the Xolair RiskMAP looks like a sound product protection plan that actually cements the company’s position with providers and assures that the product will be restricted to a very sick group of patients: a group which justifies the current high cost of the treatment. If FDA’s new authority makes more companies adopt plans like this, the industry could be headed into a period when postmarketing problems become resolvable and not the cause of sudden product withdrawals.

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Get on the Brand Wagon

The new rules of drug safety mean that sponsors will have a lot to think about when they submit an NDA to the Food & Drug Administration. But while there’s a lot of new policy coming, companies shouldn’t overlook changes to the way they make one of their most basic decisions—what to call a newly approved product.

The brand name is a small part of the overall NDA. But it’s quite unsettling when FDA denies a sponsor its preferred option for a new drug name—sometimes wiping out years of brand name recognition. (Sanofi-Aventis’ obesity drug rimonabant—Zimulti, née Acomplia—is a good recent example.) And there’s always the odd case of a product that’s approved without an agreed-upon trade name—a disaster for any marketing department.

The Onion, of course, was way out in front of this

The process by which companies obtain FDA approval of a proprietary name has been pretty straightforward. Drug companies submit up to two names for review, and the agency tests for potential medication errors, as well as false and misleading claims. Sponsors can usually expect to hear back from FDA within 90 days of the user fee date—but there are always examples of reviews that take much longer.

But all that’s about to change.

Under a pilot program proposed in the Prescription Drug User Fee Act reauthorization package, the responsibility for testing brand names would shift from FDA to the drug sponsor. In exchange, FDA would commit to completing its review within a set time period. In essence, that would make the system more predictable for drug sponsors—albeit a bit more expensive. The RPM Report has covered this topic extensively; for more complete coverage, read this story and this story.

Want to learn more? The RPM Report is co-sponsoring an audio conference on this very topic with the Food & Drug Law Institute next week. Experts from FDA and industry will be on hand to answer all your questions about the changes to—and challenges of—getting a drug name vetted by the agency.

Our expert panel includes Debbie Henderson, FDA’s director of executive programs at the Center for Drug Evaluation & Research; Jerry Phillips, director of the Drug Safety Institute and the former head of FDA’s Division of Medication Errors & Technical Support; and Bob Lee, assistant general patent counsel at Eli Lilly.

The audio conference, “Naming Drugs: The Pharmaceutical Brand Name Challenge,” will be held on Wednesday, July 18 from 1 pm-2:30 pm. Registration information can be found on FDLI’s website at http://www.fdli.org/conf/413.

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Can P&G Stomach the Risk Even When It's Reduced?

P&G Pharmaceuticals has been the Henny Youngman Rodney Dangerfield! of the drug industry: it couldn't get no respect. And so last year it remade itself, becoming what it calls a “search and development organization,” apparently on the model of Shire and Endo.

When it announced it was abandoning discovery, in February 2006, P&G was both admitting it couldn’t compete in research—and that it couldn’t stomach the risk. It laid off, or transferred, most of its researchers; it has spun off at least three research programs (more on that in another post); and now it’s got 45 people scouring the earth for licensable products in its chosen therapeutic areas: gastro-intestinal, musculo-skeletal and women’s health. Two key criteria: P&G only want drugs for patients that have “high involvement in their disease”; and they want products for which the development risk is “reduced.”

They’ve got some ambitious goals. To reach their growth targets, they want to launch one new product every 4-5 years – and that drug needs to become – echoing Jack Welch’s famous maxim for GE—number one or two in its category. To get to their launch target, P&G figures it will need to do 2-3 deals per year.

The question, however, is whether the kind of products that get to be #1 in their categories are also the kind of products that P&G management will be willing to pay for. It’s a challenge, admits Jeff Davis, who runs new business development. P&G has a shareholder base which demands 4-6% growth a year—that’s the kind of growth that justifies not reduced-risk research, but no-risk research, the sort that figures out how to get more or less pulp into orange juice or no-drip caps onto detergent bottles.

Moreover, while Big Pharma isn’t generally ponying up for reduced-risk development projects (in general, they still want NMEs), spec pharma is, and paying Big Pharma-sized upfronts. But P&G figures it can win these deals by emphasizing its consumer-focused marketing approach (it had an entire team of R&D, finance and marketing execs outfitted with an electronic system that, for a week, at all times of day, signaled them to react to the unpleasant gastrointestinal events of ulcerative colitis patients). And if—as this blogger believes--spec pharmas are going to be P&G’s biggest dealmaking competition, then P&G really will have an interesting advantage.

The pitch worked for Aryx Therapeutics, one of two companies with whom P&G has signed deals since its reorganization (the other is Nastech, for nasal-delivered parathyroid hormone). The Aryx drug, for GERD and gastroparesis, hit all the P&G criteria: a GI product (for GERD and gastroparesis) and risk-reduced (works like Propulsid but, apparently, avoids the drug-drug interactions which killed it). “We had three virtually identical term sheets,” says Aryx VP and COO John Varian but chose P&G because of their “focus on the consumer.”

Still, P&G is hardly burning up the dealmaking track. They’ve done two deals since their restructuring—the last in July 2006. Davis is confident that in ’07 his group will be able to get to terms sheets on 2-3 programs. There are plenty of biotechs who'll appreciate the P&G approach. But we wonder whether the Consumer King will tolerate the risk of signing them.

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Locking the Sample Cabinet

Maybe nothing lasts forever
not the mountains or the sea
but the times we had together
they will always be with me
- The Samples “Nothing Lasts For Long”

It's a potent weapon in pharma's arsenal. But is drug sampling on the way out?

The New York Times has a story today about a handful of leading academic medical centers and physician practices restricting or eliminating drug samples. While the drug industry--or more specifically, the drug industry information providers IMS and Verispan--yesterday prevailed in its quest to overturn New Hampshire law forbidding gathering of physician prescription data there, knowing which docs prescribe which drugs and how often will be of less use if reps can't drop in and drop off drug samples.

This isn't necessarily news: the University of Michigan Health System has banned drug samples since 2002. The upshot? Docs and students there practice "without the influence of drug samples, encouraging them to prescribe higher cost brand name medications when a generic or lower cost brand would work as well." But sampling proponents contend that (among other benefits), freebies can be helpful for patients concerned about costs--after all, a free drug costs less than a drug that's, well, not free.

And a new Booz Allen survey published in IN VIVO shows that it's not just the poorest patients who are affected. As more consumers take on much bigger shares of the health costs, say the consultants, they've started to focus on price, including the price of drugs--often going so far as to reject their doctors' recommendations to save money.

So, sampling is good? Maybe, in some cases. But in general sampling is designed to make money for pharmaceutical companies over the long haul, whether or not it saves patients a few bucks at the outset of treatment. Sadly, there's no such thing as a free drug, most of the time.

Despite a few locked cabinets here and there, drug sampling isn't going away quite yet. But these sampling skirmishes are another issue for primary care drug marketers to worry about. Another reason why the appeal of specialty drugs continues to grow.

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