Much Ado About Little or Nothing

The FDA announced its new efforts to "to increase competition in the market for prescription drugs" and in my view it is likely to do little or nothing to affect spending on prescription drugs in the United States. The first step announced by the FDA is simply that that the FDA will publish and maintain a list of off-patent branded drugs with no generics. The second step announced is that the FDA will prioritize review of ANDAs for generics where there are less than three generics approved for that drug. The first step is likely to have little impact because it simply ignores the fact that the major generic companies devote significant resources to research the patents on the drugs for which they would like to compete, making the FDA’s effort largely superfluous. The second step is also likely to do very little. The attractive generic markets draw many entrants while the less attractive attract far fewer. It is the market size, not the lag in review, that largely shapes competition in the generic market. No, despite the periodic and well-publicized spikes in the price of a small number of generic drugs, the problem with prescription drug pricing has very little to do with the speed of entry into the generic market and has much more to do with the marketing-driven sales of branded drugs. The FDA has proposed nothing in that regard nor is there anything yet proposed by the Trump Administration in that direction.

BIO 2017: Part I ––Virtual Development Is A Reality.

I attended the big BIO Annual Meeting, which I had not attended for several years, which was held this year in San Diego from June 19-22. As always, BIO is a great place to get a sense of the overall state of the Pharma world and pick the brains of some very smart people. My perception of people in the life science world has always been that the great majority are remarkably willing to share their own knowledge and insights and this year’s meeting reinforced that perception. It also reinforced my impression that the biotech industry folks party a good deal harder than the law professors with whom I generally hang out, but that would be the subject of a different blog.

As longer-term readers of this blog know, I have had a continuing interest in the topic of biosimilars––particularly in the question of whether one or more significantly different business models for biosimilar development would be feasible and more cost-effective from a patient and insurer perspective. To put this in perspective, we can use the example of Remicade/ infliximab. Remicade is an antibody that binds to the protein TNFα and prevents TNFα from delivering its inflammation-stimulating message. Remicade was one of the first TNFα blocking drugs (others include Enbrel and Humira) and it has been approved for use in a number of severe inflammatory diseases, including Crohn’s disease, ulcerative colitis, and rheumatoid arthritis.  The FDA has already granted Pfizer approval to market Inflectra, a biosimilar Remicade (yes, Pfizer the pharmaceutical behemoth, is in the biosimilars space). If I wanted to start a virtual biosimilar company and develop my own biosimilar Remicade (why wouldn’t I want to go head to head in the marketplace with Pfizer?) who are all the people and service providers I would need? One of my main goals at this year’s BIO meeting was to learn as much as I could about the availability of the various kinds of expertise and services that are required to take the development of a biosimilar from a proposal to an FDA approved product. Could a small, virtual company produce a biosimilar Remicade that could be approved by the FDA? 

The first step in developing a biosimilar is to create a cell-line (most-likely using Chinese Hamster Ovary, or CHO cells) that has been engineered to efficiently produce an lgG1:Κ

(that describes the genus of antibody to which infliximab belongs) protein that is highly similar in structure and activity to the original Remicade produced by Janssen. This first step requires sophisticated expertise in protein engineering and analysis. Is this expertise available on a contract basis? Can I find a CDO or CMO that can start at the very beginning and provide me with my starting point of a cell-line to begin further development? The answer I got at BIO2017 was “yes.” There are absolutely companies out there that will provide me with a cell-line that has been engineered to produce my biosimilar and that has been analyzed by a variety of means as being structurally similar, with the correct glycosylation, comparable affinity for the target protein, and pharmacokinetics in an appropriate in vivo model. Immunogenicity analysis is a bit more complicated, but it would and could be begun in the earliest phase of limited human clinical testing.

The second step is hiring the expertise to guide the development through the regulatory process, from preclinical testing through clinical testing and the requisite regulatory filings. There was a covey of CROs (terrible wordplay intended) hawking (insert another groan here) exactly those capabilities at BIO 2017. At the same time, the actual manufacturing, from pilot-scale to market-scale, could be contracted for (and likely from the same company that did the development and analysis of the master cell-line). At the end of the day (or weeks of RFPs and negotiations) all the steps could absolutely be set in motion. All the parts necessary to develop, manufacture, and license our biosimilar Remicade would be in place and all that would remain are a relatively low risk of failure in the clinic, worries about being sued for infringement of some number of process patents by Janssen (a flurry of such biosimilars infringement suits was predicted by retired U.S. District Court Judge Faith Hochberg at BIO 2017), and finding a buyer or buyers.  I’ll discuss the risk of failure, infringement, and marketing issues in Part II of Virtual Development.

More Ado About Prices

It is almost impossible to read the news today without coming across an article about the high prices of drugs and various approaches to bringing drug prices down. I have discussed the general problem of drug prices in previous posts (Drug Prices and the Pharmaceutical Market, Pharmaceutical Pricing-- The Story That Just Keeps Going, and What the Market Will Bear: Pricing Pressures and Pharmaceutical Value). However, in today’s post I will briefly discuss two very different developments in the drug-pricing story. The first is a resolution aimed at pricing that was recommended for adoption by the American Medical Association (AMA) House of Delegates. The second development is the growing concern over the difficult-to-gauge gap between the list or “retail” price of drugs and the actual amounts paid by different payors.

On the first development, the AMA House of Delegates recently supported the adoption of Resolution 236 Retail Price of Drugs Displayed in Direct-to-Consumer Pharmaceutical Advertising. The text of the resolution as adopted is brief:

Resolution 236 asks that our American Medical Association advocate to the applicable Federal agencies (including the Food and Drug Administration, the Federal Trade Commission, and the Federal Communications Commission) which regulate or influence direct-to-consumer advertising of prescription drugs that such advertising should be

required to state the manufacturer’s suggested retail price of those drugs.

The AMA is a powerful lobbying group, but it raises the question of whether the FTC or the FDA has any authority to require the disclosure of retail prices in direct-to-consumer (DTC) advertising of prescription drugs. My quick response would be no–– neither the FDA nor the FTC has such authority. The FTC’s Division of Advertising Practices “protects consumers from unfair or deceptive advertising and marketing practices that raise health and safety concerns, as well as those that cause economic injury.” Accordingly, from the very beginning of DTC prescription drug ads, the FTC has aimed at ensuring that consumers are not misled or deceived: “In particular, it is important to protect consumers from deceptive information but not to stifle truthful information that could benefit consumers.” There is almost no chance that the FTC would find that an ad is deceptive or misleading because it fails to state the price of the item advertised. Similarly, the FDA’s focus in prescription drug advertising also is on ensuring that the ads are not misleading (and that they do not suggest the product can be used for conditions for which the FDA has not approved the drug). In my recent post on DTC ads A Better Balance Between Accelerated Access And High-Priced New Drugs: A New Conditional Approval Option I made the argument that those ads are generally misleading with respect to the effectiveness of the advertised drugs. So while it is significant that the AMA is continuing to express its concern about prescription drug prices, this particular action by the AMA is not likely to have any effect at all.

The other development I will briefly discuss in this post is the growing awareness of the gap between retail prices (such as those the AMA would like to see disclosed in DTC ads) and the prices actually paid by a variety of payors (the “price gap”). How big is the price gap? QuintilesIMS Institute addressed the question in its Annual Report Medicines Use and Spending in the U.S. (May 2017). The executive summary of the report began with what is truly the bottom line:

Spending on medicines increased by 5.8% to $450Bn in 2016, growing at less than half the rate seen in the last two years, based on invoice prices. After adjusting for estimated rebates and other price concessions by manufacturers, which continued to rise in 2016, net spending was $323Bn, up 4.8% over 2015 levels. When adjusted for these concessions, as well as economic and population growth, medicine spending increased 2.6% in 2016 and has increased by an average of 1.1% per year since 2006, while the balance of medicines being used has shifted strongly to specialty medicines from traditional treatments.

The Report then went on to summarize its findings with respect to year-over-year increases for drugs already in the market:

The average net price for brands already in the market is estimated to have increased by 3.5% in 2016, up from 2.5% in 2015, while remaining significantly lower than prior years. This reflects the heightened competition among manufacturers and more aggressive efforts by health plans and pharmacy benefit managers to limit price growth. Invoice price levels, prior to the impact of concessions, increased 9.2% in 2016…. [emphasis added.]

What are the takeaways from the IMSQuintiles Report? The ridiculous annual increases in retail prices for existing drugs (the 9.2% in the Report) are the attention-grabbing headlines of a number of stories on drug prices, but only the starting point for the price negotiations with payers and pharmacy benefit managers (PBMs). The price gap is a much more complicated part of the drug pricing story, which is closely linked to another major part of the pharmaceutical marketplace, the role of PBMs. Back in March, Bloomberg BNA reported that Senator Wyden (D.Ore) “proposed legislation that would force drug middlemen to disclose secret discounts they receive from manufacturers, a sign of growing scrutiny of the role played by pharmacy benefit managers in high prices.” Wyden’s proposal, S.637 - Creating Transparency to Have Drug Rebates Unlocked (C-THRU) Act of 2017 is, as the title suggests, about increasing transparency in prices (for Medicare Part D drugs), which in theory can lead to more negotiating power on the buyer side and lead to lower prices overall. This kind of transparency in the prices actually charged for drugs is very different from the “transparency” that is the subject of a number of state laws seeking to require disclosure of the costs of developing individual drugs. Sarpatwari et al reviewed those initiatives in The New England Journal of Medicine and pointed out the conceptual and practical difficulties with “cost of development” disclosure mandates. My own analysis is that transparency in the actual prices paid, which is the focus of the Wyden proposal would be helpful. Marketplaces require information to work. While much of the information needed for the pharmaceutical marketplace to work is information about the actual effectiveness of a drug, prices paid by other parties is also extremely useful. The problem of rising drug costs is unlikely to be solved by information about prices, but it would at least be a step in the right direction.

U.S. Supreme Court Issues Opinion in Sandoz v. Amgen: A Big Win for Sandoz and Other Biosimilar Applicants.

The U.S. Supreme Court released its much-anticipated ruling today in the battle between Sandoz and Amgen over Amgen’s biosimilar version of Sandoz’s Neupogen (filgrastim).  Justice Thomas’s opinion for a unanimous Court was an almost total victory for Amgen. Justice Breyer issued a very brief one-page opinion concurring in the decision but expressing his view that in future cases deference should be given to the FDA’s reasonable interpretation of the Biologics Price Competition and Innovation Act of 2009 (the Act).

There were two major issues decided by the Court today. The first was whether or not Sandoz fulfilled the 180-day notice requirement of the Act when it delivered its original 180-day notice of its intent to market a biosimilar filgrastim at the time of filing its application with the FDA. The second major issue decided was whether the Act’s elaborate provisions providing for exchanges of information (the “patent dance”) is mandatory. In the patent dance the specifying the biosimilar applicant can provide its manufacturing information to the reference drug sponsor followed the reference drug sponsor’s provision of  lists of patents it claims are infringed by the biosimilar applicant

The answer to both these questions favored Sandoz. The original 180-day notice of intent to market that Sandoz provided at the time of filing its original application with the FDA was sufficient.  No subsequent, second such notice was required. The relevant language of the opinion on that clause is:

The Federal Circuit held that an applicant’s biosimilar must already be “licensed” at the time the applicant gives notice. 794 F. 3d, at 1358.

We disagree. The applicant must give “notice” at least 180 days “before the date of the first commercial marketing.”

The provision of manufacturing information by the biosimilar applicant and patent lists by the reference drug sponsor is not mandatory. The remedy for the biosimilar applicant’s failure to provide the information  that the Act provides is that the filing of the biosimilar application is an act of infringement enabling the reference drug sponsor to file suit. Here is the relevant language of that portion of the opinion.

Clause (ii) of §271(e)(2)(C), in contrast, defines artificial infringement in the situation where an applicant fails to disclose its application and manufacturing information altogether and the parties never prepare the §262(l)(3) lists. That clause provides that the submission of the application represents an act of artificial infringement with respect to any patent that could have been included on the lists.

The Court did, however, leave a very small opening for Amgen to snatch victory from the jaws of defeat. While Amgen was not entitled to an automatic injunction under the biosimilar Act, on remand the U.S. District Court must determine (again, from Justice Thomas’s opinion):

whether California law would treat noncompliance with §262(l)(2)(A) as “unlawful.” If the answer is yes, then the court should proceed to determine whether the BPCIA pre-empts any additional remedy available under state law for an applicant’s failure to comply with §262(l)(2)(A) (and whether Sandoz has forfeited any pre-emption defense, see 794 F. 3d, at 1360, n. 5). The court is also of course free to address the pre-emption question first by assuming that a remedy under state law exists.

I would predict the District Court will not issue an injunction based on California law and Amgen’s only recourse is to continue with its infringement suit.

Good News for Sickle-Cell Patients, But How Will Emmaus Make Money? A Look at the Business Side of Pharmaceutical Policy

 Last week’s most interesting story was that a the FDA Oncologic Drug Advisory Committee voted 10-3 to recommend that the FDA approve Emmaus Medical’s L-Glutamine for the treatment of Sickle Cell Disease.  The Phase III Clinical Trial showed that patients receiving L-Glutamine had a clinically significant reduction in the number of Sickle Cell Crises over the course of the 48-week trial. There were also positive results on other measures of the drug’s benefit, while the safety issues were relatively minor. So this is good news for Sickle Cell Disease patients. There are few therapeutic options for this serious disease and the likely approval of another meaningful treatment may make a real difference in their lives. 

BUT, this is one of the most unusual drug development studies I have seen. While other Orphan Drug makers have taken older compounds through development and relied on the 7 years of Orphan Drug exclusivity to return a profit on their investment, L-Glutamine is not just an older compound. Unlike repurposed older drugs, it is widely available and used as a dietary supplement. So while Emmaus is to be commended for undertaking the costly and risky process of establishing the effectiveness of L-Glutamine for Sickle Cell Disease and will be the only manufacturer allowed to label L-Glutamine for treating Sickle Cell Disease, they will not be the only manufacturer selling L-Glutamine in bulk quantities sufficient to treat Sickle Cell Disease. A quick search online revealed numerous online sellers.  For example, one online seller is offering 250 grams of L-Glutamine (advertised as pharmaceutical-grade) for $9.95.  Since the Emmaus studies dosed patients at between 20 to 60 grams a day, depending on body weight, the 250 grams being sold online would be last between 4 to 12.5 days.  Even assuming that most patients require 60 grams per day, the price for 1800 grams online would be a bit more than $60 per month.  I have not yet seen an announcement of Emmaus’ intended pricing for their product post-approval, however, their current pricing for the same drug, approved for short bowel syndrome, would be over $2000 per month at the higher dose.  While the Rx form is likely to be covered by insurance, it still seems quite possible that a significant market share could be lost to patients simply buying L-Glutamine online. That would still be good for patients, but not very good for Emmaus’ bottom line. It will be very interesting to follow Emmaus’ sales over the next few years to see whether taking a dietary supplement through the FDA approval process can actually work for companies as well as patients.