Reflections on BIO 2014: From FIPCOs to VIDDCOs

I attended the big annual BIO Convention this past week in San Diego. BIO is THE trade association for the biotech industry and the annual BIO Conventions are HUGE events. This year's keynote speakers included Hillary Clinton and Richard Branson, to give some idea of how high-profile the BIO meeting is. One of the primary functions of the BIO meeting is to provide a variety of vendors and service providers a marketing opportunity. Wandering about the vast floor of the main exhibit hall provided an interesting perspective on the overall biotechnology industry, the vast majority of which is focused on developing products for human healthcare.  download PDF

FTC Files Brief in Mylan v. Celgene

Mylan, the generic drug company, is suing Celgene.  The issue is Celgene's use of its REMS programs to deny Mylan to purchase Celgene's drugs, which Mylan needs to develop generic versions.   REMS programs are FDA mandated and approved in order to ensure that access to some drugs is restricted when use in some populations poses unusual risks.  In the case of Celgene's drugs, the REMS programs are designed to insure that the drugs are not dispensed to women who are pregnant or may become pregnant while taking the drugs.  This is a significant move by the FTC against the increasing use of REMS programs to thwart generic competition.  Obviously the use of the drugs in bioequivalence testing by Mylan should take all necessary precautions to avoid exposing pregnant women to the drug, but that is not really Celgene's objective.  The FTC's brief is here.  Let us hope the FTC's position prevails in this case.

Andrew Pollock's NY Times Article on Increasing Pressure on Drug Prices: Do Health Insurers Now Have Skin in the Game?

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In this post I will speculate very briefly about an important new development reported by Andrew Pollock of The New York Times. The subject of Pollock's article is how health insurers at long last appear to be putting real pressure on drug prices. Though readers of this blog will not be surprised by the discussion of how drug companies price their drugs and avoid competing on price, the heart of Pollock's story is the recent efforts of pharmaceutical benefit managers (PBMs) to use their formularies to reduce insurers' prescription drug costs. There has always been some use of formularies to negotiate prices: but, according to Pollock, such efforts have now greatly increased. The article highlights how PBMs are restricting their formularies much more than in the past and drug companies are confronted with the choice of reducing their prices or finding themselves excluded from coverage for most of an insurer's patients.

The big question is. "What is responsible for the new attitude of PBMs?" Could it possibly be the case that some of the insurance reforms that are part of the Affordable Care Act/Obamacare (ACA) are actually working to either slow the rate of increase in the pharmaceutical component of health care costs or even to bring those costs down? This may indeed be the case. There are several components of the ACA that could be contributing to the new, tougher stance by PBMs. First, plans are increasingly standardized because the ACA has imposed a number of requirements for health insurance plans to meet and because the new health insurance exchanges created much more transparency in the health insurance marketplace. Second, the new ACA rules impose strict limits on the proportion of insurance company revenues that can be spent on administration rather than on medical care, a standard known as a company's Medical Loss Ratio. Taken together, this means that insurers are competing much more openly on price, and the share of premiums that can be taken by PBMs for their services is also under pressure. It seems plausible that the new, tougher attitude towards drug prices is the result of the significantly increased pressures on both the insurers and their PBMs under significant new constraints. In a future post, I will explore what this pressure on drug prices may mean for the direction of drug development.

Amgen's R&D and Roche's Tarceva Patent Mediation In India: Risks, Prices, and the Right off Access to "Essential" Drugs

There are two stories in the recent pharma news that are completely unrelated. In this week's post I will ponder their possible relationship. In the first story, Damien Garde of FiercePharma reported that a highly-regarded biotech industry analyst, Geoffrey Porges, is highly critical of Amgen's ambitious and risky R&D efforts.¹ In the second story, also in FiercePharma, Eric Palmer reported that a court in Delhi, India, has ordered Roche and Cipla to enter into mediation of their dispute over the patent on Roche's cancer drug Tarceva.²

Profits or Drugs?

There are two stories in The New York Times that, although not directly related, are the basis for today's post. The first, by Andrew Ross Sorkin, Do Drug Companies Make Drugs, or Money?, appeared in the Business Section on page B1 on June 3, 2014. The second, by Andrew Pollock, New System for Treating Cancer Seen as Hopeful, appeared on the same page of The New York Times on the same day. Sorkin's provocatively titled article focused on Valeant Pharmaceutical International's takeover bid for Allergan and on Valeant's strategy, which Sorkin characterized as buying pharmaceutical companies with revenues produced by active and successful pharmaceutical research programs and then increasing profits by cutting back on R&D. Sorkin's article, as the title indicated, posited a tension between focusing on rewarding investors with increased profits and investing in the development of new and innovative therapies. My purpose in highlighting Sorkin's article alongside Pollock's is not to take issue with Sorkin's analysis of Valeant's business strategy, but to respond to the article's title question. The answer is that pharmaceutical companies' primary obligation is to their shareholders and that means their primary objective is to reward those investors with increased profits--that is, "make money." However, as Pollock's article about a very promising new class of anti-cancer drugs illustrates, developing new and medically-valuable therapeutics is a major, although not the only, way that pharmaceutical companies seek to earn those increased profits. Now if all I had to say about these two articles is that pharmaceutical companies, like all other businesses, attract and reward investors by making profits and developing important new drugs is a way of making large profits, I would only be stating the obvious.

Comparative Effectiveness: A Major Priority for Pharmaceutical Policy

Last week, FiercePharma contained a story that referred to the superior efficacy of Roche's newest anti-CD20 antibody Gazyva compared to the original anti-CD20 antibody, Rituxan, in the treatment of chronic lymphocytic leukemia (CLL).¹ However, just this week another head-to-head study in CLL, comparing a kinase inhibitor, Ibrutinib, against yet another anti-CD20 antibody, was published in the New England Journal of Medicine.² The study concludes that Ibrutinib was superior to the antibody Ofatumumab in both progression-free survival and overall survival. Now is it also better than Gazyva? Who knows? So let me use this week's post to make a few additional comments on comparative efficacy.  Download PDF