News on Biosimilars

There has been quite a bit of interesting pharmaceutical policy news and I hope to post more soon.  In the meantime, here is a news item related to my recent posts on biosimilars.  From this story it appears that even the pegylated biologic pegfilgrastim did not present insurmountable difficulties in developing an equally effective, non-immunogenic biosimilar, although the manufacturing issues are still to be resolved.

Was I Wrong, Or Do We Have A Failure to Communicate?

I have been wrong a few times in the sixty-plus years I’ve been on Earth. Was I wrong about the risk of technical failure in biosimilar development in my June26th post on virtual biosimilar development? To be clear, what I mean by technical failure is that the molecule produced and taken through testing turns out to be non-comparable to the original biologic, either because it has less effectiveness or greater risks of adverse events, including immunogenicity. Therecent news about the 40% “first-cycle” approval rate for the first ten biosimilar applications reviewed by the FDA caused me to take another look at the risk of technical failure. I do not believe that the startling low first cycle approval rate indicates that the technical difficulty of creating a reasonably good biosimilar is very high, and that the better explanation for the low initial approval rate may be expressed in one of my very favorite films of all time, “Cool Hand Luke.” “Captain,” the brutal Warden of the chain gang prison to which Cool Hand Luke is sentenced, explains the need to punish Luke by saying “What we’ve got here is a failure to communicate.” While I would never ever suggest any real similarity or parallel between the FDA and that prison, it does seem to me that the best explanation for the low first-pass approval rate for biosimilar applications is indeed a failure to communicate. A closer look at the six biosimilar applications which received Complete Response Letters (CRLs) instead of approval helps to clarify the issue. Here is a list of the biosimilars that received a CRL and the basis for the CRL:

1. Hospira’s Epoetin zeta approval was delayed by manufacturing concerns. There were no concerns about the actual molecules safety or efficacy (the drug has been on the market in Europe for some time).

2. Pfizer’s Epoetin alph was also delayed because of manufacturing concerns; previous requests for more clinical data were satisfied. So this molecule also is approvable by the FDA.

There were three different applications for biosimilars for Pegfilgrastim and all have been delayed.

3. Coherus’ Pegfilgrastim was delayed by the FDA’s request for a reanalysis of a subset of samples with a revised immunogenicity assay and to provide additional manufacturing-related process information. Clinical data on efficacy and adverse reactions apparently were apparently satisfactory to the FDA. So although is possible that the revised immunogenicity assay will disclose some issue with the molecule, it is more likely that the delays in the Pegfilgrastim biosimilar applications indicate that the FDA is simply unsure of exactly how to assess immunogenicity for pegylated biosimilar proteins.

4. Apotex’s Pegfilgrastim­­––Apotex has not disclosed the concerns raised by the FDA in its CRL.

5. Sandoz’s Pegfilgrastim––There also was no disclosure by Sandoz of the concerns expressed by the FDA in its CRL. However, the data from 3 clinical trials, including two trials for safety and efficacy in breast cancer patients would seem to demonstrate that the molecule is safe and effective in treating chemotherapy-induced neutropenia. Here too it appears that the FDA has additional concerns to be addressed for pegylated proteins and is still considering how to best resolve those concerns.

6. Celtrion’s infliximab was approved in the second cycle after the provision of additional data. This proves that the molecule was a reasonable and functional biosimilar but that Celtrion and the FDA had not reached an earlier understanding as to exactly what needed to be included in the biosimilar application.

There are two conclusions that can be drawn from this limited data set of the first ten applications. First, manufacturing issues are always a concern for biologics. Biosimilar manufacturers need to make a good biosimilar, but they also need to make it in an impeccable facility. Second, the FDA has concerns about pegylated proteins (such as Pegfilgrastim) that are still evolving. Manufacturing issues aside, the developers of cytokines and antibody biosimilars have produced approvable molecules. The 29 biosimilars on the market in the EU with very few (if any) involuntary withdrawals for safety are clear evidence of the relative rate technical success. The European experience with biosimilars points to the conclusion that the risk of technical failure in biosimilar development is low. The early going at the FDA represents a learning curve in the data collection, submission, and review process for the biosimilar developers and the FDA. I do not believe I was wrong about the technical difficulty of creating a biosimilar. What we’ve got here is a failure to communicate precisely what needs to be done to obtain the FDA’s approval.

FDA Approves Endari for Sickle Cell Disease

It should not come as a surprise to readers of this blog- Emmaus Medical was given FDA approval for it's l-glutamine treatment for sickle cell disease.  I posted my analysis of the then-pending application back on June 17th: Good News for Sickle-Cell Patients, But How Will Emmaus Make Money? A Look at the Business Side of Pharmaceutical Policy.  As I stated then- it will be very interesting to see whether Emmaus is able to successfully complete with other sources of l-glutamine.  I look forward to Emmaus' quarterly reports.

BIO 2017: Part II ––Virtual Development Is A Reality

In my June 26th post on BIO 2017 I discussed how developing a biosimilar could now be done by a virtual company, with minimal staff overseeing the project and contracting with outside vendors for every step in the process from cell-line development through regulatory approval. The giant Exhibition Hall for BIO 2017 provided a showcase for a number of vendors who can perform the necessary parts of the biosimilar development process.  I concluded that post by noting that although a virtual company could oversee all of the development of, for example, a biosimilar Remicade/infliximab there would certainly be some level of risk in at least 3 areas. First is the straightforward risk of clinical failure. Clinical testing of the biosimilar could reveal that the product either is not comparably effective or is immunogenic, despite pre-clinical analysis of comparability. There have now been a sufficient number of companies entering into the development of biosimilars and a sufficient number of biosimilars approved in Europe (35 as of June 16, 2017) for the risk of clinical failure to be at least roughly estimated. A more complete analysis of companies abandoning particular biosimilar development efforts or failing to win approval is beyond the scope of this post, but it is now reasonably clear that while the risk of failure is relatively low.  There is some risk of clinical failure but it is certainly much lower than is the case for new small molecules or pioneer drugs. The EMA and FDA have responded to very few biosimilars applications either with an outright rejection of an application or a demand for further clinical trials.

The second risk is the competition risk. With multiple biosimilars for the same original biologic (as is would be the case for our hypothetical Remicade biosimilar), selling sufficient quantities of the biosimilar will require extensive marketing efforts and possibly price discounting to persuade doctors and payers to prefer our biosimilar over the others. Unlike the risk of technical failure, the extent of the market risk is both difficult to estimate, but, in my view, completely manageable. The solution to the market risk for a virtual company is simply to enter into an agreement with a major buyer at the very beginning of the effort. For example, under an alternative business model, the virtual development would undertake procure a supply contract with a major payer such as United Healthcare, at a pre-agreed deep discount, before beginning to incur significant development expenses. This approach eliminates market risk and most marketing expenses.

In addition to the relatively low risk of technical failure and the manageable market competition risk, there is one more significant risk to be considered, which is the risk presented by expensive patent infringement litigation with no certainty concerning the eventual outcome. The current thicket of large numbers of process patents surrounding most pioneer biologics will provide far too much fuel for patent litigation and unpredictability to the process. Although I am generally wary of proposing legislative fixes for problems, it seems to me that one may be needed here, in the form of an outer limit on the duration of patent-protection and market exclusivity for the maker of a reference biologic. One of the most hotly debated provisions of the Biosimilar Competition and Innovation Act (BCPIA) was Section 7(A), which provides a twelve year of period of exclusivity during which no biosimilar applicant may be approved simply on the basis of its comparability to the reference, or pioneer, biologic. Without rehashing that debate, it is interesting to speculate on at least one likely explanation for that 12-year exclusivity period: it is remarkably similar to the average period of market exclusivity that is enjoyed by branded small molecule drugs with reasonably large markets. According to a study by Grabowski, Long, and Mortimer the average period of market exclusivity for the branded small-molecule drugs through 2013-2014 was 12.5 years. However, it is increasingly clear that the BCPIA, with its complex “patent dance” provisions, leaves the development of biosimilars open to significant risks in the actual infringement litigation. If 12 years is not the outer limit of market exclusivity, then a slightly longer period, for example 15 years after market entry, certainly is more than long enough for any biologics reference drug maker to have been rewarded very handsomely for its pioneering efforts. Amgen is currently suing Hospira for infringement of process patents that Amgen holds for the making of erythropoietin, which it markets under the brand name Epogen. Amgen’s Epogen, its original blockbuster drug, was first approved by the FDA in 1989. Although some of Epogen’s patents may have been filed under the former system of 17 years from date of issue rather than 20 years from filing, it is close to stunning that twenty-eight years later Amgen is still seeking to defend its market exclusivity by claiming patent infringement. While I am certain that my proposed 15-year limit after market entry on the right to bring infringement actions against any biosimilar applicant will be debated as too long or too short, can anyone seriously defend 28 years, or even 20? Virtual biosimilar development is now possible, and could offer very significant efficiencies and savings. The technical failure risk and the market competition risk are ordinary business risks that can be factored into a business plan and dealt with. However, the risk of costly and uncertain patent infringement litigation for a biosimilar drug needs more certainty than the BCPIA provides. Fifteen years is enough for pioneers and would give the healthcare system a real chance at significant and desperately needed savings.

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.