In the wake of various blockbuster drugs losing patent protection, we have seen significant advancements in pharma innovation to fill the pipeline of new drugs over the past five years. The entire disease paradigm for several conditions has been turned upside down, with clinical advances that have enabled the rapid development of novel treatments. Examples include the introduction of PD-L1 inhibitors for melanoma and non-small cell lung cancer (NSCLC), curative medications targeting multiple hepatitis C virus (HCV) genotypes, and highly effective oral immunomodulators for multiple sclerosis (MS).

We have also seen efforts, such as drug-device combination treatments for diabetes and beta-amyloid targeting agents against Alzheimer’s disease, that have failed to deliver clinical results.

While several biosimilars for chronic obstructive pulmonary disease (COPD), asthma, and rheumatoid conditions are coming to market, here we focus on the year ahead for next-generation innovative drugs for three high-unmet-need indications: Oncology, Neurology, and Rare Blood Disorders.

Oncology—Scratching the Surface

Despite the multiple modalities of care for cancer patients, we have only begun to scratch the surface with regard to therapies combating different types of cancers and improvements in therapy effectiveness (both progression-free survival [PFS] and overall survival [OS] rates). Given their demonstrated outcome improvements across multiple cancer types, targeted therapies and immunotherapy agents remain the focus of large pharma companies.

In addition to label expansion of existing immunotherapies beyond melanoma and NSCLC into hepatocellular carcinoma (HCC), esophageal, and gastric cancers among others, several cell therapies and cancer vaccines make up the more than 200 immunotherapies currently under study. Beyond immuno-oncology therapies, we are still seeing advances in targeted therapies. In 2017, the Food and Drug Administration (FDA) used its priority review and Breakthrough Therapy Designation in approving abemaciclib for HR-positive and HER2-negative breast cancer, with additional uptake expected in 2018.

The complementary treatment mechanism of molecules such as PD-1/PD-L1 inhibitor drugs is further driving the growth of drugs in the combination regimen category. There are currently 750 clinical studies testing PD-1/PD-L1 inhibitor drugs in Phase III or later in combination with other therapies, including immunotherapies and targeted drugs (Norris et al., 2017). These studies are expected to create a boom in cancer therapies that will transform the field of oncology while also making treatment decisions more complex.

For these drugs to be established as a standard of care, a careful optimization of the clinical program for a given regimen is required. Such optimization will have to take into account the science as well as complex patient data sets in targeting the right patients with the appropriate treatment regimens. Precision medicine technologies are already enabling the tailoring of a drug regimen to a specific genetic code (Pothier 2017). Finally, care providers need to keep up with the accelerated pace of therapeutic breakthroughs in the field of oncology that will change how they treat their patients.

Neurology—Attracting Investors

Big pharma has largely walked away from new drug development for psychiatric and neurological conditions in part due to the notoriously difficult, controversial, and prohibitively costly R&D process. While industry giants relied on few products that proved to be highly lucrative, competition from generics is significantly eroding earnings for these manufacturers.

As a result, psychopharmacological drug research and development is attracting investments even in the face of recent high-profile failures of experimental Alzheimer’s drugs in large Phase III clinical trials. It will take years for new therapies to come to market and create the level of excitement we saw around bapineuzumab and solanezumab, but other central nervous system (CNS) indications are ripe for new launches in the near future.

Particularly in 2018, we expect various market catalysts in the largely underserved migraine indication. In a Phase III trial, Teva Pharmaceutical Industries Ltd.’s fremanezumab resulted in a lower frequency of headache than placebo among patients with chronic migraine. The drug is estimated to generate $600 million in annual sales by 2022 (EvaluatePharma 2017).

“These achievements also represent an important part of the company’s ongoing efforts to address the erosion of our largest product, Copaxone, due to generic filers. This erosion accelerated significantly last month following a competitor’s approval and the launch of a generic Copaxone 40 milligram in the U.S.,” says Yitzhak Peterburg, Teva Interim CEO (Teva Q3:17 Earnings Call).

Other migraine drugs anticipated to come to market include lasmiditan succinate for acute treatment of migraine and erenumab for prevention of episodic migraine—both are expected to come to market in 2019. Furthermore, we are anticipating developments in the epilepsy-associated rare seizure disorders, which have been largely underserved relative to common epilepsy conditions that are treated with antiepileptic drugs (AEDs).

One such drug that is being developed by GW Pharmaceuticals is Epidiolex. This drug is a plant-derived cannabidiol (CBD) oral solution. The drug is currently in Phase III of clinical trials for treating severe, orphan, early-onset, treatment-resistant epilepsy syndromes. If approved, the drug will be the first in a new class of CBD-derived AEDs.

Rare Blood Disorders—Advances

Finally, we are excited for advances in rare blood disorders. Hemophilia is experiencing a market shakeup, with Roche launching its first product, Hemlibra (emicizumab-kxwh), as a prophylactic treatment to prevent or reduce the frequency of bleeding episodes in patients with hemophilia A. With its launch of Hemlibra, Roche looks to seize market share from established major players that have dominated the hemophilia market with their established clotting factors for years.

Another FDA-identified underserved rare blood disorder, sickle cell disease (SCD), is poised to see Rivipansel (GMI-1070) come to market from GlycoMimetics, in collaboration with a large pharma player. Rivipansel is under development for the treatment of Vaso-Occlusive Crisis (VOC), a common painful complication of SCD in adolescents and adults.

Finally, Portola Pharmaceuticals Inc. is expected to introduce AndexXa (andexanet alfa), a modified human protein designed to reverse the anticoagulant activity by Factor Xa inhibitors, which cause severe bleeding in 1% to 3% of patients taking the inhibitors. AndexXa is also expected to boost sales of anticoagulants such as apixaban and rivaroxaban due to its ability to reverse the effects of the said anticoagulants.

The arrival of these innovative drugs will help those with serious illnesses and rare diseases live longer and healthier lives. We also expect these drugs to impact formularies and spending beyond 2018.

Pricing Implications

For example, a new-form cell therapy that uses chimeric antigen receptor (CAR) T-cells priced at $475,000 is the latest example of a prohibitively expensive innovative drug. What is even more concerning is that combination therapies have historically been priced at the sum of the individual prices of the drugs making up the combination therapies, leading to ever-increasing pharmacy spending even when there is reduced development cost due to drug companies’ use of previously FDA-approved drugs.

Overall, stakeholders in the healthcare system are seeking more transparency in contracting as well as greater freedom from the incredible negotiating power that others within the pharma value chain, such as pharmacy benefit managers (PBMs) and health plans, currently hold. While value-based care holds promise, monitoring outcome for complex disease states in the face of adherence is hard, and providers and payers have a tough time tracking clinically relevant data.

Despite many early challenges around initial price and discounts, the market and plan sponsors accepted the drugs into their benefit plans and agreed to reimburse for them. There were many voices lamenting the high price of these therapies and how they will “bankrupt” the system but, in the end, there was broad acceptance that a cure was worth paying for.

Demand for Innovative Drugs versus Affordability

But what does the drug channel need to consider around how these drugs are paid for versus how they are priced? The biggest underlying issue when we consider price is affordability, not demand. The widespread demand is for innovative therapies that cure disease or improve the quality of life for patients when they are transitioned from traditional drugs to novel ones. What is not widely considered by drug companies, however, is how drugs are paid for and the requirement to consider different economic models when launching an innovative therapy.

Plan sponsors, the employers, and government agencies that pay for drug therapies are constrained by a benefit-funding model that separates their dollars between medical and pharmacy costs. Drug companies have relied on incentives like discounts, rebates, patient assistance, and co-pay discount card programs to make drugs more affordable, but they largely ignore the issue of financing from the perspective of the health and drug plan benefit trusts.

How will drug manufacturers help sponsors plan to pay for therapies that cost $1 million? They cannot rely on reinsurance or stop-loss policies to cover costs for these high-cost claimants because those policies are largely written to consider medical expenses, not drug/pharmacy expenses. Drug companies need to explore ways to spread the risk of large drug payments over longer periods of time beyond a single calendar or plan year. Plan sponsors have not yet contemplated combining their medical and pharmacy dollars into a single pool or underwriting their insurance contracts in multi-year contracts.

Innovating Payment Models

As drug companies develop their revenue forecasts pre-launch, there needs to be consideration for new economic models and the implications to revenue if plan sponsors demand different risk-sharing agreements. The promise of outcomes-based and value-based contracts has yet to deliver meaningful return outside of products that have standardized biometric outcome measures such as HbA1C metrics for diabetics. Furthermore, innovative products such as gene and nano therapies for rare diseases will be even harder to contract for under value-based agreements if the clinical community does not agree on a standard of care.

Drug companies may need to embrace the responsibility of financing the payment of therapy, not just delivering on innovation. The science is moving at an exciting pace but encountering an antiquated economic model that could include long-term risk contracts, social impact bonds, financing instruments, pooled insurance contracts, and other innovative payment models used for other expensive goods.

EYG no. 07145-173GBL.

References:

  • Troy Norris, Keyuri Shah, and Kristin Pothier. “Oncology Disruption Demands Strategic Transformation.” In vivo. October 2017.
  • Kristin Pothier. “Personalizing Precision Medicine: A Global Voyage from Vision to Reality.” Wiley. 2017.
  • Cowen and Company. “Therapeutic Categories Outlook Comprehensive Study.” September 2017.
  • Teva Earnings Call. https://seekingalpha.com/article/4119613-teva-pharmaceutical-industries-teva-q3-2017-results-earnings-call-transcript. November 2017.
  • EY-Parthenon analysis. “Creative Contraction Solutions.” October 2017
  • “Worldwide Product Sales.” Accessed December 12, 2017.
  • Company Websites, FiercePharma, PubMed, New England Journal of Medicine, ClinicalTrials.gov.

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