Market Place
This week, Phispers brings you key insights from the US, where health insurer Cigna acquired pharmacy benefit manager Express Scripts. Alongside, the USFDA chief Scott Gottlieb termed drug pricing as a rigged system, pharma bro Martin Shkreli got sentenced to seven years in prison. After the US, China made headlines by announcing a revamp of its regulatory setup, which includes its healthcare regulator — the CFDA. Japan’s Eisai and Merck signed a US$ 5.76 billion deal to develop and sell Eisai’s cancer drug Lenvima. Novartis rejigged its top brass after its operations head quit. A study found Sanofi and Regeneron’s cholesterol drug Praluent significantly reduces major adverse heart events. And GSK got another reprieve as Hikma’s Advair generic failed to get the USFDA nod.
Gottlieb
highlights problems with drug pricing as Shkreli gets 7-year imprisonment
Last week, ’pharma bro' Martin Shkreli was sentenced to seven years imprisonment for securities fraud related to two hedge funds he ran, and also for fraud stemming from his involvement with Retrophin, a drug company he had founded in 2011.
Shkreli is best known for raising the price of a drug Daraprim by 5,000 percent while running Turing Pharmaceuticals. Shkreli has already been ordered to forfeit nearly US$ 7.4 million in form of assets.
“The one person to blame for me being here today is me,” Shkreli told a judge before she pronounced the verdict. “Not the government. There is no conspiracy to take down Martin Shkreli.”
Two days prior to this verdict, Scott Gottlieb, commissioner, the US Food and Drug Administration (FDA) had criticized pharmacy benefit managers (PBMs), health insurers and drugmakers for “Kabuki drug-pricing constructs” that profit the industry at the expense of consumers. Kabuki is a classical Japanese dance-drama, known for stylization of drama and elaborate make-up.
Gottlieb had called it a “rigged” system that keeps some generic drugs off the market and leaves patients paying high costs. He said the existing system makes it harder for biosimilars (cheaper versions of complex drugs) to enter the market because older, more expensive drugs are favored.
The FDA chief’s comments stoked speculation over what steps the Trump administration may take to control prescription drug costs.
Gottlieb has prioritized approving more generic drugs to help lower prices, and last year he allowed more than 1,000 copycat drugs into the US market.
Gottlieb said three PBMs — CVS, UnitedHealth Group Inc and Express Scripts — control more than two-thirds of the market. And the top three wholesalers — AmerisourceBergen Corp, Cardinal Health Inc and McKesson Corp — control more than 80 percent.
Meanwhile, billionaire Warren Buffett called health costs a “tapeworm” eating at the inside of companies. Buffet’s Berkshire Hathaway Inc has joined hands with Amazon.com and JPMorgan Chase to address healthcare for their US employees, with the aim of improving employee satisfaction and reducing costs.
Healthcare
shakeout speeds up: Cigna to buy Express Scripts for US$ 54 billion
While Gottlieb was criticizing drug pricing, an acquisition was underway — health insurer Cigna Corp agreed to buy pharmacy benefit manager (PBM) Express Scripts Holding for around US$ 54 billion.
Express Scripts is the largest of the remaining independent PBMs. The deal would give the two companies substantial bargaining power over drug prices in the US. It also signaled that a shakeout in healthcare has indeed gathered momentum in the country.
In the US, healthcare spending is rising at a rapid pace, accounting for an estimated 18 percent of the US economy in 2017. PBMs, such as Express Scripts, negotiate drug benefits for insurance plans and employers.
In the US, the medical supply chain has become cumbersome. Insurers, PBMs, drug distributors, pharmacies, and large medical groups — all get a cut of the profits from caring for patients. Bringing these businesses under one roof could streamline costs and improve care.
The deal could help Cigna compete with players like CVS Health Corp and UnitedHealth Group Inc. The former recently acquired Aetna Inc for around US$ 68 billion, linking its pharmacies and drug-benefit plans with the insurer’s coverage.
If Amazon founder Jeff Bezos wanted to get into the health insurance industry, “the target that would have made sense for them is Cigna,” Ana Gupte, senior health care services analyst at Leerink Partners, was quoted as saying in a CNBC story.
Paula Wade, a principal analyst at Decision Resources Group, said "the Cigna move is part of a realignment of the whole industry in response to the frustration" over drug pricing.
Andrew Witty to head a PBM: Meanwhile, Andrew Witty, former CEO of GlaxoSmithKline who retired from the British drug major a year back, is taking a leadership role in managing drug benefits in one of the largest, fastest growing outfits in the US.
Witty has been named the new CEO of UnitedHealth’s Optum division, a PBM group and healthcare analytics company. Optum has 140,000 staffers around the world. It earns roughly half of UnitedHealth’s revenue (which was US$ 201 billion in 2017) from its three key subsidiaries — OptumHealth and OptumInsight as well as OptumRx.
China overhauls
its regulatory setup; announces restructuring of CFDA
China is undertaking a sweeping overhaul of its regulatory setup in order to close loopholes. As part of these changes, the government is merging five-year old standalone healthcare regulatory agency — the China Food and Drug Administration (CFDA) — into a gigantic national market supervision administration.
As per the new regulations, the State Council is planning to aid new drug developers by protecting intellectual property through a patenting system designed to cut the risk of infringements while maintaining the same encouragement towards the development of generic medicines. The new drug regulator’s operations will extend only to the provincial level, whereas drug sales and marketing activities will be monitored by local market-supervision agencies.
The Chinese government has proposed to combine the CFDA with agencies that regulate business registration, quality control, pricing and anti-monopoly efforts. Together, these agencies will form a new department.
Among other changes, China is giving its central bank the power to write the rules for the financial sector. This is being undertaken to curb the risks in the US$ 43 trillion banking and insurance industries.
In the biggest industry overhaul since 2003, the China Banking Regulatory Commission and the China Insurance Regulatory Commission will be merged.
The regulatory changes signal wider moves to consolidate the power of the Communist Party and tighten President Xi Jinping’s grip over China.
The CFDA was established in 2013, when it became a standalone department. “Given the unique characteristics of drug regulation, a separate state drug administration will be established and managed under the national market regulatory administration,” said the government presenter at the conference. As of now, the announcement lacks detailed plans.
Japan’s Eisai and Merck sign US$ 5.76 billion deal to develop and sell cancer drug
Last week, Japan’s Eisai Co and US-based Merck & Co announced they have signed a potential multibillion-dollar deal to develop and sell Eisai’s cancer drug Lenvima, which is already approved in dozens of countries as treatment for thyroid cancer and advanced kidney cancer (when used along with another medicine).
As per the deal, the Japanese drugmaker will potentially receive up to US$ 5.76 billion if it proves a success. This includes an upfront payment of US$ 750 million. The remaining US$ 5.01 billion will be paid by Merck for development achievements and sales milestones, a joint statement said.
The two companies will initiate new clinical studies to make Lenvima applicable to multiple types of the disease, including endometrial cancer, when given along with Keytruda, a drug developed by Merck.
Merck will be entitled to half of all global Lenvima sales revenue, even for its already approved uses for thyroid cancer and advanced kidney cancer.
The deal is similar to a multibillion-dollar oncology collaboration Merck struck with AstraZeneca Plc for its cancer drug Lynparza last year.
Novartis
rejigs its top brass as operations head quits; bets
big
on a digital
The management of Novartis has stepped up its focus on manufacturing tech, digital efforts and ethics revamp. On Monday, the Swiss drugmaker said Andre Wyss, president of operations, is leaving the company and it has appointed three new members to its executive committee.
Bertrand Bodson, chief digital officer, Steffen Lang, global head, Novartis Technical Operations, and Shannon Klinger, chief ethics, risk and compliance officer, have been appointed to the Executive Committee of Novartis (ECN). All changes are effective as of April 1, 2018.
“The appointments of Bertrand Bodson, Steffen Lang and Shannon Klinger to the ECN will help us accelerate our efforts to lead in data and digital,” said CEO Vas Narasimhan.
Wyss is leaving the company to “pursue opportunities outside of Novartis,” the company said.
Novartis recently revised its compliance and ethics policies to prevent the legal crackdowns it has faced in other country. In South Korea, a bribery investigation ended in the indictment of a group of employees who've since been dismissed by Novartis.
Klinger's appointment comes one week after shareholders urged the company to act to avoid ongoing problems with compliance.
Narasimhan has said that one of his top goals is to use technology to transform the way Novartis does business in every area, from research to commercial.
Meanwhile, in a commentary published in Fortune, Narasimhan said discovery of new cardiovascular medicines is at its lowest point in decades and represents less than 10 percent of global R&D spending.
Sanofi-Regeneron’s cholesterol drug reduces adverse heart events, says study
In a study released last week, Praluent — an expensive potent cholesterol drug sold by Regeneron Pharmaceuticals and Sanofi — significantly reduced major adverse heart events.
Released at the American College of Cardiology’s scientific meeting in Orlando, the findings of Odyssey Outcomes data reveal conclusive evidence that Praluent not only significantly reduced the number of cardio incidents experienced by patients, they also led to a clear reduction in deaths.
It remains to be seen whether the new data will prompt insurers to pay for increased use of the medicine in the US. Regeneron and Sanofi have said they would deeply discount theirUS$ 14,000-a-year cholesterol treatment to US$ 4,500 to US$ 8,000 for some patients in order to loosen insurer restriction on the drugs. So far, the drug has sold poorly.
The announcement “will set an important precedent in the ongoing drug pricing debate here in the US,” Spencer Perlman, an analyst with the Bethesda, Maryland-based investment advisory firm Veda Partners, said. “This will send a ripple effect across the industry and crowded therapeutic categories will likely face additional pressure.”
GSK
gets another reprieve as Hikma’s Advair generic stumbles yet again
GlaxoSmithKline won another reprieve for its blockbuster drug Advair as the USFDA asked Hikma Pharmaceuticals to conduct further clinical studies on its generic copy of GSK’s lung drug.
This is not the first time GSK’s Advair has won a reprieve. In 2017 too, Hikma and Mylan faced delays in the US approval for their respective Advair generics. And last month a third Advair copy from Novartis’s Sandoz division also failed to get the FDA nod.
Hikma said it plans to submit a response to the USFDA with new clinical data in 2019. The USFDA has required significant amendments to its application. Vectura, Hikma’s partner on the project, said if all goes well, a potential approval and launch of the generic Advair (which is an inhaled medication) could come in 2020.
The timing of the arrival of generic Advair in the United States is critical to GSK’s near-term earnings outlook. With these latest snags, GSK is likely to enjoy higher earnings from Advair for a longer duration. Though Mylan still has a chance to win the USFDA nod for its generic version later this year.
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