Gene therapy ‘cures’ force new payment models

Solving the scientific challenges around gene therapy took decades. Figuring out how to pay for these new medicines will, hopefully, be quicker. As gene- and cell-therapies begin to trickle onto the market, with pipelines expanding behind, payers and manufacturers are frantically trying to work out how to fund these often one-time treatments, several of which purport to offer patients something close to a cure.

Smaller companies like Spark Therapeutics have engaged in outcomes-based contracts or installment-payment options with individual insurers; Spark’s Luxturna was approved by FDA for an inherited eye disease in late 2017. It costs $425,000 – per eye.

Big Pharma are involved in the debate, too, as their portfolios also shift toward high-value gene- and cell-based therapies. Novartis’ Kymriah, a $475,000 cancer therapy that involves modifying both genes and cells, has starred in several pharma-payer discussions in the 18 months following its US approval. Despite a no-cure, no-pay deal for children covered by the government’s Medicaid system, uptake of the drug has been limited.

Novartis’ CEO Vas Narasimhan has renewed interest in addressing the pricing issue, however, since paying $8.7 billion for gene-therapy company AveXis in April 2018. The deal came with a recently-filed candidate for spinal muscular atrophy, and two further clinical-stage candidates. (Novartis also has ex-US rights to Luxturna.)

Narasimhan is reportedly looking beyond health insurers to re-insurance companies, like Munich Re or Swiss Re. These groups underwrite conventional insurers, for instance in the case of catastrophic natural disasters. Why not have them, similarly, underwrite the outlier costs of patients in need of these specialized therapies, which, though pricey, can also save up to several million dollars in healthcare costs?

It is not an entirely new idea: several US states have created state-funded reinsurance ‘pools’ to help local insurers cope with the most expensive medical claims, and slow the rise in premiums for families and individuals. The World Bank teamed up with reinsurers in 2017 to cover against future Ebola pandemics, according to the Financial Times. This last parallel is imperfect: infectious disease outbreaks in developing countries present particular population-level health risks that are not relevant in the case of rare genetic disorders. But the re-insurance idea has legs. The costs of multiple specialist treatments could be pooled, for example, including across payers. Europe already offers a few examples of international payer cooperation to fund high-cost treatments for rare diseases.

The difficulty will be in agreeing the details – just as it has been for today’s growing handful of outcomes-based reimbursement deals. At what point, and for whom, does the re-insurance cover kick in? How will payers (and patients) absorb re-insurance premiums as these, necessarily, grow with the number of high-priced, one-time, potentially curative treatments that come to market? Will such a system force already high prices up further still?

The science behind these new therapies is extraordinary. As further gene- and cell-based medicines reach or approach the market in 2019 and beyond, society now requires similarly extraordinary efforts to solve the funding challenge – and fast.

As Keytruda expands, payers recoil

Checkpoint inhibitors like Merck’s Keytruda (pembrolizumab) and Bristol Myers Squibb’s Opdivo (nivolumab) are extending the lives of many cancer patients. Yet their success across a growing range of cancers is forcing payers to negotiate harder bargains, including reimbursement caps.

 

Keytruda’s December 2018 approval in Europe as an adjuvant treatment for late-stage melanoma patients who have undergone surgery is just the latest in a string of approvals for the drug across multiple cancer types and settings. Keytruda is used across cancers of the skin, lung, blood, head and neck, liver, intestine and cervix, among others. Based on its quarterly sales trajectory, it will soon be an $8 billion blockbuster.

 

At an average cost of about $13,000 per month, Keytruda, like others in its class, is much pricier than chemotherapy. Much of the data supporting checkpoint inhibitors are strong – the KEYNOTE-054 trial backing Keytruda’s recent EU melanoma approval, which enrolled over 1000 patients, showed a 44% reduction in the risk of disease recurrence or death compared to placebo.

 

It’s hard to argue with that. (These patients’ current option, post-surgery, is to ‘watch and wait’ to see if the disease returns.) UK watchdog the National Institute of Health & Care Excellence (NICE) agreed to make the drug available via the Cancer Drugs Fund.

 

Yet this is a ‘managed access’ scheme – a temporary agreement, while further data are collected on the drug’s longer term benefits, particularly overall survival. CDF will fund the drug until the end of 2021, after which NICE will review its guidance.

 

The US FDA will issue its decision on Keytruda in this melanoma setting by February 2019. Checkpoint inhibitor approvals will continue – and may accelerate – beyond that. The drugs work by interfering with a mechanism used by cancer cells to hide from our immune system. This unlocks our body’s own defences against the abnormal cells. It is a fairly general approach, which works across several tumor types, especially those, like melanomas, where there is already a low-level immune response.

 

Checkpoint inhibitors are already a crowded class. Alongside category-leader Keytruda and Opdivo, the first to gain approval back in December 2014, sit Bristol’s Yervoy, Roche’s Tecentriq, Merck KGAa’s Bavencio, AstraZeneca’s Imfinzi and Sanofi/Regeneron’s Libtayo – plus plenty more in late-stage development.

 

Competition, in theory, gives payers more negotiating power. But checkpoint inhibitors are not all the same. Some inhibit different receptors within the complex immune-system control pathways. This makes them more appropriate in some settings than in others. Dosing and administration frequency can vary, along with toxicity. So some checkpoint inhibitors may carve a niche where there are relatively few alternatives.

 

And some may work better in combination with other treatments – not just older, chemotherapy drugs, but newer targeted therapies, too, with high price tags of their own.

For example, Keytruda is in a Phase III trial alongside Amgen’s oncolytic virus drug, Imlygic. Early data suggest that the duo may significantly enhance the strength of response. Adding an oncolytic virus may also expand checkpoint inhibitors’ reach beyond tumors that already trigger a low-level immune response, to include those that are immunologically “cold” – which accounts for the majority. That could unleash even faster growth in the class.

 

These dynamics will force a range of new pricing and payment structures, beyond the relatively straightforward price-volume arrangements, and overall spending caps, already in place in some European markets. The same drug used within a combination may have to be priced lower than when used alone, for example. Pricing may need to be linked to specific indications. Payers may insist on even stronger survival data.

 

Indication- and combination-specific pricing approaches are compelling in theory, and have long been investigated. Implementing them has proved very tricky, though. Checkpoint inhibitors’ runaway growth may be what helps overcome those practical barriers.

Rare and Innovative? Not Enough for European Payers

There are no longer any free tickets to access European or US drug reimbursement, even for highly novel drugs that address rare diseases. UK cost watchdog the National Institute of Health & Care Excellence (NICE) and the US Institute for Clinical and Economic Review (ICER) have both turned down two newly-approved, innovative orphan drugs as too expensive.

Alnylam Pharmaceuticals’ Onpattro (patisiran) and Ionis/Akcea’s Tegsedi (inotersen) treat a very rare disease called hereditary transthyretin-mediated amyloidosis (ATTR), for which no other therapies exist. Both reduce disability and enhance quality of life. But Tegsedi costs $388,000 per patient per year in the UK, and Onpattro costs $167,000 – and there’s little evidence as yet that their benefits endure over the longer-term. So NICE declared in late 2018 that neither drug would be an effective use of resources. ICER, faced with $450,000 annual list prices for both treatments, reached a similar conclusion.

 

NICE’s rejection is preliminary – a review will happen in February 2019 — and ICER’s opinions are non-binding on the US’ multiple payers. But the UK reimbursement process in particular is a familiar dance: manufacturers go in with aggressively priced, highly novel medicines – Onpattro is the first RNA interference (RNAi)-based drug ever approved in the US and Europe –  and NICE says ‘no way’, even with the more generous cost-effectiveness thresholds that accompany highly specialised technologies. Manufacturers come back with a revised price (typically) or some other kind of patient access agreement (less often), and the drug may then get a green light. The approval may apply only to a certain patient groups – though with only about 150 ATTR sufferers in the UK, restrictions may be less likely in this case.

 

The steps are so familiar that Ionis’ spokesperson admitted that NICE’s decision was “not unexpected”. NICE’s objections tend to cover similar ground, too – besides price, manufacturers are regularly chastised for assumptions made in their economic models and costings, usually biasing in favour of treatment, and insufficient evidence of long-term benefits (a fact of life for new medicines).

 

One might wonder why sponsors do not check in ahead with NICE – which offers sponsors early advice – and use more conservative estimates. The companies had already offered NICE confidential discounts. But the estimated incremental cost per quality-adjusted-life year (QALY) for Tegsedi was still nearly three times the threshold (per the manufacturers’ own economic model) and over six times using NICE’s preferred model. ICER, similarly, is recommending discounts of between 90-97% for the drugs.

 

These are not slight adjustments. Nearly 20 years after NICE came into being, the discrepancies between manufacturers’ and payers’ estimates of value can still be vast – even, as in this case, when there is more than one option (Pfizer has a similar drug on the way in a related disease). Alnylam anticipated payers’ value-quest in the US, engaging in discussions around value-based agreements for Onpattro with payers including Harvard Pilgrim Healthcare, Express Scripts, Aetna. That is good. Prices that are closer to payers’ well-publicised thresholds would be even better – not least for patients, who could access treatments faster.

GSK buys Tesaro to re-enter oncology race

GlaxoSmithKline’s latest deal to buy US cancer company Tesaro looks a bit like a strategic U-turn. In 2014, Sir Andrew Witty, then CEO, did a swap-deal with Novartis: it sold off the company’s established oncology business because it was un-competitive, and bulked up instead on consumer healthcare. Now, Witty’s successor Emma Walmsley has ditched a flagship consumer brand in India, the malted drink Horlicks, and is paying $5.1 billion for Tesaro’s marketed oncology drug, Zejula (niraparib), and a pipeline.

 

 

It is not quite a U-turn: Witty maintained some promising early-stage cancer programs, and the intention was to bide time until these came through, potentially leap-frogging rivals, including in the white-hot immune-oncology space. But the internal assets were never going to be enough. And shopping for cancer assets is pricey – GSK paid a 110% premium to Tesaro’s 30-day average share-price, sending its own stock plummeting (even though Tesaro’s share price had been even higher earlier on in the year).

Zejula is a PARP (poly-ADP ribose polymerase) inhibitor, which works by blocking cancer cells’ ability to repair their own DNA. The class is highly promising, but Zejula, approved in the US in 2017 for recurrent ovarian cancer, is not at the front. AstraZeneca and Merck & Co.’s pioneer Lynparza (olaparib) has been available for four years for advanced ovarian cancer. In 2018, it was approved for use in some forms of breast cancer, and showed strong Phase III data supporting earlier use in ovarian disease – all of which solidifies its lead over rivals, including Clovis Oncology’s Rubraca (rucaparib), which was recently awarded FDA breakthrough designation for use in prostate cancer. Meanwhile, Pfizer came onto the scene in October 2018 when Talzenna (talazoparib) was approved for patients with a certain kind of breast cancer.

In short, GSK is joining a suite of more experienced rivals in a hotly-contested race to expand PARP inhibitor use into other cancer types. Walmsley points out that the Tesaro deal will build GSK’s commercial capability in oncology as well as its pipeline. But catching up will be tough – and will require more capital still, beyond the $3.8 billion generated by the Horlicks sale.

Hence investors’ flight from the stock despite reassurances that the hallowed dividend would be protected. There are bright spots, including the vaccines division and HIV-focused ViiV Healthcare. And GSK has successfully dampened the impact of generic Advair on its flagship respiratory franchise. But in pharmaceuticals, the company has spent years organizing and re-organizing its R&D, shifting its focus in and around emerging markets,

consumer health and generics. These changes have come at a cost, in terms of innovation, performance, and trust. It’s precisely these three pillars that Walmsley has identified as GSK’s priorities – for the long-term.

The diabetes battle: Will Novo’s oral GLP-1 knock Trulicity off its perch?

Timing is of the essence for Novo Nordisk. The Danish company may use its priority review voucher to accelerate oral GLP-1 agonist candidate, semaglutide, past the regulators – though a decision is not confirmed. Buying a few more weeks – or months – to eat into sales of Lilly’s fast-growing once-weekly injectable GLP-1, Trulicity, would make sense. That drug is already head-to-head in market share terms with Novo’s pioneer once-daily injectable GLP-1, Victoza. And in November 2018, Lilly played a new trump card: superior cardiovascular outcomes data, versus placebo, for Trulicity in the 9,900-patient REWIND trial. Uniquely, according to Lilly, two thirds of the patients included in the trial did not have heart disease to begin with. The 5-year median follow up period is also the longest in any GLP-1 study, the company claims.

Novo has already launched its own once-weekly contender to rival Trulicity. Ozempic (injectable semaglutide) was approved in late 2017 in the US, with trial evidence suggesting it may lower blood sugar and promote weight loss to a greater extent than Trulicity. The Danish company has been working hard to try to claw back some of Lilly’s gains, but Trulicity’s $2 billion 2017 sales still dwarf young Ozempic’s (though Victoza is still category leader, selling $3.5 billion in 2017).

Novo’s once-daily pill version of Ozempic won’t be available before the end of 2019 – even with the priority review. But if approved, it could help Novo shore up its leadership of the GLP-1 space. And that is the most important battlefield in diabetes right now. These biological drugs lower blood sugar by stimulating insulin release and inducing satiety. They can help delay patients’ progression onto injected insulin, and, crucially, they are much easier to use than insulin. They are taken as a standard dose, without the requirement to measure blood sugar levels. That matters a lot, since adherence is the key challenge in diabetes: the drugs work perfectly well in controlled trials, but have proven far harder to use effectively in the real world. GLP-1s are more valuable commercially, too, as insulin prices continue to be eroded by competitive pressures, including from biosimilars. GLP-1 drugs will account for the largest chunk of diabetes drugs’ sales by 2024, according to analysts.

GLP-1 agonists have already evolved from twice- and once-daily to once-weekly injections, ramping up billions in sales in the process. By creating an oral version – one of the first oral

formulations of a biologic drug – Novo could hit another jackpot, if patients find it easier to take than a weekly injection.

There is an ‘if’. Most people would prefer to avoid needles. But swallowing oral semaglutide does require some fore-thought. The drug must be taken on an empty stomach, with water (but not too much), and at least 30 minutes prior to a meal. Otherwise, it may not work properly. As David Kliff, publisher of Diabetic Investor, notes, these constraints “add an element of uncertainty” to a drug that most analysts believe will be a sure win.

There will be a pricing battle, too. If Novo prices oral semaglutide like a pill, it might gain market share but risks accelerating price declines for injectable GLP-1s, including its own Ozempic. Either way, Lilly will push Trulicity’s cardiovascular data hard. (Oral semaglutide narrowly missed showing a statistically significant reduction in major adverse cardiovascular events versus placebo, in the last of ten trials supporting its efficacy and safety. It did show a statistically significant reduction in all-cause mortality among the approximately 3000 patients with high CV risk, however.)

Kliff reckons there may, by late 2019, be another game in town: Intarcia Therapeutics’ GLP-1-releasing implant. No pills, no injections, just a match-stick-sized device inserted under the skin of the abdomen, changed every six months. But FDA rebuffed the exenatide micropump in late 2017, prompting staff cuts and a long silence from the company.

If and when Novo’s oral GLP-1 is approved, it may bump up against another highly competitive class of oral diabetes drugs: SGLT-2 inhibitors. These are locked in their own battle for market share as sponsors push data showing the treatments may help reduce the risk of cardiovascular and kidney disease.

The diabetes drug market will remain dynamic, as incumbents battle it out using pricing and convenience to secure optimal market access.

Bayer Cuts Internal R&D, Looking Outside

Bayer’s late November announcement of 12,000 job cuts and a focus on ‘collaborative research models’ and ‘external innovations’ to fuel pharma R&D is not a surprise. Rumors had been swirling for months in the German press. Bayer board member and innovation chief Kemal Malik talked candidly to IN VIVO earlier in 2018 about Big Pharma’s existential challenge. Declining internal R&D productivity, and new sources of innovation scattered widely across companies of all sizes and in all corners of the globe, are forcing change. “We will pivot to a new model for sourcing innovation,” he predicted.

So here it is. Bayer is now taking what is described as an “essential step” to focus on external, not internal, innovation. Most other pharma firms have already done so, to different degrees. The rate of scientific and technological progress means any single pharma, however large, cannot expect to capture more than a tiny part in-house. Collaboration is crucial – for new tools, new approaches and new attitudes.

Collaboration is also cheaper than investing in internal R&D. Paul Stoffels, EVP and Chief Scientific Officer of Johnson & Johnson, reckons that for each dollar it pays into its JLABS biotech incubators – one of the several channels the company uses to access external innovation – other investors fork out $4. These biotechs don’t, of course, deliver ready-made drugs to J&J. But they nevertheless provide a highly-leveraged external innovation engine.

In its bid for “sustainable business success,” Bayer is now moving more aggressively in the same direction. The German conglomerate’s Bayer Leaps program, which got off the ground in 2016, was the start. Bayer Leaps is a series of large, long-term equity investments, alongside other backers, to build new companies working with stem-cells, CRISPR gene-editing, synthetic biology and other cutting edge tools. The aim: to create best-in-category businesses as the foundation for future partnerships – and the future pipeline.

The Bayer Leaps programs were intentionally kept outside the main organization, because, in Malik’s words, “change challenges people, their role, their careers.” As the fresh young seedlings take root, though, the main plant will be cut back to provide space and sunlight.

That said, Bayer’s recent streamlining is not, ostensibly, linked to particular progress within the Bayer Leaps portfolio – these are still early stage ventures. They won’t fill the post-patent-expiry gaps left by heart drug Xarelto and eye treatment Eylea. The move is instead about improving focus, efficiency and agility, generating savings to spend on in-licensing some pipeline. The group is also divesting its animal health business and two non-core consumer product categories.

The head-count cull may also help shift the culture of this 150-year old company. The appetite for change among many of its employees will be virtually zero. A majority may have built their careers around an R&D model that they see little reason to change. Yet the reality today is that “where an innovation comes from is less important than how we turn it into benefit for patients,” as Chairman Werner Baumann put it in his statement accompanying the announcement.

The recent FDA approval of cancer drug Vitrakvi (larotrectinib) is a case in point. The treatment is among the first to target tumors based on their genetic mutations, not their location in the body. Bayer can claim the drug as theirs: they will sell or help sell it. But Bayer did not discover or develop it. That was down to five-year-old Loxo Oncology. The global partnership was signed a year ago.