The Friday Five – 5 questions raised this week in pharma

July 10, 2014
Ref: The Friday Five Desk

Will other EU countries support off-label Avastin use in AMD?

Hotly contested debate between pharma and European regulators over the value and price of drugs is hardly a new issue, but industry appears to have a new challenge on its hands with regard to off-label usage where significant cost savings can be extracted.

Exhibit A is the ongoing case of Roche's Avastin and its (unapproved) use for the treatment of wet age-related macular degeneration (AMD). Backed by Italian regulators last month, their French counterparts have now moved to support use of the product in this indication instead of Roche and Novartis' molecularly-related (but much more expensive) Lucentis or Bayer/Regeneron Pharmaceuticals' Eylea.

Use of Avastin for AMD has been a more prominent issue in the US market for some time, with its impact on Lucentis sales in Europe notably more muted. If support in this particular instance grows it could set a precedent for other products to be used off-label and thus rob the industry of revenues. The losses and gains associated with such regulatory procedures are never this clear cut, however, as illustrated by the European Federation of Pharmaceutical Industries and Associations' decision to cite safety as its primary concern when criticising the actions of the French government.

Efforts to reduce off-label use in the US on safety grounds have had little impact to date; how this approach works among European regulators – who arguably have more economic motivation for supporting use – remains to be seen.

See also ViewPoints: Italian legislation to support off-label drug use unlikely to pass EU scrutiny.

How do physicians view industry's investment in medical affairs?

This week we published results from a Physician Views poll that collected the views of pulmonologists towards medical affairs personnel employed by the pharmaceutical industry – see Physician Views Poll Results – Pulmonologists embracing industry's investment in medical affairs: particularly in Europe; some room for catch up in the US.

The role of medical affairs – positioned at an interface between the R&D and commercial spheres of the pharma industry – is an increasingly important one for drugmakers. These personnel are in a prime position to navigate the industry's continued transition from merely selling drugs to playing an integral role in the efficient workings of healthcare systems.

The positive news is that physicians polled to date by FirstWord appear to appreciate the role that Medical Affairs personnel play (while also providing some feedback on how industry could improve further). See also...

Physician Views Poll Results: Role of medical affairs is critical, according to oncologist feedback and Physician Views Poll Results: Neurologists agree – role of medical affairs in MS space is key in enhancing industry/physician communication.

Has AbbVie learnt any lessons from Pfizer?

As AbbVie intensifies its efforts to acquire Shire – having made a fourth bid worth $51.5 billion this week – one notable subtext is the similarity between this pursuit and Pfizer's recent chase of AstraZeneca. Furthermore, there has been some debate as to whether AbbVie can learn anything from Pfizer's failure – see Spotlight On: A failed pursuit? – the AstraZeneca/Pfizer timeline.

With the complexities of the UK takeover law also having to be taken into consideration, one notable lesson that AbbVie appears to have taken on board is to give itself the flexibility to return with a higher offer over the next few weeks. In keeping its options open, AbbVie has also not ruled out a hostile bid, something that Pfizer was quick to discount.

Shire too, appears to have learnt some lessons. While it has mirrored the defensive posturing of AstraZeneca to some extent – most notably via the projection of bullish forecasts for its late-stage
pipeline – the company is yet to respond to AbbVie's fourth offer two days after it was made (at the time of writing) – a notable contrast to the rapid fire rejections made by AstraZeneca within hours of receiving a bid.

AbbVie's approach may be working, with numerous analysts suggesting that its latest bid stands a good chance of bringing Shire to the negotiating table while simultaneously indicating some 'wriggle room' for an increased offer.

Tax-inversion or over-dependency – what is driving AbbVie's M&A aspirations?

A key catalyst for AbbVie's pursuit of Shire is the potential tax-lowering benefits that the Irish-domiciled company offers, and the broader role of tax-inversion M&A as a key industry theme was reinforced this week with Salix Pharmaceuticals agreeing to merge with Cosmo Pharmaceuticals – see ViewPoints: Tax inversion continues to drive pharma M&A deals both large and small.

For AbbVie, however, a second notable consideration appears to be driving its bid to acquire Shire; its level of dependency on Humira, which accounts for around 60 percent of its revenues. As FirstWord has argued before, if you are going to be overly-dependent on one product then Humira is pretty much the blueprint for the profile of that product. See FirstWord List: Top 15 pharma and lead product dependency.

Nevertheless, numerous analysts have cited the proportion of revenues that AbbVie generates from its TNF-inhibitor as one of the drivers for its move to acquire Shire. Diversification via this means, coupled with a number of potentially lucrative pipeline opportunities (i.e. in hepatitis C), would reduce AbbVie's dependency on Humira revenues at a timely juncture as biosimilar antibodies emerge.

Approval for Celltrion and Hospira's biosimilar Remicade (a potential competitor to branded Humira) in Japan this week illustrates that biosimilar monoclonal antibodies are fast becoming a global phenomenon. While the US regulators remain someway behind their European and Japanese regulators, the FDA continues to dangle the opportunity for biosimilar developers to receive interchangeability status – an opportunity that Celltrion and Hospira appear to be targeting - ViewPoints: As biosimilar Remicade approved in Japan, Celltrion and Hospira seek interchangeable label in US.

Are bullish R&D expectations sustainable from a US pricing perspective?

Leading US pharmacy benefit managers (PBMs) such as Express Scripts and CVS Caremark are expected to announce over the next few months additional product exclusions from their preferred formularies, building on the success they have achieved in 2014. Whether such opportunistic strategies are sufficient over the next few years remains to be seen, however. In a note to investors this week, Sanford C. Bernstein analyst Ronny Gal wrote "as long as there are enough patent expiries, all drug companies can benefit, and this is more or less what we have seen for the past few years. If the rate of new drug introduction is moderate and few more drug classes go generic – the current situation will continue. If the 'scientific optimists' are right and [a] new wave of great new (expensive) drugs come to market, pressure on utilisation will mount quickly."

In the meantime, expect the diabetes, respiratory and increasingly the multiple sclerosis markets to remain the targets for increased formulary pressure in 2015, adds Gal.

For further analysis – see Spotlight On: Pharma watch out! – US formulary exclusions expected to increase in 2015.