Latest Drugwonks' Blog
From today’s edition of the New York Post …
The hedge-fund ploy that’s aborting miracle medicines
Hedge-fund investors are coming to raid your medicine cabinet.
Cutting-edge treatments for diseases affecting millions of Americans are threatened by Wall Street’s latest moneymaking scheme. The ploy: Hedge funds bet against a drug company’s stock price, launch attacks against the firm’s patents on its best-selling medicines and then reap windfall profits when investors panic and the stock price plummets.
Unless Congress protects pharmaceutical-research firms from these assaults, funding for drug discovery will dry up and many new treatments won’t ever make it into the hands of patients.
Hedge-fund manager Kyle Bass pioneered the strategy, which relies on a new legal procedure known as “inter partes review,” or IPR. This year, Bass — who previously made $590 million betting that homeowners wouldn’t be able to make their mortgage payments during the financial crisis — filed a review against Acorda Therapeutics’ patent on a drug that helps multiple-sclerosis patients walk. The challenge caused Acorda’s share price to crash by 10 percent.
Wall Street began exploiting the system after Congress created the Patent Trial and Appeal Board, a new arm of the Patent Office tasked with taking a second look at patents that some consider too vague. Since its formation in 2013, the board has proven so hungry to annihilate patents that it’s been called a patent “death squad.” Even the board’s own chief judge has started to admit “the number of patents [going down] is starting to get excessive.”
Bass quickly saw how the board was wiping out patents and jumped at the chance to make money from a self-fulfilling prophecy: challenge the patent and short the company’s stock to profit on the market’s reaction.
Other funds have copied Bass’ strategy. The Mangrove Partners Master Fund acquired a 270,000-share “short” position in VirnetX, which owns patents for a Internet-privacy technology. Within weeks of filing two reviews against VirnetX patents, Mangrove unwound its short position, profiting from an 8 percent drop in the stock price.
Although these reviews can be filed against any patent, they’re particularly threatening to medicine patents and the companies that own them. David Winwood, an executive at Louisiana State University’s Biomedical Research Center, explains that “most often, a startup company’s sole asset is a patent application or issued patent, upon which the company’s fortune lays.”
With the cost of developing a new drug estimated at nearly $2.6 billion, biotech companies need strong patent protection to attract funding and keep competitors out of the marketplace while they recoup their investment. Wall Street’s abuse of these pharmaceutical reviews weakens patents and makes medical research look increasingly like a poor investment.
And with more than 110 petitions filed against pharmaceutical patents in fiscal 2015 — roughly double 2014’s total — the threat to R&D funding is only growing.
Fortunately, Congress can protect drug-development efforts while still enabling judges to weed out bad patents.
Under the Hatch-Waxman Act, more than 80 percent of drug patents are already challenged by companies seeking to enter the market with generics — compared with only 14 percent in the 1990s. Another law, known in Washington as “BPCIA,” also encourages challenges to pharmaceutical patents.
In short, if a drug patent is actually too vague, generic manufacturers can challenge and invalidate it and enter the market. IPR challenges simply aren’t necessary.
That’s why Congress needs to exempt pharmaceutical patents approved by the FDA from these challenges. Such an exemption would ensure that Wall Street profiteers don’t deprive innovators of research funding, while still being able to take down vague tech patents.
Preserving the existing patent-challenge procedures will ensure that companies have the confidence to invest in research and development. The laws give patents adequate protection, enabling firms to recoup the decades and billions of dollars invested in drug research.
Armed with that confidence and shielded from hedge-fund attacks, research firms will continue to create the innovative, life-saving treatments patients need.
Peter J. Pitts, a former FDA associate commissioner, is president of the Center for Medicine in the Public Interest.
PBMs generate according Credit Suisse about $90 billion in revenue – all from drug companies paying them rebates -- because they have been given the near monopoly power to determine who gets what medicines and how much they will pay for them. PBMs demand rebates in exchange for giving drug companies preferred position on formularies. (They are also rumored to demand a discount off of the already discounted price Rx companies give before rebates.)
On top of that, PBMs then – in partnership with many health insurers – take the drugs that they have gotten at a discount and put them in the highest cost sharing tier for the sickest patients, those with cancer, autoimmune disorders, HIV, hepatitis C and chronic pain. And at that point, drug companies – who have already pledged rebates of up to 40 percent of something near the agreed upon sale price – pick up a lot of the out pocket cost that the PBMs have dumped on patients.
It gets even better. To top it off, the PBMs, led by Express Scripts, have been portraying themselves as the thin blue line between profiteering specialty pharmacies and the same consumers they are screwing to fatten their margins.
The Valeant controversy prompted journalists to wonder if other specialty pharmacies were owned and operated by drug firms whose products they distributed.
Indeed, in recent weeks Express Scripts (ESI) has capitalized on the journalistic frenzy feeding over the relationship between Valeant and Philidor to shove aside many specialty pharmacies, replacing these entities with ESI’s own retail pharmacies and self-serving drug formularies without notice.
That was enough cover to permit Express Scripts and other PBMs consolidate its already substantial control over prescription drug sales and increase profit margins by tearing up contracts with any specialty pharmacy that distributed unique drugs to specific groups of patients.
The most recent example of this Putin-like business practice: Express Scripts sudden decision to terminate a relationship with a specialty pharmacy company called Linden. Because Linden Care manages the pain meds of many patients using drugs made by Horizon Pharma, Express Scripts smeared Linden as another Philidor.
And if anyone had taken the time to look at what Linden did, it would discover (it took me all of 10 seconds) that Linden is not a ‘captive pharmacy.’ Horizon does not own Linden’s business. Moreover, specialty pharmacies like Linden that are focused on pain management have state-of-the-art security systems, sophisticated software to identify and weed out “doctor-shopping” patients and corrupt prescription factories. They work closely with the Drug Enforcement Agency and local law enforcement issues to prevent fraud and abuse. Most importantly, they ensure that patients suffering from chronic and severe pain can access the medicines they need. Which is why Horizon and many other companies with pain management products use such niche pharmacies.
In contrast ESI just terminated the contract, forcing patients to find – without notice – a new retail pharmacy under ESI’s control. As Adam Fein recently asked: PBMs routinely monitor their networks, why did it take a highly publicized pharmacy meltdown before PBMs finally cracked down?
Maybe it’s because ESI wanted the business. Maybe it was because it also has its own specialty pharmacy Accredo that has a larger share of Horizon’s business than does Linden.
CMPI has dealt extensively with the safe distribution and use of pain meds. Linden is the gold standard for doing so. Pain management is a highly specialized medical field, with doctors, pharmaceutical companies, and pharmacies working together to provide vital care to patients in severe chronic pain while ensuring adherence to the strictest standards of compliance and regulations in the industry.
Linden is asking a federal court to put the termination on hold so, at the very least, it can negotiate a new contract with ESI and assure that in the interim patients are not endangered. It is within the jurisdiction of the court to ask: How many patients will be deprived of – or forced to change their medicines -- because of this shift?
If the earth were a single state, Istanbul would be its capital.
-- Napoleon Bonaparte
I’ve just returned from the World Cancer Leaders’ Summit in Istanbul. (The event was held in partnership with the International Agency for Research on Cancer, the International Atomic Energy Agency (IAEA), and the World Health Organization.) It was a Turkish delight in more ways than one.
I had the opportunity to talk about the value of quality as it pertains to access. Beyond discussing bioequivalence, biosimilarity, and the many and varied issues pertaining to 21st century pharamcovigilance, my major points were that (1) the most expensive drug is the one that doesn’t work and, (2) broader access to poor quality medicines is not a public health victory.
A key learning for me was that, when it comes to “the market” and “society" -- the market is society. That’s important to remember whether the debate is about access in the Developing World or price/value in the First World. We are all in this together.
During my session’s Q&A a representative from India accused me of slamming generic drugs. I told him that he was hearing what he wanted to hear. I reiterated that generic drugs play a crucial role in access to healthcare around the world – but that quality is a non-negotiable variable for all drugs (both innovator and generic). I reminded him about what I’d said no more that 90 seconds earlier about the USFDA’s new Super Office of Pharmaceutical Quality – that we must approach the issue with “one quality standard” for all medicines.
After all, per the Journal of Infection (2008;56:35-9), “Nothing is more expensive that treatment failure.” In the 21st Century, pharmacovigilance must be about ensuring predictable patient outcomes.
The Indian gentleman’s question highlights an important problem – what happens when your desires do not match the facts? The answer is that we have to listen with an open mind, carefully, and respectfully. We all have to enlarge our circle of policy colleagues. I’m pleased to report that he and I had a long and productive chat afterwards.
The theme of the event was, “Effective international collaboration … across country borders, across disease groups and, through public private partnerships.” It's a small world after all and, at least for a few days, Istanbul was indeed it’s capital.
Oncologists are supposed to treat cancer patients. But some have decided instead to set themselves up as judges of what patients' lives are worth.
This type of bean-counting ought to be abhorrent to anyone who calls himself a physician.
A recent article in JAMA Oncology is emblematic of this strain of thinking. The piece employs a "value framework" endorsed by the American Society of Clinical Oncologists to determine what a new drug "should" cost. Once approved by the FDA, the drug in question, necitumumab, will be the first of its kind to treat stage IV squamous non-small-cell lung cancer.
The lead author of the article, Daniel Goldstein, noted that adding necitumumab to the standard combination of drugs for such patients "only" adds about two months to patients' life, on average. As a result, he calculates, necitumumab should cost $600 a month.
Put another way, Goldstein believes that each extra day of life is worth, at most, $20. About the same price as a new toaster.
Goldstein's morbid conclusion demonstrates the callousness of ASCO's value framework, which seeks to derive "appropriate" drug prices from their average effect on longevity. In the process, the framework marginalizes the value of life.
Goldstein notes that "[t]here is a desperate need to find appropriate prices for new treatments while maintaining incentives to drive game-changing innovations." Yet his approach would whittle away payments for the hardest to treat cancers and for patients who have had no real advances in care for decades.
Necitumumab is not just another drug. As Nick Thatcher, the lead investigator for the necitumumab clinical trials, observed: "I think it's important to remember we're dealing with squamous cell lung cancer," which has proved notoriously difficult to treat. "It's the first time," he notes, "that we've seen benefit in this group of patients over the last 20 or 25 years." In that context, demonstrating any effectiveness at all counts as a breakthrough.
History indicates that more profound breakthroughs will follow, as researchers build on each incremental advance. The first anti-AIDS treatments added "only" two months of life in 1987. By 2006, a combination of new drugs—tailored to the particular biology of the patients—added 15 years of life. The value framework doesn't account for increasing medical progress over time.
Moreover, the value framework does not measure the value of living longer from the patient perspective. The five-year survival rate for those diagnosed with this form and stage of lung cancer is 1 percent. Isn't every extra day with loved ones—and beating cancer—worth more than $20?
Goldstein's conclusion—that many oncology drugs in clinical practice in the United States would fare poorly in cost-effectiveness analyses—could be applied to lung cancer treatment prices as a whole.
Since 1973, the average survival generated by any type of chemotherapy is 1.7 months. The average cost of treating lung cancer patients in the last year of life is $94,000. Drugs are about 20 percent of that spending. Why not let people die 1.7 months sooner and save the money?
When insurance companies try to control costs by restricting access to treatments, they are rightly lambasted for it. Doctors who seek to determine which drugs are worth paying for are no better.
We would not countenance paying more to extend the life of a rich man than a poor one, whatever the difference in their economic "value." Nor would we deem the life of a mother of five more worth saving than that of a childless woman, without a family to mourn her passing. But it is no more acceptable to average the social value of their lives in deciding whether it's worth it to treat them.
A cynic, it is said, knows the price of everything and the value of nothing. By this measure, ASCO's framework is cynical in the extreme. The only framework worth defending is one that says life is too precious to put a price on it.
Prescription drug plan is bad medicine for N.J. economy
White House contenders want to address – but don't understand – prescription drugs prices. The Center for American Progress has a plan. A bad one. The CAP plan would effectively turn the U.S. government into the world's biggest intellectual property thief, thus gutting pharmaceutical innovation and crippling New Jersey's economy.
New medications are expensive to develop. On average, it costs $2.6 billion and it takes a decade to bring a new medication successfully to market.
One of the reasons the process is so expensive is that most potentially promising compounds don't pan out. The vast majority of compounds never make it from the lab to the clinical trial stage, and the FDA approves only 12 percent of those that do.
Only a small percentage of approved medications ever recoup their development costs. Pharmaceutical companies have to set prices to cover the costs of both the occasional successes and the many, many, many failures that go along with them.
CAP's 45-page report ignores this reality and offers to lower drug prices by stripping pharmaceutical companies of their intellectual property. The federal government, CAP says, has the authority to license patents to knock-off generic manufacturers any time it deems brand-name drug prices are too high.
The authority for this heist is supposedly a 1980 federal law known as the Bayh-Dole Act, which ushered in a Golden Age of pharmaceutical innovation by shoring up intellectual property rights.
One provision of Bayh-Dole holds that the government retains so-called "march-in" rights to license a patent when its owner fails to take "effective steps to achieve practical application of the subject invention." In other words, if a patent is languishing unused, the feds can license it to encourage development.
CAP evidently believes that a high price tag constitutes a failure to take "effective steps to achieve practical application" – and is therefore grounds for the feds to seize a patent and license it to others.
Who decides what price is too high? Why, an all-powerful new government panel housed in the Department of Health and Human Services, of course. It's supposed to set a range for drug prices, and any drug priced more than 20 percent above this range is subject to patent seizure.
This interpretation of Bayh-Dole is the antithesis of what the authors sought. The law empowered innovators by protecting the work of university researchers, small businesses and nonprofits that incorporated basic concepts that had previously been discovered via federally funded research.
The bulk of biopharmaceutical innovation comes from private industry, which spends more than $51 billion annually to develop new drugs. These investments will simply stop if government has the authority to seize the patents of innovators any time they don't meet a government-set price.
Similar price-capping schemes in Europe, once an industry leader, essentially capped innovation and jobs. In the mid-1980s, Europe spent 24 percent more on research and development than firms did in the United States. As price caps took effect, by 2004 European development dropped 15 percent. Between 2001 and 2009, more than 60 percent of drug patents went to U.S.-based companies. In 2012, the U.S. biotech industry employed 100,000 people – twice as many as in all of Europe. Alas, as John Adams quipped, "Facts are pesky things."
As a major hub for the biopharmaceutical industry, New Jersey will bear the brunt of the CAP plan's job-killing regulations. Over 70,000 Garden Staters work for biopharmaceutical firms. Industry spending supports another 250,000 jobs in other sectors. All told, drug firms add $87 billion to New Jersey's economic output.
Government-sanctioned patent theft will lead to massive investment cuts and job losses in New Jersey. More worryingly, CAP's caps on drug prices would prevent the development of new medicines. Candidates embracing this approach pose a threat to our health.
Peter J. Pitts, a former FDA Associate Commissioner, is the president and co-founder of the Center for Medicine in the Public Interest.
Medicines aren’t priced in a vacuum. Pricing decisions are based on numerous meetings and tough negotiations between manufacturers and payers over a long period of time – often years before the FDA approves a product. In fact, many product programs are stopped or altered well before Phase III trials depending on these conversations.
So, when you hear about a new medicine and payers are complaining about the price, it’s (at best) disingenuous, but they get away with it. Why? Because manufacturers are uncomfortable calling out the insurance companies and PBMs with whom they must do business. The reverse is untrue in the extreme. And “disingenuous” is a polite way to say something else.
A new study from the IMS Institute for Healthcare Informatics puts some hard numbers behind the debate. And it’s about time.
As the report’s executive summary reports:
Price levels for pharmaceuticals in the U.S. market are often reported to the public based on list prices, and therefore do not reflect the series of adjustments that occur throughout the healthcare system and ultimately determine who pays what for medicines.
The purpose of this healthcare brief is to draw specific attention to previously published research from the IMS Institute which highlights not only the visible aspects of price increases, but also the less visible off-invoice discounts, rebates, coupons, and other price concessions to payers that often substantially offset these changes in list price. By bringing context and perspective to the complex interplay of factors that determine the level of price changes for branded medicines we hope to better inform discussions of the issues.
… Our analysis shows that branded pharmaceuticals raised invoice prices on average 13.5% in 2014, but on a net basis, after all of the concessions are adjusted for, the increase was 5.5%. This level of net price increases is notable for being the lowest of the past five years and has occurred even as invoice price increases have accelerated.
It’s time for everyone to debate the facts.
The complete report can be found here. It’s an important read at an important time.
Much ado about PCSK9 inhibitor patient assistance programs that requires users to share rights to their personal health information. Is this a legitimate quid pro quo? That’s a tough question – but not the most important one.
The foundational question is, why do companies want this information? Because it has valuable public health applications. Cumulative, de-identified real world data will provide the company with outcomes intelligence that can be shared with payers, physicians, and the scientific community. For payers and physicians, it will help better define what subset of patients with high cholesterol should receive Repatha as first line therapy, avoiding a costly (both in terms of dollars and cardiovascular health) “fail first” step-therapy scenario. And the information will allow researchers to better focus their efforts on expanding our understanding of the PCSK9 universe and the potential development of companion diagnostics.
All good reasons to have patients share their data. But should it be an “either/or” proposition? It needn’t be. Why not make such data sharing voluntary? Let patients know that by sharing their personal information they are helping “people like them” get diagnosed more directly and achieve better health results more rapidly. People want to do the right thing – but they have to understand why and how. Under this scenario the innovative biopharmaceutical industry can be the facilitators of better, more cost-efficient outcomes and be hailed as healthcare heroes.
Which is a lot better than what they’re currently being called.
Here's the knock-out blow against the lies and mis-statements regarding the 'unsustainable' cost of of new drugs"
"As costs have risen, many insurers have responded by increasing cost sharing for specialized therapies as part of their pharmaceutical insurance design. For example, CMS allows Part D plans to create a “formulary tier” specifically for drugs costing $600 or more per month. About 90% of plans use this tier and among these plans, more than half require patients to pay 25% or more of costs. Co-insurance for specialty drugs, which are taken by the sickest 3% of patients, can be as high as 50%.
This design means that the sickest patients also take the largest financial hits; a form of “double jeopardy.” However, this has primarily led to outrage against manufacturers rather than payers. For example, oncologists have criticized manufacturers for high prices because their patients cannot afford treatment. This is somewhat ironic since, as the General Accounting Office noted in July, cancer centers with higher markups on cancer drugs prescribe more of them, a practice partially enabled by the federal government’s 340B drug pricing program intended to provide discounted drugs to lower income patients. In addition, other forms of health care are equally, if not more expensive – such as ICU care – yet there appears to be comparably less concern over these costs. Perhaps the reason is that ICU care – which often costs approximately $4,000 per day – is often fully covered (as it should be), whereas specialty treatments remain only partially covered.
The reality is that less generous coverage of specialty drugs may punish the sickest patients and is not consistent with basic tenets of insurance, which are designed to cover rare but expensive events."
I just returned from Kaohsiung, where I was pleased to keynote the Taiwan Pharmacy International Collaboration Center’s Generic Equivalency and Biosimilarity conference.
Of the many excellent presentations from global experts, one of the most interesting was by Churn-Shiouh Gau, the Chief Executive Director of the Taiwanese Center for Drug Evaluation at National Taiwan University. She spoke on the current state of affairs of biosimilar regulation – and her talk generated some tough and specific questions.
For example – should Taiwan approve a biosimilar is the originator product hasn’t been approved. (For example, Remicaide isn’t an approved therapy in Taiwan – and there are already a few biosimialrs on the market in many other places – such as the EU.) Her view was “no.”
Also, should Taiwan approve a biosimilar that isn’t approved for use in its country of manufacture? Following the theory that what’s good for the goose is good for the gander, why should one country take a risk on a product (especially ones so new and complicated as biosimilars) that hasn’t been deemed safe and effective in its native land? Her view was, “no.”
Representatives of the Taiwan FDA (a First World Regulatory body) weighed in with many comments and caveats. Clearly questions such as these need to be addressed as seriously as those concerning biosimilar review pathways.
Voltaire said, “Judge a man by his questions rather than by his answers.” And the same can be said of medicines regulators. But we need to ask the right ones or we fall into the trap that Thomas Pynchon warns about when he writes, ““If they can get you asking the wrong questions, they don't have to worry about answers.”
“They” can broadly be defined as those focusing on biosimilars exclusively as a cost-saving mechanism. Safety and quality must always drive the regulatory discussion.
In talking about Opdivo, the new drug for people with advanced lung cancer that can add up to 2 years of life, Bach asserts:
"Federal law prevents the maker of nivolumab (Bristol-Myers Squibb) from providing assistance to patients who cannot afford the treatment. Programs such as Genentech's for Avastin, in which beneficiaries receive the drug free once they have spent a certain amount in a calendar year, are rare."
Untrue. Companies can't provide assistance directly but it can do so through 3rd party foundations and do so regularly. BMS provides an incredible amount of support to patients which frankly is provided because insurers don't cover the cost of the entire drug though it saves them money and improves patient lives better than stuff like surgery (which insurers cover completely). But in Bach's warped world, this is fine.
Then he proclaims that the only way to measure value is to see how much a new medicine or technology adds to a health plan's budget. Let's set aside the fact that most health care spending increases are the result of an increase in the use of other services and Bach never scrutinizes that. More important, new medicines almost always over time reduce the use of other services and contribute to at least half the increase productivity and longevity.
Bach claims that new medicines are no more effective than old medicines because they don't add any more average survival. Really? If that's the case than, how has cancer survivorship and life expectancy steadily increased over the past 20 years. Perhaps what he is say is that the additional increment of average survival (which ignores genomic variation) is not worth say $100000. But that ignores the fact that treatments are targeted to smaller populations that have fewer options than previous generations. Unfortunately, high prices are partially a result of investing the same amount of time and money on tinier groups of cancer patients. Bach knows better. After all, one of his co-authors in the paper he cites in his NEJM oral hallucination about new drugs not adding more survival despite higher prices, makes that very point in another study: " In the absence of significant pricing and total oncology outlay flexibility by payers, our analysis suggests that private sector investment in small oncology segments, and in stratified medicine generally, may not prove economically sustainable, thus endangering the translation of scientific advances into bedside medicines. Beyond increasing reimbursement, decreasing development cycle time and costs, or both, would most directly improve the economic incentives facing developers. By contrast, extending exclusivity periods, or initiating advance market commitments and awarding prizes would likely have less impact and involve greater implementation challenges." (Trusheim, Berndt "Economics of Stratified Medicine" Personalized Medicine (2012) 9(4), 413–427)
So in otherwords, Bach wants lower prices at all costs, even if it kills innovation and people.
Bach is channelling Andrew Wakefield, another lighly published doctor who used the media to advance an agenda that proved toxic to the public health.
Center for Medicine in the Public Interest is a nonprofit, non-partisan organization promoting innovative solutions that advance medical progress, reduce health disparities, extend life and make health care more affordable, preventive and patient-centered. CMPI also provides the public, policymakers and the media a reliable source of independent scientific analysis on issues ranging from personalized medicine, food and drug safety, health care reform and comparative effectiveness.
