The Friday Five – 5 questions raised this week in pharma

What do new drug exclusion lists tell us about pricing pressure in the US market?

As expected, the two largest US pharmacy benefit managers (PBMs) – CVS Caremark and Express Scripts – unveiled new formulary listings this week which detail those products which have secured preferred coverage and those excluded altogether – see ViewPoints: New exclusion lists show PBMs are getting more aggressive about nixing drugs from formularies.

Publication of the new listings coincides with the recent publication of GlaxoSmithKline's Q2 results which demonstrated that more aggressive tendering processes can have a significant impact on the performance of drugs which are excluded from formularies altogether. In GlaxoSmithKline's case its asthma/COPD therapy Advair – see ViewPoints: Analysts slash forecasts for GlaxoSmithKline's respiratory portfolio as US pricing pressure intensifies – although Advair back on Express Scripts' formulary.

Like the respiratory market, the diabetes segment also lends itself to discounting efforts on the part of payers, given the presence of numerous, largely undifferentiated, products within each of the key drug classes. Exclusion of Novo Nordisk's Victoza by Express Scripts in 2014 marked a sea-change in the payer approach to diabetes and it remains an area to watch closely. FirstWord is in the process of polling US endocrinologists to gauge their views on this trend – further details will be published next week.

See also - ViewPoints: Will breadth of Eli Lilly's portfolio prove crucial as diabetes pricing pressure intensifies? and ViewPoints: Has GlaxoSmithKline's diabetes pricing strategy been undermined already?

Can payers absorb the potential cost of pharma's pipeline?

A notable feature of the new formulary listings published by Express Scripts and CVS Caremark was also the exclusion of some specialty products, such as Amgen's Epogen and Aranesp. Although the anticipated impact on Amgen is expected to be minimal – these drugs are typically covered under a separate formulary given the circumstances in which they are usually administered – their inclusion represents some posturing on the part of Express Scripts.
Another notable feature is how the new lists offer flexibility towards the new generation of all-oral hepatitis C therapies – with payers clearly hopeful of playing off manufacturers on pricing in order to generate more sizeable discounts.

While drugs such as Sovaldi are clearly expected to strain the ability of payers, a key catalyst for further pricing pressure could be a succession of new, high priced products, remarked Bernstein analyst Ronny Gal recently – a reference, for example, to cancer immunotherapies and the PCSK-9 inhibitors – see Spotlight On: Pharma watch out! – US formulary exclusions expected to increase in 2015

This week's FirstWord List looks at the potentially largest products in pharma's pipeline, with consensus estimates suggesting that combined 2020 sales across the 20 largest drugs will reach around $40 billion – see FirstWord Lists: Pharma's biggest pipeline drugs

Does a score draw beckon in the PCSK-9 inhibitor race?

Two of the products included on this list – the PCSK-9 inhibitors evolocumab (Amgen) and alirocumab (Sanofi/Regeneron) – have entered a pivotal phase in a closely contested race to market.

Not only are both products set to be filed for regulatory approval by the end of the year, but late last week Sanofi/Regeneron utilised a novel means to close the regulatory gap on Amgen – see ViewPoints: But what is an FDA priority review voucher actually worth? BioMarin finally puts a price tag on it

With commercialisation of evolocumab and alirocumab nearing – assuming approval is granted on the basis of LDL-cholesterol reduction and cardiovascular outcomes data is a post-approval necessity only – we polled cardiologists this week to gauge what initial uptake may look like - Physician Views Poll Results: Lack of outcomes data, negative IMPROVE-IT results will limit PCSK9 inhibitor use; less frequent dosing seen as offering minimal advantage

On a related note a second FirstWord Physician Views poll run this week was on NASH – another potentially lucrative opportunity for pharma but one that could add pressure payers – see Physician Views Poll Results: Gastroenterologists see significant need for NASH drugs, but cite non-invasive diagnostics as key to market penetration

Will Roche's return to RNAi prove more fruitful than its initial investment?

Roche may continue to reap significant commercial success in the oncology market – see our forthcoming list on the biggest sales growth drivers in the first half of 2014 – but like rival players is looking for ways to target diseases that have proven elusive from clinical success with small molecule, monoclonal antibody and therapeutic protein products.

Such a quest has seen the Swiss company make a return to the RNAi space, with Roche having announced this week the acquisition of Santaris for up to $450 million. "Antisense and RNAi technologies have demonstrated successful intended target gene knockdowns, the wait now is to see how this translates into therapeutic benefit for patients" says Dirk Haussecker, an independent consultant specialising in the field of RNAi therapeutics.

Roche's move for Santaris raises one of two possibilities – did the Swiss player move too early to exit the RNAi space previously, or is Santaris' LNA (locked nucleic acid) platform poised to revolutionise development efforts. One issue to consider, adds Haussecker, is the strong intellectual property position held in LNA by a rival company, ISIS Pharmaceuticals – which operates a broad development collaboration with Biogen Idec. Was Santaris Roche's second choice target? – see ViewPoints: Roche accelerates return to RNAi development race

Will rising political pressure prove a deterrent to tax inversion-themed M&A?

Debate over the sustainability of pharma's tax-inversion M&A strategy appeared to hit a critical juncture this week with the US pharmacy chain Walgreens relenting in a bid to relocate its global headquarters as part of its proposed takeover of UK rival Boots as a means to shift its tax status.

CEO of the combined Walgreen Boots Alliance Greg Wasson argued that risk of a "significant potential consumer backlash" in response to changing its tax domicile was too great to ignore.

Walgreens may sell drugs rather than manufacture them, but the implications for the pharma sector are clear. Coinciding with Walgreen's U-turn, AbbVie's deal to acquire Shire – another acquisition for which a component of strategic rationale is tax inversion – appeared to come under threat on Wednesday after the US Treasury indicated it was "reviewing a broad range of authorities for possible administrative action" designed to deter US companies from embarking on tax inversion deals.

This intensification of efforts was reflected by share price declines at both Shire and AstraZeneca on Wednesday, a clear sign than many AstraZeneca shareholders are hopeful of a second approach from Pfizer later this year.

See also ViewPoints: Shire gets break-up assurances, AbbVie gets tax break (and more, says company) and ViewPoints: Pfizer forced to answer some big questions

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