FirstWord Lists: Framing the US drug pricing debate – the key flashpoints

Rather than an unpleasant noise that could be heard sporadically to scare the pharmaceutical and biotech sectors, the US drug pricing debate now resembles a constantly beating drum; senator and Democratic presidential candidate Hilary Clinton is the newest member of the rhythm section.

Clinton's promise to tackle US drug price increases has been triggered by the latest flashpoint; a New York Times article highlighting the decision by Turing Pharmaceuticals to increase the price of one drug by 5000 percent overnight. The reaction of Turing CEO Martin Shkreli – most notably on Twitter – appears not to have helped matters, acting only to turn up the volume on this particular debate, despite his subsequent arguments to justify the price increase. It is not the first time that the US price for a drug has been increased significantly overnight, nor the first time that Shkreli has been associated with such a strategy (Spotlight On: Retrophin's price hike for Thiola raises questions, but will it raise a stink?). The extreme nature of this particular increase, however, has proven to be a catalyst in mobilizing opinion towards the issue at hand.

Spotlight On: Shkreli’s Turing risks ceding ground in public policy debate on drug pricing

Some have asked whether Turing's decision to raise the daily price of the toxoplasmosis drug Darapim from $13.50 to $750 will act as the key inflection point in the US drug pricing debate. That remains to be seen; despite Clinton's objectives, there is scepticism as to whether she will be able to push through meaningful changes, which would elevate drug pricing beyond the highly politicised subject it looks set to become against the backdrop of the race to the White House.

Furthermore, PhRMA has moved to distance the actions of Turing from the 'values' its members represent (it also states that Clinton's proposals will "hinder innovation, economy growth and competitiveness," while it would be wrong to compare the case of Darapim with that of Sovaldi, another notable flashpoint (see below). These circumstances indicate, however, that discussion around US drug pricing is almost certain to remain on the agenda; shaped not only by the latest controversy involving Turing, but by a succession of flashpoints over the past few years…

Zaltrap zapped – the MSKCC editorial

Just under three years ago, an editorial written by three prominent physicians from the Memorial Sloane-Kettering Cancer Centre highlighted Sanofi's Zaltrap – a treatment for colorectal cancer – as a therapy they were not willing to use. Why? – the product offered no additional benefit over Roche's Avastin, but on average was costing twice as much per patient, suggested the authors (ViewPoints: European drug pricing ethos lands in US – will the floodgates open?).

The editorial was significant on a number of fronts; there had previously been threats, but little action on the part of US healthcare providers; it demonstrated that cancer drugs were not as insulated from pricing pressures as many had thought; and it embodied a European ethos towards price versus perceived value. The importance of the editorial was further enhanced when Sanofi chose to reduce US pricing for Zaltrap (ViewPoints: Sanofi blinks first in cancer price stand-off; what implications for industry/payer relationship in US?).

The threat of exclusion

If the MSKCC editorial took inspiration from European drug pricing trends, then the formulary exclusion strategies implemented by US-based pharmacy benefit managers (PBMs) in recent years have fully embraced a European philosophy.

The decision by Express Scripts to exclude Novo Nordisk's diabetes treatment Victoza from its 2014 preferred formulary provided something of a benchmark, given that the drug was widely viewed as being superior to AstraZeneca's same-class (GLP-1 agonist) Bydureon; which was granted exclusive formulary status on the back of a more competitive pricing discount offered to the PBM (ViewPoints: As Novo Nordisk finds to its loss, price is now king in the US diabetes market).

Sales growth rates for both new and established drugs positioned in selected segments of the primary care market have suffered as a result: GlaxoSmithKline's Advair/Breo Ellipta franchise and Sanofi's Lantus being prime examples. The key question was whether the PBMs could replicate such a strategy in the specialty care market…

The Sovaldi spike

Express Scripts was citing the opportunity to 'play off' two competing next-generation hepatitis C drugs more than a year before approval of products from both Gilead Sciences and AbbVie would allow this (ViewPoints: Why Express Scripts' talk of a hepatitis C price war should act as warning to the industry-at-large). In the meantime, launch of the Sovaldi franchise in late 2013 saw the US drug pricing debate reach a new crescendo, aided by the headline-friendly price of Gilead's hepatitis C therapy, which at launch cost $1000 per patient per day (Spotlight On: The Sovaldi pricing debate – 5 key questions).

Sovaldi became the subject of congressional query, with Gilead asked to justify its pricing for the therapy. A two month slump in the Nasdaq Biotechnology Index followed, but acted only as a temporary brake on the sector's impressive performance since the beginning of 2013; bullish investors will argue that Clinton's current stance offers similarly navigable headwinds.

Whether Gilead's drug is a red herring in the broader pricing debate remains conjecture. Turing has justified its price increase for Darapim by arguing that additional revenues will fund R&D of improved drugs to treat toxoplasmosis, despite the view among some physicians that there is no urgent need for a new product. Sovaldi on the other hand has helped to revolutionise the treatment of hepatitis C, and effectively cure a large proportion of patients; while payers have challenged the drug's price, the volume of patients requiring treatment with Sovaldi is at the crux of this particular debate. Has Gilead been a victim of its own success? (ViewPoints: Sovaldi's legacy – to redefine the blockbuster or throw US drug prices into the mainstream spotlight?).

With Sovaldi generating sales of around $10 billion in its first year on the market (and its broader hepatitis C franchise poised to generate combined sales of $19 billion this year), it is hard to feel too much sympathy for Gilead. However, for Express Scripts chief medical officer Steve Miller, the subsequent ability of PBMs to negotiate sizeable discounts in the hepatitis C market – once AbbVie's Viekira Pak was launched in late 2014 – represents a major victory for payers. "These drugs are available to some US patients at a lower cost than in Europe," Miller reiterated to FirstWord; furthermore emboldened PBMs are already tackling their next target in the specialty market – the PCSK9 inhibitors – and are threatening that some cancer products will be next.

The physician voice

Partially offsetting the aggressiveness of the PBMs, a key trend to emerge over the past few years – prompted in part by the MSCKK editorial – has been the role of physicians, and oncologists in particular, in questioning the value that some drugs provide. ASCO's value framework – unveiled in provisional form earlier this year – should not be ignored in the broader context of this debate; particularly as the sector appears to be on the cusp of an oncology boom (Spotlight On Interview: Chief medical officer Richard Schilsky discusses ASCO's new cancer drug value framework). Reuters reported on Tuesday that a new independent academic study is the latest to conclude that the US is vastly overpaying for some cancer medications.

What's the next flashpoint?

The case of Turing looks certain to put the issue of "price gouging" – overnight price hikes – in the spotlight.

As Clinton's proposals began to emerge on Tuesday, one in particular, that pharmaceutical companies be required to spend a minimal proportion of revenues on R&D, appears to directly target companies, such as Turing, Retrophin, Mallinckrodt and Valeant Pharmaceuticals, which have significantly increased the price of acquired drugs. Another proposal is to reduce the period of exclusivity for branded biologic drugs from 12 to seven years, which could have profound implications on the biosimilar sector.

A consensus view emerging on Tuesday, however, was that Clinton's proposals appear recycled, heavily politicised and unlikely to have a significant short to medium term impact on the pharmaceutical sector (and if they did companies delivering major innovation "should be in the strongest position in the long term," noted analysts at Morgan Stanley).

The debate is unlikely to go away, however; a consistent message from physicians in the field, for example, is that promising immuno-oncology therapies will be too expensive to use in much touted combinations (which may also require longer duration of therapy), a view that appears to be largely overlooked by bullish sell side analysts (Physician Views Poll Results: Does cost remain an underappreciated barrier to uptake of immuno-oncology combinations?).

Suggesting that cost savings will have to be made elsewhere to support uptake of innovative new therapies, Miller describes the current trend in US drug spending as being simply "unsustainable." In the meantime, whether she can implement short-term change or not, the key question may be for how long Clinton keeps banging the drum.

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