Top Five Pharma Stories in 2015
The pharmaceutical and healthcare sectors contain some of the most important and far-reaching stories of the year.
2015 saw the industry hurting – especially in the US, where issues of drug pricing and tax inversions have damaged the industry’s reputation further. These issues are set to stay well into 2016 (and beyond) as the two front-running potential presidential candidates have promised to make these matters central to their campaigns.
There have also been a growing number of drug patents rejected in India, one of the world’s largest countries by population (1.2bn in 2014), leading to concerns from the industry that its intellectual property is under threat. But there have been positives: a ground-breaking new way of ‘printing’ drugs personalized to each patient has been given the green light, while the FDA also approved the first biosimilar in the US, ushering in a new era of cheaper biologics.
Here are our picks of 2015’s top five pharma stories.
5. India turns down more patents
India's Patent Office (IPO) has stepped up its campaign against pharma’s patents, this year voiding the intellectual propriety for medicines from the world’s largest firms, Gilead and Pfizer.
The IPO in January turned down a patent application from Gilead for its blockbuster hep C therapy Sovaldi (sofosbuvir), claiming it was “not novel enough” to warrant protection – despite being the first ever drug to be able to cure the disease in nearly all patients.
This came as Gilead announced that it is selling Sovaldi in India and other developing countries at just $900 per course – compared to the $84,000 price tag in the US.
In September, the Office also again rejected Pfizer’s major JAK inhibitor Xeljanz (tofacitinib) for rheumatoid arthritis, saying it does “not consider the drug to be an invention as it isn't therapeutically more effective than the original compound” – something required under the country’s intellectual property law. Pfizer said it was: “Concerned about the environment for innovation and investment in India”.
Other drugs already rejected by the IPO include: Novartis’ cancer drug Glivec (imatinib), Roche’s Pegasys (peginterferon alfa-2a) for hepatitis, Merck’s asthma treatment Singulair (montelukast), Gilead’s HIV drug Viread (tenofovir) and Pfizer’s cancer drug Sutent (sunitinib).
John LaMattina, senior partner at PureTech Health and a Forbes contributor, told eyeforpharma: “I think it is unfortunate that India refuses to pay its fair share when it comes to innovation and drug costs.
“Despite the fact that companies charge dramatically lower prices in India (witness Gilead’s Sovaldi cost of $900 in India vs. $84,000 in the US), this country will routinely claim hardship and deny patent coverage to new drugs thereby allowing local companies to manufacture them in India. This blatant disregard of intellectual property is sad, but whether western nations decide to fight this remains to be seen.”
4. FDA approves first biosimilar in the US
Novartis became the first pharmaceutical firm to launch a biosimilar in the US in September with Zarxio – a copycat version of Amgen’s chemotherapy side effects drug Neupogen (filgrastim).
This has ushered in a new era of copycat biologics – drugs that are bioequivalent versions of ‘living’ medicines but are around 10 - 25% cheaper (Zarxio was launched at a 15% discount to Neupogen).
Biosimilars have been available in Europe since 2006 and Zarxio is already available in more than 40 countries under the brand name ‘Zarzio’, where it has captured around 30% of the granulocyte colony-stimulating factor (G-CSF) market.
But in the US, it wasn't until 2010 when President Barack Obama’s healthcare reforms permitted the use of biosimilars, and it was not until 2015 that one was actually approved.
The arrival of biosimilars poses a threat to companies reliant on biotech drugs such as Amgen and Roche, and analysts have predicted a transferral of at least $110bn in revenue over the next decade from the original manufacturers to biosimilar producers.
Express Scripts, the largest manager of drug benefit plans for US employers and insurers, has also estimated the United States could save $250bn between 2014 and 2024 if 11 of the likeliest biosimilars reach the market.
3. Approval of world’s first 3D printed drug
In another ground-breaking move, the FDA in 2015 approved the world’s first 3D printed (3DP) drug in the form of Aprecia’s epilepsy treatment SPRITAM (levetiracetam).
There are already a number of treatments for the condition, but the interest from industry observers has been piqued by how SPRITAM is developed. The company’s ZipDose Technology enables the delivery of a high drug load, up to 1,000mg in a single dose, with the software able to tweak doses to the individual patient.
The advantage of this process is that the drug’s unique structure allows it to dissolve considerably faster than the average pill, and can be ‘printed’ for individual patients. This capability provides relief for seizure sufferers who often are prescribed large, hard-to-swallow pills.
While 3DP has been used previously to manufacture medical devices, this approval marks the first time a drug product manufactured with this technology has been approved, and may prove to be a game-changer in drug manufacturer in the future.
But this is just the beginning, and problems invariably come with new and disruptive technology. Dave Clarke, director of Ethical Reach Ltd, told eyeforpharma that truly 3D printing a new medicine is a “long way off reality, although theoretically it can be done, with stumbling blocks being regulatory but also drug origin integrity”.
Clarke added that he agreed with concerns from some scientists that while the approval of a 3D-printed drug opens up a new world of customized medication, it also creates the possibility of counterfeit drugs, mislabelling and a regulatory vacuum.
2. Drug pricing debate intensifies
The US has traditionally been a market of free pricing with no firm rules dictating how much a prescription medicine can cost. Because of this, the US has some of the most expensive drugs in the world, typically being double what is paid in Western Europe (which has pricing watchdogs that negotiate prices).
But for the past few years, there has been growing disquiet at the growing costs of new medicines – which have to be paid by insurance companies and individuals – with new oncology drugs regularly costing more than $100,000 for a course of treatment.
This came to a head in 2015 when Martin Shkreli, the CEO of US-based Turing Pharmaceuticals, acquired the rights to an off-patent toxoplasmosis treatment Daraprim in August. Within weeks of obtaining the generic drug, a dose of Daraprim in the US increased from $13.50 (£8.70) to $750 – an eye-watering 5,000% increase.
Shkreli said his company will use the money it makes from sales to research new treatments, but he was hit by a major public backlash after many took to social media sites decrying the price hike for a 62-year old medicine.
He has exploited a loophole, nothing more, nothing less, and only people with a financial-first approach to pharma find that palatable. He is not a bad apple, just an ugly, rotting apple in a barrel full of them.
This could be the straw that broke the camel’s back in terms of US drug pricing, as the US presidential hopeful, the Democrat Hillary Clinton, announced that drug price reforms will now be a key part of her presidential campaign, given the “price gouging” from Shkreli.
Even the staunchly pro-business Republican Donald Trump – also hoping to be his Party’s presidential candidate – told journalists in September that Shkreli “ought to be ashamed of himself” over the price increase. Medicine costs and the pharmaceutical industry will certainly be central themes in the 2016 US Election.
Mike Rea, CEO of IDEA Pharma, told eyeforpharma: “Shkreli has put a hole below the waterline of the ship. However, this is not for the reason so many headlines focus on - it isn’t that he is doing something that no-one else is (except maybe in scale). And that, perhaps, is one of the problems. The industry has been quick to decry his actions, but mainly because of the magnitude of his greed, not the presence of it.
“Whatever the argument, there is no justification, other than possibility, for the price hike. He has exploited a loophole, nothing more, nothing less, and only people with a financial-first approach to pharma find that palatable. He is not a bad apple, just an ugly, rotting apple in a barrel full of them.”
Hilary Clinton’s tweet on 21 September: “Price gouging like this in the specialty drug market is outrageous. Tomorrow I'll lay out a plan to take it on. –H.”
Martin Shkreli’s Tweet on 22 September: “Media: sorry, no more interviews. I have a busy and important job. I’ve said what I needed to and anyone interested can view those pieces.”
1. Pfizer finally finds a match – but at what cost?
The top story in 2015 came near the end of the year: Pfizer’s major $160bn (£106bn) deal to buy Botox-maker Allergan. After failing to secure a merger with the Anglo-Swedish pharma firm AstraZeneca in 2014 for $100bn, Pfizer was successful in its pursuit of Allergan, which will see the two firms combine next year.
Pfizer’s CEO Ian Read will be chairman and CEO of the new company, with Allergan CEO Brent Saunders as president and chief operating officer, overseeing sales, manufacturing and strategy. Saunders is rumored to be groomed as the next CEO of the new company when Read eventually steps down.
This also rounds off a major M&A year for pharma, with $220bn of deals in the first half of 2015 alone. The $160bn deal also surpasses the $116bn Pfizer paid for Warner Lambert in 2000, making it the largest pharma deal ever created.
The deal is centered on Allergan being headquartered in Ireland, meaning Pfizer can effectively move its tax status to the country, which has around a 13% corporate tax rate, compared to the 35% in the US. This will save it a considerable sum each year under a policy known as a ‘tax inversion’.
This deal has, however, been strongly criticised in the US, with Hillary Clinton again stepping in to voice her concerns, accusing Pfizer of avoiding its “fair share” of taxes. The deal would “leave US taxpayers holding the bag”, she told journalists in November after the deal was made public.
Donald Trump echoed these concerns, describing Pfizer’s departure from the US as “disgusting”. The US government has in recent years attempted to stop these types of inversions, but stricter laws came too late to hamper this merger – although at the time of writing the deal still needed to pass regulatory hurdles. As with drug pricing, this too will be a central theme in the 2016 US Election.
From eyeforpharma’s experts
Some of our industry contacts give their views on the key trends of the past year:
Jeff Elton, Ph.D., managing director of life sciences and predictive health at Accenture said of the Pfizer-Allergan merger: “Recent estimates are that close to 85% plus of specialty pharma have gone through tax-motivated corporate inversions. Certainly, this deal is the most visible for its size, but this trend has almost played out. To date as widely reported, Allergan has provided its investors significant value through its transition from Actavis to its current state.
“This has not always been the case for large pharma deals. It will be essential for the new entity to demonstrate how its size can bring value to shareholders in line with new return expectations established by other players and recent deals. The ultimate measure will be benefit to patients and value to health systems from the vastly expanded scope and scale of its operations. These are all the new performance ‘bars’ to which a large-scale pharma or biopharma will have to deliver.”
Mike Rea, CEO of IDEA Pharma, said there are problems inherent with the first US biosimilar approval: “There are few of us who wholly believe that it is easy to make an exact copy of a biologic - similar yes, but copy no. And there is a lot of uncertainty in that similarity. And, it is unclear at what kind of discount these agents will emerge, so it is not like the ‘generics’ market that we have seen elsewhere.
“It is for the biosimilar companies to prove similarity, not the originator, and it must not be assumed by any of us. It is hard to see that there is a patient interest in there. Biosimilars, like generics, are developed by companies with financial objectives, not patient interest, in mind.”
Dave Clarke, director of Ethical Reach Ltd and a digital strategist, said the Pfizer-Allergan deal and drug pricing have received a lot of attention, but he sees another major issue - namely the challenge pharma has in stepping up on facilitating the new healthcare world. He said: “Elements like big data and wearables feature in almost every article from every pundit, but unless HCP mentalities alter and we have both a regulatory and technical infrastructure to utilise that information in an acceptable way, the vast opportunity it gives will be lost.”
John LaMattina, senior partner at PureTech Health and former president of Pfizer Global R&D, said the pricing debate is “not a simple issue”. “Turing should be not in a position to have a monopoly on a drug that is more than 60 years old. The problem is that no one else is making it in the US and FDA policies/rules make it hard for an entrepreneurial company to rapidly enter the field and manufacture this drug and charge a fairer price. Unfortunately, the general public assumes that Turing’s behavior is typical of the entire pharmaceutical industry and is getting tarnished with Shkreli’s bad policies.”