2012 was not a banner year for sales of newly launched biotech drugs. Revenues of Regeneron's decoy receptor Zaltrap were tenfold lower than expected. And Human Genome Sciences' (HGS) lupus drug Benlysta—the first new treatment for the disease in 56 years—fell so far short of its predicted annual sales of $2.1 billion (2012 revenues are projected at $120 million) that the biotech ended up as a bargain-basement acquisition of GlaxoSmithKline. Disappointing launches like these are no longer exceptions; they are becoming the norm. And it's not only greenhorn biotech companies like HGS commercializing their first products that are stumbling. For all its deep pockets and marketing expertise, big pharma is also experiencing delays and stuttering commercial launches.
Bar a few bright spots—Seattle Genetics' Adcetris, Amgen's Xgeva/Prolia and Vertex's Pharmaceuticals Incivek and Kalydeco—the list of underperforming commercial launches by biotech companies in recent years is depressingly long. In addition to Zaltrap and Benlysta, such flops include Acorda's Ampyra, Adolor's Entereg, AMAG's Feraheme, Allos's Folotyn, Auxilium's Xiaflex, Dyax's Kalbitor, Dendreon's Provenge, Genmab's Arzerra, GTC Biotherapeutics's Atryn, Omrix's Evithrom, Progenics's Relistor, Rare Disease Therapeutics' Anascorp, Savient's Krystexxa, Xenoport's Horizant and Zymogenetics' Recothrom.
Biotech is not alone in its 'bungling'. Notable recent disappointments for pharma products include Sanofi's anti-arrhythmia agent Multaq, 2012 sales of which ($570 million) failed to reach multibillion dollar predictions; and AstraZeneca's blood thinner and purinoreceptor antagonist Brilinta, which took just $51 million in the first three quarters of 2012.
One reason why so many launches are failing is that drug markets are becoming increasingly crowded with competing products, making incumbent brands difficult to dislodge. In addition, the introduction of risk evaluation and mitigation strategies, the imposition of greater limits and penalties on commercial direct-to-consumer programs and off-label promotion, and an increasingly conservative and safety-conscious physician base are all raising the bar.
Yet these factors pale in comparison to the biggest challenge—that of convincing payers to cover a new drug. The current reality is that any company attempting to market a new drug today must navigate a patchwork of reimbursement authorities, all with different rules and standards as to how to price a drug or whether to sanction it at all.
Many payers now use health technology assessments (HTAs) to weigh the additional expense of a new drug against the increase in effectiveness it delivers over the current standard of care. The standard bearer for such assessments has been the UK's National Institute for Health and Clinical Excellence (NICE), which uses the quality-adjusted life year, or QALY, to compare the value and/or health gain of a new product against a comparator drug. Drugs that NICE considers to have a QALY of over £30,000 ($49,000) rarely receive reimbursement.
In the United States, the Centers for Medicare and Medicaid Services (CMS) must cover medical products that are “reasonable and necessary” without regard for cost, but many private sector providers now refuse to pay for expensive novel products unless manufacturers offer steep discounts. In determining coverage, even the CMS may delay a product launch; in June 2010, for example, it announced a national coverage review for Dendreon's Provenge just two months after approval. Such reviews are uncommon for drugs and unprecedented so soon after registration.
Companies that receive rejections from payers can enter a negotiation on creative pricing, defined on one side by how much the company is prepared to discount from the list price and on the other by how much the payer will pay. They can agree on risk-sharing deals where the company reimburses the payer if a drug's real-world effectiveness falls short of that suggested by pre-registration trial data. Or they can, as Boehringer Ingelheim did last year with its antidiabetic dipeptidyl peptidase 4 (DPP4) inhibitor Trajenta in Germany, simply not put the therapy on that market.
One of the key flaws of current payer-company negotiations is that all too often industry and reimbursement authorities seem to be talking over one another, rather than engaging in a dialog. In several instances, European payers have rejected a new product because their performance was compared with the 'wrong' alternative treatment. Just last month, NICE declined to recommend Pfizer's kinase inhibitor Inlyta for second-line kidney cancer because the comparator used was Bayer's Nexavar—which NICE had already rejected in 2010. Around the same time, Germany rejected Boehringer's Trajenta for a second time because the company used an existing DPP4 inhibitor (Januvia) as a comparator, rather than sulfonylureas. Paradoxically, in France, comparing Trajenta to Januvia is perfectly acceptable.
And it doesn't stop there. Inconsistency is seen concerning the willingness of reimbursement authorities to accept clinical data based on surrogate markers. Thus, the German HTA has only been accepting 'hard' clinical endpoints like patient survival or morbidity, whereas French authorities do allow patient benefit measurements based on surrogates.
Protracted drug development timelines exacerbate these problems because many of the drugs currently awaiting pricing were designed to show clinical risk benefit rather than address relative cost benefit. Put this together with the confusing tangle of reimbursement rules and shifting laws in different jurisdictions and one begins to understand why we are seeing commercialization delays of six months or more. This not only translates into disappointing sales but also eats into a product's period of market exclusivity.
Clearly, more needs to be done to harmonize and increase the transparency of payer requirements. Industry and payers need to liaise much earlier in drug development to ensure trials are better designed to provide answers to cost-benefit questions. And investor expectations need to reflect the new reality that the blockbuster commercial launch is an increasingly elusive goal.