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Pink Sheet – Science May Be Losing Out To Reimbursement In Partnering Priorities

Pink Sheet – Science May Be Losing Out To Reimbursement In Partnering Priorities

The once-hypothetical question of reimbursability is now leading the global partnering conversation, but how can anyone know whether a preclinical molecule will differentiate itself enough down the road to provide value for payers?

The reality of partnering conversations these days is that reimbursement is becoming a bigger consideration than science, particularly with the influence of European policies seeping into U.S. payer mentality, industry stakeholders said during the recent BioPharm America meeting.

“The biggest change I see today is it is not the science anymore, it is this payers’ perspective,” said Sanjeev Munshi, director of external scientific affairs, worldwide licensing and acquisition for Merck & Co. Inc.

“When I was in the labs, we were just driven by science and the potential of that science to move forward,” Munshi said. Now, the buyers are bringing in the payers’ perspective, “and you better have thought that through as you were advancing your company.”

Indeed, the pressure to somehow predict the payer response down the road to a promising yet preclinical molecule has added another layer of concern for start-up companies in search of partnering wisdom, and it was a recurrent theme among the teams of expert panelists convened in Boston Sept. 17-19 to advise them.

“It introduces a level of complexity that even for development-stage companies has obviously changed our world … in a way that we have to be more conscious of [payer pressures] than ever before,” said John Maraganore, CEO of Alnylam Pharmaceuticals Inc. However, “if you are able to provide that value proposition to the patient and the providers, then I have to think” the discussion with the payers will recognize the value proposition going forward, Maraganore said.

Sizing Payer Tolerance For Incremental Improvement

One aspect of that value proposition is figuring out the tolerance among the payer community for incremental improvements. One could argue that even a best-in-class compound represents only a shade of improvement over the first-in-class therapeutic, and there’s a gray zone today when it comes to how payers value that improvement, Arthur Hiller, CEO of SciFluor Life Sciences LLC, said.

It’s a challenging balancing act, Hiller said. Health outcomes data may be needed to support that value argument, but getting those data is an extra cost, and a start-up may not be able to generate it in a timeframe that’s workable for it as a going concern. Yet, “the further down the path you move into that gray zone of being not clearly impactful on health outcomes, clearly best-in-class versus something in the gray zone, the more challenged you’ll be,” he said.

“We could have cool science coming from the labs, academic labs, early start-ups [but] the closer you look at it, they don’t know what the delta is going to be. If it’s going to be incremental, what is the delta? Is it going to be substantially incremental in terms of value that you bring so the payers are going to pay for it? If you have a doubt in that equation, all bets are off,” said Merck’s Munshi.

“One of our main concerns now because of all these pressures, which goes to quality of life, is how much real differentiation do we have to have in order to get reimbursement, to get a price, and what is real differentiation?” Barbara Yanni, chief licensing officer at Merck, said. “We used to talk about price, and now we talk about market access, and that, of course, is linked to the price” we’ll pay for a licensing deal.

“If you’re talking about early-stage research, you really are talking about hope and promise. It’ll be very interesting to see what our new head of research, Roger Perlmutter, chooses, what areas we’re going to pursue and which we’re not. He has said several times that he doesn’t want to build this franchise model, which we had. He’s said that basically great drugs make a franchise, a franchise doesn’t make great drugs,” she said (“Merck’s Perlmutter Starts To Reveal R&D Strategy” — “The Pink Sheet” DAILY, Sep. 11, 2013).

Focus On Patients And Payers Will Follow

The perceived amount of the increment also depends on the definition of improvement. “As long as an incremental improvement solves an unmet medical need, I think at the end of the day there will be a nice commercial turnaround,” said Thomas Hanke, director of biopharmaceuticals innovation sourcing for the research unit at Novo Nordisk AS.

In hemophilia, it might be considered an incremental change to offer once-weekly injections with clotting factors instead of the current two or three, but in the eyes of the medical community or the mothers that would be a big step forward.

Globally, quality of life is a low priority for payers, but data showing that patients are going to be more compliant with a certain product has worked well, said Philippe Lopes-Fernandes, head of global business development for Merck Serono SA. In the U.S., the patient groups can be a powerful force to deliver the message that an innovation is going to hugely impact compliance, he said, adding that the company must follow up with data showing that compliance is going to be a major factor in the success of the drug. Regulators that focus on just achieving a 20% discount on the price of the drug are “really missing the point,” he said. “Because of low compliance, the cost of hospitalization and absence from work, etc., they hurt themselves.”

Richard Gregory, head of Sanofi R&D’s Genzyme R&D Center, agreed. “Our goal completely is to try to develop a transformative therapy, which in the end we hope will justify the cost-benefit analysis that will occur with payers or with governments and private payers,” he said. However, he also said he has concerns that so many companies have entered the rare disease space on the back of successes by Genzyme Corp., Shire PLC and BioMarin Pharmaceutical Inc. He admonished those new companies to focus on the patients; the point isn’t the climate of the market or the payer, he said. “It’s can you develop something that will transform a patient’s life? I have to believe if we can do that, we’ll be able to have productive discussions with payers in the end.”

FDA has increasingly valued patient opinion, engaging patient groups as never before in search of input into clinical programs that will be meaningful to them and match their sense of risk/benefit. FDA’s first-ever report produced under its patient-focused drug development initiative incorporates the symptoms of, and treatments used for, chronic fatigue syndrome and myalgic encephalomyelitis into a modified version of the agency’s new benefit/risk assessment framework (““Patient Voice” Report Puts Chronic Fatigue Symptoms, Treatments In Benefit/Risk Framework” — “The Pink Sheet,” Oct. 7, 2013).

But reimbursement is a fluctuating concept right now across much of the globe, and the definition of “value” is even more up in the air, depending on whether the question is value to the patient, to the drug developer or to the government/private payer.

“What happens in reimbursement when all of a sudden all the tools that are perfected in Europe to beat [up on] companies and make every company say the only market that’s worthwhile is the U.S., only to find that tool box has shown up over here?” Vaughn Kailian, managing partner, MPM capital, posed to a panel on strategic R&D planning.

U.S. payers are going the way of Europe, and they are very much demanding greater discounts, Merck’s Yanni said. Not only that, “they are taking advantage of the fact that consumers really don’t understand much, if anything, about the drugs and what they can do or can’t do … in a way that is a destructive trend.” It is helpful to the industry that patient advocacy is growing, and it may help to counterbalance some of the forces the payers are bringing to bear. It is the patients that can point out important things about convenience and compliance and quality of life that are very, very serious issues that should get more consideration than they do under the current system, she said.

The Effect Of The European Environment

Germany is chief among the European countries tightening up on drug pricing, and its tough reimbursement system has had an unsettling effect on drug developers in both Europe and the U.S. Most recently a round of assessments passed down on older drugs ended in disaster for Novartis AG’s oral anti-diabetic Galvus (vildagliptin) when the reimbursement watchdog said Novartis had failed to provide suitable studies in defense of its drug (“Januvia And Onglyza In, Galvus Out, As Germany Evaluates Older Drugs” — “The Pink Sheet” DAILY, Oct. 2, 2013).

In comparison, the U.K.’s National Institute for Health and Care Excellence, which has been known to wield a heavy policy hand, is now seen as relatively reasonable, Lopes-Fernandes said.

“In Germany they like to put things in a box and say, you fit there and so you are priced that way, and there is no discussion,” he said. “We’ve had extremely good discussions with NICE, because if you come with their mind set and” work with them on issues of importance to them, like compliance, “they’ll say fine, let’s do a deal, let’s find a way. They’re willing to work with you.”

But, while the U.K. model might be one the U.S. could learn from, the larger issue is whether the tighter reimbursement policies across Europe are dampening innovation both there and in the U.S., said Mark Levin, a co-founder and partner at Third Rock Ventures. “As we look at what’s happening with reimbursements, what’s that mean for innovation? I think it’s pretty complicated and it’s going to take some time to think this through.”

Designing registrational trials to be able “to deal with the pricing environment in Europe is increasingly a very important part of how we think about our R&D activities” these days, said Alnylam’s Maraganore. One obviously has to consult with both FDA and the European Medicines Agency on the study design, but ultimately one has to think about the payer and what could change during the course of a several-year trial that might change how payers will look at the dossier when it’s complete, he said.

The perception is that there is now more money in the U.S., said Merck’s Yanni. But, in fact, because of the payment structures, there’s less money in both the U.S. and Europe. It’s just that there’s even less money in Europe, she said. “When we’re doing an analysis of a licensing opportunity or even our own pipeline opportunities” and “try to project what the value of a molecule is, we see a very small amount of value in Europe,” where it used to be at least 20% or more. In fact, it can now be zero.

“It’s tremendously troubling when you think about what kind of condition we’re in because of the regulatory [environment],” she said. “The pie is smaller and a smaller piece of that pie is in Europe.”