Biologics Beware - Pharmaceutical Executive

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Biologics Beware
A new study says biologics are at the top of payers' lists for cost containment efforts.


Pharmaceutical Executive


Amevive Case Study In 2003, Biogen introduced Amevive, the highly anticipated first biologic indicated for psoriasis. The product was poised to be a big hit with patients, physicians, and payers alike. Biogen, however, did not appropriately incorporate into Amevive's managed markets and pricing strategy the critical pharmaco-economic value arguments that are now at the heart of any substantive formulary submission dossier.

Biogen priced Amevive at a significant cost premium over Amgen's Enbrel (etanercept), the market leader with at least 75 percent share of the biological market for psoriasis. Biogen apparently assumed that Amevive could command a price premium for three main reasons:

  • It is the first biological with an FDA-approved indication for psoriasis. (Enbrel and other biological treatments are used off-label, although Enbrel was indicated for psoriasis in May 2004.)
  • Amevive uses a unique immunosuppressive method of action.
  • The product offers the possibility of a more durable response.

From payers' perspectives, however, Amevive's "value proposition" offers no meaningful pharmacoeconomic value over that of lower-priced competitors. Being the first biological for psoriasis, while a useful marketing message to garner grassroots support, is an attribute with no meaningful healthcare value. Although at the time, the other specialty pharma products for psoriasis were all being used off-label, such a designation was moot in the face of reported efficacy and physicians' successful experiences with those products. At Amevive's launch, Enbrel had already been treating rheumatoid arthritis patients for years and had been used by dermatologists for the treatment of psoriatic arthritis for more than a year. Doctors and payers were familiar with Enbrel and confident about its efficacy and safety.

The introduction of a new method of action is only as valuable as the new approach's ability to address market needs by improving outcomes (increasing efficacy, increasing safety, and/or reducing side effects) or reducing costs. Unfortunately, most payers consider Amevive's efficacy as equivalent to Enbrel's, yet Amevive requires a 60–90 day onset of action period compared with Enbrel's 14–21 days. Furthermore, payers consider Amevive's durability of response to be rather anecdotal and want more data to demonstrate a clinical and pharmacoeconomic significance with meaningful impact on the healthcare value proposition.

Amevive also comes with additional costs not encountered with Enbrel. Enbrel requires a subcutaneous self-injection at home; Amevive needs intravenous or intramuscular delivery by a doctor or nurse. Perhaps Biogen believed that administration would afford a Medicare advantage. But in reality, doctors must obtain the drug directly and have reason to fear that a shortfall or delays in reimbursement will cost them personally. Enbrel, meanwhile, is available at retail pharmacies at no risk to doctors. Amevive also requires regular monitoring of immune cell counts. In short, the therapy did not offer payers a meaningful value proposition.

As a result, Amevive has failed to achieve widespread coverage on preferred formularies, and many doctors became concerned when coverage was denied even after Herculean efforts. Patients also balked at the often 20–30 percent co-pay required for Amevive. As a result, physicians and patients largely ignored Amevive, and it suffered an essentially stillborn launch. Post-launch results were further hindered by anecdotal reports suggesting that Amevive's real-world clinical efficacy was less than the company's claims. Even as Biogen diligently attempted to address many of the issues, Amevive's first quarter revenues in 2004 plunged to only $13 million, down from $17 million in the fourth quarter of 2003—a fraction of Biogen's expectations.

More than a few Wall Street analysts believe that Amevive's poor launch—and the loss in projected revenue—drove Biogen's merger with Idec. As the theory goes, Biogen was compelled by the need to get a deal done with another company before its stock took a plunge, leaving Biogen as a wounded takeover candidate. This case study illustrates the very high price that biotech companies can pay for ignoring payer's OBA approach with its focus on healthcare value.

On the Other Hand Roche's combo therapy for hepatitis C shows how incorporating OBA principles can produce an unqualified success. Before launch, Roche assessed the clinical outcomes of Pegasys+Copegus (peginterferon alfa-2a/ribavirin) compared with the standard of care and market leader at the time, Schering-Plough's Peg-Intron+Rebetol (peginterferon alfa-2b/ribavirin).

Roche understood that in the current payer climate, Pegasys' similar outcomes to Peg-Intron would not justify a pricing premium and that nothing could be gained by trying to do so by chipping at the margins of the co-therapy's clinical success. Realizing that a pricing premium had no basis in the evidence, Roche went with the theory that, with all else being relatively equal, a lower price would likely win market share.

At launch, Pegasys+Copegus was priced to offer similar patient outcomes at significantly better value than Peg-Intron+Rebetol. Coupled with an excellent, utilitarian, and focused strategy, Roche captured more than 40 percent share from Schering-Plough in just 12 months.


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