 The biopharmaceutical industry confronts a strategic dilemma: just as the genomics revolution is yielding a rich harvest of biologically-based medicines that promise to raise the standard of treatment for patients, its ability to price these medicines at will is eroding. In response, the drug majors are redefining the traditional one-to-one relationship to payers through messaging with appeal to a broader set of stakeholders as well as detailed evidence to document the medicine's clinical and economic value. The industry calls the new strategy "market access"—is it working, how is the function likely to evolve over the next few years, and what are the key considerations for companies?

 My firm has completed a new study that provides insight around this question. Extensive surveys and interviews were conducted with more than 50 leaders from managed care, employers, Medicaid, other institutions, as well as the biopharma industry. Our focus was on elucidating how market access dynamics will evolve over the next five years and defining implications for biopharma companies. We found that there is a very high expectation of change, in 12 relevant areas ranging from the role of biomarkers, IT and comparative effectiveness standards to formulary design, management, and contracting. Interestingly, payers and manufacturers were aligned on the future direction and import of most of these issues. The notable exceptions were in the management of specialty drugs, where payers expect increased scrutiny, and on the role of comparative effectiveness, where payers are more bullish than manufacturers in thinking that use of this particular tool will increasingly drive pricing and access decisions. 

With specific reference to the 12 "change drivers" we identified, the growth of personalized medicine through biomarkers and companion diagnostics scored the highest in terms of the expected degree of change over the next three to five years. Both groups understand that this is a positive trend because all these tools have a common objective: to improve outcomes and avoid inappropriate utilization by getting the right medicine to the right patient at the right time. This is the essence of "managed" care, one where the patient is the chief beneficiary.  

Right behind this as a change driver is IT and how it will shape prescribing patterns, particularly as incentives for EHR and other integrated systems are implemented, at the practice level. IT is a key enabler of the third highest degree of expected change, which is the role of emerging models of care like the ACO, where the "episode of care" approach depends on having information systems that can talk seamlessly to each other.  

We spoke with managed care firms and other payers about whether these new models would succeed in saving money while improving quality. The consensus is the jury is still out, largely because earlier efforts to integrate care failed to take root; these are in many ways a pilot effort. Ultimately, ACOs may prove an interim step in what is likely to be a lengthy journey toward a common delivery platform—one that binds patients, providers, and payers around a more efficient approach to treatment.  

Benefit design issues came next as a change driver. Clearly, the structures by which patients access care are in flux. There is a great deal of exploration underway—focused on coinsurance, deductibles, and preferred/non-preferred tiering of formulary access—to find the right balance between quality of outcomes and containment of costs. One issue from our discussions is how the insurance benefit offered under the Affordable Care Act's insurance exchanges will influence private insurance plans. The exchanges are likely to offer drug benefits less robust than what is currently offered on the private commercial side—will we see a spillover of that trend to the private market? That's an important question for both manufacturers and payers. 

Next on the list of expected changes is the management of specialty drugs. Most of the drugs being approved by the FDA are specialty, and Express Scripts forecasts that only five years from now this category will account for half of total drug prescription expenditures, up from 25 percent today. The price tag for these therapies is a major pain point for payers, of which manufacturers are all too aware.  

Does the study identify the therapeutic areas most likely to set the agenda on market access over the next three years? 

 Yes. We asked managed care decision-makers to identify the disease areas they would prioritize in managing drug utilization and expenditures during this period. Oncology came out on top, followed by rheumatology, diabetes, respiratory, orphan diseases, neurology, and obesity. The common link here is the impact that actions by both manufacturers and payers can have on addressing unmet medical need. Targeted therapies for cancer that address the etiology of the tumor is a clear example, and their novelty in raising the likelihood that the medicine will end up in the patients most suited for it suggests access can be secured at a premium price—a win for manufacturers. In diabetes, the number of new patients with all the co-morbidities of this disease continues to expand the market. Economically, it's a huge burden for payers and there is strong interest in any medication that will help lower the overall cost of treatment. We found too that the science of diabetes looks promising, with new classes of drugs coming on stream that attack the disorder in different ways. There is a big potential innovation premium here for industry.  

Obesity scored the greatest increase in interest as a priority therapy over the forecast period. Some of the same co-morbidity factors driving diabetes are at work here. The pipeline for new products with fewer side effects looks promising. And payers appear willing to reimburse obesity treatments because of the impact on population wellness, which translates to lower health costs. 

 The biopharma business is uniquely affected by public policy and legislation. Can we identify from the study the key challenges coming on the regulatory front?

 Executives on the managed care side are very focused on the implementation of the Affordable Care Act. Uncertainty is the prevailing sentiment. It remains to be seen if this complex law is a growth opportunity. Will expansion of the Medicaid-eligible population as well as the individual insurance exchanges create a windfall of new customers whose healthcare needs can be met at reasonable cost, through a balance of young and healthy against an older demographic with serious health risks? Another issue is coverage rules for drugs, including formulary management and related design questions, which are impacted in turn by rules on whether manufacturers can offer co-pay offset and coupon incentives directly to patients in the exchanges.  

The study also looked at the prospects for biosimilars. A bare majority of respondents from the managed care/payer side believe biosimilars will become widely available to US patients in the next three years; there is a stronger consensus that, if this happens, we will see downward pricing pressure on drugs that lead to meaningful savings for payers. Realistically, however, most payers contend that discounts of at least 30 percent against the originator brand will be required to deliver any real savings.  

Finally, the managed care group struck a distinctive note on comparative effectiveness rules. Surprisingly, most aren't currently employing this evidence tool to shape decisions on formulary coverage. Interviewees said they are waiting for relevant government agencies like CMS to take action; many point to internal resource constraints as the culprit in their failure to making it a priority.  

Jim Smeeding, National Association of Specialty Pharmacy:

 Did the study confirm the trend toward a blurring of the roles played by payers and providers in the healthcare system?  

Yes. The ACO model with its focus on episode of care as an alternative to traditional fee-for-service is viewed as here to stay. If payers want to reduce costs, it requires that they embrace the concept of active medical management; it's no longer financially viable to act as a passive third-party.  

There is some way to go before we have truly integrated care in the United States. This is because actions by all parties—providers, payers, and manufacturers—remain driven by disjointed financial incentives and misalignment on assumed risk that are hard to reverse. Europe is further ahead, having embraced payment schemes that are built around performance and outcomes, expressed via the accumulation of evidence of comparative effectiveness (which differs from efficacy established in well-controlled clinical trials) through post-approval observational studies, in the real world setting. It is possible that policy pressures in the expensive, high- profile specialty biologics segment might accelerate a similar transition here.  

 Payers we interviewed will be demanding progressively higher substantiation of clinical effectiveness for these biologics. They admit, however, that creating workable criteria to demonstrate value—criteria that are mutually acceptable to payers and manufacturers—is still a work in progress. Support is strong on a conceptual level but the goal now is to move from that to something that you can actually measure. If by uniformity you mean the United States will evolve toward a single federal standard of cost effectiveness, I suspect this idea will be fiercely resisted, not just on methodological grounds but because of the politics. 

There is substantial discussion on how to manage and reduce costs in healthcare. Information and data will continue to be critical as we examine disease and treatment costs holistically. Pharmaceutical prices are relatively transparent and have been a major focus of reducing costs. However, drugs are often not the major driver of the expense of treating a patient. To reduce healthcare costs, stakeholders should start with accurately measuring and comparing all costs with improved transparency and data. It is also important to capture cost offsets and savings in different treatment options. What does it cost to treat an individual throughout the full course of a disease? This is the key principle in aligning market access with treatment outcomes, in an affordable way.  

 The situation in Europe today suggests it may be naïve to assume that better information combined with the right clinical profile will result in patient access to a new drug. The patient population is increasingly diverse, so it follows that there is an equally diverse range of opinion on what constitutes improvement in the standard of care. All the industry's computer models will have little influence on that determination, which most often ends up being, "we just can't pay for it." This is the direction European countries are taking, and it will be interesting to see where that leaves the European-based industry three to five years from now. Precedent shows that there will be less innovation and slower uptake of newer drugs.  

Don't we need to start with an agreed definition among payers and manufacturers about what the concept of "effectiveness" really means? Does it apply to clinical standards only or does it incorporate cost? 

 It carries a very broad scope. Some of the larger provider and managed care organizations have evolved their own internal definitions. Efforts by the networked academic organizations like ISPOR have also brought the various interests together, which is critical as the mechanics of effectiveness evaluations must make sense to the insurance providers first, because they are the ones who pay the bill. But drug makers will confront price resistance, regardless of the degree of consensus on standards. It's always been a contest of wills to wrest a good price from a payer, and I don't expect that to change very much.  

 Each provider wants to design their own cost effectiveness model because everyone in the business claims their covered patient base is unique. The practical implication is a drug manufacturer is forced to do endless variations of the same thing to accommodate this pretense.  

Brendan Bertsch, Optimer Pharmaceuticals:

 In the United States, no standard for effectiveness can include a frank assessment of cost. Only clinical applications are permissible; anything beyond that entails endorsement of rationed care, symbolized by the "death panels" that are supposed to be implicit in the Obamacare legislation. European precedents don't travel well here. 

 Criteria for effectiveness in Europe seems to focus predominantly on cost, so much that one might suspect that in some countries, the institutionalized process known as health technology assessment [HTA] is more of a political tool masquerading as an objective evidentiary standard. It provides an opportunity for payers to tactically create negative assessments prior to negotiating a reimbursement price. The lack of objective and scientific benefit assessments becomes clear when a manufacturer can submit the same dossier of evidence for the same drug to HTA authorities in a number of countries and get a very different conclusion in each one. It would be unfortunate if these assessments amounted to no more than a clever way to manage a fixed budget for medicines, instead of identifying true innovations that benefit patients.  

The situation could only change if the agency doing the benefit assessment was not so closely tied to the payer negotiating reimbursement. There are efforts underway to create a pan-European assessment process on relative effectiveness. Opinions differ, but my view is that this is unlikely to improve the current problem of HTA bias and lack of objectivity, in a way that rewards drugs addressing unmet medical needs. That's because all reimbursement negotiations are inherently political; payers in countries controlling access to new drugs are unlikely to relinquish direct control over the HTA process. The group coordinating the pan-European HTA assessment pilot, the European Network for Health Technology Assessment [EUnetHTA], consists of representatives of the national HTA agencies. You can't expect them to support any significant changes to the status quo in their home countries, as it would adversely impact their prerogatives as the gatekeepers on patient access.  

Throughout my career, I've been closely involved in negotiations on clinical and cost effectiveness standards, in Canada as well as the United States. My experience leads me to conclude that the only way industry can avoid making this process a narrow budgetary and financial calculation is to engage the patient. Putting forward an articulate patient perspective is unsettling to the payer—which actually confirms we are doing the right thing. Patient involvement tilts the discussion away from a focus that is exclusively about the cost of therapy.  

Richard Stefanacci, University of the Sciences and the Access Group: 

Through my work as chief medical officer for a number of Medicare Advantage plans as well as membership on a national P&T committee, I can say there are only two things that drive payers on market access. The first is return on investment—not just what do we get by listing your drug, but, more important, how soon? No longer do payers want to be told about savings over a 10-year time span. Their fallback position is to eschew any immediate decision on coverage, in favor of "watchful waiting." If manufacturers want to avoid this outcome, being able to make that case for ROI is critical. The second driver for payers is regulation. If we are told we must cover a drug, we do it. Academic judgments about cost effectiveness have little, if any, impact on the decision.  

I am intrigued that in the survey, respondents from both the manufacturer and managed care side seemed to downplay the role of the patient. In this new healthcare environment, manufacturers must position value from the point of view of the patient, not just the provider. As patients will be forced to bear more of the cost burden, their adherence will be based more on how they perceive value.  

 As costs for drugs mount, particularly for life-threatening conditions like cancer, patient access programs will become a critical ethical issue. There are a lot of uninsured and under-insured people where the pressure will be intense to get them on therapy. Such programs are predominantly company-sponsored but I predict we will see more government involvement in how these programs work, and for whom.  

Europe is already there. In contrast to the United States, national authorities have to reconcile two conflicting commitments: first, to offer the broadest access possible to all citizens, and, second, to contain costs within a fixed annual budget. Their response offers a precedent for the United States: It requires some people—those with more assets—to pay a bigger portion of their health costs out-of-pocket. Overall insurance cover is important, but patient share of costs is going to be right up there too.  

The trade-off for patients from the Affordable Care Act is lower plan premiums through government programs like the Health Insurance Marketplace plans and Medicaid, partly as a result from restricted access to providers and certain types of care, including drugs as well as higher patient cost sharing.  

Payers are interested in data on how biopharma technologies improve outcomes for a defined population relative to the current treatment standard. In oncology, with rapidly changing treatment standards, this can be a significant practical challenge for companies. Traditional Phase III trials have protocols and standards that are approved by regulators years in advance of the trial completion. By the time results come, the standards can evolve and the relevance of the data can be challenged. There are efforts with regulators to address this issue, but it is a current risk that biopharma must take as a given in the development process.  

Payers need to provide industry a feasible way to develop the evidence they are asking us for, so that it is not a constantly moving target. Right now they are not doing this. The non-binding consultations we have with them do not allow us to agree on what will constitute a data package to ensure access for drugs that have a meaningful benefit, including what should be the right comparator. This is going to discourage future innovation. I submit that it is in the payer interest to play this game, and it starts with a fair playing field to help us work through the payers' fear of the budget impact of true innovation, in areas of unmet medical need, because these innovations do not always carry a cost saving or cost offset.  

 The cost challenge is compounded by the lack of consensus on how to decide which innovation creates value. Not every player in healthcare shares our view of what we would characterize as innovative. I recall inviting a senior executive from Humana to participate in a payer advisory board for a J&J compound we were developing for diabetes. He noted that, at his company, innovation was rarely described as coming from a bottle. Instead, innovation came in a Nike shoe box, because it motivated employees with diabetes to exercise. 

 It is commonly assumed that it is up to the payer to define innovation. Not true: their first responsibility is to allocate a fixed budget. You cannot pay for things with money you do not have. The concern is how payers are managing the process. It is not a coincidence that virtually every preliminary benefit assessment of oncology products by NICE in the United Kingdom is negative, regardless of the clinical data presented or the patient access scheme we present upfront. Another new trend I find alarming is the separation of the benefit assessment [the value] and reimbursement negotiations [the price] in countries like Germany. This puts manufacturers in a difficult position and allows the payer to gain the higher ground, stating "we think your product falls short...so let's now talk about price." In the new payer environment, providing the clinical data that payers are asking for, such as showing clinical superiority in a head-to-head trial, or developing molecularly targeted drugs that identify for treatment only those patients most likely to respond, isn't producing the expected response. This is because the payer is so focused on cost relative to any clinical value. I have heard it said that the only thing a payer dislikes more than a product 

 good data. Understanding this perception is a first step in defining what motivates payers in a price controlled market. Their benefit assessments seem to stray from the consensus in the medical community and any request by companies for even a small price premium over comparator products—based on data demonstrating significant statistical superiority over those comparators—will likely lead to prolonged negotiations. This challenge is further compounded when the comparators are generics. In some cases, payers are now settling limits on how much they will pay, per patient, per year. To remedy this, there is going to have to be some give on both sides, but unless society is satisfied with only having the treatments of today, more alignment must be made on the incentives to advance medicines ability to improve population health.  

 Industry still has some leverage in that we can decide where we choose to launch—or not launch. As some of the emerging markets become bigger over the next five to 10 years, there will be more options to pursue a launch strategy beyond the budget-constrained countries. I believe the biggest threat is the erosion of support for so-called incremental innovations. These are the products with clinical attributes that are quite meaningful to patients and whose success has always fueled the next round of first-in-class breakthroughs. These products are in wide disfavor now, with some companies reconsidering plans to advance next generation therapies.  

Articles

Features

Pharm Exec convenes a diverse panel of experts to identify the key markers of common ground: its time, people, and money against that greatest intangible-hope.

Pharm Exec Roundtable on Market Access

This year's pipeline report is a little different from reports in previous years in that it takes a closer look at fewer categories – the ones where the biggest things are happening: cancer, heart failure, obesity and diabetes, and hepatitis C, in addition to novel antibiotics, not a goldmine by any stretch, but an absolutely critical need. The last category, Outsiders, Sleepers, and Early Stagers, describes products that don't fit neatly into this year's setup, but are nevertheless worthy of mention. In October, a study in 

 took pharma analysts to task for getting the numbers wrong—a lot—but we've endeavored to corroborate the forecasts, both bullish and bearish, and are confident that this year's report spotlights real value, for patients and bottomlines. The pharma business model might have changed, but a lot of companies have managed to hold on to their blockbusters. 

Genome-guided tumor diagnostics and treatments with the power to manipulate a patient's immune response have the potential to impact cancer outcomes in dramatic fashion. At the Cleveland Clinic's recent Medical Innovations Summit (see 

s "Top Medical Innovations for 2014"), Eric Klein, chair at the Clinic's Glickman Urological & Kidney Institute, championed the work of companies like Genomic Health Inc.—and its recently CLIA-approved OncoType Dx prostate cancer assay—as critical to the future of cancer research and drug development. The genotype of a tumor may prove to be more useful than the genotype of the patient in which it resides. If identifying a "driver mutation" in metastatic cancers turns out to work in practice, it won't matter where a tumor originated in the body. Consequently, "drug development will be more rapid as a result," says Klein.  

Designing clinical trials around a specific tumor mutation instead of a patient's cancer type probably won't start happening next year. In the shorter term, immunotherapies have maintained their buzz among researchers, with a spotlight on the role of Programmed Death-1 (PD1) as a way to cut off one important safe harbor for cancer cells looking to protect themselves from warring T cells. In addition to Bristol-Myers Squibb's nivolumab—which received FDA Fast Track designations in malignant melanoma, renal cell carcinoma and non-small cell lung cancer last April, Stephanie Hawthorne, director, clinical, and scientific assessment at Kantar Health, points to Merck's lambrolizumab and Roche's MPDL 3280A as key players in the PD1 game. Compared with nivolumab, Roche's MPDL 3280A (which targets the PD1 ligand—PD-L1—as opposed to the receptor) may have a better safety profile, while Merck's lambrolizumab may beat nivolumab on efficacy, although it's too early for excessive confidence on that prediction, says Hawthorne. 

Lambrolizumab also received FDA's Breakthrough Therapy designation last April, and clinical trials are initially focused on melanoma and non-small cell lung cancer. Nivolumab is targeting melanoma and lung cancer, with the addition of renal cell carcinoma in Phase III. Merck announced plans to study lambrolizumab in other haematolgical malignancies, and has early trials running in triple negative breast cancer, colorectal cancer, bladder cancer, and other solid tumor cancers. Thompson Reuters' Cortellis database puts sales of lambrolizumab at roughly $845 million by 2018; Decision Resources' Efua Edusei made a similar prediction, around $800 million by 2019. "Merck would definitely have a better commercial opportunity if Yervoy wasn't already on the market," notes Edusea, adding that nivolumab could eventually restrict sales of lambrolizumab. With Zalboraf also looming large in the melanoma space, the initial label, launch date, and timeline for additional indications on both drugs could open or block the entrance to blockbuster fame and revenues. Roche is taking a different approach by shifting melanoma to the backburner; instead, MPDL 3280A is targeting the biomarker population in lung cancer as a lead indication. Merck followed suit with lambrolizumab, says Hawthorne. Thomson Reuters puts nivolumab sales at just over $2 billion by 2018; Decision Resources is more conservative on nivolumab, with sales just crossing the blockbuster mark by 2019. 

In some ways, J&J/Pharmacyclics' ibrutinib takes a similar approach to treating cancer by inhibiting a normally protective pathway for infection-fighting B-cells. Like cancer cells hiding from T cell lymphocytes after corrupting the PD1 receptor pathway, the B-cell receptor pathway is corrupted when B-cells turn malignant. Ibrutinib inhibits the Bruton tyrosine kinase (BTK), which regulates B-cell survival. A first in class oral BTK inhibitor and an FDA Breakthrough Therapy designee, ibrutinib has filed with FDA for chronic lymphocytic leukemia (an orphan indication), and mantle cell lymphoma, also a rare disease. Achieving that rare double win—improved survival and reduced toxicity compared with chemotherapy—plus a fast track to market in the United States has prompted analysts to go big on ibrutinib. Estimates range from $3.5 (Thomson Reuters Cortellis) to $6 billion (Credit Suisse) by 2020. 

In addition to ibrutinib are Gilead's idelalisib, a phosphoinositide-3 kinase (PI3K) inhibitor, and Rigel Pharmaceuticals' fostamatinib, a spleen tyrosine kinase (SYK) inhibitor. Both products, like ibrutinib, affect the B-cell pathway. Gilead filed idelalisib in the United States for a non-Hodgkin's lymphoma indication, and in October Rigel announced an end-of-Phase II meeting with FDA to discuss fostamatinib for immune thrombocytopenic purpura, or ITP (AstraZeneca ended its partnership with Rigel after the drug failed as a treatment for rheumatoid arthritis). Thomson Reuters is bullish on idelalisib, predicting sales of $3.8 billion, just short of projected ibrutinib sales. Hawthorne gives "a slight nod" to ibrutinib due to efficacy and safety; additionally, ibrutinib is pursuing a first-line indication in addition to second-line, whereas idelalisib is not currently in the clinic for a front-line indication. Roche/Biogen Idec's obinutuzumab, a CD20 inhibitor, is also a key product in this area; tested as a monotherapy and in combination with chemo for chronic lymphcytic leukemia, obinutuzumab also plays on the B-cell pathway, and also received FDA's coveted Breakthrough Therapy designation. Obinutuzumab was also granted priority review, and given a PDUFA date of December 20, 2013. Analysts are slightly less jazzed about obinutuzumab, at least compared with ibrutinib and idelalisib; forecasts from EvaluatePharma, Credit Suisse, and Thomson Reuters ranged from $400 million to around $750 million by 2019.

In breast cancer, palbociclib, a clinical candidate emerging from a research collaboration between Warner-Lambert (now Pfizer) and Onyx (now a subsidiary of Amgen), dazzled attendees of the San Antonio Breast Cancer Conference in 2012 with the results of a randomized Phase II trial. "It quadrupled progression-free survival," says Hawthorne. Currently in Phase III, palbociclib is being tested in combination with letrozole (brand name Femara, an aromatase inhibitor), and separately in combination with AstraZeneca's Faslodex (fulvestrant), to prove superiority over Faslodex alone. Edusei says several generic products in the hormone receptor positive (HR+) space, including letrozole, are available on the cheap, but palbociclib seems to represent a significant improvement over those products. Palbociclib targets metastic breast cancer in HR+ patients—more specifically, estrogen receptor positive (ER+)—that are also HER2 negative. HER2 positive breast cancer gets a lot of press, because of many new and successful drug targeting those patients, but hormone receptor positive patients are a much larger breast cancer population: roughly 75 percent of all breast cancer incidence is ER positive, according to the University of Maryland Medical Center. Thomson Reuters predicts blockbuster sales for palbociclib; Edusei and Decision Resources puts the number at $750 million by 2019. 

Unfortunately, Eli Lilly had to can a 1,144 patient multinational Phase III study on ramucirumab, a VEGF antiangiogenic monoclonal antibody for breast cancer in September, but there's a silver lining. Ramucirumab received an FDA Fast Track designation for gastric cancer, and a Priority Review in October. Gastric cancer is a "high unmet need...if you can prolong survival, I think [Lilly] has a very good option for those patients," says Hawthorne.Interestingly, ramucirumab targets the VEGF receptor, whereas Avastin targets the ligand. Avastin failed in Phase III trials for gastric cancer, which raises the question: is there a true mechanistic difference in targeting the receptor versus the ligand? If so, "these angiogenics will start to separate themselves in terms of where they might be active," says Hawthorne. Sanofi/Regeneron haven't announced plans to test Zaltrap in gastric cancer, but 

 shows a Phase II study of Zaltrap for esophagogastric cancer, a malignancy in the throat as opposed to the stomach. Gastric cancer incidence in Japan has risen sharply in recent years; Decision Resources says the global gastric cancer market will reach $2.3 billion by 2021, with 44 percent of those revenues coming from Japan. Thomson Reuters pegs ramucirumab sales at $725 million by 2018, Leerking Swann says $1.3 billion by 2020.  

Patients entering emergency rooms in the United States are more likely to be there as a result of acute heart failure than for any other reason. In the last 25 years, heart failure incidence has increased by about 175 percent, and what's worse is that drug development in this high need area has been abysmal, says Martin Sullivan, executive medical director of cardiovascular medicine at INC Research, and a board certified internist and cardiologist. Heart failure has been an "arena of therapeutic futility...there have been probably 20 candidate compounds tested over the last 15 years, and we're zero for 20 on these compounds," says Sullivan. 

That could change with Novartis's serelaxin, a peptide hormone currently under review in the United States and Europe. FDA granted Fast Track status in 2009, and Breakthrough Therapy status last summer; Sullivan says serelaxin could be a "home run" for heart failure. Citing the RELAX-AHF Phase III data, Sullivan says serelaxin "had a reduction in dyspnea, a small improvement in [hospital] length of stay, and most importantly, a significant reduction in re-hospitalizations and death in 90 days." Serelaxin is a recombinant form of human relaxin-2, a naturally occurring hormone; pregnant women release relaxin during labor, which causes ligaments to relax and become more flexible to facilitate childbirth. Using a hormonal treatment like serelaxin for heart failure is interesting because "it has so many different effects on so many different pathways," says Sullivan. "It effects inflammation, fibrosis, cell cyclin, it's a vasodilator, it does all kinds of things." 

It could also make Novartis the proud parents of a new blockbuster for acute heart failure. Thomson Reuters predicts sales of roughly $1.2 billion by 2019, and serelaxin could receive European approval by this year's end. Seamus Fernandez, managing director of major and specialty pharmaceuticals at Leerink Swann, wrote in a recent analyst note that serelaxin's Breakthrough Therapy status did not confer an expedited FDA review of the drug, according to Novartis management, but the company expects a US approval in late 2014. Leerink Swann is predicting $1.3 billion in sales for serelaxin by 2020. 

Sullivan also points to Acorda Therapeutics GGF2 candidate—a naturally occurring neuregulin or growth factor—and the results of an early stage trial, which improved some patients' ejection fraction by nine percent. Ejection fraction is a measure of how effectively the heart pumps blood. Like serelaxin, GGF2 is a peptide product with multifaceted effects in the body, including "cell cyclin, cell death, CNS effects...and it effects cell programming a little bit, potentially in vivo," says Sullivan. After a 24-hour infusion, patients given a higher dosage of GGF2 showed a heart function improvement at 28 days and 90 days. Acorda said it has discussed a new trial protocol with FDA for 2013, presumably a Phase II study, but 

 shows only a small Phase Ib double-blind study testing a single GGF2 infusion for safety and tolerability. This product may be further off, but Sullivan says if the data holds through Phase III, "that would be a major advance in heart failure." 

Incidentally, the Chinese company Zensun is also testing a neuregulin drug candidate called Neucardin for chronic heart failure. A Phase II trial has been completed in the United States, and drug has been filed already in China. The company is currently enrolling a Phase III trials in the United States, but Phase II data was less impressive than Acorda's. However, a Zensun press release states that 678 people with chronic heart failure have been given Neucardin, and Phase II data demonstrated a "three to five percent placebo corrected improvement in left ventricular ejection fraction." SciClone Pharmaceuticals will market Neucardin in China, in a deal worth upwards of $30 million if Zensun meets its regulatory milestones. Forecasting for GGf2 and Neucardin is too speculative at this point to be meaningful, but if any drug candidate shows it can improve symptoms and survival in heart failure patients, the dollars will almost assuredly follow.

Last year's pipeline covered the PCSK9 inhibitors—notably Amgen

candidates, both of which have important Phase III data read-outs in 2014—but there isn't much new to report since last year aside from forecasts on both drugs getting reined in. Leerink Swann now estimates that AMG 145 won't quite reach blockbuster status by 2020, and Thomson Reuters scaled back alirocumab to just under $500 million by 2019. Credit Suisse still thinks AMG 145 will reach blockbuster status by 2020, and puts alirocumab's sales at $865 million in 2020. During its 3Q earnings report in late October, Pfizer announced a "major" Phase III program for its PCSK9 inhibitor, called 

, according to an analyst note from Fernandez at Leerink Swann. Three is a crowd, so Pfizer tossing its hat into the PCSK9 ring can't be good news for Amgen and Sanofi/Regeneron.  

Obesity and Diabetes: Two Birds One Stone

There's still a lot to be said for the American Dream (assuming it hasn't succumbed to heart failure), but the American Diet is not worthy of admiration. "Other countries are starting to live like us...and die like us," said Dean Ornish, president of the Preventative Medicine Research institute, during the Cleveland Clinic's recent conference on obesity and diabetes. "Weight loss can reverse heart disease, prostate cancer, Type 2 diabetes" and other conditions, he said. 

FDA has already approved two new obesity drugs—Arena/Eisai's Belviq, and Vivus's Qsymia—the first FDA approvals for the condition in over 15 years, but given the size and extent of the health problem, not to mention the cost, better treatments and devices are needed. Future therapies will attempt to target the "microbiome" or gut flora, to change the way that food is synthesized in the gastrointestinal tract. Anthony Viscogliosi, principal at Viscogliosi Brothers, a New York-based VC/private equity firm, said he wants to invest in "meds that inhibit fat syntheses...that can change the microbiome to turn sugar and fat into water." 

Next-gen probiotics and nutraceuticals could potentially impact the microbiome—scientists have developed a trimethylamine N-oxide (TMAO) assay that detects TMAO—a microbial byproduct of intestinal bacteria—in the blood, that is associated with a 2.5-fold increase in stroke and heart attack. But the microbial genome, or microbiome, contains about 3.3 million genes. Compared with what we still don't know about the human genome, and its 23,000 genes, an active therapy for a specific microbiome target probably won't emerge in the next couple of years. However, Steve Nissen, the Cleveland Clinic's department chair of cardiovascular medicine, told conference-goers that the TMAO biomarket "could take off in 2014...and drugs will follow." 

In the shorter term, Orexigen Therapeutics may be the most promising and lucrative late-stage oral medication for the treatment of obesity. In January, FDA asked for additional cardiovascular outcomes data and proposed a resubmission procedure for Orexigen's Contrave, a naltrexone/bupropion combination pill, and the company expects to resubmit to FDA by the end of this year. Orexigen appears to have faired better in Europe; EMA has accepted its submission under the centralized procedure, and Orexigen expects approval in the second half of 2014. Despite a similar efficacy in comparison with Belviq and Qsymia, naltrexone/bupropion is still getting blockbuster nods. Thompson Reuters projects roughly $1.1 billion by 2019, and Credit Suisse corroborates that approximation, putting 2020 sales at $1.1 billion. Credit Suisse predicts very similar sales for both Belviq and Qysimia, which suggests the level of need in the market, or opportunities for the products to differentiate from one another, or both. 

Novo Nordisk is preparing to file a 3-mg version of its GLP-1 liraglutide (aka Victoza) for an obesity indication in the United States, and has entered Phase III trials in over 20 countries for that indication. In the United States, Novo will file by the end of this year, and expects to get an approval in 2014. The company may try to best the new raft of obesity treatments by maximizing the label; in June, Novo completed a Phase III trial studying obese patients with sleep apnea. Clinical studies indicate that liraglutide at 3 mg could bring down body weight by an average of eight percent, a slight improvement on Belviq and Qysmia, but liraglutide is an injectable, not a pill, and it's expected to be costly. Gideon Heap, an analyst with Decision Resources, says he likes liraglutide in obesity for the following reasons: "In theory, [liraglutide] will avoid any of the CNS side effects that trouble a lot of physicians in obesity, and Novo also has some good trial designs going," says Heap. "They are developing it with a Phase II trial that attempts to show prevention of the onset of Type 2 diabetes. If that gets a positive outcome, I think it would represent a strong bargaining chip for getting better reimbursement [over Belviq and Qsymia]." Credit Suisse forecasts have liraglutide's obesity indication adding another $500 million a year to the increasingly lucrative Victoza franchise, by 2019. Decision Resources predicts roughly $800 million by 2019, with a launch late next year. 

Since 1997, there have been 10 new classes of diabetes drugs, and yet, many patients still aren't able to keep their glycemic levels under control. Takeda hopes to bring an 11

  class of drug to market with its TAK-875 compound, a GPR40 agonist. Currently in Phase III testing, TAK-875 is going head-to-head against Januvia, and could potentially launch in 2015 or 2016, according to Heap. TAK-875 "is causing a bit of excitement because it's showing good efficacy while maintaining a high level of safety, of a kind you would see with the DPP4 inhibitors," says Heap. "It's as efficacious as sulfonylurea, but in Phase II showed low rates of hypoglycemia, and crucially, it doesn't appear to induce any kind of weight gain." 

Al Mann hopes to bring a new drug delivery device to market; this time he's more hopeful than ever. In September, Mann personally assured 

 that Afrezza, a product that needs little introduction, will receive its long-awaited FDA approval in April—if it isn't approved somewhere else first. Analysts seem to agree that MannKind's inhalable insulin will indeed get approved, but a lingering question remains: will patients want to use it? "There aren't a lot of patients out there demanding an inhalable insulin," says Heap. "Possibly, the developers of these [inhalation] devices are a bit carried away with how important they think that is." After completing two 24-week Phase III trials with its next-gen Dreamboat inhaler device, MannKind resubmitted with FDA in October. Thomson Reuters is predicting over $2 billion in sales, but Kiran Meekings, a consultant at the Thomson Reuters Life Sciences team, isn't so sure. She worries about the potential for adverse pulmonary effects over the long term. MannKind's clinical work has attempted to mitigate concerns about lung function associated with chronic use of an inhaled insulin, and Mann says Afrezza "is not in the lungs very long, we go quickly through the membrane into the blood, with no accumulation." Meekings says MannKind's pulmonary safety study results "weren't necessarily cause for concern...but it's something that needs to be monitored." 

Finally, Eli Lilly and Boehringer Ingelheim are attempting to bring a biosimilar insulin—the oldest biologic drug—to market. The European Medicines Agency (EMA) accepted the companies' long-acting insulin glargine biosimilar submission in July, and the product is in Phase III in the United States. Insulin glargine, also known as Lantus, is Sanofi's top seller, with over $6 billion in sales last year. Credit Suisse is bullish on the biosimilar version, with predicted sales topping $1.2 billion by 2019, not bad for a copycat. Thomson Reuters is more conservative, with a forecast of $415 million in annual sales for the biosimilar by 2019. Sanofi, for its part, is rushing forward on U300, a reformulated insulin glargine; the company said during a 3Q conference call that it would file in the United States and Europe during the first half of 2014. That product's new attributes, according to Sanofi, are fewer incidences of hypoglycemia, and a smaller volume of subcutaneous injection compared with Lantus. Incidentally, Lantus loses patent protection in 2015. Novo Nordisk, the biggest seller of insulins worldwide, hopes to wrest back marketshare from Sanofi, but probably won't get Tresiba approved in the United States before 2016, at the earliest. Thomson Reuters estimates the new and improved version of Lantus will earn $1.1 billion by 2019, a fraction of Lantus's current annual sales. 

Ben Weintraub, senior principal and director of research at inThought, a division of Symphony Health Solutions, calls his $3 to $4 billion sales estimate on Gilead's sofosbuvir—a nucleoside analog polymerase inhibitor targeting all six HCV genotypes—conservative. "The question is not whether sofosbuvir is going to be the biggest drug for hepatitis C ever, or the biggest drug launch ever...I think everyone agrees that it's going to be both of those things," says Weintraub. "The question is whether it's going to be the biggest drug ever." 

Weintraub says he's seen estimates as high as $15 billion, but the reason for his conservatism is the misguided assumption that the population of hepatitis C patients receiving treatment will rise from a current level of 10 percent, to as much as 90 percent once interferon, and it's horrid side effects, are taken out of the picture. Weintraub thinks the percentage of HCV patients receiving treatment will only increase to around 20 percent. The price of therapy is one access-limiting element, but more importantly, says Weintraub, is the fact that a substantial portion of the HCV population won't all of sudden come in to the clinic for sofosbuvir, or any other HCV drug. "If you're an IV drug user, if you're homeless and you have HCV, getting treated for it is not your primary concern," says Weintraub. "Your depression, your alcoholism, your drug abuse, your 12 other diseases, those are the things that doctors might be more worried about taking care of first." 

Several analysts including Weintraub say sofosbuvir will receive FDA approval by the end of this year. Sofosbuvir will be prescribed in combination, but Weintraub says it's likely to be priced per regimen, not per drug, at "whatever the market will bear, $70,000 for sofosbuvir, riboviron and a protease inhibitor, whatever that winds up being." 

Raghuram Selvaraju, managing director and head of healthcare equity research at Aegis Capital Corp., says Enanta/AbbVie's ABT-450 combo is "every bit as good as sofosbuvir," but isn't getting as much press because the combination regimen will likely be three or four drugs, instead of potentially two with sofosbuvir. Selvaraju says both sofosbuvir and ABT-450 "are very, very good at treating genotype-1 treatment naïve patients"—the largest HCV genotype globally, and the hardest to treat—"but they are much less good at treating null responders." After the initial fanfare surrounding sofosbuvir's "marquee drug launch," Selvaraju says the quad ABT-450 regimen "is going to show better activity against null responders with genotype 1 than the sofosbuvir two-drug regimen." Phase III data from two ABT-450 studies are scheduled to read out this quarter, but the product isn't expected to launch until 2015. However, FDA gave ABT-450 Breakthrough Therapy status in May, which doesn't automatically confer an expedited approval, but could possibly tip approval into 2014. On a recent AbbVie earnings call, CEO Rick Gonzalez told investors that ABT-450's interferon-free studies are "coming in April 2014." Scott Brun, AbbVie's head of drug development, dismissed an analyst questions about "pill burden" associated with the ABT-450 regimen, mentioned above by Selvaraju. "Sustained virologic response is king, and we're in the high 90 percent range," said Brun.  

Hepatitis C is heating up as these drugs and others compounds get closer to market, but the key late-stage players haven't changed. Recently approved in Japan, J&J's simeprevir is expected to be approved in the United States by this year's end, and BMS's daclatasvir picked up FDA's Breakthrough Therapy designation in April. For more information on these products and others in HCV, see 

's 2013 Pipeline Report. Weintraub describes J&J's simeprevir as an Incivek/Victrelis follow-on drug, and says with AbbVie and BMS both launching in late 2014 or 2015, "Gilead looks like it will have a least a year" without meaningful competition. But there's a caveat: the initial sofosbuvir approval includes interferon; the all-oral HCV combo everyone is waiting for won't get approved until 2014. 

Novel Antibiotics: HHS Begs for New Treatments

Most large pharmaceutical companies haven't rushed to develop new superbug-swatting antibiotics or anti-infectives, despite a dire need for such products. That's because historically, antibiotic R&D programs are often long and expensive, without much of a financial upside on the other end; prices have been pushed down by generics, and the course of therapy is short. The pricing problem could change; in September, the CDC announced that some 23,000 people in the United States die from antibiotic-resistant bacteria each year, and at least 2 million are infected. "There's a very direct correlation between superbugs and incredibly high hospital costs and mortality, says Thong Le, managing director of WRF Capital, the VC arm of the Washington Research Foundation. "A lot of the antibiotics we're using today have been around for 50 years." 

Last year's Generating Antibiotic Incentives Now (GAIN) Act, ratified as a provision PDUFA V, is designed to push drug makers back into the antibiotic and anti-infective space. Thanks to the GAIN Act, incentives for companies willing to take up the task of novel antibiotic development include automatic eligibility for Fast Track status and Priority Review, which shortens the FDA review period to six months. Once approved, the antibiotic would be granted an additional five years of market exclusivity. 

It's not clear whether that's a strong enough kick to make Big Pharma roll. Last spring, HHS's Biomedical Advanced Research and Development Authority announced a deal with GlaxoSmithKline to provide up to $200 million over five years to develop new antibacterial products. Similar government-financed deals with Big Pharma have been struck in Europe. Meanwhile, a few smaller biotech firms are focusing on the antibiotic-resistant and infectious disease space, and several new products could go to bat against the superbugs next year. 

Raghuram Selvaraju at Aegis Capital Corp. says Cubist, with its dual acquisitions of Trius Therapeutics and Optimer Pharmaceuticals in 2013, has positioned itself "in the vanguard of anti-infective drug development." Fast Tracked via the GAIN Act, Trius's tedizolid phosphate, a second-geneartion oxazolidinone antibacterial agent was filed with FDA in October for the treatment of acute bacterial skin and skin structure infections, and is also being tested for the treatment of serious Gram-positive infections, including those caused by methicillin-resistant staphylococcus aureus (MRSA). The drug will compete against Pfizer's Zyvox, with a couple of added benefits, like easier administration and dosing, and slightly fewer side effects. Credit Suisse has modest estimates for tedizolid, $200 million by 2020. A second Cubist product, CXA-201, in Phase III for complicated intra-abdominal infections and complicated urinary tract infections, is expected to file at the end of this year, assuming the Phase III data is strong. Selvaraju thinks CXA-201 will launch in early 2015, and earn $700 million by 2022. That product will face off against meropenem, a broad-spectrum beta lactam antibiotic to which bacteria is growing resistant. 

The best targets for infectious disease, from a financial perspective, are community-acquired pneumonia and complicated skin and skin structure infections (CSSSI), says Selvaraju. "We like CSSSI because the clinical trial design is pretty straight forward, compared with a lot of other indications," says Selvaraju. "We like community-acquired pneumonia lung infections because there are comparatively fewer solutions for that currently available." 			

Selvaraju says Cempra's solithromycin, a Phase III product targeting community-acquired pneumonia, shows promise. In September, Cempra reported in vivo data showing that solithromycin is active against a broad range of pathogens, including four of FDA's Qualified Infectious Disease Pathogens under the GAIN Act. 

For the moment, pharma doesn't seem to be answering Janet Woodcock's increasingly frantic calls for new novel antibiotics. Many small companies, including Cellceutix, Durata, Anacor, and others are moving through clinical trials and targeting serious bacterial infections, but more work is needed to better understand the complex biology of the superbugs, and to take them down. 

Like last year, some of the products uncovered during the research phase of this year's pipeline report weren't easily shoehorned into the categories presented, for one reason or another. Here are few category outsiders, sleepers—defined as potential big sellers people aren't talking about—and early stage drugs that look solid, but haven't gotten far enough in the clinic to prompt blockbuster whispers. 

Across a constellation of categories, bright new drugs are moving into position. The pharma model may have changed, but companies are keeping their blockbusters.

2014 Pipeline Report: The Sprint to Value

It seems like open season on the pharmaceutical industry. Academics and consumer activists charge pharma companies with hiding clinical trial information on medical product safety, fueling the campaign to expand public access to confidential research information. The federal government's "Sunshine" program for disclosing financial ties between industry and physicians reflects a lengthy campaign to curb marketing tactics perceived to boost inappropriate prescribing. 

Media reports regularly attack high drug prices, both for life-saving specialty drugs and for widely used treatments such as asthma inhalers. And recent disclosures raise questions about too-close ties between pharma companies and Food and Drug Administration officials.  

The well-known industry response to these and other charges is that prescription drugs account for only 10 percent of US spending on healthcare and that appropriate drug use saves money by keeping people out of hospitals and operating rooms. Developing new drugs, moreover, is enormously expensive and risky, warranting strong patent protection and a healthy return on investment.  

Such arguments, sadly, fail to generate public confidence in the biomedical research enterprise. Public surveys give pharma companies poor ratings, citing high prices, low integrity, and failure to disclose unfavorable safety information. There's a clamor for valid data on drug effectiveness and comparative prices, and high hopes that health reform initiatives will make such information more transparent.  

One clear sign of the times is the success of the campaign for broader access to proprietary clinical data. The conversation already has shifted from data "disclosure" to data "sharing," as sponsors seek strategies to retain some control over proprietary information in the face of the European Medicines Agency (EMA) proposal to release patient-level clinical reports submitted in regulatory dossiers beginning January 2014. FDA is weighing comments on its June 2013 query about making available masked and de-identified data submitted in applications. And an Institute of Medicine committee began deliberations last month on "Responsible Sharing of Clinical Trial Data," with the intent of issuing guiding principles and a framework for such initiatives. An interim report is due in January, and a final report in December 2014 that will assess the benefits and risks of data sharing and opportunities for responsible disclosure. 

Pharma companies in the United States and Europe are pressing hard to modify or postpone the EMA data release plan so that third-party programs and voluntary initiatives will gain time to demonstrate that they can enhance data transparency while protecting patients and the research enterprise. There is general agreement that clinical data sharing can be beneficial in improving the efficiency of clinical trials, validating regulatory decisions, and increasing public confidence in clinical research. But sponsors are leery about who controls access to data, the purposes of disclosure, and the adequacy of safeguards to protect all parties.  

A related fear is that releasing full regulatory dossiers could expose proprietary formulation and manufacturing data and information on product development and future indications. And public access to clinical data could undermine product exclusivity in countries such as Australia, Brazil, China, and Korea that link exclusivity to data confidentiality, explained Pfizer senior vice president Justin McCarthy at a Pharmaceutical Research and Manufacturers of America (PhRMA) briefing in October. He warned that if the EMA proceeds with its plan for full release of regulatory submissions, companies may rethink their development and registration strategies, possibly by delaying submissions for approval in Europe or limiting confidential commercial information in dossiers.  

To head off the EMA proposal, sponsors are rolling out voluntary data sharing initiatives, as outlined in a "principles" document issued in July by PhRMA and the European Federation of Pharmaceutical Industries and Associations (EFPIA). Companies are forming independent scientific review boards to evaluate outside data requests and procedures to protect patient privacy. But there's a lot of skepticism about how comprehensive and impartial these programs will be. 

Data sharing is integral to multiple FDA-industry partnerships formed to evaluate and validate innovative research methods to accelerate testing of new drugs and medical products. Yet such initiatives frequently draw fire as opportunities for industry to influence regulatory decision-making. FDA's increased reliance on user fees, as well as its interest in accelerating the development and approval of breakthrough drugs, prompt critics to question the objectivity and completeness of the agency's evaluation of new, risky medicines. 

FDA is examining whether its policies for managing public-private partnerships are sufficiently transparent and ethical following a report that industry "paid to play" in collaborative efforts to improve the development and testing of new opioids and other pain medications. A headlined article in the 

(Oct. 10, 2013) claimed that to participate, pharma companies had to pay a $25,000 sponsor fee to the meeting organizers. Although the cited activities are based on 10-year-old e-mail communications and have been superseded by other FDA initiatives and policies, Congress may investigate the case, partly in light of strong public concerns about the marketing and distribution of illegal opioids. 

Low credibility with the public and the medical community makes it difficult for pharma companies to make their case on these thorny policy issues. The current level of trust in industry-funded research and study results "is extremely low," observe Lisa Egbuonu-David, director of ROI-Squared, and Tanisha Carino, senior vice president at Avalere Health, in a commentary published by Health Affairs in September. This "trust conundrum," they note, makes it more challenging for sponsors to produce credible evidence of the value of new drugs. And such evidence is key to justifying coverage by payers and pharmacy benefit managers, particularly for costly but critical specialty drugs.  

The authors emphasize that it is important to restore trust in industry-sponsored research and to develop innovative models for obtaining evidence of real-world effectiveness, in a world with increased transparency in the cost of hospital procedures, medical care, and out-of-pocket spending on medical products that makes consumers more conscious of perceived excessive charges for medical care. Pharmaceutical companies need to conduct real-world studies on products and be able to discuss results with key decision-makers. A comprehensive, consistent approach to measuring the clinical value of medical products is central to a framework that encourages industry funding of scientifically valid research for all stakeholders.  

Washington correspondent. She can be reached at 

Column

High prices, murky financial relations, and a reluctance to disclose clinical data undermine public trust in industry and the research enterprise.

Transparency Troubles for Pharma

The state of the pharmaceutical supply chain can be summed up in three words: serialization is coming. The era of "track and trace" is upon us. Although it is unclear at this moment what level of tracking will ultimately be required, companies need to be prepared for regulations that will alter the way pharmaceuticals are packaged and shipped. New laws will raise your risk profile—particularly in ensuring product safety.  

The changes are occurring as the act of manufacture itself has become a strategic global priority for Big Pharma. Unlike a decade or two ago when much of the production was handled in-house, pharma is relying more on contract vendor manufacturing to keep pharmacy shelves full. As more and more of the R&D and manufacturing functions are outsourced, the importance of a safe and secure supply chain becomes ever more prevalent.  

In response to some high-profile thefts and product counterfeits that have occurred over that past few years, governments around the world have turned their attention to securing the supply chain through regulation focused on product serialization. 

Currently, during manufacture every batch of pharmaceuticals is assigned a lot number. Each container of product produced in that batch has the same lot, or serial, number. This allows the manufacturer some ability to track its product as it moves through the supply chain to its final stop at the pharmacists' bench. Product is being followed, but it is being tracked with a wide net. If there is a problem with the lot from theft, tampering, or counterfeiting the entire lot must be recalled—there is no way to differentiate individual containers produced in the same lot. 

"The issue with pharmaceutical cargo is not so much the impact of the product itself that is stolen [or counterfeited]," says Don Hsieh, director of commercial and industrial marketing at Tyco Integrated Security. "The products are made in lots. If that particular lot has to be recalled the cost will be in multiples of the original loss." 

Under the upcoming regulations, product will need to be traceable at the unit level. Giving each unit it own serial number will allow individual packages to be tracked up and down the supply chain, allowing for greater security and lessening large-scale recalls. 

The United States and Europe have fallen behind Turkey, Italy, Chile, and even India and China in the area of regulatory requirements for track and trace and are in the process of playing catch up. Although each entity is proposing different levels of traceability, one thing remains constant: increased regulations are on the way.  

 The idea of unit serialization is not new—the California Board of Pharmacy has been working on a bill that will require an electronic pedigree at the unit level for over a decade. Under the legislation that is scheduled to go live on January 1, 2015, every change of ownership of an individual unit as it passes through the supply chain needs to be recorded and available for inspection at the pharmacy level. At least 50 percent of a company's product that is sold in the state will need to comply with the new legislation by the start of 2015, with the remainder on January 1, 2016. 

As the California initiative gets closer to implementation, the federal government is working on legislation simultaneously that would supersede the California law. The House and Senate approved a draft version of the Drug Quality and Security Act in late September. Should the proposed legislation be enacted (

 gives it a 42 percent chance of being signed into law), it would supplant any and all state legislation on track and trace and ePedigree.  

Despite the uncertainty surrounding which legislation will ultimately become the standard, industry is focused on the January 2015 deadline for implementation and the California ePedigree legislation, as it is likely to come on line first.  

"I would say that nearly half of the firms that we have polled have already started their pilot testing," Jamie Hintlian, principal, Americas at EY, told 

 "It is a very tight pack. No one is out front in the sense that they have 100 percent of their lines and products serialized. I think most are going to come close to hitting the 50 percent mark by January 2015, but there are concerns. Concerns about how much do you invest versus hedge because maybe there will be a federal law that trumps California. While many would like to wait and see, they are not ready to play chicken with the state of California, the 12th largest economy in the world." 

The proposed legislation gaining traction in Congress does not go as far as the California initiative, at least at the start. The main points of the proposed bill, H.R. 3204, include:  

» Four years after enactment, manufacturers need to serialize each package of product distributed within the United States.  

» At the start of 2015 for manufacturers and July 2015 for dispensers—as product changes ownership, companies need to provide or receive transaction information, history, and statements in a single document (paper or electronic). Four years from enactment, all information needs to be exchanged electronically. 

» Ten years after enactment transaction information needs to be exchanged in an electronic matter at the unit level starting at the point of manufacture. 

The glaring difference between the California and Federal proposals is the timeline required for full serialization at the unit level. California calls for unit serialization on January 1, 2015, while the Federal legislation requires the same four years after the Drug Quality and Security Act takes effect. The differences are forcing industry to decide whether to pull for a particular piece of legislation. But which one?  

"To some degree, industry's preference for one piece of legislation over the other will depend on where organizations are on the readiness continuum," Hintlian says. "It appears based on the recent September agreement between the House and Senate, the federal direction may be closer to California's direction, as it requires serialization at the package level. In this case, organizations that have made progress with their California compliance programs will likely continue with their programs, although some may alter their timelines for deployment based on how the federal direction is finalized."  

Like their US counterparts, EU lawmakers are in the midst of hammering out some form of serialization legislation. The Directive 201⅙2/EU the European Parliament issued in June of 2011 gives EU member states until 2016 to enact serialization legislation. Just like in the United States the exact legislation is unclear—with each of the 28 Member States being charged with creating its own legislation things are bound to get increasingly complicated.  

Unlike the proposed US legislation, the likely EU laws will focus on the authentication of the product at the time of dispensing, instead of the individual movement of the product through the entire supply chain. When a pharmacist scans a blister pack (the most common form of dispensing in Europe) at the counter, the product's serial number would be run through a database to check if that particular number was flagged for any reason. If the product was flagged the pharmacist would be unable to dispense. 

Counterfeit pharmaceutical drugs are becoming more and more prevalent around the globe—as counterfeiters become more sophisticated it becomes increasingly difficult to tell the difference between a counterfeit product and the real McCoy, especially at first blush. While there will always be a black market for prescription drugs, the adoption of stricter tracking of pharmaceuticals as they cycle through the supply chain will make it tougher for counterfeits to make their way into the legitimate trade.  

UPS's 7th annual "Pain in the (Supply) Chain Survey" polled healthcare executives across the globe on their top business and logistics concerns. According to the report, 48 percent of those polled believed that counterfeiter sophistication is growing faster than countermeasures. In Asia, 76 percent of those polled were concerned about product security, significantly more than their peers elsewhere. 

"As more and more companies are moving into the Asian, Latin American, and African markets, the length of the supply chain and the handoffs have increased," William Hook, vice president, global strategy, healthcare logistics at UPS said. "Every time the chain is increased you leave a vulnerable point." 

As the supply chain lengthens in a global marketplace, the possibility of theft increases as well. While most would agree that the supply chain in the United States is relatively secure from theft, the same cannot be said of other areas of the globe.  

"On a percentage basis, pharmaceutical theft in the supply chain is not high," Hsieh says. "What is interesting is it is usually one of the higher value products that are stolen. There was a high of several million dollars per theft incidence a couple years back. Then many pharma companies put a limit on the amount that can go out in one shipment. Last year the average pharmaceutical cargo theft was valued at about half a million dollars." 

In anticipation of serialization legislation taking effect, pharmaceutical companies need to review not only their own internal practices, but also those of their outsourcing partners. As more and more work is outsourced the possibility for mishandling of product becomes greater and greater, and the need for technology solutions for both sides of the outsourcing relationship becomes more evident. 

"We are seeing OEMs who are struggling with small contract manufacturers who don't have systems that can facilitate the sharing of product information," John Danese, senior director, life sciences at Oracle says. "I have spoken with some of our OEMs who are preparing for the California ePedigree regulation and other global track and trace regulations. They say some of their CMO's idea of an advanced data sharing mechanism is a fax machine. Additional electronic communication is needed moving forward as these regulations come online in order for these small companies to be able to exchange the necessary data." 

The global pharma supply chain continues to grow with each passing year. With every additional link in the chain greater risk follows.  

's Senior Managing Editor. He can be reached at 

The US and Europe are moving toward the enactment of new legislation that will change the way pharma products are handled and shipped throughout the supply chain.

Supply Chain: Scanning the Future

At the conclusion of the Cleveland Clinic’s Medical Innovations Summit each year, 10 innovativetechnologies are unveiled before the audience, and designated as new and revolutionary tools forthe treatment of disease and disability. Selections for the Top 10 are chosen by way of a processthat includes personal interviews with over 100 senior Cleveland Clinic physicians. Here are a fewof the technologies that made the cut for 2014.

DRAMATICALLY IMPROVING HEALTH OUTCOMES IN HEART FAILURE PATIENTS

 Heart failure is the number one cause of hospital admission. One in five patients with heart failure are readmitted to the hostpital within 30 days, and 10 percent die during the same period. 

 In women, relaxin-2, a naturally-occuring hormone, helps loosen tissues in the reproductive organs and pelvic ligaments to help prepare for childbirth. In heart failure, Novartis's serelaxin, a synthetic version of relaxin-2, functions as a vasodilator with anti-inflammatory properties capable of increasing blood flow in the body, which helps a poorly functioning heart work more effectively. It also prevents organ damage related to reduced blood flow in the kidneys and liver, and helps resolve fluid buildup in the lungs. Phase III data from the serelaxin trial reported a reduction in death rates by 37 percent, six months after therapy. If approved, serelaxin will become the first meaningful treatment for heart failure in two decades. 

RESPONSIVE NEUROSTIMULATOR FOR INTRACTABLE EPILEPSY

SIGNIFICANT FREQUENCY REDUCTION OF EPILEPTIC SEIZURES

 Roughly one million Americans have epileptic seizures that won't respond to therapy or medication.  

 A neurological device is surgically implanted under the skin. Once implanted, the device records electrocorticographic (ECog) patterns through leads containing electrodes that are placed at the patient's seizure focus in the brain, or on the surface of the brain where seizures start. When detection thresholds are met, the device delivers short electrical pulses to interrupt the triggers before any seizure symptoms can occur. In a pivotal clinical study, the device reduced seizure frequency by 40 percent, compared to a 17 percent reduction in a placebo group. Long-term results demonstrated sustained improvements in seizure frequency post-implant. Additionally, physicians can use the data captured by the device to customize the system's electrical impulses for individual patients. 

SAFE AND EFFECTIVE TREATMENT OF DANGEROUS C.DIFF INFECTIONS

Half a million cases of C.diff are reported in the United States annually, along with 15,000 deaths.  

 The human gut contains more bacterial DNA than human DNA, and the stool is biologically active. In fecal microbiota transplantation, C.diff patients that don't respond to antibiotic therapy, a colonoscopy or enema is used to transfer a liquid suspension made from a healthy person's fecal matter into a sick person's colon, in order to restore bacterial balance and cure C.diff. Results of the procedure have been extraordinary, with some patients being cured of their symptoms within 24 hours, with no recurrences. The procedure may also be effective in treating inflammatory bowel disease and other nongastrointestinal conditions, like Parkinson's. 

 More than 100,000 people in the United States have retinitis pigmentosa, a disease that leads to blindness. Until recently, there has been no effective treatment.    

The Argus Retinal Prosthesis, approved in the United States in 2013, combines a surgically implanted 60-electrode retinal prosthesis that receives signals from a pair of external video camera-enabled glasses with a video processing unit that is worn at the waist or carried. The retinal system works when the video unit transforms images from the miniature camera into electronic data that is wirelessly transmitted to the device in the eye, which contains an antenna and electrodes that replace the degenerated cells in the retina. At that point, the data are transformed into small electrical impulses that stimulate the retina's remaining inner neurons. Also known as the "bionic eye," some blind patients have been able to read the blind chart using the prosthesis. 

At the conclusion of the Cleveland Clinic's Medical Innovations Summit each year, 10 innovative technologies are unveiled before the audience, and designated as new and revolutionary tools for the treatment of disease and disability.

Top Medical Innovations for 2014

This sponsored supplement was produced by Focus Reports.  

Joan Abellan Ponce de Leon, Stephen Wager

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The past three years have been some of the most eventful in memory for Taiwan's life sciences industry. At this year's Bio Taiwan exhibition, the annual conference that invites the international life sciences community to the island, the excitement was palpable. Foreign companies turned out in record numbers to a keynote address from President Ma Ying-Jeou, who acknowledged that Taiwan was a latecomer to the sector, but nonetheless had the capability and will to compete. Buoyed by a successful wave of financing, good product strategy, and increasing international penetration, the industry seems confident. 

Albert Liou, vice chairman of PAREXEL International, thinks that now Taiwan needs leadership, and success stories. He points to the drug development chain. "Taiwan has great capabilities in each step along the chain," he says. "But the linkages are not as strong as they could be. Academically and therapeutically, Taiwan is very capable in certain areas, like liver disease. But in terms of drug development from discovery to market, we are several years behind the West. We need leadership that can unite the links in the chain. We need, as well, our first success stories to serve as motivation and as development models."  

"We believe those first stories are coming shortly," Liou says. As for leadership, many in Taiwan look to a man that has emerged as a major connector in the country's life sciences industry: Johnsee Lee, who chairs Taiwan's Development Center for Biotechnology (DCB) and the Taiwan Bio Industry Organization (TBIO).  

Johnsee Lee, Chairman, Development Center for Biotechnology 			

When Lee took over his post at the DCB in 2010, he felt that the institute focused too much on academic research: "The wrong place for us," he says. Many industry stakeholders have pointed out that in the life sciences, Taiwan has too long emphasized—"perhaps overemphasized," says Lee—basic research over commercialization, and that the DCB was doing the same work as other national institutes like Academia Sinica. 

Albert Liou, Vice Chairman Asia Pacific, Parexel 			

Lee quickly got to work positioning DCB as the "second baton in the relay race," a translational facilitator between the lab and the shelf. As Taiwan implements a strategy that its economic council calls Diversify-Innovate-Globalize (DIG) to ease away from the country's reliance on information and communication technologies (ICT), commercializing new industries is the name of the game. Biotech is at the top of a list of six strategic emerging sectors: the "key industry" to watch in Taiwan today, says EY's country managing partner James Wang.  

James Wang, Country Managing Partner, EY 			

In his capacity as chairman of the TBIO, a unifying association in Taiwan's life science industry, Lee is responsible not only for helping Taiwan's drug development effort, but for connecting the dots in a staggeringly diverse sector. In 2013, Taiwan's Ministry of Economic Affairs (MOEA) counted 1505 life sciences companies in this market of 23 million people. Grouped under the heading "biotechnology"—the term that we will use throughout this report—these companies may be surprising in number for a small island nation, but they are perhaps most impressive in variety. Taiwan has 450 companies in the applied biotech segment, 350 companies in the pharmaceutical segment and 705 medical devices companies! 

Bio Taiwan 2013 with President Ma Ying-Jeou 			

Wang believes Taiwan is on to something. "The industry is extremely diverse, and it's filled with companies that are in most cases much smaller than their Western counterparts," he says. "But that kind of structure is good— it's good for innovation, incubation, and cultivating a knowledge focus." 

The Biotechnology & Pharmaceutical Industries Promotion Office (BPIPO) reports that total revenues for the industry have more than doubled between 2004 and 2012, to USD 8.88 billion. Lee attributes much of the difference to the newcomers, founded amid a wave of investment that began in the early 1990s. After what Lee calls an "ungraceful" development period, these companies have now surpassed Taiwan's "old guard"—large, established players that sold generics locally for decades—in terms of innovation and internationalization. 

Biotechnology Industry Revenues, 2004â2012 			

Wang says the industry is in the latter end of its incubation stage. Looking ahead, Taiwan Inc.'s pipeline looks great: 17 compounds in Phase I, 73 in Phase II and III, and 6 at the NDA stage (BPIPO, April 2013). 

Meanwhile, the Economic Cooperation Framework Agreement (ECFA), a preferential trade pact between China and Taiwan signed in 2010, has lowered trade barriers and opened the door for broader collaboration with a country that IMS estimates will become the world's second largest pharma market by 2015. "If Taiwanese companies develop a new molecule for a condition with high prevalence in Asia, why not benefit a larger population?," DCB's Lee points out. 

Investors smell an opportunity. "In the past," Lee says, "we were missing a crucial element of our ecosystem: financing. Now, because of the health of our capital market, venture capitalists are quite willing to come on board because they see an exit: sell the shares when companies float their stock on the public market. If Initial Public Offerings (IPOs) weren't so feasible in Taiwan at the moment, investors would be very reluctant to participate in the long-term play that is biotech." 

Call it a promise. Taiwanese companies report that just because ECFA is in place doesn't mean working with the juggernaut is straightforward.  

Christopher Tsai, whose blood banking and genetic testing company Bionet has successfully penetrated China, isn't particularly bullish. When asked whether China is an easy market for a neighbor with a shared heritage, Tsai offers mixed feelings: "Is it easier for Taiwanese companies to do business in China than it might be for companies with less cultural, geographical, and political proximity? Absolutely. But that doesn't mean we have a free ticket. Penetrating China is still very, very difficult." 

For instance, three years after ECFA was put is in place, pharmaceutical and med tech manufacturers in Taiwan still need a separate license to sell their products in China, which is not the case for Chinese healthcare products entering Taiwan. As the chairman of the medical diagnostics company General Biologics Corp, T.C. Lin, reports, "Today, it is not easy to get licenses in China for our products, particularly with the furor surrounding recent Big Pharma scandals in the country. The Taiwan government is pushing for mutual recognition, and producers on this side of the strait are eagerly anticipating a change." For those that rely heavily on the mainland, a China-based manufacturing plant is often the best bet for now. 

T.C. Lin, Chairman & President, General Biologicals Corporation 			

And yet, Taiwan has high hopes that this and other barriers will come down one by one as ECFA gains steam. One particular focus area for cooperation is clinical research. The Taiwan Food and Drug Administration (TFDA), which—crucially—is by all accounts an excellent regulator, is working in concert with the China Food & Drug Administration (CFDA) to pave the way for what Taigen chair Ming-Chu Hsu calls a "faster," "lower cost" paradigm for reaching the Greater China market with innovation. 

Ming-Chu Hsu, Chairman and CEO, TaiGen Biotechnology 			

Taigen, a drug development company that is at the New Drug Application (NDA) stage with its diabetes-focused product Nemonoxacin, is expected to release Taiwan's first innovative drug capable of meeting the CFDA's Category 1.1 New Drug requirements. The company is participating in a clinical trial pilot program with a handful of other late-stage peers. Industry stakeholders hope the program will lead to broad harmonization of protocols and mutual data recognition. The "ultimate goal," says Parexel's Albert Liou, is that "any new drug will be simultaneously approved in Taiwan and China."  

The typical model may look something like this: companies will conduct Phase I and Phase II trials in Taiwan, where today the IP protection is more stringent, the clinical trial authorization process is faster (two to three months in Taiwan, versus 12 to 24 months in China), the patient protection system is mature, and there are a number of great hospitals and researchers. "Ideally," says Liou, "Chinese authorities will accept this data, and Phase III trials will take place in Taiwan and China, with an eye toward simultaneous NDA filings." 

Some remain skeptical. Fang-Yue Lin, the superintendent of Taipei Veterans General Hospital (TVGH), a major clinical research center in Taiwan, remarks, "It would require a lot of 'advantage sharing' for China to accept clinical trial results obtained in Taiwan—and in my personal opinion, it will be very difficult to persuade the Chinese on this point." Industry leaders point to the fact that similar agreements with Hong Kong have looked great on paper but meant less in practice.  

Liou is more optimistic. "I think the model will work, and eventually, it will work quite smoothly," he says. He doesn't believe that Hong Kong is a fair comparison. After all, both men agree on one thing: as Lin puts it, Taiwan has a "very robust" indigenous pharmaceutical industry, with "many new drugs" under development—"something that differentiates this country from its neighbors." Liou observes that the government has a vested interest in seeing this industry succeed, and will work hard to find a way to penetrate Taiwan's biggest potential market. 

Thomas Willemsen, Vice President and General Manager, GSK 			

Moreover, although currently only local companies are involved in the clinical pilot program with the mainland, it is feasible that once the kinks are worked out, benefits will extend to multinationals too. Lin, whose hospital has a research cooperation agreement with GSK, has a confident partner on his hands. GSK's local general manager, Thomas Willemsen, says, "Taiwan remains one of the best R&D locations in the Asia Pacific region, despite its relatively small market size. And in addition to being a good research platform, Taiwan is also the perfect epidemiological environment for proof of concept or early phase trials for products destined for the Chinese market." 

Fang-Yue Lin, Superintendent, Taipei Veterans General Hospital 			

ECFA, as the name implies, is just that—a framework. It's up to the stakeholders to bring real cases through. 

Country Report

The past three years have been some of the most eventful in memory for Taiwan's life sciences industry. At this year's Bio Taiwan exhibition, the annual conference that invites the international life sciences community to the island, the excitement was palpable. Foreign companies turned out in record numbers to a keynote address from President Ma Ying-Jeou, who acknowledged that Taiwan was a latecomer to the sector, but nonetheless had the capability and will to compete. Buoyed by a successful wave of financing, good product strategy, and increasing international penetration, the industry seems confident.

Country Report: Taiwan

 illustrate the strategic contradiction facing today's industry. On the one hand, our annual survey of R&D pipeline prospects reveals an open well of potential from the scientific discoveries associated with the mapping of the human genome. That was nearly a decade ago, and its legacy is now bearing fruit, in the form of a more precise targeting of trials and treatments that promise to save more lives, at lower cost. The larger meaning here is that the case for the blockbuster product—at least in clinical terms—is due for a revival. 

But when we raise the other hand, we see a blank wall of indifference to this bounty. After a seven year hiatus, 

 returns this month with a roundtable panel of experts to examine the state of market access in medicines—a state that our participants define as one where that market is being managed to slow or even reduce access, particularly for new originator products that once were referenced as innovative. Now they are reference 

—often against the oldest generic product in its class.  

In most countries today, there is little or no premium allowed for innovation. Germany, the world's fourth largest economy and surely one of the richest, is subjecting companies to a bewilderingly complex new drug benefit assessment process. In the case of life-saving oncology products, this requires delivering as primary endpoints evidence of progression free survival projected toward overall survival—a virtually impossible measurement for any new cancer product. Failure to meet this hurdle risks a product being priced within fixed reference price classes, where older generics are the main comparator.   

This is unfortunate because, as senior editor Ben Comer notes in the pipeline profile, all this new science carries a potentially large benefit on the cost side. It speeds up the development process. More precise molecular targeting enhances the selection criteria for clinical trials and thus provides more accuracy in test results. Companies are also faring better in focusing R&D spending around areas of unmet medical need. For example, our survey tags a slow but steady resurgence of Big Pharma interest in next-generation antibiotics to treat hospital borne infections that kill 23,000 people each year in the United States alone. Controlling antibiotic resistance with a single effective new drug could produce billions in savings on costly acute care services.  

Hepatitis C is another silent consumer of healthcare dollars, with Gilead's sofosbuvir emerging as 2014's biggest new launch. But payers are likely to sound a skeptical note given the potential cost exposures—this is a ticket punched at rare disease prices—as well as the fact that the drug's constituency includes many from society's marginalized elements, who are unfamiliar with the concept of the "empowered patient." It will be interesting to see if the hype around sofosbuvir ends up confirming an unpleasant truth about even the best planned product launches: the pace of market uptake is today measured in years, not months.  

Advances are also emerging to add value to patients, even in the most crowded therapeutic segments. Despite all the options that exist in the anti-hypertensive class, thousands of patients are still non-responsive to conventional treatment and face heart disease, kidney failure, and an early death. In yet another indication of how technology is building a stronger treatment convergence between drugs and devices, Medtronic has developed a new last-ditch invasive procedure called renal denervation that can reverse the decline. It underscores the point that, for sick patients, no treatment arsenal for their condition can ever be considered too big.  

Pharm Exec's two key features this month illustrate the strategic contradiction facing today's industry.