Medicare beneficiaries have begun reaching the so-called "donut hole," the gap in Part D drug coverage, presenting--at best--a temporary dip in sales for pharma companies. At worst, pharma could suffer serious long-term effects, should beneficiaries choose not to resume their prescriptions in 2007, when coverage resumes.

With a significant number of beneficiaries facing the donut hole choosing to forgo medications altogether rather than switch to a generic (or pay out of pocket for the branded version), pharma finds itself struggling not only to maintain brand loyalty, but also to convince affected beneficiaries of the importance of sticking with treatment.

One message pharma wants to get across is that Part D beneficiaries have the option of upgrading their plans to a level at which they don't suffer the consequences of the donut hole; a recent Wolters Kluwer study found that many beneficiaries are unaware of this option.

Pharma companies are prohibited from targeting Medicare Part D beneficiaries directly, but they can work with insurers and other organizations on education efforts.

Already, said Carolyn Stables, a spokeswoman for the Academy of Managed Care Pharmacy, pharma companies are ramping up efforts to provide doctors with additional drug samples and get out the word about patient assistance programs.

The Wolters Kluwer study, one the first analyses of the donut hole's effect, found that about 16 percent of beneficiaries are discontinuing therapy once their plans no longer cover the cost of their prescriptions. Patients were most likely to discontinue medications in non-acute therapeutic categories, like arthritis drugs and proton pump inhibitors. About 33.4 percent of patients discontinued their arthritis drugs, while only 8.1 percent discontinued cholesterol reducers and 11.5 percent discontinued oral diabetes therapies. It remains unclear whether they will discontinue therapy indefinitely, or until their 2007 coverage kicks in.

About 35 percent of Medicare beneficiaries, or six million people, are expected to reach the coverage gap this year, and will be responsible for up to $2,850 in drug costs, the report found. (Estimates on the exact number of beneficiaries to hit the donut hole vary, however, and other analyses have suggested the exact number could be anywhere from three to seven million.) Compared with patients still in the deductible phase of their Part D plans, donut hole patients were about seven years older (with an average age of 73.1 compared to 66.3) and spent more per prescription ($77.47 per drug versus $32.86).

"People who are getting into the donut hole are much sicker," said Chris Messner, product director in Wolters Kluwer's Pharma Solutions unit. "They're on eight to nine therapies per month."

These older, sicker patients are also less likely to switch to a generic in the same drug category because of the risk of side effects or drug interactions, said Peter Demogenes, product director in Wolters Kluwer's Pharma Solutions unit. "They remain loyal to the brands that were most important to their health."

Articles

The Part D donut hole has arrived, and pharma is scrambling to maintain brand loyalty.

D-Day

Greater collaboration with regulatory agencies, a heavier reliance on outsourcing--and knowing when to call it quits on a project--can speed drug development and increase revenues, particularly in oncology and anti-infectives.

A study released this month from the Tufts Center for Drug Development found that the five fastest drug developers bring products to market 17 months faster than average, gaining $1.1 billion in incremental prescription drug revenue.

These so-called "speed demons"--AstraZeneca, Allergan, Boehringer Ingelheim, and Merck--run the gamut in terms of size and therapeutic expertise. But they all follow a combination of strategic and operational tactics that contribute to their faster development times, the study found.

These companies put greater emphasis on working with regulatory agencies here and abroad, outsource more functions, and have a "commitment to implementing a particular strategy across the board, enterprise-wide, rather than on a project-by-project basis," said Ken Getz, senior research fellow at Tufts.

They also kill unsuccessful projects sooner: The "speed demons" terminated 56 percent of their unsuccessful projects in Phase I, while slower companies terminated just 36 percent in that stage.

"Speed demons" developed drugs within a median of 28.5 months, and received regulatory approval 7.1 months faster than average.

"Our study confirms that speed cannot be attributed to chance," Getz said. "There are many, many places along the complex drug development continuum where inefficiencies can occur."

There are a number of improvements that all companies can make across the board, noted Michael Rosenberg, MD, president and CEO of Health Decisions, a contract research organization.

Most companies still do not use electronic data collection systems--and even if they do, they're not interpreting those figures to find inefficiencies, he noted.

"Experience suggests that many of these 'speed demons' may actually be fast turtles," Rosenberg said. "Very few companies can answer simple questions about progress: which enrollment strategies are working best, which sites are performing well, where should monitoring resources be focused."

The study analyzed 332 drugs approved by FDA between 1994 and 2005; company-specific information was compiled on 29 firms with at least two product approvals between 2000 and 2005.

In some therapeutic categories, the contrast between the fastest and slowest developer was even starker. For instance, the slowest developers might need more than 400 months to bring an anti-infective or cancer drug to market, while "speed demons" need only 40 months.

Even as companies work to develop drugs more quickly, product managers need to research the competitive environment--specifically, how it relates to the price of the drug and its side-effect profile, according to Nancy Dreyer, chief of scientific affairs for Outcome, a consulting firm on post-approval strategies.

"Nowadays, buying decisions are influenced by both clinical effectiveness as well as efficacy," she said, referring to how a drug works in the "real world" as opposed to the ideal conditions of a clinical trial. "The companies that are most successful don't see [efficacy, cost, and safety] as three isolated areas."

A new, faster recipe for drug development: Chat up regulators. Outsource where you can. And know when to let go.

Fast Forward

As more innovator companies are faced with patent challenges from generic makers--and the in-vogue solution of reverse-payment deals comes under greater scrutiny--a recent collaboration between Barr and Shire could mark a new way of handling patent challenges in the future.

After filing suit against Shire for the rights to manufacture a generic version of Adderall XR (extended release mixed amphetamine salts), Barr accepted Shire's proposal for an out-of-court settlement, securing earlier rights to manufacture the attention deficit hyperactivity disorder drug as opposed to taking its chances in court.

Last month, the two companies came to a three-pronged agreement: Barr will hold off on marketing generic Adderall XR until April 1, 2009. Barr subsidiary Duramed will purchase from Shire the rights to Adderall (immediate release mixed amphetamine salts) for $63 million. And Shire will gain European marketing rights to Duramed's contraceptive Seasonique (levonorgestrel/ethinyl estradiol 0.15 mg/0.03 mg and ethinyl estradiol tablet 0.01 mg), as well as its transvaginal ring technology, which the company says will ultimately encompass five products.

Shire CEO Matthew Emmens described the deal, in which the innovator company shelled out no money and instead traded eight years of patent life for new products, as unique. "It's consumer-friendly; it's FTC-friendly," said Emmens. "I think it's good for the American public."

More specifically, it's a way for consumers to purchase cheaper Adderall sooner--and might be a way to keep federal authorities off both companies' backs. The Federal Trade Commission considers reverse-payment deals--where an innovator company pays a generic firm not to produce a copy of its drug--anti-competitive, because they prevent cheaper generics from reaching consumers. A recent report from the FTC found that a majority of patent challenges over the past year were settled with this kind of pay-for-delay provision, prompting the FTC to crack down on these deals.

Shire's Emmens says the deal with Barr was about more than dodging bullets, however. "We could have won," had the case gone to court, said Emmens, but,  "we wanted certainty for the investor."

A Barr spokeswoman did not respond to a request for comment.

As more generic companies develop their own branded products, there are more opportunities for collaboration and deals that go beyond cash payments.

Some observers urge caution, however, and speculate that the FTC might be waiting for another test case after losing a closely watched reverse-payment ruling involving Schering-Plough drug K-Dur in federal appeals court.

"The FTC continues to look for as aggressive a stance as it thinks a court will sustain," said Robert Reznick, a partner at law firm Hughes, Hubbard & Reed.  In the case of Shire and Barr, said Reznick, "The parties have tried to make their deal an unattractive target. They have avoided the red flag of a payment, and added to the mix some new elements that they believe make the deal even more attractive to consumers."

Patent attorney Bill Heinze, of law firm Thomas, Kayden, Horstemeyer & Risley, called the settlement a "win-win situation," citing the reduced risk of losing a patent challenge altogether, and the ability to cut down litigation costs.

"Reverse-payment deals sound so fishy to so many people," Heinze said. Taking a more collaborative approach to a patent challenge "makes it that much more difficult for the investigating authorities to value these kinds of deals, [and therefore] it's much more difficult for them to object."

The recent settlement between branded and generic companies offers a 'win-win' approach to patent challenges.

Pharmaceutical Executive-09-27-2006

D-Day

Fast Forward

Shire, Barr Swap Drugs, Not Money