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FDA 2014 NDA Approvals – The Surge of the Niche Products – Good or Bad?

The FDA recently provided a summary of new drug approvals in 2014 pointing to an 18-year high. According to its website, the FDA approved 41 novel medicines in 2014, 14 more than in 2013.  Nearly 40% of the new drugs approved in 2014 were for rare diseases. This number is the highest since the Orphan Drug law was passed in 1983.  This isn’t only the case in the US, as the European Medicines Agency also approved a record number of Orphan Drugs in 2014 including 21% for rare diseases.

This suggests that the industry’s focus is on specialized products, where competition is limited, development (in the US) is facilitated (eg., by FDA Expedited Programs for Serious Conditions including Breakthrough Therapy Designation, Fast-Track Designation), and annual costs for the approved products often exceed $100,000 per patient.  This trend could accelerate, as further incentives could be on the way.  If approved, the “Dormant Therapies Act” (DTA), introduced in the US Senate and described in an earlier Camargo blog, would provide 15 years of data exclusivity for a drug product that meets an “unmet medical need”,  a condition whose treatment or diagnosis is not addressed adequately by available therapy (see, e.g., FDA Guidance for Industry: Expedited Programs for Serious Conditions  – Drugs and Biologics May 2014).  In theory, this bill will create a time-certain protection to promote development of new and essential products to market for the many diseases and conditions that currently lack effective treatments including Alpha-1, ALS, Alzheimer’s, epilepsy, lupus, mesothelioma, and multiple sclerosis. Clearly there has been a surge of product development that meets either orphan drug or unmet need classifications where no other therapies exist – in essence, niche product development.

Following the recent approvals of Imbruvica, Esbriet, and Ofev, each of which benefited from at least one or potentially all of the agency’s fast-track, priority-review, orphan-product and breakthrough therapy designations, the FDA highlighted the approvals. In the case of Imbruvica’s approval for mantle cell lymphoma, Richard Pazdur, M.D., director of the Office of Hematology and Oncology Products in the FDA’s Center for Drug Evaluation and Research (CDER), stated the “approval demonstrates the FDA’s commitment to making treatments available to patients with rare diseases”. Following the Esbriet approval, Curtis J. Rosebraugh, M.D., M.P.H., director of the Office of Drug Evaluation (ODE) II in the FDA’s CDER, stated “We continue to help advance medication therapies by approving products that treat conditions that impact public health”.  After the Ofev approval, Mary H. Parks, M.D., deputy director of the ODE II in the FDA’s CDER, stated “Providing health care professionals and patients with additional treatment options helps enable appropriate care decisions based on a patient’s need”.

However, blogger Joseph V. Gulfo, MD, MBA, suggests that “with respect to pricing of these niche therapies, drug makers and investors are seeing an irresistible confluence of forces – the FDA facilitating the development of niche products, Orphan Drug Designations indicating that these indications are indeed rare, and the combination of the “breakthrough and “rare” labels commanding premium prices”.

For example, Vertex Pharmaceuticals, a $28.7B company, charges $300,000 per year for Kalydeco, a therapy for a small subset of cystic fibrosis patients (cystic fibrosis affecting less than 30,000 patients is an Orphan indication).

Further, Pharmacyclics, Inc announced on January 12th at the 33rd Annual J.P. Morgan Healthcare Conference in San Francisco, CA, that they anticipate 2015 U.S. net product revenue of approximately $1 billion for IMBRUVICA® (ibrutinib), representing a 103% increase over the expected 2014 U.S. net product revenue.  IMBRUVICA, a chronic lymphocytic leukemia and mantle cell lymphoma drug, was one the first medicines to receive U.S. FDA approval via the new Breakthrough Therapy Designation pathway, and is the only product to have received three Breakthrough Therapy Designations.

In October 2014, the Food and Drug Administration approved Roche’s Esbriet and Boehringer Ingelheim’s Ofev,  both also designated as “breakthrough” therapy and both meant to treat idiopathic pulmonary fibrosis, a scarring of the lungs that affects roughly 100,000 Americans and kills many of them in three to five years.  As this indication fulfilled an “unmet need”, the F.D.A. took the unusual step of approving both drugs on the same day, and both well ahead of the product’s prescription drug user fee goal date of Nov. 23 for Esbriet and Jan. 2 for Ofev.  Prior to Esbriet and Ofev’s approvals, there were no FDA-approved treatments for IPF, which kills about 40,000 people a year, according to the Coalition for Pulmonary Fibrosis.

This example illustrates the emerging controversy over premium pricing:  Roche indicated the wholesale price of Esbriet would be about $7,800 a month, or about $94,000 a year — two to three times what the drug sells for in Canada and Europe. Boehringer Ingelheim priced Ofev at $96,000 – slightly above Esbriet’s price.  Carly Helfand from Fierce PharmaMarketing, indicated Boehringer took into account the prices of orphan drugs in other indications, absent a prior IBF drug to use as a reference.  Analysts estimate the market for such drugs could top out above $2 billion a year.

Paul Fonteyne, president of the American division of Boehringer, thought insurers would pay for the drugs. “The medical need is such that I doubt there would be a prolonged discussion on this” he said.  Will the insurance companies be reluctant to pay premium pricing for these drug products – attempts to counterbalance the pricing choices currently being made by the pharmaceutical companies?

In at least one instance, a counterbalance has emerged from the insurance industry, in terms of the new generation of hepatitis C drugs – a disease affecting an estimated 3.2 million people in the United States, not an orphan indication but definitely an unmet need.  The recent decision by Express Scripts, the largest U.S. pharmacy benefit manager, to make the AbbVie’s hepatitis C treatment (Viekira Pak) the exclusive option for patients and, in most cases, no longer covering Gilead Sciences Inc’s treatments (drugs Sovaldi and Harvoni, $84,000 and $95,000 for 12-week treatment course, respectively) – clearly signals a counterbalance to the higher costing – that many see as a “public health crisis”.  As part of this deal, AbbVie agreed to an undisclosed “significant discount” off its $85,000 list price for Express Scripts’ National Preferred Formulary, a list of approved and covered drugs for 25 million Americans.

However, there is no time for pause as the playing field continues to be muddled – as exemplified by the recent discloser that Anthem Inc., an Express Scripts client, will offer Gilead Sciences’ hepatitis C drug exclusively to its employer sponsored health plans.  St. Louis County-based Express Scripts actually negotiated the deal with Gilead for Anthem, according to an analyst report by J.P. Morgan.  For its part, as reported by Samantha Liss from the St. Loius Dispatch, Express Scripts will keep a portion of the discounts generated from the Anthem-Gilead deal in addition to a contractual fee for dispensing the drug.  Further, the deal with Anthem came on the heels of CVS Health’s deal to exclusively offer Gilead’s hepatitis-C drugs.

Where does the 505(b)(2) drug development process fit in the niche product market?

The examples cited above are new molecular entities (NME), but it is important to remember that repurposed drugs can fit into the niche product market. The factors driving the premium pricing for these NME niche drug products include the nonclinical and clinical trial costs along with repeated trial and error that is often encountered in NME drug development programs. Total cost for such programs is estimated to be $1.2B.  In terms of niche drug development via the 505(b)(2) pathway, there aren’t  any examples of repurposed drugs being approved as niche products as yet.  However, this niche product market is open to listed drugs that have established safety and efficacy, that could be leveraged for a new therapeutic indication fitting the orphan drug/unmet need criteria.  Via the 505b2 pathway, the cost of development can be trimmed, leading to available therapies, patient affordability and profitable commercialization.

Post contributed by Stacey Ayres, Ph.D. and Bill Stoltman, J.D.