Jeremy Schafer, director of Precision’s Payer Access Solutions, shares his thoughts on drug pricing, M&A activity, 340B changes, and other things top-of-mind for 2018.
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Focus on Drug Prices, Pharma M&A Activity, 340B Changes Is Expected in Coming Year
As 2018 gears up, it’s anyone’s guess as to what’s in store for the pharmaceutical industry this year. Will drug prices continue to dominate the discussion? What pharma-focused legislation may be in store? AIS Health spoke with an array of industry experts to get their takes on these topics and more.
What pharma trends do you expect we’ll see in 2018 with respect to drug development? Legislation? Anything else?
Stephen Cichy, founder and managing director of Monarch Specialty Group, LLC: “Expect continued changes of the 340B program. In November of this past year, [HHS] released a Final Rule implementing a payment reduction for most covered outpatient drugs billed to Medicare by 340B-participating hospitals from the current ASP [i.e., average sales price] plus 6% rate to ASP minus 22.5%. This represents a payment cut of almost 30%. The payment reduction was made effective Jan. 1, 2018, for all 340B-participating hospitals paid under the Medicare OPPS [i.e., Outpatient Prospective Payment System] with a few exceptions.
“Separately, new legislation was introduced in December 2017 under the name 340B Protecting Access for the Underserved and Safety-net Entities Act (340B PAUSE Act) that proposes to implement a two-year moratorium on most new 340B hospital participants, including both hospitals new to 340B and new locations of existing hospital participants.
“In addition, expect biosimilars to continue to play-out in the market as a major headline topic. The regulatory policy and legal issues facing biosimilars commercialization will continue to evolve.…Policies such as fail-first mandates will gain increasing attention, especially regarding their effects on biosimilars gaining market access.
“A lesser-recognized accomplishment in this past year is the enactment of the enhanced Nurse Licensure Compact [i.e., eNLC], which may play out in a meaningful way for the specialty pharmacy industry in 2018. This compact allows for registered nurses and licensed practical/vocational nurses (LPN/VNs) with a single-state license to practice in person or via telehealth in both their home state and other of 26 participating eNLC states.”
Meghan Oates-Zalesky, vice president of marketing for InCrowd: “For tech and research, we’ll see consolidation and partnerships, bringing manufacturers the best of both the consulting and innovations worlds.
“There will also be a growing comfort with innovation and technology within the pharma development process. Efforts by market disruptors to demonstrate clear efficacy and value will pay off as they debunk unfounded perceptions of risk. This work will be aided by the compelling call to action to chief executives and operators to create a culture open to innovation and tech enablement within manufacturers all aimed at bringing drugs to market faster.
“In regards to legislation, the continued Trump administration trend toward deregulation should work in the pharma industry’s favor. However, the repeal of the individual mandate could have repercussions across all of health care, including pharma, as premiums rise at the end of next year. This assumes nothing will be done legislatively to shore-up the individual market and stabilize it, which is likely, as Republicans have worked tirelessly for months to repeal, defund (defenestrate, decapitate, depreciate de-anything they can!) and now collapse the individual market.”
Pharma industry veteran who asked to remain unidentified: “Drug development will see companies backing away from Parkinson’s drug development as a result of another high-profile failure and a major advancement using CRISPR to adjust/address individual genes while in the body. There will be no legislation or any serious discussion of anything drug related in 2018.”
Jeremy Schafer, senior vice president of payer access solutions at Precision for Value: “I think oncology will continue to grow and expand rapidly as new technologies surface and an aging population creates more market demand. Manufacturers will also face continued pressure on proving value and justifying both base price and price increases. In terms of legislation, I think we will see quite a bit of promises or threats of drug price legislation, especially as the campaigning for November 2018 heats up, but I am less certain we will see actual drug price legislation in 2018. We may also see some court outcomes in areas significant to pharma like the 340B cutback from CMS and the challenge to California’s SB17.”
Are there any therapies in the pipeline that you’re watching closely?
Cichy: “In August of this past year Gilead announced FDA priority review for its planned integrase inhibitor bictegravir/F/TAF, which [it] anticipates to compete with Glaxo’s dolutegravir — marketed as Tivicay — if it wins approval in 2018. Despite the large number of drugs currently approved for HIV, distinct unmet needs continue to exist for an FDA-approved medication with a strong safety profile that offers simple regimens and dosing frequency.
“Incyte’s epacadostat is an anticipated cancer immunotherapy to watch for this year. Incyte’s clinical data appears to be stacking up well against the combination of Bristol-Myers’ Opdivo and Yervoy, which won FDA approval in early 2017 for the treatment of patients with advanced melanoma.
“In November of this past year, the FDA approved Genentech’s Hemlibra for hemophilia A with inhibitors. This is the only indicated medicine that can be self-administered once weekly by injection subcutaneously. It’s [anticipated that] Genentech’s discount pricing strategy with Hemlibra versus the current standard of care will aid adoption and penetration of the market in 2018.
“Celgene’s ozanimod is another potential new drug to watch for in 2018. Ozanimod is one of the late-stage candidates in Celgene’s inflammation and immunology pipeline and a potential blockbuster drug in the increasingly crowded multiple sclerosis space.
“Also look for AbbVie’s endometriosis drug elagolix to make some headlines in 2018. The FDA recently granted priority review for this drug, and an approval decision is expected in the early part of 2018.
“We also like Sage’s brexanalone. Sage is currently conducting Phase III studies evaluating the impact of brexanalone in the treatment of adult female subjects with moderate to severe postpartum depression. What make this drug notable, among other things, is its 30-hour continuous infusion requirement. This will require participation of the home infusion pharmacy for medication and nursing support, and may serve as an industry enabler.”
Oates-Zalesky: “I watch the immune-oncology market closely. It’s volatile, which offers potential promise for those in the space. It will continue to grow in 2018 — there are dozens of therapies in the pipeline now from the top pharma companies — addressing new indications, fewer side effects and other variations. It’ll remain highly competitive.”
Schafer: “I am watching some of the emerging gene therapies, especially in hemophilia. It will be interesting to see if these drugs continue to see success in clinical trials, whether the responses are durable and if new safety issues arise when tested in larger populations. I am also watching the pipeline in Alzheimer’s including both the anti-amyloid therapies and the BACE [i.e., beta secretase cleaving enzyme] agents to see if manufacturers can finally have some success in modifying the course of this devastating disease.”
There has been a lot of attention on the prices of drugs, particularly specialty drugs. What do you expect to see on the issue of pricing in 2018? Are there particular drugs/classes of drugs that you expect to see a focus on?
Martin Burruano, vice president for pharmacy at Independent Health, and Amy Nash, president of Reliance Rx, the specialty pharmacy subsidiary of Independent Health: “Although there will be less frequent price increases, specialty drug prices will still increase. As lower price alternatives are approved for some products (i.e., biosimilars), there will be more pressure on the brand manufacturers to be competitive. Focus will be on utilization management and preferred drugs where there may be more cost-effective alternatives for the continued high drug costs and newly approved drugs for rare diseases and oncology, as the majority of the drug cost trend is in the management of medical drug spend on the medical vs. pharmacy benefit.”
Cichy: “Pricing will continue to be a front-page topic, although I’m not certain that we’re going to hear the same high volume on this topic that we experienced in 2017. Based on our recent experience with our clients, it doesn’t feel like the level of price trend is accelerating as [it] was in years past. Instead, we expect for specialty generics to gain increasing attention as a potentially feasible counterbalance to specialty spend. We’ve already had Copaxone 40mg and Gleevec come to market, and Tracleer is coming down the pipe shortly.
“We’re also expecting to see a continuing shift away from open specialty networks, especially for drugs within certain therapeutic categories where managing the patient with disease specific programs is viewed to be important by the payer.
“Look for hepatitis C, rheumatoid arthritis, multiple sclerosis and oncology to dominate payer focus. Additional areas of interest will include those areas characterized by high-cost drugs with a more-than-usual expense trend.”
April Kunze, Pharm.D., senior director, clinical formulary development and trend management strategy, Prime Therapeutics, LLC: “We will continue to see multiple drug submissions for orphan conditions and oncology indications, both for new drug entities and supplemental new drug applications, which expand the use of a drug. Orphan drugs are often launching at more than $500,000 annually, and many of the new oncology drugs are launching at $180,000 or more per year. Although these are not used by a broad population, any use can significantly impact drug trend. Additionally, many of these drugs show marginal clinical improvement.”
Jeff Myers, president and CEO of Medicaid Health Plans of America: Last year, the pharma industry managed to avoid “even the slightest discussion of any change to policy that might lower prices to consumers and to taxpayers, who pay for a vast amount of pharmaceuticals.” Manufacturers faced “the threat of some discussion about the ridiculousness of drug prices, which they successfully squelched.” Among impacts so far from the Republican-led White House, administration and Congress, “FDA Commissioner Scott Gottlieb’s willingness to speak some truth to power about the costs of drugs and things that FDA can do to accelerate generic approvals and others” stands out.
Oates-Zalesky: “In regard to pricing it’s hard to imagine it won’t increase in 2018, just given the instability of the current administration, the lack of consideration applied to the repeal of the individual mandate and the ripple effect that could have, and even in spite of Trump’s efforts to deregulate.”
Schafer: “I think pricing will continue to be controversial leading into 2018 and will probably gain more steam as the elections approach since drug pricing is an area of concern for many Americans that both parties can leverage to entice voters. Oncology, given the life-or-death nature of the disease, is a popular target for drug price discussions, and we will probably see more of that in 2018, especially as more combination regimens are approved.
“On the manufacturer side, we did see some manufacturers in the specialty space launch products at prices lower than expected, which is a change from the norm of price parity. I would expect to see more of this in the future as well, especially if these manufacturers are rewarded with strong access from payers and are able to achieve their sales goals.”
Mesfin Tegenu, president of PerformRx: “In 2017, at least in our experience, we were lucky enough to see lower-than-expected specialty trend numbers as the result of cost reductions for hepatitis C therapies. However, we anticipate that the 2018 specialty trend will return to the 18%-25% levels we’ve seen in past years. We are starting to see more specialty products coming to market that are used for conditions that have a significant patient population involved.”
How do you think a Republican-led White House, administration and Congress will impact the pharma industry next year?
Myers: “It will continue to let the industry do what it does, without fear of change or reputational impact.”
Oates-Zalesky: “I believe the administration’s intention will be to deregulate and let market forces drive costs. I suspect there’ll be an effort made to facilitate — and speed up — the drug approval process and approve more drugs for market in the coming year. But like so many things for which the Trump administration has aspired, the reality is much more complicated than he and others had suspected. As such, this aspiration will not be met.”
Schafer: “I think the Republican-led government will likely continue the approach favoring free markets as they generally do. I would expect to see lightened regulations which may allow faster drug approvals but also the release of more generics and biosimilars, which will increase competition. The government may also act on areas that are generally unpopular like pay to delay and other arrangements that weaken the ability of lower cost alternatives to come to market.”
What kind of merger and acquisition (M&A) activity within the pharma industry might we see in 2018?
Cichy: “The overall M&A marketplace was slightly bearish in 2017. A meaningful part of this may have been deal fatigue among the more prolific acquirers. Company tax positions will be lower in lieu of the recent tax reform, which may provide increased flexibility for deal making as we move into 2018. Look for increased industry consolidation with this change, as both manufacturers and pharmacies seek to leverage size/scale as a counterbalance against industry pricing pressure.”
Oates-Zalesky: “Rather than traditional M&A, in 2018, I believe there will be more of a focus on tech acquisitions that enable faster time to market, accelerating various functions of the drug development process (e.g., discovery, patient recruiting, endpoint design, communication, among others).”
Pharma industry veteran who asked to remain unidentified: “Lots — with all of the additional repatriated dollars, expect at least one megamerger (maybe Bristol-Myers Squibb?) and several biotechs to get rolled up.”
Schafer: “I think we will continue to see manufacturers eyeing opportunities for the ‘next big thing’ by looking for small manufacturers with promising technologies, particularly in oncology, to acquire these molecules. We could also see some larger M&A if manufacturers bring in their off-shore reserves and decide to make some big buys, especially with the election uncertainty now behind them.”
Contact Burruano and Nash via Frank Sava at Frank.Sava@independenthealth.com, Cichy at firstname.lastname@example.org, Kunze through Jenine Anderson at email@example.com, Myers through Joe Reblando at firstname.lastname@example.org, Oates-Zalesky through Heidi Auvenshine at email@example.com, Schafer via Tess Rollano at firstname.lastname@example.org and Tegenu at MTegenu@performrx.com. ✧
by Angela Maas