Blockbuster pharmaceuticals thrive despite setbacks
The biggest shock to the branded drug industry in the past year has been the withdrawal of Pfizer’s drug torcetrapib from the market last December. The drug was taken out of clinical trials, just two months before the pharmaceutical company was planning to submit it for Food and Drug Administration approval, because the trial showed too many deaths.
Following the announcement of the halting of torcetrapib clinical trials, Pfizer’s market value fell by $21 billion overnight, and 10,000 jobs hit the floor soon afterward. This was particularly bad news for a company that can see the patent expiration of its top-selling drug, Lipitor, on the horizon. When that drug loses patent protection around 2010, along with it will go most of the $10 billion it brings to Pfizer’s coffers.
Despite this, Pfizer’s chief executive officer, Jeffrey Kindler, said that the company will be “capitalizing on the largest pipeline in its history,” and will place increased focus and emphasis on its business development and licensing efforts. “As a result, Pfizer continues to target the introduction of about six new products a year starting in 2010,” he added.
Pfizer is pinning some hope on its drug Sutent (sunitinib), a targeted anti-cancer treatment for patients with gastrointestinal stromal tumors, a rare stomach cancer, and advanced kidney cancer. This is the first oncology drug to be approved by the FDA for two indications simultaneously. According to the American Cancer Society, about 32,000 new cases of advanced kidney cancer and 5,000 cases of GIST are diagnosed each year.
Late last year, the FDA approved Invega (paliperidone) extended-release tablets, to treat schizophrenia. The once-daily oral medication specifically is designed to deliver paliperidone—the active ingredient derived from risperidone—through Oros
extended-release technology. Invega is marketed by Janssen (a division of Johnson & Johnson) and became available in January of this year. It is the first new prescription treatment for schizophrenia to be approved by the FDA since 2003.
Another drug to treat schizophrenia is in the works, and approval is expected this month. Wyeth will market Bifeprunox in the United States, in collaboration with the drug’s developer, Solvay of Belgium. It is a partial dopamine agonist/antagonist, as well as a serotonin receptor agonist. It is expected that partial dopamine agonist action will have beneficial effects for positive, negative and cognitive symptoms, while the serotonergic agonist action will help alleviate some side effects and possibly combat the depression and anxiety that can accompany schizophrenia treatment.
Also for mental health, Wyeth’s Pristiq (desvenlafaxine succinate), a serotonin-norepinephrine reuptake inhibitor to treat major depressive disorder, was approved by the FDA in January.
Indications for the drug were extended last month when the agency issued an approvable letter for Pristiq to treat hot flashes and night sweats associated with menopause.
For the former approval, several conditions need to be met before full approval is granted. These included a satisfactory FDA inspection of the Wyeth’s Guayama, Puerto Rico, facility and several post-marketing commitments.
For the latter, Wyeth must provide additional data on Pristiq’s risk for serious cardiovascular adverse events and hepatic effects before the application can be approved. The FDA also requested a randomized, placebo-controlled clinical trial of postmenopausal women lasting at least one year.
One drug that’s holding the industry’s attention is Sanofi-Aventis’ Acomplia (rimonabant). The drug has been approved in Europe and some Scandinavian countries as a weight-loss and smoking-cessation product, and in Mexico with a diabetes indication, but it has not yet been approved in the United States.
Unfortunately for Sanofi-Aventis, even if Acomplia is approved in the United States (where it would be known as Zimulti), it’s now up against a powerful competitor: In June, GlaxoSmithKline’s weight-loss drug Alli was approved as an OTC product, and sales mushroomed to $150 million in less than a month.
Diabetes drugs are proliferating—no surprise given the increasing numbers of people suffering from the disease. Last October, the FDA approved Januvia (sitagliptin) from Merck. The drug is the first to be approved in a new class called dipeptidyl peptidase IV inhibitors.
DPP-4 inhibitors enhance the body’s levels of a protein called GLP-1, which stimulates the pancreas to produce more insulin and prevents the liver from producing glucose. Because of this, DPP-4 inhibitors are less likely to cause hypoglycemia than some older diabetes drugs that are on the market.
Brand Generic Manufacturer Indication Patent expiration
|Coreg||carvedilol||GlaxoSmithKline||high blood pressure||Sept. 5, 2007|
|Meridia||subutramine||Abbott||weight loss||Dec. 11, 2007|
|Mavik||trandolapril||Abbott||high blood pressure||Dec. 12, 2007|
|Tequin||gatifloxacin||GlaxoSmithKline||antibiotic||Dec. 25, 2007|
|Zyrtec||cetirizine||Pfizer||allergies||Dec. 25, 2007|
|Fosamax||alendronate||Merck||osteoporosis||Feb. 6, 2008|
|Camptosar||irinotecan||Pfizer||colon cancer||Feb. 20, 2008|
|Effexor||XR venlafaxine||Wyeth||depression||June 13, 2008|
|Zymar||gatifloxacin||Allergan||bacterial conjunctivitis||June 25, 2008|
|Dovonex||calcipotriene||Bristol-Myers||Squibb psoriasis||June 29, 2008|
|Kytril||granisetron||Roche||cancer/chemotherapy||June 29, 2008|
|Risperdal||risperidone||Janssen||antipsychotic||June 29, 2008|
|Depakote||divalproex sodium||Abbott||bipolar, epilepsy, migraines||June 29, 2008|
|Advair||fluticasone & salmeterol||GlaxoSmithKline||asthma||Aug. 12, 2008|
|Serevent||salmeterol||GlaxoSmithKline||asthma||Aug. 12, 2008|
Despite the steep price of Januvia (about $4.86 per day, or $145 per month), sales have been high—about $144 million per quarter. These figures are only expected to grow, and Jami Rubin, an analyst with Morgan Stanley, forecasted 2007 sales of $350 million worldwide and $1.6 billion by 2010.
Another possible diabetes blockbuster could be Galvus (vildagliptin) from Novartis, another DPP-4 inhibitor (to be used both as a monotherapy and in use with other anti-diabetic medicines.) The drug maker announced six months ago that it had received an approvable letter from the FDA. Under the terms of the letter, the FDA has requested additional data, including a clinical study to demonstrate the safety and efficacy of Galvus in specific patient groups with renal impairment.
It is expected that Galvus soon will be approved in Europe. Last month, Novartis received a positive opinion from the Committee for Medicinal Products for Human Use, recommending the approval of the drug as a once-daily oral medication for type 2 diabetes. The European Commission generally follows the CHMP’s recommendations and is expected to issue a decision on Galvus within three months. The decision will apply in all 27 EU member states, as well as Iceland and Norway.
Also awaiting approval from the FDA is Rasilez (aliskiren), a hypertension drug from Novartis. This drug was submitted for approval in April 2006, and according to Novartis, would represent the first new treatment approach for people with high blood pressure in more than a decade.
Symbicort from AstraZeneca also is awaiting FDA approval. This drug is meant to be an alternative to Seretide and has been shown in trials to reduce the risk of a severe asthma attack by 25 percent, and the total number of severe asthma attacks by 22 percent, when compared with Seretide.
Clinical trials showed that patients using Symbicort experienced fewer severe asthma attacks and required less rescue medication compared with patients taking Seretide.
Symbicort combines two key components of asthma therapy in one inhaler: Formoterol, a unique rapid and long-lasting bronchodilator, which can be used both as maintenance and reliever medication, and budesonide, an inhaled corticosteroid that provides an additional anti-inflammatory effect.
Grocer sings new tune in community involvement
Meijer is taking another step in community relations, to the tune of promoting and selling CDs of local musicians.
The Michigan-based 176-unit grocery chain launched the Outside the Mainstream promotion in February with a solo CD from Josh Davis, a singer from Lansing, Mich., whose Fool Rooster CD was recognized by Performing Songwriter magazine for its lyric.
Each month, the chain is featuring a new performer in its circulars, which are sent weekly to 7 million households in Ohio, Michigan, Illinois, Indiana and Kentucky, according to company vice president of public affairs Stacie Behler. Meijer purchases 1,000 of the artist’s CDs and offers them for sale in all the chain’s stores for $7.49.
“The goal of the program is to bring some of the talent that we find in our own backyards to a wider audience than they can normally reach by themselves,” Behler said. “And by supporting this with a low price and a feature in our circular, hopefully it will lead people to gamble on the purchase of music that is worthy of discovery.”
Meijer, according to Behler, is trying to create regional loyalty to its stores by promoting local talent.
CDs chosen for promotion, according to the chain, must have a UPC and be professionally duplicated. Submitted CDs are sorted according to state and chosen on the basis of whatever state will be featured that month and how different the music is from the previous month.
Featured in April is Michigan-based Potato Moon with its CD “The Life of The Lonely Jones.”
CVS wins Caremark battles
WOONSOCKET, R.I. —The battle for Caremark Rx has finally come to an end. And, to the dismay of Express Scripts, CVS has emerged the winner, creating a $75 billion pharmacy benefit management powerhouse that is likely to serve as a benchmark for additional mergers within the industry.
“CVS/Caremark will offer end-to-end services, from plan design to prescription fulfillment, as well as the opportunity to improve clinical outcomes, which will result in better control over health care costs for employers and plan providers,” stated Tom Ryan, president and chief executive officer of CVS/Caremark, late last month when the deal closed. “The company will improve the delivery of pharmacy services and health care decision-making, enabling consumers to benefit from unparalleled access, greater convenience and more choice.”
With the close of the transaction—ultimately valued at $27 billion—CVS/Caremark has moved into a strong, competitive position. The combined company will be No. 1 in pharmacy sales, PBM-managed lives, specialty pharmacy sales and retail-based health clinics. It will be No. 2 in mail services.
That adds up to a lot of extra leverage for the retail health care juggernaut with suppliers, as well as insurers and payers.
In terms of synergies, CVS expects to realize between $800 million to $1 billion in revenue synergies in 2008, and significantly more thereafter. The company expects about $500 million in cost savings, largely related to better purchasing.
“We would like to note that every deal that both CVS and Caremark have done historically has yielded synergies significantly in excess of original guidance,” stated Citigroup analyst Deborah Weinswig in a recent research note. “We believe this deal will be no exception.”
Charles Boorady, also of Citigroup, believes that if the company achieves cost savings from the drug-procurement process, it likely will come from a combination of the following: manufacturers accepting the lower price or offering greater rebates, the wholesalers and distributors accepting lower prices and manufacturers bypassing the wholesalers and selling directly to the combined CVS/Caremark entity.
While many industry observers view the merger as a boon for the companies, it undoubtedly will have major implications on the industry, in general, as vertical integration is a new paradigm that—if successful—could clear the way for more mergers moving forward, with Medco and Express Scripts likely being the next targets.
“The fragmentation in the past may be the reason why vertical integration did not work, but the sheer scale of the CVS/Caremark company may be able to make it work,” Boorady said. “The only test will be whether customers buy into the concept or the concerns over the perceived channel conflict will outweigh it.”
Either way, Boorady sees it as a win-win for rival PBMs. “I see Medco and Express Scripts winning either way. If this integration works, they are likely to be the ones that are acquired next. If it doesn’t work then they could stand to gain customers that prefer a standalone [PBM] instead of a vertically integrated model.”
Another issue such a deal brings to the forefront is network restriction. If customers are willing to restrict the retail pharmacy so that employees can get their prescriptions filled at a single chain, or just a few chains in the market, then it will make the synergy from a vertical integration more obvious, according to Boorady.
However, this has been a concern for several years and has yet to materialize.
“I think most employers have concluded, and will continue to conclude, that the sheer hassle factor that you are putting on your employees by making them go to a CVS instead of a Walgreens, or vice versa, isn’t really worth what little savings you can get relative to other things you can do that present less of a hassle to the employee but can save a lot more money,” Boorady said.
However, prior to the deal, CVS Pharmacare controlled a provider network of more than 56,000 retail pharmacies. Meanwhile, Caremark’s network numbered more than 60,000 retail pharmacies, so it is unlikely that the combined company, post-merger, would suddenly pull back the size of its network—particularly, if the end goal is to remain attractive to insurers and payers and competitive with stand-alone PBMs.
According to William Blair & Co. analyst Mark Miller, the combined company is facing its first big test as it expects an announcement on the large Federal Employee Program contract—currently up for negotiation—as early as May. Three years ago, Caremark won this contract from Medco and it is likely that the two PBMs, among others, will bid for this business aggressively.
“While there are many moving parts to these types of negotiations, this will be the first big test for the new CVS/Caremark, and may provide some incremental perspective on the current state of the competitive environment,” Miller stated in a research note.
In related news, CVS/Caremark has announced the members of the company’s board of directors. As previously disclosed, the 14-member board was evenly split among designees from CVS and Caremark.
Former Caremark chairman and chief executive officer Mac Crawford has been elected chairman of the board of the combined company. Ryan will continue to serve as president and chief executive officer.
The following individuals named to the board from CVS are:
Ryan, president and chief executive officer of CVS/Caremark Corp.
David W. Dorman, senior advisor and partner, Warburg Pincus LLC.
Marian L. Heard, president and chief executive officer, Oxen Hill Partners.
William H. Joyce, chairman and chief executive officer, Nalco Co.
Terrence Murray, former chairman and chief executive officer, FleetBoston Financial Corp.
Sheli Z. Rosenberg, former vice chairman, president and chief executive officer, Equity Group Investments LLC.
Richard J. Swift, former chairman, president and chief executive officer, Foster Wheeler Ltd.
The following individuals named to the board from Caremark are:
Mac Crawford, chairman of CVS/Caremark Corp.
Edwin M. Banks, founder, Washington Corner Capital Management LLC.
C. David Brown II, chairman, Broad and Cassel.
Kristen E. Gibney Williams, former executive of Caremark’s Prescription Benefits Management division.
Roger L. Headrick, managing general partner, HMCH Ventures; president and chief executive officer, ProtaTek International
Jean-Pierre Millon, former president and chief executive officer, PCS Health Systems
C.A. Lance Piccolo, chief executive officer of HealthPic Consultants