PHARMACY

Drastic price hikes spur policy investigations

BY Richard Monks

Valeant Pharmaceuticals’ decision to raise the prices on a handful of drugs it has acquired over the past few years has led federal lawmakers and the Department of Justice to demand that the company explain its pricing policy.

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In October, Valeant acknowledged receiving subpoenas from federal prosecutors in New York and Massachusetts seeking information on its pricing, distribution and patient assistance policies.

The Department of Justice’s request followed a similar appeal in September by the 18 democrats on the House Committee on Oversight and Government Reform who have asked committee chairman Rep. Jason Chaffetz (R-Utah) to subpoena Valeant to turn over documents explaining the price hikes and have its CEO Michael Pearson testify before the committee.

Earlier in September, the company refused to comply with a request by Rep. Elijah Cummings (D-Md.) and Sen. Bernie Sanders (I-Vt.) to explain why it raised the price of two heart medica tions by several hundred percent immediately after acquiring the rights to them in April.

Valeant has said the requested information is “highly proprietary and confidential.”

Critics contended that Valeant is taking advantage of the fact that most of its drugs do not have generic equivalents and are among the few options available to patients. Since July 2014, the price of Valeant’s blood-clotting drug Mephyton has been increased eight times, and now costs about $58.76 a tablet, up from $9.37. The price of another Valeant drug, the diuretic Edecrin, has gone up nine times since May 2014, rising from about $470 per vial to $4,600 a vial. This summer it increased the price of Cuprimine — a drug used to treat Wilson disease, an inherited disorder that can cause severe liver and nerve damage — to $260 a tablet, more than four times what it cost previously. While no generic equivalent of the drug is available in the United States, generic Cuprimine sells in pharmacies outside the United States for about $1 per pill.

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Investors, limited window put merger pressure on generic drug makers

BY Richard Monks

A merger frenzy has hit the generics sector this year with a spate of acquisitions and hostile-takeover bids making headlines and reshaping the industry.

Analysts and those who closely follow the pharmaceutical business said the rush to make deals is coming from a combination of investor pressure and a narrowing window of opportunity for generic drug makers to expand their operations.

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An increasing number of drug makers, they said, view acquisitions as the only way to keep their revenues growing as fast as investors expect. In addition, they noted that the changing nature of the industry — where medications are becoming more complex and research and development costs continue to rise — makes it less expensive for a company to acquire another supplier’s portfolio than to develop new drugs in-house.

In addition, they said current low interest rates make capital cheap and allow companies to fund their acquisitions with debt. With rates likely to go up soon, generics companies are facing a limited window of opportunity to make a deal.

Consolidation has reduced competition among generics suppliers, and many said it has become a main factor behind the rising prices that have plagued the industry over the past year. By reducing the field of competitors, generics companies are in better position to negotiate prices for drugs with pharmacy benefit managers, public and private insurers, and patients.

One of the year’s first mergers came in May when Endo Inter national agreed to acquire Par Pharmaceutical for slightly more than $8 billion. The deal, which is expected to close shortly, will add Par’s high-barrier-to-entry generics, niche brands and branded and generic aseptic injectables to Endo’s portfolio. In late September, Endo agreed to sell two generic drugs to Rising Pharmaceuticals to satisfy antitrust concerns.

However, no generics manufacturer has garnered so much attention this year from regulators and investors as Teva Pharmaceutical Industries. In March, the Jerusalem-based company agreed to pay $3.2 billion to acquire Auspex Pharmaceuticals, a La Jolla, Calif.-based company that, while it has not yet brought any products to market, is developing several drugs that focus on the central nervous system to treat such disorders as Huntington’s disease, tardive dyskinesia and Tourette syndrome.

Then in July, after its hostile takeover attempt was rebuffed by My-lan, Teva reached a deal to acquire Allergan‘s generics business for $40.5 billion.

More recently, Teva acquired the Mexican drug maker Representaciones e Investigaciones Médicas, S.A. de C.V. and Gecko Health Innovations, a company that is focused on developing software and product solutions to simplify chronic respiratory disease management.

Meanwhile, by refusing to accept Teva’s $40 billion offer, Mylan was able to continue with an unsolicited bid it made in April to acquire Perrigo. After its original $29 billion offer, Mylan has extended three consecutively higher bids, with each offer being deemed undervalued by the Perrigo management. In September, the companies brought legal action against each other.

While Wall Street’s reaction has been mixed to the proposed deal, at least one analyst recently expressed deep reservations about a Mylan-Perrigo merger.

“The more we look at the Mylan-Perrigo transaction, the less we like it,” Sanford C. Bernstein & Co.’s Ronny Gal wrote in a letter to investors in October, noting that he is “increasingly seeing challenges on the horizon for some of the Perrigo businesses, which lead us to question the [merger’s] rationale.”

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Value of branded drug patent expiries at all-time high

BY Richard Monks

As 2015 draws to a close, the year is on track to be one in which the value of the branded drugs losing their patent protection approaches an all-time high.

The dozens of drugs that will have lost their patent protection this year are estimated to have global sales of $44 billion a year — the highest total since $53 billion worth of medications went off patent in 2012.

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Domestically, IMS Health data showed that 2015 patent expiries account for $27.7 billion in annual sales.

While the loss of patent protection ordinarily means the market is being flooded with a slew of new generics, that has not been the case as several of the biggest expiries this year have involved biotech drugs, and so far only a single biosimilar medication — Novartis’ Zarxio, a biosimilar version of Amgen Neupogen that hit the market in early September — has been given Food and Drug Administration approval.

In a report released earlier this year, the market analysis firm EvaluatePharma estimated that only $16 billion in global sales will actually be lost to patent expiration in 2015.

Still, some of the drugs that already have seen their patents expire and a handful that went off patent in 2014 were among the best-selling medications in the United States and worldwide, and are providing generic alternatives to millions of patients whose options were previously limited solely to brand-name drugs.

For instance, AstraZeneca’s Nexium (esomeprazole), which lost its patent protection late last year, accounts for more than $5 billion in annual sales, making it attractive to generics manufacturers. In January, the Teva Pharmaceuticals USA subsidiary Ivax Pharmaceuticals was the first generic supplier to get FDA approval for its version of the drug. Subsequently, Mylan Pharmaceuticals entered the market, and Dr. Reddy’s Labs is reported to begin marketing an esomeprazole product by the end of the year.

Several generic versions of other blockbuster drugs also have been approved over the past few months. Actavis’ Alzheimer’s medication, Namenda, lost its patent protection in April. Since then, seven generic suppliers have received approval for their versions of the drug.

In a report issued earlier this year, IMS Health noted that the launch of these generics and a handful of others — that include versions of Bristol-Myers Squibb and Otsuka America Pharmaceuticals’ antipsychotic Abilify and Pfizer’s antibiotic Zyvox — would likely limit the growth in drug spending as the year wore on.

Over the next few years, IMS said the impact of patent expiries will be less severe, but will continue to affect drugs with billions of dollars in annual sales. Next year, the company said, medications with annual sales of $18.9 billion would go off patent; 2017 will see $11.1 billion worth of drugs lose their patent protection; and products with annual sales of $20.7 billion will go off patent in 2018.

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