Un­der pres­sure, drug­mak­ers di­lute price hikes, but noth­ing is set in stone just yet — re­port

Bio­phar­ma­ceu­ti­cal price goug­ing has long en­raged politi­cians and pa­tients alike — mount­ing pres­sure on drug­mak­ers to not ap­pear like they put prof­it be­fore pa­tients — which has led to a slow­ing in size and fre­quen­cy of price hikes, a Leerink analy­sis has found.

The analy­sis echoes the find­ings of an As­so­ci­at­ed Press in­ves­ti­ga­tion — pub­lished this Sep­tem­ber — which in­di­cat­ed that al­though there were 96 price hikes for every price cut, the num­ber and size of hikes de­creased in the first sev­en months of 2018.

Ge­of­frey Porges

Leerink’s analy­sis in­clud­ed 17 large bio­phar­ma com­pa­nies — Ab­b­Vie $AB­BV, Alex­ion $ALXN, Am­gen $AMGN, Bio­gen $BI­IB, Cel­gene $CELG, Gilead $GILD, JNJ $JNJ, Re­gen­eron $REGN, As­traZeneca $AZN, Bris­tol-My­ers $BMY, GSK $GSK, Eli Lil­ly $LLY, Mer­ck $MRK, No­var­tis $NVS, Pfiz­er $PFE, Roche $RHB­BY, and Sanofi $SNY.

The most price-de­pen­dent growth com­pa­nies be­tween 2013 and 2017 were: Am­gen, As­traZeneca, GSK, and Pfiz­er; and the least price-de­pen­dent were: Alex­ion, JNJ, and Re­gen­eron. Over­all, the num­ber of price in­creas­es slowed this year by 31%, and the av­er­age size of the price in­creas­es fell by 40% — both mea­sures falling to their low­est lev­el in five years, the re­port found.

“The slow­ing of pos­i­tive price ef­fects means that in­dus­try growth is like­ly to be be­tween 200 and 400 bps slow­er go­ing for­ward than in the 2013-2017 pe­ri­od. This slow­er growth, and its as­so­ci­at­ed ef­fect on mar­gins, prof­itabil­i­ty, and cash flow, may not be ful­ly re­flect­ed in sec­tor stock prices and mul­ti­ples,” Leerink’s Ge­of­frey Porges said.

The an­a­lysts al­so found that price con­tri­bu­tions to sales in the Unit­ed States have steadi­ly de­clined from 11% in 2014 to 4% in 2017 and 2% YTD in 2018.

Sig­nif­i­cant­ly, “the de­cline in the net pos­i­tive price con­tri­bu­tion to in­dus­try growth has more or less matched the de­cline in rev­enue growth over the same pe­ri­od of time,” Porges not­ed.

How­ev­er, the im­pact of slow­ing price in­creas­es will be pow­er­ful go­ing for­ward — be­cause it will stim­u­late the un­tan­gling of the cu­mu­la­tive ef­fect of com­pound­ing from pri­or year price hikes.

“Price in­creas­es are ‘the gift that keeps on giv­ing’, since one year’s 10% price in­crease then in­creas­es the base of sales that then ben­e­fits from the next year’s price in­creas­es,” ex­plained Porges.

The Leerink team there­fore set about cal­cu­lat­ing the im­pact of trail­ing price in­creas­es over the five-year pe­ri­od be­tween 2013 and 2018. Cu­mu­la­tive pos­i­tive US price has con­tributed ~$27 bil­lion to glob­al phar­ma rev­enue in 2014, ~$45 bil­lion in 2015, ~$59 bil­lion in 2016, ~$68 bil­lion in 2017, and $71 bil­lion in 2018.

Re­port­ed glob­al phar­ma rev­enue in 2018 is rough­ly $320 bil­lion YTD, which with­out US price con­tri­bu­tions from the pri­or five years would have been 22% low­er, or rough­ly $250 bil­lion YTD, they found.

In oth­er words, it looks like price growth alone has con­tributed on av­er­age 5%/year to in­dus­try growth over the last five years, and while to­tal rev­enue growth was on­ly 1% from 2017-2018, with­out the price ef­fect, the an­a­lysts found that rev­enue growth from 2017-2018 would have ac­tu­al­ly fall­en 6%.

Fol­low­ing the re­lease of Pres­i­dent Trump’s blue­print for low­er­ing drug prices in May, a pletho­ra of com­pa­nies pledged not to in­tro­duce their usu­al hikes in the mid­dle of the year — how­ev­er, whether this re­straint will con­tin­ue in the fu­ture re­mains to be seen. Since then the HHS has float­ed two pro­pos­als to thwart soar­ing prices for Medicare and its ben­e­fi­cia­ries.

Mean­while, Mer­ck raised the price of some of its ma­jor drugs in No­vem­ber, and Pfiz­er has an­nounced it will in­crease the price of 41 drugs next month.

“These com­pa­nies are like­ly to be fol­lowed by a flood of peers, and then by in­evitable re­spons­es and re­ac­tions from Wash­ing­ton. How this col­li­sion of in­ter­ests plays out is any­one’s guess, and the ad­min­is­tra­tion’s cre­ativ­i­ty and in­ven­tive­ness with re­spect to pric­ing pro­pos­als seem un­like­ly to be di­min­ished in 2019. Iron­i­cal­ly, the sub­ject of drug pric­ing is prob­a­bly one of the few gen­uine­ly bi­par­ti­san is­sues for both ma­jor par­ties, and fur­ther reg­u­la­tion or re­stric­tions on drug pric­ing and price in­creas­es seem like­ly in our view to set up a show­down be­tween Pres­i­dent Trump, Con­gress and the Bio­phar­ma in­dus­try rel­a­tive­ly ear­ly in the New Year,” con­clud­ed Porges.


Charts: LEERINK

Mi­no­ryx and Sper­o­genix ink an ex­clu­sive li­cense agree­ment to de­vel­op and com­mer­cial­ize lerigli­ta­zone in Chi­na

September 23, 2020 – Hong Kong, Beijing, Shanghai (China) and Mataró, Barcelona (Spain)  

Minoryx will receive an upfront and milestone payments of up to $78 million, as well as double digit royalties on annual net sales 

Sperogenix will receive exclusive rights to develop and commercialize leriglitazone for the treatment of X-linked adrenoleukodystrophy (X-ALD), a rare life-threatening neurological condition

(L-R) Dr. Robert Redfield, director of the Centers for Disease Control and Prevention; Dr. Anthony Fauci, director of the National Institute for Allergy and Infectious Diseases; Adm. Brett P. Giroir, Assistant Secretary for Health; and Dr. Stephen M. Hahn, commissioner of the Food and Drugs Administration prepare to testify at a hearing of the House Committee on Energy and Commerce on Capitol Hill on June 23, 2020 in Washington, DC. The committee is investigating the Trump administration's response to the COVID-19 pandemic. (Photo by Kevin Dietsch-Pool/Getty Images)

Trump neuters FDA's at­tempt to strength­en vac­cine guide­lines, call­ing it 'ex­treme­ly po­lit­i­cal'

Stephen Hahn went before a Senate committee Wednesday and declared he’s fighting. “Every one of the decisions we have reached has been made by career FDA scientists based on science and data, not politics,” he exclaimed, adding that “FDA will not permit any pressure from anyone to change that. I will fight for science.”

A few hours later, he was undermined by President Donald Trump when a reporter asked if he was okay with stricter vaccine guidelines that the FDA was said to be cooking up. “That has to be approved by the White House. We may or may not approve it. That sounds like a political move,” he decided.

Vas Narasimhan (AP Images)

UP­DAT­ED: Still held down by clin­i­cal hold, No­var­tis' Zol­gens­ma falls fur­ther be­hind Bio­gen and Roche as FDA asks for a new piv­otal study

Last October, the FDA slowed down Novartis’ quest to extend its gene therapy to older spinal muscular atrophy patients by slapping a partial hold on intrathecal administration. Almost a year later, the hold is still there, and regulators are adding another hurdle required for regulatory submission: a new pivotal confirmatory study.

The new requirement — which departs significantly from Novartis’ prior expectations — will likely stretch the path to registration beyond 2021, when analysts were expecting a BLA submission. That could mean more time for Biogen to reap Spinraza revenues and Roche to ramp up sales of Evrysdi in the absence of a rival.

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David Berry (Flagship)

Flag­ship's next big tech­no­log­i­cal bet? The cloud

Earlier this month, Flagship announced their big bet on the software half the industry is talking about, launching the AI and machine learning startup. Now, they and a couple other investors are gambling $100 million on a software that much of the public generally thinks of as a cool, IT afterthought: cloud computing.

The idea, says founder and Flagship partner David Berry, is one of scale: The sheer magnitude of biological data that you can store on cloud technology is unprecedented. And that size, when leveraged properly, can allow you to ask questions and form insights that are similarly unprecedented.

Jim Roberts and Brian Finrow (Lumen Bioscience)

With a $4M fed­er­al grant, Lu­men jumps in­to the Covid-19 treat­ment race

It’s been less than a month since Lumen Bioscience announced a $16 million Series B to engineer spirulina — a nutrient-packed super food — for diseases like traveler’s diarrhea, norovirus and C. difficile colitis. And now, the biotech has pulled in another $4 million to do the same for Covid-19.

The approach is quite similar to other gastrointestinal targets the company is pursuing, co-founders and Brian Finrow and Jim Roberts said. The Seattle-based company is working on a camelid antibody cocktail to combat GI infection common among Covid-19 patients. In a study published in the American Journal of Gastroenterology, a majority of Covid-19 patients showed GI and respiratory symptoms, and 25% had only GI symptoms.

CEO Markus Warmuth (Monte Rosa)

Monte Rosa rakes in $96M Se­ries B as it pre­pares 'mol­e­c­u­lar glue' plat­form for IND-en­abling stud­ies

About four months after completing an extension to its Series A, Monte Rosa Therapeutics is putting its next foot forward with another heap of cash.

The Boston-based biotech is back with $96 million in Series B financing with a goal to get its lead program ready for IND-enabling studies by the end of the year. Though Monte Rosa is keeping its specific target a secret for now, the company has been researching how to utilize its protein degradation technology in breast cancer and non-small cell lung cancer, among other areas.

FDA commissioner Stephen Hahn at the White House (AP Images)

Un­der fire, FDA to is­sue stricter guid­ance for Covid-19 vac­cine EUA this week — re­port

The FDA has been insisting for months that a Covid-19 vaccine had to be at least 50% effective – a measure of transparency meant to shore public trust in the agency and in a vaccine that had been brought forward at record speed and record political pressure. But now, with concerns of a Trump-driven authorization arriving before the election, the agency may be raising the bar.

The FDA is set to release new guidance that would raise safety and efficacy requirements for a vaccine EUA above earlier guidance and above the criteria used for convalescent plasma or hydroxychloroquine, The Washington Post reported. Experts say this significantly lowers the odds of an approval before the election on November 3, which Trump has promised despite vocal concerns from public health officials, and could help shore up public trust in the agency and any eventual vaccine.

Secretary of health and human services Alex Azar speaking in the Rose Garden at the White House (Photo: AFP)

Trump’s HHS claims ab­solute au­thor­i­ty over the FDA, clear­ing path to a vac­cine EUA

The top career staff at the FDA has vowed not to let politics overrule science when looking at vaccine data this fall. But Alex Azar, who happens to be their boss’s boss, apparently won’t even give them a chance to stand in the way.

In a new memorandum issued Tuesday last week, the HHS chief stripped the FDA and other health agencies under his purview of their rule making ability, asserting all such power “is reserved to the Secretary.” Sheila Kaplan of the New York Times first obtained and reported the details of the September 15 bulletin.

PhII Alzheimer's fail­ure deals new blow to Roche, AC Im­mune — but the tau hy­poth­e­sis is far from dead

The leading anti-tau antibody has failed its first Phase II testing, casting a shadow on a popular target (just trailing amyloid beta) for Alzheimer’s disease.

Roche and AC Immune are quick to acknowledge disappointment in the topline readout, which suggested that semorinemab did not reduce cognitive decline among patients with early Alzheimer’s disease, who are either just starting to have symptoms or have mild manifestations.

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