In this post-Brexit, post-Trump, populist environment, the view is that everything is interrelated. The world is getting smaller. Things that happen ‘here’ impact what happens ‘there’. Six degrees of separation. A massive game of dominoes. The Arab Spring shows us that change starts from the bottom up which triggers, perhaps, a smouldering discontent in the UK, which leads to a decision to exit the EU which spawns, to some degree, the rise of Trump which, to some degree, will have a knock-on effect on the French election. And so on and so forth. At the micro level, industry verticals, too, have these scenarios where one thing ‘here’ impacts something else ‘there’.
Take the case of Gilead Sciences. Their recent quarterly report and FY 2016 numbers were less than stellar. This has resulted in analysts in some circles suggesting (somewhat tongue-in-cheek) that developing drugs and therapies that cure patients could be bad for business. Instead, what we ought to be focusing on is whether the right management team is in place. Or whether the pricing strategy is correct. Or whether the R&D pipeline is robust enough to identify new drug candidates that the company can commercialise. These are the questions we need to be asking.
Speaking of pricing strategy, what about the near-sighted decision by Marathon Pharmaceuticals to price their new Duchenne muscular dystrophy drug at $89,000 per year. Not just any drug mind you – a decades-old corticosterioid called Emflaza (deflazacort) that is available elsewhere for about $1,500 per year. Part of the problem may be the FDA’s ‘orphan drug’ programme which grants such therapies market exclusivity for seven years and a priority review voucher which can be sold on the open market for a nine-figure sum. These ‘carrots on the end of the stick’ are designed (inadvertently) to support this type of behaviour. Didn’t anyone at the FDA or the Muscular Dystrophy Association think to ask Marathon Pharmaceuticals about its pricing strategy last August when priority review status for this corticosteroid was announced? Or maybe, that’s the point. Maybe these are the questions we need to ask before we grant priority review status to a therapy.
Which is a segue to my next point: the FDA itself. The president wants to revamp the FDA. Make it run more like a business. Make it more efficient. Make it faster at approving drugs. He wants an outsider at the helm – someone who can look at the problems plaguing the agency through a different filter. In a world like this, how many Marathons, Valeants and Martin Shkreli’s do you think there would be? The industry itself doesn’t even want radical change.
The Trump administration has put a hiring freeze across the government (not just the FDA) which makes it harder to hire people to review the data to speed up the drug approvals. And, by the way, faster drug approvals are meaningless without reimbursement coverage (something I have opined about before in this space). Unless and until pharmacy benefit managers (PBMs) and insurance companies cannot unilaterally decide whether a) to cover drugs with an FDA approval or b) to circumvent the drug’s approved indication, this is not just an FDA problem.
Did someone mention PBMs and insurance companies? What a coincidence. Recently, Amgen released the long-awaited results of the FOURIER trial which was designed to show the impact of additional LDL-cholesterol reduction on major cardiovascular events when Repatha is used in combination with statin therapy in patients with clinically evident cardiovascular disease. The results of this trial will be instrumental in demonstrating to payers that Repatha brings additional value to patients beyond simple lipid control and that there is a meaningful benefit in terms of a reduction in cardiovascular events. What’s interesting about the results of this trial is that ‘the study was powered to show a 15% risk reduction in cardiovascular events but investors would like to see 20-25% risk reduction in order for the results to satisfy the concerns of insurance companies’. Investors would like to see what? To satisfy whom? Is it just me or is this ludicrous? We can’t just snap our fingers and ask for a ‘little bit more of a reduction’ because we feel like it. The study was powered to show what it was powered to show. That’s it. There’s no ‘but we’d like to see more of a risk reduction’. This is when people start fudging numbers and making things up. This is dangerous stuff.
You see how everything is interrelated? We started with Gilead’s fourth quarter results, which led to a thought on pricing which opened the door to talking about the FDA which ended with Amgen’s FOURIER trial results. It didn’t take much of a thread to get us from one to the next. That’s how what happens ‘here’ impacts what happens ‘there’. That’s how we connect the dots.