The OBR Blog

September 28, 2011 - 07:09 pm Posted in Featured comments0 Comments

STOCKHOLM, SWEDEN – Costs of cancer treatments will come under increasing scrutiny, and some hard decisions will have to be made to contain costs. In addition to outlays for drugs and hospitalization, treatment-induced complications have the potential to double the monthly tab, according to a study presented at the 2011 European Multidisciplinary Cancer Congress (ESMO/ECCO/ESTRO).

Treating metastatic breast cancer can run from $3000 to $8000 per month for each patient, and the additional cost of treatment-related toxicities with commonly used chemotherapy can add another $3000 to $4000 to that total, said Melissa Brammer, MD, Medical Director at Genentech, Inc., South San Fransciso, CA. Dr. Brammer and co-authors based these costs on claims from a U.S. database.

The study was based on 1551 patients with metastatic breast cancer treated with either chemotherapy and/or anti-HER2 therapy from 2004 to 2009. Patients were entered in the PharMetrics Integrated Database. There were 3157 episodes of treatment for treatment-related complications, each lasting an average of 131 days; 37% (1157) of episodes were HER2-based. At baseline, many of the patients had multiple comorbidities, including diabetes, arthritis, and hypertension.

Costs of drug treatment were calculated for the most commonly used agents: trastuzumab and lapatinib for HER2-positive breast cancer and docetaxel, paclitaxel, gemcitabine, vinorelbine, and doxorubicin.

The most common chemotherapy-induced complications were anemia (51% of episodes), bilirubin elevations (26% of episodes), and infection (19% of episodes). A similar pattern was found for anti-HER2 therapies: anemia, 51%; bilirubin elevation, 29%, and infections, 19%. Gemcitabine was associated with the highest rate of anemia, and capecitabine with the lowest rate, she said.

Anemia, dehydration, dyspnea, and neutropenia were the most expensive chemotherapy-related complications. The monthly costs of treatment for chemotherapy-related complications were: anemia, $3200; dehydration $3830; dyspnea, $4217; and neutropenia, $3453. Similar costs were observed with these complications in patients treated with anti-HER2 therapies.

Drug expenses were the driver for expenses associated with anemia and neutropenia, while the costs of treating dyspnea and dehydration were driven primarily by hospitalization expenses..

“The treatment-related costs presented here do not capture out-of-claims costs, such as alopecia and fatigue.  Incremental costs of treating adverse events should be considered in evaluating new therapies. There is a need for treatments that are effective, but do not incur significant toxicities,” Dr. Brammer stated.

by Phoebe Starr

September 19, 2011 - 10:09 pm Posted in Featured comments0 Comments

To gain insight into the commercial changes occurring in the oncology industry, Campbell Alliance initiated the Oncology National Commercial (ONC) study where 75 key industry experts, physicians, payers, and opinion leaders were surveyed. The study revealed an alarming pattern that told us that the oncology space is transforming in such a way that never-before-seen competition is now built into the “DNA” of the business of oncology, and few companies are prepared to operate in the face of this intense competition.

Below are trends and analysis found in the ONC survey:

Trend 1: Large pharma has dramatically expanded its oncology pipeline.

Large pharma has developed and bought its way into oncology to the point where two and a half times as many compounds were in clinical trials in 2010 as were in the large pharma pipeline of 2000.

Bottom-line effect: Competition is sharply greater, based on gross numbers.

Trend 2: The oncology pipeline has become increasingly targeted.

Oncology pipelines are shift-ing away from therapeutics such as cytotoxic agents and broad cell-cycle inhibitors that treat cancer with little specificity. The agents filling the 2010 pipeline are much more targeted than the agents filling the 2000 pipeline.

Bottom-line effect: There is now great overlap in mechanisms of action and molecular targets among the large-pharma oncology pipeline.

Trend 3: Multiple oncology therapies target the same molecular pathways.

In 2010, large pharma oncology pipelines were driven by new understanding of molecular pathways. Agents became increasingly engineered to their targets. If we focus on the top 10 targets, outside of the top 5, all of the other targets had only one or two agents targeted to them in the pipeline in 2000 (see Figure 2 below).

Bottom-line effect: The same scientific transparency has led to intense competition.

Trend 4: Multiple agents are now tested against even rare tumors.

In 2000, 63% of new compounds in late stage clinical trials were tested on one or more of the “big five” solid tumors (breast, colorectal, gastric, lung, and prostate). By 2010, this share had dropped below 50%. The story is one of market competition and a scattering to supposed safe havens of ever smaller patient populations.

Bottom-line effect: The pipeline for niche indications has become increasingly crowded and may represent even more competition per patient than seen in tumors that affect larger patient populations.

Trend 5: Biomarkers are fragmenting the oncology market.

Biomarkers, on one hand, allow for increased efficacy and smaller clinical trials. On the other hand, biomarkers necessarily narrow the market and funnel compounds with similar mechanisms of action to the same biomarker-defined patients.

Bottom-line effect: By defining even smaller patient populations, biomarkers may limit payoffs.

Trend 6: Oncology has become a blockbuster machine.

Entering 2010, oncology blockbust-ers had become much more valuable than they were in 2000. In 2000, only two oncology drugs had more than $1 billion in revenue. In 2010, all of the top 10 oncology drugs exceeded $1 billion in sales. This revenue growth has come in the face of decreasing incidence for most cancers in the US. Instead, the revenue growth has come largely through the increasing price of new oncology drugs.

Bottom-line effect: There is good news in that an oncology blockbuster is now a blockbuster.

Trend 7: Oncology is saturated with sales representatives.

In the past decade, the growth in oncology sales representatives was 6.9% annually, far outstripping the 3.3% growth in oncologists. This growth has outpaced the growth of oncologists in the US to the point where there are three reps for every 10 oncologists. This increase in sales reps per oncologist limits access by competition. In addition, the survey respondents confirmed that access is increasingly limited, such that about half the time, sales reps are unable to see the oncologist. This limited access suggests that the industry may be over-invested in sales representatives targeting high prescribing oncologists.

Bottom-line effect: Industry leaders expect that oncology sales forces will net increase, and this may imply that access will become even more competitive.

Trend 8: Oncologists are no longer the sole decision makers.

Oncologists began the decade making essentially all the decisions in oncology patient care. Now a host of stakeholders influence oncology therapy choice. The federal government has already begun exerting its new influence over oncology treatments. State governments are increasingly exerting access influence by mandating coverage and mandating IV/oral cost equivalence. Payers are also shifting costs to patients, who are increasingly exposed to high co-pays or coinsurance.

Bottom-line effect: As non-oncologists exert ever-greater influence over oncology therapy choice, success-ful oncology companies will redeploy customer-facing resources to address the needs of these newly important customers.

Trend 9: Payers are beginning to man-age oncology.

In 2000, oncology remained an area with few price controls. The typical flow of injectable oncology drugs was via buy-and-bill, where oncologists purchased oncology products from wholesalers and received payment (including substantial mark-ups) from health plans and Medicare Administrative Carriers. By the mid-2000s, oncology practices were able to increase margins by using group purchasing organizations (GPOs) to negotiate more favorable discounts and rebates from manufacturers. By 2010, both Medicare and many traditional healthcare plans had responded by changing the reimbursement methodology to average selling price (ASP), which is net of all rebates and discounts. ASP has removed much of the profit potential from buy-and-bill.

Payers are also controlling access to oncology therapeutics explicitly. Typically, payers seek to control costs by requiring an FDA indication, prior therapy failure, appropriate dosage, appropriate therapy intervals, or compendia listing. Prior authorizations are required for up to 65% of covered lives for the most expensive oncology monoclonal antibodies.

Bottom-line effect: The downstream effects of lower oncologist profitability are just beginning to be felt. Oncologists are shifting unprofitable patients to hospitals. Oncologists themselves are migrating from independent practices to large institutions with financial incentives less aligned with high prescribing. Eroding profit margins are leading to a decreasing direct financial interest of oncologists in therapy choice. Therapy choice may be driven more by “reimbursement confidence” than by access, and decreasing financial incentives may lead to lower prescription rates for expensive therapies.

Trend 10: The combination of commercial and clinical factors may lead to a bursting oncology asset bubble.

Oncology had been a hot area for licensing through the 2000 to 2009 period. In-licensed compounds were evaluated and purchased based on historic trends. Unfortunately for those valuing oncology assets, historic trends have not continued. Many of the key inputs to valuation models appear to be eroding sharply.

Bottom-line effect: When a supply glut is combined with eroding valuation fundamentals, a price collapse may be in the works.

There is more to this story. Please go to the September issue of OBR green to view more analysis and figures that accompany the copy in this blog. The full length article and blog were written by Jeff Stewart and Nader Naeymi-Rad of Campbell Alliance.

September 12, 2011 - 06:09 am Posted in Featured comments3 Comments

2011 is shaping up as a great year for medical oncology, and August was especially symbolic of a thriving industry. When was the last time we saw three oncology products get approved in one month, let alone a 2 week span? The staffers at the FDA must have breathed a collective sigh of relief (and pride) as they wrapped up the third oncology product approval at the end of August. It was a historic month because these three products are all novel products pointing to the promise of the future, and because all three of the approvals were issued prior to their PDUFA date. I interpret this as a signal from the FDA that the agency will act quickly when there is scientific conviction, and a signal to drug developers that a personalized oncology agent, and companion biomarker, with strong clinical evidence will gain the fastest approval timeline available.

It is remarkable that for all the talk about personalized cancer therapeutics being the Holy Grail, patients can now access two of the leading personalized therapeutics making headlines for the last year. Here’s a quick look at the headline-generating approvals so far in 2011 (numbers are approximates and taken from media articles):

Generic/Brand Name Indication Benefit Cost of Therapy
Yervoy (ipilimumab; BMS) Melanoma 3.6 months $120K
Zytiga (abiraterone; J&J) Prostate 4 months $20K
Zelboraf (vemurafenib; Roche/Genentech/Daiichi) Melanoma 6 months PFS $56K
Adcetris (brentuximab vedotin; Seattle Genetics) HL; ALCL HL – 73% RR

ALCL – 86% RR

$110K
Xalkori (crizotinib; Pfizer) NSCLC 50% RR; 48 weeks duration $115K

Does anybody else notice something in that column on the right? To me, Zytiga stands out immediately, and shows that price (or cost of therapy) is at least somewhat correlated to class, not benefit. But what about vemurafenib? A targeted therapy at half the price of Yervoy? Did Roche/Genentech leave money on the table? I’ve always strongly believed that benchmarking is the biggest factor in pricing, meaning that subsequent therapies approved in a similar indication are always more expensive than the previous benchmark. Vemurafenib throws that theory out and perhaps tells us that historic norms don’t apply to pricing in personalized oncology. The last time I saw a product come out less expensive than the market leader was when Vectibix came out less expensive than Erbitux, something that Amgen never got much credit for because of the clinical setbacks with Vectibix.

The class of 2011 is demonstrating that novel agents are making it to market, and there is reason for optimism and celebration. But in today’s environment we have to discuss cost of therapy along with the indication and benefit. When Dendreon/Provenge crashed last month due to less than expected uptake it demonstrated that there is elasticity in today’s oncology markets, and from the table above it appears that Zytiga and Zelboraf will not suffer from this elasticity. While analysts don’t see a similar problem for Yervoy, the bold pricing strategy and evidence of elasticity makes me think that demand may come up shorter than expected in the coming months. BMS isn’t a single drug company so if they miss their forecast it won’t drop the stock by >50%.

An article from the Campbell Alliance in the September issue of OBR green points out that in 2000 there were only 2 oncology products in the top 10 whose sales were >$1 billion, whereas in 2010 all of the top 10 oncology products are  > $1 billion. Analysts are also projecting that the new niche personalized products like crizotinib are likely to eventually achieve >$1 billion in sales. Is this a sustainable trend in the days of economic contraction? I think not, even in the era of personalized oncology. So while on the one hand this industry is thriving, the existing pricing models continue to ring the alarm bells. One oncologist once said to me that “pharma is going to price themselves right into regulation.”

by Don Sharpe

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