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Three Approvals in 2 Weeks, But...

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

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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