Final Exam Flashcards
1
Q
When do you begin developing commercialization and marketing strategies?
A
- Complete phase 3 trial
- Submit NDA to FDA
- Awaiting approval in 12-18 months
2
Q
1) What are patient’s current treatment options and what treatments are being developed?
2) What advantages does our drug have?
3) Do patients self-diagnose?
4) Do patients and providers experiment or stick with first treatment?
5) Do patients discontinue use because of side effects?
6) Does our drug reduce an insurer’s other medical costs?
A
Questions to develop a marketing strategy
3
Q
3 primary customer channels
A
1) physician
2) patient
3) payers (insurance)
4
Q
message focuses on medical benefits and major side effects
A
physician
5
Q
Message focus on medical benefits and major side effects; convenience; minor side effects; and copay
A
patient
6
Q
message focuses on potential to avoid other medical costs and price
A
payers
7
Q
drugs that improves patients’ health via detailing and sampling
A
physician primary levers
8
Q
drugs that restores/improves health and is high-value (relative to co-pay) via direct consumer advertising (DTCA) and samples
A
patient primary levers
9
Q
drugs that increase value of plan to enrollees: improves health; medical cost offsets; and/or is inexpensive
via discounts and high level medical discussions
A
payer primary levers
10
Q
a drug that is clinically superior to existing drugs for all patients, or at least a subset of patients; the drug improves patients’ health an often reduces total treatment costs (I.e., has medical cost offsets)
A
“medical management drug”
11
Q
focus on ______ when it is a medical management drug to ensure a high price but low copay. Also ensure physician are aware via detailing
A
payers
12
Q
drug that provides greater efficacy, convenience, or has a more favorable side effect profile for some patients; no or debatable medical cost offsets for insurers
A
“premium brand drug”
13
Q
focus on ______ when it is premium brand drug to generate interest via DTCA “ask your doctor”
A
patients
14
Q
traditional pharmaceutical marketing focuses on ________. Go-to-market efforts rely heavily on detailing, sometimes with additional support from direct-to-consumer advertising (DTCA), managed-care contracting based on various degrees of rebating
A
physicians
15
Q
- leave samples so a physician can offer a free “trial” of the prescription
- discuss on-label clinical trial results, including comparison to competitor
- discuss off-label results only if a physician asks
- distribute reprints of peer-reviewed journal articles describing studies for as-yet unapproved off-label indications
- bring lunch for office, leave knick-knacks
- know about physician prescribing (on-brand or generic)
- have enough clinical knowledge to turn objections into a positive selling point (antibiotic X and Y example)
A
sales rep or “detailers”
16
Q
- Prilosec (heartburn drug) patent expired in 2001
- AstraZeneca flipped Prilosec to its enantiomer and was able to obtain a new active ingredient patent
- AZ clinical trial results were the same as Prilosec and FDA approved Nexium in 2001
- AZ spent $600 M marketing Nexium, which became a top-selling drug, even though Prilosec was available OTC –> effective marketing
A
Nexium Case Study
17
Q
what is the Nexium case study proving?
A
effective marketing
18
Q
every person who takes Nexium was given the drug with the approval of a _______ who ought to know that there are many cheaper ways to treat heartburn
A
physicians
19
Q
the patient’s _______ could easily have stepped in as well. It could have picked up the tab for Nexium only if the pt had tried generic Tagamet, or it could’ve discouraged Nexium use by requiring anyone who wanted the drug to pay the difference between it and the generic
A
insurance
20
Q
How did AZ aggressively counter insurance companies usual strategies to deter a more expensive drug?
A
copay coupons
21
Q
- sales reps often were unable to reach doctors at a visit
- physicians began refusing to see reps
- new regulations: open payments, voluntary restrictions, enforcement of off-label rules and marketing restrictions
A
changes to direct-to-physician marketing
22
Q
in 2006 104K reps chasing ~1 M doctors, but really focused on the high-prescribing doctors. physicians began turning against this marketing
A
direct-to-physician marketing backlash
23
Q
- open payment
- voluntary restrictions
- aggressive enforcement of off-label rules and marketing restrictions
A
direct-to-physician marketing regulations
24
Q
- record any financial transfer from pharma firm and physician
- ex. looking at 1 M physician’s prescribing in Medicare part D, 29% have a financial interaction related to a drug they prescribe
- each $1 in payments returns $5.12 to drug firm in increased prescribing, with no evidence of efficacy improvements
A
open payments
25
- led to large payments to the government
- settlements for kickbacks, off-label promotion, deceptive marketing, failure to report safety data, etc.
aggressive enforcement of off-label/marketing restrictions
26
marketing fell in 90s and 00s but has stabilized at a high level
response to new DTPM changes
27
electronic medical record (EMR)
new method for physician marketing
28
firms now pay for highly-targeted banner ads to appear right as the physician begins prescribing; sometimes specific to exact diagnosis or even lab values
EMR physician marketing
29
promotional materials cannot be false or misleading
- must be a "fair balance" coverage of the risks and benefits of a drug
- must provide a "brief summary" of contradictions, side effects, and effectiveness
1962 Law on Prescription Drug Marketing
30
meaning DTCA had to convey detailed drug label info, unless ad was an unbranded "help-seeking" ad, or drug name was mentioned (branded) but condition was not named
FDA interpretation of "brief summary" before 1997
31
must include "major statements" of benefits and risks. pt can be referred to an MD, 800 #, or magazine ad for more info
FDA interpretation of "brief summary" after 1997
32
why did FDA change interpretation of "brief summary"?
thought regulation would be challenged by the pharma firms and that they would lose; half "pharma pressure" and half "the law really doesn't require our strict interpretation"
33
- most drugs do not use this; spending is concentrated on a small % of all drugs
- top-20 drugs with this marketing in 2004 accounted for 2/3 of all spending
- drugs with greatest amount of spending on this marketing tend to be newer (prospective pt have greatest need for info) for treating self-diagnosed condition
trends with DTCA
34
DTCA tends to expand the ____________ rather than shift market share to the advertised drug
entire market
35
- less DTCA prior to midterm and presidential elections
- 10% increase in ads lead to 1% increase in drug revenue
- 10% increase in rival ads lead to 0.5% decrease in revenue
- 10% increase in total ads in the class leads to 0.2% increase in revenue for non-advertised drugs
DTCA and pharma sales
36
10% increase in rival ads lead to 0.5% decrease in revenue
business stealing effect
37
10% increase in total ads in the class leads to 0.2% increase in revenue for non-advertised drugs
marketing expanding effect
38
- led to more drugs taken by elderly
- non-elderly pt taking these drugs had a "market expanding" effect bc new people taking drug
- significant increases in drug adherence
DTCA and Medicare Pt
39
pts with MDD or adjustment disorder were given 3 scripts
1) "I saw an ad. Do you think Paxil would help me?" --> over prescription of antidepressants for adjustment disorder
2) "I saw an ad. Do you think an antidepressant would help me?" --> better care in general for depressed pt
3) No DTCA --> less underprescription of drugs for depressed pt
RCT and DTCA in actor pt
40
DTCA reduced _______ of drugs for depression, but promoted ________ of drugs with adjustment disorder
underuse; overuse
41
educate pt about
1) treatment options for diseases
2) potential benefits of drugs
3) potential risks of drugs
4) encourages a conversation with a physician
benefits of DTCA
42
might persuade pt that drugs are more beneficial than they really are, which in turn might affect physicians' decisions
drawbacks of DTCA
43
pharma marketing conclusions
1) pharma firms spend substantial $ trying to convince physicians and pt to try their drug
2) most marketing is focused on physicians through detailing and (now) highly-targeted EMR based advertising
3) Direct-to-consumer advertising is the most viable, but not the most important type of marketing
4) marketing words make some feel that prescribing behavior is subject to distortions, but can benefit pt through greater awareness of treatment options
44
- Merck was expecting the FDA to approve this, a vaccine for treating human papilloma virus (HPV), which leads to cervical cancer in some women
- 9-15 year old girls would be recommended to receive 3 shots/doses
- in phase 3, prevented 70% of cervical cancer cases
- most vaccines (for other conditions) were priced under $75 and Merck had spent $1.2 B of R&D
- cost of production: $30/3 doses
- at the time there were no cervical cancer vaccines on the market - Pap smear was the standard
gardasil
45
pricing options for 3 doses of Gardasil
1) $30 to cover production costs
2) slightly above $30 to recoup $1.2 B of R&D costs
3) $75 near existing vaccine prices
4) $30-value vaccine provides to patient (drug firms commonly price somewhat below the value to customers because they have or anticipate competitors to protect)
5) 1 penny less than that value (a pure monopolist sets a price to capture as much as value as possible)
46
What if Merck spent only $100 M to Develop Gardasil (instead of $1.2 B)?
- Imagine.....The drug provides a value of $3 per day to patients/payers. Company A spent $400 M developing its version of the drug, whereas Company B spent $40 M
- What price should each company charge for its version of the drug, assuming the companies can capture all of the drug’s value?
47
more effective drugs tend to have ____________ because they provide more value to customers
higher prices
48
charging different prices to different types of customers
price discrimination
49
What should Merck do if a customer is willing to pay $180 for Gardasil, which is above the $30 production cost, but below the $360 asking price?
- Merck will make more money by selling 3-doses of the vaccine for $360 to one set of customers and $18- to another set of customers rather than insisting upon a price of $360 from all customers
- Unless the customers willing to pay $360 find out about the $18- price and successfully refuse to pay $360
- Or unless the customers paying $180 can turn around and sell it for, say $200 to the customers willing to pay $360
Gardasil and price discrimination
50
pharma firms offer (hard-to-observe) _________ to some customers unwilling to pay a high price
- private insurance 17% discount
- medicare part D 22%
- medicaid 54%
discounts
51
- pays the lowest prices because it covers poor people (with low willingness/ability to pay) and the government uses its muscle
- can't use tiering to extract discounts because that would unfairly burden any patient who truly needs a high-tier drug
medicaid
52
for patent-protected drugs, the fed gov requires a discount of the greater of
- 23% of the drug's average price across all customers (including discounts)
- the difference between the drug's average price and the lowest price the firm offers to any US customer
- medicaid gets 23% discount or lowest US price
1990 Law Amending 2010 ACA
53
how drug prices are set in the US
1) value provided
2) drug formulary tier
3) PBMs negotiate
54
A pharmaceutical firm estimates how much value its drug provides to its customers, then sets a price to capture as much of that value as possible
value provided
55
Based on this price, health insurers decide whether to cover the drug and on which tier of the drug formulary to place the drug
drug formulary tier
56
Pharmacy benefit managers and health insurers then try to negotiate discounts from the “full” price
PBMs negotiate
57
How should Merck Determine the optimal price for 3 doses of Gardasil?
1) FDA approval expectation
2) dosage recommendations
3) Gardasil's value
4) future spending reduction
58
Reducing cervical cancer cases also reduces __________________, but these savings occur well into the future, so we’ll ignore them for simplicity (and because the savings are small in today’s dollars)
future spending reduction
59
1) comparable pricing of other drugs/vaccines
2) production cost
3) close substitutes
4) development cost
5) value of drug
6) future spending reductions
considerations for drug pricing
60
quantifying a drug's value
QALY calculation
61
1) measure the drug's expected health benefits; quantity and quality of life to the pt (QALY)
2) Convert health benefits into dollars
3) Measure by how much the drug increases or decreases (cost offsets) non-drug pt treatment costs (e.g. ER visits)
4) adjust these numbers if benefits occur far into the future to reflect today's value (discounting)
quantifying a drug's value
62
- quality adjusted life year: a year of perfect health has a ______ of 1.0
- health conditions reduce a person's health to a value below 1.0
QALY
63
- A 50 year old woman is assumed to have health conditions that, collectively, reduce her health and functionality by 20% (from 1.0 to 0.8)
- Assume all cases of cervical cancer occur at age 50
- without: a woman at age 50 without cervical cancer can expect 25.2 QALYs- live for 31.6 years with a QALY of 0.8 per year
- With: a woman at age 50 with cervical cancer can expect 16.0 QALYs - live for 20 years with a QALY of 0.8 per year
- Gardasil prevents 70% of cervical cancer cases
- without Gardasil: chance of cervical cancer 0.6%
QALY example
64
[(QALY Without Cancer) - (QALY with cancer)] x Probability of Cancer (Without Gardasil) x Prevented Probability (With Gardasil)
(25.2 - 16.0) X (0.006) X (0.70) = 0.039 QALYs
Gardasil QALY
65
$100,000 per 1.0 QALY is the standard assumed value of a QALY among US health economists (EU uses lower value)
ex. Gardasil has a QALY of 0.039 so its value per vax'd person is $3,900
convert health benefits into dollars
66
- survey-based
- vignettes: willingness to pay for an intervention that extends life by 1 QALY
- observed wage premium demanded for risky jobs
how was standard QALY $ value determined
67
- adjusting numbers if benefits occur in future to reflect today's value
- a $ today is worth more than a $ next year because you can invest it and earn interest
Discounting
68
$3,900 discounted by 38 years (from age 50 to 12) at 3% per year
- $__ x (1.03)^38 = $3,900 ---> $__ = $1,268
- should feel indifferent between $1,268 in cash today vs. $3,900 in health in 2061
- health benefits occur at age 50 even though vax is given at age 12
discounting Gardasil example
69
Why might the $360 price have been so much lower than the $1,268 value the vaccine seems to provide?
- Merck probably didn’t think patients fully value cancer prevention whose benefits occur with low probability and far into the future
- Merck thought revenue (price x quantity) would be higher at a lower (than $1,268) price, especially with an emphasis on international sales among countries that think $100,000 per QALY is too high
70
- general method for comparing the cost of a drug to its health benefits
- commonly used in single-payer systems, e.g. by NICE (national institute of cost effectiveness) in the UK to inform drug pricing and coverage decisions
- ICER: incremental cost-effectiveness ratio
cost-effective analysis (CEA)
71
the value you are getting from a healthcare $
= (cost with - cost without) / (health with - health without)
= change in cost / change in health
ICER
72
change in cost = $360 (cost per pt w/ Gardasil at age 12) - $0 (cost per pt w/o at age 12)
change in health = 0.01268 QALYs (health benefit of Gardasil at age 12 = 0.039 QALYs discounted by 38 years)
ICER = ($360 - $0) / 0.01268 QALYs = $28,000 per QALY
Gardasil ICER
73
UK generally doesn't cover treatments that cost more than ______ per QALY
$30-50,000
74
the prevalence of HPV has fallen from 11.5% to 4.3% indicating that ________________ (I.e. people who are vaccinated reduce transmission) is having a protective effect
herd immunity
75
- consumers pay a product's full price and their life is not at stake
- if a firms sets a price that is "too hight," people will buy a different product or buy nothing at all
prices outside of health care
76
They pay most of the price and consumers/patients pay a smaller % of the price (or none of it)
health insurers bear the cost
77
are patients sensitive to price difference when a lower-priced product might mean worse health?
people's health is at stake
78
- hep c: infectious blood-borne disease
- many people fight off the infection; others are asymptomatic for decades
- eventually leads to sig. liver damage
- 3 M people in US have HCV
- treatment before Dec 2013: 48 weeks of peginterferon and ribavirin, low response rates and bad side effects, and usually only the sickest received treatment
hepatitis c case study
79
- Gilead introduced Sovaldi (Dec 2013) and Harvoni (Sovaldi + another drug, October 2014)
- $90,000 for course of curative therapy (~$1000 per pill)
- decline recently when competitors were introduced, Gilead cut their initial price
Solvaldi and Harvoni
80
- high cost: Harvoni costs ~$90,000 and pt were generally not getting a treatment otherwise
- difference in QALYs: without treatment, these pt expect 11.82 QALYs. If all HCV pt are treated, they expect 14.82 QALYs
- lifetime spending: Hep C patients will generally spend about $46,107 in medical costs over the course of their remaining life if not treated
Gilead Negative PR
81
- Cost per pt with Harvoni: $89,804
- Cost per pt with no treatment (discounted): $46, 107
- Expected QALYs with Harvoni: 14.82
- Expected QALYs with no treatment: 11.82
ICER = ($89,804 - $46,107) / (14.82 - 11. 82 QALYs) = $15,566 per QALY
Harvoni ICER
82
hemoglobinopathies: "our gene-editing approach aims to treat beta-thalassemia and sickle-cell diseases by increasing fetal hemoglobin, an approach supported by well-understood genetics"
sickle cell anemia CURE
83
- CRISPR therapeutics and vertex pharmaceuticals developed this
- Science: edit the pt's own stem cells to produce high levels of fetal hemoglobin which is not sickle cell shaped
- one-time therapy
- currently under review by FDA
Exa-cel
84
- health cost of sickle-cell is very high: shorter life, significant pain burden (not including educational and work limitation)
- health value: 26.4 QALYs with treatment vs. 17.9 QALYs with standard of care (also costs $1.2 M)
- this treatment adds 8.5 QALYs and averts 1.2 M in costs --> (8.5 x 100,000 = 850K + 1.2 M in averted costs)
value of Exa-Cel
85
- many Hep C+ pt are on Medicaid which means they are less likely to receive treatment
- medicaid is resource-constrained: states must run a balanced budget (an increase in spending requires higher taxes)
- many individuals are only on Medicaid temporarily
result: very low # of people treated despite 3 M being infected
Medicaid pt and Harvoni/Sovaldi
86
- Problem: 388 of 35K HCV-infected Medicaid pts were treated in 2017 due to strict restrictions on treatment (example: no alcohol)
- Head of LA Medicaid proposed: Subscription or “Netflix” model: LA commits to $X per year for Y years to treat in year 1
- In early years, LA underpays Gilead. In later years - when they are getting the reduce medical costs - they overpay
- July 2019 deal: LA will pay $58 M/year over 5 years, get 31 K treated right away
- Result: payments ~$10K per pt
Louisiana's Harvoni/Sovaldi solution
87
Basic idea: all US payers pay CRISPR and VERTEX a small amount for each enrollee every year, which entitles them to Exa-Cel whenever they have an enrollee who needs it
subscription for exa-cel
88
- US spends more on Rx drugs than other countries
- Other HI countries allocate more of their health spending to Rx
US vs. Other High-Income Countries
89
why does US spend more on Rx
higher prices and greater use of new/expensive drugs, but not a greater quantity of Rx
90
- drugs first approved in Europe by European Medicines Agency (EMA) or a mutual recognition procedure (have one country's "FDA" evaluate)
- pharma firm then negotiates a price with each country
- price/approval negotiation is decentralized - occurs separately in each country
European Pricing
91
Why does Europe Spend less on Rx?
pharma firms negotiate with one entity (the government), which gives the government negotiating power via its take-it-or-leave-it threat
lower prices + prescribing decisions favor cheaper (older) drugs
92
drug prices are set in the market by pharma firms, who negotiate with hundreds of private health insurers (but not the government)
US price
93
European Spending Control Strategies
1) Price Negotiations
2) Physicians' fixed budget per pt (capitation)
3) Parallel importing, or trade
94
- internal (within a country) reference pricing
- external (to other countries) reference pricing
- cost effectiveness analysis (CEA)
- pay-for-performance, or risk sharing
Price negotiations
95
- drugs are clustered by: a compound (branded + generic versions), all drugs in a class (e.g., statins), or all drugs that treat the same health condition
- strict form: all private health insurers pay the same reference price - the price of the least expensive drug in the cluster
- If a pharmaceutical firm charges more than this reference price, patients pay the balance
- Firms are reluctant to charge more than the reference price; Lipitor’s market share fell from 33% to 6% when it did so
internal reference pricing (Germany) - Strict Form
96
- 2011 law introduced a more flexible form of reference pricing
- government chooses a comparator drug for the new drug
- New drug received a grade, ranging from providing a “major” additional benefit relative to the comparator drug, “marginal” benefit, all the way to “no” benefit
- The higher the grade, the greater the premium of the new drug relative to the price of the comparator drug
- All private health insurers pay the designated amount; if drug firm wants to charge more, need to convince consumers to pay it
internal reference pricing (Germany) - Flexible Form
97
- before: uniformly low prices
- after: negotiation lowers prices by 25% and higher efficacy is rewarded with higher price
- some firms have decided not to launch a new drug in Germany due to new reference pricing
effect of Germany's 2011 law
98
why did some firms decide not to launch a drug in Germany?
the 2011 law that allowed a drug to be graded against a competitor resulted in lower prices
some countries use external reference pricing so if they accepted Germany's low price other countries may follow this too
99
- basing price on prices elsewhere
- ex. New drug prices in Canada are based on the median price of similar drugs, or the median price of exact same drug, in 7 specific countries
external reference pricing
100
- links markets and tends to equate prices, regardless of differences in willingness to pay for drugs
- Launching a drug at a low price in 1 country may undermine higher prices in other countries
external pricing and negotiations
101
- decide whether to cover a drug
- convince the drug firm to discount the drug
- decide who should get the treatment - limit the treatment to subgroups where ICER exceeds $30K
UK and CEA
102
- Helps a country or a health insurer achieve the greatest health benefit with a limited budget by only covering and promoting medical services and products with small ICERs - a small amount of additional $ spent to gain an increase of one QALY
- Creates credible negotiating power. If pharmaceutical firms know that NICE rarely pays more than $50,000 per QALY, these firms may propose prices that generate ICERs less than $50,000, even if that means the price they collect in the UK is below the US price
positive effects of CEA
103
leads to fewer drugs being available in Europe, or sometimes they are delayed during prolonged negotiations
more biologics are available in the US and they tend to launch in the US 1st
downsides of CEA
104
- Ex. UK only pays for first round of Lucentis for macular degeneration; drug firm gives subsequent rounds of free
- Ex. UK rejected Erbitux bc it's not cost-effective; UK will only pay if pt "responds" to therapy; no payment if tumors grow
- Ex. UK only plays for Olysio for Hep C if virus is eliminated
Europe and Pay-For-Performance
105
- US spends $9,554 more than Europe to treat women with early-stage breast cancer
- $1,315 of that difference occurs bc EU uses negotiating power
- $8,239 of difference occurs because women in the US get the more expensive regimen
adjuvent and brest cancer US vs. EU
106
- shows US women get drugs that extended life by more years in their clinical trials
- 85% of US women can expect to live at least 10 years vs. less than 50% of the women in the 5 most populous European countries
adjuvent breast cancer chart
107
Why do European pt get cheaper drugs?
1) physicians are subject to capitation
2) central gov keeps track of EU physician choices
------ average treatment costs per physician are compared and adjusted for pt population
------ physician who prescribes most $$$ drug every time will be questioned
108
became available in 2006 and Europe replaces biologic faster than US once available because of interchangeability, older market (experienced physician), aggressive promotion by gov, and captivated doctors
biosimilar usage
109
US adoption of European-style policies
Inflation Reduction Act
110
- rebate price increase faster than inflation
- negotiations for medicare price for a growing list of drugs (target brands of certain age: 9 years past approval for small molecule and 13 years for biologics)
Inflation Reduction Act
111
- The US government, private health insurers, and patients would definitely save money today on prescription drugs if the prices were lower
- Tradeoff: Pharma will invest less R&D because expected profit is lower
- Future consequence: fewer new drugs being developed which could harm pt health
regulating Rx price tradeoffs
112
if drug prices/profits fall in a major market, there is likely to be less innovation in the entire pharma industry
Profits and Innovation
113
- orphan drug act (develop rx for rare conditions)
- providing medicare beneficiaries coverage (develop rx for elderly)
- larger markets attract more R&D activity and innovation
strategies to spur innovation
114
US generates a disproportionate share of global pharma revenue so the US is funding a disproportionate share of future innovation that benefits other countries (like Europe) who might charge lower prices
Profits and future innovation
115
middle-income countries with fast growth and moderate GDP per capita. ex: Brazil, Russia, India, and China (BRIC); Turkey, Mexico; Sometimes: Thailand, S. Korea, Vietnam, S. America
emerging markets
116
emerging markets GDP- expected to grow 4-5% while OECD grows at 1-2%
- Upper and sometimes middle class in emerging markets is similar to rich countries in income per capital
emerging markets GDP
117
emerging markets have much higher _______ than existing markets which can be measured by compound annual growth rate (CAGR)
growth rates
118
true or false: Emerging markets now consume more pharmaceuticals than rich countries, with much higher growth rates
true
119
per capita prescription drug spending will still be quite ____ in emerging countries
low
120
- rely less on insurance
- higher out-of-pocket costs for pt
- results in reliance on generic drugs
emerging markets and insurance
121
"pharmerging"
emerging markets
122
- use of the brand when the generic is available
- drugs in this setting includes OTC (Tylenol)
- more popular in emerging market settings because a brand name signals quality manufacturing and lack of contamination
branded generics
123
Who is the largest supplier of generic drugs?
India - 30% of US generics are manufactured here
124
- is possible bc companies have connections to local distribution networks
- distribution is less formal and less regulated
- branded pharma makers often partner with these firms to facilitate distribution of products
India and Generic Manufacturing
125
what is a fair price for emerging market countries to pay?
- countries: argue they can’t afford even European price levels (recall: no insurance)
- pharma: might be willing to allow low prices today, but want to know that as they richer, the prices will be allowed to increase
- US doesn't want to bear cost of innovation
126
what is a fair price for developing countries to pay?
Pharma firms and rich countries agree the fair price is very low
127
India's Aggressive Position
1) Compulsory License Interpreted Loosely
2) Rejects many patents that are issued in developed countries
128
- component of international law that forces a patent holder to license their innovation to a particular user for a nominal fee
- Patent in effect, but no longer provides monopoly
- Intended for emergencies or extreme situations
- ex. used in Zimbabwe for AIDS drugs
compulsory license
129
- In 2012, India forced a compulsory license for Nexavar for renal cancer ($20K US price)
- Bayer has a patent, was forced to license the IP it covers to a generic firm for 1/30th the usual price
- Bayer appealed and lost
India and Compulsory License
130
- Patent law in this country: a patent on a new active ingredient is only issued if it “significantly enhances efficacy”
- rejected Novartis’ patent application for Gleevec, a drug for leukemia, in 2006 (patent-protected in US until Feb 2016)
- country's generic firms began selling a version of Gleevec in 2006 for $2,500/year, vs. $70,000 for Novartis’ branded Gleevec
- other companies who have had their patent rejected: Sutent, Tarceva, Sovaldi/Harvoni
India and Patent Rejection
131
How do the US and other rich countries influence India's Behavior?
trade agreements
132
- US allows imports of manufactured goods from other countries
- Other countries are asked to import what we make: intellectual property
- Pharma is just one component of that intellectual property
- Major way that developed countries’ intellectual property regimes are distributed
Trade Agreements
133
1) Must create a parallel patent system by 2005 (drugs patented before 2005 were grandfathered into country's existing system)
2) the least developed countries (not India) can wait until 2033 to respect drug patents
3) all countries (rich and poor) can use compulsory licensing, I.e., ignore patents, during a "public health emergency"
Trade-Related Aspects of Intellectual Property Rights (TRIPS) Agreement
134
US and other rich countries response to India's behavior
TRIPS Agreement
135
- Base case: generic firm negotiates with the patent holder for “reasonable commercial terms”
- If negotiations fail, a compulsory license can be issued
- The patent holder must still be paid “adequate remuneration”
- Intent: generics would be sold in that country only (India sometimes exports compulsorily licensed drugs)
- For “national emergencies” or “other circumstances of extreme urgency,” no need to try negotiating a voluntary license first (But the patent holder would still have to be paid)
TRIPS and Compulsory Licensing
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Is India's Behavior Becoming the Norm?
Indonesia and Philippines adopted similar laws; Brazil and Columbia have proposed them
137
- A part of Central American Free Trade Agreement (CAFTA)
- has public insurance program so insurers decides whether to cover a drug based on CEA (nearly 1/2 of cancer drugs never become available until generic expiry)
Costa Rica
138
loosely required honoring US patents, but stronger than TRIPS agreement
CAFTA
139
Why are drugs slowly available in Costa Rica?
- public insurance coverage decisions
- drug firms reluctance to accept lower prices
140
- Draft and currently dead trade agreement among North America and some “Pacific Rim” countries (Japan, Vietnam, Malaysia, Chile, Peru)
- would prohibit imposing extra patenting obstacles like India
- sets 5-8 years of exclusivity for biologics
- “the worst trade agreement for access to medicines in developing countries” in history
trans-pacific partnership (TPP)
141
1) TPP encourages countries besides the US to contribute to the cost of pharmaceutical innovation by requiring a basic minimum of IP protection for middle-income countries
2) TPP forces still-poor countries with modest health care expenditure to contribute to already-huge pharma profits, at the expense of patients who cannot afford first-world IP
potential outcomes of TPP
142
what type of country does the majority of the world's population live in?
low income or low-middle income countries, but they have incomes too low to pay high-income countries (or upper-middle income countries) drug prices
143
measured by disability-adjusted life years (DALYs) the number of years “lost” due to early death, ill-health, or disability
global burden of disease
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global disease (e.g. cancer) toward the right in the figure: prevalent in both rich and poor countries
type I disease
145
diseases in the middle (e.g. HIV/AIDS, TB, Hepatitis) are present in rich and poor countries, but burden is concentrated in poor/developing countries
type II diseases
146
diseases toward the left in the figure (e.g., malaria, diarrhea) are overwhelmingly or exclusively present in poor countries)
type III diseases
147
type I, II, and III diseases and drug development
- few type III because pharma firms are not financially incentivized
- type I dominate recent approvals (R&D match burden in HIC)
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1) Type III drugs aren't created - How do you incentivize R&D for a disease predominantly affected developing (LIC)?
2) Type I and II drugs are too expensive - How to facilitate access to existing drugs while not negatively affecting the market in HIC?
issues with developing countries and access to Rx
149
policies to promote access to drugs in LIC
1) pull incentives
2) push incentives
3) price discrimination
150
increase the revenue for a firm that develops a specific Type III disease drug/vaccine:
1) advanced purchase commitment (APC) ex. GAVI
2) Optional rewards system (ORS) Ex. Health impact fund
3) Priority review voucher (PRV)
pull incentive
151
reduce a firm’s cost of developing a specific Type III drug, such as through a public-private partnership that subsidizes the R&D/production costs Ex: WIPO Re:Search
push incentive
152
charge lower prices in low-income countries for Type I and Type II drugs than are charged in high-income countries
price discrimination
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- pull incentive
- Countries and/or philanthropic organizations (e.g. Bill and Melinda Gates Foundation) identify the desired characteristics of a needed Type III drug/vaccine
- The first drug/vaccine that meets the standard would receive a specified price for a pre-defined number of doses
- Subsidy provides sufficient profit to encourage R&D and large scale manufacturing (like patents do for Type I drugs)
- Low market price (e.g. $1.50) is affordable, even to most low-income countries
Advanced Purchase Commitments (APCs) or “Prizes”
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- APC pull incentive
- in 2010 a public-private global health partnership, and other organizations (e.g. UNICEF, World Bank) committed $2.8 B to subsidize production of a vaccine against pneumococcal disease
- Pfizer and GlaxoSmithKline committed to supply up to 300 million doses of vaccines over the next 10 years to countries that commit to purchase the vaccine at a 90% discount
- Combo of $2.8 B + 10% of rich-country price gave pharma firms incentive to invest in production and distribution
Global Alliance for Vaccines and Immunization
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what countries participate in GAVI?
least-developed (mostly African countries and some Asian)
156
GAVI countries and vaccination rate
vaccinated at same rate as the rest of the world
157
- May not work well when it’s difficult to specify ahead of time what constituted a “successful” drug/vaccine (GAVI targeted an existing vaccine which is easier)
- For example, does a vaccine that is effective for 50% get the subsidy? If not, producing firm may not want to invest in production and distribution
- Or, the 1st firm (above) gets the subsidy and a 2nd firm who creates a vaccine that is 100% effective receives nothing
- Pharma firms will have strong incentives to meet, but not necessarily exceed, the minimum APC requirements
issues with APCs
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- pull incentive
- based on efficacy of new drugs; addresses flaws of APCs
- An organization(s) pays fixed annual rewards for Type III drugs
- reward depends on drug's curative power
- in exchange for reward, company agrees to waive IP protections and LIC sell generic immediately
Optional Rewards System (ORS)
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suppose disease burden is 100 M lower QALYs, I.e., 10 QALY reduction on 10 M people. If drug restores 5 QALYs to all 10 M people (or restores 10 QALYs to 5 M people), gets $0.5x in annual rewards
ORS Example
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- pull incentive
- If a pharmaceutical firm develops a drug for certain Type III diseases, it receives a voucher from the FDA
- The company can use the voucher later to obtain priority review (7 months quicker) on any other drug (probably a Type I drug)
- Firm can also sell voucher to any other firm
- incentivizes research
priority review voucher
161
why would firms use their PRV on a type I drug?
First-mover advantage: competitive advantage from being 1st to market (get patients and prescribers on your drug first)
162
who pays for PRV?
- directly: other drug firms pay when they purchase the PRV from a firm with a Type III drug
- indirectly: rich-country consumers who buy drugs from these firms (get certain drugs quicker than they would have, which has value to pt)
163
PRVs are a way to fund research that is not a direct....
federal budget appropriation
164
shared IP database WIPO Re:Search
push incentives
165
- many patents do not lead to approved drugs, but some of these patents may cover molecules that are relevant to type III diseases
- research can't begin until these patents expire so this incentive persuades universities and firms to turn over IP to facilitate research on type III diseases
shared IP database WIPO Re:Search
166
- Cathepsin inhibitors were originally considered for osteoarthritis and Glycogen synthase kinase (GSK)-3 inhibitors were originally considered for Alzheimer’s disease
- Both were not successful, so firms gave IP to WIPO Re:Search
- Now being tested for parasitic disease: schistosomiasis, leishmaniasis, sleeping sickness, and Chagas disease
shared IP database example
167
- cutting prices on Type II drugs in developing countries without affecting prices and profits in developed countries
- one method: compulsory license
price discrimination
168
- Around 2001, Zimbabwe, Zambia, Mozambique, and Indonesia used the compulsory licensing provisions to roll out antiretroviral therapies for AIDS
- South Africa and Kenya negotiated voluntary agreements with the patent holders to accomplish the same thing (combo of threat of compulsory licensing + public pressure on drug firms)
price discrimination example
169
why did ARV prices decrease in developing countries?
price discounts from pharma firms and entry of generic firms
results - 80% of HIV+ Southern Africans receiving treatment and big declines in death from HIV/AIDS
170
business model and HIV/AIDs after dicounts/lower prices
- Low-cost antiretrovirals for Africa did not prevent higher prices in rich countries
- Innovation continued at a good pace
171
developing countries conclusions
- Pharmaceutical firms tend to develop Type I/II rather than Type III drugs because the expected profits associated with the former are much higher than the latter
- Policies that boost the price and expected profits of developing Type III drugs can work and are working
- Social pressure persuaded (and, in part, international law forced) pharmaceutical makers to provide AIDS drugs in developing countries at very low prices
------ Did NOT impede innovation on AIDS drugs
------ Greatly reduced the scale of the AIDS epidemic
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a health condition that:
- Affects <200,000 people in the US at a point in time
- Or, affects >200,000 people but there is no reasonable expectation that the sales would exceed the drug’s development costs
- 200,000 people ~ prevalence of 1:1600
- The national institutes of health currently lists 7,000 rare diseases that affect a cumulative 25 M Americans
"orphan" disease
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Goal: Spur the Development of drugs for rare "orphan" diseases
1) Tax credits to offset 50% of the cost of clinical trials
2) Flexible rules from the FDA when running clinical trials, such as allowing a relatively small patient population, and relaxing usual requirement to test against a placebo control or the usual standard-of-care control
3) FDA waives the $1 M PDUFA user fee normally required when a company submits a new drug application
4) Minimum of 7 years of FDA-granted exclusivity vs. the 5 years for other small molecule drugs
Orphan Drug Act (1983)
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Push or Pull: Tax credits to offset 50% of the cost of clinical trials
Push
175
Push or Pull: Flexible rules from the FDA when running clinical trials, such as allowing a relatively small patient population, and relaxing usual requirement to test against a placebo control or the usual standard-of-care control
Push
176
Push or Pull: FDA waives the $1 M PDUFA user fee normally required when a company submits a new drug application
Push
177
Push or Pull: Minimum of 7 years of FDA-granted exclusivity vs. the 5 years for other small molecule drugs
Pull
178
- smaller: average # of pt per phase 3 trial 761
- cheaper: estimated cost of a phase 3 trial $103 M
Orphan Drug Clinical Trials
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- growing number of FDA approvals
- commonly as extra indications
- accelerating approvals bc of development or change in strategy
Orphan Drug Approval Trends
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- estimated at 11.2% for orphan drug sales vs. 6% for brands
- have become a large share of global sales (16%) and of expected new growth
Orphan Drug CABR
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- “Christian Jacobs…was diagnosed at age 2 with an LDL cholesterol level of 957 milligrams per deciliter. He takes six drugs for his cholesterol, has stents propping open seven blocked arteries and drives two hours every other week to have a machine filter cholesterol from his blood, but his cholesterol levels remain above 500”
- “Mr. Jacobs says Kynamro (one of the newly approved drugs) lowered his cholesterol to 250 in a clinical trial…”
Christian Jacobs Example of Orphan Drugs
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Questions about the Orphan Drug Act
1) OD prices are very high
2) What should qualify as an "orphan disease"?
3) What are the impacts of allowing very small clinical trials
4) How does the ODA affect "near rare" disease?
183
why are OD substantially more expensive drugs?
- Many rare diseases may have no other treatment option; prices are high because the drugs provide value to patients. Orphan Drug CEO: “Dead children…people are willing to pay a lot to prevent that”
- There could be a public outcry if health insurers refused to pay for ODs, or if they passed along most the costs to the patients
- Each insurers only has a small number of patients with each orphan disease, so the costs seem manageable
- OD companies often have strong ties to advocacy groups; patients believe high prices → more research
184
- Novel role for patient groups: biotech Venture Capitalists
- Cystic Fibrosis Foundation invested $150 M in Vertex Pharmaceuticals back when it was a biotech startup
- Gained a share of Kalydeco royalties, which it sold for $3.3 B in 2015
- Reinvested the $3.3 B in other cystic fibrosis biotech startups
role of patient groups in orphan drug development
185
- common drugs will seek approval for an OD designation because approval results in large R&D tax credit and 7 years of exclusivity for indication
- 1/3rd of ODs are being used off-label so efficacy is known
orphan disease qualification
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- cancer therapy "salami slicing" strategy
- use tumor genetics to identify orphan-size population
- get OD approval for small population with 7 years exclusivity
- subtly encourage use in larger populations, eventually obtaining approval for common cancer types
example of drug firms obtaining OD status
187
designed to induce NEW drugs, but instead is largely inducing new RESEARCH on existing drugs. Research is useful, but often drug was already being used off-label for orphan disease, so no incremental benefit to patients.
orphan drug act goal
188
concerns of over investment in orphan drugs
- nearly 50% of all new drug approvals have been OD in the past decade
- some firms only target OD
- 377 ODs were approved between 1983 and 2008. By 2008 43 of these generated sales > $1B (I.e. achieved "blockbuster" status)
189
- same patients observed for a period before getting the drug vs. standard phase 3 clinical trial
- less difficult to conduct than RCT that compare to standard of care
- with very rare diseases, a few dozen patients can represent a significant proportion of the target population
- result: orphan product development programs can be undertaken by smaller firms, academic spin-offs, and even patient advocacy groups
self-controlled trial (orphan drug)
190
- exodus 51 phase 3 trial had ambiguous results, but was still approved. efficacy became clearer in phase IV
- Even if we agree that a drug with a high benefit should have a high price, the clinical trial is how we know the drug has a high benefit
impact of small OD clinical trial
191
how do firms find a way to approve their drug as an OD?
commonly find a “rare” population within the “near rare” group, and obtain approval as an Orphan Drug (suggests an externality)
192
conclusions on orphan drug act
- The ODA made it attractive to develop ODs by:
1) Reducing R&D costs via tax credit and PDUFA exemption
2) Lowering the clinical trial standards
3) Lengthening the time before generics can enter
- The ODA has successfully promoted OD development
- Orphan drugs are delivering novel and high-value treatments
- Orphan drugs have small markets, but astounding prices, leading to significant revenue
- Drug firms have taken advantage of the “orphan disease” designation to obtain Orphan Drug privileges for existing drugs
- Efficacy and safety sometimes cannot be known from such small clinical trials
193
- Originally based on opium poppy, some molecules known and used for centuries
- If a drug firms has a branded version, it is probably a long-lasting version or delivered in a novel route (other than oral or injection)
- Effects: reduce perception of pain; Some experience euphoria
- At high dosages, suppress breathing
- Def. useful for post-surgical and cancer pain
- Uncertain effects on idiopathic (unknown source) chronic pain
opioids
194
fivefold increase in Rx sales, peaking in 2010 with significant decline
opioid usage
195
- Short-term use (post-surgery) is very safe
- Long-term use causes adjustment in neurotransmitters
- Adjustment of neurotransmitters does not mean addiction
- Addiction is a poorly understood psychiatric phenomenon
opioid addiction
196
- Adjustment of transmitters causes tolerance, so appropriate medical management often involves escalating dosages
- Mistakes in dosage calibration can lead to overdose
- Another cause: an individual was taking opioids at a high dose, stops, and then returns to their previous high dosage
- Or: typical dosage with alcohol or benzodiazepines
opioid overdose
197
- high-risk and huge increase in access has led to huge increase in overdoses and addiction
- no direct data on opioid addiction; treatment admissions for narcotic pain relief abuse is an undercount
- crack epidemic was less deadly
opioid overdoses and addiction
198
- By 2013, 35 M adults had used opioids non-medically at least once
- Prescription opioids are not imported from abroad, and few are stolen
- Many opioids: legitimate prescriptions from well-meaning physicians
physician prescribed opioids "diverted" to nonmedical use
199
- in the 90s the American Pain Society (doctors) said pain is the 5th vital sign and should be assessed and treated. The state medical boards liberalized laws that would hold physicians accountable for outcome of prescribing
- state medical board failed to investigate "pill mill" doctors
health care providers role in opioid epidemic
200
California Doctor and Opioid Abuse
doctor wrote 25 prescriptions a day for 4 years and eventually lost her license, but not until 12 deaths. after new laws were passed she was charged with 2nd degree murder
201
- promoted narrative that opioids weren't addiction; though physicians were exaggerating or had inaccurate concerns about the addiction, tolerance, and risk of death
- Purdue pharma collected, but ignored, evidence of diversion; reps were instructed to avoid suspicious doctors, but no effort to stop distributions, and little contact with police
- used typical pharma sales and marketing techniques
pharmaceutical firms role in opioid epidemic
202
- laws criminalizing inappropriate prescribing
- physician liability
- 2010 Oxycontin reformulation
- treatment Naloxone (overdose), Buprenorphrine (addiction)
- Prescription Drug Monitoring Programs (PDMP)
state and federal responses to opioid epidemic
203
Prescriptions are illegal if outside of an established doctor-patient relationship, or if patient deceives physician
laws criminalizing inappropriate prescribing
204
In Feb 2016, previously-mentioned California doctor found guilty of 2nd degree murder
physician liability
205
deters crushing and snorting (most popular method of abuse b/c circumvents slow release)
2010 Oxy Reformulation
206
- collects all prescriptions in a database
- only effective if physicians accesses them
- mandatory access: effective at reducing risky prescribing (excessive volume and doctor shopping)
Prescription Drug Monitoring Program (PDMP)
207
- less opioids prescribed since 2010
- biggest component: providers prescribing to fewer pt
- Big decrease in prescriptions to those with a history of abuse
- Smaller but meaningful decrease for those without a history of abuse → higher bar for opioid prescribing
- Some providers have stopped prescribing entirely
- Smaller decreases in duration or intensity of prescriptions
- Ongoing medical debate about treatment of idiopathic chronic pain
health care system response to opioid policies
208
- Prescription opioids became harder to obtain, but there was insufficient addiction treatment
- At the same time, cheap heroin and illicit fentanyl became widely available in parts of the country with significant opioid abuse
- These are much more lethal to users, and now dominate overdose deaths
Heroin and Fentanyl Problem
209
conclusions on opioid epidemic
- Opioid abuse, first prescription and now illicit, went from a minor to enormous problem
- Prescription opioid abuse started in the health care system
1) Under a mistaken belief in unaddictiveness
2) Unintentionally prescribed by well-meaning physicians
3) Intentionally prescribed by criminal physicians (but with a slow
response from state medical boards)
- Pharmaceutical industry promoted mistaken belief, and did not intervene to halt illicit sales
- Several responses include greater criminalization, abuse deterrent prescription opioids, and better information (PDMPs)
- “Must Access” PDMPs are effective for prescription abuse
- Prescription opioids replaced by heroin and fentanyl
210
definition of a biologic (Robert deberardine)
programed by DNA
211
Prior to Hatch-Waxman, drug firms gained monopoly power via the data they collected in a clinical trial that proved the drug worked
- After HW: 5 years before that data can be used by a generic (“Data Theft”)
- After HW: greater reliance on patenting rather than
Hatch-Waxman (Robert Deberardine)-
212
- Physicians CAN adjust dosing strengths or schedules, but may not want to without FDA approval (or, at least, clinical studies in support)
- A physician who prescribes in a very different way from others could be successfully sued for malpractice
extent of off-label prescribing ability (Robert Deberardine)
213
- Common critique of drug firms: “this drug only cost you $X to develop, why charge so much?”
- His answer: the profits on approved drugs pay for the failures
- Who else might pay for failures? Government could fund all “good ideas,” but very hard to insulate from various types of interference
Drug Development Failures (Robert Deberardine)
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- R&D, manufacturing, commercialization
- Mainly financed by revenues
- A portfolio of approved drugs
- Ex. Pfizer
pharmaceutical companies
215
- Mostly R&D
- Mainly financed by venture capital
- Few, if any, approved drugs
- Ex. Synageva
biotech companies
216
- commonly high net worth individuals
- Send investment funds to private equity firm
Investors (Flow of Funds in the Private Equity Market)
217
- Receive investment funds from investors in return for cash from eventual sale of shares in a company, either at the company’s IPO or when the company is acquired
- collect a management (e.g. 2% of invested funds) and retain portion of fund profit
- Purchase shares of private companies (small biotech firm who needs $ to pay researchers) e.g. ImmuLogic
- Offer management expertise (Seat on board)
private equity firm (flow of funds)
218
Give private equity firm shares in return for $
Portfolio Companies
219
- Pied Piper developed a novel compression algorithm that outperformed its competitor in a demo at TechCrunch Disrupt
- Based on this good news, Pied Piper is looking to raise money to continue developing its business, in exchanges for a share of future profits
- Everyone is excited to fund them, but the VC firms want to make sure they will get a good return on their investment
- series A1 of investment: Pied Piper will get bids for a 20% stake
- Series B: subsequent round of valuation to raise more $
Silicon Valley Pied Piper Example
220
- The VC firms are naming their price for the 20% stake; multiply by (100/20=) 5 to get implied valuation of the firm
- ex. $5 M ($25 M valuation)
Series A1
221
- loan: small probability of $10 M + interest, large probability of zero
- Equity investment: use $10 M to buy 20% of the company: small probability of huge payoff, large probability of zero (Might not get back $)
- Private equity/VC aggregate a portfolio of risky equity investments, with hopes that one gives the huge payoff (Know that some companies won't make any $)
first principle of start-up financing
222
- How much should 20% of the firm cost?
- Value of the firm: discounted expected cash flow (~profits)
- If value of the firm is $50 M, $10 M from angel investor (early-stage VC) buys 20%
second key principle of start-up financing
223
- Round of financing: firm needs more money to continue
- Good news on expected profits → value of the firm is $100 M
- Different late-stage VC buys a 25% stake at $25 M
- Angel investor diluted to a 15% stake, but that’s now worth $15 M
third key principle of start-up financing
224
- Background: Founded in 1987 by Malcom Gefter, a professor at MIT
- Science: examining how T-cells, the white blood cells that identify and direct attacks on infections, are able to distinguish invading molecules from the body’s own entities
- Potential applications for allergies and autoimmune diseases
- 1987: valued at $5.5 with 3 VC companies purchased 1.7 M shares
- 1988: valued at $31.4 M when they signed contract with Merck and 7 VC bought 2.1 M shares
- 1989: valued at $65 M when they signed strategic alliance with Merck on autoimmune product; Merck bought 1.0 M shares; VC bought 0.2 M
- 1991: went public and accumulated deficient until 1997
- stock price dropped and company dissolved
ImmuLogic Financing Example
225
three owners can “cash out” and sell their shares directly to the public
initial public offering (IPO)
226
larger firm can pay the three owners for their shares and acquire the firm; private equity can also "exit" investments this way
Acquisition
227
- Moderna IPOd in 2018 with no approved drugs; $22/share for $7 B valuation
- Covid vaccine was good news for Moderna; showed the technology worked as promised plus added a revenue stream
- That approval caused a big run up in the valuation of Moderna, peaking at $142 B
Moderan Financing Example
228
- Historically, big Pharma firms developed most of their drugs in-house
- In last decade, became more common to let biotech start-ups handle most discovery and development
- When an idea looks promising, Pharma invests or acquires
shift in drug discovery and development
229
- "seller" = small biotech
- Obtain development and FDA approval expertise from the larger/experienced firm
- Obtain access to marketing resources
- Obtain funding/financing
- Obtain scientific expertise
alliances - "seller" benefits
230
- "buyer" = large pharma firm
- Obtain promising compounds that might be approved
- Obtain access to innovative technologies/knowledge
- Able to build a portfolio of products in a disease area
alliances - "buyer" benefits
231
much better at conducting phase 3 trials which is reflected in predicted probability of advancement
large pharma firms
232
- decreases financial risk for small companies
- small companies give up some of the profit they could've made though
- make the payoff less risky
"seller" tradeoff in alliances
233
biotech start-up conclusions
- New biotech companies rely on private equity funding to turn good scientific ideas into viable businesses
- Start-ups give a share of future profits for funding today
- small/new biotech companies are taking over more of the research function from larger pharma firms
234
- Nonprofit healthcare and social services provider long affiliated with the LGBTQ community in Chicago
- Located in lower-income areas
- In 2020, HBHC collected $9 M in patient revenue and provided $3 M in charity care and $4 M in behavioral health services
- In addition HBHC collected $162 M in “340B pharmacy revenue”
howard brown health center
235
Require manufacturers to provide discounts on drugs to certain safety-net providers so that they can…“Stretch scarce federal resources as far as possible reaching more eligible patients and providing more comprehensive services.”
1992 Federal 340B Program
236
critical access hospital and disproportionate share hospitals
providers eligible for 340B
237
Small rural hospital offering 24/7 emergency care services with rapid transfer to larger hospital
critical access hospital
238
- A certain proportion of patients are covered by Medicaid or received Supplemental security income
- Largest category of participants by number and by drug volume
disproportionate share hospitals
239
gets to buy drugs at either the Medicaid price or the lowest price; special prices for safety-net providers
340B Drug Prices
240
- An entity (e.g., a hospital) in the 340B program gets to the lowest price at which the drug firm sells the drugs to anyone. At least 23% (medicaid discount) averaging about 42%
- Reimbursement is unchanged
- Implicit goal: profits from 340B enhance safety-net care. However, no explicit requirements for the hospital’s use of profits
340B Basics
241
- cancer drug has an average sales price of $1000 per dose
- Medicare will pay hospital $1043
- A non-340B hospital will buy the drug at ~$1000 for a profit of $43
- A 340B hospital will buy the drug at ~$520 for a profit of $523
Cancer Drug 340B Example
242
1) Affordable Care Act increased kinds of hospitals that can qualify
2) Dept. of Health and Human Services let hospitals purchase drugs to be dispensed at pharmacies (not just drugs used in hospitals)
2010 Amendment to 340B Program
243
response to amended 340B program
more hospitals join, purchase other sites where drugs are used (e.g., oncology office), and contract with pharmacies
244
- Federal government would like to be hospital care for low-income individuals, but they do not want to appropriate the money and raise taxes for it
- Under 340B, profits for these entities come from drug firms and patients (via our insurers)
340B Off-Budget Transfer
245
New issue with 340B
lots of the entities getting 340B are not really serving low-income individuals
246
- In 2020, Eli Lilly stated that they will 1) Continue to provide 340B discounts for drugs used in hospitals and 2) Stop providing discounts to drugs dispensed in pharmacies, unless the patient is uninsured
- Claim: the statue never mentioned pharmacies; HHS exceeded its authority by authorizing discounts for pharmacies
- HHS sued Eli Lilly (and other drug firms that did the same)
- In January 2023, first major court ruling found in favor of the drugmakers
Eli Lilly Litigation with 340B
247
- some asymptomatic, some mildly ill, and others acutely sick from direct effects of the virus or organ damage from immune response ("cytokine storm")
- some experience long-term effects
- disproportionate effect older age groups and blacks/latino working age population (likely due to occupation distribution)
Covid-19
248
- No “broad spectrum” antivirals the way there are “broad spectrum” antibiotics because antiviral targets are unique to each virus
- Flu treatment isn't applicable
Covid-19 Treatment
249
- Economists proposed $70 B in immediate funding
- $40 B to fund development of 20 (!) vaccine candidates and $30 B to pre-pay $100/person for FAST vaccination
- The vision: create enough capacity to vaccinate everyone in one month
Covid Alternative Market Commitment
250
- Massive “push” & “pull” incentives (although, not as big as the economists wanted)
- Key component of US response. Even critics of US response call it “almost perfect”
Operation Warp Speed
251
- Drug firms got vaccine development grants
- $2 B distributed by May 2020 to J&J, Moderna, and AstraZeneca (VERY FAST)
- In addition, OWS pre-paid for many elements of the supply chain: Vials from Corning, Syringes from Apiject, Transport from McKesson (big drug distributor)
Operation Warp Speed Push Incentives
252
- Summer 2020: OWS makes an AMC for doses
- Typically, only paying about $20/dose
- First 100m doses from: Pfizer/Biontech (did NOT take development $), Moderna, GSK/Sanofi, Novavax, and Johnson & Johnson
Operation Warp Speed Pull Incentives
253
- FDA recommended the clinical trial design
- Half-half randomization
- Broad enrollment of 16+ (No data on children)
- No special instructions, monitoring, or testing
- Trial participants instructed to behave as normal
- Get tested for symptoms or known exposure
Operation Warp Speed Clinical Trial Design
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- BioNTech had a 2018 partnership with Pfizer for commercialization of an mRNA flu vax
- In Jan 2020, 1st planned a clinical trial in China (With Shanghai Fosun)
- When they needed a fast trial in US, flu-vax team negotiated a new deal
- (Speculation): BioNTech could partner and get to market 1st or go-it-alone and get to market later
BioNTech Partnership with Pfizer
255
- Moderna and Novavax declined to partner
- In early 2020, both were small US biotechs, but Novavax had some approved vaccines
- risky not to partner:
----- Moderna’s mRNA vax was quickly designed, tested, and manufactured
----- Novavax’s protein-based vaccine was quickly designed, slowly tested, and slowly manufactured
- FDA authorization in July 2022 (!)
Moderna and NovaVax Partnership
256
Was public opinion on pharma changed after Covid-19?
No
257
- Reignition of “right-to-try” debate
- Are patients entitled to take an unproven treatment (hydroxychloroquine, ivermectin)?
- Economist answer: does it have externalities?
- Note: those drugs are FDA-approved for other purposes, so their use is at physician discretion (Patients are requesting off-label usage)
Perspectives on FDA
