Biologics Swing For The Fences: Payer Perspectives On Antibodies In Primary Care

Companies with large-molecule expertise increasingly are eyeing primary care markets, confident that improvements in safety and efficacy will make them competitive with oral standards of care.

As companies with proficiencies in large-molecule R&D survey the landscape for opportunities, they see increasingly competitive specialist disease markets, or still foggy regulatory pathways for biosimilar products. A few companies have identified what they believe is “white space” in a category that has been back-burnered mainly by an industry bent on cost-efficiency and innovation – primary care.

Large-molecule specialists are emboldened by advances in the selectivity and low-cost manufacture of antibodies and other biological therapies. Payers “The Pink Sheet” spoke with will be on guard, but overall would give favorable coverage to biologic products that bring markedly better health outcomes without breaking the bank.

Big pharmas are developing biologic treatments for seasonal allergy and chronic obstructive pulmonary disease (Johnson & Johnson); type 2 diabetes, migraine and vasomotor symptoms (Pfizer Inc.); and hypercholesterolemia and asthma (Amgen Inc.). For the most part, their programs are in early stages. All three have strengths in biologic-manufacturing capabilities and in commercializing primary care drugs.

Iain Chessell, who heads up MedImmune LLC’s Center of Excellence for Neuroscience, which has an anti nerve-growth factor antibody against osteoarthritis in Phase I (currently on clinical hold) and several antibodies against COPD in Phase II, says that “[biologics] have selectivity which is intrinsic to the molecule, and that allows us to go after targets previously intractable to small molecules.” He maintains that the selectivity of large molecules will allow researchers to truly test the target in the clinic (Also see "Medimmune Bets on Pain: Why The Large Molecule Specialist Thinks It Can Win" - Pink Sheet, 27 Jun, 2011.).

But specificity for the target, which translates into safety and efficacy benefits, will not be enough to supplant oral standards of care. The first generation of biologics entered smallish, specialist markets such as autoimmune disorders, multiple sclerosis and cancers in which manufacturers could price at will because the diseases were serious and the patient populations were too small to attract the attention of payers. But as biologics enter disease markets with patient populations numbering in the millions, they will not be able to continue the pricing they enjoyed in specialist indications. Less-frequent dosing, even at once every few months or a few times per year, won’t help them, particularly in heavily genericized markets. John Fox, associate vice president of medical affairs at Michigan-based Priority Health Services, puts it bluntly: “We don’t pay for convenience.”

Still, once such products are launched into these vast markets, the sheer volume of physician and patient preference for less-frequent dosing, or for a less onerous route of administration, may take on greater weight with payers.

If The Price Is Right

The biggest determinant of payer willingness to cover these products will be their price. Better health outcomes are important, but only if married to cost savings. And with biologicals, a big lever on pricing is the cost of protein manufacturing. Although, as Gary Owens, a former executive with Independence Blue Cross and currently president of Gary Owens Associates and chair of the Towers Watson Rx Collaborative P&T Committee, notes, while the cost of production is relatively unrelated to the cost of the drug, it could make enough of a difference in the case of biologics in primary care to win over payers.

Seattle-based Alder BioPharmaceuticals Inc. is working at the forefront of companies lowering the cost of protein manufacturing. Its Mab Xpress yeast expression platform, in which antibodies are produced in yeast cultures at a fraction of the cost of traditional Chinese hamster ovary (CHO) systems, can scale to quantities of 50K-200K liters, says CEO Randy Shatzman. “Unlike a CHO cell line which has a plasma membrane that is fairly fragile and so limits the size of the tanks you can use to 20K-25K liters, a yeast cell has a cell wall, so you can go much beyond that,” he explained.

According to Shatzman, that allows Alder to make antibodies at $50-$100/gram, a tenth the cost of CHO. And that lets Alder price its antibodies in $5,000-$7,000/year range, a price point he thinks will fit comfortably in the indications he’s targeting. “Now you’ve got that margin where you want it to be to have a decent product.” That’s a steep discount to the numerous markets where antibody therapies cost $18,000-$20,000 and higher.

Alder cut a deal with Bristol-Myers Squibb Co. in November 2009, granting the pharma exclusive rights to ALD518, a Phase II antibody against IL-6 for rheumatoid arthritis (Also see "Bristol Pays $85 Million Upfront To Acquire Rheumatoid Arthritis Compound From Alder" - Pink Sheet, 10 Nov, 2009.). In June 2011, BMS paid Alder a $15 million milestone for moving ‘518 into a multi-arm Phase IIB trial (Also see "Alder Obtains First Milestone Under BMS Deal, Advances Own Program In Cancer Supportive Care" - Pink Sheet, 21 Jun, 2011.). Shatzman claims that the milestone conclusively validated the Mab Xpress platform which was used to manufacture the drug. “It showed us the flexibility of this platform, and where it can go,” he said. “And BMS is on board with it.”

Alder has two proprietary antibodies in its portfolio targeting large-population disorders treated in part or as a whole by primary care physicians. ALD403, which will enter Phase I in the second quarter of 2012, inhibits calcitonin gene-related peptide (CGRP), a molecule shown to trigger migraine attacks. Its planned indication is chronic migraine, which is treated primarily by neurologists as well as by PCPs. The second drug, ALD306, targets proprotein convertase subtilisin kexin 9 (PCSK9) and is for high-cholesterol patients who don’t respond well to treatment options including statins and for patients with familial hypercholesterolemia. PCPs will be the majority treater for ALD306, which moves into the clinic in the fourth quarter. Alder aims to find a partner for ‘306, but will retain as much control as possible over ‘403.

Both indications are in fact significant subsets of vast populations, particularly the cardiovascular indication. And dyslipidemia is an indication in which the physician and the patient, and presumably the payer, are concerned to manage the condition so that it doesn’t progress to a more serious state. In fact, this satisfies one of Owens’ two requirements for positioning antibodies for primary care markets: they must target a subpopulation.

“Not all hypertension drugs work on all people,” he said. “But when you spread it out across a big population, you’re willing to give 100 people an anti-hypertensive knowing only 60 will respond, because the price is low and also, if they don’t respond, you can give them something else. But if you escalate that price point, I don’t think managed care will give 100 people a drug to get only 60 responses. They’d like to give 100 people a drug and get 90 responses.”

He adds that the number-needed-to-treat (NNT) will come into play significantly when pharmacy and therapeutics (P&T) committees compare small-molecule and large-molecule drugs, and could swing coverage decisions in favor of a higher-priced biologic if it gets more responders.

Owens’ other requirement is that the drug show dramatically superior outcomes compared to existing oral therapies. The idea is to create a value proposition tailored for biologicals in large population disorders. Payers will tolerate a moderately higher cost if there is a significant health benefit that they would not otherwise have received.

Shatzman is confident that an annual cost of $5,000-$7,000 will be palatable to payers for the indications he is targeting, and uses the same NNT calculation that Owens used to defend it.

Alder is not the only company using a microbial production platform. Roland Andersson, senior executive at Accenture, and David Northrup, a senior manager in the life science supply chain strategy group, note that the cost, speed and yield advantages of microbial cultures have been valued in the marketplace through a spike in acquisitions and alliances. Merck & Co. Inc. acquired GlycoFi Inc. in 2006 [See Deal]; Adimab LLC has employed its yeast culture systems in a spate of recent deals, most recently with Biogen, Genentech Inc. and Eli Lilly & Co.[See Deal]; and Avidia Inc. was acquired by Amgen in 2006 in part for its E. coli expression system (Also see "Amgen Expands Inflammation Pipeline With Avidia Purchase" - Pink Sheet, 29 Sep, 2006.).

Homing In On The Right Population

Some early entrants into primary care disease markets include Novartis AG and Roche’s Xolair (omalizumab), indicated for moderate-to-severe persistent asthma, and more recently, Amgen’s Prolia (densosumab), indicated for treatment of postmenopausal women with osteoporosis at high risk for fracture. Data from The Zitter Group show significant levels of access restrictions for both products including prior authorization and step therapy.

Xolair, co-marketed by Novartis and Roche, with annual global sales of approximately $1 billion, is detailed primarily to allergists and pulmonologists, although in rural areas where specialists are sparse, it is detailed to PCPs. John Fox says that patients with severe asthma, who end up in hospitals frequently or in emergency rooms, require expert management, and that’s why the drug is detailed to specialists. Also, Xolair requires weight-based dosing, while dosing frequency is based on immunoglobulin E levels. Many PCPs don’t want to be involved.

In fact, companies targeting primary care markets with biologics would do well to aim for the moderate-to-severe part of the patient spectrum rather than the mild segment. In chronic pain, for instance, it’s the moderate-to-severe segment of the population that is given opiates. Patients with mild pain are well served by over-the-counter treatments. Payers would be inclined to favor a non-opioid alternative that didn’t bring side effects of abuse, addiction and constipation. Yet, as Owen notes, they’ll also be wary of introducing new, even marginally more costly drugs into this population because its size would magnify a jump in cost.

The situation in type 2 diabetes is similar, though with a difference. The gold standard in diabetes is metformin or the sulfonylureas, both generic. As patients progress, they are started on semi-synthetic basal and bolus insulin, and even may be given an oral on top of that. A moderately more expensive biologic that replaced any or all of those therapies likely would be viewed with favor by payers.

“In hypertension,” says Owens, “you can treat uncomplicated disease with angiotensin-converting enzyme (ACE) and angiotensin receptor blocker (ARB) inhibitors. They’ll all be generic this year [Editor’s note: Novartis’s Diovan went off patent in Europe last year, and will lose exclusivity in the U.S. in 2012]. I think you’ve got to have the more difficult-to-treat patients at least as the first target of these drugs, or it’s going to be a real uphill battle to get payers to allow them reasonably unrestricted access.”

In practice, most companies developing biologics for primary care markets are targeting the more seriously ill segment of the population or parsing the population by some sort of biomarker. In the case of Alder, its chosen indications hopefully will provide a jumping-off point into larger populations.

It’s not clear how payers will weigh “conveniences” such as subcutaneous self-injection versus physician assisted injection versus intravenous infusion in the context of a large population or primary care disease. Consumers may have active lifestyles and may be unwilling to take a half day off to go to a doctor’s office or an infusion center. Owens points out that, over the years, the movement in diseases such as multiple sclerosis and rheumatoid arthritis has been toward patient self-administered drugs.

“As you begin to get larger populations, patient self-administration has to be a goal of most manufacturers,” he asserts. As to whether payers will embrace self-administration, Owens says it comes down to a price-value decision. “If there’s high value but also high price, plans may restrict access,” he states. “If there’s high value and lower price, they may be willing to open up more access for better outcomes. But it will be a very intense value discussion at the P&T level.”

Environmental Factors Impacting Pricing And Utilization Of Biologic Treatments

The combined effect over the next five to 10 years of biosimilars coming onto the market in significant numbers, of moderately priced biologics entering primary care markets, and of increasingly cost-conscious payers in the developed markets – eventually will lead to lower prices of biologic drugs across all indications except the rarest diseases.

Another nearer-term factor that may depress the price of biologics will be the proliferation of Accountable Care Organizations (ACOs). Priority Health’s Fox is quite certain that when ACOs start coming on line in 2013, with their focus on Medicare Part B, participating physicians will shift patients from Part B injectibles to Part D oral drugs in order to partake of the savings (Also see "Physicians Have Bigger Stake In Patients' Total Care Under Medicare ACOs" - In Vivo, 1 Apr, 2011.). “ACOs will restrict the growth of biologics only because physicians will be at risk; they’ll be more judicious about when to start a patient and when to continue the patient,” he said.

The survivors in this scenario will be large-molecule specialists that can produce markedly superior drugs at lower cost, which can be passed on as lower prices. It remains to be seen whether the big pharmas with biologics in their pipelines targeting large populations and primary care diseases will be able to wean themselves away from old pricing algorithms. Most of their candidates are in early stages of development and likely will reach the market when these price-dampening dynamics start settling in.

Smaller, more nimble companies like Alder seem already to have read the writing on the wall.