Cancer “Moonshot” Launch Team Announced: Uncomfortable Ties To Anti-Industry Headlines

The Vice President’s cancer “moonshot” is a great opportunity for biopharma companies to engage in a process that should remind policymakers and the public of the promise of biomedical innovation at a time when the industry’s pricing and financial engineering activities are under scrutiny on Capitol Hill. The selection of the “blue ribbon” panel puts those two images in stark contrast.

Whatever else the Vice President’s cancer “moonshot” initiative becomes, it is a welcome opportunity for innovative biopharma companies to put their best foot forward.

At a time when the headlines are dominated by claims of price gouging and (attempted) tax evasion, a little starry-eyed optimism about the potential to cure cancer is most welcome. And—whether that overarching goal really makes sense or not—there is no denying that the recent wave of novel oncology therapies is something that should be celebrated.

Still, the messages from Washington do tend to promote a sort of cognitive dissonance. It isn’t easy to make sense of legislative calls for the National Institutes of Health urging the agency to “march in” on patent rights for one leading cancer drug (Astellas Pharma Inc./Medivation Inc.’s Xtandi) at the same time NIH is promoting a vision of unprecedented potential for advances in cancer treatment via collaboration with industry. (Also see "Obama’s Legacy Agenda: Curing Cancer, HIV, Malaria and Addiction – Not Capping Prices" - Pink Sheet, 28 Jan, 2016.)

Or take the “blue ribbon” panel formed by NIH to advise on the Moonshot: It includes two biopharma industry executives whose resumes that resonate uncomfortably with some of the unfavorable headlines.

The first is Pfizer Inc. R&D head Mikael Dolsten.

In “moonshot” world, that’s an obvious choice – the head of the largest pharmaceutical industry R&D organization in the US should obviously be on the panel. How better to illustrate the value of American innovation?

Except, of course, Pfizer was busy trying to become an Irish company at the time the panel was announced – until the Treasury Department released rules specifically designed to block the company’s planned “inversion,” prompting Pfizer to call of its deal with Allergan Inc. (Also see "The Fall Of Pfizergan: The Beginning, The End And Everything In Between" - Pink Sheet, 11 Apr, 2016.)

“Un-American” though Treasury’s actions may have been (in the ill-chosen words of Allergan CEO Brett Saunders) Dolsten will indeed be representing a leading American company on the moonshot committee after all.

A “Biotech” Success Story Based on Generic Injectables…

But it is the second industry representative that really poses the challenge of holding two contradictory ideas in mind at the same time: NantWorks LLC CEO Patrick Soon-Shiong.

At first glance, he is another logical choice: Nantworks has received extensive media coverage for its vision of combining revolutionary advances in information technology and genomics to—well—cure cancer. Clearly some small start-up company should be represented on the panel, and given the reported personal relationship between Soon-Shiong and Vice President Joe Biden, that makes him another obvious choice. (As did Soon-Shiong’s press release pre-empting the President’s announcement of the “moonshot” with a similarly named industry consortium, Moonshot 2020).

But Soon-Shiong had a long career in industry before Nantworks, and in the current climate that background echoes with the pointed criticism about monopoly pricing practices in the industry.

A former transplant surgeon, Soon-Shiong entered the pharmaceutical business in the early 1990s, forming a company called VivoRx Inc. Even then, he aimed high. The goal wasn’t to cure cancer, but to cure diabetes using islet cell transplants.

The company (and Soon-Shiong) received a lot of attention based on early reports of success, and Mylan Pharmaceuticals Inc. invested in the firm with the goal of commercializing the technology. The early promise didn’t pan out – and the Mylan/VivoRx deal ended in arbitration with VivoRx agreeing to refund a portion of Mylan’s investment.

Soon-Shiong’s success, however, is based on the next two companies he formed: American Pharmaceutical Partners and ABI Biosciences. The former acquired a long-troubled generic injectable business (formerly Lyphomed). The latter developed a reformulated version of paclitaxel that is now marketed as Abraxane. Both were sold to larger companies for billions of dollars—but the history isn’t exactly an unvarnished story of breakthrough innovation.

That is clearly the case with APP, whose business is manufacturing generics not innovating new therapies. APP inherited a long, troubled compliance history with Lyphomed, and the company is clearly a success story: it was sold to Fresenius Kabi AG in 2008 for almost $4 billion (net of debt).

But its growth came with some controversy: the company was featured as part of a 2001 New York Times investigation into the Group Purchasing Organization sector, with one article highlighting the fact that Premier was an investor in APP (predating the Lyphomed purchase) and thus had a stake in the success of APP as a supplier.

But perhaps more germane to the current climate is the circumstance that drove a large part of the premium price paid for APP: the company found itself as the sole supplier of heparin in the US after Baxter AG’s competing product was found to be contaminated (ultimately traced to a raw material supplier in China).

What did APP do when it found itself as the sole supplier in 2008? It raised prices. The increase was incredibly modest compared to the headline-driving increases for “sole source” products like Daraprim or Nitropress, but Fresenius’ acquisition offer was likely driven in large part by a desire to control that cost line for its dialysis business going forward.

By all accounts, APP was a responsible actor—or even the hero—in the heparin story. But that is still an unusual and resonant item on Soon-Shiong’s resume in the current climate.

…An Unusual Patent Case…

It is American Biosciences Inc. that is most interesting in the context of the “moonshot,” since the company was founded to develop novel cancer therapies.

ABI first came to our attention in 2000, when Bristol-Myers Squibb Co. —which was facing imminent competition to its Taxol brand paclitaxel—suddenly announced that it had listed a new patent in FDA’s “Orange Book” to protect the product, and claimed that it did so under threat of litigation from ABI.

Bristol had publicly declared paclitaxel to be “unpatentable” during a series of hearings designed to enforce a “reasonable pricing” clause in the company’s technology transfer agreement with NIH –a precursor to the “march in” arguments today, though with the important nuance that NIH did in fact do most of the clinical development for paclitaxel before transferring it to Bristol.

Despite claiming it could not patent the drug at the time it was approved, Bristol nevertheless asserted patent rights once generic competition was imminent. Under Hatch/Waxman procedures, simply asserting patents triggers a stay of approval on generics –but that stay was almost up when the ABI patent suddenly appeared.

What followed was one of the stranger episodes in the strange history of Hatch/Waxman case law, with ABI suing Bristol to force the patent listing – a case where if Bristol “won,” generic paclitaxel could be approved right away, but if it “lost,” generic paclitaxel would be delayed.

Bristol “lost,” and a short delay ensued until Ivax Corp. was able to launch – and then only because FDA acted quickly to approve the application during a brief window when Bristol was ordered to delist the ABI patent and before the company asked to relist it on its own account.

Ivax continued to face litigation over the patent from Bristol, until the two companies finally settled in 2002 and the ABI patent was delisted for good . (Also see "Bristol De-Lists ABI Taxol Patent Under Settlement With Ivax" - Pink Sheet, 28 Jan, 2002.)

One important coda: the machinations around the paclitaxel defense drew the notice of the Federal Trade Commission, and were part of a 2003 settlement over a series of patent defense tactics used by the firm. (Also see "Ivax Generic Paclitaxel Clears FDA; Bristol Patent Case Pending In N.Y." - Pink Sheet, 18 Sep, 2000.)

Here is how FTC described the ABI patent in that context:

BMS improperly listed a third patent in the Orange Book and thereby obtained the ability to trigger the Hatch-Waxman provision for another 30-month stay as a result of a conspiracy with American Bioscience, Inc. (ABI). Shortly after the 30-month stays that BMS had obtained from its unlawful listings of the '537 and '803 patents expired, but before any ANDAs for generic paclitaxel obtained FDA approval, BMS and ABI agreed on the terms of an option to license ABI's '331 patent. The agreement provided that ABI would receive royalties based on a significant percentage of BMS sales of Taxol, an arrangement that would be highly profitable to ABI if BMS continued to enjoy protection from generic competition to Taxol.

BMS submitted the '331 patent to the FDA for listing in the Orange Book, but it could not have reasonably believed that the relevant claims of the '331 patent were valid, or consequently that the '331 patent should be listed in the Orange Book as claiming Taxol. BMS knew of material prior art that invalidated the relevant claims of the '331 patent. Moreover, BMS's own experience with the sale and use of Taxol prior to that date invalidated the relevant claims of the '331 patent.

To be clear, ABI was not accused by FTC of any violations. But that word “conspiracy” sure suggests FTC wasn’t convinced its hands were clean either.

…And Abraxane

Then there is Abraxane itself, the paclitaxel formulation that ABI was developing on its own. That is another success story: the product is closing in on $1 billion in annual sales under the ownership of Celgene Corp., which acquired ABI (renamed as Abraxis BioScience Inc.) in 2010 for almost $3 billion.

The Abraxane formulation has an undeniable advantage over the original Taxol formulation, by substituting albumin for Cremaphor as a solubilizing agent. That in turn allows delivery of higher doses of the active ingredient without risking the reactions associated with Cremaphor.

The question that has dogged Abraxane since it was approved in 2005, however, is whether other strategies to minimize paclitaxel toxicity can produce similar outcomes – and at a much lower cost. Those questions have become more pointed in recent years, as sales of the product have tripled under Celgene’s ownership.

Abraxane’s growth earned it the dubious honor of inclusion in the initial Medicare Part B prescription drug spending dashboard, based on its “high annual spending per user.” According to CMS, total Part B spending on Abraxane in 2014 was $275 million, at an average cost per beneficiary of over $15,000. Generic paclitaxel, in contrast, costs Medicare about $200 per patient.

The original application for Abraxane was a 505(b)(2) submission, referencing Taxol, but supported by a head to head study showing higher response rates in metastatic breast cancer. However, when Abraxis submitted survival data from the head to head trial, FDA concluded that no difference was demonstrated and noted that fact in labeling.

It has subsequently been approved for indications in lung and pancreatic cancer, again following the 505(b)(2) pathway referencing Taxol.

While FDA has cited a safety advantage for the formulation, the agency has never approved any specific claims of efficacy advantages tied to the formulation. Indeed, FDA reinforced that message in an advertising letter sent to Celgene in 2012 citing materials circulated by Abraxis prior to the acquisition that claimed a “tumor targeting” aspect of the formulation. (Also see "Abraxane White Paper Distribution At ASCO Draws FDA Advertising Letter" - Pink Sheet, 2 Feb, 2012.)

In other words, Abraxane is a product that nicely encapsulates many of the issues involved in the debate over the value of innovation in oncology—and one that increasingly looks to be on the losing side of that debate.

During a Pew Charitable Trust event discussion on the proposed CMS demonstration program to test new payment formulas for Medicare Part B, Abraxane provided a rare point of agreement between one of the most vocal advocates for testing a lower “spread” in Part B – Peter Bach from Memorial Sloan Kettering—and the chief opponent of the proposed cut—American Society for Clinical Oncology VP-Clinical Affairs Stephen Grubb.

Bach and his colleagues cited Abraxane in breast cancer as an example of how the new policy could have a salutary effect on incentives in oncology in a report released to coincide with the Pew event. Under the current ASP+6 methodology, the report notes, Abraxane generates a spread of $1,000 per 12-week course of treatment, compared to just $12 for generic paclitaxel. Under the proposed ASP+2.5%+$16.80 structure, the spread on Abraxane would be reduced to $484 while the spread on paclitaxel would increase to $72.

Grubb agreed with Bach on the premise that Abraxane is not better the paclitaxel, noting his own participation in a clinical trial that reached that conclusion. However, he argued that the correct response is to use educational campaigns, like ASCO’s “Choosing Wisely,” to encourage use of the lower cost option – rather than overhauling the payment system to address one case.

As a practical matter, Bach’s own data suggest that the proposed demo wouldn’t necessarily drive prescribers to choose paclitaxel, since there is still a very large difference in the spread under the demo price. However, it would be a very logical target for the proposed second phase of the demo, where CMS says it is considering ideas like reference pricing, where the reimbursement could simply be set at the paclitaxel rate.

So even as Soon-Shiong joins the launch team for the Cancer “Moonshot” to help drive the next phase of innovation in oncology, the one cancer product he developed may be a prime focus of another Obama Administration effort intended to bring the cost of new therapies back to earth.