Speedy U.S. Drug Reviews Would Make Payers The New Gatekeepers

|
Includes: AMGN, ANTM, CELG, ESRX, LLY, MRK, NVS, SRPT
by: EP Vantage

Through the conflicting messages that emerged from President Donald Trump’s summit with biopharma executives yesterday, one thing was crystal clear – the US FDA will be under instructions to speed up drug reviews. What this would do, rather inadvertently, is give even more power to private payers.

Trimming 8,900 pages from a 9,000 page new drug application, as Mr. Trump suggested, will necessarily remove substantial amounts of data pertaining to safety and efficacy. Payers will want to see a more robust data set before agreeing to put novel drugs on their formularies – especially given the potentially massive costs of safety issues that are detected only after drugs are in common usage.

Mixed message

As with many issues being raised in the very early days of this presidency, only the barest of detail about streamlining the FDA have been mentioned. An example is an executive order requiring the identification of two regulations for repeal for every one that is published, although it is not at all clear how that is to be implemented.

He told the pharma leaders – including the chief executives of Eli Lilly (NYSE:LLY), Celgene (NASDAQ:CELG), Amgen (NASDAQ:AMGN), Merck & Co. (NYSE:MRK) and Novartis (NYSE:NVS) – that he has a nominee for FDA commissioner who will streamline the agency. “You’re going to get your products either approved or not approved, but it’s going to be a quick process,” he said.

He fixated on figures of $2.5bn and 15 years to develop a new drug, statistics that the lobby group Pharmaceutical Research and Manufacturers of America use, “to come up with a product where there’s not even a safety problem” – forgetting that development time and resources are consumed in determining whether a novel agent in fact poses any safety issue.

That question will still be of vital interest to payers – after all, adverse events have costs attached to them. If NDAs are indeed to be 99% smaller, as Mr. Trump proposes, they will necessarily omit data that can be used to evaluate downstream health care costs as well as savings. Thus, a streamlined FDA will thrust more authority on pharmacy benefit managers like Express Scripts (NASDAQ:ESRX) and insurers like Anthem (NYSE:ANTM) to determine access.

An example of this has been the much-disputed review of Sarepta’s (NASDAQ:SRPT) Duchenne muscular dystrophy agent Exondys 51, which the FDA approved on limited efficacy data but payers have resisted covering (Catabasis crashes and Sarepta stumbles in DMD, February 1, 2017).

Competition

In any case, Mr. Trump’s comments gave biopharma leaders a moving, if non-existent, target for criticism and plenty of reassurance.

Pfizer (NYSE:PFE) Chief Executive Ian Read, who did not attend the meeting, downplayed the talk of pricing restrictions that Mr. Trump continues to discuss and instead focused on regulatory streamlining.

“To the extent that they can remove regulations and make it easier and faster to bring drugs to market, that will make the marketplace a lot more competitive, which will then in turn help to bring down drug prices,” Mr. Read said in the company’s fourth quarter earnings call with analysts.

While Mr. Read and the biopharma leaders who met with Mr. Trump did the mandatory executive genuflection toward competition, it should also be noted that rigorous FDA drug review benefits them, presenting a big cost barrier to small rivals without the resources to do large trials. Should a streamlined FDA emerge, Mr. Read and his CEO counterparts may be thankful for a vigorous payer community to provide a backstop.

Lilly Chief Executive David Ricks acknowledged this in his own analyst call following the White House meeting when he described a “good relationship” with payers. “They negotiate hard for rebates and discounts for their customers, most of which are large commercial plans or Part D,” he said. “And we do our job, which is to sell the value and try to maintain formulary position.”

If the best way of determining what the 45th US president will do is to listen to what he says, then drug reviews are about to condense. More drugs may be approved for legal use and at a faster pace, shifting more key access decisions to the closed-door talks between pharma and payers.