When it comes to pharmaceuticals, the focus of policy makers, the media, academics, and advocacy groups tends to be on who’s paying how much. They often neglect what Americans are paying it for -- that is, the drugs themselves.
As a result, too many people risk missing the big picture, which is that Americans are gaining access to more and more innovative medicines that are granting them longer and better lives.
In 2019, U.S. Food & Drug Administration (FDA) approved 48 new medicines, bringing the total for the past three years to 153. That is 25% more than for any such period since 1938, when President Roosevelt signed the Food, Drug and Cosmetic Act, and the modern era of pharmaceutical regulation began. The record for approvals was set in 2018; last year’s total was the second-highest ever.
In regulatory jargon, these approved drugs are called “new molecular entities,” or NMEs. As the FDA says on its website: “Many of these products contain active moieties that have not been approved by FDA previously, either as a single ingredient drug or as part of a combination product; these products frequently provide important new therapies for patients.”
(A “moiety,” by the way, is part of a molecule that often gets its own name and is found within other molecules, too.”)
What the NME total does not include is also significant. The list of 48 “does not contain vaccines, allergenic products, blood and blood products, plasma derivatives and gene therapy products” or other biological products, which are often the most advanced medicines. (Last year’s 48, for example, does not include the approval in May of a revolutionary genetic treatment for a terrible disease afflicting young children – more on that below.)
The list also does not include approvals for new indications – or other applications for an already-approved drug. For example, the drug Keytruda, originally approved in 2014 for advanced melanoma (skin cancer), has since been granted FDA approval for more than 20 indications. Seven of those approvals came in 2019 (and one so far in 2020), including for certain kinds of cancers of the lungs and esophagus.
Nor does the total include generic drugs, or copies of patented medicines. For fiscal year 2019, the FDA approved an incredible 1,171 generics, breaking the previous year’s record by 21%. In all, more than 3,000 generics have been approved since Oct. 1, 2016. The flood of generics is, in large part, the result of a streamlining of the approval process under FDA Commissioner Scott Gottlieb, and it’s a key reason that the price of the average prescription has leveled off and even declined under the Trump Administration.
While the volume of FDA approvals has been encouraging, drug R&D has to earn enough of a return on investment to keep the innovations coming. Remember that Investments that began decades ago produced the drugs approved in 2019.
Today, there are threats from such proposals as pricing U.S. drugs – the source of most global innovation – according to an index of prices set by governments in foreign countries. We’ll explain some of the dangers of this International Pricing Index at the end of this newsletter.
Wide Variety of Approved NMEs
The variety of NMEs approved last year is striking. Let’s begin with cancer. In our last newsletter, we quoted Janet Woodcock, the director of the FDA’s Center for Drug Evaluation and Research, writing that “2019 was another strong year for making new cancer and blood therapies available to patients in need.”
The FDA approved two new drugs for breast cancer, two for bladder cancer, and others for multiple myeloma (a type of blood cancer), prostate cancer, and large B-cell lymphoma, the most common type of non-Hodgkin lymphoma. Other approved drugs treat mantle cell lymphoma, which causes strokes and heart attacks, and a type of leukemia that afflicts adults.
Also approved was Rozlytrek, the third oncology drug that, said the FDA in an August press release, “targets a key genetic driver of cancer, rather than a specific type of tumor.” The release stated that the treatment is…
based on a common biomarker across different types of tumors rather than the location in the body where the tumor originated. The approval marks a new paradigm in the development of cancer drugs that are “tissue agnostic.”
Here, drawing from the FDA’s excellent annual report on new therapy approvals, issued last month, are just some of the other drugs approved last year:
‘First in Class’ and ‘Breakthrough’ Drugs
Of the 48 drugs, 20 were considered “first in class,” that is, they have, in the FDA’s words, “potential for strong positive impact on the health of the American people. These drugs often have mechanisms of action different from those of existing therapies.” Among them were the depression drug Zulresso and Balversa for advanced bladder cancer.
Thirteen of the approved drugs were awarded “breakthrough” status, meaning that they treat “serious or life-threatening diseases for which there is unmet medical need and for which there is preliminary clinical evidence demonstrating that the drug may result in substantial improvement on a clinically significant endpoint (usually an endpoint that reflects how the patient feels, functions or survives) over other available therapies.” Among them: Adakveo for sickle cell and Rozlytrek for metastatic solid cancer tumors.
22 New Biological Products, Including 3 Vaccines
Biological products, or biologics, are highly complex compounds. They can also be living cells or tissues, “made from a variety of natural resources—human, animal, and microorganism—and may be produced by biotechnology methods,” according to the FDA, which last year approved 22 of them.
Several of the biologics were vaccines, including Ervebo, approved in December to prevent the disease caused Zaire Ebola virus, which kills about half the people it affects. The last Ebola outbreak, from 2014 to 2016, led to 11,324 deaths in Africa and one in the United States.
Other approved biologic vaccines were Exembify, which prevents Primary Humoral Immunodeficiency (PI), a term encompassing multiple disorders of the immune system that can sometimes lead to death if untreated, and Dengvaxia for dengue disease, a painful mosquito-borne illness that each year sickens 100 million people around the world and kills 22,000, according to the Centers for Disease Control and Prevention.
The FDA also approved a separate treatment for PI for adolescents, a biologic to control bleeding in hemophilia patients, and, as we mentioned above, a genetic treatment called Zolgensma for spinal muscular atrophy (SMA), the number-one genetic cause of death in infants.
Biosimilars Lag; What Can Be Done?
Unfortunately, only 26 biosimilars – whose relationship to biologics is roughly the same as that of generics to branded small-molecule pharmaceuticals – have been approved since the FDA began the process is 2015. Ten of those were approved in 2019, compared with seven in 2018 and five in 2017. The trend is up, but the pace is frustratingly slow.
Biosimilars are far more expensive to develop and produce than generics: a cost per drug of between $100 million and $250 million, compared with just $1 million to $4 million, according to Erwin Blackstone and P. Fuhr Joseph Jr., writing in the journal American Heath & Drug Benefits.
Pharmaceutical manufacturers worry that the investment may not be worth the cost if they can gain approval but are still not be able to bring their biosimilars to market. The concern is not clinical; it’s obstacles to acceptance by physicians and pharmacy benefit managers not to mention a barrage of patent lawsuits that lead to long delays. We examined the biosimilars issue in Newsletter No. 54, and we will revisit it soon as advocates push for reforms that will ease uptake.
A great deal is at stake. Biologics are the fastest-growing pharmaceutical expense. Since 2014, writes Avik Roy in Forbes, they are responsible for essentially all of the increase in drug spending. They represent just 2% of prescriptions but 37% of spending, so biosimilars offer significant cost savings opportunity.
Of the nine biosimilars approved last year, three have Herceptin as their reference branded drug and two have Humira.
Herceptin treats early-stage breast cancer that is Human Epidermal growth factor Receptor 2-positive (or HER2+). Two previously approved biosimilars also have Herceptin as their reference drug, and competitors to the branded drug, which was approved by the FDA back in 1998, went on the market last year. According to FiercePharma, Herceptin ranks number-17 among top-selling drugs, with $2.9 billion in revenues in the U.S. in 2018.
The number-one seller is Humira at $13.7 billion. Initially approved by the FDA in 2002, Humira treats several auto-immune diseases, including rheumatoid arthritis and Crohn’s. As with Herceptin, the FDA has approved a total of five biosimilars with Humira as the reference product. But, because of legal settlements, Humira will keep competition in the U.S. at bay until 2023.
By contrast, in Europe, where far more biosimilars have been approved and come to market, competitors to Humira began being sold last year. The effect of biosimilars was immediate, with revenues for branded Humira falling 34% in the first three quarters of the year outside the U.S. (compared with an increase of 10% domestically).
Other biosimilars approved by the FDA in 2019 had as their reference products: Avastin, the 18th top-selling drug in the U.S., for multiple cancers (now with a total of a total of two biosimilar competitors); Neulasta, ninth top-seller, for low white blood cell counts (with three biosimilars); Remicade, ranking 11th, for stroke (four biosimilars); Enbrel, third, for auto-immune diseases (two biosimilars); and Rituxan, fourth, for several diseases, from rheumatoid arthritis to leukemia (also two biosimilars).
There’s little doubt that if these biosimilars gain wide acceptance in the market – as many have done in Europe –the competition will lead to significant and sustainable savings in drug costs.
The Great American Drug-Developing Machine
The U.S. continues to lead the world in developing new drugs (about twice as many as all of Europe combined from 2014 to 2018), and the people who live here are the main beneficiaries. Of the 48 novel drugs, 33 were approved first in the United States. Americans not only develop most of the world’s drugs; we also have far greater access to them.
As we noted in our last newsletter, a PhRMA analysis last year, using data from the research firm IQVIA, as well as the FDA, the European Medicines Agency, and Japan’s Pharmaceuticals and Medical Devices Agency, compared how broadly and quickly new cancer medicines became available in 15 rich countries, many of which set prices artificially low.
The U.S. was, far and away, and the leader. Some 96% of the new drugs were available in the U.S.; Germany and the U.K. tied for second with 71%, with Canada at 57% and Japan at 50%; the median was just 62%. The average delay in the public’s access to the new cancer medicines was a mere three months in the U.S., again by far the best. French patients could not gain access to the average new drug for 19 months; Italy, 20 months; the U.K., 11 months. The median among the nations was 16 months.
The reason is no secret. While highly regulated, the U.S. health care system remains far more responsive to the market and the immediate wants and needs of the public and physicians, compared with government-controlled systems in other countries. U.S. policy has been developed with an eye toward encouraging scientific innovation.
In an important piece in the New England Journal of Medicine on Jan. 30, Dhruv Khullar and colleagues presented a model of “the structure of the pharmaceutical reward system and the way in which existing and proposed policies affect it.” They are worth quoting at length:
The evolution of a successful drug occurs in three sequential periods. During the innovation period, a drug is developed and tested but cannot be sold. Only a small minority of drug products are ultimately approved by the FDA, and for those that are, this approval constitutes the start of the monopoly period, during which no other corporation can manufacture and sell the drug. After the various patents and exclusivity periods of a drug expire, the competitive period commences. Other corporations can now produce and market identical copies (i.e., generic or biosimilar drugs) of the innovator product (i.e., the brand-name drug).
Each pharmaceutical policy can be understood in terms of how it affects the financial condition in one (or more) of these three periods. Financial losses generally occur during the innovation period. Positive and potentially sizable profits occur during the monopoly period and then decline during the competitive period.
The decision to develop a new drug is driven largely by a corporation’s expectation of the relative sizes of these three periods — that is, what it anticipates the investments and rewards to be before and while embarking on drug development. For a given corporation, realized net profits may ultimately prove to be larger or smaller than anticipated, but public policy creates an environment that defines what can be expected on average.
Policymakers can use four types of levers to alter the expected financial results in the reward box: market entry levers, monopoly protection levers, payer requirement levers, and tax policy and direct financial incentives.
Threats to a Delicate, Productive System
The system the authors describe is delicate. It currently produces remarkable results – far more medicines each year than any other country produces with far greater access for patients. In the debate over drug pricing, these results – incredibly enough – are often ignored when changes are advanced. For example, Vital Transformation, a consulting firm, looked at the consequences of the International Pricing Index (IPI) that is part of H.R. 3 legislation, which passed the House in December.
According to the analysis, 64 drugs came to market over the past 10 years under biotech partnerships that have been so productive lately. With the IPI in effect, there would have been “56 fewer approvals of medicines originating from these small biotech companies, a reduction of nearly 90 percent.”
The largest overall impact would be seen in the treatment of cancers, with the loss of 16 treatments ranging from chronic myeloid leukemia (CML), lymphoblastic leukemia, ovarian cancer, breast cancer, prostate cancer, and lymphoma. In addition, two treatments for non-insulin-dependent diabetes would not have reached the market, as well as 10 orphan drugs for rare conditions such as pulmonary fibrosis, glioblastoma (cancers of the brain), and pulmonary arterial hypertension. Also included in the 56 drugs at risk are treatments for migraine, narcolepsy, wound care, and hepatitis B.
Changing policy while overlooking the powerfully positive effects of the current system could be disastrous.
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