Tough competition between diabetes drugmakers, coupled with higher payer leverage, has sparked the question of whether formulary access has become a zero sum game: Does success for one mean failure for another?
That is the current climate in the insulin market right now, pushing the leaders in the space to make bold moves.
Last month, Danish diabetes drugmaker Novo Nordisk announced its veteran CEO Lars Rebien Sorensen would be stepping down at the end of the year, an expected move but several years ahead of schedule. His successor, Lars Fruergaard Jørgensen, gave some hint to the reasoning behind the leadership change, pointing to "unprecedented" competition and payer pressure.
Several weeks later, Novo revealed plans to cut about 2.4% of its global workforce, trimming its R&D and headquarters staff in a move designed with that heightened competitive landscape in mind.
Novo Nordisk, along with the French Sanofi and Indianapolis-based Eli Lilly, have long dominated the market for diabetes, and specifically insulin, in the U.S. Yet, a widening range of treatment options and greater leverage on the side of payers, has crimped margins and pitted the three companies in a battle for formulary access.
Over the past two months, both CVS Health and United Health — two large pharmacy benefit managers — have removed Sanofi’s top-selling basal insulin Lantus (insulin glargine) from their 2017 formulary lists. In place of Lantus, CVS and United Health will give preferred placement to Eli Lilly and Boehringer Ingelheim’s Basaglar (glargine injection), a cheaper, follow-on biologic of Lantus.
When Basaglar launches in the U.S. this December, it will be the fifth long-acting insulin on the market, joining Sanofi’s Lantus and Toujeo (glargine) and Novo Nordisk’s Levemir (detemir) and Tresiba (degludec).
"Long-acting insulins have become a commodity," said David Kliff, who publishes the industry newsletter Diabetic Investor, in an interview with BioPharma Dive. "In today’s environment, payers have the upper hand when it comes to making deals."
That advantage is translating into pressure on insulin pricing, which all three drugmakers have begun to feel.
Novo has said average net prices for its diabetes drugs, particularly in the basal segment, are expected to be low- to mid-single digit percentages lower next year compared to 2016.
"The market environment is becoming increasingly challenging and contract negotiations [with payers] for 2017 have reflected an intensified price competition," outgoing CEO Sorensen said on a call with analysts in August.
Eli Lilly, which recently committed to averaging 5% revenue growth through 2020, has also baked in intensified pricing pressures in the U.S. to its forecasts. Lilly CFO Derica Rice, speaking on recent earnings call, pointed to increased rebating and discounting for diabetes products as a byproduct of stepped-up competition.
And Sanofi gave guidance last October forecasting its global diabetes sales will decline by an average annualized rate of between 4% and 8% through 2018.
This effect is unsurprising, according to Kliff. "The battle is over formulary placements, which translates into market share, which translates into the potential to make money."
Tresiba vs. Toujeo
With Novo, Sanofi and now Eli Lilly battling for position in the U.S. insulin market, concerns over future growth in diabetes have grown.
Sanofi, for example, typically has been able to count on strong sales from Lantus, which is its top-selling drug and the top-performing basal insulin in the U.S. Over the past three years, Lantus has racked up U.S. sales of €12 billion (nearly $13.5 billion under recent exchange rates).
Those impressive figures are showing signs of slipping, however, falling by nearly 17% over the first six months of the year (in constant exchange rates, year-over-year). Some of that drop has been expected, as patients switch from Lantus to the newer, improved Toujeo. Lower prices have also played a part, according to the company.
Sanofi hopes rapid growth from Toujeo, which currently accounts for 6.1% of the U.S. basal market, can offset flagging performance from Lantus. But it will have to fend off competition from Novo’s recently approved Tresiba, an improved version of Levemir, at the same time as Basaglar threatens Lantus.
Tresiba, which was launched in the U.S. in January, has seized a 2.9% share of total prescriptions in the basal market as of July, and Novo hopes to bump that to a 5% share by the start of 2017.
Novo is banking on new data from two studies which compare Tresiba and Lantus to help it differentiate Tresiba and drive growth. Results released earlier this year showed treatment with Tresiba helped lower instances of hypoglycemia in both Type 1 and Type 2 diabetes patients. A third study, pitting Tresiba against Toujeo, is expected to start in 2017.
"It is our anticipation and our expectation that if we … roll forward to 12 months, 18 months, that we will see a bifurcation of the basal market," said Novo’s Sorensen, discussing his hopes of achieving differentiation for Tresiba on a recent earnings call.
"We have, based on our expectation, that the SWITCH data will be able to improve the label of Tresiba, that we will find Tresiba in a separate category of the basal market. So, this will be our approach to any review that is taking place by the big players," he contended, trying to make the case for Tresiba.
Sanofi and Novo are also both racing to win approval from the Food and Drug Administration for their respective combination insulin products. The FDA has delayed its review for both products by three months, pushing a decision on Sanofi’s combination of Lantus and lixisenatide into November.
"To me, it has become a data arms race. That is why you are starting to see all these new things [measured] in clinical studies," said Kliff. "They are looking for any edge they can get."
"Still an unsatisfied market"
While Eli Lilly hopes Basaglar can wrest revenue from Lantus, Lilly Diabetes Vice President Mike Mason still sees diabetes as an unsatisfied market.
"I think there is much room for innovation to provide better solutions to help people in their daily life meet their goals," Mason said in an interview. "We still see the insulin market [growing] at about 2.7% year on year."
Yet, Lilly could see benefit from its ability to offer a product in each diabetes drug class. With the entry of Basaglar, Lilly will have long- and short-acting insulins, as well as a DPP-4, a SGLT-2 and a GLP-1.
Kliff argues this broad portfolio of diabetes medicines gives the Indianapolis drugmaker an edge in payer negotiations, particularly when Basaglar is likely priced at a discount to Lantus and other long-acting insulins.
"I think we will have some advantages of having a complete portfolio for physicians, payers and patients," Mason said, speaking about the company's continuum of care approach.
So far, with two of three big U.S. payers adding Basaglar to their formularies for next year, Lilly looks to be positioned well. But tighter competition and the corresponding demands for concessions from payers may mean any victory may be less sweet than before.