Editor's note: What market forces or trends will shape the biopharma industry in 2018? In this series, BioPharma Dive's editors take a stab at predicting how the year may unfold for AI, oncology and neuroscience. Read about how AI could shape pharma and why neuroscience could take center stage in drug development next.
Cancer drugs have largely remained unaffected by the still-simmering scrutiny over rising pharmaceutical prices, routinely costing over six figures for a year's treatment.
In classes like hepatitis C and diabetes, a combination of pushback from payers and increased competition have brought down the prices of some drugs. But for oncology, drugmakers retain a free hand to debut new drugs at prices in line or above competitors, even without demonstrably superior efficacy.
Yet that state of affairs could soon change. An influx of "me-too" drugs coupled with a lack of clear differentiation across several key classes could spur fitful price competition. That could open the door for payers looking to rein in costs, through more aggressive use of formularies.
Trying to stand out in a crowded market
Lured by the promise of lucrative returns, biopharmas have invested heavily in oncology R&D, swelling pipelines with product candidates — many following in the footsteps of already approved drugs.
In immuno-oncology, for example, five checkpoint inhibitors are currently approved in the U.S. and a dozen more are in mid- to late-stage testing. While some have first secured regulatory OK in new indications, most have trials ongoing in the same major cancer groupings, such as non-small cell lung cancer.
PD-1/L1 inhibitors approved in the U.S.
|Maker||# of FDA-approved indications||2017 YTD sales, millions||List price, avg. per month|
|Keytruda||Merck & Co.||10||$2,512||$13,200|
|Opdivo||Bristol-Myers Squibb Co.||10||$3,587||$13,480|
|Bavencio||Pfizer Inc, Merck KGaA||2||—||$13,000|
Merck & Co.'s Keytruda (pembrolizumab) and Bristol-Myers Squibb Co.'s Opdivo (nivolumab) are the clear frontrunners in clinical use and commercial success. The jury is still out, however, on how different each PD-1/L1 blocker is from the next. As newer entrants move into the same indications, payers could choose to favor one over the others, inviting competition on rebates, if not on list prices.
A similar dynamic could evolve in a class of ovarian cancer drugs known as PARP inhibitors. AstraZeneca plc's Lynparza staked out the market first, winning U.S. approval in 2014. Clovis Oncology Inc.'s Rubraca (rucaparib) and Tesaro Inc.'s Zejula (niraparib) won regulatory OKs this year, crowding the market with drugs that have so far shown broadly similar efficacy.
PARP inhibitors approved in the U.S.
|Maker||# of FDA-approved indications||2017 YTD sales, millions||List price, per month|
|Rubraca||Clovis Oncology Inc.||1||$39||$13,940|
|Zejula||Tesaro Inc.||1||$65||$15,930 (300 mg) $10,620 (200 mg)|
For drugmakers, the risk is that assets like PD-1/L1 blockers or PARP inhibitors will become viewed as commodities. As more and more patients become eligible to receive these drugs, the crowding queue could trigger price competition in a way that oncology has so far sidestepped.
Avoiding Gilead's doom
Biopharmas will likely turn to two strategies to stave off a race to the bottom. Makers of checkpoint inhibitors have invested heavily in combinations pairing PD-1/L1 blockers with other immuno-oncology medicines or chemotherapy. If one drug can carve out a position as the go-to backbone for combinations, that company will likely be able to evade any payer restrictions that emerge in the coming years.
Merck's deal with AstraZeneca to split rights to Lynparza and develop it in combination with each companies' respective checkpoint inhibitor, for example, looks to fit into that framework.
Many will seek to define benefit in distinct slices of the cancer market, aiming at particular mutations or cancer types where competition is limited by a defined patient group. In many ways, cancer's variety is what has limited the sector-wide battles for market share that have come to define diabetes and inflammatory diseases. Doubling down on that looks like a probable strategy across oncology.
For cancer drugmakers, the fate of Gilead's hepatitis C business is a clear lesson in how quickly competition can erode pricing. When Gilead first introduced its highly effective hepatitis C medicine Sovaldi (sofosbuvir) in late 2013, the drug debuted for a list cost of roughly $1,000 per pill. The Foster City biotech's successor Harvoni (ledipasvir/sofosbuvir) commanded a similar premium and together the two drugs have earned nearly $50 billion since approval.
But similarly effective drugs from first Merck and then AbbVie Inc. have brought prices in the hepatitis C market crashing down, compounding a maturing market. In some irony, what had been an initial catalyst of the current debate over drug pricing has now become the industry's poster child of a competitive market.
Hepatitis C is a dramatically different market than cancer. But Gilead's experience shows that even pharma is susceptible to pricing battles. Expecting oncology to be immune even as newcomers flood in could lead to some unpleasant surprises for drugmakers.