Commercialization

The Food and Drug Administration on Nov. 8 approved a powerful new medicine for weight loss, clearing Eli Lilly’s Zepbound for adults with obesity or who are overweight and have at least one related health condition.

The drug, which was already available to treat Type 2 diabetes under the brand name Mounjaro, is one of a class of medicines known as GLP-1 agonists that have revolutionized the treatment of obesity. Demand for these drugs is already sky-high and outstripping the ability of their makers, most prominently Lilly and rival Novo Nordisk, to supply them.

“Obesity and overweight are serious conditions that can be associated with some of the leading causes of death such as heart disease, stroke and diabetes,” said John Sharretts, head of the FDA’s division for diabetes, lipid disorders and obesity, in a statement from the agency. “In light of increasing rates of both obesity and overweight in the United States, today’s approval addresses an unmet medical need.”

According to statistics from the National Institutes of Health, nearly 1 in 3 adults in the U.S. are overweight, while more than 40% have obesity. Excessive weight is associated with a range of other health conditions, including diabetes and heart disease.

GLP-1 agonists activate a receptor for a gut hormone of the same name, and are thought to work by reducing appetite and slowing gastric emptying.

While early versions of GLP-1 agonists had only modest effects, newer drugs like Wegovy, Mounjaro and Novo’s Ozempic offer better blood sugar control and more substantial weight loss. Their success has helped make GLP-1 therapies a dominant treatment type for metabolic disease, one that could possibly surpass insulin in global sales by the end of the decade.

Tirzepatide, the drug ingredient in Mounjaro and Zepbound, also stimulates another receptor known as GIP.

GLP-1 agonists’ benefit might not end with blood sugar and weight. Novo has reported trial results showing Wegovy can prevent heart related complications, which could help persuade insurers reluctant to cover the drug’s cost. The company has also recently released data showing Ozempic, which contains the same ingredient at a different dose, can help treat kidney disease.

The cardiovascular data for Wegovy is set to be presented at the American Heart Association’s annual meeting this weekend.

While Zepbound and Wegovy haven’t been tested head-to-head, Lilly’s data suggest its drug might lead to greater weight-loss. In clinical trials, Wegovy-treated participants lost between 10% and 16% of their body weight.

Lilly ran two large clinical trials testing Zepbound in overweight and obese people who either had or didn’t have diabetes. Results showed patients treated with the highest approved drug dose lost about 12% to 18% of their body weight.

In approving Zepbound, the FDA put a safety warning for severe gastrointestinal disease on the drug’s labeling — a caution that Wegovy did not receive. Both drugs carry black box warnings for the risk of thyroid tumors due to preclinical findings in rats, although it’s not clear if that risk is also present for humans.

Wegovy sales have risen fivefold this year, reaching 21.7 billion Danish krone, or about $3.1 billion over the first nine months of the year. Sales for Ozempic, a Novo GLP-1 drug approved for Type 2 diabetes treatment but used off-label in weight loss, were up 58% to over $9 billion.

Lilly, meanwhile, said Mounjaro sales were $3 billion during the first nine months of the year. The drug’s financial success to date, and prospect for greater revenue in the future, has helped make Lilly the most valuable pharmaceutical company, lifting its market value to nearly $600 billion.

Lilly said it will sell Zepbound for $1,059 per month at list price, about 20% less than what Novo charges for its rival drug Wegovy. The prices don’t account for rebates and discounts the companies offer to insurers, which can result in a much cheaper net price.

So far, Wegovy supply has been limited by manufacturing constraints, and remains restricted at the starter doses in order to ensure treatment for people already established on treatment.

Lilly has sought to prepare for high Zepbound demand. “We’re not at all happy with the capacity we’ve announced already. This is really all hands on deck,” CEO David Ricks told analysts in early November.

Eli Lilly has asked for approval of Zepbound in Europe, China, the U.K. and in several other countries. 

Novo Nordisk and Eli Lilly in early Nobember reported strong sales growth for their rival GLP-1 metabolic disease drugs, setting up a 2024 showdown between the latter company’s drug Zepound and Novo’s Wegovy.

Both companies cautioned about potential supply constraints, however. Wegovy still has limited availability at the starter dose, and Lilly CEO David Ricks said there is a need to increase manufacturing capacity “pretty dramatically from the current levels.”

Wegovy sales jumped nearly five-fold to 21.7 billion Danish krone, or about $3.1 billion, through the first nine months of this year, according to Novo. Sales of Ozempic, which is approved as a diabetes drug but used off-label in weight loss, were 65.7 billion krone, a 58% rise.

The performance of those products has been strong enough that Novo has raised its guidance for the year three times. The company now expects total sales growth between 32% and 38% for the year, with operating profit growth of between 40% and 46%.

Lilly revealed equally promising sales numbers for Mounjaro, which is approved as a blood sugar-lowering agent for people with Type 2 diabetes. Zepbound, which was approved a week in the U.S. after Lilly’s earnings, is for weight loss. 

Sales of the dual-acting drug were $3 billion for the first nine months of 2023, which will be its first full year on the market. It is now Lilly’s second-biggest seller after another GLP-1 drug called Trulicity, sales of which have declined as Mounjaro’s have grown.

Novo and Lilly’s rivalry could be intensified by recent, positive clinical trial results that found Wegovy helped prevent heart attacks and strokes in overweight patients. The Danish drugmaker has asked the FDA to include heart protection in its drug’s label, and further data from that trial evaluating Wegovy as a preventive cardiovascular medicine are expected to be released at the American Heart Association meeting on Nov. 11.

Novo has also boosted its case for Ozempic in diabetes with data indicating it protects kidney health. That is in response to data suggesting Zepbound is more effective at lowering blood sugar in diabetes and shedding pounds.

Supply remains a challenge for both companies as strong uptake continues. Manufacturing issues have slowed Wegovy’s launch, and the lower doses used to start patients remain restricted to ensure that people who have reached maintenance doses continue to have access.

Yet Novo executives argue these hurdles are not slowing their drug’s potential. With the raised guidance throughout the year, “it feels like we have released the handbrake and are moving at very high pace in terms of growth rates,” said CFO Karsten Munk Knudsen in a November call with analysts.

On a Nov. 2 call with analysts that accompanied Lilly’s third-quarter results announcement, CEO Ricks acknowledged “we're not at all happy with the capacity we've announced already. You'll see more.”

“This is really all hands on deck,” he said.

At the start of the last decade, big pharma was getting smaller. Blockbuster medicines that had fueled years of growth were losing patent protection, exposing the industry’s largest companies to generic competitors. The resulting impact was so substantial it temporarily stalled the relentless upward march of U.S. drug spending.

Today, big drugmakers are facing an even larger “patent cliff,” with more than $200 billion in annual revenue at risk through 2030. But this time around, many of the brand name drugs losing market exclusivity are biologic products, manufactured from living cells, rather than the chemical pills that previously dominated the ranks of pharma top-sellers.

These biologic drugs, like AbbVie’s anti-inflammatory treatment Humira and Merck & Co.’s top-selling cancer medicine Keytruda, will face competition from so-called biosimilar drugs that, unlike generics, may not be as easily substitutable. Still, it will be a treacherous period for drugmakers to navigate, as they will need to replenish their research pipelines and carefully manage new product launches to replace lost revenue.

“This is of tectonic magnitude,” Arda Ural, health sciences markets leader at the consultancy EY. The looming patent expirations "capture most blockbusters," he added.

Besides Humira and Keytruda, drugs like Bristol Myers Squibb’s immunotherapy Opdivo, Johnson & Johnson’s immune disease medicine Stelara and Regeneron’s eye treatment Eylea will reach the end of their patent protection this decade.

The launch of Amgen’s copycat version of Humira in January was a start of sorts for this looming industry-wide patent cliff. Half a dozen other Humira biosimilars arrived by mid-year. As a result, U.S. sales of the drug, which totaled $18.6 billion in 2022, are predicted to steadily shrink.

A different sort of cliff

The pattern of sales decline for Humira and other blockbuster biologics like it is expected to be different for several reasons, though.

Many biosimilars won’t be interchangeable, or directly substitutable, by pharmacists, for example. Physicians, meanwhile, may be reluctant to switch patients who are stable on the branded drug, meaning that initially it will be newly diagnosed patients with chronic diseases who are most likely to receive biosimilars. And because biosimilars are more expensive to develop and make, their manufacturers won’t be able to afford cutting prices by nearly as much as with generic pills.

“If you track the sales of a typical small molecule that goes generic it really goes off the cliff — 80% of the market can be gone in 30 to 90 days and the price goes down even more,” said Richard Kelly, a senior partner with the law firm Oblon, McClelland, Maier & Neustadt who specializes in life sciences intellectual property.

“[Biosimilars] have to be sold,” he added. “[Salespeople] have to go around to the doctors to sell a drug. It’s just another product in the detail-man’s bag.”

Take the statin Lipitor, once the world’s most lucrative drug. Sales fell from nearly $11 billion in 2010, the year before it faced generics in the U.S., to $4 billion in 2012. Pfizer’s overall revenue fell from $68 billion to $59 billion over the same period.

In the case of Humira, the fall is expected to be more gradual, with the company forecast to retain more than one-third of its 2022 U.S. revenues in 2024 and hold onto more than $2 billion through 2030, according to Evaluate Pharma.

The impact will be felt, nonetheless: AbbVie and analysts alike expect company-wide revenue to fall for at least a year because of Humira competition. And AbbVie executives recently indicated sales are likely to be sluggish in 2024, too, walking back earlier predictions that the company would see a return to growth then.

Humira’s sales erosion will be closely watched throughout the industry as executives and investors try to understand the long-term effects of biosimilar entry. Early biosimilars didn’t impact prices the way that payers and lawmakers had hoped, in part because there weren’t many of the copycat drugs. (While 42 biosimilars are now approved in the U.S., only a little more than two dozen are available on the market.) Branded drugmakers also successfully used contracts and rebates to stave off competition.

However, analysts and industry experts believe the sheer number of Humira copycats and the entry of interchangeable products will allow them to take share from AbbVie.

The chief question facing AbbVie is how quickly it can recover through two replacement products: Skyrizi for psoriasis and Crohn’s disease, and Rinvoq for rheumatoid arthritis and several other inflammatory disorders. The company has upgraded its forecasts for both drugs, which it now says will earn $21 billion combined in 2027, approximately equalling Humira’s peak sales.

One major reason Humira achieved its massive sales was the many different autoimmune disorders for which it gained approval. With follow-on biologic drugs, however, the incentives to do so may be limited by the Inflation Reduction Act, which gives the federal government the power to negotiate lower prices within Medicare, said Mara Goldstein, Mizuho Securites’ senior biopharma analyst.

“We’re living through this real time and it’s a little challenging,” she said. “Does it truly create a disincentive to develop indications? Will companies continue to invest in new clinical trials right up to patent cliffs? How does [the law] change the value of dollars invested over time?”

New lessons to learn

AbbVie followed the lessons of the previous patent cliff by merging with Allergan in a 2019 deal that gave it enough new revenue to withstand the expected erosion of Humira's sales. Its approach was similar to large pharmaceutical companies’ strategy ahead of the 2010s patent cliff, which spurred the megamergers of Pfizer with Wyeth and Merck with Schering-Plough.

Megamergers might not be the answer this time, however. For one, current pharma executives have expressed reluctance to do big deals because of the complexity of combining two companies. There is debate, too, over the effects such deals have on market valuation and R&D productivity afterwards.

Another reason is that, after years of industry consolidation, there are not many major large drugmakers left as attractive merger targets. Those that remain have patent cliffs of their own, Goldstein said.

Instead, the hunt for new products will either be in big drugmakers’ own laboratories or in those of smaller biotechnology companies. By having two successor blockbusters already in waiting, AbbVie has shown it can execute on the former approach.

Yet, across the industry, big drugmakers’ “R&D productivity is not necessarily corresponding to the R&D investment,” Ural said. R&D productivity and returns have, with a few exceptions, steadily declined each year over the past decade, according to data from both IQVIA and Deloitte.

Meanwhile, in biotech, “there may not be enough assets out there,” Ural added. “It’s going to be a fight for established assets, of which there aren’t that many.”

That fight will be fueled by large cash holdings. Jefferies analyst Michael Yee estimates big drugmakers have $500 billion in cash to spend on acquisitions and other pipeline-building transactions. Small and mid-sized biotechs have simultaneously seen their valuations drop, limiting their financial options, Yee wrote in a Feb. 5 note to clients.

The experimental drugs large pharma companies chase, through acquisition, licensing or inside research, might need to be different, too. They could find advantages in development platforms that can generate multiple new medicines like messenger RNA, gene editing or next-generation antibody technology, or in drugs that have promise across multiple indications.

Humira-sized blockbusters may become harder to achieve, though, which will change how drugmakers develop and commercialize new products, said Bill Coyle, global head of biopharma at consulting firm ZS. AbbVie, for example, needs two drugs — Sykrizi and Rinvoq — to replace sales of Humira.

“I think we’re potentially entering an era of fewer blockbusters and a lot more smaller products,” he said. “The other shift for many of the big pharmas is that their cadence of launch needs to be more efficient and frequent. They need to become more effective launchers of new assets.”

Patent thicket-ing

For drugs further from patent expiration, extending the date of generic or biosimilar entry through the construction of a “patent thicket” is another tactic drugmakers are pursuing. By surrounding Humira with dozens of patents in the U.S., for example, AbbVie pushed off biosimilar entry by seven years after the drug’s principal patent expired.

Others in the industry are seeking to do the same. Merck is testing a subcutaneous version of the intravenous Keytruda, which could potentially merit a separate patent and extend its market exclusivity by years.

A trial of subcutaneous Keytruda in lung cancer is due to deliver results this year. While subcutaneous Keytruda would likely still be delivered by physicians, it could be more convenient. “It’s not the same as having to get an IV, where you have to sit in a chair for an hour or two,” Kelly said.

Other drugmakers sought to push out the entry of biosimilars using this strategy, including Johnson & Johnson with its multiple myeloma medicine Darzalex and Bristol Myers with its Keytruda rival Opdivo.

Already, Bristol Myers has benefited from such intellectual property practices with its medicine Revlimid. The blood cancer drug’s exclusivity was protected by patents held by its original developer, Celgene, that were strong enough to keep most generic competition at bay through 2026. That will give Revlimid, a small molecule drug, a pattern of sales decline that looks more similar to biologic drugs, at least for a few years.

Tahir Amin, founder and executive director of the Initiative for Medicines, Access & Knowledge and a critic of pharma companies’ intellectual property practices, said he expects drugmakers with approaching cliffs to use late-earned patents to delay competition.

Striking limited distribution deals with copycat drugmakers, as Celgene did with Revlimid, could also be a tactic to stave off government drug price negotiation, because the Inflation Reduction Act limits that authority to only those products with no competition.

“At the end of the day the patent system is going to define how they shape the market,” he said.

The Federal Trade Commission has dropped its challenge to Amgen’s $27.8 billion acquisition of Horizon Therapeutics after the drugmaker committed it will not use “bundling” practices to win favorable insurer contracts for Horizon’s gout and thyroid disease medicines, the federal government announced in September.

A special FTC monitor will review Amgen’s contracts with insurers to ensure that rebates for older Amgen drugs like Enbrel aren’t conditioned on agreements to give Horizon’s products Krystexxa and Tepezza advantageous positions on formularies. The antitrust regulator argues such agreements are anticompetitive and raise prices for consumers.

If confirmed, the proposed agreement would avert a battle in federal court testing the FTC’s new theory of how concentration in the pharmaceutical industry can harm consumers. In the past the FTC typically objected to acquisitions when both the buyer and the target company owned competing drugs, such as when Celgene was forced to sell its psoriasis drug Otezla to merge with Bristol Myers Squibb.

The settlement will likely reassure many in the pharmaceutical sector, as executives and investors had feared an activist FTC might seek to block more acquisitions — one of the key ways big drugmakers build their pipelines and a major draw for investors in pre-commercial biotechs.

“We think the broader industry is breathing a collective sigh of relief that M&A — a critical component of this sector’s innovation recipe — has indeed not been outlawed,” Christopher Raymond, an analyst at Piper Sandler, wrote in a note to clients.

Amgen insisted that it had no plans to use rebates for its other drugs to get Krystexxa, a gout treatment, and Tepezza, for thyroid eye disease, into preferred formulary positions.

“This narrow assurance, formalized in the consent order with the FTC, will have no impact on Amgen’s business,” the company said in a Friday statement. Amgen expects the deal to close sometime in the fourth quarter, hinting at a faster timeline as the company had previously anticipated a mid-December close.

What the FTC won was the ability to verify that pledge, through the appointment of a compliance monitor who will review insurer contracts within 30 days of signing. Amgen employees involved in the commercialization of the two drugs will be required to review the consent order annually and acknowledge that they understand and are in compliance.

Amgen will also need to notify the monitor if Tepezza or Krystexxa, which are intravenous drugs infused at hospitals and other healthcare facilities, gain approval as self-administered drugs and are eligible for coverage under insurers’ pharmacy benefit plans.

The consent order requires Amgen to seek FTC permission to buy any company involved in the marketing of products or development of experimental drugs to treat thyroid eye disease or gout.

The FTC signaled in August that a settlement might be coming when it, urged on by a judge, withdrew an administrative complaint. The agreement announced in Septembmer may have been hastened by an approaching federal court date on a motion by FTC. Some state attorneys general were also seeking an injunction against the merger. As part of the agreement, the FTC and attorneys general will dismiss that court case.

Taking on one of the world’s most lucrative drugs isn’t easy. The problem is so thorny that, among the companies challenging AbbVie’s arthritis treatment Humira with low-cost copies in the U.S., several strategies have emerged in the first months of direct competition.

The manufacturers of these generic biologics, or biosimilars, are battling to gain a place on insurers’ coverage lists. Success could mean a bigger slice of the $19 billion in U.S. sales that Humira earned AbbVie last year.

So far, most have chosen to price their biosimilar Humiras at only a small public discount, banking instead on offering insurers rebates in private negotiations. A few are trying something more radical with steep upfront price cuts.

The contrasting tactics highlight the intricacy of U.S. drug pricing, as well as reasons for why biosimilars have so far disappointed in making expensive biologic medicines more affordable and accessible to patients. That promise has, with a few exceptions, not materialized as quickly or as broadly as had been hoped.

Price split

While generic copies of pharmaceutical pills typically enter the market at prices well below their branded competitor, the same hasn’t been true of biosimilars.

Four of AbbVie’s new challengers have set a discount of just 5%, betting that behind-closed-door negotiations with insurer middlemen known as pharmacy benefit managers will result in rebate deals sufficient to gain coverage.

Two launched their copies at deep discounts to Humira, as low as 15% of the drug’s nearly $7,000 list price for a four-week supply.

Others, though, are hedging their bets. Amgen, Biocon and Sandoz have all gone with high- and low-price products to suit different types of healthcare buyers. (Amgen, which was the first to launch a biosimilar Humira in January, chose a narrower split than Biocon and Sandoz did.)

“There are definitely some dynamics here that are creating an obvious divide,” Fran Gregory, vice president of emerging therapies at pharmaceutical distributor Cardinal Health. “It’s highly influenced by the payers and PBMs.”

Boehringer Ingelheim, which launched its biosimilar at a 5% discount to Humira, claims it is “competitively priced.” Called Cyltezo, Boehringer’s drug is the only biosimilar approved so far as an “interchangeable,” or able to be substituted directly by pharmacists without a specific prescription.

“We recognize the potential benefits of a two-price strategy and are pursuing this approach for implementation in 2024,” said Stephen Pagnotta, Boehringer’s biosimilar commercial lead, in an email. “This approach will allow us to provide different pricing options to meet the diverse needs of patients and improve accessibility.”

Competitive lessons

Pharma companies will be watching the post-monopoly market for Humira closely, in part because no biologic drug has faced so much competition in such short order.

How pricing for Humira biosimilars shifts over time may carry wider lessons as more biologic copycats pour onto the market in the coming years. For AbbVie, the competitive balance could determine whether the sales decline it expects results from lower prices it can match, or whether it loses volume it can’t replace.

Christopher Raymond, an analyst at Piper Sandler, recently surveyed around 400 physicians, and concluded Humira is currently retaining market share in rheumatoid arthritis, its main indication. According to the findings, declining use of the drug in digestive and skin conditions has been offset by a new product, Skyrizi, that AbbVie introduced as a Humira successor.

“Based on this feedback, while price is clearly a drag on this franchise, we think Humira as a brand is likely to be stickier than investors may anticipate,” Raymond wrote in a July 20 note to clients.

Such scenarios have been commonplace with biosimilar launches. Inflectra, an alternative to Johnson & Johnson’s Remicade and one of the first biosimilars launched in the U.S., struggled to make headway when it first arrived. Its maker, Pfizer, eventually sued J&J alleging anticompetitive practices. They settled the case in 2021.

Over time, competition has had more of an impact. Nearly seven years after the launch of Inflectra, the average sales price of Remicade and its biosimilars has dropped by 68%, according to a report from biosimilar manufacturer Samsung Bioepis. Biosimilars now account for nearly half of the market.

Other factors may play a role, too. According to Samsung, biosimilars of cancer treatments have made greater inroads more quickly than those for immune-related disorders, like Humira and Remicade. Lookalikes to Roche cancer drugs Avastin and Herceptin have taken, respectively, 85% and 83% market share, for instance.

That’s due in part to “value-based” payment models, which reward doctors for reducing overall costs. Autoimmune drugs like Humira and Remicade are also taken for many years, making it harder to switch patients stable on branded drugs to a biosimilar.

“Providers are ready, able and willing to prescribe biosimilars to patients who are naive to treatment,” said Gregory. But branded products may be harder to replace among patients already taking them. Many of those drugs remain on PBM formularies, she said.

PBM choices

Two of the three largest PBMs in the U.S., Cigna Healthcare’s Express Scripts and United Healthcare’s Optum, have already updated their coverage lists in the wake of Humira biosimilars launching.

Both Express Scripts and Optum chose Cyltezo and Novartis’ Hyrimoz, along with an unbranded Novartis product, to add to their earlier selection of Amgen’s biosimilar.

In a statement, Aetna’s CVS Caremark said it is “reviewing the availability of additional entrants and plan[s] to recommend coverage of one or more of these products.”

The choices PBMs make can significantly impact consumers’ out-of-pocket costs. For example, they can end up paying more for deeply rebated products because cost-sharing is sometimes based on drugs’ list price. In response, policymakers have called for greater transparency into PBM practices and how they pass on rebates.

“The PBMs have a financial model that they’ve been living with for years,” Gregory said. “That financial model will not change overnight. But I think it will change over time.”

The Food and Drug Administration in early July awarded a full approval to the Alzheimer’s disease treatment Leqembi, a decision expected to significantly increase use of the therapy and, potentially, others that work like it.

Developed by partners Eisai and Biogen, Leqembi received a conditional approval early in 2023. FDA staff concluded the drug was reasonably likely to provide some level of benefit to patients, based on results from a roughly 850-person study that showed sharp reductions of a protein many researchers believe to be the root cause of Alzheimer’s.

Insurers haven’t been convinced, however. Medicare, the government program covering the majority of U.S. patients with the disease, has in place a policy strictly limiting access to Alzheimer’s medicines that were given conditional approval and target that protein of interest, known as “amyloid beta.”

Medicare’s policy has curbed the use of both Leqembi and an earlier drug from Eisai and Biogen, Aduhelm, as it requires patients to be enrolled in a randomized clinical trial in order to get these therapies. The pushback has been so intense that Aduhelm, once pegged by Wall Street as a blockbuster product, generated only a few million dollars in its first full year on the market.

Eisai and Biogen have another shot at a multibillion-dollar Alzheimer’s drug with Leqembi, especially now that the FDA has granted full approval. The agency’s decision hinged on results from a larger, more recent clinical trial that found cognition and function declined 27% slower among participants who received Leqembi as opposed to a placebo.

“Today’s action is the first verification that a drug targeting the underlying disease process of Alzheimer’s disease has shown clinical benefit in this devastating disease,” said Teresa Buracchio, acting director of the FDA office that reviews neurological disease drugs, in a statement. “This confirmatory study verified that it is a safe and effective treatment for patients with Alzheimer’s disease.”

Medicare has said it will provide broader access to amyloid-targeting Alzheimer’s therapies that receive full approvals, though restrictions will remain. In particular, coverage would be contingent on patients and their doctors agreeing to participate in registries that collect data on how these treatments work in the real world.

While some Alzheimer’s groups and experts have criticized these proposed requirements as overly burdensome, Medicare last month emphasized any registry would be free and easy to use.

That would bode well for Leqembi’s uptake, according to Brian Skorney, an analyst at the investment firm Baird.

In a recent note to clients, Skorney wrote that the registry is a “minimal barrier for physicians who treat Alzheimer’s disease to prescribe Leqembi to their patients [and] reflects positively on the potential near-term success” of the drug.

Analysts at RBC Capital Markets have predicted Leqembi, which is currently priced at $26,500 per year, could at its peak reach $10 billion in annual sales. Eisai, meanwhile, has said it anticipates at least 10,000 patients in the U.S. will be on the drug by the end of the company's 2023 fiscal year.

But how quickly sales increase will depend on Eisai and Biogen’s ability to address certain challenges. Estimates hold that roughly 6 million people in the U.S. have Alzheimer’s of any stage. If even a relatively small fraction are cleared to use Leqembi — a drug administered via an hour-long intravenous infusion every two weeks — the volume could overwhelm Alzheimer’s treatment centers.

Additionally, treatment with Leqembi requires considerable testing. To be eligible for the drug, patients must be positive for disease-causing amyloid beta and be diagnosed with either mild cognitive impairment or mild dementia due to Alzheimer’s. They also must undergo at least several MRIs before and during treatment to scan for “ARIA,” a known side effect of amyloid-target therapies that presents as swelling or micro-bleeding in the brain.

In the larger study that led to Leqembi’s full approval, around one-fifth of participants on the drug experienced ARIA. There were also three deaths in an extension portion of the study in which all participants received Leqembi. Researchers observed brain bleeding in two of those patients, and a “possible cerebrovascular accident” and severe ARIA in the third.

Leqembi's new label includes a boxed warning — the most significant kind of warning a drug can carry — alerting patients and doctors to the potential risks associated with ARIA.

The safety risks have fueled debate among doctors about whether Leqembi is a net-positive for patients. Some see it as the most effective option yet for slowing a devastating disease, while others believe it offers marginal benefits at best.

According to Constantine Lyketsos, director of the Memory and Alzheimer’s Treatment Center at Johns Hopkins Medicine, Leqembi is “doing better than the placebo, but not much better.”

In an interview earlier in 2023, Lyketsos argued there appears to be a ceiling of effectiveness for even the more promising anti-amyloid drugs. Because of those limits, and the potential side effects, he said he is “certainly going to be very conservative at first” when prescribing medicines like Leqembi.

Costs may also be a concern for prescribers and patients. Medicare expects members on its original plan to pay 20% coinsurance of the Medicare-approved cost for Leqembi once they meet their Part B deductible. That could leave some patients on the hook for hundreds or thousands of dollars.

Medicare noted in a statement that costs may differ depending on whether patients have supplemental coverage or secondary insurance, or if they're enrolled in a Medicare Advantage plan.

“With FDA’s decision, [the Centers for Medicare and Medicaid Services] will cover this medication broadly while continuing to gather data that will help us understand how the drug works,” said CMS Administrator Chiquita Brooks-LaSure.

Bristol Myers Squibb on Oct. 26 trimmed its expectations for sales of its newer medicines, predicting sales will grow more slowly over the next several years than it previously forecast.

The pharmaceutical company now anticipates its new product portfolio to bring more than $10 billion in revenue by 2026, adjusted from a prior guidance of between $10 billion and $13 billion in 2025.

Bristol Myers shared the update alongside third quarter earnings that showed a 2% decline in revenue compared to same period in 2022, largely due to sliding sales of the company’s cancer drug Revlimid. The widely used multiple myeloma medicine now faces generic competitors in the U.S., as well as Europe.

New drugs like the anemia treatment Reblozyl, heart therapy Camzyos and multiple sclerosis medicine Zeposia are meant to cushion that financial blow, so the guidance change is a notable adjustment.

While investors were expecting declines from Revlimid, Bristol Myers’ new product sales came in below analyst forecasts. In particular, sales of Reblozyl, Camzyos and cancer cell therapy Abecma missed expectations.

Abecma, which had 13% lower sales between July and September than the same period last year, faces competition from a rival cell therapy from Johnson & Johnson and Legend Biotech. Bristol Myers has also had challenges with manufacturing the drug, which the company said it has made progress resolving. 

Third quarter sales of Sotyku, a new psoriasis pill approved late last year, surpassed consensus forecasts, according to a client note from Leerink Partners’ David Risinger.

Still, Christopher Boerner, Bristol Myers’ commercial head, told investors on an Oct. 26 call that, while sales of Camzyos and Sotyktu have risen, growth has been slower than the company anticipated. Abecma and Zeposia, meanwhile, have “lagged expectations.” 

“The commercial team is laser focused on building on the momentum of performance in the quarter and, importantly, accelerating performance where necessary,” Boerner said. “We are also further increasing our investment behind selective brands to ensure performance accelerates.”

In addition to declining sales of Revlimid, Bristol Myers also faces the threat of U.S. government negotiation on the Medicare price of it and Pfizer’s blood thinner Eliquis. Bristol Myers has sued to block the government’s new program, which was put in place by last year’s Inflation Reduction Act.

Thursday’s earnings call was the last for Bristol Myers CEO Giovanni Caforio. The executive retired on Nov. 1, handing leadership of the company to Boerner.

One of Caforio’s last acts as CEO was Bristol Myers’ proposed $4.8 billion acquisition of cancer drug developer Mirati Therapeutics, announced in October. 

“We’re as confident as we have been on the long-term growth profile of the company,” said Boerner. “The focus right now is around executing on the commercial side, continuing to move the pipeline forward and ensuring that we’ve got the right focus on bringing innovation in externally with business development.”

Sanofi will split off its consumer health business as soon as the end of next year, the company said Oct. 27, following a trend of large pharmaceutical companies moving away from over-the-counter products to focus on higher-profit novel medicines.

The announcement of the planned divestment came as the Paris-based drugmaker outlined third quarter earnings and a near-term outlook that disappointed investors. In the third quarter, revenue and per-share earnings were below analyst forecasts, declining from the same period a year prior. Executives forecast continued earnings declines in 2024 due to higher tax rates.

Sanofi’s Paris-listed shares declined by nearly 20% following the announcement, erasing about $20 billion in market value, or roughly the equivalent of BioNTech’s entire capitalization.

In recent years, Novartis, GSK, Pfizer and Johnson & Johnson have hived off consumer health units and bet their futures on innovative drugs emerging from their own laboratories or through licensing deals and biotech buyouts.

Sanofi, which owns consumer brands like IcyHot, Allegra and Gold Bond, is making the spinout part of its “play to win” strategy. The company said the shift will provide “greater management focus and resource allocation to the needs of the biopharma business.”

Executives are weighing how best to divest the consumer health unit, but stated “the most likely path” would be the creation of a publicly listed company headquartered in France through an initial public offering or other capital markets transaction.

The separation would leave the company with a biopharma portfolio of specialty care, general medicine and vaccine products that collectively earned 10.7 billion euros, or $11.4 billion, in the third quarter 2023. By comparison, the consumer health business brought in 1.2 billion euros.

Sanofi’s top seller remained the fast-selling eczema and asthma drug Dupixent, part of its longstanding collaboration with Regeneron, which brought in 2.8 billion euros in revenue.

The overall growth from its biopharma drugs was weighed down by major products that have lost market exclusivity, including most recently the multiple sclerosis drug Aubagio. The biopharma division’s revenue grew 3.1% in the third quarter over the same period in 2022 when the effects of currency exchange rates were excluded, while the consumer division grew 4.6%.

With changing currency exchange rates, however, revenue fell 4% over 2022, a larger loss than Wall Street analysts anticipated. Moreover, quarterly per-share earnings of 2.55 euros was lower on a reported and currency-adjusted basis over 2022 and also less than analysts had forecast.

Executives expect the per-share earnings decline to continue into 2024 at “low single-digit” rates, in part because of a predicted two-point rise in taxes to 21%, before a “strong rebound” in 2025.

The separation of consumer health will help drive that rebound, the company said, along with cost savings and a focus on new products. The company hopes to save some 1.3 billion euros by improving procurement practices, centralizing research and development in hubs and focusing R&D and technology platforms.

Another 700 million euros will be shifted from oncology R&D to immunology, an area of medicine in which Sanofi has had more success. Sanofi has already made some big bets in this area, committing $500 million to an inflammatory digestive disease drug partnership with Teva and $125 million to private company Recludix for another experimental inflammation drug.

Medicare will negotiate the prices of top-selling drugs for blood clots, diabetes, cancer and arthritis, flexing newly granted authority that for the first time allows the insurance program to use its market power to lower the cost of certain medicines.

On Aug. 29, the Biden administration released a list of 10 drugs that will be included in the first round of negotiations, which will run over the next year and produce prices that take effect in 2026. Among the drugs on the list are the widely used blood thinners Eliquis and Xarelto, which made their respective makers more than $10 billion in U.S. sales last year, as well as the diabetes treatments Januvia and Jardiance.

The list also includes AbbVie and Johnson & Johnson’s leukemia drug Imbruvica, Amgen’s anti-inflammatory therapy Enbrel and Novartis’ heart failure medicine Entresto. Rounding out the initial 10 were AstraZeneca’s Farxiga, J&J’s Stelara and Novo Nordisk’s insulin aspart, which is sold under the brand names Fiasp and Novolog.

More than 8 million people covered by Medicare used the drugs between June 2022 and May 2023, according to a fact sheet provided by the Centers for Medicare and Medicaid Services, or CMS. Gross spending over the period surpassed $50 billion, or about 20% of prescription drug costs under the so-called Part D benefit.

The list’s announcement moves forward an effort to expand the federal government’s role in determining what drugmakers can charge for their products. Democrats gave Medicare its new negotiation powers via last year’s Inflation Reduction Act, which passed Congress along party lines.

Known as the IRA for short, the law fulfilled policy goals long-sought policy goals held by Democrats. But its drug pricing provisions, which also cap out-of-pocket costs on insulin for people in Medicare, are popular among voters of both parties.

“For far too long, Americans have paid more for prescription drugs than any major economy,” President Joe Biden said in a statement. “And while the pharmaceutical industry makes record profits, millions of Americans are forced to choose between paying for medications they need to live or paying for food, rent, and other basic necessities. Those days are ending.”

For the pharmaceutical industry, the IRA was a significant — and rare — political defeat after years of fiercely contesting any legislative attempt to regulate drug pricing in the U.S.

Six large drugmakers, along with the powerful lobby PhRMA, have since sued to block the law and its implementation in lawsuits filed over the past two months. They claim the law is unconstitutional and, rather than setting up a process of negotiation, unfairly compels drugmakers to accept terms set by the government or endure ruinous fines.

“Although drug companies are attempting to block Medicare from being able to negotiate for better drug prices, we will not be deterred,” Xavier Becerra, head of the Department of Health and Human Services, said in a Tuesday statement.

To determine the 10 drugs included in Tuesday’s list, Medicare was directed to identify the medicines on which it spent the most under Part D, which covers products taken outside of a doctor’s office. Therapies with generic competitors were not eligible, nor were products approved within a certain number of years.

By next February, CMS will send an initial price offer to the companies, which then have one month to counteroffer. Further meetings can then take place, with CMS announcing the “maximum fair price” it ultimately determines by Sept. 1, 2024.

Those prices will take effect Jan. 1, 2026, and remain in place until a drug becomes ineligible for the program, such as when a generic competitor enters the market. For some of the initial 10 selected that may be quite soon. Januvia, for instance, is protected from competition until May 2026, per Merck’s most recent annual filing.

Medicare will select more drugs for negotiation each year, eventually including Part B medicines and expanding to 20 per year from 2029 onward.

The minimum discount required under the IRA varies based on a drug’s years on market, but must be at least 25%. However, it’s unclear exactly how the resulting savings will be used. Some people covered by Medicare could benefit from lower coinsurance based off a drug’s price, as well as reduced liability during their deductible phase. Savings might also help reduce premiums.

“There is no specific guarantee within the law that any of the savings the government derives from the so-called negotiations will be passed on to patients,” said Catherine Owen, U.S. commercial general manager for Bristol Myers Squibb, which sells Eliquis along with Pfizer.

Bristol Myers and its pharmaceutical peers have also warned the law will impact their investment in drug research and development, and push them to prioritize biologic medicines over chemical pills.

Some, such as Novartis and Eli Lilly, claim they’ve already made decisions to sideline certain programs because of how the law limits the time in which they can earn money on newly approved products.

According to Owen, Bristol Myers recently decided against running a lengthy study of an experimental small molecule drug called iberdomide in newly diagnosed multiple myeloma because of the IRA’s negotiation timeline.

People with the blood disorder sickle cell are anticipating the arrival of two gene therapies that could dramatically reshape their disease, potentially offering something approaching a cure.

Insurers, too, are preparing for the treatments, which are expected to carry price tags in the seven figures. While five other expensive gene therapies are already available in the U.S., sickle cell is far more prevalent than the inherited diseases they treat, affecting an estimated 100,000 people in the country. Many are covered through Medicaid, the federal insurance plan for people with limited income.

An experimental model proposed by the Centers for Medicare and Medicaid Services in February could help state agencies better afford those medicines, as well as offer a testing ground for payment schemes that could apply to other pricey gene therapies. Yet the timeline for its implementation might mean it comes after the first sickle cell gene therapies reach market.

“Sickle cell is a call to action,” said Michael Sherman, chief medical officer of Point32 Health, the parent company of Harvard Pilgrim Health Care and Tufts Health Plan.

“Without these kinds of models, we’re going to see access issues,” he added. “The Medicaid state agencies, like other parts of the financing system, were never designed with this sort of upfront shock.”

The gene therapy model is one of three pilot programs CMS will test in the coming years in response to an executive order from President Joe Biden directing the agency to find further ways to lower prescription drug costs. Administration officials described these programs as building on last year’s Inflation Reduction Act, which gave Medicare the authority to negotiate prices for a limited number of drugs.

Under the gene therapy model, state Medicaid agencies could delegate authority to CMS to coordinate multistate frameworks to pay for gene therapies based on how much patients benefit from treatment. In sickle cell, for example, payment could be contingent on whether patients remain free of the pain crises they regularly experience.

These types of payment schemes, typically known as outcomes-based arrangements, are already used in some cases for the currently available gene therapies. But budget limitations and federal price reporting requirements have limited their use within Medicaid, indirectly shaping how they’re designed for private insurers, too.

“There’s a lot of benefit, I think, to having both more of a centralized purchaser or negotiator across Medicaid programs … and having more centralized data collection,” said Stacie Dusetzina, a professor of health policy at Vanderbilt University Medical Center. “I think it also gives CMS a little bit of an upper hand at the negotiating table.”

Jeff Marrazzo, the former CEO of gene therapy developer Spark Therapeutics, agrees that a centralized approach in Medicaid could help.

“What I’ve observed is that state Medicaid agencies … generally have experienced more challenges with providing access to cell and gene therapies,” he wrote in an email. “This is due in part to the cost density of cell and gene therapies, but also because these organizations lack the infrastructure required to implement alternative pricing, reimbursement, and access models.”

Marrazzo cited data collection as one example, noting that some state agencies might lack the ability to appropriately track clinical outcomes for patients treated with a gene therapy.

CMS envisions testing several different types of outcomes-based arrangements, including an annuity model where continued payment is based on continued benefit. (To date, gene therapy developers have favored a rebate-based approach, where a certain percentage of their treatment’s cost is returned to the insurer if a specific outcome is not achieved.)

Five years ago, Spark proposed a similar annuity-based idea to help insurers pay for its then newly approved gene therapy Luxturna, for a type of childhood blindness. Spark priced the treatment at $425,000 per eye and sought to offer an installment payment plan, proposing the CMS run a demonstration project around Luxturna.

Its ability to do so was limited by Medicaid rules requiring drugmakers give the program the “best price” they offer on their products. In the event a patient didn’t benefit from treatment, and an insurer therefore didn’t owe the remaining installment payments, Spark would have had to report that fractional cost as its best price.

CMS recently tweaked its policy, allowing drugmakers to report multiple “best prices” in the context of outcomes-based arrangements. “This was an important first step,” Marrazzo wrote. “Along with the [recent] policy change, I do believe CMS providing a more centralized approach could lead to more annuity models being taken up, particularly by Medicaid plans.”

The agency plans to focus the model on a specific disease, and indicated sickle cell as a likely candidate. Behind the advancing sickle cell treatments is a growing pipeline of other gene therapies in development.

“Our concern has been that, for some of these more rare diseases, we haven't seen the access that we would like to see. Sickle cell is one of them,” said CMS Administrator Chiquita Brooks-LaSure on a call with reporters last week. “One of the reasons we're so excited about this model is because we think states need some assistance from us to really be effective in the space.”

But CMS doesn’t envision launching the gene therapy model until 2026 at the earliest, years after the two gene therapies now nearing market are expected to be approved. Their developers — Bluebird bio and partners Vertex Pharmaceuticals and CRISPR Therapeutics — expect the FDA to decide on their respective approval applications in December. 

Under current timelines, CMS would begin developing the model this year and announce model specifications in 2024 and 2025, with implementation following the year after. The agency would then track metrics like gene therapy spending, use and change in access over time to evaluate its success.

To some, earlier would be better. “Being in a business, I don’t understand why it takes two years to announce model specifications,” Sherman said.

The planned model is also voluntary, so CMS would need to rely on participation from both state Medicaid agencies and from drugmakers. The latter group, CMS argued in its report, would be enticed by the prospect of simpler market access.

That access could come with some tradeoffs, however. “It may be a little bit less attractive because of the inability to command the highest possible price, especially if there is a large population that's going to be treated and many Medicaid programs are interested in joining together into this kind of one model,” Dusetzina said.