The right drug, with clear efficacy addressing a high unmet medical need, can withstand pushback from payers even when it is priced at a premium and even in 2014. Gilead Sciences Inc.’s Sovaldi (sofosbuvir) stands as proof of the value innovative new medicines can hold for physicians, patients and even payers – but only if the competition remains limited.

Sovaldi was the standout in an interesting class of drugs that nonetheless largely represented niche specialty commercial opportunities or fell under the scrutiny of payers. There were innovative new medicines like Merck & Co. Inc.’s first-in-class PD-1 inhibitor Keytruda (pembrolizumab) for melanoma and the first drugs to treat the progressive and fatal lung disease idiopathic pulmonary fibrosis: InterMune Inc.’s Esbriet (pirfenidone) and Boehringer Ingelheim GMBH’s Ofev (nintedanib) (Also see "Merck’s Keytruda Opens Door, But Combination Trials Could Unlock Efficacy" - Pink Sheet, 8 September, 2014. and [A#14141016002]).

Another highlight was the approval of three antibiotics for resistant Gram-positive infections and one for Gram-negative infections, Cubist Pharmaceuticals Inc.’s Zerbaxa (ceftolozane/tazobactam), late in the year, offering potentially important alternatives to treat increasingly challenging infections and a positive signal that the development and commercial pendulum is shifting back in favor of antibiotics.

All-in-all, FDA approved an impressive 51 novel drugs and biologics during the year, well above the 35 NMEs and novel biologics approved in 2013 and surpassing the 45 NMEs and NBEs approved in 2012, then a 15-year high. The high approval rate suggests industry’s R&D engines are humming ([A#00150105021])

Launch trajectories are lengthening as new drugs enter smaller specialty categories, often growing over years through indication expansion, and as it takes longer to secure reimbursement.

But many of the year’s new drugs were in niche indications like IPF, hemophilia or rare cancers. Drugs that did launch in large commercial therapeutic areas like type 2 diabetes were second or third to market – even fifth in the case of Eli Lilly & Co.’s GLP-1 agonist Trulicity (dulaglutide), which just recently launched in the fourth quarter.

In another large category, chronic obstructive pulmonary disease, GlaxoSmithKline PLC’s new drugs Breo Ellipta (fluticasone/vilanterol) and Anoro Ellipta (umeclidinium/vilanterol) largely offer dosing and convenience benefits, the value of which payers struggle to quantify.

“It’s almost like you either hit it big or you just creep along,” Alan Gray, senior director of oncology commercial strategies at the consulting firm Kantar Health, said of the current launch environment. “It’s just getting more and more challenging, and it’s because the bar is so high today to determine commercial success,” he said. “It’s just more and more difficult to hit that $200 million in the first year.”

That amount of first-year sales, $200 million, has long been viewed in the industry as a benchmark for a drug eventually reaching blockbuster status, when sales surpass $1 billion. But launch trajectories are lengthening as new drugs increasingly enter smaller specialty therapeutic categories, often growing over many years through indication expansion, and as it takes longer for new drugs to secure reimbursement access.

The Sovaldi Perfect Storm

Sovaldi was the exception in 2014, a commercial success straight out of the gate. Though the nucleoside polymerase inhibitor was approved by FDA in December 2013 and launched shortly after, its success played out over the course of 2014 and it is included in this round up, as is GSK’s Breo Ellipta, which similarly launched in the fourth quarter of 2013. (And of course for drugs that debuted late in 2014, it is too early to gauge their commercial success.)

The factors that made Sovaldi so immediately successful came together like a perfect storm: a paradigm-changing drug in an area of high unmet medical need where a bolus of patients had been warehoused awaiting treatment with the new generation of direct-acting antivirals, combined with a flawlessly executed launch on the part of Gilead.

The key decision on the part of Gilead was to price Sovaldi higher than where many expected or believed to be reasonable – $1,000 per pill in the U.S., or $84,000 for a 12-week course of treatment – and then not to waver on that decision despite a significant spotlight. The long-term consequences of that decision, now that AbbVie Inc. has started to undercut Gilead with payer deals for its newly-approved rival three-drug regimen Viekira Pak, will play out in 2015, but clearly in 2014 the Sovaldi launch was an unmitigated success ([A#14141219005]).

Sovaldi generated $8.55 billion in sales in the first nine months of the year, as reported by Gilead, knocking over records along the way. Its first year sales, though not yet known, will come close to matching the sales of Pfizer Inc.’s Lipitor (atorvastatin) at its peak.

Because of the large number of patients with hepatitis C and thus the significant impact of Sovaldi on health care costs, payers, legislators, public health advocates and the general public were outraged over the price. But Gilead hardly blinked, and when it did respond to critics, the company defended the price on the basis of the drug’s long-term value to the health care system with its ability to cure patients and prevent liver disease, hospitalizations and liver transplants.

“[Sovaldi] is going to be a great case study for future launches to start thinking about how do we manage a launch, how do we price a drug and how do we stand behind our innovation,” Campbell Alliance’s Sood said.

“They did not flinch,” said Rohit Sood, head of global launch excellence at Campbell Alliance. “It is going to be a great case study for future launches to start thinking about how do we manage a launch, how do we price a drug and how do we stand behind our innovation.”

Kantar Health’s Gray agreed Gilead made a savvy play on its pricing strategy. “Does Tom Brady, the best quarterback in the league, feel badly about making money? No,” he said. “Yes, there is a certain amount of capped resources available but the star players will truly get that value because of what they bring to the table.”

The company held its line with its new sofosbuvir combination Harvoni, approved in October and combining sofosbuvir with a NS5A inhibitor ledipasvir. By eliminating the interferon/ribavirin backbone, which was still needed for most Sovaldi patients, Gilead achieved the chief ambition of HCV treatment – and priced equivalently to the total cost of care with Sovaldi plus interferon/ribavirin ([A#00141020011])

But with the introduction of Abbvie’s Viekira Pak, Gilead may have to reconsider its inflexible stance on price. Days after the approval, Abbvie announced it would price its triple combination about 12% below Harvoni and scored an important exclusive contract with Express Scripts Holding Co., which announced it would exclude Harvoni from its national preferred formulary in favor of Viekira Pak ([A#00150105006]).

A Blockbuster Life Rolled Into One Year

Sovaldi is a one-of-a-kind launch the likes of which may never come around again. But it also represents a new kind of blockbuster model because its quick-fire rise to stardom will be short-lived ([A#14141007006]). Gilead’s new fixed-dose combination Harvoni is expected to become the new standard of care for treating hepatitis C because it is the first all-oral regimen approved for HCV ([A#00141020011]). Sofosbuvir will continue to be important to Gilead, but Sovaldi as a brand will fade ([A#2014500121]).

That’s a fate all the hepatitis C therapies will face – in part because patients have been able to wait for the next big thing. Vertex Pharmaceuticals Inc. faced this situation with the launch of its hepatitis C medicine Incivek (telaprevir) in mid-2011. The drug generated $950.9 million in sales that year, but Vertex was unable to make the transition to the next-generation all-oral regimens, and Incivek generated just $23.5 million in the first nine months of 2014.

“It’s almost like a smart phone type of revolution where you have such radical technology,” Gray said. “You have to have planned obsolescence nowadays to keep penetrating the market. When you have a revolutionary treatment, these longer lifecycles are going to be shorter and shorter.”

The fading market is also an eventuality because of the nature of HCV treatment – the therapies are so effective that patients typically need only one round, so the opportunity is more fleeting than the chronic care markets of days past.

Those days seem to have been replaced by a new model of chasing lightening in a bottle, and the Sovaldi experience has certainly showed it to be a profitable one – though it remains to be seen what Gilead can do to sustain its success.

A single exceptional drug launch, among several slower launches (at least by sales metrics) is similar to what industry saw in 2013 and 2012, though the bar for success was considerably higher with Sovaldi. Last year, it was Biogen Inc.’s oral multiple sclerosis treatment Tecfidera (dimethyl fumarate) that broke away from the pack, and in 2012, it was Regeneron Pharmaceuticals Inc.’s Eylea (aflibercept) for age-related macular degeneration that stood out as the launch of the year ([A#00140113013]).

Both Tecfidera and Eylea continue to be viewed as two of the industry’s most successful recent launches. Tecfidera generated $876 million in sales in 2013 following its launch in April of that year, while Eylea generated $838 million in 2012, a full 12 months of sales, following its U.S. launch in late 2011.

2014’s Notable First Half Drug Launches
Drug and Manufacturer	Indication	Launch Month	IMS reported U.S. sales (from launch through October)
GlaxoSmithKline’s Breo Ellipta (fluticasone/vilanterol)	COPD	October 2013	$45.5 million (from Jan.-Oct.)
Gilead’s Sovaldi (sofosbuvir)	Hepatitis C	December 2013	$7.12 billion (from Jan.-Oct.)
AstraZeneca’s Farixga (dapagliflozin)	Type 2 diabetes	January	$137.6 million
Celgene’s Otezla (apremilast)	Psoriasis	April	$26 million
GSK’s Anoro Ellipta (umeclidineum/vilanterol)	COPD	April	$16.2 million
Biogen Idec’s Alprolix (coagulation factor IX [recombinant], Fc fusion protein)	Hemophilia B	May	$12.6 million
Biogen Idec’s Eloctate (antihemophiliac factor [recombinant], Fc fusion protein)	Hemophilia A	June	$6.7 million
Cubist’s Sivextro (tedizolid)	Gram-positive infections	June (oral)/August (I.V.)	$5.9 million
Source: IMS Health

COPD/Diabetes Launches Face Payer Challenges

Sovaldi aside, few new entries in the first half of 2014 appear on track to generate $100 million or more in sales in their first year.

Breo Ellipta, which debuted in late 2013 with much fanfare and was intended to be the lynchpin of GSK’s strategy to drive respiratory growth beyond the blockbuster Advair Diskus (fluticasone/salmeterol), in particular has disappointed.

Approved for chronic obstructive pulmonary disease, Breo generated just $45.6 million (£29 million) in the first nine months of 2014, as the drug struggled to secure reimbursement. A second respiratory drug from GSK, Anoro Ellilpta (umeclidinium/vilanterol), the first long-acting beta2 adrenergic agonist (LABA)/long-acting muscarinic antagonist (LAMA) to reach the U.S. market for COPD, generated $9.4 million (£6 million) from its launch in April through the end of September, according to GSK.

GSK says Ellipta is securing better reimbursement faster than Breo, but the launch is still slow out of the gates, despite the fact that LABA/LAMA combinations could eventually become the new standard of care for COPD Also see "GSK’s Big Push To Maintain Its Respiratory Reign" - In Vivo, 18 November, 2013..

The issue for new drugs like Breo and Ellipta is that they offer only incremental benefits over the current standard of care. In the case of Breo in particular, it offers once-daily dosing versus dosing twice-a-day with Advair, considered the gold standard inhaled corticosteroid/LABA combination.

The commercial challenge for GSK has been compounded by the fact that the respiratory category has come under increasing scrutiny from payers in the U.S. more generally. Even Advair, GSK’s top-seller, is not immune. The company missed some key contracts for Advair in 2014, and the drug’s sales have fallen as a result, down 14% to $4.98 billion (£3.11 billion) in the first nine months of the year. Going into 2015, the company made difficult price concessions on Advair to secure contracts.

The U.S. pricing environment in respiratory is having serious consequences for GSK, which recently initiated a £1 billion cost cutting program and announced sweeping job cuts in the U.S. Also see "GSK Reveals Big Changes As 2015 Growth Prospects Fizzle" - Pink Sheet, 27 October, 2014..

The diabetes category likewise saw several new drug introductions, but no new mechanisms of action. Among the introductions were the second and third SGLT-2 inhibitors to reach the market, AstraZeneca PLC’s Farxiga (dapagliflozin) and Eli Lilly & Co./Boehringer Ingelheim GMBH’s Jardiance (empaglifozin). Farxiga launched in January, entering the market about one year behind Johnson & Johnson’s first-in-class Invokana (canagliflozin). Jardiance was approved by FDA in August and launched in September.

Neither AstraZeneca nor Lilly have reported sales of their respective SGLT-2 inhibitors, but IMS data show Farxiga has been one of the year’s stronger performers, generating sales of $136.7 million from its launch in January through October.

New GLP-1 agonists were also introduced, Tanzeum (albiglutide) from GSK and Trulicity from Lilly. They are the fourth and fifth GLP-1 agonists to reach the market, though they offer once-weekly dosing as an advantage over Novo Nordisk AS’ market-leading Victoza (liraglutide), administered once-daily.

GSK priced Tanzeum well below Victoza when it launched the drug in July as a key component of its foray into the market, while Lilly priced Trulicity more in line with Victoza; Trulicity is viewed as having the best clinical profile among the GLP-1s that are dosed once weekly because it showed non-inferiority to Victoza in a head-to-head trial Also see "Lilly Prices Trulicity Near Victoza, But Well Above Tanzeum" - Pink Sheet, 19 September, 2014..

But with so many mechanisms and therapies available to diabetes patients, payers are looking for ways to reduce costs through fierce pricing negotiations and increasing cost management programs like prior authorizations.

“You see this type of pushback from [payers and patients] saying I’m not willing to pay for the latest and greatest every time,” Gray said. “Ultimately, [drug makers] have to identify what patient population can benefit the most from that drug for that particular value price.”

It will take time to see how competitive categories like COPD and diabetes evolve as payers take a harder line on costs. Opportunities for tried and tested mechanisms offering incremental improvements will certainly be more limited than the days of yore. As for the next big breakout star, it might be one of the PCSK9 inhibitors expected to launch in the class of 2015. Nonetheless, it’s doubtful another Sovaldi will come around anytime soon.

Head Of The Class: A Star Stands Out Among 2014 Drug Launches

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