2011 Year In Review

pharmafile | January 6, 2012 | Feature | Business Services, Manufacturing and Production, Medical Communications, Research and Development, Sales and Marketing |  2011, Europe, emerging markets, year in review 

A round up of some of the key themes in pharma’s year

EUROPE IN CRISIS

While the Eurozone has averted meltdown for the moment, confidence in the economic region hit rock bottom by the end of 2011. For pharma the implications for health budgets are clear, with many countries introducing draconian measures during the year to cut costs.

The situation is most dire in Greece, Italy and Spain, where debts owed by the health system to pharma companies are mounting. Spain’s regional governments owe €5.4 billion for medicines supplied to hospitals, and are paying bills on average 430 days late, according to Spain’s pharma industry association Farmaindustria.

The association has told Bloomberg it is negotiating a plan to create state-guaranteed securities backed by €5.4 billion ($7.1 billion) in overdue payments.

The mechanism would allow the regions to delay payments for four to six years, and would be underwritten by the national government, with pharma paid in bonds.

Greece used a similar solution earlier this year, repaying hospital debts to pharma with bonds, but the lack of investor confidence in Greek debt meant pharma still lost out on the deal.

Roche was one company which was given bonds, but lost 26% of their original value when it sold the bonds on, the company’s chief financial officer Alan Hippe disclosed earlier this year.

Meanwhile Spain continues to pass new austerity measures which further reduce healthcare spending. The chief of Farmaindustria, Humberto Harness, says a new law approved in August will slash €1.85 billion from medicines spending, a sum representing more than 10% of the market.

Farmaindustria claims laws introduced a year ago are responsible for 4,000-5,000 jobs lost in the pharmaceutical industry, plus a further 15,000 – 20,000 jobs in companies dependent on the sector. The industry association says this is due to a reduction of €300 million in R&D spending, and warns the outlook could worsen. ‘These numbers will double,’ he warned.

GERMANY

Major patent expiries and large-scale restructuring are also contributing to industry job losses. Pfizer announced cuts in Spain and Germany in the latter half of the year, citing pressures from austerity measures and reforms in the respective countries.

Meanwhile spending cuts to Germany’s healthcare spending attracted criticism from the pharma industry. Lilly’s chief executive John Lechleiter said it was time for a fresh start between the government and industry, and he called for closer collaboration and better communication between the two sides.

Germany’s part in the austerity measures sweeping Europe has seen controls put in place that aim to save its healthcare system around €2 billion per year starting from 2011.

They include a new law to control prescription drug costs that offers a one-year window for pharma to negotiate prices with health insurers after introducing new drugs, with the Health Ministry setting a maximum price if no agreement is reached.

“In no other place in the world has the environment for innovative pharmaceuticals changed more in the last 12 months than it has in Germany,” Lechleiter told the Federation of German Industries Conference in Germany.

Another protest against Germany’s cuts was the decision by Boehringer Ingelheim and Lilly not to launch their new diabetes drug Trajenta in Germany, stating the country’s new pricing controls are to blame.

The companies have launched Trajenta in other European countries, but came to the decision that Germany’s pricing policy would not reflect the ‘the positive benefits’ of their medicine.

MEDIATOR SAFETY CONTROVERSY

Away from the problems with the Euro and its economy, France also suffered a crisis of confidence in its drug regulator and pharma industry.

The scandal surrounding Servier’s Mediator snowballed durng 2011, centering on allegations that potentially fatal side effects of the drug were hushed up by the pharma copmany and ignored by France’s drug regulator AFSSAPS. The drug was developed as a diabetes treatment but millions of people used it to help them lose weight, and it was withdrawn from the French market in November 2009 because of safety concerns.

Analysis of data now suggests it is linked to at least 500 deaths in France between 1976 and November 2009.

The controversy badly damaged the reputation of France’s medicines regulator AFSSAPS, as well as Servier, one of the country’s biggest home-grown pharma companies. The company’s founder, 88-year-old Dr Servier, stepped down from his role as president of the G5 industry group, which represents Ipsen, Pierre Fabre, Sanofi, Servier and LFB – and appeared in court in February in a case brought by alleged victims and their relatives, claiming his company did not ‘behave in a transparent way’ and made ‘misleading claims’ about its diabetes drug Mediator.

Health minister Xavier Bertrand is now pushing through a radical reform of the French medical regulatory system, after an official report showed that Servier’s diabetes drug had caused up to 2,000 deaths from heart disease.

Bertrand has also stated that the blame lies squarely with Servier, which the minister says will compensate victims if and when the case is proven in court, but also pointed to failings at AFSSAPS.

The agency has been roundly condemned in the media for its failure to act, and will now be re-modelled as the National Agency for the Safety of Medicines (ANSM).

New legislation aims to end the current system of financing the drug regulator, which currently obtains 80% of its funding from charges to pharma companies.

A report written by the Social Affairs Inspectorate said the drug should have been banned 10 years earlier, and added that it was ‘incomprehensible’ that the authorities had failed to act sooner.

The G5 has said it would revisit its fundamental commitments to ensure that another case such as Mediator could not arise.

This includes their commitment to better serve the patient through innovation and ensuring better monitoring of all their medications.

The G5 says it supports proposals for reform and the aim of achieving greater transparency from pharma companies.

In particular, it fully supports one of the key ideas of the reform agenda which involves publishing a list of links between experts and laboratories, and the amount of money paid for services rendered.

Work has begun on reviewing 19,000 drugs currently approved in France, of which 12,000 are on the market, and Takeda’s Actos was one drug withdrawn from the market as a result of the new more vigilant approach.

LEEM, which represents all of France’s pharma companies, says it is very worried by clauses in the new law which would restrict visits by sales representatives, and ban  pharma funding medical education.

It fears this will create ‘uniquely restrictive practices’ in France, and rules which are incomprehensible for international companies and will be bad for jobs in the sector.

PFIZER’S FACEBOOK PAGE HACKED

Pfizer was the victim of hackers who temporarily took control of its Facebook page in July.

A UK group calling themselves The Script Kiddies added unflattering profile images to the page and posted links to news articles critical of the firm.

The company acknowledged its Facebook page had been ‘compromised’ and said: “We have been working with Facebook to understand what happened so we can guard against it in the future.”

Initial speculation focused on whether problems with Facebook had allowed the attack, with some commentators suggesting pharma would start backing away from the social network if that were the case, but the cause seems to be closer to home.

“So apparently, the articles are all claiming the security breach on Pfizer’s page was Facebook’s fault? No … thank Pfizer and Pfizer only,” the hackers tweeted.

During the time the company’s Facebook page was compromised, details of a social media consultant apparently employed by Pfizer were posted to the page, along with claims that he had been in charge of the account.

The Script Kiddies group, which also attacked Fox News and posted false reports of President Obama’s death on its website took particular aim at Pfizer’s failed antibiotic Trovan.

The company was sued in Nigeria after a 1996 meningitis trial in which 11 children died during Trovan’s testing, and the case re-emerged in 2010 in the US embassy cables released by Wikileaks.

DRUG PRICE ROW RESURFACES

In November, disputes over the high cost of some drugs broke out into the open. The chairman of NICE, Professor Sir Michael Rawlins, blamed the pharma industry’s ‘inefficient’ and increasingly costly R&D model for the rising price of cancer drugs.

Rawlins and director of NICE International UK Dr Kalipso Chalkidou used an editorial in The Lancet Oncology to criticise the growing costs of clinical trials.

They said that the past 40 years the median monthly cost at launch (and adjusted to 2007 prices), has risen from less than $100 in 1965-69 to more than $5,000 in 2005-9.

The authors believe this is down to the “escalating costs and inefficiencies of clinical trials”, coupled with additional burdens imposed by drug regulators such as the FDA. “The sums spent on research and development have increased three times over the past two decades but, as judged by the number of drugs licensed per dollar of research and development, the innovative performance of the drug industry has declined,” said Rawlins and Chalkidou.

As a solution to the problem, the authors pointed to a study that suggested clinical trial costs could be decreased by 40-60% without adversely affecting their quality. They said this figure can be achieved with simple measures to reduce costs, including electronic data capture, reduction in the length of case-management forms, and modified site-management practices.

The latter should include greater use of statistical techniques to detect fraud, rather than over-reliance on site visits by regulators and sponsors, they added.

NICE was responding to a new report in The Lancet Oncology that estimates the annual cost of new cancer drugs rose to £185 billion ($286 billion) in 2009 in high-income countries.

The report, authored by 37 leading researchers, criticised both this growing cost and bodies such as NICE for delaying new cancer treatments from reaching the market. In response NICE said:

“Rather than criticise organisations such as NICE for declining reimbursement on grounds of cost effectiveness, clinicians and patient advocates should start challenging pharmaceutical companies about the high prices they seek for products with modest benefits.” In their final note, Rawlins and Chalkidou said that the focus should not be on high-income countries: “We should all be more concerned about the difficulties facing low and middle income countries in accessing affordable cancer care, rather than constantly focusing on the problems facing developed countries.”

The ABPI has responded by saying that developing new medicines is a complex, and expensive process that remains full of uncertainty, but is the only way to address unmet clinical need.

A spokesman said: ‘‘The UK already has among the lowest medicine prices in Europe, and all pharmaceutical companies in the UK are subject to a profit cap – but they still need to receive a fair price for the medicines that reach market if they are to continue investing in R&D.”

HUGE FINES FOR US PHARMA TRANSGRESSIONS

In October, GlaxoSmithKline agreed to plead guilty to distributing adulterated drugs made at its now-closed facility in Cidra, Puerto Rico, and pay a $750 million fine.

The case brought by the US Department of Justice also saw details disclosed regarding a record whistleblower payment to Cheryl Eckard, a former quality assurance manager at GSK who will receive $96 million from the settlement.

According to the lawfirm representing Eckard, this is the first time that the US False Claims Act has been used to “hold drugmakers accountable for violations of government manufacturing standards”, and could set a precedent for other similar actions.

Eckard was dismissed in 2003 after raising concerns with the company’s management about manufacturing violations at the Cidra facility.

She notified the FDA of the situation and filed a lawsuit in 2004. GSK will pay $150 million to settle the criminal charges and $600 million for the civil claims, which relate to a number of cases of adulterated drugs manufactured at the Cidra plant between 2001 and 2005, according to a DoJ statement.

Brands cited in the case included anti-nausea medication Kytril (granisetron), the topical antibiotic Bactroban (mupirocin), Paxil CR (paroxetine) for depression and diabetes treatment Avandamet (rosiglitazone and metformin).

GSK failed to ensure that Kytril and Bactroban finished products were free of contamination from micro-organisms, it is alleged, while Paxil CR tablets made at the facility split and may not have had any therapeutic effect. In addition, Avandamet tablets may have had too little or too much active ingredient, says the DoJ.

GSK senior vice president and head of global litigation, Perre Villareal, said the company “regrets that we operated the Cidra facility in a manner that was inconsistent with current Good Manufacturing Practice (cGMP) requirements.

EMERGING MARKETS

Investment in pharma’s emerging markets continued apace, and many companies saw their 2011 revenues lifted with strong growth in sales from countries such as India, China, Brazil and China.

IMS Health forecasts that revenues from the group of ‘pharmerging markets’ will approach US levels of spending on medicines soon. Over the next five years, the pharmerging markets are expected to nearly double their spending on medicines, to $285-315 billion, compared with $151 billion in 2010.

Underlying this growth will be government commitment to expanded healthcare access, particularly in China, which is currently addressing the gulf in health provision between the relatively well off urban population and the rural inhabitants. IMS forecasts that by 2015, the pharmerging markets will become the second largest geographic segment globally in spending on medicines – surpassing Germany, France, Italy, Spain and the UK combined, and approaching US levels.

Victoza launched in China

One of the most significant product launches in China this year was Novo Nordisk’s diabetes treatment Victoza. The country is one of the fastest growing diabetes markets in the world.

Victoza (liraglutide injection) has been launched as an add-on therapy for type II diabetics who can no longer keep their blood sugar levels down with metformin or sulphonylurea.

The rate of diabetes in China is rising fast as its middle class continues to grow, leading to an increasing prevalence of traditionally Western problems such as diabetes and obesity. The population of China reached 1.33 billion in 2009, and a 2008 New England Journal of Medicine report estimated that around 10% of the population had diabetes – a proportion that is expected to continue to rise as the population ages.

This all makes China a major emerging market for pharma in diabetes, but problems with access and payers make the country as problematic as it is lucrative. It currently takes around two years for new drugs to receive approval in China, and the government can also order sudden price cuts, making the market unpredictable. The healthcare system also lacks appropriate funding, with a 2006 report showing that the government spent around 1% of its GDP (gross domestic product) on healthcare. During a similar period the English government that spent 7.3% of its GDP on the NHS. 

India wary of foreign investment

The Indian government has decided not to put any restrictions on the level of foreign direct investment (FDI) in the pharmaceutical sector, but it is considering applying ‘filters’ to help preserve India’s domestic drug industry.

A high-level meeting in October chaired by Indian Prime Minister Manmohan Singh concluded that India will continue to allow 100% investment by overseas organisations in pharmaceutical operations “under the automatic route for greenfield investments”. However, in the case of brownfield investments in pharmaceuticals, the government will require approval of any proposed deals by India’s Foreign Investment Promotion Board (FIPB) for an interim period of up to six months, according to the national Press Information Bureau. 

In the meantime the government will examine whether any additional regulations need to be drawn up “to ensure that there is a balance between public health concerns and attracting FDI in the pharma sector”. The meeting was held in response to the so-called Maira report, which was published in June and examined the impact of merger and acquisition activity in India’s pharma industry and looked in particular at whether large-scale takeovers of Indian companies by multinational drugmakers could have a material impact on the domestic sector. One concern often raised is that too much involvement by foreign companies could lead to price increases and restrictive trade practices, and possibly impact access to medicines for some sections of Indian society. 

Brazil

Bristol-Myers Squibb signed a technology transfer agreement with the Brazilian Ministry of Health in November to expand access to once-daily HIV protease inhibitor Reyataz.

BMS will transfer the manufacture and distribution of Reyataz (atazanavir sulphate) 200mg and 300mg capsules to the Brazilian Ministry of Health’s technical-scientific unit Farmanguinhos.

Pharma firms have come under fire in recent months for not helping to improve access to HIV medicines in middle-income countries. Last July, Medecins sans Frontieres said countries such as India, Indonesia, Thailand, Vietnam, Ukraine, Colombia and Brazil with significant HIV populations were being excluded from discounts designed to cut the cost of antiretroviral therapy.