The year in review 2013

pharmafile | December 13, 2013 | Feature | Manufacturing and Production, Medical Communications, Research and Development, Sales and Marketing |  2014, NHS, Obama, adams, review of the year 

The year 2013 brought a new series of challenges for pharma. As the dust settled following the bulk of major patent expiries that ebbed and flowed across the two years prior, the industry took stock of its future with fewer staff and adapted its business models. 

Outside of corporate concerns, pharma had to deal with increasingly loud criticism of its actions, whilst having to devote much time defending its actions on the transparency agenda.

On top of all of this, the FDA was almost completely shut down throughout most of October as US politicians’ four-year argument over Obamacare spilled over into the streets of Washington, D.C. 

Pharmafile looks back on these happenings and more for our 2013 review, whilst also looking ahead to the challenges and opportunities 2014 will bring.

UK: Cancer Drugs Fund to remain

The Cancer Drugs Fund (CDF) was set up in October 2010 and was initially designed to inject £650 million into the NHS until 2014 for new cancer drugs that were rejected by NICE, or under appraisal by the watchdog. 

The CDF has proven controversial as many charities and healthcare professionals have asked why cancer gets a special fund, but drugs for conditions such as Alzheimer’s or multiple sclerosis do not.

But perhaps more importantly for the government, large sections of the British press have praised the scheme, which has gone some way to ending the ‘nasty NICE’ stories emanating from right-wing tabloids.

Cancer charities – notably the Rarer Cancers Forum – have also welcomed the Fund with open arms, but in 2013 these groups and a number of cancer drugmakers became increasingly vocal about the Fund’s March 2014 end-date.

In fact, in a rare move, Sanofi, Roche, and Novartis all came together in September to tell the government that the Fund should remain after 2014. The government duly listened and just one week later prime minister David Cameron announced that an extra £400 million worth of funding would be invested into the scheme, which will now run until 2016.

Cameron said at the extension’s announcement: “When I became prime minister three years ago, many patients with rare cancers were being denied lifesaving treatments. That is why we created the Cancer Drugs Fund, it is why we are extending it, and it is why we are partnering with Cancer Research UK to conduct new research into the effectiveness of cancer drugs.”

Health secretary Jeremy Hunt added that the government had made an exception for cancer because it was considered ‘the number one killer’, adding: “We do think that we had a particular problem with a lack of access to these drugs.”

This means that by 2016 the government will have handed over around £1 billon extra to the pharma industry for many drugs NICE had deemed not cost-effective. The two most commonly prescribed drugs via the Fund have consistently been Roche’s Avastin and Merck Serono’s Erbitux, which both have licenses for colorectal cancer. 

Roche’s Avastin also has licenses for ovarian, lung, breast and kidney cancers, but has been rejected for all of them by NICE despite being the biggest selling cancer treatment in the world.

There was talk that these and other popular medicines would be assessed under Value-Based Pricing (VBP) plans in order to increase their uptake, but this would have been more complicated than simply extending the Fund.

UK: drug pricing policy

The CDF was meant to be a stop-gap before the arrival in 2014 of VBP, but the government announced in November that it has heavily watered-down its original plans.

It was expected that VBP would be agreed upon and implemented by 1 January next year, but in actuality the PPRS remains intact, with NICE set to decide how to implement certain value-based assessments into its appraisal of a new drug’s cost-effectiveness.

This is in sharp contrast to the intentions of the original plans published by the former health secretary Andrew Lansley in June 2010, as he wanted NICE to be severely downgraded and the government allowed to set prices on new drugs based on new definitions of value.

But this is not what the industry wanted and the new plans – PPRS with elements of VBP wedded to it – makes the new-look scheme something of a victory for pharma. In return the industry will have to keep the drugs bill flat for the next two years, and grow by less than 2% for the three years after that.

This has been derided by a number of firms such as Pfizer and the BioIndustry Association, who say it could impact the UK research environment negatively. But just how this will all work still hinges on whether NICE incorporates a broader definition of value into its HTA processes. A decision on this is not expected until next autumn, leaving pharma somewhat in limbo as to just how and when these new HTA plans will come into force. 

UK: NHS reform takes hold

Whilst drug reform in the UK was delayed there was no such luck for those opposed to the major reform of the NHS, the roll-out of which began in April. Much like with VBP, the plans were Lansley’s baby, and were also announced in 2010 shortly after the coalition government came to power.

In a nutshell, the government’s Health and Social Care Act (2012) removed the ten Strategic Health Authorities and 151 Primary Care Trusts in England, replacing them with more than 200 GP-led clinical commissioning groups.

These groups are responsible for around £60 billion of the health service’s annual budget, with the remaining £45 billion budget taken up by NHS England (formerly the NHS Commissioning Board).

NHS England now oversees the new clinical commissioning groups (CCGs), and has also taken on the daunting responsibility of making £20 billion in NHS savings by 2015, the so-called ‘QIPP challenge’. NHS regulator Monitor has also been given a wider remit to ‘help’ competition between NHS service providers, something that many have seen as creeping privatisation.

Many also remain concerned that GPs – who are independent contractors to the NHS – are now running the majority of its budget and commissioning. These family doctors are also still meant to run their surgeries whilst balancing the books and running the business of the NHS with almost no managerial training.

There was widespread and very public criticism of this reform and, leading up to its enactment in 2012, almost every professional health body and journal told the government it must drop its plans.

To appease the growing revolt, the government set up a ‘listening exercise’ in 2011, which resulted in some major aspects of the reforms – such as the competition remit of Monitor – to be watered down.

This is also where NICE was given back its full HTA remit after healthcare professionals wrote to the government complaining about its removal. But despite the chaotic build up, the transition in April came and went quietly.

Much of this may be down to the fact that as many as 40% of the old PCT and SHA managers are believed to be working with CCGs, meaning the process has been more evolutionary than revolutionary.

One group known as the National Health Action Party, made up of disgruntled healthcare professionals, has not been so quiet, though, and this year have ramped up the pressure on the government to take back the reforms.

They seemingly have the support of shadow health secretary Andy Burnham, who has said he will repeal the reforms should Labour get to power in 2015. But despite the rhetoric and simmering anger from some, reversing the laws may now be impossible given how embedded the new system will be by the next election.

UK: Francis report a watershed for the NHS

The NHS reforms were said by Sir David Nicholson, out-going chief executive of NHS England, to be so big you can ‘see them from space’. But in 2013 an ever bigger event shook the NHS – the latest and most damning of the Francis reports.

The £13 million Francis Inquiry, named after its chair Robert Francis QC who specialises in the NHS and medical negligence, was published in February and is the fifth major investigation into the Staffordshire Hospital scandal, and Francis’s second report.

Data showed that there were between 400 and 1,200 more deaths than would have been expected from 2005 to 2008 at the hospital, prompting a series of inquiries. 

The QC’s latest report suggested that hospital staff and managers should face prosecution if patients are harmed or killed as a result of poor care. But it stopped short of naming and shaming any individuals from Staffordshire hospital or its local health authority as being directly responsible for the deaths.

In all, Francis made 290 recommendations to help curb the ‘toxic’ culture building up in the NHS, which he believes helped nurture the neglect seen at Staffordshire. 

The government has said it will not implement all of them, but did agree with Francis’s belief that there should be an increased focus on compassion in the recruitment, training and education of nurses. This led to new rules being introduced in 2013 on how nurses are trained.

The bigger question will remain how to change NHS culture across an organisation that is the fourth largest employer in the world, especially when the government seems averse to pointing the finger at some of the bigger names at the top of the NHS.

In a scathing indictment of what happened between 2005 and 2008, Francis wrote in his report: “A system which ought to have picked up and dealt with a deficiency of this scale failed in its primary duty to protect patients and maintain confidence in the healthcare system.

“The extent of the failure of the system shown in this report suggests that a fundamental culture change is needed. This does not require a root and branch re-organisation – the system has had many of those – but it requires changes which can largely be implemented within the system that has now been created by the new reforms.

“I hope that the recommendations in this report can contribute to that end and put patients where they are entitled to be – the first and foremost consideration of the system and everyone who works in it.”

Prior to the publication of the report, many spectators believed Francis would name Sir David Nicholson as one of the individuals responsible for Mid Staffs, as he led the health authority responsible for the Staffordshire hospital for 10 months between 2005 and 2006 – the height of the failings in care.

This was not to be as Sir David was not mentioned in the end, but has continually been blamed by many family members of the patients who died given his role at the time. In March he faced a committee of MPs to explain what happened during his tenure that lead to these failings. He denied to MPs that he had done anything wrong and said he would not be stepping down.

But just two months after his rather defensive and somewhat angry appearance in front of MPs, Sir David announced that he was to ‘retire’ in March 2014. 

Writing to Professor Malcolm Grant, the chair of NHS England, he said: “My hope is that by being clear about my intentions now will give the organisation the opportunity to attract candidates of the very highest calibre so they can appoint someone who will be able to see this essential work through to its completion.

“Even in retirement I will always be the staunchest advocate of the NHS. I continue, and will always continue, to be inspired and moved by the passion that those who work in the NHS show.”

The search for a successor ended in October with Simon Stevens, former aide to Tony Blair and group executive vice-president of US company UnitedHealth, appointed as the new chief executive elect of NHS England. It will now be down to Stevens to be the public face steering the NHS through the rough seas it surely faces over the next decade.

UK: AllTrials – transparency

For pharma, one of the biggest (or perennial) problems has been that of clinical trial transparency. In the UK, the call for the industry to release more data has reached fever pitch, with the disclosure of more data now inevitable.

The main reason for this has been the success of Sense About Science’s AllTrials campaign which has thrust the issue of data transparency into the public spotlight, with the help of the BMJ journal and Bad Pharma author Dr Ben Goldacre, among many others.

The campaign argues that thousands of clinical trials have not had their results reported, and that some have not even been registered.

Information on what was done and found in these trials can therefore never be seen by doctors and researchers, leading to potentially bad treatment decisions, missed opportunities for good medicine, and trials being repeated.

The campaign is asking that all trials, past and present, be registered and the full methods and results reported. The campaign has more than 65,000 signatures and the backing of some big names: including the PLOS ONE journal, the Faculty of Pharmaceutical Medicine, NICE, nearly 100 healthcare charities and, most importantly, GlaxoSmithKline, currently the only pharma firm to sign up and proactively help achieve greater trial publication.

Not all have shared GSK’s views and many in pharma – notably UK lobby group the ABPI – have continued to shun AllTrials by refusing to sign up. But AllTrials is less of a concern to pharma than new plans from the European Medicines Agency (EMA), which will begin to proactively release trial data in earnest from 2014.

One of the major points is that from January the EMA will no longer recognise clinical trial data as commercially confidential information (CCI), stating earlier this year that the interests of public health ‘outweigh considerations of CCI’. 

This means that beginning from next year, just about anyone will be able to request clinical trial data to view and interpret it as they wish, given that the EMA no longer sees this information as confidential. It will not, however, publish data retroactively or in its ‘raw’ form, or give out individual patient information. But make no mistake, there will be more trial data available to the public than ever before.

Unsurprisingly, the industry has hit out at these plans with the European pharma lobby group EFPIA suggesting that self-regulation on data disclosure is the best way forward. It remains to be seen if this idea will be taken on board in the EU or the UK, but open data is coming and pharma will be looking to battle hard in 2014 to make sure it regains a foothold on just how that process will happen.

UK: NICE rejections – rejecting NICE

NICE’s remit remains as much a bone of contention in 2013 as it has done since its establishment in 1999, although this year saw a slew of rejections – mainly for new and costly cancer medicines – and, in turn, public denouncements from a number of pharma firms.

In October, Eisai’s Yutaka Tsuchiya, the deputy president of the firm, said NICE’s list of factors when coming to judgements on which drugs to approve was ‘too limited’. “When we meet your government and talk to Jeremy Hunt, we tell him that unless you improve this, we will withdraw our investment in the UK,” Tsuchiya warned.

The Japanese company, which recently invested £100 million in a new European HQ and factory in Hatfield, UK, added that NICE was acting ‘as a block’ on new drugs being launched in England. It remains to be seen if the firm will follow through on its threat, but the public vocalisation of these deep-seated concerns is becoming more common for pharma.

Pfizer has also shared its thoughts, using a piece in the Times newspaper in September to argue much the same, with the MD of Pfizer UK Jonathan Emms writing: “19 out of 20 attempts fail before they reach the patient – even before any NICE review.” He went on, like Eisai, to urge the UK government to examine the way NICE makes its decisions.

Emms aimed a further dig at the watchdog, saying: “NICE is blocking the innovations that scientists are discovering. [In 2012] it turned down 40% of new medicines, telling the NHS that it cannot use them or restricting use. In doing so, NICE is denying patients access to some of the best treatments available today.”

The ABPI also got in on the NICE-bashing act, agreeing with Emms that NICE needed to be more open to new ways of assessing medicines in order for more patients to get access.

NICE will continue to be a frustration for pharma next year and even the advent of VBP appears unable to change its processes, as was once promised. Watch this space for more ‘nasty NICE’ stories in 2014.

Global: China syndrome

Outside of the UK, the biggest concern for pharma has been China. Four of the world’s biggest pharma firms – GSK, Novartis, Sanofi, and Lilly – have all been embroiled in a public argument about corruption and healthcare costs.

It began in June with GSK, which has taken the brunt of the China syndrome. Chinese police alleged that the London-based company used travel agencies to help launder around £320 million worth of ‘sweeteners’ to doctors.

The firm pledged to co-operate fully with China’s authorities, but has insisted that those people involved in the bribery worked around its systems, defrauding the company as well as the Chinese healthcare system. But China upped the ante when it arrested four senior GSK China executives in late September.

One of these executives – Liang Hong, the vice president of operations in GSK China – told China Central Television (CCTV): “All of these costs [of GSK’s bribery] were included in the price of the drugs. The money we spent running the business accounted for about 20% to 30% of the drug price.” Liang, who was unshaven and unkempt, appeared to be speaking from a detention cell.

But it didn’t stop there: Lilly was soon dragged into fresh new allegations when a Chinese newspaper, the 21st Century Business Herald, reported that a former senior sales manager for the company said that bribery and illegal payments at Lilly’s China operations ‘were widespread’.

The newspaper went on to allege that Lilly spent more than 30 million yuan ($4.9 million) bribing doctors in China to prescribe the firm’s medicines instead of rival products. In September, Novartis became the latest pharma manufacturer to say it will investigate allegations of malpractice in its Chinese operations and take ‘swift remedial action’.

The Swiss company’s eye-care division Alcon was caught up in these new claims – again stemming from a Chinese newspaper – alleging that it used funds earmarked for post-marketing patient experience surveys to offer bribes to various doctors.

It looked at times as if China was trying to scare pharma. Analysts and pharma executives believe the country’s officials have decided to crack down on behaviour such as bribery in an attempt to lower its healthcare bill – a reflection perhaps of the more difficult economic times that the country is facing.

But Chinese firms have not found themselves immune either, as allegations appeared in October that sales teams at Chia Tai Tianqing Pharmaceutical Group – 60%-owned by Chinese firm Sino Biopharmaceutical – had paid for doctors’ trips to Taiwan and Thailand in return for their attendance at an event.

China is essential for pharma’s growth in the coming decades, so quite how it deals with these allegations in 2014 may be a glimpse into how the future could look for the industry. Many believe that drug prices will be lowered by these firms to appease the Chinese authorities – but this may set an unwanted precedent for other countries.

Global: mergers and acquisitions

Many pharma firms went on an M&A spree in 2009 right through to 2011, as those at the sharp-end of the industry braced themselves for a generic onslaught on their big-selling drugs.

Mergers between Pfizer and Wyeth, Merck & Co and Schering-Plough, Novartis and Alcon, and Sanofi and Genzyme all took place in this period as big pharma firms looked to add new revenue to their drying streams.

Since then, smaller M&As have become more commonplace, with ‘mega-mergers’ becoming a thing of the recent past, although big deals have still played out. In 2013, two of the biggest were between the US firm Amgen (the largest biotech firm in the world) and its $10.4 billion purchase of cancer specialist Onyx. 

There was, as always, a dance between the two as Onyx held out for the best share price, meaning the deal dragged on for months – but in the end analysts thought the arrangement was a sound one for both parties. The deal for Amgen revolves almost solely around Onyx’s blood cancer brand Kyprolis, which analysts predict could make around $3 billion a year in peak sales by 2021.

Onyx’s other oncology compounds, in various stages of clinical development, will join nine Amgen products – four of which are investigative, first-in-class oncology treatments expected to be registered by 2016.

This is Amgen’s second biggest deal after its 2001 purchase of Immunex for just under $17 billion, and shows that it is firmly setting its future sights on the oncology market. The second big deal of 2013 was between generics firm Perrigo and Ireland-based Elan in a contract worth $8.6 billion. 

US-based Perrigo, which specialises in generics and OTC brands, was enticed by the low Irish tax rate it will enjoy and growing royalties from multiple sclerosis treatment Tysabri.

Under the arrangement, Perrigo and Elan will be combined as ‘New Perrigo’ and based in Ireland. Here it will enjoy a 12.5% corporation tax rate, significantly below the US rate of 35 per cent. Perrigo will also have a share in the royalties of Tysabri. 

Elan currently earns a 12% royalty on global net sales of the drug, but from May next year this will increase to 18% on annual net sales up to $2 billion, and to 25% on annual net sales above this amount.

Global: Obamacare, FDA shutdown and US politics

At the beginning of October, the US health reforms – known colloquially as Obamacare after president Barack Obama, who signed them into law in 2010 – came into force. Obamacare is a new system that for the first time means Americans will have the chance to ‘shop’ for insurance plans, whilst insurance companies need to play by new rules.

Around 85% of Americans don’t have to sign up for anything new because they already have insurance. The Affordable Health Care Act is designed to target the 15% of people (around seven million) in the country without cover.

But although this is designed as a marketplace, most individuals without health insurance must sign up by 15 December to have a plan that begins from 2014. If they haven’t signed up, they can be fined.

It was, however, a difficult birth: on 1 October, the day roll-out began, the Republican Party forced a shutdown of the federal government over its concerns that Obamacare is unaffordable. 

For 17 days, all major government departments were either fully or partially shut down – including the FDA – as Democrats and Republicans fought over Obamacare and raising the ceiling on its $16.7 trillion debt.

A default on its debt payments was averted at the eleventh hour as Republicans gave in to mounting public pressure to end the shutdown, and the Obamacare law escaped intact. But the new marketplace for health insurance was itself a shambles: the web services for Obamacare at HealthCare.gov failed to work for thousands of people in the first week of its roll-out. 

These ‘exchanges’ struggled to meet the higher-than-expected demand on 1 October, with many users reporting long waiting times.

People also reported errors while trying to create accounts along with site crashes on the Healthcare.gov website. Obama was reported to have told aides in an Oval Office meeting in late October that the administration had to take responsibility for the fact that the website was not ready on time.

Most of the glitches appear to have been ironed out but the controversy of the plans – and the opposition of the Republicans – will not be so easily dealt with.

Global: gene patent ruling

US-based diagnostic firm Myriad Genetics had an up-and-down year – its stock rose steadily through the first half of 2013 and spiked when news that Oscar-winning actress Angelina Jolie announced that she had undergone a mastectomy after using the firm’s cancer test.

Myriad’s test found that Jolie had the BRCA1 mutation – and an up to 87% chance of developing the disease which also killed her mother. Analysts believed that the significant publicity Jolie lent to Myriad would lead to more women wanting to use its test. At that point, the firm essentially had a monopoly over the BRCA 1 and 2 genes as it had patented them.

But in June, a US Supreme Court verdict ruled that human genes cannot be patented, although synthetic DNA can be as a result of a law suit brought by the Association for Molecular Pathology, which challenged patents which Myriad had been granted on BRCA1 and BRCA2. The firm’s stock
duly dropped.

“Myriad did not create anything,” the Court said in a subsequent statement. “To be sure, it found an important and useful gene,” it continued, “but separating that gene from its surrounding genetic material is not an act of invention.”

This meant that Myriad could keep its BRCA test, but would be open to competition as it now had less patent protection than before the ruling. Just four months later, Quest Diagnostics began selling its own genetic test to uncover the risk of hereditary breast cancer.

At $2,500, Quest’s new BRCAvantage test is cheaper than Myriad’s, which costs more than $3,000, so this could give it leverage in a potentially lucrative market.

The ruling was a pragmatic one urged by president Obama, and nicely balances the need to protect synthetic patents on one side, while appeasing concerns over monopolies and allowing pharma to own naturally occurring genes.