:kate rawson .:prevision policy llc .:january 9, 2012

Copyright © 2013 PrevisionPolicy. All rights reserved.

Health Care Reform, Spending Cuts and Drug Health Care Reform, Spending Cuts and Drug Approvals: What to Expect From the Obama Approvals: What to Expect From the Obama Administration’s Second TermAdministration’s Second Term

.:Kate Rawson

.:Prevision Policy LLC

.:January 9, 2012


The Prevision Policy TeamThe Prevision Policy TeamCole Werble, Founding Member

Michael McCaughan, Founding Member

Ramsey Baghdadi, Founding Member

Kate Rawson, Senior Editor

Laura Helbling, Reporter/Analyst

Material from this presentation is derived from interviews with company executives and investors, and from transaction data tracked by Windhover

Information Inc., publisher of The RPM Report.

Credit Where Credit is Due


Agenda

“Status Quo” Election Major agency heads expected to remain in office Congressional changes due to retirements and primary defeats

Affordable Care Act Survives (Barely) Ruling is generally a positive for biopharma companies SCOTUS ruling on Medicaid expansion is one downside; IPAB impact is worrisome to industry

FDA Innovation & Safety Act New incentives for drug development in unmet areas (antibiotics, rare disease, “Breakthrough”) “Fixes” drug shortage problem Provisions to increase manufacturing quality of facilities overseas

FDA Drug Approvals: It Was a Very Good Year “The Program”: focus on novel drugs with more meetings, greater transparency Review times lengthen for novel drug and biologics Will it improve first-cycle review percentage? Hard to improve on near-perfection

Congress Avoids the Cliff: What Does That Mean for Rx Risk? Usual suspects could be on the chopping block Series of smaller cuts vs. a “Grand Bargain” Big question is whether pharma can protect Part D rebates for dual-eligibles


4

Life After 2012

The Year of the Patent CliffThe Year of the Patent Cliff Lipitor, Plavix, Zyprexa, etcLipitor, Plavix, Zyprexa, etc.

A Wild Year in WashingtonA Wild Year in Washington PDUFA V/FDASIAPDUFA V/FDASIA Supreme Court ACA ReviewSupreme Court ACA Review Election DayElection Day

Caps a Disastrous DecadeCaps a Disastrous Decade Pipeline DroughtPipeline Drought Death of the BlockbusterDeath of the Blockbuster Corporate DownsizingCorporate Downsizing

BUT THERE IS HOPE!BUT THERE IS HOPE!


A “Status Quo” Election…


…Means “Status Quo” Agency Leadership


Affordable Care Act Survives (Barely)

"It is not our job to save the people from"It is not our job to save the people from the consequences of their electoral choices.” the consequences of their electoral choices.”


Affordable Care Act Survives (Barely)

•Ruling is Positive For Biopharma; Robust Growth Expected… Ruling is Positive For Biopharma; Robust Growth Expected… •CMS projects national drug spending be 8.8% in 2014 (versus 2.4% in 2013)

•4.7 percentage points faster than in the absence of health care reform

•Medicaid enrollment to increase by up to 19.6 million people in 2014

•Retains IP protections contained in the biosimilars provisions in the ACA

• ……But There Are Potential DownsidesBut There Are Potential Downsides•SCOTUS decision allows states to opt out of Medicaid expansion risk-free

•Impact of Independent Payment Advisory Board (IPAB) yet to be seen


2013: A Year of Implementation

Affordable Care ActAffordable Care ActOct. 1 Deadline to Launch ExchangesMedicaid Expansion Still FluidFinal Regs Coming Soon:

•“Sunshine” Act on Provider/Pharma Payments•Medicaid Rebate Rule

FDA Safety & Innovation ActFDA Safety & Innovation Act

•Incentives for Antibiotics

•Biosimilar Pathway Taking Shape, SLOWLY

•Major Resources for Generic Drug Reviews

•Supply Chain Impact•Foreign Inspections•Shortage Response•Compounding


10

““Breakthrough Therapies”Breakthrough Therapies” Hyper-Fast Development for Drugs That Show Extraordinary Clinical Efficacy

Vertex has two: ivacaftor and ivacaftor/VX-809 combo for CF

““Qualified” Infectious Disease Agents (GAIN Act)Qualified” Infectious Disease Agents (GAIN Act) Five-Year Added Exclusivity For Anti-Infectives/Anti-Fungals Targeting Priority

Infections

““Enhanced” Accelerated ApprovalEnhanced” Accelerated Approval Codifies AA, Directs FDA to Update Guidance/Regs Does NOT Modify Approval Standard

Rare Disease ProvisionsRare Disease Provisions

Pediatric Rare Disease VoucherPediatric Rare Disease Voucher

Pediatric Exclusivity Made PermanentPediatric Exclusivity Made Permanent

Single-Enantiomer Provision Extended Five YearsSingle-Enantiomer Provision Extended Five Years

Innovation In FDASIA


Implications of “Breakthrough” Therapies

“What I think FDASIA does more than had been done previously is it says to all

of FDA, management and staff, ‘Get into this stuff.’…

“If there’s a process for identifying things that are so impressive-looking

that you’re going to designate them as breakthrough, the involvement should

be not just at the division level, but broader than that. You’re going to

have Jenkins in the room and maybe Janet. We should all be paying attention to how we do that.”

Bob Temple, FDA/CMS SummitDecember 11


GAIN Act: Anti-Infective Incentives

““There's no area that we're There's no area that we're working on harder than trying to working on harder than trying to

develop pathways that are develop pathways that are feasible and scientifically feasible and scientifically

rigorous for developing and rigorous for developing and approving new antimicrobials. It approving new antimicrobials. It is a public health crisis. We need is a public health crisis. We need

new antimicrobials.”new antimicrobials.”

-- John Jenkins, FDA/CMS -- John Jenkins, FDA/CMS SummitSummit

December 10December 10


The “Lake Wobegon Effect”

FDA: Where All The Drugs Are Above Average

There are now at There are now at least least 1616 (!) (!) “Special” “Special”

designations at designations at FDA FDA


Drug Shortages: Unprecedented Attention

FDASIA “Fixes” FDASIA “Fixes” The Shortage The Shortage

ProblemProblem


What Is In:What Is In:•More Mandatory Reporting by More Mandatory Reporting by PharmaPharma

•Non-Compliance Publicized, not Non-Compliance Publicized, not PunishedPunished

•““Flexibility” For Recovering Flexibility” For Recovering ManufacturersManufacturers

•FDA Task ForceFDA Task Force•Inter-Agency CoordinationInter-Agency Coordination

•Input from Stakeholders, including 3d Input from Stakeholders, including 3d party Reportingparty Reporting

•Limited Hospital Re-PackagingLimited Hospital Re-Packaging•Intra-System Use OnlyIntra-System Use Only

Congress Has Now “Fixed” This Problem…

Even If No One Knows How…Even If No One Knows How…

What Is Not:What Is Not:• Change ASP/AMP FormulasChange ASP/AMP Formulas

• Incentivize Quality/Reliability of Incentivize Quality/Reliability of SupplySupply

• Medicaid Rebate/340B “Holiday”Medicaid Rebate/340B “Holiday”

• All Subject to Further StudyAll Subject to Further Study

• GAO Report Due in 18 GAO Report Due in 18 MonthsMonths

Ideas “On The Shelf” Ideas “On The Shelf” For Next Time….For Next Time….


FDASIA: Supply Chain ElementsFDASIA: Supply Chain Elements

“Upstream” Provisions Included Manufacturing Registration, Foreign Inspection, Import Controls

“Good Import Practices” to Match GMP, GCP Model

“Downstream” Deferred New Anti-Counterfeiting Provisions Included

Pedigree, Track-and-Trace Are Not

Track and Trace Discussions Continue; Draft Legislation Released For Public Comment


Compounding The Issue…

Rx Compounding Legislation Likely in Rx Compounding Legislation Likely in 20132013

May Be Vehicle for Additional Measures on Supply Chain


PDUFA: Perpetual FDA Reform

Congress Hauls in FDA Every 5 Years and Looks Under the Hood

Routine Maintenance for FDA


FDASIA and PDUFA V: Two Key Texts

FDASIAFDASIA““The Law”The Law”

PDUFA VPDUFA V The “Goal The “Goal

Letter”Letter”


Policy Zig-Zag

Lasting Initiatives Unfulfilled Ideas

PDUFA I1992-1997

Actionable deadlines, broader delegation of approval authority within FDA

FDAMAInnovation(PDUFA II)1997-2002

Meeting schedules, special protocol assessments; fast-track, rolling NDA submissions

Dissemination of off-label information; NIH clinical trial registry

PDUFA III2002-2007

Good review practices; Pediatric drug testing

FDA increased safety authority for two years post approval

FDAAADrug Safety(PDUFA IV)2007-2012

REMS, Phase IV mandatory studies, NIH clinical trial registry, active post-market surveillance (Sentinel)

DTC review, antibiotic incentives, priority review vouchers, FDA staff publication rights, Reagan-Udall Foundation


UFA Multiplication

PDUFA

ADUFA

AGDUFA

MDUFMA

DTC Fees*

Tobacco Product Fees

Food Safety Fees

BsUFA **

GDUFA **

*Enacted, but never collected; **New!


FY 2011 FY 2012 FY 2013

User Fees $879 mil. $1,326 mil. $1,969 mil.

Budget Authority

$2,459 mil. $2,506 mil. $2,517 mil.

Total Program

$3,339 mil. $3,832 mil. $4,486 mil.

User fees as % of Total

26.3% 34.6% 43.9%

Towards 100%?

User fees = • 60% of premarket review • 75% of generic drug activities


PDUFA V: Getting With “The Program”

• Applies to NMEs OnlyApplies to NMEs Only

• Two Month LONGER Reviews (12 or 8 months)Two Month LONGER Reviews (12 or 8 months)• First Time in PDUFA Era that Slower is Better

• Buys Time for Inspections, REMS Negotiations

• Pre-NDA Meeting is Vital Pre-NDA Meeting is Vital • Though Technically Optional

• Limited Opportunity to Supplement Filing

• Expect RTFs for Incomplete Applications

• Greater Emphasis on Planning ReviewGreater Emphasis on Planning Review• Multiple Check-Ins With Sponsor

• Late-Cycle Meeting is Key Innovation (and Already Late-Cycle Meeting is Key Innovation (and Already Controversial)Controversial)• Sponsors Want “Verbal Complete Response”

• FDA Management Emphasizing Process Review

• Decision Maker Engaged


Getting With “The Program”

Source: Office of New Drugs Director John Jenkins, FDA/CMS Summit for Biopharma Execs Dec. 10 http://www.fda.gov/downloads/AboutFDA/CentersOffices/OfficeofMedicalProductsandTobacco/CDER/UCM331454.pdf


Getting With “The Program”: Implications

• Better Meetings:Better Meetings:• Outside Consultants in the Room

• Fewer, Less Exciting Advisory Committees:Fewer, Less Exciting Advisory Committees: • Late-Cycle Meeting Eliminates “Surprises”

• New Communication Challenge for Sponsors:New Communication Challenge for Sponsors:• What to Say About FDA Updates?

• Unlikely to Improve “First-Cycle” Performance:Unlikely to Improve “First-Cycle” Performance:• Tough To Beat Near Perfection


Hard To Improve on Recent Record

NME NME Approval Approval

Rate is 80%Rate is 80%


A Clear Success (1): Faster Reviews



A Clear Success (2): No More “Drug Lag”



Less Clear: More New Medicines?


39 approvals approvals


The Drug Class of 2012


The Year-End Approval Rush

•ARIADARIAD’s Inclusig for two rare forms of leukemia

•Human Genome SciencesHuman Genome Sciences’ raxibacumab for inhalational anthrax

•NovartisNovartis’ Signifor for Cushings disease

•NPS PharmaNPS Pharma’s Gattex for short bowel syndrome

•AegerionAegerion’s Juxtapid for a rare cholesterol disorder

•Bristol-Myers SquibbBristol-Myers Squibb’s Eliquis anti-clotting drug

•JanssenJanssen’s Sirturo for pulmonary tuberculosis

•SalixSalix’ Fulyzaq first drug approved for HIV-associated diarrhea


Dueling Cartoons

December 31December 31Going Over the Cliff

January 1January 1

We Have a Deal!We Have a Deal!

Sort of….Sort of….


The “Deal”

Done (“Permanent” Changes)Done (“Permanent” Changes)Tax Rates Tax Rates Alternative Minimum Tax “Patch”Alternative Minimum Tax “Patch”Estate TaxEstate Tax

Dealt With (For One Year)Dealt With (For One Year)““Doc Fix”Doc Fix”Tax Extenders (R&D Credit)Tax Extenders (R&D Credit)UnemploymentUnemploymentFarm BillFarm Bill

Unresolved Unresolved SequesterSequesterDebt CeilingDebt CeilingDeficit ReductionDeficit Reduction

Let’s Try this AgainLet’s Try this AgainMarch 1March 1


A Grand Bargain in 2013?

Divided Government Can WorkDivided Government Can Work

Balanced Budget Act of 1997


Medicare Cuts and Pharma

““Round Up The Usual Suspects”Round Up The Usual Suspects”

Part D Rebates for Duals

Change in Part B Payment (ASP+4%?)

Move Part B Drugs To D

Generic Incentives

Least Costly Alternative

End “Pay for Delay” Settlements


Key Takeaways

Health Reform Will ProceedHealth Reform Will Proceed Pharma already paid for insurance expansion in form of new fees, rebates Pharma already paid for insurance expansion in form of new fees, rebates

and discounts in 2010and discounts in 2010 SCOTUS ruling on Medicaid expansion lowers number of newly coveredSCOTUS ruling on Medicaid expansion lowers number of newly covered Administration will continue to push for implementation of the Independent Administration will continue to push for implementation of the Independent

Payment Advisory Board; industry would need to seek separate “repeal” billPayment Advisory Board; industry would need to seek separate “repeal” bill

Positive FDA Environment Will ContinuePositive FDA Environment Will Continue Seamless leadership = uninterrupted FDASIA/PDUFA V implementationSeamless leadership = uninterrupted FDASIA/PDUFA V implementation Climate for new drug reviews as good as it gets; “drug lag” no moreClimate for new drug reviews as good as it gets; “drug lag” no more User fees increasingly critical for FDA resourcesUser fees increasingly critical for FDA resources

FDA Congressional Oversight “Tinkering,” Not Major OverhaulFDA Congressional Oversight “Tinkering,” Not Major Overhaul Rx compounding legislation likely for 2013Rx compounding legislation likely for 2013

Fiscal Cliff Deal Provides 85-Day Reprieve From Part D RebatesFiscal Cliff Deal Provides 85-Day Reprieve From Part D Rebates Biden-McConnell deal excluded major provisions that would affect industry; Biden-McConnell deal excluded major provisions that would affect industry;

sequestration avoidedsequestration avoided Key question will be whether Part D rebates for duals can be protectedKey question will be whether Part D rebates for duals can be protected


Thank You!

Available on [email protected]@PrevisionPolicy.com202-297-6420202-297-6420

:kate rawson .:prevision policy llc .:january 9, 2012

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