Drug Shortages: Danger and Opportunity?

IV drug shortages

 

Are we the only ones shocked by this?

Despite efforts by the Obama administration to ease shortages of critical drugs, shortfalls have persisted, forcing doctors to resort to rationing in some cases or to scramble for alternatives, a government watchdog agency said on Monday. The number of annual drug shortages — both new and continuing ones — nearly tripled from 2007 to 2012.

We’ve done some work in the parenterals space (see here, for example), and indeed we are aware of some facilities in the US being closed.

But the size of the problem really stunned us.

Consider this:

“We are at a public health crisis when we don’t have the medicines to treat acutely ill patients and we don’t have the basics like intravenous fluids,” said Erin Fox, a drug expert at the University of Utah whose data was used in the analysis. The most acute shortage now is that of basic IV fluids, she said.

Curious, we decided to take a brief look at the report discussed in the article.

The PDF is available here.

The report, prepared by the Government Accountability Office (GAO), is a detailed study of the problem.

Here are a few items we found interesting:

1. Active shortages are those which exist for 1 year or less. Ongoing shortages are for one year or longer. What’s really alarming is the number and growth rate of ongoing shortages.

This suggests that manufacturers are simply existing these markets for economic reasons. One would think that if the economics were strong, the manufacturing problems would be resolved. But this does not appear to be the case.

Active Drug Shortages

This is an alarming growth rate.

The GAO arrives at the same conclusion:

GAO also identified potential underlying causes specific to the economics of the generic sterile injectable drug market, such as that low profit margins have limited infrastructure investments or led some manufacturers to exit the market.

2. Sterile Generic Injectables account for 44% of the shortages from 2011-2013, with an additional 18% of shortages come from oral generics. Interestingly, certain therapeutic areas, such as anesthetics, anti-infectives, cardiovascular, and nutrition account for significant numbers of drug shortages.

3. Patient care is directly affected by these shortages. Consider this shocking statement:

During a shortage, providers may have to cancel or delay procedures, which can have detrimental health effects on patients. Providers may also have to ration care by prioritizing the patients who have a greater need for the drug. For example, provider association representatives said that if a drug is used in patients across age groups, but is essential for the care of newborns, a hospital may institute a policy that the drug can only be administered to newborns and will no longer be administered to adults.

Unbelievable.

There are other side effects from these shortages which directly impact patient care. For example,

…emergency service providers have reported significant difficulties finding alternative medications for stopping seizures and are concerned with the viability of alternative therapies in certain emergency situations….when effective alternatives are identified and located, medication errors may increase because the dosage of the alternative drug may differ from what providers are accustomed to using.

Some health care providers are turning to internal compounding (which has its own issues) or even “grey market” suppliers. These are manufacturers who are not authorized to manufacture or sell these products in the US.

The root causes of these shortages are complex.

Product Quality – According tot he GAO report, 40% of shortages are due to manufacturing quality concerns, such as particulate matter or plant maintenance issues.

Capacity constraints – When manufacturers have a problem, then sometimes close the facility entirely. But for those who decide to remain open, a shutdown in one area can cause temporary, but long-term reductions in plant output.

API shortages – As one can imagine, fewer manufacturers of finished product results in reduced demand for API. However, API shortages appears to be less of an issue.

Can this problem be resolved? Are there opportunities for manufacturers or even new companies to enter the space and address these problems?

We’ll discuss some potential solutions in a future post.

 

How was San Francisco?

 

 

We’re still knee-deep in our follow up activities from the San Francisco conferences and receptions.

Specifically, we spent the bulk of our time at the rapidly-growing Biotech Showcase at the Parc 55. EBD has summary videos and statistics that will tell you all about the conference.

So it’s impossible for us to prepare an extensive review of the JP Morgan conference or the other conferences taking place simultaneously.

However, there were a few key themes that emerged even from our somewhat limited participation:

Party Like It’s 1999: When we wrote about the hot IPO market in August, we didn’t think it would last much longer. Certainly not beyond the Fourth Quarter of 2013.

We were wrong.

Sell Sell Sell: The media tends to focus on a narrow set of stories (hot IPOs, earnings, big venture rounds, and clinical trial failures). However, down in the trenches, the overwhelming theme is on acquiring assets (products, business units, companies) that are revenue-generating. Even products and companies with EBIDTAs that are borderline positive could find an audience in this environment.

In fact, one of our projects involving the acquisition of a parenterals facility/business garnered a lot of attention in San Francisco because executives are looking for revenues.

In addition, the interest for liberating on-market, under-marketed products from Big Pharma remains very high, as it was in 2013.

Get in there and sell.

You Have To Get Out More:  We make it a point to attend as many receptions as possible while there. It’s  a critical aspect of the entire week. Yet we still find a lot of individuals who prefer to spend their evenings in the quiet calm of their hotel rooms with room service and a wide-screen TV.

This is a mistake.

Next year, do yourself a favor and plan your evenings strategically. Keep on eye out on Twitter for a directory to all of the evening receptions. Bring your business cards and network as much as possible.

Remember, you can always sleep on the plane ride home.

Novel Antibiotics: We Need Them

 

 

anti-bacterial drug approvals decline

The decline and fall of anti-bacterial drug approvals. Is there a renaissance in the making?

Yesterday the Wall Street Journal summarized the current situation in antibiotic drug development and commercialization. To summarize:

  • Big Pharma is slowly returning to antibiotic (really, antibacterial) drug discovery and development
  • Physicians are caught between resistance to old antibacterials and a lack of new ones
  • New pricing models similar to cancer pricing are needed to make it worthwhile for Big Pharma

There is no question that the need is present, and growing rapidly. As the article points out:

There is an acute medical need for new antibiotics. Antibiotic-resistant infections now kill around 50,000 people a year in the U.S. and Europe, and that number is rising, according to the World Health Organization. In the U.S., two million people a year will contract a drug-resistant infection, with direct health-care costs of as much as $20 billion, according to the Centers for Disease Control and Prevention.

The FDA recognizes the challenge faced by both physicians and the industry, and they are responding. Last year, for example, the FDA provisionally announced a rule that states that companies who develop anti-bacterials against a select list of pathogens will be awarded with an additional five years of market exclusivity (the list is available here, while the full FDA document is available here).

Dr. Brad Spellberg, Assistant Professor of Medicine at UCLA, published an excellent summary of the problem:

In 2012, antibiotic development continues to stagnate. Two systemic antibacterial agents have been approved for use in humans by the U.S. FDA from 2008 through the current year. Compare that to sixteen that were approved from 1983-1987. In particular, we have had no new classes of antibiotics to treat Gram-negative bacilli (GNB) for more than 40 years – amazingly, the fluoroquinolones were the last new class of antibiotics to treat GNB. Meanwhile, antibiotic resistance continues to spread like wildfire, particularly among the GNB.

He also highlights the problem we as a society have with antibiotic pricing versus oncology drug pricing:

…The FDA continues to approve [antibiotics] based on disease state one at a time (pneumonia, urinary tract infection, etc.) rather than based on the organisms the antibiotic is designed to kill. Thus, companies spend $100 million for a phase III program and as a result capture as an indication only one slice of the pie. There is also imbalanced drug pricing in society. We will pay $50,000 for a course of cancer chemotherapy that prolongs life by 3 months, but we don’t want to pay more than $100 for a course of antibiotics that cures the target infection. This pricing difference is neither rational nor data-driven; there is no cost-efficacy analysis that supports cancer drug pricing. Rather, drug pricing in the U.S. is based on public perception and fear. People are terrified of cancer, but not of infections.  

The notion of pricing antibiotics up to the prices for novel cancer therapies is quite disturbing, but understandable. How will Payers be convinced that a second or third line antibiotic course of therapy (let’s assume 10-14 days) can justify a $5000 price tag? Matt Herper discusses the antibiotic issue in an article at the unwieldy Forbes web site:

Governments and insurance companies need to commit to paying 10 or 50 times more than they already do if industry is going to put resources into fighting the threat of superbugs…

But when it comes to trying to produce new antibiotics, governments, insurers and hospitals seem anything but serious when they vote with their wallets. The cost of a course of branded, expensive antibiotics costs $3,000 per patient. Meanwhile, Sovaldi, a new Gilead Sciences treatment that can cure hepatitis C in combination with other drugs, costs $84,000 per treatment course. Cancer medicines that add weeks or months of life can cost $100,000 per patient. Drugs for rare diseases now commonly cost $200,000 or more per patient per year, and are seen as a quick way for biotech companies to ramp up sales.

Fortunately, it’s not only Big Pharma that’s returning to the fold. A number of start ups are getting funded on the basis of antibiotic research and drug discovery. And many of these assets are available for licensing. For example, a quick search turned up the following assets available for licensing:

  • AFN-1252 is an oral and iv antibiotic with potency against all drug-resistant phenotypes of staphylococci including hospital and community-acquired MRSA.
  • Nemonoxacin is a novel, non-fluorinated quinolone antibiotics with a broad spectrum of activity against various resistant pathogens, in particular hospital- or community-acquired MRSA and vancomycin-resistant bacterial strains.
  • Dalbavancin is a long-acting, intravenous (IV) lipoglycopeptide for the treatment of acute bacterial skin and skin structure infections (abSSSI).

So there are encouraging signs here. We have novel antibiotics being discovered and developed in small companies, we have Big Pharma jumping into the mix, we have the FDA developing policies which encourage antibiotic drug development, and we have substantial unmet needs in major markets. Hopefully, this activity will result in a series of novel, reasonably priced antibiotic launches throughout the remainder of the decade.

FDA Approvals: Is it really as bad as they say?

 

 

This week we’re greeted with the following headlines:

The FDA Approvals of 2013: A Watershed?

US new drug approvals slip in 2013 vs prior year

An ominous trend resurfaces as new drug approvals plunge in 2013

Is it really all that bad?

Is our industry doomed?

The headlines are driven by the 27 NMEs approved by the FDA in 2013, which is definitely a decline from the 39 approved in 2012 and the 30 in 2011.

In fact, 2012 was a banner year not only because of the high number of NME approvals, but also because 20 of the 39 were First-in-Class (see this CDER PDF for the data).

However…

If you look at NME approvals from 2003-2012, the FDA averages 25-26 a year. There have been some peaks (36 in 2004) and some valleys (18 in 2007).

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So, if anything, the 27 NME approvals in 2013 a return to the mean.

McKinsey makes the same point in their analysis, noting that the 20-year average of NMEs from 1993-2012 was 28 per year (See this CDER PDF for historical data)

Having said this, there are some worrying signs, such as Big Pharma approvals relative to Sales and R&D spending.

Gone are the days when Big Pharma could launch an NCE that was 5th in the Class and still generate millions in sales and 5% p.a. pricing growth rate.

But there is good news in that companies which used to be called “biotech” or “small pharma” are doing well, such as Gilead, Celgene, and others.

And, there appears to be a movement towards earlier-stage in-licensing by Big Pharma. Plus, judging by the attendees at the upcoming Biotech Showcase, there are a number of venture firms looking for early-stage investment opportunities. 

The fact remains that the things which make up drug development: chemistry, biology, pharmacology, clinical trials…these are all incredibly difficult and unpredictable activities which are largely out of our control.

So we think the results from 2013 should be placed in their proper context. There is no question that the industry has challenges.

However, as long as there are diseases with unmet needs, there will be creative scientists and clinicians who will discover new drugs and new treatment modalities.

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