In business parlance, a bolt-on acquisition is one in which the smaller company offers its acquirer strategic value. Swiss drugmaker Novartis’ recently announced $9.7 billion takeover of The Medicines Co. certainly qualifies.
However, MedCo.’s strategic value is anything but certain. MedCo. is a one-drug company whose lead asset, inclisiran, is one of several injectable, cholesterol-lowering meds known as PCSK9 inhibitors. And that’s a drug class with a checkered past.
The two other previously marketed PCSK9 inhibitors, Sanofi’s Praluent and Amgen’s Repatha, have been commercial disappointments thus far. That led Sanofi, under new CEO Paul Hudson, to exit the U.S. cardiovascular market in December, a move which includes ending heart disease research in favor of immunology and other potentially lucrative areas, and relinquishing Praluent marketing rights to development partner Regeneron.
“We’re taking the actions; we’re not scared,” Hudson said at last month’s J.P. Morgan Healthcare Conference. “We’re out of cardiovascular; we’re out of diabetes research. We’re not going to keep looking back. We’re looking forward.”
If you’re Novartis, it is instructive to look back, lest the company repeats the mistakes of the past. At launch in 2015, Sanofi and Amgen each thought they had breakthrough drugs on their hands, capable of putting a dent in the most common cause of death in America — heart disease — and generating blockbuster sales.
As such, Sanofi priced Praluent at $14,600 per year; Amgen followed suit and set rival Repatha’s price at $14,100. As it turns out, they grossly miscalculated.
While the then-new drugs’ price tags weren’t outrageous compared to the multimillion-dollar prices for some of the one-and-done genetic treatments, they struggled to gain a foothold, mainly due to payers’ reluctance to foot the bill for what is ostensibly a lifetime of treatment. “What payers decided to do was to put up every barrier they could to getting patients, even those who really needed the drugs, on the drugs. They decided that they could make more money by saying ‘no,’” recalls Dr. Steven Nissen, chief academic officer of the Miller Family Heart and Vascular Institute at the Cleveland Clinic.
Both PCSK9s addressed a largely unmet clinical need in patients with an inherited disorder called “familial hypercholestrolemia” (FH), which results in having very high levels of low-density lipoprotein (so-called “bad cholesterol) in the blood. They actually did a better job of cutting the rate of heart attacks and strokes for some people than earlier drugs like statins (think Pfizer’s Lipitor and Merck’s Zocor).
“We have people with statin intolerance, with heterozygous familial hyperlipidemia,” Nissen says, referring to one of the two types of FH commonly seen. “We have people who can’t get their LDL down on statins. And for the first couple of years these drugs were available, there was only one answer we ever got from the payers: ‘No.’”
Indeed, despite manufacturer promises of long-term savings to the health system, pharmacy benefit managers (PBMs) effectively clamped down on access via strict prior-authorization practices (criteria that must be met in order to access a drug) and high co-pays. Of patients given a prescription for a PSCK9 inhibitor during the drugs’ first year on market, only 47.2% received approval from their insurer, according to one study by the Duke Clinical Research Institute. And of those, 34.7% never filled the script from the pharmacy, likely due to high out-of-pocket cost.
“When the PCSK9 medications first came out, they did not have a lot of [data] to necessarily prove [they] were going to be effective in terms of lowering the risk of heart attacks,” notes Seth Friedman, pharmacy practice and health plan services leader for pharmacy benefits consultancy Arthur J. Gallagher. “Because of that, a lot of plans made the decision, frankly, to just not cover them.”
Such data would come later. Repatha won approval to prevent heart attack and stroke in December 2017; Praluent added a heart benefit to its label in April 2019. However, despite outcomes studies showing their cardio-protective benefits, the Gallagher team found that “a lot of plans didn’t go back and change their coverage. They continued to exclude the drugs,” Friedman says.
Another factor weighing on the launches was the pricing dynamic. In an effort to boost sales, Amgen lowered its price by 60%, to $5,850, in late 2018. Sanofi did the same several months later, slashing its own price tag to the exact same point. Instead of allowing the marketers to scale up their reimbursement, though, many PBMs barely batted an eyelash.
“Plans didn’t. . .change their coverage. They continued to exclude the drugs.”Seth Friedman, Arthur J. Gallagher
Their reaction, or lack thereof, has a lot to do with the way incentives work in the drug industry. Drugmakers extend rebates to PBMs in order to win preferred status on their formularies. PBMs often prefer the higher-priced versions of drugs because it means they can pass on a higher rebate to their health plan customers.
In the case of the PCSK9s, some PBMs structured benefit plans to retain higher-priced versions of the drugs, so as not to forfeit the higher expected rebates. “We haven’t seen much movement over to those other formularies [with the lower-priced version of the drugs],” Friedman says. While PBMs have loosened up their criteria from a pricing and rebate perspective, he downplays its overall effect. “Has utilization gone up a little bit? Yes, but not where PCSK9s are now cropping up to anywhere near the top of a client’s drug spend.”
As one would expect, these factors have dragged down sales. Praluent revenues rang in at an underwhelming $308 million in 2018 and actually decreased last year to $283 million, which Sanofi attributed to higher rebates. Repatha revenues landed at $550 million in 2018, rising 20% last year to $661 million.
So what did Novartis see in MedCo. and inclisiran? First, an opportunity to bolster its cardiovascular franchise. Second, a chance to succeed where Praluent and Repatha have not.
Inclisiran was submitted to the U.S. Food and Drug Administration in December. A twice-yearly injection, it lowers LDL cholesterol in a way that’s different from any statin — or from Repatha or Praluent. Like the other two drugs, inclisiran targets PCSK9, a protein which is essential to LDL cholesterol.
But inclisiran does it differently: Through a process known as RNA interference, whereby it degrades the messenger RNA cells used to translate genetic instructions into proteins. The drug has been shown in several phase 3 trials to cut those levels by more than 50%, and with minimal side effects. An outcomes trial is underway.
Because it is injected just once every six months, inclisiran holds out the promise of better compliance than the two FDA-approved PCSK9 inhibitors, both of which are injected twice monthly. Meanwhile, Novartis sales reps will already be in doctor’s offices selling heart-failure med Entresto. They will be able to offer a PCSK9 inhibitor with compelling efficacy, safety and dosing.
Inclisiran must be injected in a doctor’s office — a feature which likely attracted Novartis, with the drugmaker assuming a scenario where patients get the shot during biannual checkups. A majority of cardiologists, however, viewed this as burdensome. Based on a poll of 50 cardiologists by the investment bank Jefferies, 70% said they find the requirement for HCP administration “unattractive,” while half say they’re unlikely to adopt the necessary buy-and-bill scheme.
For his part, Nissen calls the drug “a welcome addition,” adding that he won’t wait for Novartis’ five-year cardiovascular outcomes trial, Orion-4, to read out in 2024 before utilizing inclisiran. Novartis is expecting a 30% relative risk reduction, whereas Repatha and Praluent only manage about 15%.
That’s because LDL as a surrogate measure, he says, “has been the most reliable of any of the surrogate measures that we’ve used in medicine.”
Whether the new entrant can break onto PBMs’ approved drug lists may have more to do with negotiation than clinical features and benefits. “I don’t know how much [payers] necessarily look at the benefits of compliance, even though they should, in their decision-making,” Friedman adds. “I think a lot of it comes down to the rebate and the pricing that they’re going to get from the manufacturer.”
More than anything, Novartis has to get inclisiran’s price right. What PBMs learned from the Repatha/Praluent pricing showdown is that drugmakers are willing to leverage drug cost to optimize market access where clinical considerations are relatively similar, notes Judy Sulick, VP of trade relations at the pharmacy benefits manager EnvisionRx.
“This was a terrible problem that is only now beginning to get a little bit better.”Dr. Steven Nissen, Miller Family Heart and Vascular Institute at the Cleveland Clinic
Asked how the PBM could react to a third PCSK9, Sulick says clinical elements are “the top priority” that supersede all other economic considerations. “Outcomes, patient adherence and persistence experiences should be similar or better. Economically, the product would need to be at parity with or better than the other products to be considered for formulary placement.”
Still, Nissen thinks PBMs had their priorities out of whack when it came to Praluent and Repatha. “Do I think that the PCSK9 drug should be put in the water supply? Absolutely not,” he explains. “Do I think that we need to be prudent in how we use them? You bet I do. But in denying market access, it’s not about the market; it’s about denying patients access. This was a terrible problem that is only now beginning to get a little bit better.”
By way of comparison, Nissen points to the price of AstraZeneca’s Crestor (rosuvastatin) before it went off patent. The undiscounted, average wholesale price for branded Crestor was between $740 and $993, for a three-month supply, per figures provided by AJG. On an annual basis, then, one year of rosuvastatin equates to slightly less than the annual cost of a PCSK9 inhibitor.
“I personally think it’s reprehensible,” says Nissen of the way PBMs have managed their formularies vis-a-vis the PCSK9s. “Sooner or later, this is going to come back to haunt medicine. Physicians and patients have a different goal than pharmacy benefit managers, which are driven primarily by greed and incentivized, perversely, to do the wrong thing. And, frankly, I think a lot of physicians like me are pretty fed up with it.”