Express Scripts Reports Specialty Drug Spending Steadily Rising, And Pipelines Show More To Come

Not only are specialty drugs “the fastest-growing segment of drug spend,” but the pharmacy benefits manager Express Scripts predicts that specialty drug spend will account for 40% of U.S. drug expenditures by 2014.

Utilization of specialty drugs “will continue to grow (around 12% per year) over the next three years,” the PBM forecasts in its 2010 Drug Trend Report, issued this April. That growth will be driven by the approval of new specialty drugs for currently unmet medical needs – which is substantiated by the last few years of novel product approvals by FDA ("For NMEs, The Song Remains The Same: Specialty Markets Eye Further Growth For 2010, While Traditional Big Pharma, Primary Care NDAs Are Few" — Pharmaceutical Approvals Monthly, February 2010).

The Express Scripts data highlight the downstream ramifications of the shift in biopharma R&D away from mass-market drugs and toward specialty therapeutics, a category encompassing costly, chronic conditions treated with agents that typically require handling and monitoring outside of traditional retail pharmacy channels. While FDA approval data illustrate the trend, the PBM's data provide a quantification of the economic impact.

“Looking back at the last five years, two main patterns in drug trend have emerged,” Express Scripts said. “Specialty drug-cost trends have increased tremendously, with year-over-year spending increases in the solid double digits.” From 2009 to 2010, specialty drug spend grew 19.6%. At the same time, “annual increases in traditional drug-cost trends have slowed, leveling off at less than 2%,” the PBM said.

In 2010, “for the first time, specialty costs (in both the pharmacy and medical benefit) comprised 25% of total drug spend and exceeded the [per member per year (PMPY)] spend in the top four traditional therapy classes,” Express Scripts said. Those top traditional classes were high cholesterol, diabetes, high blood pressure and depression.

The top three specialty classes in 2010 were inflammatory conditions, multiple sclerosis, and cancer – and each grew “at rates in excess of 23%.” Indeed, all of the top 15 specialty therapy classes showed increases in PMPY spending between 2009 and 2010, while more than half of the top 15 traditional classes posted a decline.

Some of that decline comes from generic competition, which is rife in the top traditional therapy classes where big pharma’s R&D interest has dropped off. Five of the top six traditional class markets are dominated by generics: high cholesterol, high blood pressure, depression, asthma and ulcer disease. (The outlier, diabetes, has a highly active pipeline.) With a host of primary care products due to lose patent protection in the next couple of years, that impact is only going to get worse. The looming patent cliff has prompted biopharma to turn to specialty drug R&D in its search for innovative products.

The High Price Of Innovation

That has helped biopharma companies and patients with rare diseases, but made matters more difficult for payers.

“Innovation across many specialty therapy classes has led to the discovery of novel biologic drugs that significantly broaden treatment options for certain conditions,” Express Scripts said. But, as a result, “plan sponsors face a significant challenge from high-cost biologics and other specialty medications.”

“Limited generic competition combines with a dearth of statistically valid head-to-head comparisons to make branded specialty agents expensive,” Express Scripts said. As a result, the growth in unit cost is “particularly dramatic” in specialty therapy classes,” which grew 9.2% compared with a 3.5% gain in unit cost for traditional classes. “In classes with limited competition, plan sponsors have few options to manage drug mix; this allows manufacturers more freedom to increase pricing,” the PBM noted.

The potential for profit has been a big draw for pharma "The Return Of Big Pharma? 2011 Novel Approvals Could Show Payoff Of Licensing And Acquisition Strategies" — Pharmaceutical Approvals Monthly, February 2011. As the PBM observed, “to take advantage of the situation, many pharmaceutical companies have shifted their research and development dollars from traditional medications to specialty medications.”

The continued expansion of established biologics (e.g., the TNF inhibitors) into new indications is another challenge for PBMs trying to manage specialty pharmacy benefits. “The number of indications is increasing for many products,” the report notes. The number of drugs per patient is also higher in specialty classes, because “difficult-to-manage, complex diseases often require multiple therapeutic agents.”

Express Scripts does not see the emergent pathway for biosimilars to be much of a panacea for rising specialty spending. “Most biosimilars will not be A-rated, so automatic substitutions will not occur,” the PBM said.

Pharmacogenomics: Going Test By Test

New, targeted drugs and biologics have prompted a rise in pharmacogenomic testing. With an emerging, but still unclear, regulatory framework at FDA, more pharmacogenomic tests are moving from the laboratory to the market – but not without some bumps in the road ("Targeted Oncologics ISO Companion Diagnostics To Find Attractive Patients" — Pharmaceutical Approvals Monthly, February 2011).

“As with most medical technologies, each test must be evaluated carefully – test by test, indication by indication – to determine not only whether it offers a net benefit, but also for which patients and at what cost,” the Express Script report states.

“Although some genetic tests have passed careful, evidence-based evaluations, many have not,” the PBM noted. It expressed caution about “the novelty of many pharmacogenomic tests” and “the complexity involved in giving and interpreting their results.”

“Two especially crucial considerations are whether the results of the test change care in the clinical setting and whether changes in care lead to better health outcomes in clinical practice,” Express Scripts said. “Although these two requirements seem intuitive and straightforward, evidence for them presently is sparse (or even negative) for many pharmacogenomic tests.”

Data presented recently at the annual American College of Cardiology meeting illustrates the difficulty in moving from pharmacogenomic discovery to validated and fully researched tests being integrated into clinical practice. The GIFT study failed to show a clear effect on outcomes from use of a genomic test to identify Plavix non-responders, prompting debate regarding the paucity of evidence to show that testing improves outcomes. And lacking evidence, testing does not feature in influential practice guidelines from professional societies ("Will Plavix Testing Be Enough To Limit Use Of Newer Antiplatelet Drugs?" — "The Pink Sheet," Apr. 18, 2011).

Pharmacogenomic testing has seen better penetration in the cancer marketplace, led by the long-standing example of HER2 testing for Herceptin, and many experimental oncologics are in development with a companion diagnostic. “Pharmacogenomics will play an important role in the treatment of cancer,” Express Scripts stated. “Tests that help identify appropriate patients for treatment will frequently accompany the medication and may be required via FDA-approved product labeling.”

The PBM reports that there are currently 21 FDA-approved oncology drugs with pharmacogenomic information in labeling. However, the regulatory and commercial complexities of tandem development of drugs and diagnostics are still emerging ("Companion Diagnostics: A Business Area Fraught With Challenges Ahead" — "The Pink Sheet" DAILY, Mar. 15, 2011).

Oral Drugs Propel Rising Cancer Drug Trend

Cancer is third in terms of Express Scripts’ PMPY drug spend, but it far and away dominates the specialty drug pipeline. “The cancer pipeline is extensive, accounting for approximately half of all specialty drugs in development,” the drug trend report states.

Increasing use of oral cancer drugs is a key element of the category’s growth. Express Scripts highlighted two more oral oncologics that “may be approved within the next year”: Pfizer’s crizotinib for some NSCLC patients, for which Pfizer has started a rolling submission, and another fast-track candidate, Merck/Ariad’s mTOR inhibitor ridaforolimus for bone and soft tissue sarcomas. The sponsors have predicted filing ridaforolimus in the second half of 2011.

Spending on pharmaceutical treatment of cancer is only incompletely revealed by the Express Scripts data. “Non-oral (typically infused) cancer medications are often billed under the medical benefit,” such as Medicare's Part B, the PBM noted. Three of the most recent novel oncologics approved by FDA – Dendreon’s Provenge (sipuleucel-T), Sanofi-Aventis’ Jevtana (cabazitaxel) and Eisai’s Halaven (eribulin) – are billed under the medical benefit, the report pointed out.

Infusions continue to dominate novel cancer drug approvals, but the first wave of oral targeted therapies – products like GlaxoSmithKline’s Tykerb (lapatinib), Novartis’ Tasigna (nilotinib) and Bristol-Myers Squibb’s Sprycel (dasatinib) – has been adding new claims “allowing for their use earlier in treatment protocol or for new indications,” Express Scripts said.

Indeed, in cancer the 77.3% increase in pharmacy spend outstripped the 37.3% increase in medical drug spend from 2009 to 2010, Express Scripts data show. Going forward, however, that balance could shift as the two most expensive cancer therapies to date – Provenge and Bristol-Myers Squibb's Yervoy (ipilimumab) – are both infusions ("As Yervoy Launch Nears, Pricing Of Maintenance Therapy Remains A Key Question" — "The Pink Sheet," Apr. 11, 2011).

Pharmacy Benefit Vs. Medical Benefit

“Many oral medications are in development to treat conditions such as rheumatoid arthritis, multiple sclerosis, cancer, and hepatitis C, which are now treated mostly by infused or injected drugs,” the report continues. “Significant uptake of oral specialty medications will affect the pharmacy benefit directly.”

“As members move from traditional medications to specialty medications, much of the cost moves to the medical benefit,” Express Scripts explained. Therapies that are administered in a clinical setting, like many injectable and infused products, typically fall under an insurers’ medical benefit, while products that are taken at home fall under the pharmacy benefit.

Express Scripts estimates that 55% of specialty medication costs are billed under medical benefits. In some therapy classes, medical benefit drug spend is skyrocketing. The PBM calculated that between 2005 and 2008, medical drug spend shot up 204.2% for pulmonary hypertension and 326.9% for multiple sclerosis; the pharmacy drug spend increase for those two conditions was 115.1% and 48.5%, respectively.

In some of the larger specialty categories, pharmacy PMPY growth outstripped growth in medical drug spend: not only cancer, but inflammatory conditions (60% vs. 56.7%) and anticoagulants (67.9% vs. 50%).

The move from medical to pharmacy benefit is only expected to increase in the anticoagulant class, thanks to the advent of oral anticoagulants that are dispensed by retail or mail-order pharmacy and do not require health professional administration like the older generation of injectables.

Blood Thinners Break Through To Top 15

“Blood-modifying medications such as Plavix (clopidogrel) moved into the top 15 medication classes in terms of spend for the first time,” the report points out. The increase in anticoagulant and antithrombotic spending is expected to accelerate, based on the number of oral agents that are in late-stage development, like Johnson & Johnson/Bayer’s Xarelto (rivaroxaban), Bristol/Pfizer’s Eliquis (apixaban), Daiichi Sankyo’s edoxaban and Sanofi-Aventis’ otamixaban.

Express Scripts also focused on potential changes in the injectable heparin market. While the first generic of Sanofi-Aventis’ Lovenox (enoxaparin) was launched in July 2010, the PBM noted that the launch was rocky. However, the report states, another generic Lovenox “may compete in this market in 2011.”

Furthermore, Express Scripts projects, Sanofi-Aventis’ next-generation injectable LMWH semuloparin could be approved in 2011. The PBM described semuloparin as “a next-generation Lovenox that is more effective with no increased risk of bleeding.”

Inflammatory Melange Of Hot Growth Areas

The inflammatory disease category is large, encompassing multiple hot growth areas for biologics, including gout and rheumatoid arthritis.

The once-fallow gout market has seen two novel approvals in recent years, and Express Scripts sees further competition from biologics already approved for the orphan autoinflammatory condition CAPS. Regeneron’s Arcalyst (rilonacept) and Novartis’ Ilaris (canakinumab) “may receive expanded indications to treat gout in the near future,” Express Scripts said. Regeneron plans to file its IL-1 Trap Arcalyst for gout in the third quarter; Novartis has predicted filing an sBLA for Ilaris in gout in the first months of 2011.

In a two- to three-year timeframe, Express Scripts sees potential approval of Pfizer’ rheumatoid arthritis candidate tofacitinib, a leading JAK inhibitor candidate, as well as apremilast, one of Celgene’s small selective cytokine inhibitory drugs, in psoriasis.

Lupus costs are also expected to take off with the March approval of GSK/Human Genome Sciences Benlysta (belimumab).

Early Treatment, Oral Drugs Drive MS Trend

Where the inflammatory disease category encompasses many diseases, the next largest specialty drug class at Express Scripts is comprised of only one: multiple sclerosis. But the recent and near-term pipeline for MS is burgeoning – and potentially very expensive. The most recent NME approval, Novartis’ oral Gilenya (fingolimod), “costs nearly $48,000 per patient for a year of treatment, considerably more than injectable drugs for MS,” Express Scripts said.

“Increased use of MS medications earlier in a patient's disease course and use of new oral drugs for MS may have contributed to the increase” in drug utilization from 2009 to 2010, Express Scripts suggested. “National clinical authorities increasingly recommend initiation of therapy immediately after diagnosis to delay progression.”

The late-stage pipeline of oral MS drug candidates is well-stocked. Express Scripts lists Biogen-Idec’s dimethyl fumarate, Sanofi-Aventis’ teriflunomide, Teva’s laquinomod, and Merck Serono’s cladribine. Cladribine’s prospects have dimmed considerably after an extensive “complete response” letter. Teva recently presented laquinimod Phase III data that underwhelmed investors, although it showed modest efficacy and relatively good safety.

The advent of oral MS therapies does not preclude continued development of injectable products. Injectable biologics on the market for other conditions are being studied for expansion into the MS market “in the near future,” Express Scripts said, including Genzyme’s (now Sanofi-Aventis’) fast-track candidate Lemtrada (alemtuzumab, approved as Campath in oncology), which would be infused annually, and a new subcutaneous formulation of Facet Biotech/PDL’s organ transplant agent Zenapax (daclizumab).

Diabetes Nears The Top Of Traditional Spend

Diabetes is poised to overtake high cholesterol as the biggest driver of PMPY pharmacy spend “in the next few years,” Express Scripts said. In 2010, “high blood cholesterol and diabetes each represented 9.1% of total traditional spend and nearly 8% of overall spend.”

“As recently as 2005, diabetes drugs were fifth on the list” of the largest cost per member per year, and the category has moved steadily up the rankings. “Increased prevalence with the diabetes class reflects more aggressive treatment and instituting drug therapy earlier following diagnosis,” Express Scripts explained.

Express Scripts highlighted two drugs under review that have the potential to have an impact on diabetes drug trends in the near term: the first sodium-glucose transport protein inhibitor, Bristol/AstraZeneca’s dapagliflozin, and Lilly/Boehringer Ingelheim’s DPP-4 inhibitor Ondero (linagliptin).

The glucagon-like peptide-1 agonist category is expected to produce new candidates, but the leaders are a couple of years out. Lilly/Amylin’s once-weekly Bydureon (exenatide extended-release) is “expected to be available in 2012,” Express Scripts projected. Sanofi-Aventis/Zealand Pharma’s once-daily lixisenatide “could reach the market in 2013.”

The Expanding Asthma Armamentarium

The long transition away from CFC-containing propellants in asthma inhalers has had a side effect of returning off-patent drugs to functional market exclusivity. “A-rated generics to many inhaled drugs will be delayed by complex inhalers, patents on the non-CFC propellant HFA,” and “additional testing requirements to ensure bioequivalence,” the PBM said.

A healthy pipeline of new molecular entities, especially for chronic obstructive pulmonary disease, promises to keep unit prices high. FDA recently approved Forest/Nycomed’s Daliresp (roflumilast), the first PDE IV inhibitor in COPD. Two investigational muscarinic antagonists are in trials: Forest/Almirall’s Eklira (aclidinium), with NDA filing planned for the second half of 2011, and Novartis’ glycopyrronium. Novartis also has a pending COPD agent, the long-acting beta-agonist Arcapta Neohaler (indacaterol).

FDA’s February 2010 safety warning against use of stand-alone long-acting beta-agonists has spurred development of fixed-dose combination products. Express Scripts pointed to LABA-containing combos in the pipeline containing Merck’s Asmanex (mometasone), indacaterol-based combinations, and GSK’s Advair follow-on Relovair (fluticasone plus the LABA vilanterol).

By Bridget Silverman