Another Mouse Trap

Another Mouse Trap

This morning Novo Nordisk (NYSE: NVO) announced they have submitted semaglutide, their once-weekly GLP-1, to the FDA for approval. Per a company issued press release;

“Novo Nordisk today announced the submission of a New Drug Application (NDA) to the US Food and Drug Administration (FDA) and a Marketing Authorisation Application (MAA) to the European Medicines Agency (EMA) for semaglutide, a new glucagon-like peptide-1 (GLP-1) analogue administered once-weekly, for the treatment of adults with type 2 diabetes.”

Should this drug be approved and we see no reason why it won’t be semaglutide will be the fourth once-weekly GLP-1 on the market. Semaglutide will join Bydureon from AstraZeneca (NYSE: AZN), Trulicity from Lilly (NYSE: LLY) and Tanzeum from GlaxoSmithKline (NYSE: GSK).

Now Novo will do their best to claim they have built a better mouse trap, that semaglutide is superior to the three other once-weekly GLP-1’s on the market. Yet, all they have done is contribute to a problem they would rather not have in the first place. That the only way they can compete in this crowded market is stand out from the crowd and the only way this happens is if they deeply discount and/or rebate semaglutide. In other words, initiate yet another diabetes drug price war.

A war that is being fought with the five, yes five long acting insulin’s – Lantus, Toujeo from Sanofi (NYSE: SNY), Levemir and Tresiba from Novo and Basaglar from Lilly. A war being fought with 3 SGLT2’s – Jardiance from Lilly, Invokana from Johnson and Johnson (NYSE: JNJ) and Farxiga from AstraZeneca. A war being fought in nearly diabetes drug category. A war being lost by the drug companies and won by payors and PBM’s.

Is it any wonder that all of these drug companies have slashed their sale forces? Is it any wonder that they are re-examining their pipelines?

To fully appreciate the power in the hands of payors and PBM’s look at the SGLT2 market, something we wrote about earlier today. Lilly has some truly outstanding data from EMPA-REG, data so compelling that the FDA has approved Jardiance their SGLT2 for a new indication “reduce the risk of cardiovascular death in adults with type 2 diabetes and established cardiovascular disease”. That’s no small feat and is a big deal, or should be a big deal. But as we noted payors and PBM’s believe that the cardiovascular benefits seen with Jardiance is a class effect even though they have no data to back this up.

Just how crazy is this, consider that Invokana and Farxiga the two SGLT2’s that compete with Jardiance besides having no hard-cardiovascular data both have had adverse label changes. Still Invokana leads the category and as we noted earlier AstraZeneca is deeply discounting/heavily rebating Farxiga making it tough for Jardiance to gain meaningful share. Jardiance has shown some signs of making headway but not to the extent one would think given the EMPA-REG data.

Again, as we noted earlier today JNJ did a good job of locking up formulary position for Invokana. Something that does not change overnight and won’t change with data alone no matter how great that data might be. Until the we see the cardiovascular data for Invokana and Farxiga, the belief will be that all SGLT2’s have cardiovascular benefits. Until proven otherwise payors and PBM’s will continue to hold the upper hand when it comes to pricing and formulary position.

The real question is how good does the data we don’t have yet from JNJ or AstraZeneca have to be. Is matching EMPA-REG good enough or do they have to do better than EMPA-REG?  No matter what the data says we can’t help but believe that whatever it says good or bad will be dissected more ways than a dead frog in an eighth-grade science class. (Not sure if frogs are still dissected or not, but we digress.)  That this will become one of those unwinnable arguments over data sets, how the data was interrupted, which patients where used, how data was defined, etc.

In fact, the only way we see Lilly being a clear winner here is if the data is clearly inferior to EMPA-REG. That the cardiovascular benefits of Jardiance are beyond dispute, that Invokana and Farxiga aren’t even in the same ballpark as Jardiance. And let’s be honest we just don’t see that happening. Even worse for Lilly we won’t know anything definitive for another year, until the data comes out all they can do is curse the darkness or play the price/rebate game.

This is what happens when everyone is out building mouse traps instead of innovative therapies. All mouse traps do basically the same thing the same way. Yes, some may be more efficient that others but at the end of the day they have one purpose and one purpose only. That these mouse traps are basically interchangeable. Why then would anyone pay a premium for one of these interchangeable mouse traps?