Restricted Access More Bad News

Restricted Access More Bad News

Yesterday Diabetic Investor created a firestorm when we reported that Sanofi (NYSE:SNY) was reducing the number of Toujeo sales reps who would be trained to sell Afrezza. That this number had been reduced by two-thirds. The MannKind (NASDAQ:MNKD) Afrezza zealots on Twitter went ballistic, with one tweeting that the size of the diabetes sales force was 4800 when in fact it’s not even half this size and not all reps sell Toujeo even fewer Afrezza.

Today comes more bad news from our friends at FiercePharma who noted just how difficult it is for reps to get access to physicians.  The entire article can be found at http://www.fiercepharma.com/story/bad-news-first-pharma-reps-more-half-doctors-now-restrict-access/2015-09-03.

The harsh reality for every drug company not just Sanofi is the changing sales environment. Back in the day there was no such thing as physicians’ offices restricting access, today as the article notes this is commonplace. The Sunshine Act which was designed to shed light on pharmaceutical sales practices has made an already difficult job even more difficult. The days of lavish parties, fancy dinners and junkets are long gone.

Even without restricted access and the Sunshine Act companies were facing another obstacle, the commodization of diabetes drugs which made price more important than performance. The balance of power has shifted from the companies to payors who effectively control share through formulary placement, placement which is garnered not by a drugs performance but by its price and/or rebates. This is the reason Sanofi had little choice but to discount Toujeo pricing it on par with Lantus. The simple fact is Toujeo is just incrementally better than Lantus and this minor difference in performance did not justify premium reimbursement or favorable formulary placement.

The same can said for Afrezza, as payors just aren’t willing to provide favorable terms for patient convenience which is how they view Afrezza. The problem with Afrezza has never been whether the drug works or that patients using the drug aren’t seeing improved outcomes. The problems with Afrezza has more to do with the fact that patients can achieve similar results using either Novolog or Humalog and these insulin’s are cheaper than Afrezza. For all the talk there is about better outcomes payors are more concerned with costs, managing their diabetes patients as cheaply as possible.

Given this environment combined with the fact that it cost on average $250,000 per year to keep a rep in the field drug companies have been reducing head count. Novo Nordisk (NYSE:NVO) a company that rarely reduces head count did just that recently as they too see what’s happening in the marketplace. The sad reality for pharmaceutical sales reps is their function is no longer mission critical and their function can and is being replaced by technology.

Add in the fact that many physicians even if they wanted to use a certain drug aren’t allowed to do so. This is a common compliant we here that like it or not the patients’ health insurance more often than not determines which treatment regimen is used. Yes a physician can prescribe a non-preferred drug but the cost is then passed onto the patient either through higher co-payments or worse the patient must bear the entire cost of this drug.

To combat this many companies use co-payment equalization cards, patient assistance programs or give away the drug for free. While this is great for the patient these programs come with a heavy price cutting into profits.

Perhaps one day the MannKind Afrezza zealots will understand that the Afrezza story has never been about whether the drug works. That this is a story about the business of diabetes and how that business can and does determine which drugs obtain blockbuster status and which become nothing more than niche players.