Welcome to the future

Welcome to the future

Late last week The National Institute for Health and Care Excellence (NICE) has requested for additional information to validate that Jardiance is cost-effective in comparison with other treatment options already available in the market.  The drug was approved in Europe back in May and was recently approved by the FDA in early August.  Jardiance is the now the third SGLT2 to hit the market, Invokana being the first and Farxiga™ being the second.

Although the move by NICE does not mean it will not be covered in the UK it does point to the issues facing diabetes drugs makers and is sign of things to come here in the US. While the US does not yet have an agency such as NICE, the fact is we actually have something that provides the same function as NICE, it’s called competition.

For some time Diabetic Investor has been noting that the diabetes drug market is on its way to becoming a commodity style market where price trumps performance. That this obsession with me-too copycat drugs will eventually come back to haunt drug makers. The fact is as with conventional blood glucose monitors payors have gained the upper hand and basically are able to dictate what they will pay. The drug maker either capitulates or faces the prospect of seeing their particular me-too copycat drug regulated to lower level formulary placement or worse not covered.

It wasn’t that long ago that Diabetic Investor speculated that Invokana from Johnson and Johnson (NYSE:JNJ) would be the poster child for the how much the drug market has changed. How being first to market is not the advantage it once was. That as competition in the diabetes drug market intensifies the ability to be nimble and flexible with price becomes critical. Even before Jardiance was approved the presence of Farxiga from AstraZeneca (NYSE:AZN) was impacting Invokana sales.  Now that Jardiance is here there is no question that Lilly (NYSE:LLY) will use price as a weapon to gain a toehold in the market.

The fact is this battle in the SGLT2 class is really no different than what’s already happened with short-acting insulin’s, DPP4’s and GLP-1 categories. Perhaps this is why Novo Nordisk (NYSE:NVO) announced today they were terminating all activities within inflammatory diseases. According to a company issued press release; “Novo Nordisk today announced a decision to discontinue all its research and development (R&D) activities within inflammatory disorders while increasing its efforts within diabetes prevention and treatment, obesity and diabetes complications. “

Now for those unfamiliar with Danish corporate speak, which isn’t that much different than American corporate speak, allow Diabetic Investor to translate; “ Hey folks we just can’t afford to keep spending money and dedicating man hours to a disease state that we aren’t competitive in. Honestly we’ve got a serious fight on our hands with our diabetes franchise and if we don’t do something done, like yesterday, these issues are only going to get worse. Quite frankly we just aren’t used to playing in this world where our products aren’t getting premium reimbursement.”

Think for a moment how it must feel at JNJ’s headquarters in beautiful New Brunswick New Jersey.  By all accounts Invokana sales were exceeding expectations and for time some began to speculate that Invokana could be the next Januvia. Yet this euphoria over early results quickly turned to depression when it became obvious that Astra would use price as a weapon when they launched Farxiga; depression which will soon become full blown panic when Lilly jumps in the market. This is like watching your favorite football team score the winning touchdown, only to have the call reversed by instant-replay and then losing the game in overtime. As with instant replay the most dreaded words in the diabetes drug business are, upon further review ……..

We’ve said it before and we’ll say it again the diabetes market, drugs or devices, is not for anyone who doesn’t have a very strong tolerance for pain. That this is going to be a knock-down battle for market share and formulary placement. That payors will be relentless in their quest to drive prices even lower and that drugs companies will face a lose-lose scenario; either capitulate to the payors demands or risk being left off formulary. This is the reason drugs companies must be just as relentless when it comes to controlling costs as the only hope they have to compete is to operate as lean and mean as they can.

Think about this for a moment Invokana was approved by the FDA March 29, 2013, barley over one year ago and already the drug is facing serious competition.  That the company has already started offering discount programs to patients, a tactic normally not seen for a first to market drug just 19 months after approval. Welcome to the future folks.