The Lucentis/Avastin Investigation: “The Story is Far From Over”

If you thought the battle over Lucentis and Avastin was confined to FDA, CMS and NIH, you’re wrong. Now Congress is jumping into the fray in significant fashion as is typically the case when the government feels they are overpaying for something.

On October 18, Senate Special Committee on Aging Chairman Herb Kohl (D-Wisc.) sent a letter to Acting CMS Administrator Kerry Weems asking why Medicare was paying a steep premium for Lucentis when the “chemically similar” cancer drug Avastin can be used off-label for age-related macular degeneration at a fraction of the cost.

The letter was in response to Genentech’s decision to cut off distribution of Avastin to compounding pharmacies, which are responsible for creating micro-doses of the drug that are tolerable in the eye. For more on Genentech's strategy, see this feature in the December RPM Report.

Kohl asked two questions of CMS: 1) How much has Medicare spent on the two drugs since 2005?; and 2) What measures has CMS taken to reduce expenditures on Lucentis, such as using Avastin?

Now things are starting to heat up. On November 7, 14 and 16, Kohl launched a formal investigation by sending two letters to FDA Commissioner Andrew von Eschenbach asking for all documents related to FDA field inspections and one letter to Genentech president of product development Susan Desmond-Hellmann, respectively. Kohl asked Genentech for essentially any document related to the Lucentis/Avastin dispute, from the company’s decision-making to meetings with FDA, NIH and CMS.

“We’re trying to figure out what really happened,” says one Senate staffer involved in the investigation. The committee is receiving “conflicting stories” from FDA, CMS, NIH, Genentech and the compounding pharmacies, the staffer says.

The Aging Committee has interviewed officials from Genentech and received documents from the government agencies. However, investigative staffers are still waiting for more evidence to come in.

The investigation is focused on several questions, according to the Senate staffer. First, “what happened during the FDA inspection” of Genentech’s San Francisco facility and the reason for the destruction of several lots of Avastin at the site.

Second, the staffer says, Genentech had agreed to take part in the National Eye Institute-sponsored head-to-head CATT study of Lucentis and Avastin if the design were changed to focus more specifically on safety and the trial was extended to allow for longer follow-up. “This summer, Genentech had a change of heart,” and the committee wants to know why the company changed its mind and chose not to participate in the trial and charge the government retail price for Lucentis.

Third, there was “initial concern” that Health & Human Services General Council Daniel Meron may have been unduly influenced to reject designating the CATT study a demonstration project in order for CMS to fund the trial. Then-Acting CMS Administrator Leslie Norwalk had approved the demonstration project.

The Office of the General Counsel justified its decision by saying it was obvious the demo project would improve the quality of the clinical trial and would benefit from having Medicare beneficiaries participate in it, therefore a demonstration project was not needed to prove it.

As a result of the CATT study delay, Kohl is developing legislation that gives CMS authority to waive co-pays for patients participating in government-funded clinical trials and comparative-effectiveness studies. Co-pays present a study design challenge because beneficiaries can be unblinded to what drug they are receiving because it represents a percentage of the total drug cost. In other words, the higher the co-pay, the more expensive the drug.

The Senate staffer says this type of situation occurs routinely with head-to-head studies but the CATT study is the “most egregious” example.

The Senate Special Committee on Aging will wait to receive more documents over the next several weeks, and after review, decide whether to hold an oversight hearing. “We have enough to hold a Q&A hearing right now, but we want to wait until we have all the documents,” the staffer says. “The story is far from over.”

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Here's Looking at You, Barry

Genentech held its mega-Christmas party this past weekend. This year's venue: AT&T Park, home of the San Francisco Giants and, until recently, home field for the star slugger Barry Bonds. The day before, Bonds pleaded not guilty to charges that he'd lied to federal investigators about taking steroids.

Nice timing for the makers of human growth hormone, don't you think?

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"FDA Doesn't Have to Follow the Panel's Recommendation, but It Usually Does"

How often have we seen that caveat in news reports about FDA advisory committee meetings? But seldom is it as close as it was yesterday, when Genentech/Roche's Avastin fell 5-4 before the agency's oncologic drugs advisory committee, which was considering the blockbuster cancer drug as a treatment for recurrent or metastatic breast cancer.

Reuters notes that so far Roche stock has fallen more than 4% on the news on Thursday morning in Europe, while Genentech took a whopping 9% hit on Wednesday.

The WSJ reminds us that docs in the US are already prescribing Avastin in these indications off label, but that the FDA's stamp would allow Genentech to promote in that indication and make it more likely insurers would pick up the tab.

What's more, Genentech based its application on a National Cancer Institute study that acutally shows a significant Avastin benefit in a measurement called "progression-free survival," which nearly doubled to 11.3 months for patients on the drug plus paclitaxel vs. 5.8 months on paclitaxel alone.

There was no meaningful difference in overall survival, however.

So, will FDA look at the panel's slim margin and go ahead and approve the drug on the progression-free survival data? If not, are other drugs out there in the clinic that show little in the way of survival benefit (yet solid surrogate-endpoint data) going to cause heartache for companies and their investors?

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Genentech Gets Tough: Who is the Target?

How do you crack down on compounding labs without adversely affecting your key customers? That is the tricky question Genentech is grappling with as it tries to shut off the primary source of supply for bevacizumab (Avastin), for ophthalmologic use against neovascular macular degeneration.

An October 11 letter from Genentech to “retinal community” members makes the compounding pharmacies the clear target. “As of November 30, 2007, Genentech will no longer allow compounding pharmacies to purchase this product directly from wholesale distributors,” the company declared.

In response to questions about potential limitations on supply to hospital pharmacies, the company emphasizes that is not taking any action to limit that source of supply. A Genentech spokesperson says there will be no allocations to hospital pharmacies to try to restrict spillage from the use of VEGF in oncology to the ophthalmic markets.

If ophthalmologists want to get Avastin from hospital pharmacies, that route will remain open, a company spokesperson explains.

That makes the October 11 announcement appear to be a surgical strike by Genentech against one class of trade – a class that the company argues has raised quality control issues. Genentech points out that it has the Food & Drug Administration on its side in questioning use of compounded Avastin: a December 4, 2006 warning letter from the agency to the New England Compounding Center; and FDA inspection observations at Genentech which note continued off-label ocular use of Avastin.

But is Genentech really restricting this fight to compounders? By cutting off the supply of the inexpensive ($17 - $50 per shot) Avastin, the company will be moving more of the ophthalmologists to the $1,950 per moth (ranibizumab) Lucentis.

Genentech is shifting a large inventory risk to its customers: the wholesalers and ophthalmologists. The firm says it is not changing payment terms from its current 85-day dating for the product. It could have extended the payment terms to soften the blow of forcing more doctors to the higher-priced version of anti-VEGF treatment. The higher priced product also puts the eye doctors in the uncomfortable position of trying to collect average co-pays in the $400 per month range.

The tough approach to its customers is exacerbated by the context of the extended argument that the company has been having with segments of the ophthalmologic community over the potential for Avastin and the effort from the specialty community to support a comparative trial of Avastin and Lucentis. Genentech has helped to make that trial difficult for the eye doctors and the government to undertake. In the fight, the company has created bad feelings among a number of opinion leaders in the small customer class of ophthalmologists.

The move against compounders also shifts liability risks as well as carrying costs. One close observer of the field says Genentech is making this move to isolate the company from liability and make ophthalmologists fully liable for any adverse events that could arise from using Avastin in the eye.

The observer notes that there is an ongoing study of Medicare macular degeneration claims at Duke (the AWARE study under Scott Cousins) to try to pick up the frequency of untoward events from excessive anti-VEGF from injection in the eye. The study uses date from the Chronic Condition Warehouse database, managed by a Medicare contractor, the Iowa Foundation for Medical Care (IFMC), a Medicare contractor. Genentech claims that Lucentis has been designed as an antibody fragment to bind more specifically in the eye and avoid appearing systematically.

If Genentech can shift Avastin ophthalmic sales to Lucentis, the investment community will be impressed, but the cost might be forcing more financial and liability risk on its customer base.

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Who's Afraid of REMS Marketing Limitations?

Some coincidences can be very instructive and tell you a lot about the future.

RiskMAPs & black boxes don't necessarily spell doom

If Genentech’s current experience with its omalizumab (Xolair) allergic asthma therapy is any model, FDA's new risk minimization action plan (RiskMAP) authorities don’t look like necessarily a bad thing.

The safety issues facing the drug--an expensive therapy at the root of Genentech's recent acquisition of partner Tanox--were troubling, and resulted in a black box warning proposed in February by FDA and updated earlier this month.

Almost to the minute as the House of Representatives wrapped up its version of the FDA revitalization act (user fee reauthorization and drug safety reforms) last Wednesday evening, Genentech was explaining to a small group of financial analysts that one of the prominent, new regulatory powers being granted to FDA by Congress may actually be a boon to a threatened Genentech brand:

11 July, 6:00 PM at the Capitol: The House halts its truncated debate on the FDA Amendments (HR 2900), only one representative (New York Democrat Maurice Hinchey) speaks out against the well-managed bill. A final one-sided roll-call (403-16) passed the bill at 8:29 PM.

3:00 PM in South San Francisco: Genentech product development president Susan Desmond-Hellmann (right) tells a conference call on Genentech’s second quarter results that the company’s adoption of a new RiskMAP for Xolair will be a stabilizing event for the product and good for its continued growth. (Indeed the product's sales have been growing since the initial FDA warning anyway: Xolair sales were up 17% to $111 million in the first quarter when the safety alert was announced and up 14% in the second quarter to $120 million while Genentech and FDA were working out the specifics of the RiskMAP. The accepted plan was announced on July 2.)

Asked to comment on the commercial impact of the RiskMAP, Desmond-Hellmann characterized the company’s dealings with FDA and creation of a new safety program as a very positive effort. She said that the RiskMAP would help Genentech balance the needs of a very sick patient population with “a wish to protect them from adverse events.”

But RiskMAPs or REMS (as they are being called in the new legislation) have been signaled out by critics of the new legislation as one of the more threatening aspects of FDA’s new safety armentarium. An informal short-hand for describing the new authorities has already developed in pharma circles: the RiskMAPs allow FDA to “inform, nag and nudge, and impose limits.”

Not to Desmond-Hellmann or Genentech. Noting that many of the analysts might not be familiar with the procedures “because they are relatively new,” she portrayed the RiskMAP as a good way to work with FDA to supplement traditional labeling and provide more guidance to the medical community.

Both the Senate and House drug safety bills will make REMS more prominent by giving FDA more explicit authority to require extensive programs to alert doctors and patients to problems with new or already-marketed drugs. That authority includes requiring special messages to the medical community and patients, safety messages in ads, limited access restrictions, and follow-up surveys, registries and closer product surveillance.

Lets break down the elements of Xolair's RiskMAP:

Black Box Warning: The most onerous part of program is the box warning at the top of Xolair’s professional labeling.
Patient Medication Guide: Pateints are to be given a brochure starting with a direct mention of the analphylaxis risk before each injection.
Patient observation after injection: The RiskMAP stresses that physicians should keep patients in their offices for an adequate period of time after administration of the shot to watch for a reaction. FDA doesn't specify a waiting time but patients generally wait about two hours already, according to a 2005 study by Genentech's Xolair marketing partner Novartis.
Follow-up surveys: Genentech will follow-up with doctors administering the drug (mostly allergists and pulmonologists) and with patients to find out how the educational materials are working. In effect, the surveys just act to keep Genentech and Novartis more closely in front of the doctor and tied to the patient.
Two post-marketing studies: One will look for a skin test for use with Xolair to try to address the unpredictable nature of the side effect. This is an obvious step that the company would have likely undertaken on its own at the first sign of the increased rate of anaphylaxis. The second test is a version of closer product surveillance through an creation of an observational repository of cases of hypersensitivity reactions associated with Xolair and appropriate control cases. Again, this is a reasonable portective move to assure that the company will not be left at the mercy of FDA’s adverse event reports in the future.

Overall, the Xolair RiskMAP looks like a sound product protection plan that actually cements the company’s position with providers and assures that the product will be restricted to a very sick group of patients: a group which justifies the current high cost of the treatment. If FDA’s new authority makes more companies adopt plans like this, the industry could be headed into a period when postmarketing problems become resolvable and not the cause of sudden product withdrawals.

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Why No More Roche-Genentechs?

Another note from the Oxford Bioscience CEO retreat: why can’t more acquisitions follow the Roche-Genentech model?

The question is being raised with increasing frequency. Understandably so: it’s frustrating to biotech CEOs and scientists to watch their creations disappear into what they see as the bureaucratic abyss of Big Pharma. Sure, these disappearances delight VCs, but they don’t do a lot for the employees who worked as hard as they did because they felt they were building something uniquely valuable.

Sometimes those employees are right. If you think about Genentech-Roche, the deal actually saved both parties. At the time unable to invest in research and delivering sub-par commercial results, Genentech would certainly not exist as an independent company today without the Roche reprieve. Neither would Roche, which gets from Genentech products nearly 50% of its sales and 60% of its operating profit growth. Its ownership position in Genentech shares now accounts for 30% of its own market cap.

Indeed, there is virtually no question that the deal was the single most successful transaction in the modern history of pharmaceuticals. Granted by the deal nearly six years of freedom from stock-market concerns, Genentech created a product-development engine which has delivered virtually unprecedented productivity. And Roche reaped the benefits.

So why have there been no repeat successes? Early on, American Home (now Wyeth) bought a majority of Genetics Institute, and American Cyanamid traded some cash and products for a stake with Immunex. Both were attempted variations of the Roche/Genentech deal; so, in some ways, was Novo's spin-off of Zymogenetics, Novartis' acquisition-cum-alliance with Idenix, and GlaxoSmithKline's alliance-cum-put/call transaction with Theravance.

The jury is still out on the last three; only the Wyeth/GI deal can really be said to have worked at all (that’s the source of Wyeth’s biologics business—key to its growth). But it took Wyeth way too long to capitalize on what it had and when it did, it wasn’t with GI as an independent company. Cyanamid disappeared into Wyeth before it could take advantage of Immunex – and Immunex disappeared into Amgen.

When the subject of acquisitions was raised at the Oxford meeting (full disclosure: the Blog was on the panel), it was pretty clear that there are plenty of biotechs which, rather than getting taken out completely, would welcome the chance to continue semi-independent existence. John Dee, former CEO of Hypnion, sold to Lilly a few months ago, said that he would have preferred it; he apparently even discussed the idea in deal negotiations. But it went nowhere.

There are probably plenty of good reasons Roche-Genentech is tough to duplicate. VCs would certainly rather have a simple exit; so would public shareholders. More importantly, while there probably aren’t many Genentechs around, there certainly aren’t many Roches: controlled by the Hoffmann and Oeri-Hoffmann families, the virtually private Swiss company could make big long-term bets without listening to the carping of investors and analysts (“You’re consolidating those losses for how long? And you don’t even get worldwide rights to its programs?”).

Still, Tuan Ha-Ngoc, the CEO of Aveo, noted two interesting candidates for the Roche role: Astellas and Takeda. Both have global ambitions; both have relatively tolerant shareholder bases. Both apparently want to buy into the biotech industry.

So who knows—maybe the next Roche will be Japanese.

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