Rhonda Greenapple is the President of Reimbursement Intelligence. She can be contacted here with comments or questions.
Generic Erosion: How Osteoporosis Category Impacts Current and Future Market Entrants
Osteoporosis currently represents over a $4 billion dollar market that will continue to grow as a result of shifting demographics, DTC campaigns and new market entrants.
It becomes a significant cost center to health plan pharmacy budgets, especially Medicare, where 30 percent of the population has osteoporosis. These treatments aim to reduce the risk of fractures and promote bone growth. Within the Medicare population, 17 percent will sustain a fracture during their lifetime. It becomes more critical to prove medical cost offsets if they desire a premium price.
Plans are seeking evidence that new products prevent the costs of vertebral and hip fractures that increase medical costs including hospitalization, long-term care or home care, physician visits and procedures, medication, etc.
Between the launch of generic Aledronate in March 2008 and July 2008, the market share of Fosamax has declined from a market leader 45 percent to 10 percent, and the generic during that same period rose from 0 percent to 35 percent. How will this change in a $4 billion-plus market affect current treatments and future market entrants?
Reimbursement Intelligence conducted a study in August 2008 with Pharmacy and Medical Directors representing 100MM covered lives to understand the impact of generic entry. The study revealed more than 40 percent of plans had a generic conversion rate of over 60 percent.
Generic conversion was dramatic in four months and it applied not only to new starts but also existing patients. In the past, plans left patient's therapies with the policy. We do not tinker with what is working. In the current category, plans do not see differentiation and therefore the rate of switching is high.
Plans use aggressive campaigns, including mailings to physicians, regarding generic availability. For members, the plan offers coupons as incentive to switch and reminds them of the reduced co-pays for generic or alternatively force switches by increasing co-payments.
The most impactful cost control is using utilization restrictions that force "generic first." This limits the market substantially as it pushes the branded products to second line.
The pipeline for osteoporosis products is robust, and includes SERMS, Estrogen Agonists, and Monoclonal Antibodies. What does generic market entry mean for these products?
As plans look at cost controls, they will start asking what the "value" is of new therapies relative to generic alternatives. In other words, is the incremental benefit worth the price? The chart below demonstrates that almost a third expect a 30 percent or greater risk reduction to differentiate from current therapies. The bar for access is not equal to but better.
How can future products prepare for this environment?
1. Do not assume you will be unique.
It is important you understand how you will be perceived and compared to current standard of care. Plans consistently rank MOA behind efficacy, safety and price. In reality, it is price, efficacy and safety.
2. What is the best strategy to differentiate?
You must understand what can make your product stand out from the crowd. With each new class and product, it becomes more difficult to get SOV with both payors and physicians. With targeted research, payor evaluation should be sought in developing clinical trials and health outcomes research.
Also, it is important to look at subpopulations, prevention and reducing the progression of the disease.
3. Prepare for the worst
It is important to identify what is the worst case scenario for formulary access and reimbursement for your brand. This will allow you to incorporate into your business planning and commercialization strategy. With the risk of being second line, it is critical to build physician loyalty, reimbursement support programs and effective pricing/contracting strategies.
Lipitor was able to defend its position with only a 30 percent loss in market share. However, it is not a good analogue for most companies as they put a lot of muscle behind DTC, physician campaigns, etc. There are plenty of examples where it was an 80 percent loss of market share as well.
Preparing for the worst allows you to plan to improve and minimize erosion.
4. Make sure the price is right
These formulary and reimbursement restrictions can impact revenue forecasting and commercialization for products in the pipeline. Manufacturers will also need to look at pricing and contracting strategies that will maximize access and minimize utilization restrictions. This requires a careful analysis of how these rebates and contracts will impact profit margins.
On the other hand, premium pricing strategies need to be tested and validated prior to implementation. The ability to price premium will only become more difficult in the current environment.
Generic market entry in billion dollar categories impact both current brands as well as future market entrants. It is critical to plan and ameliorate erosion with effective strategies. - Rhonda Greenapple