Forest plan to force Alzheimer's patients to new drug tripped up by supply issues

Forest Laboratories CEO Brent Saunders

Is it possible to be just too clever when it comes to marketing? That is something that Actavis ($ACT) CEO Brent Saunders will find out now that his decision to stop making the original version of the Alzheimer's treatment Namenda has turned into a production pileup for the company.

The plan, called a "cheap trick" by some analysts when announced, was to force patients to start taking the once-daily version of the drug before generics hit the market next year and then hope that most of those patients would not want to switch back when the copycats became available next April. But the conversion has happened so quickly that the company is now having difficulty keeping up with demand, Bloomberg reports.

"We're working as fast as we can to fix supply for the XR version," Actavis spokesman David Belian told the news service.

Namenda is one of the drugs that Actavis got with its $28 billion merger with Forest Laboratories. Saunders hatched the plan some months before the merger was completed in July and being named by Actavis Executive Chairman Paul Bisaro to head the combined company. Many drugmakers raise prices of branded products ahead of a generics launch to prod patients toward a newer version of a drug in hopes of retaining some of the revenue that will be lost to generics. Taking a product off the market to force a switch is less common.

At the time, BMO Capital Markets analyst David Maris said that what Forest was doing amounted to a "major disservice to patients." But he conceded that it was a disservice that would probably pay off for investors, allowing Forest to hold on to most of Namenda's $400 million in quarterly sales.

Saunders has said the success of the plan, which was to stop making the original version of the drug in August, depended on three things. Those three were patient acceptance, the ability to get payers to cover the drug and "ensuring that we optimize the efficiency of our manufacturing capabilities to ensure adequate supply to support the ultimate conversion to the XR product."

But it became apparent pretty quickly that the third condition, having sufficient supplies, was proving more challenging than the other two. In June, Forest said it had decided to continue making the original version into the fall after the changeover exceeded expectations. "Conversion rates are demonstrating patient and payer acceptance," he said, "… and we continue to make progress in improving manufacturing yield and efficiency."

Actavis spokesman Belian declined to give Bloomberg any details about when the Dublin-based company thinks the supply shortage can be rectified. The next test will be whether the inability of some patients to immediately make the switch doctors were told would be required, will create any blowback for the company among doctors, patients and caregivers.

- read the Bloomberg story