Post by dreggy on Sept 4, 2013 8:54:00 GMT -5
ViewPoints: As Novo Nordisk finds to its loss, price is now king in the US diabetes market
If any further evidence was necessary that there has been a tangible shift in the pricing dynamics of the US diabetes market, it was provided on Tuesday when Novo Nordisk confirmed that it has lost two contracts to supply its Victoza, NovoLog and Novolin brands to the pharmacy group Express Scripts.
Insight, Analysis & Opinion
Victoza will remain on the Express Scripts formulary listing until the end of the year – when it will be replaced by Bristol-Myers Squibb’s Byetta/Bydureon franchise – while NovoLog and Novolin have been dropped immediately in favour of competing products manufactured by Eli Lilly. Novo and Lilly have previously competed on price in the insulin market, although this competitive dynamic in the GLP-1 market where Victoza competes is novel.
As one analyst was quick to point out, it is the case of Victoza that is particularly telling given that Novo Nordisk’s product is widely viewed as being the best in class GLP-1 agonist and has performed commercially as such since launching. It is prescribed as the first choice therapy by around 60 percent of physicians, key opinion leaders (KOLs) recently told FirstWord’s Therapy Trends team - see KOL Insight: Diabetes: Battle for ascendancy escalates in expanding market.
In a note to investors, Morgan Stanley analyst Peter Verdult cautioned “What is more concerning is the move by Express Scripts to favour an inferior product in a class based on price alone (i.e. Byetta/Bydureon over Victoza). This has wider and potentially damaging consequences for the industry, not only in diabetes, but other therapeutic areas”.
Not only has Victoza demonstrated superior efficacy to Bristol-Myers Squibb’s competing Byetta and Bydureon franchises, but it also has a compelling side-effect profile. While it is administered once daily, it has a much more convenient device than the once-weekly Bydureon.
That said, product differentiation within the GLP-1 class (as with other diabetes drug classes) is relatively limited, which has seen marketing strategies and price discounting within this disease space become increasingly competitive (another recent example being lower than expected Q1 sales for Merck & Co.’s Januvia, reportedly driven by greater discounting for Eli Lilly’s Trajenta).
That Bristol-Myers Squibb has reportedly won the GLP-1 contract with Express Scripts at the expense of Novo Nordisk is also a coup for the US company, which markets the Byetta and Bydureon franchises with AstraZeneca.
In announcing their Q2 results, both companies highlighted an increased marketing push from Novo Nordisk for Victoza since early 2013 and conceded that their own sales and marketing spend had been increased simply to retain market share. Forecasts for Byetta/Bydureon have been downgraded as a result, with analysts at Barclays halving their long-term estimates - see ViewPoints: Analyst halves revenue forecast for AstraZeneca, Bristol-Myers Squibb's Byetta/Bydureon franchise.
Suggestions that Bristol-Myers Squibb and AstraZeneca will up their game moving forward will no doubt gain momentum as a result of the Express Scripts contract, which reportedly accounts for between 15 percent and 20 percent of Novo Nordisk’s current US Victoza sales. Analysts at Bloomberg were quick to suggest that the move by Express Scripts puts 2014 guidance for the company at risk.
Results from a recent FirstWord Physician Views poll illustrate the importance of pricing to the US diabetes market. When asked to describe what factor is the most important when a new diabetes product is detailed to an endocrinologist, 38 percent of respondents cited insurance coverage and out of pocket costs. Whether Bristol-Myers Squibb and AstraZeneca can build on this success remains to be seen; FirstWord’s recent poll also revealed that Novo Nordisk continues to be perceived by endocrinologists as the leading player in terms of product detailing by some margin - see Physician Views Poll Results – Novo Nordisk winning the US diabetes marketing battle.
As the Danish company has found to it loss, however, price looks certain to become a key determining factor in the US market, towards which European based players need to be mindful suggests Verdult. By 2015, he adds, Eli Lilly should be in a position to offer payers the broadest portfolio of products among any company operating in the diabetes space. As FirstWord has previously discussed, biosimilar insulin development will play a key role in allowing Lilly to expand the breadth of its portfolio; a route that Sanofi also looks to be taking - see ViewPoints: Sanofi sees no conflict in marketing biosimilar insulins alongside branded Lantus
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