Reimbursement and Regulation Shape Pharmaceutical Research

The Medicare drug benefit and FDA's Critical Path Initiative will push and pull new drug development.

Several important events during the past year promise to reshape the environment for developing and testing new medical products. Congress established prescription drug coverage for some 40 million Medicare beneficiaries, a vast expansion of federal support for and control of expenditures on medicines. Even in its early stages, this program is focusing public attention on prescription drug prices, marketing, utilization, and effectiveness.

At the same time, concern that increased public and private investment in biomedical research is not yielding more new applications for innovative new therapies spurred a number of regulatory initiatives designed to streamline and accelerate new drug development.

The need for major changes in medical research and testing also was highlighted by developments that raised serious questions about the adequacy of current pre-approval testing and postapproval oversight of several widely used drugs.

New Medicare measures
The Medicare drug benefit is expected to boost prescription drug use by seniors and provide incentives to develop therapies needed by elderly patients such as arthritis, cardiovascular conditions, and Alzheimer's disease. But it also may squeeze prices and profit margins of pharmaceutical companies that sponsor research. A new payment system for oncology treatments and other therapies administered by physicians may alter incentives for R&D in these areas, while the Medicare outpatient pharmacy benefit will establish model formularies, post negotiated prices, promote treatment protocols, and track adverse events and outcomes more thoroughly-all likely to shape prescribing practices and new product utilization. These developments will require sponsors to incorporate outcomes measures into studies earlier in the development process, and may cause earlier abandonment of unpromising research.

Streamlining research
The Food and Drug Administration unveiled its "Critical Path" report in March to stimulate new thinking about how to convert new biomedical discoveries into safe and effective therapies more quickly and more efficiently. Former FDA commissioner Mark McClellan championed the initiative due to concerns about the lag between gains in genomic and other cutting-edge biomedical research and the development of new medicines able to improve public health. The report aims to examine and improve techniques used to evaluate the safety, efficacy, and quality of medical products by identifying obstacles and possible solutions to the high failure rate of potential new medical products during the development process.

The Critical Path report supports more translational research at the National Institutes of Health (NIH) and other organizations, and highlights the need for new tools and strategies to improve clinical trial design. FDA is seeking ways to identify new biomarkers and surrogate endpoints linked with clinical outcomes, and exploring how pharmacogenomics (PG) and proteomics can help target responders, monitor clinical response, and measure drug effectiveness.

Promoting pharmacogenomics
A related FDA initiative aims to encourage sponsors to expand their use of genomics information to spur discovery of more individualized dosages and treatment regimens. For the past year, FDA has been working to finalize a draft guidance issued in November 2003 designed to encourage pharma companies to voluntarily share internally developed PG data with FDA. This information may help sponsors select high-response individuals for clinical trials, a strategy that promises to reduce clinical research costs, accelerate drug development, and promote appropriate and safe use of complex new treatments. Pharma companies acknowledge that they are using PG information to better understand metabolic effects of test therapies, but most companies are reluctant to submit this data to FDA. They fear it will raise questions that could delay product approval or limit its approved label. FDA's data submissions guidance would allow sponsors to send in genomic data voluntarily for analysis by a special FDA review group, separate from the established new drug review process.

In clarifying its PG policy, FDA found that sponsors also fear that information on new biomarkers might prompt the agency to require a company to co-develop a diagnostic test in order to bring a new pharmacogenomic treatment to market. The emergence of more genomic markers that can identify high- and low-responding patients is prompting regulators to encourage the development of diagnostic tests able to determine which patients should be treated with a therapy, the appropriate dose, and risks associated with treatment.

FDA is considering additional guidance to clarify how it should regulate diagnostics and pharmacologic interventions that may be developed by different manufacturers and traditionally are considered separate entities for regulatory, reimbursement, and clinical practice purposes. Different FDA centers regulate medical devices, drugs, and biologics, providing more need for the agency's Office of Combination Products to oversee medical products that involve multiple components.

While some FDA staffers would like to require the use of a diagnostic for any PG therapy with an identifiable biomarker, manufacturers seek a more flexible approach to co-development that recognizes the significant differences in processes and practices for producing diagnostics as compared to drugs and biologics.

Going electronic
FDA also seeks to streamline research and the application review process by encouraging sponsors to submit more data electronically. The Department of Health and Human Services (HHS) intensified its push for a national electronic medical records system during this past year, starting with an effort to reach agreement on health terminology and electronic data standards. FDA is supporting the e-health initiative by proposing new systems for recording and transmitting research information. While these approaches may have long-term benefits in ensuring the accuracy of data and reducing research expenditures, the transition will be complex and costly in the short run.

Assuring safety and quality
The fall of 2004 was marked by a number of crises for the pharmaceutical industry and for federal regulators that raised serious questions about pre- and postapproval safety testing of new products. After months of debate, the experts decided that antidepressants may cause serious problems for young patients and warrant black box warnings. FDA subsequently required labeling changes for these products, plus MedGuides for patients to clarify the additional risks. Then, Merck had to pull Vioxx off the market due to evidence that long-term use of the COX-2 inhibitor raised the risk of cardiac events. On another front, British regulators shut down Chiron's Liverpool, UK vaccine manufacturing plant, creating a serious shortage of flu vaccine in the United States for the flu season.

Members of Congress pointed fingers at lax FDA oversight, accusing agency officials of trying to squelch staff warnings on drug safety issues and of ignoring signs of trouble at Chiron. One response was to call for full disclosure of all clinical trial results by sponsors and FDA-including those studies that fail to demonstrate efficacy. The reluctance of sponsors to provide timely information on clinical trials enrolling subjects and to fully disclose study results drew sharp rebukes and demands for policy changes. Investigators launched probes into possible unethical manufacturer behavior, as government officials and industry leaders weighed a range of messages emerging from these events:

• the nation's adverse event reporting and postmarketing surveillance systems are limited and slow to identify looming safety problems
  
• sponsors may need to provide much more safety data to bring to market treatments that patients may use for years
  
• DTC advertising for chronic-use drugs may encourage overmedication and unsafe practices
  
• the U.S. vaccine supply system is antiquated and unreliable and needs a major overhaul to prevent shortages and inequitable access
  
• perhaps regulators and policy makers should rethink efforts over the past decade to accelerate the drug approval process and streamline research requirements.

All these issues will be on the agenda for health and medical policy debates in coming months.

Sidebar: More Reliable Vaccines
For some time now, the U.S. healthcare system has been plagued by shortages of many vaccines for children and during flu season. Observers describe the nation's vaccine supply system as "very fragile" and "unreliable," characteristics that have escalated with the departure of major pharma companies from the vaccine business. Flu vaccine shortages in 2000 and 2003 prompted the Centers for Disease Control and Prevention (CDC) to ramp up supplies this year, particularly to meet growing demand generated by the government's own campaign encouraging patients to get a shot.

A key component of CDC's plan to ensure broader access to flu vaccine involved signing up San Francisco-based Chiron to provide over 40 million doses this fall from its newly acquired Liverpool, UK plant. The plan fell apart in October, though, when British regulatory authorities suspended the license of the facility due to "issues with systems and processes" designed to ensure product quality. While the Brits stood to lose less than 20% of their annual flu vaccine supply, an amount that other manufacturers could fill, the shutdown is devastating to the United States, which had relied on Chiron for about half of its 100 million dose order. Chiron bought the facility from PowderJect Pharmaceuticals in July 2003, and spent $75 million to upgrade the facility. But the company may have been pouring money down a sinkhole.

In August of 2004, Chiron acknowledged contamination problems with actual vaccine lots, but still assured FDA that it was an isolated situation, easily remedied. In fact, just a few days before the shut-down, Chiron CEO Howard Pien told a Senate committee that it had addressed its contamination issues and would deliver flu vaccine as promised. FDA officials were awaiting a Chiron report when Britain's Medicines and Healthcare Products Regulatory Agency closed the plant for three months because its inspectors did not feel that Chiron would be able to fix its problems sufficiently to ensure product quality.

While U.S. public health officials scrambled to find alternative supplies and to encourage prudent use of available doses, the Chiron debacle spotlighted serious problems with the U.S. vaccine supply system. Only two other manufacturers produce flu vaccine for the huge U.S. market, a situation that limits possibilities for dealing with emergencies. Several large companies have left the U.S. market because vaccine making is a difficult, low-profit business. Research and manufacturing are complex and susceptible to problems, and the United States offers the added threat of lawsuits and political interference. The Chiron crisis is sparking interest in a range of proposals to spur more flu vaccine production:

• Expand government guarantees for vaccine purchase to cover unused doses that manufacturers often have to discard every year.
  
• Provide grants and support for manufacturers adopting modern vaccine production techniques. National Institutes of Health officials are offering up to $150 million in financial incentives to encourage pharma companies to develop modern flu vaccine production technologies, such as cell-based cultures and DNA engineering. Everyone agrees that it's vital to shift away from today's old-fashioned egg-based systems that are slow and difficult to change, but that could take years.
  
• Expand vaccine production through regulatory and market reforms. A report from the National Vaccine Advisory Committee, which appeared in October as the flu vaccine crisis was emerging, recommends dropping price caps on vaccines for children, improving vaccine coverage by payers and insurers. It would also seek more harmonization in U.S., as well as foreign vaccine approval requirements to increase supplies in an emergency.-JW

SIDEBAR: Building Biodefenses
Although pharma companies have long sought stronger liability protections for vaccines and drugs, bills to provide such protections have been stuck in Congress for years. The legislators approved Project BioShield legislation in July, but only after dropping key liability provisions. Now Senate Judiciary Committee chairman Orrin Hatch (R-Utah) and Senator Joseph Lieberman (D-Conn) are hoping to gain approval of a BioShield II bill next year that would create more incentives for industry to research and develop vaccines and treatments.

Without liability protection and other provisions, industry's fairly lukewarm response to the BioShield program is likely to continue. HHS recently awarded $232 million in contracts to companies developing new vaccines against smallpox, plague, and tularemia, but the recipients are fairly small, and two are British. The Senate Judiciary and Health committees held a hearing on BioShield II last month to build support for tax incentives, intellectual property protections, and liability shields to spur more counter-terrorism product development.

The bill includes protections from lawsuits in the case of adverse side effects from such cutting-edge therapies. A controversial proposal offers patent extensions on existing commercial products to manufacturers that create bioterror countermeasures. Even though Hatch and Lieberman would limit such patent gains to smaller firms, generics makers strongly oppose "wild-card" awards that could be applied to blockbuster drugs.

Some health experts want to extend BioShield protection to companies that develop antibiotics, and similar proposals could be applied to vaccine producers in general and flu vaccine makers in particular. Politicians on both sides of the aisle support policies to end the continual shortages and to encourage more domestic vaccine production as a way to protect the nation's health against a flu pandemic or other health crisis.-JW