Case Studies: LAAM, Naltrexone, Clozapine, and Nicorette

The purpose of the case studies is to gain insight into the experiences of companies that are relevant to developing and marketing medications for drug abuse and addiction. Presented below are two in-depth case studies of LAAM (Roxanne), for heroin addiction, and naltrexone (DuPont Merck), for heroin (as Trexan) and alcohol (as ReVia) addiction. In addition, we present two smaller case studies on clozapine (Sandoz), for schizophrenia, and Nicorette (SmithKline Beecham), for smoking addiction. These case studies address the following general topic areas: (1) product history and development timeline; (2) clinical development and product positioning issues; (3) product marketing strategy and sales; (4) policy interaction in product development and distribution (e.g., with HHS, FDA, NIH, and DEA); and (5) likely future of the product.
 

 Summary of Case Study Results

The four case studies have several elements in common, particularly with regard to the target patient population. For example, three of the four drugs involve treatment for substance abuse including LAAM and naltrexone for heroin addiction, naltrexone for alcoholism, and Nicorette for smoking. Clozapine was included in this study because the market for antipsychotic drugs shares certain characteristics with the market for pharmacotherapies for drug addiction including: 1) small market size, 2) treatment funding primarily through public sources, 3) and some patients who need help caring for themselves and complying with medication. The four patient populations represented in the case studies serve as highly relevant examples of some of the barriers that may exist in the development of pharmacotherapies for cocaine addiction.

Although each population shares several important characteristics, the condition of each population is viewed differently by outside populations. Differences in the markets for these drugs include the levels of federal funding provided for clinical trials, addictive properties of the drug, and treatment delivery system. As a result of these differences, each case study provides key lessons about the barriers to the development of pharmacotherapies (Figure 22 below).

Figure 22. The Key Lesson From Each Case Study
Case Study Drug Key Market Lesson
LAAM Existing delivery system via methadone maintenance clinics created significant market barriers.
Naltrexone Despite excellent pharmacological properties, poor patient compliance and failure to gain acceptance by providers and payors severely limited market penetration.
Clozapine High cost of treatment due to required weekly patient monitoring severely limited market penetration.
Nicorette Fewest distribution barriers and over-the-counter approval boosted sales and led to an influx of competing products.
As mentioned above, the government played a key role in the development of three of the four case study drugs by lowering some of the market barriers, particularly by funding clinical trials. These strategies are summarized in Figure 23 (below), and more detail is provided below.
 

Existing Government Strategies to Lower Market Barriers

The government was involved in aspects of development and marketing for each of the four case study drugs. These phases, adapted from the 1995 IOM report, include discovery, clinical studies, NDA phase, and marketing.
Figure 23: Overview of Past Government Strategies to Lower Market Barriers
 

Strategy

Case Study Drugs
 
Naltrexone
 
LAAM
Trexan
ReVia
Clozapine
Nicorette
Discovery          
Funding of basic science research
ü
ü
ü
 
ü for Nicorette and other nicotine replacement therapies
Clinical Studies          
Funding of clinical trials
ü through NIDA
ü through NIDA
ü through NIAAA
 
ü
NDA Phase          
Fast-track approval
ü given informally
not known
not known
ü given informally
ü given informally
Orphan drug status
ü small market size
ü small market size
     
Other market exclusivity    
ü 3-years post-approval
ü due to lengthened approval process
ü limited exclusivity for both the prescription and OTC forms
Less stringent phase IV clinical trial requirements    
ü requirements based on annual prescriptions
   
Marketing          
Mandated coverage      
ü HCFA(now known as CMS) mandated coverage
 
Source: The Lewin Group

 Discovery and Clinical Studies

Funding of Basic Science and Clinical Trials

For three of the four case studies, the federal government funded a significant portion of the pre-clinical and clinical research necessary for FDA approval. By funding clinical trials, the federal government lowered the barrier caused by the high cost of clinical research and development. The initial investment of funds for clinical research and development is a significant barrier, particularly if the intended patient market is small, e.g., number of heroin addicts, or if the market is highly regulated, e.g., the delivery of treatment via methadone maintenance clinics. A small or highly regulated market negatively impacts the net present value (NPV). Pharmaceutical companies cannot be expected to develop a product with a negative NPV. When the federal government funds clinical trials, it lowers the barrier of high cost of clinical development. In the case of naltrexone, our respondents from DuPont felt that the drug would most likely have not been developed without the federal government's clinical and financial support.
 

NDA Phase

A) Fast-track approval

The FDA can grant fast-track approval to those drugs that it deems will provide a new therapeutic effect for a particular patient population. For example, clozapine was given a "1A" approval rating because it was hailed as the first break-through antipsychotic drug in 30 years. Similar fast-track approvals were given informally to LAAM and Nicorette. Those drugs given a "1A" approval level are accorded a shorter FDA review time, which lowers the time-to-market barrier and allows a company to start marketing its drug faster than drugs with lower ratings.

B) Orphan Drug Status

All of the drugs in these case studies were granted some form of market exclusivity post-FDA approval, either via orphan drug status or other exclusivity incentives. For example, LAAM was granted orphan drug status primarily because the size of the potential product market, i.e., based on the expectation that users of LAAM would be drawn from the patient population then taking methadone, fell below a U.S. prevalence of 200,000 patients. Orphan drug status can provide 7 years of post-approval market exclusivity as well as tax credits and federal grants for clinical research for the treatment of rare conditions. Orphan drug status serves to lower the investment barrier, while raising the expected returns, thus providing a more favorable NPV than a drug without orphan status.

C) Market exclusivity other than Orphan Drug Status

Naltrexone (as ReVia), clozapine, and Nicorette were given varying lengths of post-approval market exclusivity. Although not as comprehensive as orphan drug status, marketing exclusivity allows a pharmaceutical company to sell its drug for a certain length of time free of competition from generic versions of the drug. This type of marketing exclusivity is often granted to encourage pharmaceutical companies to develop an indication for a drug, e.g., naltrexone, whose patent has expired or to encourage a company to develop an already approved drug for a new indication. With market exclusivity, the expected returns are higher, thus improving the NPV, making entry into the market more appealing.

Pharmacotherapies that are unable to qualify for orphan drug status (e.g., Nicorette) may also apply for market exclusivity under the Waxman/Hatch regulations in the Drug Price Competition and Patent Term Restoration Act of 1984. A new product must meet the following criteria in order to qualify for exclusivity:

D) Less stringent phase IV clinical trial requirements

In the case of ReVia, the FDA modified regulatory requirements to encourage DuPont to submit a SNDA for alcoholism. The FDA linked phase IV clinical trials requirements to the annual sales of ReVia. No phase IV trials were required if sales of ReVia did not meet certain thresholds. If ReVia did well on the market, DuPont would have to conduct phase IV trials based on the level of sales. By allowing for flexible phase IV studies, the federal government lowered post-marketing costs, improved NPV projections, and made investment in the alcoholism indication more promising.
 

Marketing

Mandated Coverage

The federal government exercised a coverage mandate in the case of clozapine. Once Sandoz separated its expensive Clozaril Patient Monitoring System (CPMS) from sales of clozapine, the Health Care Financing Administration(now known as Centers for Medicare and Medicaid Services(CMS)) (HCFA(now known as CMS)) required all state Medicaid agencies to cover the cost of clozapine therapy and provide a patient monitoring system of the providers choosing. This helped to increase patient access to clozapine and increase sales. By mandating coverage of treatment for certain conditions, the federal government can ensure that patients have access to appropriate therapies and provide incentives for pharmaceutical companies to pursue a wider market. This can lower the market barrier associated with an uncertain payment structure and result in a more favorable NPV.
 

Case Study 1: LAAM

Introduction

Drug Overview

LAAM (levo-alpha-acetylmethadol) is a synthetic opioid analgesic marketed under the trade name Orlaam by Roxane Laboratories for the treatment of opioid dependence. The clinical effects of LAAM, comparable to the effects of methadone, allow the medication to serve as a substitute for other opiates (e.g., heroin), suppressing craving and staving off withdrawal symptoms in opiate-dependent individuals. In contrast to methadone, LAAM is able to suppress withdrawal symptoms for forty-eight to seventy-two hours; therefore, the medication is only administered three times per week rather than daily. LAAM may only be administered at federally and state-approved opioid treatment programs (OTPs). In these programs, two treatment approaches are typically used: a) short term treatment (six months or less), or b) long term treatment (lifelong maintenance). Federal regulations require the treatment programs to provide "a comprehensive range of medical and rehabilitative services...that include medical evaluations, counseling, rehabilitative and other social programs...which will help the patient to become a productive member of society" (21 CFR 291).

Market Overview

In 1993, it was estimated that approximately 0.9% of young adults in this country had tried heroin and a significant percentage became dependent on the opiate (Johnston 1994). According to Abt Associates, in 1995, approximately 500,000 people were addicted to opiates. In the United States, there are approximately 1,000 FDA-approved opioid treatment programs (750 methadone maintenance programs and 250 - 300 inpatient hospital detoxification programs). SAMHSA reports that approximately 115,000 (25%) opiate addicts receive treatment from the maintenance programs.

Key Issues from the Case Study

LAAM had an extensive research cycle that lasted over twenty-five years with limited private investments and two unsuccessful New Drug Applications (NDAs). After finally obtaining FDA approval in 1993, the medication confronted severe market barriers largely pertaining to public policy (e.g., regulations on controlled substances, take home medications, reimbursement, treatment of pregnant women) and treatment issues (e.g., inertia of methadone providers, patient preference).

A few key points emerged repeatedly during the telephone interviews for this case study. Certainly, some private respondents believe that government agencies should continue to play an active role in the development of pharmacotherapies for substance abuse addiction. Indeed, LAAM may never have made it to the market without the government's participation, particularly in support of clinical development of the drug. However, given a choice between government funding for R&D with restrictions on marketing versus full control over their product, pharmaceutical companies would choose the latter.

Second, multiple sets of restrictions and regulations, which govern the distribution of the medication in opiate treatment programs, continue to be major barriers to the distribution of LAAM. These include:

Respondents suggested that efforts should be made to streamline these barriers and thereby restore some of the marketing window and increase availability of medications. Alternatively, one respondent recommended maintaining the existing regulations and barriers but extending the period of market exclusivity through legislation (e.g., the Orphan Drug Act).

Third, respondents emphasized that the market for such medications as LAAM differs significantly from the market for traditional pharmaceutical products. Unlike the marketing of traditional pharmaceutical products, pharmaceutical companies marketing substance abuse medications face stringent regulations on distribution, delivery systems, and provider reimbursement. In the substance abuse treatment market, pharmaceutical companies cannot market to pharmacies or physicians; their medications are not prescribed by physicians or obtained over-the-counter. Pharmaceutical companies must market their medication to the opiate treatment programs and clinics throughout the country. These OTP clinics diagnose the patients, develop treatment plans, and administer the medications to the patients. The qualifications of the clinic personnel vary significantly from state to state; in certain cases, clinic managers have limited medical background and limited knowledge in pharmacotherapy. Therefore, pharmaceutical companies report having a difficult time introducing a new medication into these clinics.

Product History and Development Timeline

As shown in Figure 24 (below), LAAM was first developed as an analgesic in 1948. Fraser and Isbell (NIDA 1994) conducted the first clinical study of LAAM in 1952; their research demonstrated that LAAM had the capacity to suppress opiate withdrawal symptoms for over 72 hours. In 1968, Dr. Jerome Jaffe discovered the potential utility of LAAM in opiate maintenance treatment and initiated the clinical research on LAAM. The initial IND application for clinical studies on LAAM was submitted in 1969 by Dr. Jaffe. Clinical research on LAAM, funded mainly by the government, continued throughout the 1970s by various researchers. In 1979 and 1981, NDAs for LAAM were submitted to the FDA by NIDA contractors; however, these NDAs were not approved. On January 24, 1984, LAAM received orphan drug status for the treatment of opiate addiction. By receiving orphan drug status, the medication was granted a 7-year period of market exclusivity following FDA approval. Rosina Dixon, who was the sponsor of LAAM when it obtained its orphan drug status, conducted research on the drug for a period of time but never submitted an NDA. In the mid-1980s, only limited clinical research was conducted on LAAM. Clinical trials and research on LAAM resumed in late 1980s and early 1990s under the sponsorship of NIDA via a contract with Biometrics Research Institute (BRI) to prepare the NDA. In 1993, the FDA approved LAAM for marketing and the seven years of market exclusivity granted under the Orphan Drug Act began; the market exclusivity ends in July 2000.

Figure 24: Timeline for the Development and Approval of LAAM

Clinical Development and Product Positioning

Clinical Trials, Phases I - III

As discussed earlier, Fraser and Isbell conducted the initial clinical trials on LAAM at the Addiction Research Center in Lexington, Kentucky. These studies examined the clinical effects of LAAM in "post-addict" subjects and in subjects who were dependent on significant doses of morphine. In addition, these Phase I studies demonstrated that following parenteral administration, withdrawal symptoms were suppressed for 48 hours. The Phase II clinical studies were conducted in the late 1960s and 1970s by Irwin et al. and Blachly et al. (NIDA 1994). These studies focused on the dose response, clinical pharmacology, and safety of the medication. Research from these studies demonstrated that, in contrast to daily administration of methadone, LAAM was to be administered every 48 to 72 hours.

In the late 1960s and early 1970s, the federal government funded two major Phase III clinical studies of LAAM under the sponsorship of the Veterans Administration and the White House's Special Action Office for Drug Abuse Prevention (SAODAP). These two clinical studies were conducted to determine the efficacy and safety of the medication in a treatment setting. Concurrently, Jonathan Whysner of MRA, Inc., was also conducting Phase III clinical trials under an Investigational New Drug application (IND) in 1973 in preparation for the submission of his NDA for LAAM (NIDA 1994).

Initial IND and NDA Applications

During the 1970s, NIDA assumed responsibility for LAAM and contracted with two companies to submit the NDAs. In 1979, the initial NDA was submitted by NIDA in conjunction with Jonathan Whysner of MRA, Inc. The FDA declined to review this NDA based on insufficient documentation in the Chemistry and Manufacturing sections. After the FDA declined to review the application, NIDA purchased it from MRA and revised the application for resubmission. The NDA was resubmitted to the FDA in 1981 by NIDA; once again, this request was denied due to inadequacies in the application (Medications Development Division 1997).

Funding cuts in NIDA research budgets in the early 1980s led to a hiatus in research on LAAM. However, with the advent of the HIV/AIDS epidemic and the realization that needle sharing was placing addicts at high risk for contracting disease, NIDA once again focused their energies and funding on researching LAAM. In 1990, the Medications Development Division (MDD) was created at NIDA. This division became responsible for LAAM and sent out a request for proposal (RFP) for the preparation and submission of an NDA. The RFP received responses from seven different companies including Biometrics Research Institute (BRI); in 1990, NIDA contracted with BRI for $3 million to develop and submit the NDA.

 

Contract between NIDA and BRI

According to respondents, BRI initially became involved in the development of pharmacotherapies for the treatment of substance abuse addiction in the 1970s. BRI had a contract with NIDA to assist with the collection of data on naltrexone; it worked with NIDA on the medication up to the Phase III clinical trials at which point DuPont became the primary party responsible for naltrexone. Concurrent with BRI's involvement in naltrexone, one of its patients was conducting research on LAAM. After BRI ended its contract with NIDA for naltrexone, it assisted its client, Jonathan Whysner, with the research and development of LAAM.

After receiving NIDA's RFP for the submission of the LAAM NDA, BRI conducted an initial market analysis that examined the number of clinics and patients. Their calculations estimated the percentage of patients that were suitable for LAAM and the percentage of those that would switch from methadone to LAAM. According to officials at BRI, the theory in the 1970s and 1980s was as follows: (i) patients off the street would receive methadone for a period of time; (ii) after the patients stabilized on methadone, patients would then begin receiving LAAM in the clinical setting; (iii) once the danger of relapse was minimized, patients would receive naltrexone and progress to becoming drug-free (Bradford 1997).

Under BRI's contract with NIDA for the submission of the NDA, BRI was responsible for collecting data from past research, conducting any necessary new research, and preparing and submitting the NDA. Government funds ($3 million) were to cover costs for collecting research on LAAM and conducting any new studies. BRI would fund the manufacturing and marketing costs of the medication.

In 1991, after gathering the past data, BRI submitted an IND Application to the FDA. Upon review of the IND, the FDA requested that two additional studies, a pharmacokinetic study and a labeling study, be conducted prior to submission of an NDA. In June 1992, the Labeling Assessment Study (the final clinical study prior to FDA approval) was initiated.

The NIDA contract required BRI to market and distribute the medication upon submission of a successful NDA. BRI's greatest strengths were in clinical trials and data management associated with NDA development and not in product marketing and distribution. Therefore, BRI elected not to engage in the marketing of the drug. In August 1992, officials from BRI left the company in order to create BioDevelopment Corporation (BDC) for the purpose of marketing and distributing LAAM. BDC was created by three principals who raised the funding for their company through private channels. After its creation, BDC assumed the contract from NIDA. BRI remained a subcontractor and continued to assist with the preparation of the NDA. In June 1993, BDC submitted an NDA for LAAM to the FDA; this application was approved by the FDA in July 1993, eighteen days after submission. After the medication received FDA approval, the DEA and FDA worked quickly to reschedule LAAM. In August 1993, one month later, the FDA and DEA agreed upon the rescheduling of LAAM to a controlled substance II (CSII) with a "no take-home" policy. FDA incorporated this policy into the labeling of the medication, a labeling that also restricted the use of the medication by women of childbearing age. After obtaining FDA and DEA approval, BDC was now permitted to market the medication to the opioid treatment programs.

Product Marketing Strategy and Sales

Before BRI responded to NIDA's RFP, BRI conducted a market analysis to ascertain the potential market size and the number of potential patients for LAAM in this market. Prior to FDA approval, BDC conducted its own market analyses to project its return on investment. According to their calculations, 715 public methadone maintenance clinics were in operation and serving approximately 90,000 - 110,000 patients daily. Officials at BDC hypothesized that 50 to 60 percent of the current patients were possibly suitable for treatment with LAAM. BDC believed that the advent of LAAM could potentially reduce the costs of treatment by decreasing the number of patient visits per week and thereby decreasing administrative costs. Officials at BDC therefore believed that the clinics would now be able to serve 10,000 - 20,000 new patients on the same budget for treatment services (Bradford 1997).

However, during the market analysis in 1993, BDC and BRI did not fully account for the existing regulations and restrictions that had to be met prior to medication distribution. BDC assumed that virtually no state or local regulatory barriers existed. For example, BDC assumed that once the DEA had rescheduled the medication, states would quickly follow suit and reschedule LAAM. However, by August 1993, BDC began to perceive the barriers that had to be overcome prior to distribution of LAAM.

Barriers to Distribution

In contrast to traditional pharmaceutical products, LAAM had to overcome many barriers after FDA approval. To permit the distribution of LAAM to treatment programs, states first had to reschedule the medication from a Schedule I drug (permitted only for clinical research) to a Schedule II drug (permitted for restricted use in treatment settings). Certain states, such as Texas, have "automatic rescheduling" where medications rescheduled by DEA are immediately rescheduled by the states 30 days after the DEA decision. Other states, such as Michigan, have pharmacy boards that convene periodically to review the rescheduling of controlled substances. Finally, in some states such as California and Florida, the legislature must pass legislation authorizing the rescheduling of medication. Such legislative efforts may require significant time and may require the drafting and enactment of legislation, delaying market entry in states by months and/or years (NIDA 1994).

Even after rescheduling the medications, many states had to revise or amend existing regulations for OTPs. The OTPs must adhere to strict guidelines established by the federal, state, and, in some instances, county governments. In many states, the restrictions were specifically directed toward "methadone maintenance programs." Therefore, to allow clinics that administer LAAM to operate legally, states had to revise the laws so that the regulations applied generally to opioid treatment programs rather than to a particular type of treatment program (e.g., methadone maintenance).

Following each state's own approval process for the medication, BDC had to focus its energies on the issues of reimbursement for the medication. Many OTPs received funding for their clinics from state general appropriations. The funds were directed toward covering the operating costs of the OTPs and for the reimbursement of the administration of the medication. Costs of the medication were and continue to influence clinics' decisions to distribute LAAM. According to the 1996 Drug Topics Red Book, methadone dosage costs approximately $0.50 per day while LAAM costs approximately $2.00 per day (accounting for LAAM being taken three times per week). According to data collected by Capital Consulting Corporation, methadone purchasing costs per patient per day ranged from $0.32 to $0.55 compared to LAAM costs that ranged from $0.71 to $1.53 per day. In certain states, Medicaid would reimburse clinics for the cost of methadone but would not cover the cost of LAAM. Therefore, clinics either had to negotiate with the state to receive greater funding or the clinics had to absorb the additional costs associated with LAAM. This uncertainty regarding medication reimbursement and state funding as well as costs have served as major barriers to the distribution of LAAM in many clinics.

Another barrier to the distribution of LAAM at the clinic level (besides costs and reimbursement) may be the inertia of the methadone providers. Respondents acknowledged that the personnel in many clinics seemed resistant to change and to the implementation of a new medication. The introduction of a new medication in the clinical setting demands new protocols, new training, and new reimbursement mechanisms and negotiated rates. Staff acceptance and their positive support for the medication are an important step toward patient acceptance. Prior to staff acceptance, personnel need to undergo training to understand the medication and its differences from methadone. Once the barriers at the state and clinic levels are overcome, the medication may become an integral component of treatment in clinics.

Patient acceptance of the medication is integral to the distribution of the medication in the clinics. Initially, patients had strong negative perceptions about LAAM and had heard rumors about the medication including the following:

In the past three years, patient perceptions of LAAM have changed significantly. Many patients report that they feel "more normal" on LAAM than they have in a long time, including their time on methadone. Despite increased patient support for LAAM, patients have also voiced their opposition to LAAM's "no take-home policy" which is inconvenient and a marked difference from methadone. Take home methadone may be given only to a patient who, in the reasonable clinical judgment of a program physician, is responsible in handling narcotic drugs. In determining whether a patient is responsible for handling narcotic drugs, a physician may consider the following: absence of recent abuse of drugs, regularity in clinical attendance, absence of serious behavioral problems, and length of time in maintenance treatment. According to the FDA regulations, a patient who has satisfactorily adhered to the program rules for at least 3 months and who has "made substantial progress in rehabilitation" may receive no more than a 2-day take-home supply of medication. A patient who has adhered to the program rules for at least 2 years may receive no more than a 3-day take-home supply of medication. Clinics throughout the country vary in the stringency of their take-home policy.

Marketing Strategies

One marketing strategy employed by BDC was to capitalize on LAAM's infrequent administration and the subsequent decreased administrative costs, relative to methadone. BDC marketed this advantage to the staff of OTPs, expecting a positive response. However, staff and clinic personnel became upset, fearing that their funding could be cut with the advent of LAAM; clinics also believed that states would compel the clinics to treat a greater number of patients with the same funding.

Realizing the negative response to this marketing approach, BDC sought to highlight LAAM as an alternative to methadone. Methadone must be administered daily and patients have to take methadone home if clinics were not operating over weekends. In contrast, LAAM only requires administration three times per week and operates under a "no take-home" policy. Patients do not need to interrupt their daily schedule in order to receive medication; communities do not need to be concerned with the diversion of LAAM on the streets. However, emphasizing the strengths of LAAM over methadone as a marketing strategy did not seem to improve the market penetration of the medication. While a "no take-home policy" was a positive attribute of LAAM in the eyes of people in the communities, clinics often viewed the "no take-home" policy of LAAM as a disadvantage. The following example illustrates the complex market interactions at the local level.

In one small Western city, LAAM was introduced into one of the city's two private methadone clinics. The availability of LAAM produced a significant increase in patients (and revenue) for this clinic (clinic A), since patients were attracted to the reduced visit schedule offered by LAAM. The city's other clinic (clinic B) responded to the loss of patients (and revenue) by liberalizing its take home methadone policy, so that patients would be less attracted to the availability of LAAM in clinic A. The liberalization of the take home policy was such a successful marketing strategy that a dramatic increase in the enrollment in the clinic B resulted. Many of the clinic A patients transferred to clinic B. Clinic A responded to this loss of business by increasing its availability of take home methadone. According to[a] survey respondent in clinic A, "with LAAM the only positive is a reduced visit schedule. With take home methadone, patients get a reduced visit schedule and some extra income (i.e., illicit take home sales) to help pay for clinic fees." (Rawson 1996)

As highlighted by this change of events, it was not profitable for clinic A to administer LAAM given the resulting activity of clinic B, namely the liberalized take-home methadone policy. On the other hand, creating an OTP that administers LAAM in a city with no treatment programs may be profitable for a clinic. However, distributing LAAM in one clinic in a city with other OTPs may generate a loss for the LAAM clinic.

Market Revenues

As discussed above, BDC did not anticipate the barriers to market penetration following FDA and DEA approval. Prior to the creation of BDC, its principals raised $2 million to cover the initial start-up costs. An additional $2 million was raised during the first 12 to 18 months of the company. According to officials at BDC, it was anticipated that the start-up funding would need to last for 18 to 24 months before the sales of LAAM would reach "break-even" and begin to generate a profit. BDC had estimated that approximately 20,000 patients would be receiving LAAM at 24 months (Bradford 1997).

Figure 25 (below) highlights the difference between the projected number of patients receiving LAAM and the actual number of patients over the last four years. As demonstrated by the following graph, the sales from LAAM fell well short of BDC's expectations and its threshold values. After 24 months, only approximately 2,000 patients were taking LAAM, significantly lower than the projected 20,000 patients. After 48 months, it is estimated that approximately 5,000 patients (less than 5 percent of persons in OTPs) are receiving LAAM daily (Roxane and BDC estimates).

Figure 25: Expected and Actual Number of Patients Receiving LAAM
Source: Industry estimates.

Acquisition of LAAM by Roxane Laboratories

After 12 months in the market, BDC realized that its funding was insufficient to support the continued marketing and distribution of LAAM. In the fall of 1994, BDC began looking for a pharmaceutical company with which to merge. Offers were received from three small firms and two larger pharmaceutical companies, Roxane Laboratories and Mallinkrodt. Roxane had already established itself in the field of substance abuse with the acquisition of methadone from Lilly. BDC decided to join Roxane in part due to this experience. In January 1995, Roxane Laboratories acquired BDC and the marketing and distribution rights to LAAM.

Prior to acquiring BDC, Roxane conducted its own internal market analysis. The focus of the market analysis was not the overall potential magnitude of the market but rather the percentage of the potential market that could be realized and the time required to realize that market. In an effort to further market penetration of LAAM, Roxane has conducted extensive training of clinic staff to facilitate the introduction of LAAM into the clinical setting. Staffs have been educated on the positive attributes of LAAM and have heard testimonials from patients already receiving the medication.

The penetration of LAAM has increased slightly since Roxane's acquisition of BDC, and Roxane Laboratories holds the medication in high regard and will continue to distribute the medication to clinics throughout the country.

Experience of LAAM in the VA clinics

In contrast to other public clinics, the VA has been successful at distributing LAAM. It is estimated that approximately 10% of the patients taking LAAM are receiving the medication in clinics funded by the VA. According to Dr. Richard Suchinsky, Associate Chief of Addictive Disorders at the VA, the hospitals have introduced the medication into all 33 OTPs within their systems and approximately 10 - 15% of their patients are receiving LAAM. Certain VA clinics in the larger cities are even directly inducting patients onto LAAM rather than transferring patients from methadone to LAAM. The successful distribution of the medication in the VA system may be attributable to three different factors. First, the VA clinics have a strong medical presence with physicians who understand the pharmacokinetics of the medication. Second, the VA clinics have not had to confront the same number and level of regulations and restrictions as other public OTPs. Third, in contrast to the state and local OTPs, the VA clinics have not had significant difficulties obtaining reimbursement for the medication. Finally, the VA hospitals were involved in the LAAM Labeling Assessment Study conducted in 1993 prior to FDA approval.

Policy Interaction in Product Development and Distribution

The interaction of policy with LAAM product development and distribution occurred throughout the thirty year period.

Government Involvement in Clinical Development

The federal government's role as a major financier of research on LAAM during the 1970s was instrumental in promoting earlier clinical trials. The Phase III studies of note funded by the government, the VA and SAODAP studies, were conducted to determine the safety and efficacy of the medication. The government was also instrumental in reinvigorating the research on LAAM in the late 1980s. NIDA funded the Labeling Assessment Study and contracted with BRI (and subsequently with BDC) to submit the NDA for LAAM that was subsequently approved by the FDA in July 1993.

Government Involvement in Product Marketing and Distribution

While government involvement during clinical trials was supportive, government involvement following FDA approval was more restrictive. As discussed above, many of the market barriers confronted by the medication pertained to federal and state policies (e.g., regulations on controlled substances, reimbursement issues, and take-home restrictions). Prior to FDA approval, the government had granted LAAM orphan drug status that gave the medication 7 year market exclusivity after FDA approval; the market exclusivity does not conclude until July 2000. However, the government restrictions and market barriers have significantly shortened this period by increasing the time required for the product to penetrate the market.

Marketing to Public Clinics

The marketing of LAAM has been directed exclusively to state approved public programs and to programs within the VA. The pharmaceutical companies have not directed their marketing energies toward private clinics because there is little data available on the number of private clinics and the number of patients receiving treatment. According to BDC, it was difficult to ascertain the size of the market but BDC believed that the market was not substantial. Due to the absence of concrete data and statistics, BDC and Roxane have focused their time on the public and VA clinics.

Likely Future of Product

At this point in time, LAAM has captured less than five percent (approximately 5,000) of the patients in the OTPs. An additional barrier to market penetration is the existing cap on the number of patients that may be treated in the individual OTPs. To establish an opioid treatment program, the clinic must obtain approval from the state authority and local government planning boards. In approving these clinics, these officials often examine the proximity of other clinics and the size of the treatment population. Depending on these and other circumstances, clinics may have a difficult time obtaining approval from the state or the local boards. The budgets for the OTPs have effectively established a de facto cap on the number of patients that may be treated in OTPs. Therefore, to further LAAM's market penetration, patients would have to be shifted from methadone to LAAM (CSAT 1994).

Clinical Trials and New Indications

Currently, Reckitt & Colman Pharmaceuticals, Inc. (in collaboration with NIDA), is developing buprenorphine and buprenorphine combined with naloxone as treatments for opiate dependence. Once approved, these products will compete with methadone and LAAM in the existing system, challenging methadone and LAAM's current market share.

In addition to the clinical trials being conducted on a new medication for opiate addiction, academic-based research on LAAM is continuing. Dr. Walter Ling of the Friends Research Institute and the University of California at Los Angeles (UCLA) is conducting a study on the efficacy and safety of take-home LAAM; the results of this study may be utilized in an effort to change the labeling concerning LAAM's "no take-home" policy. In addition, Dr. Doug Anglin at UCLA is conducting research comparing the effectiveness of methadone to LAAM in reducing of HIV transmission (Medications Development Division 1997). At this point in time, however, Roxane Laboratories is neither conducting nor sponsoring any research on take-home LAAM or the possible effects of LAAM on women of child-bearing age.

The Behavioral Pharmacology Research Unit at The Johns Hopkins University recently completed a study on the dose-related efficacy of LAAM for opioid dependence. According to the researchers, "the results indicate that LAAM's efficacy as an opioid dependence pharmacotherapy is related to dose and that high-dose LAAM is safe and efficacious for male and female drug abusing patients." These results support earlier data regarding the safety of the medication for women of child-bearing age, an issue addressed in LAAM's labeling (Eissenberg 1997).

Conclusion

Since its approval by FDA in 1993, LAAM has captured less than five percent of the patients in OTPs. Despite its ability to suppress withdrawal symptoms longer than methadone and despite its ability to make the patients feel "more normal," LAAM has only penetrated the market to a limited extent for various reasons. According to respondents from the private sector, it has been difficult to introduce LAAM into the market in part because methadone has existed as the sole medication for opiate addiction for over 25 years. Also, it has been difficult to break the virtual monopoly that methadone has established in the market, especially given the higher cost of LAAM. Aside from methadone's hold on the market, the main barriers to the marketing and distribution of LAAM have been the following:

These barriers have served as formidable obstacles for market penetration and have significantly reduced the value of the 7 year market exclusivity period of LAAM extended by its orphan drug status. According to respondents from the private sector, the existence of these barriers and the relatively small size of the potential market will continue to deter pharmaceutical companies from investing funds in the R&D and marketing of pharmacotherapies for the treatment of opiate addiction.
 
 

Case Study 2: Naltrexone

Introduction

Drug Overview

Naltrexone is a pure opioid antagonist originally marketed by DuPont as Trexan for the treatment of opioid dependence, and later as ReVia for the treatment of alcohol dependence. Naltrexone binds competitively to opioid receptors in the brain, and thus blocks the physiologically reinforcing euphoric effect of exogenous opioids like heroin. Naltrexone also plays a role in blocking the endogenous opioids associated with alcohol consumption, thereby blocking the euphoric effects of alcohol. Naltrexone works to help addicts control their craving for either heroin or alcohol by eliminating the euphoric effects. Naltrexone is typically distributed through treatment centers as part of comprehensive treatment programs for the treatment of opioid and alcohol dependence.

Market Overview

Estimates of the number of opioid addicts (primarily heroin) in the U.S. range from 500,000 to 1,000,000 (IOM 1990, Abt Associates 1995, Hammil and Cooley 1990). These estimates have remained fairly stable since the 1970s. In contrast, 15.3 million people in the U.S. are afflicted by alcohol abuse and dependence (Pink Sheet 1995, Scrip 1993). There were approximately 650,000 patients in alcohol treatment centers in 1992 (NDATUS 1993).

Key Issues from the Case Study

Naltrexone provides two related yet distinct pharmaceutical R&D and marketing lessons. Naltrexone's development encompasses over 30 years and reveals a wide range of government involvement in the drug development process, from conducting and funding clinical trials to creating novel regulatory approval incentives. For example, the impetus and vast majority of funding for clinical development came from the federal government through the National Institute on Drug Abuse (NIDA) and the National Institute on Alcohol Abuse and Alcoholism (NIAAA). Interviewees emphasized that the development of naltrexone required a true public-private collaboration between the federal government and DuPont, the company that owned the rights to naltrexone. However, the story of naltrexone also reveals that despite significant government efforts and a willingness of DuPont to pursue naltrexone's development, a number of market barriers have prevented naltrexone from becoming successful. To date, sales of naltrexone for both the heroin treatment indication and the alcohol treatment indication have fallen far short of DuPont's original, modest expectations. In both cases, federal government support of naltrexone's clinical development was necessary but not sufficient to overcome some of the key market barriers.

A major market barrier with naltrexone is low patient compliance. There are several reasons patient compliance on naltrexone therapy is low, and there are several consequences. There is a large barrier to the initiation of naltrexone therapy because patients must be completely opioid free. Many addicts return to heroin use before detoxification because they are not able to cope with the physiological withdrawal effects of complete detoxification. State-level treatment centers for heroin addicts have not been able to afford the more intensive psychosocial support systems necessary to ensure patient compliance to Trexan. In addition, according to our interviewees, directors of federally funded clinics are often non-clinicians who do not understand how a non-addictive alternative to methadone can be effective for heroin treatment despite evidence from clinical trials which demonstrated that naltrexone was highly effective if taken. Low patient compliance also limited the marketing of naltrexone, as ReVia, to comprehensive alcohol treatment centers.

The following sections provide a more comprehensive overview of the research, development, and marketing experiences of naltrexone.

Product History and Development Timeline

Executive and legislative mandates of the 1970s provided the impetus for the development of naltrexone as a narcotic antagonist to treat the rapidly rising number of heroin addicts, both in the U.S. and in U.S. military personnel abroad. The timeline for the development of Trexan is presented in Figure 26 (below). The timeline for ReVia continues in Figure 27 (below). In June 1971, President Nixon created the Special Action Office for Drug Abuse Prevention (SAODAP), which consolidated all federal agencies that had resources devoted to drug abuse and addiction research. The SAODAP was first directed by Dr. Jerome Jaffe. By September, 1971, the Division of Narcotic Addiction and Drug Abuse (DNADA) of the National Institute of Mental Health (NIMH), in conjunction with SAODAP, had initiated a research plan to expedite the development of a narcotic antagonist, that could be used as a non-addicting pharmacotherapy for the treatment of opioid addiction. In March 1972, Congress passed the Drug Abuse Office and Treatment Act, with a particular interest in developing "long-lasting, non-addictive, blocking and antagonist drugs or other pharmacological substances for the treatment of heroin addiction." This Act provided financial support for research in this area. In 1973, DNDA separated from NIMH and became the National Institute on Drug Abuse (NIDA) (Julius 1976).

 

Figure 26: Timeline for the Development of Naltrexone as Trexan
Source: The Lewin Group

SAODAP and DNADA selected naltrexone for further development because, of the other drugs in early development at the time, naltrexone came the closest to meeting their 12 criteria for an ideal narcotic antagonist:

  1. ability to antagonize the euphoric high of opiates
  2. absent or low-agonistic effects, especially unpleasant ones
  3. does not cause physical dependence
  4. does not exhibit increasing tolerance to its antagonistic actions
  5. absence of serious side effects and toxicity even in chronic use
  6. easily administered, i.e., no surgery or painful procedure involved
  7. long-lasting or moderate duration of antagonist effects
  8. absent or low abuse potential
  9. reversible effects in case of medical emergency
  10. high potency to allow administration of small amounts in a biodegradable vehicle
  11. easily available and inexpensive
  12. therapeutic efficacy in treatment of narcotic addiction (Julius 1976).
SAODAP rejected several drugs in favor of naltrexone. For example, SAODAP rejected naloxone because of its high cost, difficult synthesis, poor oral absorption rate, and short duration of action (Julius 1976). It rejected cyclazocine because of its potential for strong agonist properties as well as other drugs that were considered to be too early in development.

Naltrexone was originally synthesized in 1963 and patented in 1967 as Endo 1639A (U.S. patent number 3332950) by Endo Laboratories, a small pharmaceutical company in Long Island, New York. Endo was a manufacturer of pain relief medications and had conducted substantial research on narcotic agents. Naltrexone was a cyclopropylmethyl analog of naloxone (used as an antidote for acute opiate overdose). In 1969, DuPont purchased Endo Laboratories to acquire a company with pharmaceutical marketing experience to help sell DuPont's Symmetrel, an antiviral compound. With the purchase of Endo, DuPont acquired the rights to several successful drugs, including: Coumadin (warfarin), an anticoagulant; Percodan, a prescription narcotic; Nubain, a combination agonist/antagonist analgesic; and Naloxone, for narcotic overdose. DuPont acquired the rights to naltrexone, still in the early development phase, as part of the overall purchase of Endo.

In 1972, SOADAP approached DuPont for permission to develop naltrexone for clinical use. At the time, it seemed unlikely that DuPont would develop naltrexone. First, DuPont thought naltrexone would have relatively low market potential. Second, the patent for naltrexone would most likely have expired before clinical development would have been completed. Third, thebaine, a chemical precursor to naltrexone, would have to be purchased from Mallinkrodt, the pharmaceutical company that isolated thebaine.

Ultimately, NIDA asked for DuPont's assistance in facilitating naltrexone's transit through the FDA regulatory process - in particular to identify the required clinical trials and to file the NDA. DuPont interviewees reported that a primary reason for helping the government to bring naltrexone to the market was the company's "public spirited" mission. DuPont agreed to assist NIDA with the development of naltrexone, particularly with filing the NDA, regardless of the economic returns. In return, NIDA agreed to pay for the bulk of clinical development costs.

The clinical trials for naltrexone as a treatment for heroin addiction began in 1973 (Schecter 1974, O'Brien 1978). The NDA for heroin treatment was approved in 1984, the same year the U.S. patent expired. On March 11, 1985, naltrexone was designated an orphan drug which provided 7 years of post-approval market exclusivity.

The impetus for the funding of clinical research to gain an alcohol indication for naltrexone also came from the federal government. Researchers at VA hospitals who had been using Trexan to treat heroin addicts noticed that treatment with Trexan reduced both heroin and alcohol use (O'Brien 1996, Volpicelli 1995, and O'Malley 1995).

Figure 27: Timeline for the Development of Naltrexone as ReVia

Source: The Lewin Group

The funding for the development of the alcohol indication for naltrexone was provided by the NIAAA. The SNDA for the alcohol treatment indication was approved in 1994, providing 3 additional years of market exclusivity for the alcohol indication (Pink Sheet 1994).

Clinical Development and Product Positioning Issues

A large amount of preclinical research on opioid receptors and narcotic antagonists had been underway prior to the development of naltrexone (Crabtree 1984), but naltrexone was the first narcotic antagonist to be clinically tested and developed for the treatment of heroin addiction (Schecter 1980).

Clinical Trial Results

The clinical trials showed a modest success in the reduction of heroin use. Factors that made treatment successful included: sustained therapy with naltrexone, participation in multidisciplinary programs, and good family and social support (Crabtree 1984). The early clinical trial results showed that compared with the methadone maintenance patients, those patients who were attracted to naltrexone therapy were relatively "more motivated and emotionally stable" (Schecter 1974). In 1974, Schecter and colleagues found that naltrexone successfully blocked the pharmacologic effects of heroin (Schecter 1974). Clinical trials by Martin et al. (1973) and Resnick et al. (1974) and the National Research Council Committee on Clinical Evaluation of Narcotic Antagonists (1978) showed that although naltrexone was an effective opiate blockade, clinical success, i.e., a reduction in heroin use, was limited to fully compliant patients. Similar results were found in clinical trials for alcoholism (O'Brien 1996). As a result of these findings and others, the labeling for naltrexone reads, "[Naltrexone], unlike methadone or LAAM (levo-alpha-acetylmethadol), does not reinforce medication compliance and is expected to have a therapeutic effect only when given under external conditions that support continued use of the medication" (naltrexone package insert).

Clinical Trials Obstacles

One unanticipated obstacle during the clinical development of naltrexone was the difficulty in patient accrual and compliance for the clinical trials, which resulted in much higher costs than initially anticipated. Dr. Arnold J. Schecter, who conducted many of the early safety and efficacy studies for naltrexone in the treatment of opioid addiction at the State University of New York, reported that patient recruitment was difficult because some patients feared a new drug, lacked a desire to become drug free, were unwilling to possibly receive a placebo, and disliked the rigid protocols associated with the clinical trials (Schecter 1980). In addition, patients had to remain opiate free for a minimum of 5 to 10 days prior to treatment because naltrexone would cause severe withdrawal symptoms in patients with opioids in their system (Schecter 1974). Many addicts were unable to remain opioid-free for the required amount of time because of the physiological withdrawal effects. Finally, unlike methadone treatment which helps to suppress craving, naltrexone had no effect until the addict attempted to use heroin. Some patients feared that when on naltrexone they would be more vulnerable to these heroin cravings and felt that methadone was more effective in controlling their cravings.

Many researchers also encountered suspicion in the community regarding treatment of patients with a new experimental drug. The methadone maintenance clinics were especially reluctant to refer patients for naltrexone therapy, partially because of their need to keep their own censuses high enough to receive funding (Schecter 1980). As a result of these difficulties recruiting patients, the naltrexone clinical researchers made no efforts to screen out patients who can be difficult to manage in clinical trials, e.g., patients who were poorly compliant, and this may have compromised the results of the clinical trials (Schecter 1980).

The methadone maintenance clinics felt that naltrexone therapy was less effective and more costly than methadone for two primary reasons. One reason was that heroin addicts would have to be completely opioid free prior to starting naltrexone therapy. This meant that, unlike methadone maintenance, heroin addicts undergoing naltrexone treatment would experience all of the physiological symptoms of opioid withdrawal creating a huge hurdle for initial compliance to therapy. Second, naltrexone therapy required more extensive psychosocial support services than methadone treatment, primarily because naltrexone was non-addictive and lacked the reinforcing effect of methadone. Schecter and colleagues (1974) estimated that total clinical treatment with naltrexone was almost twice as expensive as methadone treatment (an increase from methadone's annual per patient cost of $1200 - $1700 to a cost of $3500 per year) because of this need for more intensive psychosocial services. Naltrexone supporters argued that naltrexone therapy would be substantially more economical when compared with inpatient beds, jail facilities or other therapeutic communities (Schecter 1974). In addition to the difficulties of patient compliance, Dr. Schecter noted that the lack of adequate funding of the antagonist clinics, well below funding of methadone clinics, was another factor in the limited success of the early clinical trials (Schecter 1980).

Naltrexone had a few additional clinical side-effects or problems that concerned many treatment providers. First, naltrexone did not prevent addicts from using other drugs to experience a euphoric effect. Second, there was a danger of opioid overdose in those patients who tried to overcome the naltrexone blockade. Third, patients on naltrexone would have to use pain medications that did not rely on opiate action, and patients were encouraged to carry a card that indicated they were on naltrexone in the event of an emergency. Finally, some practitioners feared an increased chance of depression, although this was not clinically verified (Schecter 1980). These problems compounded the problem of low patient compliance and created significant barriers to the clinical acceptance of Trexan.

The clinical trials for alcohol treatment encountered similar problems with low patient compliance. Naltrexone did not perform significantly better than a placebo unless it was administered as part of a comprehensive, multidisciplinary treatment program (O'Malley 1995). As a result the labeling for ReVia included the following stipulation, "ReVia should be considered as only one of many factors determining the success of treatment of alcoholism." This labeling indication had a profound effect on product marketing strategy and sales by limiting marketing to comprehensive alcohol treatment programs.

Naltrexone researchers for both opioid and alcohol indications faced many barriers during the course of their research including difficulties with patient recruitment, patient compliance, the high cost of clinical support services, and the traditionally low funding of treatment centers. While the government funded and supported the clinical trials, the funding fell short of the amount necessary to provide the more intensive psychosocial support. Researchers also faced difficulties recruiting patients, which meant that all patients who agreed to participate in the clinical trials were accepted into the treatment program. The researchers did not "reject" any patients from the clinical trials. This may have negatively affected the results of the clinical trials by including a high proportion of high-risk patients, who may have been motivated more by payments for participating in the trial than addiction treatment which lead to poorer compliance and higher drop-out rates (Schecter 1980). These barriers had a significant impact on DuPont's marketing efforts after Trexan and ReVia were approved.

Product Marketing Strategy and Sales

DuPont did not expect Trexan or ReVia to become major revenue generators. Just prior to the launch of ReVia, Trexan sales were approximately $5-8 million annually, which represented approximately 15-25,000 patients per year, or less than 5% of the estimated number of heroin addicts (Scrip 1993). Trexan was marketed only through comprehensive treatment centers at a price of $3.80 per patient day (Scrip 1993). When Trexan's name was changed to ReVia and the alcohol treatment indication was added, DuPont expected U.S. sales of ReVia to rise to $15-25 million annually, which represented approximately 45-80,000 patients per year, or 1% of alcohol addicts and opioid addicts in the U.S. (Scrip 1993). For the treatment of alcoholism, the recommended dosage of ReVia is one 50mg tablet per day for up to 12 weeks. When it came on the market in 1995, ReVia was priced the same as Trexan at wholesale prices of $227.58 for 50 tablets at 50mg (Pink Sheet 1995).

As of October, 1996, DuPont Merck reported that sales of ReVia since market entry in January 1995 had been lower than expected. As of October, 1996, DuPont had not yet reached the FDA's threshold of 200,000 prescriptions that would have required them to conduct phase IV clinical trials (Pink Sheet 1996). The primary market barriers of patient compliance and the need for more intensive and expensive psychosocial support than other existing therapies significantly limit market penetration. Trexan has failed to penetrate the highly regulated federal treatment market for opioid addiction, and ReVia has failed to gain coverage under most private insurance plans. For both indications, DuPont sales representatives perceived that they had to manage provider and patient expectations by reminding them that naltrexone was not a "cure" for addiction. DuPont also had to convince providers that it was appropriate to treat a drug addiction with a pharmacotherapy. The marketing of naltrexone remains subject to significant barriers, and DuPont has not been successful in selling ReVia except in limited cases. (For example, the VA hospital system has widely adopted the use of naltrexone in the treatment of alcoholics.) These market barriers remain the most persistent and the most difficult to overcome.

Methadone maintenance clinics for the treatment of heroin addiction are subsidized by the federal government and highly regulated at both the federal and state levels, in part because methadone is a controlled substance. Naltrexone is not a controlled substance and does not fall under the same regulatory umbrella as methadone. However, funding for the treatment of heroin addicts was funneled primarily through methadone maintenance clinics at the state level. Thus DuPont's marketing strategy for Trexan focused on working with the methadone clinics, which were primarily controlled by state health care agencies such as the State of New York Division of Substance Abuse. Representatives from DuPont noted they also marketed to private hospitals or "white collar" treatment areas because patients in private hospitals tended to be more highly motivated and have a stronger support network, and would experience more favorable treatment outcomes.

DuPont's Marketing Strategy

DuPont had an extremely difficult time trying to convince methadone clinic personnel to use naltrexone once it was approved. One barrier was that clinics would have to implement more intensive psychosocial support programs to promote patient compliance. Most facilities could not afford to implement naltrexone therapy due to the combined price of the drug, the drug treatment program, and the additional time for counseling.

DuPont did not launch a targeted marketing campaign to physicians, primarily because non-physician administrators often made the crucial funding and regulatory decisions that affect the care given in the facility. DuPont marketed naltrexone as a non-addictive antagonist blocking therapy that would help rid patients of opioids completely. DuPont also stressed that the patients would have to be motivated to comply with the therapy. The DuPont sales force had a difficult time explaining the antagonistic mechanism of naltrexone and its benefits to a lay audience that was uninformed about the science underlying naltrexone and the drug's mechanism of action. The sales force reported that they were entering a consumer marketplace with inherent misunderstandings and negative perceptions. Pro-methadone treatment providers argued that because methadone was dependence-producing, it was easier to maintain a patient on methadone and thus more likely that treatment would be successful. One former member of the DuPont sales force said these misunderstandings continue to be a great barrier to the use of naltrexone.

After working around or within the methadone treatment camps, DuPont gave up trying to convert proponents of the "methadone philosophy" to the benefits of treatment with antagonists. These two treatment camps were very strongly divided. DuPont found a favorable audience in the private heroin treatment clinics. Specifically, the clinicians in the private clinics reportedly had a better understanding of the clinical benefits of naltrexone therapy. Also, private clinics could more easily afford the additional psychosocial therapy to help maintain patient compliance because some private insurers covered naltrexone treatment.

The publicity and stigma surrounding treatment of substance abuse was another market barrier for DuPont to negotiate. There was a negative public perception of methadone clinics as a "taxpayer-supported program that keeps junkies addicted." As a non-addictive blocking agent, naltrexone was perceived much more favorably than methadone. However, the favorable view of naltrexone raised expectations to the extent that naltrexone was being touted as the "cure of opioid addiction." Clinical trials results showed that naltrexone would not cure the addiction, but naltrexone would enhance the chances of a successful recovery if used as part of a comprehensive treatment process. Favorable expectations raised initially by the press could not be met. DuPont salesmen devoted considerable effort to managing these expectations and explaining the importance of naltrexone therapy in conjunction with a comprehensive treatment program.

Marketing Strategies for ReVia

The alcohol treatment market is very different than the opioid market. At the time ReVia entered the market, there were a few potential competitors with products that all demonstrated poor clinical results. For example, the market for disulfiram (marketed as Antabuse) was limited in its clinical effectiveness because of poor patient compliance. Other treatments that had been tried, including off-label use of antidepressants like fluoxetine, demonstrated poor results in treating alcohol abuse. ReVia was a significant improvement over disulfiram in its safety profile and potential for improved patient compliance and outcomes. In addition, because the treatment system was not as highly regulated as the heroin treatment system, DuPont had more flexibility in marketing directly to the clinics and treatment providers. Despite ReVia's clinical superiority over disulfiram and less restrictive distribution channels than for heroin treatment, DuPont's sales force encountered similar marketing problems.

Clinical trials with alcohol showed similar results to the clinical trials with opioids. In an outpatient setting, ReVia, administered via a prescription to the patient, was not much more effective than a placebo. However, in comprehensive alcohol treatment programs, ReVia was very successful in helping patients reduce their alcohol consumption (O'Malley 1995). Therefore, DuPont marketed naltrexone only through comprehensive inpatient and outpatient alcohol treatment centers, including the VA hospital system where the clinical trials were conducted.

While DuPont could have marketed its product directly to general practitioners, there were many reasons why it did not. DuPont did not want naltrexone to be falsely construed as a "miracle pill" that would "cure alcoholism," because it could not stop all alcoholics from drinking, especially without counseling from comprehensive treatment centers. Additionally, DuPont stressed that even a reduction in alcohol use was a desirable outcome (Behavioral Health Treatment 1996). As with Trexan, there is a strong camp of treatment providers who feel that alcoholism should not be treated by substituting one drug for another and that alcoholics were not cured unless they were abstinent. For these reasons, DuPont wanted to ensure that ReVia was marketed as a complementary, rather than stand-alone, therapy.

Interviewees reported that another barrier to market penetration is that ReVia has been unsuccessful in gaining formulary access with private insurance companies. For example, a chain of California treatment centers using naltrexone as the primary pharmacologic treatment suspended operations after only six months citing managed care companies' lack of desire to cover such treatment (Behavioral Health Treatment 1996). Managed care companies may be reluctant to cover naltrexone treatment because few cost-effectiveness studies on treatment with naltrexone have been done. However, employers are also responsible for limiting substance abuse treatment coverage in their employee's health plans (Buck 1997).

Policy Interaction in Product Development and Distribution

In addition to conducting and funding most of the clinical trials for Trexan and ReVia, the federal government implemented several policies to further promote the development and distribution of naltrexone.

The FDA gave Trexan orphan drug status, granting DuPont seven years of post-approval market exclusivity. When ReVia was approved, the FDA granted DuPont three additional years of market exclusivity for the alcoholism indication. These market exclusivity rulings protected DuPont from generic versions of the medication.

The FDA also added a novel step-wise regulatory incentive for phase IV clinical trials for ReVia. The FDA allowed DuPont to tailor the type of phase IV studies that had to be conducted based on the extent of use of the product, in a four-tiered system based on the number of annual prescriptions. If the number of prescriptions stayed below 200,000 per year, DuPont would be exempted from any phase IV requirements. If the number of prescriptions rose above 200,000 per year in the first three years, DuPont would conduct pharmacokinetic studies in patients with severe renal disease and severe hepatic disease. At each of 500,000 and 1,000,000 prescriptions per year, DuPont would conduct a series of additional phase IV trials including studies in older adults and children, patients with common co-morbid conditions, and larger patient populations. DuPont is also required to provide in its annual report to the FDA the amount of drug manufactured as well as the number of prescriptions (new or refill) filled annually based on IMS data. This ruling allowed the FDA to make the product available to a small number of patients without requiring DuPont to conduct expensive phase IV trials, while also ensuring that additional data would be collected if the product was used more widely (Pink Sheet 1995). (Note: DuPont and Merck & Co. formed a partnership in 1991 known as DuPont Merck, which owns the rights to Trexan and ReVia. DuPont Merck markets its products under the DuPont Pharma name.)

Likely Future of the Product

DuPont has essentially stopped actively marketing both Trexan and ReVia. The company still provides information to clinicians upon request and makes naltrexone available to clinicians for use with their patients on an as needed basis. Researchers have approached DuPont for permission to test naltrexone for use in a wide variety of other conditions including obesity, schizophrenia, and chronic obstructive pulmonary disease (Watson 1996). The FDA awarded orphan grants (research grants for treatments of rare conditions) for the use of naltrexone with a number of rare conditions, including childhood autism (FDA 1989). In addition, researchers have used derivatives of naltrexone in other conditions. For example, the FDA granted orphan drug status to methyl-naltrexone as a drug that blocks the side effects of morphine without interfering with pain relief in cancer treatment (Oncology 1996). However, because naltrexone is now completely off-patent, DuPont will most likely not pursue any other indication for naltrexone without a guarantee of market exclusivity post-approval.

Conclusion

Naltrexone held great clinical promise when it became an important figure in the federal government's efforts to combat heroin addiction in the 1970's. As a non-addicting antagonist of the euphoric high of opiates, naltrexone had certain characteristics of a drug that promised to revolutionize the treatment of heroin addiction. Naltrexone showed great promise in clinical trials by significantly reducing heroin use in patients. The federal government made the development of naltrexone a top priority, and created consolidated government divisions with the funding necessary to conduct the clinical research and development.

Orphan drug status and related provisions for market exclusivity, and the flexible phase IV trial requirements are all useful tools employed by the FDA to give DuPont more incentive to develop naltrexone. However, other barriers described above overshadowed the advantages gained from these regulatory incentives.

The federal government played a key role in eliminating many barriers to the development of naltrexone for both heroin and alcohol addiction. Several key barriers the government recognized and lowered, and their effect on DuPont's incentive to market the drug, are shown in Figure 28 (below).

Figure 28: Market Barriers Successfully Lowered
During Naltrexone Development
Market Barrier
Government Intervention
Effect
High expense of clinical development, with a low projected return The federal government funded and conducted the vast majority of clinical trials Lowered DuPont's initial development costs and made the initial research less risky financially
Difficulty of obtaining thebaine, a precursor to naltrexone The NIH negotiated with Mallinkrodt to obtain thebaine DuPont had easier access to an essential precursor material
Patent expiration FDA granted orphan drug status and additional market exclusivity "Protected" the market to increase DuPont's chances of gaining a return on their investment
High expense of post-marketing studies FDA granted variable Phase IV research requirements DuPont could bring the drug to the market without having to conduct costly Phase IV trials until the drug was widely used
Despite the high level of government intervention, there were several barriers that DuPont and the federal government were unable to overcome. Estimates of naltrexone's sales suggest that naltrexone has reached less than 5% of heroin or alcohol addicts. As of October, 1996, sales of naltrexone had not reached the FDA's minimum threshold of 200,000 prescriptions per year to require phase IV research. As shown in Figure 29 (below), many of these barriers are related to issues of patient compliance.

 

Figure 29: Significant Market Barriers That Impeded DuPont's Market Success
Market Barrier
Effect on DuPont's Marketing Success
Patient compliance The non-addictive property of naltrexone, which was a high priority in choosing to develop naltrexone, makes patient compliance difficult. Clinical trials had shown that naltrexone was not effective without additional psychosocial therapy.
Need for intensive psychosocial therapy in addition to drug treatment Limits the distribution of naltrexone through comprehensive patient treatment centers, and potentially misses another market segment that may seek care primarily through a general practitioner.
Higher cost for more intensive psychosocial therapy State level treatment centers can not afford to implement the more intensive psychosocial support systems necessary to maintain patient compliance on naltrexone. In addition, there was no established reimbursement system for naltrexone treatment at the state level.
Federally controlled heroin treatment system As a result of extensive regulations at the federal and state levels, DuPont had to market directly to individual state substance abuse directors, who often lacked clinical backgrounds.
Difficulties recruiting patients for clinical trials The methadone maintenance clinics were reluctant to allow their patients to enter clinical trials for naltrexone either because they needed to protect their patient censuses, or they believed that a non-addictive alternative to methadone would not be effective.
Unrealistic patient and provider expectations Naltrexone was not a "miracle pill" that would cure a patient of all addictions and DuPont sales representatives had to manage provider expectations and convince them that reducing consumption of opioids or alcohol was significant.
Lack of insurance coverage Although some heroin addicts are covered under Medicaid, many private insurers are unwilling to cover naltrexone. In addition, managed care companies and employers offer limited insurance coverage for substance abuse.
Provider reluctance to use pharmacotherapies in the treatment of substance abuse Many providers in the addiction world share a philosophy that substance abuse should not be treated with drugs, which further impeded DuPont's sales efforts.
 
 

Case Study 3: Clozapine

Introduction

Drug Overview

Clozapine is a tetracyclic dibenzodiazepine antipsychotic agent marketed by Sandoz Pharmaceuticals under the trade name Clozaril in the U.S. and Leponex in the rest of the world. It is part of a class of drugs known as "atypical antipsychotic agents" which do not exhibit the typical extrapyramidal side-effects of antipsychotic agents including acute dystonia, rigidity, tremor, and akathisia. Clozapine has been used to treat schizophrenia, nonschizophrenic psychotic states, depression, neuroses, and behavioral disorders (Ereshefsky 1989). Clozapine has demonstrated remarkable results in treating patients with schizophrenia, particularly those who were previously treatment-resistant. Unfortunately, clozapine has been associated with an elevated rate (2% of all patients taking clozapine) of agranulocytosis characterized by a sharp decline in white blood cells making the patient more susceptible to potentially fatal infections. As a result, the FDA required that a comprehensive case-management system be used by all providers who dispense clozapine to ensure that patients' white blood cell counts are monitored weekly. The use of clozapine was also restricted to three sub-populations: (1) treatment-resistant patients with schizophrenia (approximately 10-20% of patients with schizophrenia), (2) patients who cannot tolerate the extrapyramidal symptoms of conventional anti-psychotics, and (3) patients with evident tardive dyskinesia that is not suppressed. (Tardive dyskinesia is characterized by involuntary repetitive movements of the facial, buccal, oral, and cervical musculature. Unlike most anti-psychotics that cause tardive dyskinesia in 15-20% of patients, clozapine has not been found to cause tardive dyskinesia.) (Ereshefsky 1989). Clozapine therapy must be initiated in an inpatient setting, to ensure the safety of the patient by titrating the dosages to reduce the risk of agranulocytosis. As described in this case study, the risk of agranulocytosis and the need for stringent and expensive patient monitoring was a major barrier to market penetration.

Market Overview

Approximately 1% of Americans (2.4 million people) are afflicted with schizophrenia, and between 10 - 25% (approximately 250,000) of these patients receive little or no benefit from conventional anti-psychotics (Cruzan 1989). Sandoz estimated that of these, approximately 33% (60-80,000) would respond to clozapine therapy (Pink Sheet 1991). Although patients with schizophrenia represent only a small portion of the U.S. population, they account for almost 25% of all inpatient beds used for any medical treatment in the U.S. The schizophrenia pharmacotherapy market is estimated at $1.1 billion annually and includes haloperidol, the most widely prescribed antipsychotic drug, clozapine, risperidone (approved in 1993), olanzapine, perphenazine, among others (FDC Reports 1997).

In addition to having a relatively small patient population, the market for drugs for schizophrenia shares a number of other characteristics with the substance abuse population. For example, both markets share Medicaid as a primary payer, a state-run treatment system, and a patient population that often has trouble with activities of daily living. For the schizophrenia market, approximately 90% of schizophrenia patients in the U.S. are Medicaid recipients, many are treated in state-run hospitals, and patients with schizophrenia are more likely to be non-compliant with pharmacotherapy than patients without schizophrenia (In the case of schizophrenia, non-compliance is attributed to the fact that patients with schizophrenia do not understand their condition). The similarities of the markets make the inclusion of a case study on a treatment for schizophrenia especially pertinent to the development of pharmacotherapies for substance abuse.

Key Issues from the Case Study

As much of the initial research and clinical development of clozapine was conducted outside the U.S. and funded by Sandoz, the clinical development issues are less relevant to U.S. R&D efforts. Rather, clozapine's post-regulatory and marketing periods are more relevant segments of this case study, in light of the FDA's novel regulatory requirement of a patient monitoring system and prohibitively high cost of clozapine treatment which severely impeded sales despite high clinical demand. These issues were resolved only through legal action involving the Food and Drug Administration (FDA), the Federal Trade Commission (FTC), the Health Care Financing Administration(now known as Centers for Medicare and Medicaid Services(CMS)) (HCFA(now known as CMS)), and providers such as the Department of Veterans Affairs (VA) Hospitals who demanded a lower cost of clozapine distribution.

The development of clozapine relates to the development of pharmacotherapies for substance abuse because a private pharmaceutical company invested its own money to develop a drug despite a small market. The fact that Sandoz marketed clozapine to a worldwide market helped to lower the barrier of small market size. However, the drug faced a significant market penetration barrier in the U.S. and Canada when sales of the drug were linked to an expensive patient monitoring system. Once distribution of the drug was separated from the patient monitoring system, sales of clozapine in the U.S. doubled. This case study provides an example of how a tightly controlled drug delivery system and a high price can impede market penetration.

Product History and Development Timeline

Clozapine was developed in Eastern Europe by the Wander division of Sandoz Pharmaceuticals. Clozapine's clinical development can be divided into essentially two phases, or "attempts." The first "attempt," depicted in Figure 30, began with clozapine's discovery and synthesis in 1952, and ended in 1975, when clozapine was withdrawn from worldwide markets after an outbreak of clozapine-associated agranulocytosis.

Clozapine was first patented in the late 1950s in Switzerland. European clinical trials began in 1962. Clozapine was first patented in the U.S. on November 10, 1970. U.S. clinical trials began in 1972, 10 years later after the European trials. From 1973 until 1975, clozapine was marketed for the treatment of schizophrenia in 22 countries (in Europe, Asia and Africa) under the trade name Leponex.

Figure 30: Timeline for Clozapine Development, Part I
Figure 31: Timeline for Clozapine Development, Part II
In 1975, clozapine was withdrawn from the world market after 16 cases of clozapine-associated agranulocytosis resulted in 8 fatalities in Finland (Anderman 1977). Other cases of clozapine-associated agranulocytosis and fatalities were reported to a lesser extent in other countries. Compassionate use of clozapine was allowed in research settings from 1976 to 1982. In 1981, as providers developed stricter patient monitoring systems, the sales volume of clozapine began to increase.

The second "attempt" at the clinical development of clozapine began in 1984, after an FDA advisory committee approved further U.S. clinical development of clozapine, as shown in Figure 31 (above).

U.S. phase III clinical trials recommenced in 1985 and the U.S. NDA was approved in 1989. The FDA approval stipulated that Clozaril (U.S. trade name) be sold only with a patient monitoring system to prevent fatalities due to agranulocytosis. In February 1990, Sandoz introduced Clozaril in conjunction with the Clozaril Patient Management System (CPMS) to promote the monitoring of patients' white blood cells to identify and control cases of agranulocytosis. Pricing of Clozaril in connection with the CPMS triggered marketing resistance to the drug, as described below. In December 1990, 33 states and the District of Columbia filed suit against Sandoz claiming that the company was "price-fixing" by limiting the sale of a highly desired product for a limited patient population through a monitoring system that was prohibitively expensive, and which could be provided by health care providers less expensively.

The remainder of this case study will discuss in detail the events after clozapine entered the U.S. market, and how the resulting bundling issues were resolved.

Clinical Development and Product Positioning Issues

The product history and clinical development of clozapine is not directly pertinent to the case study, as most of the clinical development occurred in Europe. There were very few barriers to diminish the intent of Sandoz to develop their antipsychotic drug. From initial clinical trials, the drug demonstrated improved efficacy over competing products without the same extent of extrapyramidal side-effects. The main barriers faced by Sandoz arose from marketing issues in the U.S. associated with the CPMS.

Product Marketing Strategy and Sales

When clozapine was approved by the FDA in 1989, the agency required that the drug be distributed with a patient monitoring system. The FDA had several reasons to require a patient monitoring system including: (1) a high incidence of a potentially fatal adverse reactions, (2) the inability to identify in advance patients who will suffer the reaction, (3) the probability that the risk of death can be substantially reduced by weekly testing and monitoring, (4) FDA's experience that physicians do not always comply with label recommendations for relatively burdensome testing and monitoring, and (5) an unusual patient population that cannot be relied on to take responsibility for regular testing (Peck 1990).

Sandoz implemented a novel marketing tactic of selling clozapine exclusively through the CPMS in conjunction with Caremark, a division of Baxter, and Roche Biomedical Laboratories, which tied distribution of the drug to weekly white blood cell monitoring. The drug and the CPMS were bundled at a price of $172 dollars per week, which resulted in a cost of approximately $9,000 (1990 dollars) per patient per year making clozapine therapy approximately 8 to 15 times more expensive than therapy with traditional anti-psychotics (Tokarski 1990). Clozapine was sold primarily to state mental health hospitals, the VA hospitals, and state Medicaid programs. Sandoz was criticized for charging so much for a drug that was desperately needed for a relatively small group of patients whose treatment was funded almost entirely through taxpayer dollars, via Medicaid.

Sandoz had several reasons to justify the high cost of the drug in conjunction with the CPMS, including: (1) to recover research and development costs, (2) to cover the costs of the monitoring system, (3) to ensure financial stability with the U.S. patent for clozapine set to expire only 4 years after market approval, and (4) to reduce the chances that Sandoz would be subjected to liability suits due to cases of agranulocytosis resulting from improper monitoring.

This marketing strategy created a significant price barrier to rapid diffusion of the product. By July 1990, only 5 months after clozapine was introduced in the U.S., the VA hospitals stopped providing clozapine to patients because of the restrictive cost (Tokarski 1990). By December 1990, almost 1 year after clozapine was introduced, only 7,100 patients (of a target market of 250,000) were taking clozapine. The poor distribution of a needed drug and provider lawsuits prompted the federal government, through legal and regulatory activity, to force Sandoz to separate the drug from the patient management system.

As shown in the graph below, in less than one year after Sandoz separated the drug from the patient management system and HCFA(now known as CMS) mandated that clozapine be included on state Medicaid formularies, sales of clozapine in the U.S. doubled. Sales of clozapine have been increasing since 1991, despite increasing competition. In 1993, clozapine enjoyed a worldwide sales growth of 60%. In 1993, Janssen's risperidone (Risperdal) entered the market as the second atypical antipsychotic, creating stiff competition for clozapine. In 1996, clozapine's worldwide growth was 17% with 1.7 million worldwide prescription sales and a 7% share (based on number of annual prescriptions) of the total market. In comparison, Risperdal captured 14.2% of the world market in 1996, with a 69% increase in prescriptions. Haldol and haloperidol generics are still the most popularly prescribed anti-psychotics with 18.8% of the worldwide market and 3.1 million prescriptions (Pharmaceutical Approvals Monthly 1996).

Policy Interaction in Product Development and Distribution

The key legal issue surrounding Sandoz's marketing strategy was that the FDA required a patient management system, but they did not require that Sandoz should control the only patient management system thus creating a distribution monopoly and limiting the supply of the drug (Peck 1990). In August 1990, the FDA clarified their labeling requirements to explain that any patient monitoring system could be used with the drug as long as the system maintained certain standards to ensure patient safety (Peck 1990). Despite protests from provider groups such as the American Medical Association (AMA) and the American Pharmaceutical Association (APhA) who felt that pharmaceutical companies lacked the authority to credential pharmacy or medical practice, the FDA required Sandoz to be responsible for registering alternative patient monitoring systems (Martin 1991, Hospital and Community Psychiatry 1991).

In January, 1991, Sandoz separated the sale of clozapine from the monitoring system, which lowered the cost of the drug alone to $4160 per patient per year, provided that the supplier had their own patient monitoring system registered by Sandoz. Also at this time, Sandoz began a public relations advertising campaign in USA Today and the Wall Street Journal declaring that they had made no profit on Clozaril, and with the patent expiration date only 4 years away, were almost guaranteed not to make a profit. In May, 1991, HCFA(now known as CMS) ordered state Medicaid programs to cover the cost of clozapine. In June, 1991, the FTC pronounced that Sandoz had violated antitrust laws by requiring patients to enroll in an exclusive and extensive blood monitoring program. In 1992, Sandoz reached a $20 million settlement with the provider groups. Despite these lowered market barriers and the lower cost of clozapine, as of 1996 only 11,000 patients were receiving clozapine in the U.S..

Likely Future of the Product

Recently, the FDA Psychopharmacologic Drugs Advisory Committee unanimously recommended that after 6 months blood monitoring could be reduced to every two weeks and voted 7-3 to allow monitoring after 1 year of therapy to be voluntary. The FDA based their decision on a national registry study which showed that the risk of agranulocytosis is greatest in the first few months of therapy. This ruling will expand the market for clozapine treatment to include patients who did not use clozapine because of the monitoring requirements and will make treatment less expensive. Because the rate of agranulocytosis is low and can be identified and controlled, clozapine may yet become a popular first-line therapy (Pink Sheet 1997).

Clozapine faced a few other significant market barriers, all associated with the required patient monitoring that may be reduced now that the monitoring requirements have been lowered. These barriers included patient reluctance to use clozapine because of the required monitoring which was time consuming, involved needles, and required them to go to the doctor on a weekly basis (Boodman 1993). As the monitoring restrictions are reduced, more patients may be willing to try clozapine, potentially as a first-line therapy.

Clozapine's U.S. market exclusivity ended in 1995. Clozapine served as the first model of an antipsychotic agent without extrapyramidal side-effects, and thus spawned research into the newer classes of atypical anti-psychotics entering the market today. Since the introduction of clozapine, several atypical anti-psychotics have entered the market increasing competition. These products, e.g., risperidone, hope to demonstrate the same clinical efficacy as clozapine without the side-effects. Although clozapine has not reached its market potential of 250,000 patients, further clinical research based on second generation clozapine products that do not have a potentially fatal risk factor may be more successful in penetrating the market.

 Conclusion

Clozapine had great clinical promise when first introduced in Europe in the 1960s. Once the potentially fatal side-effect of agranulocytosis was properly managed, the demand for clozapine rose but not to the level of initial expectations. The major market barrier to the success of clozapine in the U.S. was the prohibitively high cost of the associated patient monitoring system. This is the key issue of this case study that could be a potential market barrier for the development of cocaine pharmacotherapies in the future.
 
 

Case Study 4: Nicorette

Introduction

Drug Overview

Nicotine polacrilex is a smoking cessation therapy marketed under the trade name Nicorette by SmithKline Beecham in the United States and Pharmacia & Upjohn internationally for the treatment of nicotine addiction. The clinical effects of Nicorette allow the medication to serve as a temporary substitute for nicotine, slowly decreasing the patient's craving for nicotine. In contrast to the Nicoderm CQ transdermal patch, the Nicorette gum delivers a controlled dosage of nicotine to the body through the mucous membrane lining of the mouth (Nicorette 1997). Patients may obtain the medication over-the-counter at pharmacies or from their physicians. Clinical trials suggest that counseling and support received during the initial few weeks of treatment help patients cope with the behavioral aspects of nicotine addiction (Law 1995).

Market Overview

The potential size of the market for treatment of addiction to nicotine is significantly greater than that of other addictive substances such as heroin. According to a 1995 report by Abt Associates, approximately 496,000 people were addicted to opiates. In contrast, according to the Centers for Disease Control and Prevention, approximately forty-eight million Americans were current smokers in 1994. As Figure 32 highlights, the potential market for smoking cessation products has remained between forty-eight and fifty-five million people since 1965.

Figure 32: Total Number of Current Adult Smokers, 1965-1994

Key Issues from the Case Study

Similar to other pharmacotherapies for substance abuse addiction, government agencies have played an important role in the research and development of the medication. Government agencies financed many studies conducted in the late 1970s and early 1980s that led to FDA approval of Nicorette.

In contrast to most pharmacotherapies for substance abuse addiction, Nicorette is not subject to the different levels of federal, state, and local regulations and restrictions. The pharmaceutical companies involved in marketing Nicorette did not have to direct their time and energies toward rescheduling the medication or overcoming legislative barriers. Like more traditional medications, the medication was quickly introduced into the market after FDA approval.

A key difference between Nicorette and other medications for substance abuse addiction concerns the marketing strategies used by the pharmaceutical companies. SmithKline Beecham and Marion Merrell Dow (former licensee of Nicorette and now Hoechst Marion Roussel) were able to market the medication to the pharmacies and the physicians in the private sector. When Nicorette was approved as an over-the-counter smoking cessation therapy in 1996, the pharmaceutical companies were able to directly market the medication to smokers.

The following discussion provides a more comprehensive and detailed overview of the research, development, and marketing experiences of Nicorette.

 

Product History and Development Timeline

Figure 33: Timeline for Development, Approval, &
Implementation of Nicorette

As the timeline in Figure 33 highlights, the first formal clinical study of nicotine and its withdrawal symptoms was conducted in 1942. However, the first clinical study on nicotine gum was not conducted until 1973 by Ferno et al. Clinical research on Nicorette and nicotine replacement therapy conducted throughout the 1970s and 1980s was financed jointly by the private and public sectors. In the early 1980s, Pharmacia & Upjohn were conducting clinical research that led to the development of nicotine polacrilex (i.e., Nicorette gum). The NDA for the 2 mg strength of Nicorette was submitted in 1983. In 1984, the medication was approved by the FDA as the first smoking cessation treatment therapy. In 1984, Marion Merrell Dow was licensed the rights to market the medication within the U.S. while Pharmacia & Upjohn marketed the medication abroad.

In 1992, the FDA approved the 4 mg strength of the medication and the patent on the compound expired. After obtaining FDA approval for the 4 mg medication, Marion Merrell Dow and SmithKline Beecham joined their "consumer product" lines. Marion Merrell Dow merged with SmithKline Beecham in an effort to halt the diminishing sales generated from Nicorette; the sales for the medications fell 17% between 1991 and 1992 due to the emergence of new nicotine replacement therapies. This merger served as the launching pad for the efforts to switch Nicorette from prescription medication to an over-the-counter (OTC) treatment. In February 1996, the FDA granted SmithKline Beecham the right to distribute the medication over the counter and granted a three-year market exclusivity on the OTC version until February 1999.

Clinical Development and Product Positioning

Clinical Trials, Phases I - III

As highlighted in the previous section, the first clinical trial that identified the withdrawal symptoms generated by the loss of nicotine was conducted in 1942 by Johnston et al. Intensive research on nicotine dependence and nicotine withdrawal symptoms, however, did not occur until the 1970s. During the early 1970s, researchers inferred nicotine dependence from titration studies, studies that confirmed the nicotine seeking behavior, and nicotine withdrawal symptoms (Henningfield 1997). This research, funded in part through grants from NIDA, the National Cancer Institute (NCI), and the National Heart, Lung and Blood Institute (NHLBI), laid the groundwork for researching nicotine substitution therapy and alternative delivery systems for nicotine. The initial nicotine replacement therapy was investigated in the early 1970s by Ferno et al. (Nunn-Thompson 1989). Based upon the hypothesis that nicotine was the agent that caused the smoking dependence, Ferno sought to develop a mechanism for nicotine replacement to help reduce the characteristic craving for cigarettes. In 1973, Ferno et al. developed the chewing gum formulation (nicotine polacrilex) that would give the body reduced amounts of nicotine until the dependence on nicotine was eliminated. Research on this replacement therapy continued throughout the 1970s and received top priority from the FDA.

NDA Applications

In 1981, Pharmacia & Upjohn submitted the NDA for nicotine polacrilex; the NDA for the 2 mg strength gum was subsequently approved in 1983 (Nunn-Thompson 1989). After obtaining FDA approval, Pharmacia & Upjohn licensed the rights of Nicorette to Marion Merrell Dow to market the medication in the United States. Research on nicotine replacement systems continued by NIDA supported researchers including Jarvick, Hughes, Griffiths, and Henningfield (Henningfield 1997). Throughout the 1980s, research on Nicorette gum continued. Clinical trials were conducted throughout the 1980s that determined that nicotine replacement therapy was more effective when accompanied by behavioral adjuncts including counseling, nicotine weaning, and relapse prevention. According to clinical trials conducted through 1985, patients that received nicotine polacrilex gum had 27% abstinence rates with intensive specialized support, 21% with minimal support, and 10% when the medication was taken at the advice of a physician.

Concurrent to the research on the efficacy of nicotine gum in clinical settings, Marion Merrell Dow and Pharmacia & Upjohn were conducting research on the efficacy of 4 mg doses versus 2 mg doses of Nicorette. In 1992, the FDA approved the 4 mg dose of Nicorette gum in conjunction with the approval of four other nicotine replacement therapies including Nicoderm CQ and Nicotrol nicotine transdermal patches.

SmithKline Beecham Merger and the OTC Research

The merger between SmithKline Beecham and Marion Merrell Dow consumer lines in 1992 initiated the clinical research for the potential switch of Nicorette from prescription medication to an OTC remedy (The Tan Sheet 1993). Clinical trials on the efficacy and safety of the OTC product were conducted throughout the spring of 1993 and were completed in August 1993. Research continued in 1994 when SmithKline Beecham (which had obtained marketing rights to Nicorette as of January 1, 1994) submitted the SNDA. In the SNDA, SmithKline included a non-clinical study on the comprehensiveness of the labeling to consumers, two clinical studies that examined physician's prescription rate of the medication and the patients' subsequent quit rates, and two OTC use trials. FDA determined that these clinical trials demonstrated the safety and efficacy of the OTC product and FDA approved the Rx-to-OTC switch in February 1996. In October 1996, the FDA granted the product 3 years of market exclusivity under the Waxman-Hatch regulations retroactive to the OTC approval date (The Tan Sheet 1996). The Waxman-Hatch regulations were established under the Drug Price Competition and Patent Restoration Act of 1984 and these regulations set the criteria for drugs (prescription and OTC) seeking market exclusivity. To obtain market exclusivity, the following criteria must be met:

  1. The FDA must not have approved an identical drug product with the same conditions of use prior to this request.
  2. The NDA or SNDA must contain reports of new clinical investigations, not studies relied on for the approval of another drug product or a previous NDA.
  3. NDAs must be supported by clinical studies other than bioavailability studies.
  4. The clinical studies in the NDA must be conducted or sponsored by the person submitting the application and the studies must be essential to the approval of the NDA.
Product Marketing Strategy and Sales

In contrast to other pharmacotherapies to substance abuse addiction, the manufacturers of Nicorette did not have additional significant market barriers after FDA approval. After the approval of the prescription strength form of Nicorette, Marion Merrell Dow focused its energies on the physicians and the pharmacies. The company educated physicians and pharmacists concerning the efficacy of the medication when taken in conjunction with physician support and behavioral counseling.

Marketing Strategy

Following the OTC approval of Nicorette gum, SmithKline launched a new marketing strategy directed at consumers. SmithKline utilized numerous different approaches to educate the public about the new medication, including the following:

Marketing Sales

As highlighted by the table below, the sales of Nicorette increased dramatically after the FDA approval of the OTC version of the medication. Sales in the second quarter of 1996 increased over 100% from the sales in the first quarter, rising from $37 million to $78 million. During 1996 alone, the sales from Nicorette surpassed $225 million dollars. This figure is comparable to target peak annual revenues for new drugs of major pharmaceutical companies. Nicorette is sold at an average wholesale price of $3.77 per day (2 mg strength) and $6.59 per day (4 mg strength), and retails in pharmacies in the range of $45 to $55 for a 108-count package of Nicorette and $25 to $30 for a 48-unit package (Garrett 1994; Tan Sheet 1996). By comparison, the average wholesale price of $3.77 per day for Nicorette (2 mg strength) is more expensive than methadone ($0.50 per day) and LAAM ($2.00 per day), but is less expensive than naltrexone ($4.50 per day).

In terms of market share, Nicorette currently dominates the smoking cessation treatment product market; Nicorette accounts for 81 percent of the market, while its closest competitor, Nicoderm CQ only accounts for 6.5 percent of the market (Tan Sheet 1997).

Figure 34: Nicorette Sales in 1996 in U.S. Market

Policy Interaction in Product Development and Distribution

As discussed above, the federal government played an important role in the development of the medication. Grants from NCI, NIDA, and NLBHI funded, in part, research that laid the groundwork for the development of nicotine replacement therapies. After Ferno et al. developed the nicotine polacrilex gum, the FDA granted this research top priority (Nunn-Thompson 1987).

During the early 1980s, the FDA acknowledged the emergence of treatment systems for smoking cessation. In response to the research on these treatments, the FDA established conditions under which OTC smoking deterrent drug products would be recognized as safe and effective. In its proposed conditions, the FDA acknowledged that a single protocol for the evaluation of smoking deterrent products is not necessarily universally appropriate. However, the FDA also acknowledged that "it is imperative that well-controlled clinical trials be performed to evaluate these drugs. In designing these trials, important issues must be considered carefully in order to ensure proper evaluation" (Federal Register 1982). The guidelines and the conditions established by this panel of officials shaped the clinical trials that were eventually conducted on Nicorette and other smoking cessation products approved for OTC use.

Likely Future of the Product

Currently, the 2 mg and 4 mg strengths of Nicorette are available to consumers as OTC products. In February 1996, Nicorette obtained market exclusivity for their product under the Waxman-Hatch regulations; this market exclusivity will expire as of February 1999. Phase IV clinical trials are currently being conducted by SmithKline Beecham on safety of the medication in adolescents; it is uncertain whether these clinical trials will be employed to get a new indication for the medication.

Currently, three smoking cessation products, Nicorette gum (SmithKline Beecham), Nicoderm CQ patch (SmithKline), and Nicotrol patch (McNeil), have been approved by the FDA for OTC use. Product development continues and new methods of delivery (i.e. inhalers) have recently been approved by the FDA for prescription use. Once the market exclusivity on Nicorette, granted as of February 1996, expires in February 1999, SmithKline is likely to see other comparable products vying for market share.

Conclusion

As discussed above, the market for smoking cessation products differs significantly from the markets for medications such as LAAM or naltrexone. First, the size of the potential market varies tremendously. According to the Centers for Disease Control and Prevention (CDC), nearly 48 million people identified themselves as current smokers in 1994. In 1995, there were only 496,000 individuals that were identified as heroin addicts. The potential return on investment is higher in the market for smoking cessation in part due to its tremendous size. Second, manufacturers of Nicorette did not have to overcome regulatory barriers (i.e. rescheduling of the medication) after FDA approval, and did not have to adhere to DEA regulations. Once Nicorette was approved, the drug companies were able to initiate their marketing strategies throughout the country. Third, SmithKline Beecham and Marion Merrell Dow were able to directly market the medication to physicians in the private and public sectors and to pharmacies; their marketing strategies were not limited to a select number of highly regulated clinics.

These differences have significantly influenced the level of market penetration obtained by the smoking cessation products versus the market penetration of other pharmacotherapies for substance abuse addiction. In the past 15 years since its initial approval, Nicorette has been taken by over 13 million people in the United States alone (The Tan Sheet 1996).