The purpose of this section is to characterize private industry's views on market barriers to anti-addiction pharmacotherapy development. The 1995 IOM report, Development of Medications for the Treatment of Opiate and Cocaine Addictions, identified numerous market obstacles that appear to hamper private sector investment in anti-addiction medication development, e.g., market size, development costs, regulatory requirements for approval, and social attitudes about drug abuse (see Figure 35). This section pulls together industry views on these and other market barriers to pharmacotherapies for cocaine abuse and addiction with the objective of identifying barriers with the greatest impact on industry investment decisions. Additional information gathered for this section provides insights into estimating the relative import of various market barriers, including those considered to be "make-or-break" or otherwise critical barriers, and of the feasibility of surmounting them under current circumstances.
Source: IOM, Development of Medications for the Treatment of Opiate and Cocaine Addictions, 1995.
This section contains information from four sources: a) interviews with executives from five private firms (three pharmaceutical and two venture capital firms); b) the market analysis for a prospective cocaine medication; and c) scenarios of company decisionmaking; and d) case study reports of LAAM, naltrexone, clozapine, and Nicorette. The case study reports, market analysis, and scenarios of company decisionmaking provide information about the market potential for cocaine medications and lessons on development and marketing from previously developed pharmacotherapies.
The interviews with executives of private firms helped to identify the barriers to industry development of medications for cocaine abuse and addiction. It is important to note that the small sample of firms precludes either a representative study or assurance that all possible barriers have been identified. Instead, the primary goal of the interviews with the executives of private firms was to better understand the relative significance of barriers to this market.
In order to provide context for the market environment and background for understanding the market barriers from industry's perspective, this section summarizes pharmaceutical and venture capital firms' approaches to the evaluation of new drug investments.
The decision to develop a drug requires the input of both the clinical development departments of the company and the market research/product planning departments to help assess the clinical and commercial viability of candidate products. One of the company executives described a two-step decision making process. First, a pre-clinical committee meets to discuss key topic areas of interest for the company (e.g., CNS, cardiovascular disease) and then agrees upon a preferred list of development topics. For example, if there is a research breakthrough in the area of cocaine abuse and addiction, the pre-clinical committee first would have to agree that the breakthrough warranted the company's focus on that particular disease area. If the pre-clinical committee agrees that drug development should be pursued, it would refer the drug candidate to the commercial development arm of the company, which then would assess the product's market potential.
A part of the overall risk-versus-reward analysis by pharmaceutical firms involves financial calculations, e.g., the net present value (NPV) of a product. Although these calculations may be performed at any point during the development cycle of the drug, one interview respondent noted that most financial calculations are performed at the end of Phase II or the beginning of Phase III clinical trials of a product. These financial calculations are most often performed by market research or product planning departments as part of an assessment of a candidate drug's potential commercial viability. Interview respondents cautioned that while NPV and other financial calculations are important quantitative indices of risk and reward, certain qualitative factors that may be more difficult to quantify (e.g., product liability issues, opportunities to pursue drug development in other areas) must be weighed in assessing risk versus reward.
The VC interviewees were not involved primarily in pharmacotherapies for substance abuse. They attributed this not to a lack of interest, but rather to a lack of opportunities. One VC company executive indicated that in his five years of evaluating biotechnology and pharmaceutical products, he had never seen or evaluated a compound for the treatment of addiction.
VCs reported that their evaluation of candidate investments did not focus on a "magic number" such as a return on investment (ROI) calculation. Rather, VCs employ a large number of criteria to screen potential investment opportunities. One large venture capital firm's investment standards (noted in the recent literature, not drawn from interviews) are based on four fundamental questions about the candidate investment:
One VC interviewee noted criteria similar to those noted above when evaluating a pharmaceutical or biotechnology investment. One of the VC firms analyzes potential ventures by considering all facets of market potential, including pharmacology, data on how the molecule works, animal models, results from clinical trials (if available), and potential revenues. In the case of a pharmacotherapy for cocaine abuse and addiction, this VC firm is most concerned about the following: (1) the likelihood of a "clean" trial (e.g., a trial whose results are not confounded by lack of patient compliance, co-morbidities, dropouts, and other related factors) may be low, (2) compliance issues of the drug post-market, and (3) lack of clarity of the desirable clinical treatment endpoints, confounding judgments about whether an anti-addiction drug works. However, the VC representative stated that social stigma and other qualitative factors would not be an issue if the projected revenues for the drug appeared to be strong.
Another VC interviewee stated that the firm used similar investment criteria, adding to the key drug investment criteria the importance of the reputation and quality of the people involved in the venture, and ease of regulatory approval.
Some of the market barriers identified in the 1995 IOM report were confirmed through the interviews with private firms and case studies conducted for this effort. Figure 36 summarizes the market barriers that were confirmed (in full or in part) and not confirmed during this study. (As noted above, the number of interviews and case studies was limited by the scope of this study.) Although no new general types of market barriers were identified during this project, certain ones were elaborated or described in a more contemporary context.
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Confirmed | Not Confirmed | Notes |
| Uncertain market environment |
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| Discovery | |||
| Limited number of researchers focusing on drug abuse |
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| Lack of well-characterized animal models of cocaine addiction |
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| Limited basic science knowledge of addiction, craving, and relapse |
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| File IND | |||
| Clinical Studies | |||
| DEA regulations |
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| Complications of concomitant illness and polydrug abuse |
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| Patient population perceived as difficult to study |
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| Efficacy outcomes difficult to define or measure |
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| Few clinical investigators |
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| File NDA | |||
| Length of FDA approval process |
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| Other Approval | |||
| State rescheduling |
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| Varied state / local approval processes |
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| DEA review time |
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| Marketing | |||
| Varied state and local regulations |
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| Lack of traditional marketing to physicians |
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| Pricing clause in DHHS CRADAs |
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| Small foreign market |
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| Treatment System | |||
| Limited number of narcotic treatment programs |
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| Stigma of drug-abuse |
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| Bias by some treatment providers against pharmacologic treatments |
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| Varied state / local treatment regulations and financing mechanisms |
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| Uncertain treatment financing |
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Two types of market barriers emerged from our report. Critical barriers are those that must be surmounted in order for pharmaceutical firms to regard as feasible the prospects for developing cocaine addiction medications that will be financially successful. Non-critical market barriers are those that, if lowered or eliminated, may enhance (though perhaps only marginally) the financial outlook for developing cocaine addiction medications only if the critical barriers are also lowered. That is, without lowering the critical barriers, lowering the non-critical ones would be unlikely to transform an unattractive market into an attractive one.
Among the diverse market barriers perceived by the industry, three emerged as critical in this study, i.e., that would have to be lowered or eliminated in order to begin to make new drug development attractive to pharmaceutical companies:
Uncertain market penetration was another reason for the skepticism of the market. Interviewees from two of the companies stressed that potential patient compliance problems and limited access to patients (i.e., given the need for many substance abusers to obtain pharmacotherapy under controlled settings) made them uncertain about the true market size for cocaine treatment. Representatives of two pharmaceutical companies noted that many publicly-funded treatment centers were managed by non-physicians who tended to oppose the use of drugs to treat substance abuse, which such staff regarded as "behavioral" conditions, thereby further restricting the potential sale of these drugs.
As reported in the case studies, sales of LAAM and naltrexone were restricted by the limited number of heroin and alcohol treatment programs and the limited capacity of these programs. Twenty-five percent of opiate addicts receive treatment from the methadone maintenance programs while less than 1 percent of people in the U.S. afflicted by alcohol abuse and dependence are in alcohol treatment centers. LAAM is restricted to maintenance programs as required by The Narcotic Addict Treatment Act of 1974. Distribution of naltrexone is limited to comprehensive treatment centers, which enhance patient compliance. These market restrictions severely limit sales of the drugs and create another barrier to pharmaceutical companies that are considering developing a pharmacotherapy for drug addiction. One major market advantage of Nicorette is that, with an over-the-counter formulation, patients do not need to visit a treatment center or a provider to obtain treatment, vastly expanding market potential.
The lack of medical treatment models is another shortcoming of the substance abuse treatment system that poses a major concern for pharmaceutical companies. The pharmaceutical company executives cited an "anti-medication" climate among publicly-funded treatment center staff that would severely limit sales of pharmacotherapies through treatment centers. Interviewees implicated the large number of non-physicians (a.k.a. "non-prescribers") as the main reason for the anti-medication sentiment at these treatment centers.
Our market analysis supports the finding that there is a large number of non-physicians at publicly-funded treatment centers. The 1991 NDATUS study of specialty substance abuse providers surveyed 9,000 treatment centers and found that there were only about 2.2 full-time equivalent psychiatrists and other physicians, respectively, per 1,000 enrolled patients (Office of Applied Studies, 1993). The most recent surveys that have examined staffing patterns confirm that the substance abuse treatment system involves little or no physician time in the treatment of patients.
For example, methadone treatment for heroin addiction would appear to be the most medically oriented model of drug treatment. However, the role of physicians in methadone clinics is generally small and circumscribed to initial diagnostic assessments (i.e., of heroin addiction), management of methadone dosage, and some primary health care services. Most clinic services are oriented to the behavioral and psychosocial needs of the patients, and are delivered by counselors, social workers, and, less often, psychologists (Institute of Medicine, 1990).
This sentiment was repeated in our LAAM and naltrexone (Trexan) case studies, which found that a major market barrier for both products has been that treatment decisions and funding for heroin addiction are often controlled by state-level substance abuse program administrators who often do not have clinical backgrounds.
Reimbursement was an issue for LAAM, naltrexone, and clozapine. Treatment for heroin addiction (e.g., LAAM and naltrexone) has been funded primarily through federal and state budgets, making reimbursement difficult for pharmaceutical companies. In the case of clozapine, many public payers (e.g., Veteran's Administration, several state Medicaid agencies) refused to pay the additional cost of purchasing the Clozaril Patient Monitoring System ($9,000) before Sandoz uncoupled the drug and the monitoring system.
As reported in our market analysis, price sensitivity to a cocaine medication is another aspect of payment that may be a critical market barrier because price resistance may limit market size. As no approved pharmacotherapy for cocaine abuse has been tested on the market, it is not possible to know how sensitive the market would be to such a medication. However, indirect available evidence from other substance abuse medications (e.g., LAAM, naltrexone) and the current nature of cocaine abuse treatment and its financing would appear to indicate that the market would be very sensitive to the price of a cocaine medication. In a market where the average daily treatment cost is a modest $9.00 per outpatient and $23.00 per inpatient, a cocaine pharmacotherapy priced at a daily dose of a few dollars would represent a significant proportionate cost increase. This may be particularly so in the estimation of substance abuse treatment providers that are vested in psychosocial approaches to the exclusion of pharmacotherapy. It is important to note that the price sensitivity of the current treatment system may vary considerably from that of more typical pharmacotherapy markets that involve physician prescribing and distribution through pharmacies.
Several points within the drug approval process were seen by industry as potential market barriers to product development in this field. However, as a group, none were viewed as major barriers that could not be surmounted, especially if the market barriers cited as critical ones above were lowered or eliminated.
For two of the pharmaceutical companies interviewed, the cost of funding the necessary clinical trials for obtaining FDA approval was seen as a minor barrier to cocaine pharmacotherapy development. However, the pharmaceutical company that reported that the science base was not a barrier also reported that the regulatory aspects of development would not preclude moving ahead, so long as the science base and the financial market potential were evident. Also, one of the VC firms interviewed stated that drug regulation would not be a barrier if the market potential of the drug was very favorable.
Patient Populations Perceived to Be Difficult to Study
Three of the four case study drugs were for patient populations perceived to be difficult to study for a variety of reasons (e.g., patient recruitment, compliance, and co-morbidities). For example, patient compliance has been seen as a barrier to the success of naltrexone in both the heroin addiction and alcoholism markets, because the drug is not effective unless patients take part in a treatment program with a more intensive psychosocial component than for other pharmacotherapies. Compliance is often an issue when treating patients with schizophrenia, primarily because they may not recognize their illnesses or understand the need for treatment. In addition, alcoholics and other substance abusers may also have severe co-morbidities (e.g., hepatitis or depression), which may lead to poor clinical trial outcomes or adverse events that are unrelated, but wrongly attributed, to the study medication. Finally, researchers involved in the development of LAAM and naltrexone had difficulty recruiting patients because methadone maintenance clinics were unwilling to refer patients to clinical trials for fear of lowering their patient census and associated reimbursement.
Representatives of two companies stressed that cocaine abuse and addiction drugs in the pipeline need better access to patients for conducting clinical trials. A representative of another company described how adverse effects experienced by cocaine patients with multiple co-morbidities could be improperly attributed to its investigative treatments. Although pharmaceutical company representatives viewed these patient-related difficulties as real problems, they did not regard these problems as absolute barriers that could not be overcome given other incentives for entering the market.
Ambiguity of Desired Clinical Endpoints
The uncertainty associated with designation of required clinical endpoints to be used in clinical trials of medications for cocaine addiction was cited as a market barrier, though not a major one. Two pharmaceutical company interviewees identified this ambiguity as a potential barrier, and one company representative expressed some concern that "chasing a moving target" could increase the costs of conducting clinical trials. However, the pharmaceutical company interviewees were not aware of the FDA's current efforts to update its draft guidance for trials of drugs to treat cocaine addiction.
The case study of naltrexone demonstrated the difficulty of convincing providers and patients that a reduction in use of heroin or alcohol can result in favorable health outcomes. Although naltrexone blocks the effects of both heroin and alcohol, it does not prevent patients from using these substances. Researchers noticed that because patients using naltrexone did not experience the euphoric effects of heroin or alcohol, they had less incentive to inject heroin or drink alcohol, and their volume of use was reduced. Many provider and patient support groups have expressed that total abstinence is the only acceptable cure.
DEA Regulation
DEA regulation was not generally cited by pharmaceutical company representatives as a market barrier. One interviewee mentioned the potential risk of exposing an existing successful product used for other indications to cocaine treatment. The company indicated that the increase in development costs of the drug and the potential for rescheduling of the drug could restrict the market opportunities for its original indication and market.
The case study of LAAM, which is regulated by the DEA as a Schedule II drug, demonstrates how DEA regulation can be a hurdle for drug development. This regulation places severe restrictions on distribution channels, primarily in order to prevent the drug from being diverted to the black market. DEA scheduling prevents a drug from being marketed in a state until that state has rescheduled the drug, and state rescheduling could delay product marketing by years.
It is highly unlikely that an existing product would meet the criteria for being rescheduled by the DEA. In order for a currently marketed product to be rescheduled because of its use in cocaine dependent persons, it would have to meet two criteria: 1) the drug must have abuse liability, and 2) the drug must be classified as a narcotic. While methadone and LAAM meet these criteria, naltrexone is not scheduled. In addition, products with abuse potential are scheduled at the time of their NDA approval, and if an existing product showed higher or lower than expected abuse liability after marketing, it could be rescheduled upwards or downwards, regardless of whether it ever was used in a cocaine dependent population (Cummings, 1997).
Other Approval Issues
The clozapine case study demonstrates that special requirements for approved use and other atypical restrictions can pose significant market barriers. Clozapine has a potentially fatal side-effect, agranulocytosis, that warrants strict patient monitoring. This contributed to clozapine's being approved as a second- or third-line therapy, i.e., for patients who are resistant to other treatments. The strict weekly monitoring of patients on clozapine increases the cost of treatment. Sandoz originally linked sales of the drug to its Clozaril Patient Monitoring System at a cost of almost $9,000 per patient per year, severely impeding the ability and willingness of payers to purchase this treatment and dampening sales.
Drug Marketing Issues
Two market barriers related to drug marketing were identified. As previously described, the possibility of the pharmacotherapy being distributed through publicly-funded treatment centers rather than through physician offices was a concern of the pharmaceutical companies because of the companies' limited access to patients.
Variations in federal, state and local regulations have proven to be market barriers in the case of LAAM. LAAM is the most highly regulated of the drugs (DEA Schedule 2), whereas Nicorette is the least regulated (available over-the-counter). DEA regulation of LAAM has limited market penetration by restricting delivery of LAAM to methadone maintenance clinics. In contrast, with its far less stringent regulation, Nicorette is readily available to its large target population.
Social Stigma
Social stigma of drug abusers was cited as a market barrier by representatives of two of the pharmaceutical companies, though it is regarded as surmountable if the commercial and scientific viability of the product is favorable. The pharmaceutical companies that identified social stigma as a barrier were familiar and sympathetic to the case experience of Eli Lilly and methadone, in which the drug's original analgesia market plummeted after people associated methadone with heroin addiction treatment.
Representatives of one of the pharmaceutical companies that has a strong CNS portfolio expressed concern that the negative image of the drug abuse population would hinder the likelihood of a pharmacotherapy's financial success. Further, one company representative indicated that if a highly promising or approved drug for a non-substance abuse CNS disorder showed potential effectiveness for treating cocaine addiction, the company would be very circumspect about pursuing the cocaine indication for fear that any adverse events or stigma associated with the substance abuse indication would threaten the market for the original indication.
One pharmaceutical company interviewee suggested that social stigma can be circumvented by renaming drugs for cocaine indications. Another interviewee suggested that future progress of the science base and pharmacology may enable designating different drugs from a class of closely related yet distinct molecules, all of which would have same or similar CNS actions. Thus, one molecule could be designated as a cocaine medication while another from the same class could be designated for another CNS indication, thereby avoiding the problem of attempting to market a molecule for a cocaine indication that is effective for another CNS indication.
Industry Perception of Science Base Readiness
There was a divergence of opinion among the pharmaceutical company interviewees about the readiness of the science base for cocaine pharmacotherapies. Representatives of two companies expressed skepticism about the readiness of the science base. One representative indicated that current limitations stem from a lack of understanding regarding the biological and genetic basis of addiction. The interviewee contended that, in contrast to the situation for Parkinson's disease, researchers have been unable to implicate the genetic abnormalities underlying addiction, and that the science base for cocaine abuse and addiction is "not close." This interviewee regarded the existing cocaine pharmacotherapies as "half-way technologies." Furthermore, scientists from the same company judged that the probability of a scientific breakthrough in the area of cocaine abuse and addiction in the near future is very low.
Representatives of another pharmaceutical company indicated that a financially successful cocaine medication needed to demonstrate long-term efficacy, but reported that the current science base for achieving long-term efficacy is "very weak." In contrast, representatives of another pharmaceutical company indicated strongly that the science base is ready, and consequently that the science base is no longer a market barrier to development of cocaine pharmacotherapies. This company reported that it had successfully identified several drug candidates that exhibited cocaine blocking activities in both in vivo and in vitro models.
Scientific executives from one company who questioned the science base did suggest that there are opportunities for existing and potential products to be used as effective adjuncts to cocaine abuse therapy. For example, existing drugs for anxiety could help manage symptoms associated with withdrawal.
The views cited in this study concerning the readiness of the science base come from personnel who are knowledgeable about drug development and marketing and are in decision-making roles in companies with real or potential interest in this field. However, these views are taken from a limited sample of such personnel.