How Teva Defended Copaxone From Generic Competition

Ronny Gal, Ph.D., a senior analyst at the investment bank Sanford C. Bernstein & Co., recently published a thought-provoking analysis of Teva and its strategy for defending multiple sclerosis specialty drug Copaxone from generic competition.

Gal argues that Sandoz is using a similar strategy to defend Gleevec against generic competition from Glatopa.

Below, I provide some context and include the highlights of Dr. Gal’s analysis. He notes that the strategies work best when there’s only one generic competitor. Given the likely approval paths for pharmacy-dispensed biosimilars, I expect that manufacturers of specialty drugs will use these tactics when defending their products, too.

THE BEST DEFENSE

According to the 2015 Express Scripts Drug Trend Report, Copaxone is the most widely used drug in the multiple sclerosis therapy class, with a market share of about 35% for commercial payers. It accounts for about 4% of specialty drug spending by commercial plans and Medicare.

Teva’s Copaxone defense strategy had two primary components:

1. Shift patients to a different formulation. Teva has migrated many patients from Copaxone’s 20 mg/mL formulation to a 40 mg/mL formulation. The 2015 Express Scripts Drug Trend Report offers a handy summary of these dynamics:

“Glatopa, an A-rated generic to Copaxone, launched in mid-June 2015. Glatiramer is a disease-modifying drug administered by subcutaneous (SC) injection to treat relapsing forms of MS. It’s not a biological drug, but it’s more complex and difficult to replicate than most traditional drugs. Copaxone has been available for nearly 20 years as a 20mg/mL formulation that’s injected once daily.

Several patents on the original formulation expired in 2014, but litigation over a later patent delayed the release of a generic. In addition, Copaxone 40mg/mL—a strength that’s needed only three times a week—was FDA approved in January 2014. It will have protection from direct generic competition until at least May 2017, but likely longer following the issuance of additional patents. Up to 70% of patients shifted to the higher strength before Glatopa launched.” (page 50)

2. Contract with payers to protect the older formulation. Last year, Teva confounded expectations by retaining a much larger share of the 20 mg/mL formulation against Glatopa. Dr. Gal and his colleagues at Bernstein describe Teva’s contracting strategy behind this success:

“With Copaxone, Teva has essentially experimented with a new model. Rather than provide the bulk of the discount to the retailers/wholesalers, it offered the discount to the payors in exchange for exclusivity of the brand vs. the first generic—Sandoz/Momenta. Notice many of the same payors also own specialty pharmacies. Teva distributes much of its Copaxone 20 and 40mg via specialty pharmacies owned by these payors (allowing them to make some dispensing profits).

Thus, when Sandoz showed up with a traditional discount to the channel, it found out those buyers could not shift volume to its products as the determination of preferred product was made by the payors. When Sandoz turned their strategy to the payors, they were able to capture 25%-30% share (Teva wisely left some accounts to be taken to avoid price war). However, most payors were locked in 'rights to match' contracts with Teva and it did not make economic sense for Sandoz to try to compete Teva down to its walk away price (as Sandoz's 25%-30% share of clients have 'most favored nation' clauses in their contracts).”

This is somewhat analogous to Pfizer’s reported approach when Lipitor faced generic competition. See Pfizer's Lipitor Strategy and the 2012 Generic Monster, from March 2012.

Here’s a look at Copaxone’s market share:

[Click to Enlarge]

Note the low share for Glatopa and the growth of the 40 mg/mL formulation. These market share figures correspond to the relatively small decline in Copaxone utilization that Express Scripts reported for 2015.

Despite slower-than-expected generic substitution, I speculate that Teva’s strategy benefited the healthcare system. Total spending declined faster than it would have if Teva had done nothing, while Teva managed to hold on to market share, albeit at discounted prices.

In coming years, expect more creative strategies as biological specialty products face biosimilar competition. As Sun Tzu said more than two thousand years go: “Attack is the secret of defense; defense is the planning of an attack.”