Michigan wants to save $40 million by cutting PBMs out of Medicaid

Michigan’s Medicaid program would like to stop using pharmacy benefit managers to oversee prescription drug claims and negotiate prices with drugmakers, according to a notice from the Michigan Department of Health and Human Services.

The state proposed that it would start managing drug coverage on its own beginning Dec. 21. Michigan hopes the move will save Medicaid money by increasing its portion of drug rebates and slashing administrative costs. The department expects the proposal will save the state about $40 million.

The state also thinks the move will streamline the administrative process for providers and ensure uniform drug coverage for Medicaid enrollees.

As drug costs continue to skyrocket, several states have stopped outsourcing prescription drug claims and negotiations to PBMs because they have failed to deliver the cost savings they promised. Recent studies have found that PBM prices often exceed Medicaid fee-for-service drug prices, which has prompted states to break off their relationships with the PBMs.

Instead of easing drug benefit administration and negotiating better prices, many state Medicaid programs think PBMs are unnecessary middlemen that use tactics like spread pricing to grow their profits without delivering real benefits to taxpayers or beneficiaries.

But PBMs say this view is misguided and that they’re experienced negotiators who help states control drug costs by negotiating payment rates with drugmakers using formularies and utilization management tools that states can’t develop or leverage on their own.

Drugmakers pay PBMs rebates after the point of sale and can add up to 40% or more of a drug’s list price. PBMs usually try to address high drug prices by negotiating bigger rebates from pharmaceutical manufacturers, especially for brand-name drugs.

Critics, including public officials and patient advocacy groups, argue that PBMs have an incentive to prioritize high-priced drugs over more cost-effective medications because they’re partially reimbursed based on the size of the rebates they get from the manufacturers. There have been a number of reports of PBMs using tiering or other strategies to favor on-patent drugs over less expensive drugs that are just as beneficial, which could cost governments and patients more money.

PBMs are facing increasing scrutiny from lawmakers as they take aim at prescription drug prices. Some PBMs have responded by merging with other healthcare organizations, which can obscure the accounting of their PBM practices inside a larger company.

https://www.modernhealthcare.com/medicaid/michigan-wants-save-40-million-cutting-pbms-out-medicaid

Activist investor withdraws nomination for Brookdale board

Activist investor Land & Buildings Investment Management withdraws its nomination of James Flaherty III for Brookdale Senior Living’s (NYSE:BKD) board after talking with other Brookdale investors.

“While we view the conditional nature of the board chairmanship transition as the epitome of bad corporate governance, we support Guy Sansone ultimately becoming chairman of the board,” said Land & Building’s Jonathan Litt in a statement.

Litt said the firm will continue to monitor the situation at Brookdale and “take appropriate action as necessary.”

Previously: Brookdale calls activist investor’s nominee ‘unfit’ for board (Oct. 3)

https://seekingalpha.com/news/3504608-activist-investor-withdraws-nomination-brookdale-board

GSK recalls popular heartburn drug Zantac globally after cancer scare

GlaxoSmithKline (GSK.L) on Tuesday said it is recalling the popular heartburn medicine Zantac in all markets as a “precaution”, days after the U.S. Food and Drug Administration found “unacceptable” levels of probable cancer-causing impurity in the drug.

Zantac, also sold generically as ranitidine, is the latest drug in which cancer-causing impurities have been found. Regulators have been recalling some blood pressure and heart failure medicines since last year.
Britain’s medicines watchdog said GlaxoSmithKline (GSK) was recalling four prescription-only Zantac medicines: a syrup, an injection and tablets of 150 and 300 milligram (mg) dosages. (bit.ly/2IATooO)
Over-the-counter 75 mg dosage Zantac products are produced by a different company and are not affected by the recall, it added.
“GSK informed the MHRA of our decision to suspend the release, distribution and supply of all dose forms of Zantac products,” a company spokesman confirmed to Reuters.

“GSK is continuing with investigations into the potential source of the NDMA,” he said, adding that the investigations include continued engagement with its suppliers and with external laboratories to conduct tests on finished product batches of Zantac.
The Medicines and Healthcare products Regulatory Agency (MHRA) said healthcare professionals were told on Monday to “stop supplying the products immediately, quarantine all remaining stock and return it to their supplier”.
“We are advising that patients should not to stop taking their medication, and do not need to see their doctor until their next routine appointment but should seek their doctor’s advice if they have any concerns,” the MHRA said.

GLOBAL STOPPAGE

U.S. and European health regulators said last month they were reviewing the safety of ranitidine, after online pharmacy Valisure flagged the impurities.

The FDA said Valisure’s higher-temperature testing method generated very high levels of NDMA from the ranitidine drugs.
NDMA had previously been found in some blood pressure medicines from a class of drugs known as angiotensin II receptor blockers, or ARBs.
After checking the over-the-counter drugs using a low-heat method of testing, the FDA said it found much lower levels of NDMA than was discovered with a higher temperature test employed by Valisure.
The U.S. regulator has asked ranitidine makers to conduct their own testing to assess levels of the impurity and to send samples of their products for testing by the agency.
Swiss drugmaker Novartis (NOVN.S) halted global distribution of its ranitidine drugs last month.
Last week, Walmart Inc (WMT.N) joined pharmacy chains CVS Health Corp (CVS.N), Walgreens Boots Alliance Inc (WBA.O) and Rite Aid Corp (RAD.N) in suspending the sale of over-the-counter heartburn drugs containing ranitidine.

Canada’s health authorities have asked makers of the drugs to halt distribution as they gather more information. Last month, regulators in Hong Kong pulled four products, while in Ireland 13 products containing ranitidine were recalled.
The impurity was believed to have been introduced by changes in the manufacturing process.
https://www.reuters.com/article/us-gsk-heartburn-zantac/gsk-recalls-popular-heartburn-drug-zantac-globally-after-cancer-scare-idUSKBN1WN1SL

Deal-depressed third quarter leaves nowhere to hide

Megadeals flattered the biopharma M&A scene in the first half of 2019, but the numbers took a nose dive in the third-quarter.

First, the good news for deal bankers and investors: in dollar terms 2019 is already the biggest year for biopharma M&A since 2015, the peak of the biotech boom.
But the bad news is that the $182bn spent on acquisitions so far this year has mainly been down to the Bristol-Myers Squibb-Celgene and Abbvie-Allergan megadeals. There were no big-ticket buys in the third quarter, exposing an M&A market that looks decidedly stagnant.
Indeed, the last time so little was spent on acquisitions was the first quarter of 2013. This analysis only looks at drug makers, and excludes medtech companies or genomics specialists. It also includes minority and majority stake purchases, business unit acquisitions and option deals, as well as whole company takeouts.

Perhaps the third-quarter numbers represent a collective pause after the spending spree of early 2019. And at least the number of deals, if not their value, ticked up again.
But with only 36 purchases in the most recent quarter, still one of the smallest quarterly deal counts in recent memory, there could be renewed worries about the underlying level of M&A activity (Biopharma set for a big buyout year – on dollar terms at least, July 9, 2019).
Perhaps buyers are waiting for valuations to fall even lower before they bite. The likes of Biohaven and Uniqure have been touted as takeover targets this year, but still do not look like bargains.
Desperation can force an acquirer’s hand, however. A case in point is Lundbeck’s $2bn purchase of the migraine player Alder Biopharmaceuticals, the biggest deal of the third quarter. The Danish group needed a reasonably priced CNS asset, and Alder, with its fourth-to-market CGRP inhibitor and a sinking valuation, fitted the bill.
This was only one of three third-quarter deals to hit the billion-dollar mark: the others were Gilead’s R&D deal with Galapagos, which included a $1.1bn equity investment to take Gilead’s stake in the group to 22%, and Vertex’s purchase of the type 1 diabetes player Semma, a risky early-stage bet on which the jury will be out for some time.

Biggest M&A deals announced in Q3 2019
Date announced	Acquirer	Target	Status	Value ($bn)
September	Lundbeck	Alder	Open	2.0
July	Gilead Sciences	Galapagos*	Closed	1.1
September	Vertex	Semma	Open	1.0
September	Swedish Orphan Biovitrum	Dova	Open	0.9
September	Novartis	IFM**	Open	0.8
*Cost of acquiring a 22% stake as part of a licensing deal. **Option deal: the value relates to maximum takeout price, including an upfront fee that was not disclosed. Source: EvaluatePharma;.

The lacklustre third quarter could be a blip, but there is still time for the whole of 2019 to fall short, given that several big deals have not yet been sealed amid a clampdown from the US Federal Trade Commission on acquisitions seen as anticompetitive.
Doubts about Roche’s $5bn purchase of Spark are growing after that takeout was recently delayed yet again on antitrust concerns; the offer has now been extended until October 30. Meanwhile, the Abbvie-Allergan tie up was hit by a second request for information last month. It is unclear what the sticking points are, and Allergan had already said it would offload its pancreatic insufficiency drug Zenpep and its investigational anti-IL-23 MAb brazikumab, a potential rival to Abbvie’s Skyrizi.
At least the Bristol-Celgene purchase now looks likely to go through, after Bristol sold Celgene’s psoriasis blockbuster Otezla to Amgen in August, though the debt-exchange part of the deal was delayed by 10 days today.
Investors will hope that M&A activity picks up towards the tail end of this year, but a further slump could raise fears that the lull will continue into 2020 – particularly if regulators continue to bare their teeth.
https://www.evaluate.com/vantage/articles/data-insights/ma/deal-depressed-third-quarter-leaves-nowhere-hide

Venture cash gets even more concentrated

In terms of venture cash, living up to last year was always going to be a hard task. The latest figures indicate that 2019 will fall well short of 2018, but the grand total brought in by young drug developers should still look healthy compared with the years before that.
However, this headline number masks a potentially worrying trend: the number of rounds continues to fall, and reached a five-year low in the third quarter of 2019. This concentration of more wealth into fewer hands looks like bad news for start-ups and, perhaps, the biopharma ecosystem as a whole.
This analysis includes only developers of human therapeutics, excluding sectors such as medtech or diagnostics. But it echoes a trend seen in medtech for some time: a widening gap between the haves and have-nots, which has led to a shrinking pool of M&A targets.
While some might argue that more selective venture funding could strengthen the biopharma talent pool by weeding out weaker players from the start, it is unclear whether this is indeed the case – or whether funnelling cash towards the hottest sectors means valid opportunities in less fashionable fields are missed.
A look at the biggest fundraisers in the third quarter neatly illustrates how one sector, oncology, is gobbling up a massive share of the cash: six of the top 10 rounds involved cancer companies.
The list was headed up by the German mRNA and cell therapy specialist Biontech, which brought in a whopping $325m in July; the group is preparing to float this week in an IPO that could raise the company a further $250m and give it $4.5bn valuation.

Top 10 VC rounds of Q3 2019
Company	Investment ($m)	Round	Location	Specialism
Biontech	325	Series B	Germany	Oncology
D&D Pharmatech	137	Series B	S Korea/US	CNS/fibrosis
AM-Pharma	133	Series F	Netherlands	Kidney disease
Lepu Biotechnology	130	Series A	China	Oncology
Achilles Therapeutics	127	Series B	UK	Oncology
Recursion Pharmaceuticals	121	Series C	US	AI drug discovery
Nkarta Therapeutics	114	Series B	US	Oncology
Passage Bio	110	Series B	US	Rare CNS diseases
Kronos Bio	105	Series A	US	Oncology
IGM Biosciences	102	Series C	US	Oncology
Source: EvaluatePharma.

Another of the third quarter’s big VC winners, IGM Biosciences, has already managed to go public. The company has just taken its first candidate, an anti-CD20 bispecific antibody, into the clinic.
And investors are not avoiding high-risk, early-stage companies, at least not those in the right areas. The preclinical groups Nkarta Therapeutics and Kronos Bio are looking at natural killer cells and historically “undruggable” cancer targets respectively. And one of only two CNS players to make the top 10, the gene therapy specialist Passage Bio, is yet to enter the clinic.
While the current set-up benefits the few rather than the many, the headline figures in the third quarter could have been worse for start-ups: after two consecutive quarters of falling cash there had been fears that the slump might continue (Venture investing dips again for biopharma, July 11, 2019).
Instead, it looks like 2019 will follow the pattern – if the outlier of 2018 is excluded – of venture activity dipping mid-year and rising again in the latter half.
The bonanza seen last year was probably not sustainable. But, if the downward trend continues, groups in neglected areas could find it even harder to raise cash. It will be a while until the ramifications of this shift become clear.

Annual biopharma venture investments
Date	Investment ($bn)	Financing count	Avg per financing ($m)	No. of rounds ≥$50m	No. of rounds ≥$100m
9M 2019	10.2	278	38.3	84	26
2018	17.3	415	44.1	129	38
2017	12.1	442	29.9	72	16
2016	9.7	442	23.4	48	13
2015	11.0	514	22.5	56	13
Source: EvaluatePharma.

https://www.evaluate.com/vantage/articles/data-insights/venture-financing/venture-cash-gets-even-more-concentrated

Goldman: Sell Puma, Clovis on Company-Specific, Competitive Risks

Belying the popular notion that oncology biotechs are lucrative investment options,Goldman Sachs is taking a bearish stance on Puma Biotechnology Inc PBYI 19.41% and Clovis Oncology Inc CLVS 9.16%.

The Analyst

Analyst Paul Choi downgraded Puma from Neutral to Sell and reduced the price target from $24 to $8.
The analyst reiterated a Sell rating on Clovis shares and lowered the price target from $13 to $3.

The Thesis

Smid-cap oncology biotech stocks, especially those with exposure to precision oncology and targeted therapy, have nearly doubled year-to-date, Choi said in a Tuesday note. (See his track record here.)
Yet Puma and Clovis have meaningfully underperformed, with investor expectations having worsened further, the analyst said.
Choi said he sees potential for further downside due to underappreciated company-specific and competitive risks.

Puma Faces Headline Risk From Rival Breast Cancer Drug

Competitive data from Seattle Genetics, Inc. SGEN 2.82%‘s tucatinib at the end of 2019 creates a challenging setup for Puma’s Nerlyx, for which the next potential driver is likely to be in HER2+ metastatic breast cancer, the analyst said.
“We believe that even if tucatinib is not differentiated on efficacy, it may garner more market share on greater tolerability based on mCRC data shown at ESMO.”
Goldman Sachs reduced its 2025 sales estimate for Puma by 25% on a lower expected uptake in the metastatic setting and slower international adoption of Nerlynx.

Diminished Top-Line Outlook, Investment Seen As Overhangs On Clovis

With respect to Clovis, Choi projects risk to longer-term consensus estimates that have baked in meaningful growth driven from Rubraca’s use in prostate cancer and a frontline/combo use with PD-1s.
Following AstraZeneca plc AZN 0.7%– Merck & Co., Inc. MRK 0.49%‘s Lynparza PROfound prostate and PAOLA-1/PRIMA first-line maintenance ovarian data, Goldman reduced its peak Rubraca sales estimate by 25% on lower expected share in prostate and ovarian.
“Given the diminished topline outlook and continuing investment in rucaparib label expansion, we see the high cash burn and convertible debt burden continuing to be overhangs on the stock,” Choi said.
https://www.benzinga.com/analyst-ratings/analyst-color/19/10/14560896/goldman-recommends-selling-puma-biotech-clovis-oncology-cites-company-specific-comp

As docs ditch primary care to become hospitalists, MedPAC warns of shortage

• The number of hospitalists has increased nearly 50% between 2010 and 2017, according to a new report by the Medicare Payment Advisory Commission (MedPAC).
• Many primary care physicians (PCPs) are apparently abandoning that specialty in order to become hospitalists, who can expect better pay and more predictable work hours.
• Nevertheless, MedPAC concludes that access to primary care physicians by Medicare enrollees remains adequate — for now.

Hospitalists — physicians typically trained in internal medicine but who only attend to patients while they’re in hospitals — began populating the healthcare landscape in the 1990s. But only in the past decade have they really become a significant component of inpatient care.
According to the newly released MedPAC report, the number of hospitalists nationwide grew from 32,427 in 2010 to 48,407 in 2017. During that same period of time, the proportion of internal medicine residents who decided they wanted to become hospitalists grew from 9% to 19%.
This has put a damper on the growth of primary care physicians. According to new data from MedPAC, about one in five physicians it previously considered to be a PCP was actually a hospitalist. As a result, the number of PCPs practicing in 2017 were cut from 186,193 to 140,290, a drop of 25%. Therefore, growth in the number of PCPs was negligible — up less than 5,000 between 2010 and 2017. Their overall numbers actually contracted by 0.6% between 2016 and 2017, according to MedPAC.
Still, the commission does not see the glacial growth in primary care physicians over much of the past decade to be a cause for alarm. According to its surveys of Medicare beneficiaries, the “revised counts of PCPs do not change the conclusion that beneficiary access to care has remained adequate” and that access remains as good or better than the population of privately insured Americans.
According to MedPAC data, the number of encounters between each PCP and Medicare enrollee dropped from 4.1 in 2013 to 3.7 in 2017, a reduction of about 10%. It appears physician assistants and nurse practitioners are picking up the slack. Each Medicare beneficiary had 1.8 encounters with those clinicians in 2017, up from 1.1 in 2013, an increase of more than 60%. Encounters with specialist physicians and other practitioners barely budged during that time.
But that doesn’t mean MedPAC is unconcerned about the current trends with PCP growth. It concluded its report noting the “flat or declining trend in PCPs reinforces the Commission’s concern about (the) future pipeline.”
https://www.healthcaredive.com/news/medpac-warns-pipeline-concerns-more-primary-care-docs-become-hospitalists/564434/