Merck’s Januvia, Medicare Pricing, And The Meaning of Patent Life
Executive Summary
Recent patent extension win for Januvia illustrates the dilemma that will be faced by manufacturers of older, single-source drugs that are chosen for price negotiation in the Medicare program.
It seems like a "we're not in Kansas anymore" moment. The validity of Merck & Co., Inc.’s patents for its 16-year old blockbuster diabetes treatment Januvia (sitagliptin) were upheld by a US district court 29 September, bolstering market exclusivity for the drug until May 2027.
The decision is subject to appeal. Nevertheless, Merck’s victory over patent challenger Viatris Inc. was hailed as a big win for Januvia’s marketer, which had previously anticipated the drug would lose its exclusivity in 2023. (Also see "Viatris Loses US Challenge To Januvia And Janumet Patents" - Generics Bulletin, 23 Sep, 2022.)
At the same time, the development is an example of how industry’s patent extension efforts could become a liability in the new world of Medicare price negotiation. Established by the Inflation Reduction Act, the negotiation policy targets costly, older drugs that have managed to stave off competition from generics or biosimilars well beyond their original period of exclusivity through a variety of patent maneuvers. (Also see "Medicare Price ‘Negotiation’ Process Gets Broad Brush Treatment In New Law" - Pink Sheet, 16 Aug, 2022.)
Under the law, qualifying drugs are single source, among the top 50 in terms of Medicare spending, and are at least seven years from approval (for small molecule drugs), or 11 years from licensure for biologics, when they are chosen.
Using that criteria, the Centers for Medicare and Medicare Services will publish a list of 10 Medicare Part D drugs selected for the first round of price negotiation in September 2023. Januvia fits the bill and is likely to be among the drugs selected, according to an analysis published 30 September in Health Affairs by Micah Johnson, Brigham & Women’s/Harvard Medical School, et al.
If a generic launches before the end of the months-long Medicare price negotiation period, the process would be terminated. If a generic launches after the end of the negotiation period, the brand would cease to be subject to the negotiated price at the start of the first year that begins at least nine months after the generic entered the market.
It is one of five drugs identified by the researchers that would be at least 20 years old when its negotiated prices go into effect in 2026. The others include Novo Nordisk A/S’s Levemir and Novolog insulins and AstraZeneca PLC’s asthma and COPD treatment Symbicort. Amgen, Inc.’s anti-inflammatory, Enbrel, is also among the group and will be approaching 30 years old in 2026. (See table at the end of the story for details on the possible products.)
In choosing the Part D drugs that are likely to be subject to negotiation, the authors considered Medicare spending for all formulations of the brand combined and used gross spending data before rebates, as stipulated by the law.
Because of their age, Januvia and the other four drugs will likely face the deepest cuts mandated by the law. Drugs that have been approved for 16 years or more by the time a negotiated price is scheduled to be implemented will be subject to a minimum price discount of 60%, and CMS is free to seek additional reductions. Younger drugs will be subject to minimum discounts of 25% and 35%, depending on the number of years since their approval.
Generic Competition Before August 2024
In the first year of the program, the negotiation process will conclude on 1 August 2024 and the discounted prices will go into effect 1 January 2026 (the schedule in later years will be different). (Also see "Medicare Drug Pricing Reform Is A Reality: Here Is What’s On The Agenda" - Pink Sheet, 16 Aug, 2022.)
The law makes allowances for situations where generic competition comes to market during the negotiation process. But prices could stay in place for up to two years if a generic is introduced after the price is implemented.
Specifically, if a generic launches before the end of the negotiation period, which will last 11 months the first year and nine months thereafter, the negotiation process would be terminated. If a generic launches after the end of the negotiation period, the brand would cease to be subject to the negotiated price at the start of the first year that begins at least nine months after the generic entered the market.
Merck has entered into patent settlement agreements with generic drug companies that allows the introduction of Januvia competition beginning in May 2026 (or earlier under certain circumstances). That means competition would reach the market nearly two years after negotiations for Januvia are concluded and that price could stay in place until the beginning of 2028.
Januvia would face a shorter exposure to the negotiated price if generic competition begins earlier. But to avoid price negotiation altogether, a generic would have to be marketed prior to August of 2024. That would represent a major shift in plans for the drug.
The situation highlights the dilemma that will be faced by companies who might choose to settle patent litigation in a way that would allow cheaper copycats to enter the market ahead of patent expiry but in a limited fashion – enough competition to keep a brand drug off the negotiation target list, but not so much that it would eviscerate their earnings on the product.
Manufacturers of brands might let the competitor enter the market in limited circumstances, limited quantities or even at a particular price point, explained Rachel Sachs, a professor of law at Washington University in St. Louis. However, she added that CMS or antitrust regulators could find ways to limit that potential strategy. (Also see "Patent Settlements and Medicare Negotiation: What Leverage Does Pharma Have To ‘Game’ Price Reform?" - Pink Sheet, 8 Aug, 2022.)
Timing Of Generic Competition For Eliquis, Symbicort
Johnson and co-authors call out a couple of other examples among their negotiation candidates to illustrate how generic competition could be complicated by the new regime. Bristol Myers Squibb Company and Pfizer Inc. announced in 2020 that based on settlement agreements reached with generic manufacturers, they expect generic competition to their anticoagulant Eliquis “could occur after 2026 but before 2031,” subject to appeals and future challenges, they noted.
Symbicort could be subject to generic competition before August 2024 but its patent situation is currently in flux, the researchers pointed out. The US Food and Drug Administration gave full approval to a generic version in March but AstraZeneca “then obtained an additional patent and immediately filed a lawsuit against the generic manufacturer to forestall entry,” they noted. The suit is pending.