Winning Combinations

In an effort to diffuse the impact of generic competition, revitalize established brands, and enhance patient convenience for long-term drug therapy, pharma companies are offering an increasing number of combination drugs. These products can expand disease markets and increase patient compliance, while reducing consumer copayments, thereby benefiting pharma companies and patients.

Getting It Approved

One example is Pfizer's new product Caduet (amlodipine and atorvastatin), which is designed to help people lower their blood pressure and cholesterol by taking just one pill daily. This new tablet is the first to combine medicines that address two different disorders simultaneously. The company estimates that 30 million Americans suffer from both high cholesterol and elevated blood pressure—the two leading risk factors for heart disease. Analysts forecast that Pfizer will generate $200 million in Caduet sales this year and $400 million in 2005.

Another example is Vytorin, a cardiovascular therapy comprising Schering-Plough's Zetia (ezetimibe) and Merck's Zocor (simvastatin) that reduces cholesterol in different ways. Ezetimibe is a cholesterol-absorption inhibitor, whereas simvastatin decreases endogenous liver production of cholesterol by inhibiting HMG-CoA reductase. The combination of these two different mechanisms could achieve additive or synergistic cholesterol-lowering effects.

Low Risk, High Reward

The financial risk of developing combination products is generally low. Although they must still undergo clinical testing, these trials generally are smaller and less demanding. As a result, they are less expensive than the type required for other drugs. (See "Getting It Approved".)

Indeed, the financial reward for pharma can be lucrative because the new combinations often come with fresh patents that protect the medicines from similar generic combinations for years after the individual ingredients have lost their legal protection.

Some new drugs may become available only as part of a combination pill. A Pfizer mixture in development combines Lipitor (atorvastatin), which works primarily to reduce bad cholesterol (low-density lipoprotein), with an experimental drug, torcetrapib, which raises good cholesterol (high-density lipoprotein). This combination, which has not yet been named, could be marketed in two or three years, and torcetrapib will be sold only in combination with atorvastatin. Lehman Brothers estimates global peak sales will be $1.5 billion.

Filling the Gap

As pressures mount to build up their pipelines, most major pharma companies are mixing current or past blockbusters to help fill the product void. Because of a high percentage of failures during trials, the amount companies must spend to bring a single drug to market in the United States has grown to approximately $1.7 billion, according to Bain & Co.

Bain points out that pharma companies are earning only a 5 percent return on their investment in finding new drugs, below levels typically demanded by equities investors. The Bain report also notes that licensing products from other companies, which was a profitable strategy until recently, now brings only a 6 percent return on investment. The trend has been for large pharma companies to design strategies around blockbuster products for widespread ailments such as heartburn, high cholesterol, and depression. But many of these products are losing patent protection and are being replaced by lower priced generics.

Although pharma companies will not likely abandon the blockbuster model, it is inevitable that they will aggressively deal with increased pressure on R&D, aging facilities, and expensive work forces by identifying alternative strategies to support their growth. The focus on combination products, although not a strategy that will single-handedly solve these challenges, can ameliorate them by effectively blunting competition from generics, thus increasing the market presence of mature brands as well as enhancing patient compliance.

Winning Over Doctors

Despite the move toward combo products, some physicians prefer to prescribe separate drugs to customize patients' medical regimens. These doctors often avoid prescribing combination drugs because they are offered in a limited number of dosages, which makes it difficult to tailor drug regimens or solve patients' problems with a single pill. Specifically, some physicians are concerned that they may not be able to isolate the cause if a patient experiences side effects from a combo product.

Even though such products are controversial, with critics asserting that they only offer minimal clinical advantages besides convenience, the potential benefit for the patient is a financial one. Essentially, patients would make just one insurance co-payment when one drug replaces two.

FDA's New Focus

In the past, FDA asked manufacturers to identify for themselves a product's primary mode of action and recommend the center to lead the review. Under a new proposal published in May, the primary mode of action would be defined as "the single mode of action (drug, device, or biological product) of a combination product that provides the most important therapeutic action." The agency notes, "This would be the mode of action that is expected to make the greatest contribution to the overall therapeutic effects." In situations when the most important therapeutic action cannot be easily determined, FDA would assign the product to a center evaluating a similar product. But many of the issues relating to combination product regulation would remain. For example, there is no consistent precedent at FDA for directing the product to the appropriate jurisdiction (device vs. drug).

In addition to the drug-drug combinations, other products that are receiving considerable attention include drug-eluting stents and orthopedic implants with genetically engineered human protein and antibiotic bone cement. FDA notes that these combination products represent a nascent category employing cutting-edge technologies "that hold great promise for advancing patient care." None of these mixed combinations fits precisely into any of FDA's traditional categories for regulatory review: drugs, devices, or biological products.

Given the rising costs and uncertainties of developing new drugs and devices, a strategy is emerging that urges companies to focus on a few areas of strength rather than attempt to cover all the bases. Although some companies are giving more consideration to outsourcing specific functions, such as manufacturing, there is also considerable interest in accelerating their ability to developing combination products.