Target diseases with no cure
What made Baraclude No. 1 prescription drug?
By Kim Da-ye
Bristol-Myers Squibb isn’t a brand name familiar to Koreans. It is little known that the New-York based pharmaceutical firm’s treatment for chronic hepatitis B is the best-selling prescription drug in Korea with some 85 percent share of its niche market.
Behind the drug’s fast expansion in one of the countries most affected by hepatitis B is the firm’s pursuit of treatment for serious diseases that have had no cures. Baraclude is a lucrative reward for BMS that treads the paths that have rarely been traveled.
“There are a lot of companies out there that make medicine. There are only few companies that discover medicine,” Michael Berry, the head of BMS’s Korean branch, said in an interview with Business Focus.
“We focus on diseases that do not have cures. That’s a very different strategy from other companies.”
BMS produces only branded medicines also known as innovators, no generics. Generics are copies of innovators that can be produced after the patents of innovators expire. And the firm focuses solely on serious illnesses including various types of cancers, diabetes, hepatitis, HIV and Alzheimer’s disease.
Berry said that there are six new drugs to launch in the next two years here. It has already brought out in the market two drugs in the past six months including Onglyza, a diabetes treatment developed in partnership with another pharmaceutical giant AstraZeneca.
Next month, BMS begins selling Kombiglyze XR, the combination of Onglyza and another diabetes drug called Metformin.
Next year, another diabetes treatment, Forxiga or dapagliflozin, will be out in the market. Berry calls it "a brand new generation drug to treat diabetes."
Later this year, the company will launch Eliquis, a drug to prevent patients with atrial fibrillation from having strokes. The product was developed under partnership with another U.S. juggernaut Pfizer.
Other drugs in the pipeline to enter Korea are for treating lung cancer, gastric cancer and Alzheimer’s disease that are all plaguing the Korean population.
“We need cough medicines, but sometimes you don’t need fifty of them whilst there are other diseases that have no medicines and cures. That’s why our focuses are the areas that don’t have cures like Alzheimer’s disease,” Berry said.
The company is a high-risk, high-return section of the pharmaceutical industry dominated by global juggernauts that can afford large-scale investment.
The benefits and downsides of such strategy are rather obvious.
The demand for a newly discovered treatment that is working is guaranteed.
In addition, there aren’t many competitors. “We are in a small group of companies that can discover medicines,” Berry said.
A billion-dollar quest to discover a medicine, however, can fail anytime. “You have to invest about a billion of dollars to get a new drug. If right at the end the medicine does not work, you are left with nothing. Innovation is only achieved with high risks,” Berry said.
Producing only branded medicines also means that the firm is under constant pressure to keep a diversified pipeline and is likely to lose much of the sales to generic drugs once the innovators’ patents expire.
BMS said in its 2011 annual report that once an innovator is no longer protected by a patent, generic brands quickly eat up a “major portion of that product’s sales.”
For instance, in May this year, BMS lost exclusivity in the U.S. for Plavix, the firm’s globally best-selling product. Plavix treats coronary artery disease and generated alone $6.62 billion in revenue in the U.S.
Despite risks, development of new medicines is believed to be domestic pharmaceutical firms’ way out from the business environment that has become increasingly hostile.
The government has toughened regulations against pharmaceutical firms’ provision of kickbacks known as “rebates” to hospitals and pharmacies. The free trade agreement between Korea and the U.S. is expected to strengthen regulation against generics.
Hard times await small- and medium-sized firms that lack original technology, manufacture mostly generics and rely on marketing activities.
In 2011, BMS spent $3.84 billion on research and development out of the total expenses of $14.26 billion. It represents an 18 percent of the revenue.
Marketing and selling the products cost the company $4.2 billion, compared to the product’s own cost at $5.6 billion.
In comparison, Dong-A Pharm, the largest Korean pharmaceutical firm by sales, spent 6.99 percent of the revenue at 73 billion won ($63 million) and Green Cross, the second largest, invested 7.64 percent of the revenue worth 58.67 billion won ($50 million) in the R&D.
Much of BMS’ R&D activities are taking place in Asia including Korea. The firm has partnered with hospitals here, most recently with Catholic Medical Center.
Berry said that in case of the development of Baraclude, big clinical studies were done in Asia.
“Doctors in Korea achieved a lot of Korean data to help them understand how the medicine works in Korean patients,” he said.
Last week, the firm was notified by Korea Food & Drug Administration (KFDA) for approval of studying hepatitis C. Berry said that Korea is the first country in Asia to do so and a “disproportionate” number of Korean patients are expected to benefit from early research efforts in this part of the world.
BMS has also transformed into a biopharmaceutical firm in the past few years as the understanding of a human body and diseases has changed.
“Biopharmaceutical products are certainly not more profitable necessarily. It’s an advance of science, not a question of profitability,” Berry said.
So far BMS brought out one bio medicine to cure rheumatoid arthritis called Orencia.
As a biopharmaceutical firm, BMS established a new strategy called “String of Pearls.” BMS has acquired small biopharmaceutical firms and products to create synergies with the firm’s hundreds of thousands of employees and big infrastructures,
Success of Baraclude
Along with Japan and China, Korea has a significant portion of the population affected by hepatitis B. BMS projects that about 75,000 patients are under treatment and some two million people are chronically affected.
Baraclude, a drug that was launched in 2007 here and now generates the largest revenue among prescription medicines, has a few competitors including Bukwang Pharm’s Revobir and Novatis’ Sebivo. GlaxoSmithKline’s Zeffix is effectively out of the market because of the high rate of patients’ tolerance to it. The sales of Baraclude were 113.5 billion won in 2011 — up 49 percent from a year ago.
Apart from Baraclude’s strength and low incidence of resistance, its fast growth has been helped by the local office’s close cooperation with the government and medical organizations.
While chronic hepatitis B cannot be cured, the national health insurance would reimburse patients for purchase of Baraclude for only a year in the first year of the drug’s launch.
It was extended to two years in the second year and three years in the third year. The drug can be now reimbursed for unlimited period of time.
For delivering information on Baraclude, BMS partnered with the Korean Association for the Studies of the Liver (KASL). It together executed advertisements that called for patients to take blood tests and ultrasound tests every six months to protect their health from hepatitis B.
“There is no secret — a good drug partnering with the government and partnering with the KASL,” said Berry.