PracticalDermatology

The dermatology pharmaceutical landscape is shifting. With a spate of mergers and acquisitions, the emergence of new players, and the departure of others, perhaps only one common descriptor applies to the rate and extent of the recent developments: unprecedented.

Steve Clark, a veteran of the dermatology pharmaceutical industry, has worked for several leading companies over the years. Currently Worldwide Chairman of Dermatology of Coria Laboratories, a Division of Valeant Pharmaceuticals North America, Mr. Clark observes that there have been changes in the dermatology market in the past. “Throughout my career I've seen industry go through many cycles. Big pharma companies have come and gone in dermatology. This was brought on by companies researching and developing a drug for a non-dermatological indication and through serendipity finding compounds that work in dermatological applications,” he says.

“There have been start-up companies in dermatology that didn't make it or were acquired by another company. However, what we have seen in the last several years is a dramatic change as the number of companies in dermatology has been narrowed through acquisition and consolidation.”

Dramatic in their own right, recent changes in the dermatology pharmaceutical industry landscape may be particularly noteworthy given the relative inactivity of medical dermatology companies in recent years as signified by a dearth of new drug approvals over the past several years. “The pharmaceutical industry hasn't really come up with much new from an NCE [new chemical entity] perspective in dermatology,” observes Jeff Wayne, an almost 30-year veteran of the dermatology pharmaceutical industry and current Vice President of Sales and Marketing for Promius Pharma. A relative newcomer to the dermatology space, Promius Pharma is a subsidiary of Dr. Reddy's, a global corporation involved in the manufacture of drug ingredients, marketing generic formulations, and developing and marketing proprietary products. According to Mr. Wayne, Dr. Reddy's had a strategic goal to develop branded specialty products, particularly in the dermatology space. It acquired a dermatology pipeline from Trigenesis Therapeutics, Inc. in 2004.

The changes in industry have come relatively quickly, and the long-term repercussions are largely unknown. To help dermatologists understand the shifting landscape, we went right to the source and asked industry to provide its take on the changes and future trends.

The US Dermatology Market is Attractive
Of all the changes that have taken place, perhaps the largest was the acquisition of 162-year-old Stiefel by GlaxoSmithKline (GSK), a move that brought the world's second largest pharmaceutical company fully into the dermatology marketplace. Prior to the acquisition, completed last July, GSK had two dermatology products. Now the company has Stiefel's entire product portfolio and hopes to bring new treatments and skincare products to market.

According to William (Bill) Humphries, president of Dermatology for Stiefel, a GSK company, Sitefel's 162-year history is “an enduring part of what we're bringing forward” following the acquisition. Stiefel, a GSK company, will continue to emphasize existing product brands and technologies, such as VersaFoam while investing in identification of new chemical entities. Prospects for further worldwide expansion loom. Mr. Humphries says the company expects to expand in the BRICMT (Brazil, Russia, India, China, Mexico, Turkey) and Japan markets. Valeant says it also seeks to expand from its US foundation into global markets.

If nothing else, recent developments in the marketplace indicate that dermatology is an attractive area for pharmaceutical companies. This is true on a global scale and specifically within the US. Consider the case of Leo Pharma, a global dermatology company that recently launched its US operations. The more than 100-year-old company that developed Dovonex (calcipotriene) and Taclonex (calcipotriene 0.005% and betamethasone dipropionate 0.064%) and marketed them worldwide had licensed the products in the US. Last year, Leo announced it would re-acquire marketing rights to its dermatology franchise from Warner-Chilcott, and in January it launched US operations.

Establishing US operations is a, “Cornerstone of Leo's global growth strategy,” says John V. Koconis, CEO of Leo Pharma. “The US is a leading market in the world.” Part of US importance is due to the world-wide prominence of American thought leaders, he says. Furthermore, he suggests, the FDA's rigorous approval process—sometimes decried by critics as too stringent—is actually an attractive feature for dedicated pharmaceutical companies. While he is careful to avoid suggesting that the FDA's requirement are “more stringent” or in any way superior to those of other regulatory bodies, Mr. Koconis acknowledges that bodies often require different types of information, and meeting FDA's “rigorous” requirements helps provide a full portfolio of data to support the safety and efficacy of a new drug.

One growing area of interest for the FDA appears to be the quality of life impact of therapy, Mr. Koconis says. The decision to approve isn't based solely on efficacy. “You need to be able to show value and quality of life for the patient,” he says.

For both newcomers and established companies, the shifting landscape may present opportunities to refocus. “The medical dermatology industry is constantly evolving with new companies and products entering the market, which only helps us to sharpen our thinking, look at new partnership and product opportunities to progress not only what Allergan can achieve from a business perspective, but how we can collectively grow the market to broaden access to cosmetic and medical dermatology products to consumers across the world,” observes Cathy Taylor, Senior Manager, Corporate Communications at Allergan, Inc. She notes that the company's 2008 acquisition of Aczone—at the time the first new chemical entity approved for acne treatment in the last 10 years—“provided us with an invaluable opportunity to provide access to a novel treatment to patients in the United States.”

Another attractive feature of the US dermatology market is its size. “You don't need a huge sales force,” to effectively serve this market, Mr. Wayne points out. Furthermore, dermatology is a unique specialty, says Rajiv De Silva, COO, Specialty Pharmaceuticals for Valeant, because it is “one of the few where there still is a pretty viable relationship between industry and the professionals.” Last year, Valeant, which had previously marketed the Kinerase cosmeceutical line and Efudex (fluorouracil) in the US, acquired Coria Laboratories and Dow Pharmaceuticals.

The Size Debate
“The cost of developing a drug today is extraordinary compared to what it was even two to three years ago,” Mr. Clark says. “For example, our development costs for Atralin was $38 million and Acanya was $43 million. The FDA keeps raising the bar on proving safety and efficacy. Not only does this cost more, but it requires more time, which reduces a drug's patent life, which gives companies a shorter time to generate a reasonable return on investment.”

Mr. Clark also points out that once a drug goes off patent, “the speed with which generics come into the market and are electronically linked to the branded product to be substituted has increased significantly.”

Plus, companies shoulder the investment needed to get on managed care formularies, which can be in the range of 20-30 percent of the selling price of the drug, he says, plus the time invested in those negotiations.

“Since 2005, the percentage of generic prescriptions in dermatology has grown from 58 to almost 70 percent. However, the innovation of new treatments comes from branded pharmaceutical manufacturers,” observes François Fournier, President of Galderma LP. “We have no problem with the use of generics, as long as rules allowing fair competition are applied consistently across the board to both brands and generics.”

Yet in the current environment, “Dermatologists are forced to select from therapies that may not meet the formulation or topical vehicle considerations they feel are best for the individual patient,” Mr. Fournier notes.

The challenge of developing NCEs in dermatology is that they take as much time and money to develop as any other drugs, but compared to indications such as cardiovascular health and hypertension, the revenues are significantly lower, Mr. Wayne points out. At larger pharmaceutical companies focused on these more lucrative disease states, investments in R&D are more likely to support those areas, and dermatology may need to fight for research dollars, he suggests. By contrast, smaller, specialty focused companies can concentrate their research and development focus on dermatology.

Noting that Promius is investing in R&D in dermatology, Mr. Wayne adds that the company continues to investigate opportunities to in-license, comarket, and co-promote therapies. He says a benefit of smaller, specialty companies is that they may have the flexibility to acquire and promote products that may not fit the portfolios of larger, multispecialty companies—especially those that are streamlining operations.

Specialty companies tend to see benefits of their unique focus. “In the dermatology market, where we are seeing ‘big” and ‘large' players enter the industry, Allergan plays a unique role,” Ms. Taylor says. “We are a specialty pharmaceutical company, so we can be nimble with how we operate and have a deep focus in our expertise, but at the same time have the global resources to be able to continue to be a strong player in this ever-changing market.”

Still, larger players tout the benefits of their resources. GSK currently investigates 65 million molecules per year in respiratory, neurology, urology, and other disease areas, according to Mr. Humphries, and there is now investment in a dedicated R&D program in dermatology. It's the combined benefit of GSK's overall resources and the dermatology- specific programs, that may yield therapeutic innovations, he suggests. “My own opinion is that a lot of dermatology drugs are found as part of a discovery project,” Mr. Humphries says.

The Trends
Disease States of Interest. Mr. Koconis says that Leo is focused on identifying new therapies developed to meet a range of needs. Noting that the emergence of the biologics for psoriasis has introduced a higher level of scientific rigor and sophistication to therapeutic selection, he says his company will be “Looking much more into the science, compliance, newer targets, newer therapies…a lot of innovation in the dermatology space.” And, he adds, “Only committed players are staying.” He also promises significant investment of resources into R&D.

Expect future developments in psoriasis and eczema, disease states that both Leo and Stiefel say they are focused on. Leo is continuing development in the AK area, while Stiefel says it will also continue to focus on acne/antibiotics and antifungal development. Galderma's research focus also includes these areas. The company says it continues to focus on acne, skin cancers, psoriasis and steroid-responsive dermatoses, pigmentation disorders, rosacea, onychomycosis and medical solutions for skin senescence.

Ortho Dermatologics is a new name but certainly not a new presence in dermatology. The 30-year-old company changed its name from OrthoNeutrogena just over a year ago to “underscore our devotion to the future of medical dermatology and aesthetic medicine,” according to a statement. Ortho Dermatologics has said it remains dedicated to acne, antifungals, post-procedure care, and aesthetic medicine.

Mr. Wayne says that Promius is focused on several areas, including psoriasis, acne, and onychomycosis.

Reformulations. Despite attention to finding NCEs, the recent trend of reformulating is likely to continue, as technological advancements permit the development of more patient-friendly and effective topical therapies. This trend is fueled by demand from patients and prescribers as well as by economic pressures, Mr. De Silva says. And the potential to develop new formulations persists. Costs to bring a new chemical entity to market can be staggering, he notes, and recouping those costs can be difficult in the dermatology space. Nonetheless, he says that Valeant continues to invest in R&D and is open to working with smaller companies that may have identified drug candidates to bring those candidates to market.

“There's a saying that GPs treat patients and specialists treat diseases…with the exception of dermatology,” Mr. De Silva says. As such, dermatologists are interested in new, patient-friendly formulations, he observes.

Medical Aesthetics. Medical aesthetics represents an opportunity for development, but not necessarily in terms of toxins and fillers, according to Mr. Humphries. Development in this area could include, for example, treatments for alopecia or hyperhidrosis.

Consumer Dermatology. Both Stiefel and Valeant foresee opportunities in the realm of consumer dermatology. Stiefel offers various consumer products and plans to enrich and augment these offerings. Consumer dermatology represents the third pillar of Stiefel's growth plan, along with prescription drug development and medical aesthetics, according to Mr. Humphries.

Valeant also intends to expand its cosmeceutical offerings and enhance physician dispensing. “We do see value in the dispensing side of what dermatologists do,” Mr. De Silva says, adding that the company will implement programs to support dermatologists in this role.

Physician Support. “Our goal is to make the lives of dermatologists simpler,” Mr. De Silva says. As such, Coria will continue to provide rebates and co-pay assistance to “make it easier for dermatologists to prescribe products.” The rebate trend continues to grow among dermatology pharmaceutical companies. Mr. De Silva says that Coria/Valeant is dedicated to developing a topnotch detailing force, so that reps “are business partners with physicians.”

On the heels of the Annual AAD meeting where Leo had its first official presence as a US company, Mr. Koconis said he was gratified to meet dermatologists one-on-one. “It's important to maintain and keep a high level of interaction with dermatologists,” he says, “It allows us to delve much more into science how can we help patients holistically.”

Yet changes are inevitable within the celebrated industry/physician relationship that has been a hallmark of dermatology. “The pharmaceutical industry as a whole is evaluating how it interacts with prescribers,” Mr. Wayne says, noting that face-to-face time with prescribers is limited, and there are increasing pressures from managed care that limit access to branded products. There are concerns industry-wide about how much access patients will have to branded drugs and how much physician prescribing may be dictated by managed care.

“We encourage and rely on support of physicians to help us work with managed care organizations and help us ensure patients have access to medications and physicians can prescribe what they think is appropriate,” Mr. Wayne says. “We are 100 percent committed to supporting the specialty.”

For its part, industry must provide the evidence that particular products provide a benefit to patients in order to allow prescribers to build a strong, “scientific argument,” in support of specific therapies, Mr. Wayne suggests. “The onus is on us to provide them the information they need to make that argument.”

Physicians seem to embrace this emphasis on science and patient benefit, but some worry about possible reduction in industry support for education and other programs. “Dermatologists associated with various societies are concerned with the down-sizing of the number of companies and reduced support for the specialty in the future,” observes Mr. Clark.

For it's part, Galderma also says it remains committed to supporting dermatology education and providing support to clinicians.

One of the first and a very notable change that emerged with the acquisition of Stiefel by GSK was a new standardized approach to CME and industry support. In order to “enhance the level of transparency and openness,” Mr. Humphries says the company has implemented standard policies for CME support, including a decision to work with select CME providers. In response to concerns raised by some dermatologists, he assures that the company remains committed to supporting education and the specialty. Although it does not provide grant support to for-profit meetings, Stiefel, a GSK company, plans to have a presence at these meetings through exhibit hall participation.

Challenges Ahead
Managed Care/Healthcare Reform. Mr. Koconis predicts that growing pressures from payers may make it even harder for patients to get access to drugs. However, in the long-term he hopes that physicians, industry, payers, and patients will find successful strategies to manage costs.

Healthcare reform and the growing influence of managed care mean changes for the specialty, Mr. Wayne agrees. “The healthcare environment is changing and we need to change along with it,” he asserts. “We need to all stay committed to helping the specialty” by providing useful products that provide benefits to patients and have the scientific evidence to support those benefits.

The Workforce. Mr. Clark notes ongoing concerns about the dermatology workforce in America. “I believe this is a major problem when you consider a higher percentage of dermatologists going into practice today are emphasizing cosmetic dermatology,” he says. “Physician extenders have been a welcome addition but there is still an ongoing need to train more dermatologists to provide care.”

Mr. Fournier also points to changes in dermatology care delivery. “Only about one third of dermatology diagnoses now take place in a dermatologists office,” he says. “This tells us that patients are seeking treatment from other doctors and even in places such as retail clinics.”

Further Consolidation? In terms of changes in the future, Mr. Clark foresees ongoing changes in healthcare as it relates to reimbursement. He adds, “I see fewer companies coming into dermatology unless they have new technology that offers better treatment, and unfortunately I see companies having reduced access to dermatologists. This has already happened in residency programs and I see this as unfortunate in that I believe companies can bring value to dermatologists in training.”

As for the dermatology pharmaceutical market, Mr. Koconis anticipates less dedicated companies may disappear but he predicts, “the market will grow even if the number of players consolidates. There are going to be positive developments.” But he admits that achieving those ends may be difficult at times.

Blue Skies Ahead?
“I do believe that if industry works together with dermatology, we see blue skies ahead,” Mr. Fournier says. He suggests the following guiding principles for success:

• Dermatologists need to remain the experts in skin care.
• Dermatologists need to better organize within their national, state and local societies to maintain better prescribing control of the best treatments for their patients.
• Dermatology companies must continue to innovate.
• It's all about the patient.