Experienced Investment Analyst Predicts Non-Opioid Pain Drugs Will Reduce Opioid Abuse and Health Care Costs

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Corey Davis, Ph.D., Managing Director of Equity Research at Seaport Global Securities, has more than 20 years of sell side experience covering just about every therapeutic area within the specialty pharma and biotech sectors. Recently, he has focused on the impact of the opioid epidemic in the US, and the development of non-opioid alternatives for pain.

In analyzing the R&D landscape, Davis says biotech and pharmaceutical companies have an uphill battle in convincing health care providers and insurers to shelve their cheap, effective opioid pain drugs in favor of new, more expensive non-opioid medicines.

A key goal for biotech and pharmaceutical companies, Davis says, is addressing the overall burden to the health care system caused by opioids, not only the tremendous expense associated with addiction, but also the significant financial costs resulting from additional time spent in the hospital after surgery and treatment of debilitating adverse side effects such as sedation, respiratory depression, and constipation. 

Achieving that milestone, Davis says, will require improvements in clinical trial design that take into account the subjective nature of pain and that elucidate not only cost-effectiveness of non-opioids, but also elevate their opioid sparing effect to a primary endpoint – something that will require recognition from the FDA.

Beyond clinical trial design lies the challenge presented by insurance companies, which Davis observes, “have very little incentive to prioritize any new pain drug that would come with a premium price over cheap generic opioids. There have been plenty of news articles citing insurance companies’ refusal to reimburse new branded drugs that carry a lower risk for addiction and other side effects. If that doesn’t change, drugs simply aren’t going to be developed.”

Davis joined Seaport Global in December 2017 from H.C. Wainwright & Co. He also spent two years at Canaccord Genuity, four years at Jefferies, and three years at Natixis Bleichroeder. He began his career in 1997 at Hambrecht & Quist and remained for nine years as the firm became JP Morgan through acquisitions. Davis received a B.A. in Biology from Middlebury College in 1991 and a Ph.D. in Molecular Biology from Princeton University in 1997.

In a recent interview with WuXi AppTec Communications, Davis discussed the substantial progress being made by biotech and pharmaceutical companies developing non-opioid pain medications as well as what’s at stake for patients, and the overall health care system in reducing the risks associated with opioid consumption. WuXi AppTec Communications’ interview with Davis is part of an exclusive series spotlighting the inside perspectives of thought leaders on topics shaping the future of new medicines.

WuXi: Why has the drug industry been slow to develop effective alternatives to opioid pain medications?

Corey Davis: Until recently, there hasn’t been an ultra-sense of urgency to develop alternatives; by recently, I mean in the last five years or so. The opioid epidemic, which is becoming cliché, has taken the media spotlight and it is a huge problem. For that reason, the urgency from a societal standpoint to develop opioid alternatives has become higher. But drugs don’t get developed unless there is financial incentive to do so, and that’s improving.

To answer the question more specifically, there’s probably 10 different reasons. Number one is opioids are pretty good at relieving pain from an efficacy standpoint. They’re terrible on the safety side. But it’s hard to compete with the efficacy of an opioid, and it’s not for lack of trying. Drug companies have looked extensively at alternatives. The Holy Grail would be to develop a drug that had the potency of an opioid with the side effects of a placebo, at the extreme.

But other reasons are that clinical trials are notoriously difficult not only to conduct, but to achieve success, for a bunch of different reasons. There’s a very high placebo rate. The placebo rate in pain trials has been creeping up over the last 10 years, whereas the drug effect arm in pain trials is staying the same. So, the delta between the two becomes more difficult to tease out.

Another reason is that pain, unlike other disease endpoints, is completely subjective. There are no surrogate markers for pain; no biomarkers one can measure. It’s completely dependent on a patient’s rating of their own pain.

There’s also tremendous heterogeneity of different pain conditions, whether you’re thinking about cancer pain, pain caused by inflammation or tissue injury, or neurological pain, migraine pain, irritable bowel syndrome pain or fibromyalgia; each of those carries a different pathophysiology so it’s not necessarily a one size fits all when you’re trying to conduct a clinical trial for pain. You’re seeing a high rate of failure in Phase III, and stepping back, the preclinical models could also be much better, especially compared to other areas.

On top of that, payers and insurance companies have very little incentive to prioritize any new pain drug that would come with a premium price over cheap generic opioids. So this again is reducing the incentive for drug companies. There have been plenty of news articles citing insurance companies’ refusal to reimburse new branded drugs that carry a lower risk for addiction and other side effects.

So, when you put all that together, despite the fact that this is the single largest pharmaceutical volume market out there, there just has not been the type of volume influx you would imagine for new pain drugs. I think that’s changing, but it’s still going to be years before we get there.

WuXi: What are the scientific and regulatory challenges in developing non-opioid medications?

Corey Davis: First I would say it’s probably not in identifying targets. Maybe the known targets are not going to turn out to be druggable targets, but there are plenty of targets out there, at least hypothetical targets for new drugs, such as different ion channels, cannabinoid receptors, NGF (nerve growth factor) and lots of GCPRs (G-protein coupled receptors).

So aside from targets, the second scientific piece we need is to develop better preclinical models  in terms of animal models that are more predictive of these drugs’ behavior in humans because we’ve seen things that work in preclinical trials that simply don’t work in humans and vice versa.

Number three I would say is finding reliable surrogate biomarkers (such as inflammatory signals) would certainly help remove some of the subjectivity from the endpoints used in clinical trials. And number four would be to minimize the placebo response using various tools in clinical trial design, which kind of morphs into the regulatory hurdles and challenges that are part of this question as well.

I touched on regulatory hurdles, but to elaborate on these challenges would be things like the choice of primary endpoints. They are pretty standardized, but they can get better. For example, the FDA seems to be moving more towards preferring a “responder analysis” as the primary endpoint—as opposed to a landmark analysis of mean pain score differences from baseline to endpoint. This can be more informative not only for the agency, but also for clinicians in looking at the percent of patients that can expect an “X” percent change in their pain scores. So, it helps in writing the label, it helps inform clinicians in what their patients can expect if responder analyses are provided.

Other items include adequate powering (of clinical trials) and selecting the right patient population for the desired indication. For example, opioid-experienced patients tend to behave differently than opioid-naïve patients in clinical trials.

And as I mentioned, different types of pain don’t all have the same pathophysiology, so you have to ensure inclusion of the correct patients for the indication you’re seeking—and excluding patients with different forms of pain; and if the indication is simply chronic pain, making sure you use the right model. It’s pretty standard to use procedures such as bunionectomy for acute post-surgical pain, and osteoarthritis or back pain for chronic pain. But careful selection of the correct patient population is critical for both clinical trial success, and on the regulatory front.

WuXi: How will non-opioid drug strategies evolve over the next five to 10 years? Will there be an increase in number of companies entering this field?

Corey Davis: The single biggest thing that spurs development of new drugs is clinical need, and a close second is financial incentive and depending on which publication or study you look at, as much as 10% to 40% of the public suffers from chronic pain. There are more than 250 million prescriptions written for pain drugs every year. As far as I know, that is still the single largest pharmaceutical market in volume terms.

The end user demand is obviously there. People are always going to be in pain, unfortunately, and need to be treated. Therefore, the next important step is insurance companies’ willingness to pay for new drugs, to ensure the financial incentive is intact. As more pressure is levied from the political front – from the societal front – to do more to reimburse at a higher level for drugs that don’t carry all the baggage of opioids, it will increase the incentive for drug companies to move into this field.

In the past 20 years, you’ve seen a lot of reformulations of existing drugs as opposed to new molecules. I think that’s going to change dramatically because these reformulations are really not innovative and there’s plenty of them out there. I do think you’re going to see an influx of companies as long as the demand is there and the financial incentive to get reimbursed for the therapy is approved, everything is going to move in the right direction.

WuXi: How many non-opioid drugs are in development?

Corey Davis: The best source is a publication that came out in February 2018 from the Biotechnology Innovation Organization, “Pain and Addiction Therapeutics.” They’re showing four novel non-opioids at the NDA or BLA stage, 21 in Phase III development, 49 in Phase II and 35 in Phase I, so that’s a pretty high number of late stage compounds that are novel non-opioids.

WuXi: What scientific advances are needed to develop effective non-opioid drugs?

Corey Davis: I don’t think there is a lot of science that we don’t understand, that needs to get elucidated; unlike some of the scientific advances in oncology, for example, where immuno-oncology is exploding. Before that happened, advances needed to be made. That hurdle was met and now we have an explosion in immuno-oncology.

I don’t think we have that remaining hurdle with pain. But some of the science I already mentioned, things like elucidation of more targets; there are targets out there, but we can always find more. One example is CGRPs (calcitonin gene-related peptides) that are fairly new in migraine pain and it looks like some of those will be in the market in the next year or two. That’s been a big advance in the science of identification of the target and the drugs for that class.

The NGF receptor blocker that Pfizer and Eli Lilly and Co. have (tanezumab, which is awaiting final Phase 3 data starting this year from six studies in 7,000 patients) is a good example of a novel target, and the first of a new class of drugs.  The class has been troubled by rare instances of joint damage and peripheral nervous system side effects, so it represents still a high risk, albeit high reward, endeavor.

As I mentioned before, I do think we need better pre-clinical models, but companies and scientists have looked exhaustively at those, so I don’t know if we can hold out hope for that.  I also mentioned better reliable surrogate markers. People have looked for those as well, to no avail. So I’m not sure there is a lot more that can and will be done on the science front to help us bring these new drugs forward.

WuXi: Should there be more incentives for companies to develop non-opioid pain medications? If so, what would you suggest?

Corey Davis:  Yes, we need more incentives. But the financial incentives, it sounds a little cold, are a critical incentive that gets drugs developed. If those aren’t there, history has shown that promising programs never find the necessary investment.

The FDA’s Orphan Drug Act was one of the best pieces of legislation that was ever enacted to ensure that effective therapies are developed for rare diseases. Orphan drugs have been some of the most lucrative for the drug industry, and in many cases, life saving for the patients they treat, and they certainly would never have been developed if those financial incentives didn’t exist.

So there are tools that exist to help companies develop new pain drugs if lawmakers push for creative legislation to help fight the opioid epidemic.  In fact, there are currently an astounding 64 proposed bills kicking around the US Congress within the House of Representatives Energy and Commerce Committee.

To go back to what I said earlier, the pressure that’s being placed on insurance companies to reimburse for new drugs at an equal level for these cheap opioid immediate release drugs, which have been on the market for decades, is what’s really needed. If that doesn’t change, drugs aren’t going to get developed.

There’s a company, Pacira Pharmaceuticals, which has reformulated an old short acting drug, bupivacaine, to create a longer acting version called Exparel. It’s an anesthetic not an analgesic. When you’re comparing a $300 Exparel price tag in a post-surgical setting versus cheap liquid morphine in a pump, the cost of the morphine versus Exparel seems like a no brainer.

But when you consider all the over-arching potential cost saving like getting a patient out of the hospital sooner and getting them ambulatory earlier and avoiding all of the serious risks of opioids from both acute and chronic use, Exparel has been proven to be cost effective because it has a proven opioid sparing effect. It’s a powerful argument that needs to go beyond the level of the hospital pharmacist (whose bonus can be myopically enhanced by cost savings from mandating use of morphine instead of Exparel), and up to the level of C-suite executives that can better appreciate the benefit to the system of opioid-sparing alternatives

These are financial incentives that aren’t immediately apparent, but as drug companies work with policy makers and hospital systems to prove the cost effectiveness of non-opioid alternatives, they are slowly, but surely being recognized.

WuXi: Are there many of these cost-effectiveness studies being conducted?

Corey Davis:  Yes, all the time. But not only cost-effective studies.  If a drug can obtain an opioid sparing claim from the FDA that would be a very powerful tool for drug companies to do more of the cost-effective studies; to prove that reducing opioid consumption in hernia procedures, for example, by 25% would reduce the overall cost of that patient to the hospital by ‘X’.

But those cost-effective studies aren’t always easily conducted and are not always believed by the P&T (Pharmacy and Therapeutic) committees at these hospitals. That’s where the challenge lies. The best first step is to get these opioid sparing claims from the FDA. That’s one area where the agency could be a little bit more lenient, perhaps allow those as primary endpoints. They’re secondary endpoints now, but they’re important endpoints of trials to allow those claims, which would provide the incentive to convince the payers that the effect of the new drug is real.

WuXi: What kinds of partnerships will be needed to bring non-opioid drugs to patients? Is the traditional biotech-pharma partnership model still relevant?

Corey Davis: Yes, the age-old pharma-biotech partnering model still holds true in every therapeutic area. It’s been proven time and again that most innovation occurs at smaller more entrepreneurial companies. I don’t see that changing.

The company, Nektar, for example, has a drug NKTR-181 that is on file with the FDA for chronic pain that is a tweak on traditional opioids and has been shown to have a lower abuse liability.  The company is actively seeking a partner to help commercialize the product, but the magnitude of any future deal is likely going to be contingent upon the success Nektar has in obtaining a US Drug Enforcement Agency Drug Scheduling status better than the standard Schedule II that all opioids have.

Take the company, Cara Therapeutics, which is developing a drug with a code name CR845, a kappa opioid receptor agonist. It has been in late stage trials for both pain and recently pruritus. It’s a perfect example where the oral version of 845 in a Phase II chronic pain study failed to separate from placebo even though it’s pretty clear there is a difference from baseline. But having a strong placebo effect didn’t allow (the trial) to tease out the drug effect. It’s probably not going to be developed any further for chronic pain because what Cara found is a very strong utility in treating the itch associated with kidney disease; and maybe liver disease associated itch and atopic dermatitis associated pruritus.

So here is a pain drug that was being developed for pain, but it didn’t pan out so the company is shifting gears and moving towards this other claim for pruritus. But getting back to partnering, the thing is that for these smaller areas (such as pruritus) Cara doesn’t need a partner. Eventually the company may need a partner to commercialize the drug, but what partners provide are two things.

One, most importantly, is funding. But if you get that funding from venture capitalists or Wall Street, you don’t really need a big pharma partner. Secondly partners provide commercial infrastructure.

Beyond commercial infrastructure what is critically important is the expertise of a commercial person’s influence on the Phase III (trial) design because you need to start to incorporate more than just scientific endpoints in Phase III. In order to become commercially successful in all those things I talked about – getting an opioid sparing claim and doing responder analyses – smaller companies can benefit from having an experienced partner.

WuXi: What biotech companies are taking the lead in developing non-opioid drugs?

Corey Davis: I go back to Cara. That’s one of my favorite stocks. Nektar is another at very late stage.  Pacira with Exparel is another. Heron Therapeutics is also developing an extended release bupivacaine for post-surgical pain that is six years behind Pacira but has some differentiating features. You have Trevena developing a little bit of a twist on the old opioids for post-surgical pain.

You have companies working in the cannabinoid receptor agonist space; a little company named Zynerba Pharmaceuticals that’s moving more towards epilepsy, an orphan condition, and not necessarily pain. The big companies, Pfizer and Lilly have tanezumab for chronic pain. All the CGRP companies -Amgen, Teva Pharmaceuticals, Allergan and Lilly – are developing CGRP drugs for migraine pain.

Then there’s a host of smaller companies that are earlier in development. We’ll see if those pan out. I think it’s too early to draw too many conclusions for some of the smaller companies working on non-opioids just because you really must get a well-controlled Phase II trial completed before you can say with certainty that something’s going to make it.

WuXi: Is there still a place for opioid drugs in treatment of pain, or should they be phased out?

Corey Davis: No, would be my answer to that. I’m sure others would have different answers, those who have had horrible experiences with acquaintances or loved ones who have become addicted to opioids. It’s a very difficult question.

But I think we would be doing a lot of patients a disservice if we across the board eliminated access to opioids. Certainly, it should be more controlled than it is now. The way to do that is to have alternatives available.

Take a terminal cancer patient with incredible pain; to not have access to something like the fentanyl products that are indicated for that would be a horrible way to take this. Pain is not going away and to eliminate the most potent drugs to alleviate pain and suffering not only would not be realistic but also unfair.

The right way to go is to have other alternatives so patients can reduce their opioid consumption and still have effective pain relief. Think about the 16- to 22-year-old kid going in for a sports injury who’s never taken an opioid and gets it for treatment of rotator cuff surgery, or some other surgery, and ends up getting addicted just from a normal medical procedure. Those are the kinds of places where you should try to reduce opioid usage, not completely eliminate the availability of opioids.

WuXi: How will non-opioid drugs affect the health care system? Will there be a substantial cost savings?

Corey Davis: A short-sighted view of somebody reviewing the cost of a new drug versus the cost of an old, highly genericized drug, is obvious; there is no cost savings.

In fact, it can be the exact opposite, depending on the advantages any new product offers. And that’s the hurdle many of these companies need to get over. Cheap opioid generics are hard to beat, especially because they are fairly efficacious. But when you look at the overall burden to the health care system, not only of opioid abuse, there are tremendous savings that can be placed in three buckets: direct healthcare; workplace; and the criminal justice system.

These include direct health care items like a reduction in the number of days spent in the hospital after a surgical procedure, in treating side effects associated with opioids like respiratory depression, sedation and falls, and constipation, and for hospital admissions due to overdose.

Then in the workplace bucket are the lost work days and loss of productivity due to treatment or addiction.  Lastly, the costs of opioid addiction to the criminal justice system are astronomical, yet difficult to quantify.

As an aside, opioid-induced constipation is a new FDA-approved indication that’s just popped up as being fairly lucrative and that tells you right there that for something as simple as constipation there’s a whole new class of drugs for treating a side effect of opioids. So if you avoided opioids you wouldn’t have had to pay for those drugs to treat the constipation.

Doctor visits and hospital admissions are by far a big chunk of health care spending. If you can reduce those two things by developing more effective pain treatments, you save the system substantial money. But the people who are reimbursing for drugs don’t always think that way. Therein lies the challenge.

The answer to the direct question is yes, there will absolutely be substantial costs saving, but it needs to be viewed in a holistic way in the entire system.

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