Payer pressure has been squeezing diabetes drugs, leading to some major sales difficulties and layoff rounds. As Bernstein analyst Wimal Kapadia observes, things are on the mend in terms of 2019 formulary coverage, but one drug could "disrupt them all."

Most diabetes drug classes "fared much better than we would have anticipated," Kapadia wrote in a Tuesday report to clients. Other than fast-acting insulins, all classes saw an uptick in 2019 formulary coverage, he said.

Novo’s Tresiba is driving a coverage improvement for the basal insulin class, Eli Lilly and Novo are competing in the GLP-1 field, and Merck & Co.’s Januvia and Lilly and Boehringer Ingelheim’s Jardiance are winners in their respective DPP-4 and SGLT2 arenas. But Novo’s oral semaglutide could put pressure on all of them, Kapadia contended.

Oral semaglutide will touch on both the branded orals and the injectable GLP-1s and therefore holds power to shake up the coverage landscape. "The payers' ability to use it as a tool to squeeze in the branded orals and injectable GLP-1s will likely come down to price," the Bernstein analyst said.

If Novo prices the drug at a small premium to existing orals, payers might use it to drive down other drugs’ costs given its superior efficacy profile. Or, if the drug comes at a high price, Kapadia said he expects "step edits," where patients will be required to go through cheaper SGLT2s or DPP-4s before moving up to oral semaglutide.

Novo has amassed a large pool of late-stage data for its megablockbuster hopeful. Across the Pioneer trials, oral semaglutide proved better at reducing blood sugar and helping patients lose weight, even when it was pitted against Januvia and Jardiance, or in some cases, against Novo's own Victoza and Lilly’s GLP-1 rival Trulicity. It has already turned up cardiovascular outcomes data, showing it could cut CV-related death versus placebo.

The Danish diabetes giant had bought a priority review voucher with an eye on an earlier nod, executives revealed during its fourth-quarter earnings call in early February. That could mean a potential approval by the end of the year, ODDO BHF analysts have previously said.

Currently, Novo’s Victoza and Ozempic and Lilly’s Trulicity account for about 86% of GLP-1 volumes, according to Kapadia. Coverage has increased across the board for them—Victoza, plus 8%, Ozempic, up 58%, and Trulicity, 5%—and even AstraZeneca’s extended-release Bydureon BCise saw coverage grow 4% as the British drugmaker shifts patients to the easier-to-use version. It is a remarkable phenomenon "for a class that is the most expensive amongst diabetes products," the Bernstein analyst noted.

Even though Trulicity still holds the top spot for the second year running with a coverage ratio of 84%, including almost all patients across commercial and 70% in the highest quality tier of Medicare Part D plans, those that allow only Trulicity have decreased, Kapadia noted.

Pricing pressure and cut-throat competition has yet to spread to the GLP-1 franchise at least from a coverage perspective. The "duopoly" is working well for now, as Ozempic’s expansion hasn’t disrupted Trulicity in any major way, but 2020 might be a different story, Kapadia figured.

"With consecutive years of coverage expansion for the class, we would be very surprised if we did not see some tightening in 2020," he said. Victoza is benefiting from a CV risk-reduction nod in 2017. But last November, Trulicity got its own CV data. In the Rewind study, the Lilly GLP-1 reduced a combined rate of heart attack, stroke and CV death compared with placebo. Because just over 30% of participants had established CV disease, Credit Suisse analyst Vamil Divan at that time argued the data could help Trulicity distinguish from other drugs. Meanwhile, Ozempic is also looking to get pooled CV data onto its label. Both will file ahead of contracting season, Kapadia said.

With all the data Lilly and Novo rolled out to differentiate their products, Kapadia said payers will likely become pickier. "Our take is that payers will almost certainly try to push the market toward a single award," he wrote. "We suspect that it will come down to price to ensure decent coverage."

Elsewhere in the diabetes landscape, Tresiba saw its coverage ratio rise 16%, the largest change in the basal insulin category, and it's now just slightly smaller than Novo’s Levemir. Coverage for fast-acting insulins, including Novolog and Lilly's Humalog, largely stood still in 2019. Within the stable DPP-4 class, Januvia grew 7%. As for SGLT2s, Kapadia noted a significant change in 2019, when Jardiance’s 19% growth came at the expense of Johnson & Johnson's Invokana. The two drugs were at the same level in 2018.

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