Jakafi FDA Approval Triggers Milestone Payment - So Where Does Reimbursement Fit In?

16 Nov 2011 Gustav Ando

Upon yesterday's FDA approval of Incyte Corp's Jakafi (ruxolitinib), the first-ever drug for a debilitating bone marrow condition called myelofibrosis, the biotech firm received a US$10 million payment from drug giant Novartis.

It's perhaps no surprise that Incyte should be rewarded in this way - after all, Jakafi is the first drug of its kind, targeting a new mechanism of action which inhibits the JAK pathway, and its approval from the FDA has been almost uninhibited. In fact the FDA has approved it for a broader indication than Incyte had been looking for, and furthermore the approval comes a good month before it was expected!

Jakafi FDA Approval - Good News All Around, Right?
Well, yes - to an extent. The US$10 million payment is the result of a wide-ranging R&D collaboration deal between Novartis and Incyte, in which the former paid US$150 million upfront and then a US$60 million development milestone. In exchange, the Swiss firm has received European licensing rights for Jakafi. These payments are not unusual - indeed, depending on how future development of the drug goes, Novartis may pay up to around US$1 billion to Incyte as part of this deal.

What's conspicuous from its absence in the deal - and pretty much all similar deals - is any reference to reimbursement decisions. If the last few years have taught us anything, it's that regulatory approvals mean little unless it can be backed up with positive decisions from the payers - particularly in Europe. And payers certainly look at things very differently from the approvals agencies!

But Here's The Problem
While licensing deals often have payments linked to sales milestones - which can act as a sort of proxy to market access - positive/negative reimbursement decisions actually offer a more clear-cut share of the development risk.

Additionally - and more critically - the lack of reference to reimbursement milestones in licensing deals skews the incentives for biotech companies. It makes them overly focused on designing trials for approval…not for reimbursement.

This can have a critical impact on the potential market access for a drug. Sure, it might gain approval, but the payers might not like what they see in the design of a trial.

In particular, the elevated threshold for reimbursement approvals in many markets - where head-to-head trials and/or overall survival endpoints are frequently required - might mean that a drug that was designed for approval still never sees the light of day. Jakafi was 'lucky' in that it had no competition, hence no ability to have a head-to-head trial, and overall survival was not a relevant endpoint.

Will They Pay The Ultimate Price?
The price that Incyte has attached to Jakafi - US$7,000 for a 30-day supply, equating to about US$85,000 a year - raised many eyebrows. It beat (in fact doubled) most market expectations. And once the drug reaches Europe, one has to wonder how reimbursement authorities - the NICE's, HAS's, IQWiG's, AIFA's and TLV's of this world - will feel about a price that is anywhere near that range.


Filter Sort