DAILY UPDATE

Drugmakers in deal frenzy seek to be first, best or gone

Do a few things, and do them well. That’s the strategy the drug industry is following in a wave of deals where small companies are getting bigger and the big ones are getting smaller. An industry wide recalibration that has been building since 2011 reached a peak this week with a flurry of activity by Pfizer Inc., GlaxoSmithKline Plc and Valeant Pharmaceuticals International Inc.

The biggest drugmakers are reshuffling units to get rid of ones that don’t make them leaders in a particular market, while smaller players are buying competitors to add size, lest they be swallowed up themselves.

That’s the reason drugmakers like London-based Glaxo are quitting the cancer business as Basel, Switzerland-based Novartis AG bulks up. It also may be why New York-based Pfizer, which has a handful of promising oncology drugs, tried to buy AstraZeneca Plc, the London-based drugmaker with a complementary cancer portfolio.

To that end, Novartis agreed to buy Glaxo’s oncology business for as much as $16 billion, to sell Glaxo its vaccines line for as much as $7.1 billion and to sell its animal health business to Eli Lilly & Co. for $5.4 billion. Valeant, meanwhile, announced a bid to buy Allergan Inc. for $45.7 billion, part of its announced strategy to join the ranks of the world’s five biggest drugmakers.

The three-company transaction reflects the busiest period of industry deals since 2009, with $141 billion in pharmaceutical company acquisitions or divestitures over 12 months, according to data compiled by Bloomberg.

The be-first-or-get-out strategy was the justification for Indianapolis-based Lilly’s part of the Novartis-Glaxo deal, said Lilly Chief Executive Officer John Lechleiter. While veterinary medicines weren’t a priority for Novartis, Lilly sought to make them one.

After the deal closes, Lilly will be the second-biggest animal-health company behind Zoetis Inc., Mark Purcell, an analyst with Barclays Plc, said in a note to clients. The same business philosophy is driving dealmaking in human drugs, according to Lechleiter. “You’re seeing companies strengthening areas where they’re already strong and building up critical mass,” he said.

The strategy shift follows a decade of megamergers, including Sanofi’s $74 billion purchase of Aventis SA in 2004, Pfizer’s $64 billion purchase of Wyeth LLC in 2009, and four other deals since 2002 valued at $40 billion or more that consolidated the industry into today’s multinational giants.

Gone are the days when a company with a powerful sales force could go to the market with the third or fourth drug in a class, then force its way into blockbuster sales, said John Boris, an analyst with Atlanta’s Suntrust Banks Inc. That’s the reason for Pfizer’s bid for AstraZeneca, he said: Pfizer needs a deep offering of the best possible cancer drugs.

Pfizer and AstraZeneca are trying to make that transition from a time they used armies of sales representatives to sell broadly used drugs for basic health conditions. Years ago, they “could survive on second- and third-tier assets, based on their marketing muscle,” Boris said in a telephone interview.

Drugmakers can’t do that anymore, and Pfizer may have seen the writing on the wall. Two potential billion-dollar-plus drugs, Eliquis and Xeljanz, have fizzled in their starts. And its top experimental drug, the breast cancer treatment palbociclib, has a potent competitor in Lilly’s bemaciclib.

AstraZeneca’s oncology pipeline has experimental drugs that use the body’s immune system to attack cancers, considered by analysts among the most promising areas for new treatments. Adding them would make Pfizer a powerful player in cancer.

Meanwhile, the small are getting bigger. Generic and specialty drugmakers such as Mylan Inc., Actavis Plc and Valeant have been buying competitors, expanding geographically and using the deals to cut costs. The result is consolidation -- the top three generic-drug makers last year had total sales of copycat drugs that were 23 percent higher than the top three in 2009, according to data compiled by Bloomberg.

Generic-drug makers are also buying up more profitable injectable and brand-name drugs in a bid to grow bigger than rivals. Actavis’s $25 billion deal for Forest Laboratories Inc. will give it a combined market value of about $60 billion, as of yesterday’s share prices. That puts it just behind Lilly. Visit Bloomberg for the report.

Nationwide IV fluid shortage threatens care

Since mid-January, the nurses at the Coastal Cancer Center in Myrtle Beach, South Carolina, have been spending several hours each week tracking down suppliers who can provide the intravenous (IV) solutions necessary for patients scheduled to receive chemotherapy.

If they are unsuccessful, Vijay Paudel, MD, an oncologist at the facility, is faced with the onerous decision of which patients will get their treatments and who will have to wait.

Normally, securing the week’s IV fluids takes the cancer center’s nurses about half an hour, but a nationwide shortage that began in January has made the task a day-to-day or week-to-week challenge for oncology practices, hospitals, and other healthcare facilities across the country. The 2 companies that supply the bulk of the nation’s IV fluids attribute the shortage to increased demand caused by a difficult influenza season. But many in the healthcare industry question whether economic and other factors are the real drivers of the shortage.

Panicked calls from oncology practices having difficulties securing saline prompted Community Oncology Alliance, an advocacy organization, to conduct an online survey of its membership in February, according to Ted Okon, MBA, executive director of the alliance. Of the 66 respondents, most reported having to take steps to avert shortages, and nearly half reported having to adjust the way fluids are used.

Okon said oncology practices are trying everything they can to procure intravenous fluids, including paying excessive amounts for them, using dextrose instead of saline, and breaking down larger bags. Some suppliers that have saline are putting pressure on practices to sign a contract to obtain all of their supplies for a year or to agree to buy other products from them, according to Paudel.

Hospitals are feeling the squeeze, too. A survey of pharmacy directors by the American Society of Health-System Pharmacists (ASHP) in early February found that 76% of US hospitals and other health care facilities were affected by the saline shortage and that shortages of alternatives were also emerging.

More than half reported they were able to meet patient needs by using various strategies to conserve their supply. But 29% of ASHP’s survey respondents said they could not meet all patient needs. Almost two-thirds (64%) of the facilities reported using such alternatives as Lactated Ringer solution or dextrose/sodium chloride solutions. Nearly half (48%) reported changing patients’ doses, nearly a third (29%) reported prioritizing which patients should get saline, and 3% reported delaying treatment for some patients.

“It’s maddeningly frustrating that we don’t have these basics,” said Erin R. Fox, PharmD, director of the Drug Information Service at the University of Utah in Salt Lake City, which tracks drug shortages nationwide. Fox said that although shortages of drugs, particularly sterile injectables, have become common in recent years, it is unheard-of to have a shortage of such a basic supply.

Northwestern Memorial Hospital in Evanston, IL, has so far managed to avoid patient-level effects of the IV fluid shortage, said Gary Noskin, MD, chief medical officer at the hospital. Other recent shortages have affected patient care at Northwestern Memorial or required clinicians to switch to alternatives, Noskin said.

However, a coordinated effort by clinicians, supply chain staff, and the hospital’s pharmacy staff has allowed the facility to manage and conserve the available supply of IV fluids. But the effort, which includes weekly calls to suppliers and daily inventory audits throughout the hospital, has come at a cost of staff time. Noskin estimated since the IV fluid shortage began in January, the cost to the organization by mid-March was about $100 000.

The situation has started clinicians from multiple disciplines talking about the use of IV fluids. “It’s allowed us to systematically evaluate our use of intravenous therapies and determine what is appropriate and what might not be,” Noskin said.

The reasons for the shortage aren’t entirely clear, although both the US Food and Drug Administration (FDA) and the 2 primary US manufacturers of IV fluids put some of the blame on increased demand for fluids, driven in part by the 2013-2014 flu season.

Even so, similar shortages have not arisen during previous and more severe seasons, sparking some skepticism about the current problem. “Why is the supply chain so fragile that it creates a national crisis?” asked Fox.

Some previous shortages of sterile injectables have been caused by quality problems, and recent recalls suggest that Baxter and Hospira have not been immune to these concerns.

“This is all an economic problem,” said Okon. He said changes in the US Centers for Medicare & Medicaid Services’ reimbursement policies for drugs administered in outpatient settings have exacerbated already tight profit margins. Still, manufacturers queried by the GAO did not think that these reimbursement policies were contributing to shortages. Visit JAMA for the report.

Drug Safety Communication for Epidural Corticosteroid Injection

FDA is warning that injection of corticosteroids into the epidural space of the spine may result in rare but serious adverse events, including loss of vision, stroke, paralysis, and death. The injections are given to treat neck and back pain, and radiating pain in the arms and legs. The effectiveness and safety of epidural administration of corticosteroids have not been established, and FDA has not approved corticosteroids for this use.

FDA is requiring the addition of a Warning to the drug labels of injectable corticosteroids to describe these risks. To raise awareness of the risks of epidural corticosteroid injections in the medical community, FDA’s Safe Use Initiative convened a panel of experts, including pain management experts to help define the techniques for such injections which would reduce preventable harm.

The expert panel’s recommendations will be released when they are finalized. FDA will convene an Advisory Committee meeting of external experts in late 2014 to discuss the benefits and risks of epidural corticosteroid injections and to determine if further FDA actions are needed. Read the MedWatch safety alert.

New data signal smaller jump in healthcare costs

Statisticians working with insurers to project next year's insurance premium rates say they expect to see an average increase of about 7%, well below the feared double-digit increases making recent headlines.

"The double-rate increases we've been hearing are probably exaggerated," says Dave Axene, a fellow with the Society of Actuaries, adding that there would be wide variation across the country. "That's not what we're seeing from the actuarial organizations — I guess we're being a little bit more optimistic."

Axene says that as insurers dig through the new health exchange enrollees to figure out their ages and health conditions to determine next year's premiums, he expects an overall increase of 6% to 8.5%. He bases that on work he and others within the society have done with insurance clients. Before the Affordable Care Act, premiums rose an average of 7-10% a year.

Axene warns there could be wide variations in actual costs."In some states, there's a very wide spread between the high rate and the low rate — in Manhattan, it was 2-to-1 — but these are averages," he says.

He's also been able to get an early read on some of the people who have been enrolling, though the March and early-April exchange enrollees' data aren't yet available. The early enrollees tended to be people with "higher morbidity," he says — about 6-8% had higher-than-average healthcare needs. But that had been expected, and probably won't play a large part in next year's premiums.

However, insurance costs are likely to rise more in coming years as reinsurance and risk corridors disappear in 2017. Part of the reduced growth rate could be due to improvements in the healthcare system that will continue to rein in costs over time.

Several new reports also hint at a bend in the health cost curve — even as health spending picks up with the improving economy.

The change after years of large increases in how much healthcare costs seems to be coming for several reasons, the reports find: Americans are using their prescribed medications more often, which may be keeping them out of the hospital; payment systems have begun to reward quality over quantity, which has encouraged a team-based, data-driven approach; and record numbers of medications have been developed to address chronic disease, while older medications have come off their expensive patents.

The findings include a report from the IMS Institute for Healthcare Informatics that found that even as health care spending has rebounded with the economy, the growth rate remains lower than usual. In addition, the Congressional Budget Office (CBO) projected lower health insurance premiums than originally expected.

"Growth in medicine spending remains at historically low levels despite a significant uptick last year, and continues to contribute to the bending of the health care cost curve," says Murray Aitken, executive director of IMS, which provides reports to health companies and creates market forecasts. "We think (the uptick in spending is) a reflection of a stronger economy, more patients with insurance and some relief of pent-up demand for services because of the economic downturn."

IMS found that Americans spent $329.2 billion on healthcare last year — up 3.2% from 2012 and a rebound after spending went down 1% in 2012. The report listed several reasons for the change, including expired medication patents, price increases, higher prices on new medicines and more consumers using the health care system.

The study found that even before the rollout of the Affordable Care Act, consumers shifted to high-deductible plans and paid higher out-of-pocket expenses.

Aitkin says people spent more on drugs and less on follow-up visits and hospitalizations, which could be key to keeping the growth rate low. Health experts have long held that if people can afford — and take — prescribed medications, it may keep them safe from heart attacks or low blood sugar levels, and ultimately keep their overall health costs lower.

Aitkin says 23% of prescription drugs had no co-pays in 2013, mostly because of provisions within the Affordable Care Act, including the one for coverage of contraceptives as preventive medications. Women saved $483 million in out-of-pocket costs in 2013 for contraceptives alone.

And hospitalizations from emergency room visits decreased 14.6%, possibly because consumers were encouraged to try other options first. Prescribing pain medications, probably in response to narcotic addiction, has also gone down.

This week, the CBO downgraded its original premium projections by about 15% lower than projected in the fall of 2009, in part due to "lower projected health care costs for the federal government and the private health sector."

Visit USA Today for the article.

Hospital safety under scrutiny after two nurses wounded in stabbings

Two nurses wounded in two separate attacks at two different Los Angeles County medical centers continued to recover Monday, but their injuries further illustrate the need to improve hospital workplace safety, an association said.

“We can not stand by while nurses, other hospital staff, patients, families, and visitors are put in harm’s way in hospitals that fail to provide the measures that will protect their staff and the community,” said Malinda Markowitz, co-president of the California Nurses Association. “It is time for the Legislature to act.”

The association is backing a bill introduced by Sen. Alex Padilla, D-Pacoima, that would require the state’s Occupational Safety and Health Standards Board to adopt workplace violence prevention plans to protect health care workers from aggressive and violent behavior. The Senate Labor Committee is expected to hold a hearing on the bill on Thursday.

But the California Hospital Association opposes the bill, saying it is unnecessary because current law already requires hospitals to adopt and implement a comprehensive workplace violence prevention plan.

Meanwhile, a spokeswoman for the Los Angeles County Sheriff’s Department said security tapes at one of the entrances at Olive View-UCLA Medical Center in Sylmar would be reviewed and an investigation was ongoing, but no details were released on how 26-year-old Ramiro Carnalla was able to bypass a weapons screening area with a knife early Sunday morning.

Carnalla was arrested on suspicion of stabbing a nurse repeatedly inside the Sylmar hospital. His bail was set at $55,000. Deputies and officers found him after they heard a woman scream and went to the source of the outcry, spokeswoman Lt. Denise Stephenson said in a statement.

Weapon detectors were installed at all Los Angeles County hospitals after a gunman walked into the walk-in clinic at County/USC Medical Center in 1993 and shot up the facility. He wounded three doctors and held two other staff members hostage for four hours.

In a separate incident on Sunday, a second nurse was wounded about seven hours later at Harbor-UCLA Medical Center. Thomas Robert Fredette, 38, of Santee was arrested on suspicion of stabbing a nurse in the ear with a pencil. Visit Los Angeles Daily News for the story.

Syracuse hospital bans e-cigarettes after patient on oxygen catches fire while using one

Syracuse, NY - A Syracuse hospital is warning patients not to use electronic cigarettes after a patient on oxygen caught fire while puffing on one of the devices. Joe Galloway, a Syracuse Fire Department investigator, said the cause of the March 22 fire at St. Joseph's Hospital Health Center has not been determined yet, but he confirmed the patient had an electronic cigarette.

Dr. Sandra Sulik, the hospital's vice president of medical affairs, is convinced an e-cigarette sparked the fire. "There's no doubt about it," she said.

Electronic cigarettes, or e-cigarettes, deliver nicotine or other substances to a user in the form of vapor. The fire investigation at St. Joe's comes at a time when there is growing concern nationally about the safety of e-cigarettes which are not regulated by the government and have been linked to poisonings and fires.

The patient, whose identity was not released by the hospital, was burned across her face from ear to ear, said St. Joe's spokeswoman Kerri Howell. The patient had an e-cigarette in her mouth and was using oxygen when the fire started, Howell said. The patient is now at home doing well, Howell said.

The woman suffered first- and second-degree burns and was transported to the burn unit at Upstate University Hospital, according to Galloway.

Brandon Leonard, a St. Joe's patient safety representative, was in the patient's first-floor room helping her roommate when he heard a loud pop and saw flames through a privacy curtain separating the patients' beds. Leonard, who is also an emergency medical technician, ran to the other side of the room where he saw flames around the patient's nose and fire shooting out of the end of a hose connected to an oxygen outlet in the wall.

E-cigarettes typically contain a rechargeable, battery-operated heating element, a replaceable cartridge filled with liquid nicotine or other chemicals and an atomizer that when heated converts the contents of the cartridge into a vapor. Manufacturers of the smokeless, odorless devices say they can be used almost any place.

Thomas Kiklas, cofounder of the Tobacco Vapor Electronic Cigarette Association, said he's not heard of any cases of e-cigarettes igniting oxygen. Kiklas said there have been a few reports of e-cigarettes exploding. He said those cases involved e-cigarettes that were overcharged or users who put the wrong batteries in them.

Since the fire, St. Joe's has been telling patients e-cigarette use is not allowed. The hospital has a policy that prohibits tobacco use inside its buildings or outdoors on its campus. The policy also prohibits e-cigarette use.

Sulik said some e-cigarette users who have quit smoking regular cigarettes do not consider themselves smokers and assume anti-smoking rules do not apply to them. Sulik said the patient who was burned had quit smoking three years ago, but had not told hospital staff about her e-cigarette use before the fire. The hospital also is making new signs to alert patients, visitors and staff that e-cigarette use is prohibited. Visit Syracuse for the story.

A top hospital opens up to Chinese herbs as medicines

The Cleveland Clinic, one of the country's top hospitals, is a surprising venue for the dispensing of herbs, a practice that is well established in China and other Eastern countries but has yet to make inroads in the U.S. because of a lack of evidence proving their effectiveness.

The herbal clinic, which opened in January, has one herbalist who sees patients on Thursdays. Patients must be referred by a doctor and will be monitored to ensure that there are no drug-herbal interactions or other complications. The herbal clinic is part of the hospital's Center for Integrative Medicine, whose offerings also include acupuncture, holistic psychotherapy and massage therapy.

"Western medicine does acute care phenomenally.… But we're still struggling a bit with our chronic-care patients and this fills in that gap and can be used concurrently," says Melissa Young, an integrative medicine physician at Cleveland Clinic.

While acupuncture programs have sprouted across the U.S., there are only a handful of herbal clinics. Osher Center for Integrative Medicine at Northwestern University and NorthShore University HealthSystem, affiliated with the University of Chicago, both include herbal medicine among their offerings.

Jamie Starkey, lead acupuncturist at the Cleveland Clinic who got the herbal clinic started, says there is little scientific research outside Asia on using herbs as medicine. Ms. Starkey says she had to translate studies to convince the Integrative Medicine's former medical director that an herbal clinic could be effective.

"The evidence base for these approaches using modern rigorous methods of randomized trials is quite thin," says Josephine Briggs, director of the National Center for Complementary and Alternative Medicine, part of the National Institutes of Health. NCCAM is funding research looking at fundamental biological mechanisms of some herbal products. But they are not currently funding any efficacy studies involving humans. Some research is looking at how herbs may affect drug metabolism.

There are thousands of herbs—primarily plant parts but also some animal and mineral products—that are used in traditional Chinese medicine. Herbs are usually used in combinations and can be taken as capsules, tinctures, powders or tea. Herbs can be toxic if taken in the wrong dose.

At the Cleveland Clinic's herbal center, new patients are given a one-hour consultation that may include a battery of questions (How's your sleep? Body temperature? Ringing in your ears? Headaches?), a physical examination of the tongue, and the traditional Chinese method for pulse-taking (three fingers on each wrist to check different pulses corresponding to various organ systems). They are asked to sign a waiver acknowledging that "herbal supplements are not a substitute for a medical diagnosis."

Consultations are $100 and are not covered by insurance. Follow-ups are $60 and a one-month supply of herbal formulas costs on average about $100. On one day at the clinic last month patients had needs ranging from chronic pain to anxiety, digestive issues and multiple sclerosis. Visit the Wall Street Journal for the article.

F.D.A. will propose new regulations for e-cigarettes

The Food and Drug Administration will propose sweeping new rules on Thursday that for the first time would extend its regulatory authority from cigarettes to electronic cigarettes, popular nicotine delivery devices that have grown into a multibillion-dollar business with virtually no federal oversight or protections for American consumers.

The regulatory blueprint, with broad implications for public health, the tobacco industry and the nation’s 42 million smokers, would also cover pipe tobacco and cigars, tobacco products that have long slid under the regulatory radar and whose use has risen sharply in recent years.

The new regulations would ban the sale of e-cigarettes, cigars and pipe tobacco to Americans under 18, and would require that people buying them show photo identification to prove their age, measures already mandated in a number of states. Visit the New York Times for the article.