The market in the US is characterized by strong growth

Orexo’s key market today is the American market for buprenorphine/naloxone products. Orexo operates in the market through the commercialization of ZUBSOLV®, which is an effective drug for people suffering form opioid addiction. Dying from an overdose is one of the most common causes of deaths in the US and in 2017 more than 70,200 Americans died of an overdose, mainly caused by opioids.1 The problem is classified as an epidemic. Several important federal initiatives have been taken to increase access to treatment, and this creates scope for continued strong growth.

 1 Center of Disease Control

Fentanyl is causing an increasing number of deaths in the US opioid epidemic

The opioid problem in the US is on an epidemic level. In 2019 the use of synthetic opioids such as fentanyl caused an increasing number of deaths, while the overall number of overdose deaths declined slightly. There is still a huge need for treatment and in 2019 the dynamic buprenorphine/naloxone market grew by over 14 percent.1

A global problem and an American health crisis

According to the World Drug Report 2019 an increasing number of people are using opioids and collectively the number amounts to approximately 53 million people worldwide. Opioids continue to cause the most harm, accounting for two-thirds of the deaths attributed to drug use disorders.2 The problem exists in both developed countries and in less developed countries but is by far the greatest in the US, where a fifth of those dependent on opi­oids live.3The problem in the US has reached epi­demic proportions, where more than 67,300 died of an overdose in 2018, a slight decrease compar­ing to 2017 when the corresponding number was about 70,200.4 Approximately 70 percent of these deaths were caused by opioid abuse and the num­ber who are dying from stronger synthetic opioids, such as fentanyl, continues to increase.5 In 2017 the opioid crisis in the US was classified as a Public Health Emergency, which means that resources should be allocated to avert or avoid public health crises. In Europe, with an estimated 1.3 million6 high-risk opioid users, opioid addiction is not as great problem as in the US. However, there are sig­nals that synthetic opioids now also play a bigger role in Europe. One in every five of those entering drug treatment for an opioid-related problem now reports a synthetic opioid, rather than heroin, as their main problem drug.7

Opioid abuse costs societies substantial resources

From an economic point of view opioid addiction is a considerable problem. In addition to loss of life and lower quality of life, large costs are associated with lower productivity and a lack of resources, and there are also increased healthcare and cor­rectional treatment costs. In the US, costs related to opioid addiction are enormous and considera­bly higher than previously calculated. The White House Council of Economic Advisors, which is an advisory committee to the American President, estimates that the opioid epidemic cost the US society USD 696 billion in 2018 and more than USD 2.5 trillion, between 2015–2018. This amount is much higher than what some other studies found, which can be explained by growing death toll in recent years and as it includes a broader societal cost of premature death.

Great need for treatment driving strong market growth

A sharp increase in prescription of opioid painkillers over a little more than two decades is the primary reason that today there are an estimated 12 million people abusing opioids in the US.8Approximately 4 million are considered to be in need of treat­ment.9 Of these, approximately 1.4 million receive so-called Medication Assisted Treatment, MAT, where the most common form of treatment is buprenorphine/naloxone, which is given to approxi­mately 1 million.8 The market for buprenorphine/naloxone products has grown substantially in recent years with an annual growth of approxi­mately 14 percent.9 Considerable political and media focus has increased knowledge and aware­ness of opioid dependence and its risks, which has led to more people seeking help. The launch of the Affordable Care Act (ACA) healthcare reform, also known as Obamacare, has also resulted in more people gaining access to subsidized care.

Market consists of three payer segments

The market for the treatment of opioid addiction using buprenorphine/naloxone can be divided into three different payer segments, the public segment, where care is financed by public sector payers such as Managed Medicaid, FFS Medicaid and Medicare Part D. Other segments are the commercial segment, which comprises private insurance companies and the cash segment, where patients themselves finance their care. The public segment differs from the others in that it is to a great extent stringently controlled by insurance companies with regard to what drugs may be prescribed and which physician a patient can choose. Pharmacy Benefit Managers (PBM) play an important role, as they are responsi­ble for assessing, on behalf of the insurance com­panies and employers, which drugs are to be cov­ered by insurances.

Looking at the market from a competitive per­spective based on payers decision to make a prod­uct exclusive reimbursed or not, it can be divided in two segments, preferred formulary businesses or open formulary businesses (read more in the last paragraphs on this page).

Publicly financed care growing fastest

The public segment has grown the fastest in recent years and represents today 53 percent of the mar­ket. The development is driven by the fact that more and more people have gained access to pub­licly financed healthcare through the Affordable Care Act, and due to the fact that employers have become more restrictive in offering private health­care insurances. The commercial segment, repre­senting 35 percent of the market is growing, but not in the same pace as the public segment. The cash segment (12 percent of the market) has dis­played a flat development.

In beginning of 2020 ZUBSOLV® will increase its best-in-class coverage in the commercial segment from 97 to 98 percent. ZUBSOLV’S coverage in the public segment amounts to 36 percent.

Increased generic presence

The market has historically constituted of multiple generics of Subutex® and Suboxone® tablets. In comparison with other pharmaceutical markets, generics have not had a significant price pressure effect. However, generics are favoured by the fact that many insurance companies in the public seg­ment automatically give generics priority and thus indirectly put pressure on companies with new products to lower the price if insurance companies are to deviate from this principle. In beginning of 2019 the generic part of the market increased when four generics on the market leading drug Suboxone® film entered the market. The launch of generics were launches at risk, as the patent dis­putes are still unresolved. The entrance of film generics has primarily impacted Suboxone® film which saw its market share decline significantly. ZUBSOLV® has been impacted by payers open up for more treatment alternatives. Despite the increased presence of generics the list price of generics has been on a par with or a little higher than that of the drugs sold under patent-protected brand names, but recently there have been campaigns from indi­vidual generic companies that have offered dis­counts to pharmacies which have then reduced the price in the cash segment.

Suboxone® film market share amounts to 29.9 percent, a decrease from 65.0 percent by end of 2018. Orexo’s market share for ZUBSOLV® amounts to just over 4.2 percent (5.0) and the corresponding number for BioScience Delivery and their drug, Bunavail®, is approximately 0.2 percent (0.5).10 The remainder of the market is constituted by generic companies.8

Payers open up for more treatment alterna­tives offering opportunities for ZUBSOLV®

The trend in the market is to open up for more treatment options, which is negative for Orexo in the short term but has potential to be positive in the long term. During the first half of 2019, gener­ics were added to the preferred formulary lists by insurance companies previously only offering ® as a preferred alternative. The develop­ment has had a negative impact on the volume in 2019 but there have been a positive impact on the earnings as the rebates are much lower.

The number of exclusive positions for ZUBSOLV® has reduced and only a few minor exclusive posi­tions are left, making ZUBSOLV® less dependent on such positions.

When the payers open up for more treatments ZUBSOLV® can be added to formulary lists which ear­lier have been blocked, by e.g. Indivior or generics. Positive signs in this direction have already been visible as Medicaid in Florida, Ohio, Alabama and Texas have added ZUBSOLV® on their list and on these open formulary lists ZUBSOLV® is growing faster than the market average.

1 IQVIA Data
2 World Drug Report, 2019
3 UNODC World Drug Report 2014
4 Center of Disease Control
5 Center of Disease Control
6 European Drug Report, 2019
7 European Drug Report, 2019
8 Clarion Healthcare
9 IQVIA Data
10 IQVIA Data as of year-end 2019/2020

Global forces increasing abuse of opioids and other drugs

The great increase in prescription painkiller drugs in the past decade has led to more and more Americans abusing opioids. This development is also the result of strong underlying global forces that go beyond tablet abuse and which have led to an explosion in the number of opioids and other drugs available and their abuse.

Social exclusion and mental illness

Developed countries often have a larger percentage of drug consumption. Individuals with a higher socioeconomic status tend to introduce but also facilitate the establishment of illegal drug use.1 However, it is usually socially and economically vulnerable people in these societies that develop an addiction or suffer from physical or mental impairment in connection with their abuse. People living on the fringe of society whose lives are characterized by long-term unemployment, social exclusion and shattered dreams are not seldom a hotbed for extensive drug dependence.

Migration

Flows of refugees can have an impact on the use of drugs. People fleeing from war and conflicts often live under difficult circumstances and often lack a social safety net. Studies demonstrate that people suffering from post traumatic stress and depressions run a greater risk of being introduced to drugs. Being a refugee also means increased exposure to new drugs.2

Trafficking

Drug trafficking

With the spread of globalization, trade barriers have been removed, thus promoting world trade. At the same time, the ability of illegal drug cartels to reach out to more markets has been facilitated, which has led to drug trafficking growing. Increased efficiency of distribution channels and increased competition have also generally led to the lowering of drug prices among users.

Human trafficking

After drugs and weapons, human trafficking is the third largest and most profitable organized crime in the world. In 2012 the International Labour Organization (ILO) estimated that 21 million people were the victims of trafficking.3 This type of crime is one of the most profitable, is growing the fastest and is strongly linked to drug abuse.4

Illegal drug industry

To reduce the risk of unlawful distribution and abuse, the market for drugs classified as narcotics is stringently regulated. At the same time it is estimated that more than 5.5 billion people each year have very little or no access to drugs classified as narcotics for the treatment of moderate or severe pain.5 This development is one of several reasons for the great gains made by the illegal drug industry, which further increases the risk of abuse.

1 World Drug Report 2016
World Drug Report 2016
3 International Labour Organization http://www.ilo.org/global/topics/ forced-labour/lang--en/index.htm
4 U-fold, Uppsala Universitet
5 World Drug Report 2016