By Doug Roe, Chief Editor
Unless you have been off the grid the last several months, you have undoubtedly read about the travails of pharmaceutical companies trying to break into the estimated $1.3 billion epinephrine auto injector market. Mylan and its EpiPen have the dominant market share and, due to recent events, many experts are projecting that dominance could reach well over 90 percent in 2016-17.
In October, drug giant Sanofi issued a voluntary recall of its newly released smart device, the Auvi-Q. The Auvi-Q was considered med device innovation; its smaller size and talking instruction were winning favor with users. At the time, it was deemed the first real competitor to the EpiPen. Unfortunately, as with most innovations, some technical problems surfaced. In its recall announcement, the FDA stated that Auvi-Q “products have been found to potentially have inaccurate dosage delivery, which may include failure to deliver the drug,” which could create potentially life-threatening situations for patients needing timely emergency treatment of severe allergic reactions.
Most recently, in February, the FDA rejected Teva Pharmaceutical’s generic version of the EpiPen, citing “certain major deficiencies” in Teva’s application. The decision will likely delay a market release until late 2017, or beyond.
So what does it take to overcome the delivery device challenges related to this market opportunity? Med Device Online recently had a chance to discuss the topic with Chris Stepanian, CEO of medtech startup Windgap Medical. Stepanian shared his views on those issues and detailed his company’s plan to evolve auto injector device technology.
Med Device Online: Why did you select such a challenging market (epinephrine) — with a dominant and well-entrenched leader and generic equivalents on the horizon — for your first product? What opportunity did you identify?
Chris Stepanian: Brent Buchine and I are two of the company founders. Brent’s background is in MEMS (micro-electromechanical systems), microfluidics, and advanced material technologies. He has done a fair amount of consulting for companies looking to scale up microfluidics. I have a varied background in advanced materials, but a fair amount of business experience, and definitely a deep respect for feedback from the customer.
That is where we started. We did not know if there was a huge market opportunity here, but we began by trying to figure out what the customer need was. We did not want to develop a hammer and then stand around looking for a nail. What we wanted to do is start with the nail — to really understand the need — and if there was a powerful one, to come up with a technology that would satisfy that need.
Things just came together: Brent and I were introduced, and the idea of using fluidics technology to try and create consistent, rapid reconstitution of a dry drug product came from some of those initial conversations. We started with discussions with the patients, figuring out the portability, stability, and ease-of-use requirements. We talked to allergists; they were very interested in patient compliance — how to enable the patient to have the device with them at all times, and to make sure that it was potent and was used properly at time of need. We came to understand that the opportunity was sizeable, and it was growing rapidly.
MDO: How have you evaluated new entrants’ history of failure in this market?
Stepanian: Mylan [maker of the EpiPen] has done a brilliant job marketing to patients. They have grown the market, both in terms of units and overall revenue. Entrants that have tried to come in have largely failed. I think Twinject (discontinued March 30, 2012) is a notable one. Reports were it was less reliable than what a lot of allergists felt comfortable with, so rollout for the product was hindered.
Auvi-Q came in with great fanfare, and Sanofi is a powerful commercialization partner. In the first year, they surprisingly captured about 7 percent of the market, which for a branded product was tremendous. Of course, that was before its recall due to performance issues.
Mylan has also done a very effective job making caregivers/providers feel quite comfortable with the EpiPen. For that reason, there is a tendency to try and convince (their) patients to stay with the product they already know and trust. In my opinion, that has helped to blunt the introduction of some new products.
MDO: Are there additional factors you see impacting entry?
Stepanian: Mylan has continued to really dominate in this space, but you need to add another stakeholder to this discussion: the payers. Payers are very concerned about patient health, as well as their bottom line. You need to show them a path to lower the cost of overall care, and better yet, lower direct product costs. If you are not presenting them with a device that shows a clear path to cost savings — a me-too product, for example — they are generally less inclined to approve it.
Auvi-Q came in at a higher price point and with a bit shorter shelf life than EpiPen. And payers — at least on initial rollout — were not reimbursing it as well. It was interesting to see Auvi-Q’s initial rapid growth, but a lot of that growth was proven to come from end-users directly paying for the product. We have an investor whose child has significant allergies. She went to her insurance company and found out that Auvi-Q was a tier 3 product. Essentially, they said, “Since you don’t have a driving need for this talking feature, we are not going to reimburse it at all. If you want to get the EpiPen, we will reimburse you for that. We are happy to give you a tier 2 copay, but we are not going to allow the tier 3 copay — if you want to buy it, it is out of your pocket.”
That’s a pretty big disincentive, and the data we have seen has shown that a lot of Auvi-Q prescriptions, at least initially, were going unfilled because patients would go to the pharmacist and get denied. That is a real inhibitor to growth.
We think we have come up with something that will appeal to all three parties: the patients, the providers, and the payers. In today’s healthcare reality, that is what you need to keep in mind when you are developing a new product.
MDO: Considering the effect you’ve described — that payers have on a product’s rollout success — will you target a price point more comparable to EpiPen?
Stepanian: We really have not nailed down our pricing, but I can give you a for-instance. Our shelf life is twice that of existing products, so if our price also is twice as much then, arguably, that is pricing parity. Remember, the vast majority of these devices are thrown away unused.
One could say that we are taking some costs out of the overall administrative system, because patients do not have to go back each year to get another prescription for a Windgap medical device. Now, if you provide a product cost that is lower than 2X — perhaps 1.75X or 1.5X — that is effectively a real cost savings to the payer and to the patient.
Based on conversations that we have had with patients, many of whom are buying their device out-of-pocket, that approach has appeal. They understand that logic. What is going to happen once we are allowed to market our product actively? We will find out. But it is encouraging. We believe we have a path to provide our patients and our payers with a lower cost of ownership.
In the second half of this two-part series, Windgap Medical CEO Chris Stepanian discusses his company's device and its development process in greater detail, as well as offers a peek behind the curtain at Windgap's down-the-road plans.