Labopharm's Oleptro could face reimbursement hurdles as company engages in partnership talks

Labopharm's (NASDAQ:DDSS) Oleptro (Trazodone Contramid) may face reimbursement hurdles in the US since managed care companies are reluctant to pay for alternative formulations of generics, experts noted. Oleptro, a new slow release formulation of trazodone, gained FDA approval recently for major depressive disorder (MDD).

A consultant close to the situation noted that it will be difficult for Labopharm to obtain widespread reimbursement for the new formulation of Oleptro. "In reality it is no more effective than marketed antidepressants, and it will only hold exclusivity rights for three years," the consultant said.

Dr Richard Shelton, a psychiatrist at Vanderbilt University Medical Center, agreed that it may be difficult to for Labopharm to gain reimbursement for Oleptro. Managed care companies tend not to pay for alternative formulations, an increasing trend within the past year, particularly with slow release formulations of agents, he noted.

Yet James Howard-Tripp, Labopharm's CEO, said that he is confident Oleptro will be reimbursed as a third-tier treatment and believes that once marketed the company will be able to "pull this forward". Labopharm has been engaged in "good" discussions with payors, he noted, adding that Oleptro will be used for a different indication than the generic version of trazodone that is currently being used.

Dr Ripu Jindal, an assistant professor of psychiatry at the University of Ottawa, noted that the generic version of trazodone was originally approved to treat depression; however, the side effect of excessive day time sleepiness has led it to be used off-label to treat sleep disturbance.

When asked about the possible reason for Labopharm’s 14% fall in share price, from the close of trading on the day of approval to close of trading yesterday, one analyst noted that this was likely to be due to investors taking a closer look at Oleptro’s post-approval potential and examining the commercialization and marketing hurdles it may face.

Two analysts agreed that if Oleptro gains reimbursement status it will likely be a third-tier drug. The analysts agreed that typically this involves a significant co-pay agreement, increasing competition in relation to generics.

Jim Lawson, an insurance broker with Lawson Financial, explained that the first-tier of a formularly typically includes generics, the second tier includes preferred drugs reimbursed with the most favorable co-pay, and the third-tier includes drugs that are non-preferred and are reimbursed with higher co-pays or with conditions, such as step therapy.

HOWEVER, DR DAVID SACK, A PSYCHIATRIST AT PROMISES TREATMENT CENTERS IN CALIFORNIA, SAID THAT IT IS "VERY LIKELY" THAT OLEPTRO WILL BE REIMBURSED. HE EXPLAINED THAT ANTIDEPRESSANTS ARE COSTLY TREATMENTS, AND INSURERS HAVE NOT BEEN THAT SUCCESSFUL IN ENCOURAGING THE THERAPEUTIC SUBSTITUTION OF GENERICS. HE NOTED THAT DESPITE LUNDBECK’S (CPH: LUN) CITALOPRAM PATENT EXPIRATION, THE GENERIC VERSION HAS NOT REPLACED PRESCRIPTIONS. RATHER, THE COMPANY'S COMPOUND LEXAPRO (ESCITALOPRAM), APPROVED IN 2006, IS NOW PRESCRIBED. THE PATENT FOR ESCITALOPRAM EXPIRES IN 2012.

According to Dr David Sheehan, professor of psychiatry at the University of South Florida College of Medicine, Oleptro allows a physician to adjust the dose to antidepressant levels that are just as effective as currently marketed antidepressants.

Sheehan noted that Oleptro would be ideal for MDD patients experiencing sleep trouble since trazodone is already used to treat patients with sleep problems. "Oleptro will be a welcome alternative for patients who do not respond well to agents such as fluoxetine, and don’t want to be wired and jittery," he said.

Additionally, Oleptro is not associated with sexual dysfunction, a side effect that is commonly experienced with other selective serotonin reuptake inhibitors (SSRIs), Sheehan added.

Howard-Tripp noted that the benefit of providing a treatment option for MDD that treats sleep disturbance and does not cause sexual dysfunction will increase the likelihood of adherence, making Oleptro an attractive alternative to existing treatments. However, Shelton, noted that Oleptro is unlikely to make a "big dent in the marketplace."

Howard-Tripp said Labopharm is currently in active partnering discussions for a US-specific deal. Labopharm would prefer a co-promotion deal and is working towards securing a deal ahead of launch, he noted. He explained the company has done very well in previous deals where Labopharm has been intimately involved in promotion of the product, adding that Labopharm would be more interested in a profit split than in royalties. Labopharm has an existing partnership for Oleptro with Angelini Pharmaceuticals in Europe and Japan.

The first analyst noted that a co-promotion deal with a profit split may not be the most desirable situation. Labopharm’s currently marketed drug Rizolt (tramadol) has seen disappointing sales, the analyst added. It may be more favorable for the company to gain a large upfront payment for Oleptro, both analysts agreed.

Labopharm is currently developing its capability to commercialize products itself, Howard-Tripp noted. The company’s pipeline includes the a tramadol-acetaminophen combination formulation currently in Phase III trials. Howard-Tripp said there is a possibility that Labopharm could commercialize the product itself, if approved. If Phase III results are positive Labopharm expects to file for approval in 4Q10, he noted.

Labopharm has a market capitalization of USD 108 m (EUR 78.32m).

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