A few weeks ago, Novo Nordisk ($NVO) said it had lost Express Scripts' business on two of its top drugs, Victoza and NovoLog. Well, that was just part of the action at the pharmacy benefits manager. More than 40 other drugs, including some of Big Pharma's newest growth prospects, got the same treatment. And ironically, drugmakers may have their own marketing techniques to blame.
The PBM's National Preferred Formulary for 2014 includes a list of 44 treatments and supplies that won't be covered. Patients will be required to choose alternatives, which are helpfully listed alongside the newly excluded products. Among the excluded drugs are Pfizer's ($PFE) newly approved rheumatoid arthritis drug Xeljanz, Johnson & Johnson's ($JNJ) recently launched psoriasis treatment Stelara, and GlaxoSmithKline's ($GSK) newly minted respiratory drug Breo Ellipta.
This is the first time that Express Scripts' ($ESRX) preferred formulary designates certain drugs as "not covered," spokesman David Whitrap said in an emailed statement. But the move is part of a larger trend among payers of all stripes, which are increasingly reluctant to pay for treatments that are new and more expensive, but not considered to be clinical breakthroughs. Express Scripts rival CVS Caremark ($CVS) blocked 34 treatments last year for cost reasons, but most of them weren't big sellers; at the time, CVS said it planned to expand the list.
"If you look across our industry, there is broad and growing acknowledgment ... that not all drugs need to be covered," Whitrap said. "Drug choices in some classes are larger than ever, with many products costing more with no additional health benefit."
Ironically, one of the pharma industry's favorite marketing tactics--the co-pay card--played into Express Scripts' decision. As drugmakers have rolled out expensive new products, they've offered assistance to patients who can't afford the higher co-pays insurers use to steer members to generic drugs and other less costly alternatives. Thwarted in their cost-control efforts, payers have been protesting those co-pay assistance programs, blaming them for unnecessary healthcare spending. Some healthcare insurers even banded together to sue drugmakers over co-pay assistance.
And now, Express Scripts has hit back. In addition to newer drugs like Xeljanz, the excluded category includes older, commonly used treatments such as Bayer's multiple sclerosis drug Betaseron and Merck's ($MRK) hepatitis C treatment Pegintron. "Nearly all of the drugs being given not covered status have co-payment cards that unnecessarily drive up the cost of care," Whitrap explained.
The new formulary will apply to an estimated 30 million to 40 million members; Express Scripts estimates that the new drug exclusions will affect fewer than 2% of them. At 2% of the low end, that's still some 600,000 patients, which could be a painful hit to some drugmakers. Novo's loss of Express Scripts' business, for instance, is expected to cut into 2014 earnings by anywhere from 1.8% to 3%. Analysts estimated that the PBM accounted for 15-20% of Victoza's sales.
Government gatekeepers in other countries routinely weigh cost and effectiveness when deciding whether to pay for drugs. Indeed, several have tightened up their standards in a bid to save money, including Germany, which instituted a strict pricing policy based on a new drug's benefits in comparison with existing treatments. Australia recently announced that it would be tracking patients using Bristol-Myers Squibb's ($BMY) new melanoma treatment Yervoy to gauge whether real-world results make it worth the $100,000-plus sticker price.
Such hasn't been the case in the U.S., at least not in a broad, systemic way. But obviously, change is afoot. Memorial Sloan-Kettering Cancer Center made headlines last year for writing Sanofi's ($SNY) new colon cancer drug Zaltrap out of its treatment protocols, based on doctors' judgment that it was too expensive for the benefits it delivered to patients. Soon after, Sanofi announced rebates that would cut Zaltrap's cost in half.
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