Gilead Sciences' ($GILD) hepatitis C drug Sovaldi may mark a tipping point. Undoubtedly a breakthrough treatment, Sovaldi bears an undoubtedly high price tag: $84,000 for 12 weeks of treatment. And payers, seeing the number of high-priced therapies now on the market, with more in the pipeline, are balking.
As Bloomberg reports, the Sovaldi launch has pharmacy benefits managers (PBMs) casting about for new tactics to control drug spending--and those new tactics could sap the power from some long-standing pharma strategies.
PBMs might refuse to pay a higher price for drugs that are more convenient to take than cheaper alternatives are. They might not cover all new drugs in a new generation of treatments, opting to analyze the field and choose the best--and most cost-effective--option. They might even bring in outside experts to review the data, just as cost-effectiveness watchdogs in other countries do.
It's a PBM's job to hold the lid on drug spending; their decisions about new drugs already carry a lot of weight. If patients have to try a cheaper alternative before gaining access to a brand-new treatment, or pay a higher share of the cost of a particular brand, that hampers drugmakers' efforts to grow sales. Already, Express Scripts ($ESRX) and CVS Caremark ($CVS) are experimenting with formularies that outright exclude certain brands in favor of cheaper meds they consider equally effective.
But no premium for patient convenience? Developing more convenient forms of existing meds is a staple of lifecycle management: instant release moves to extended release, as with antipsychotics like AstraZeneca's ($AZN) Seroquel, whose original formula is off patent, but extended-release version still on. Or Teva Pharmaceutical Industries' ($TEVA) Copaxone; the company is developing a longer-acting dose, hoping to woo patients to the new version as generic competition for the original formula hits as early as May.
In Gilead's case, the company is working on a combo pill containing Sovaldi and a new hepatitis C fighter, ledipasvir, hoping that an easier-to-take antiviral cocktail will trump a two-pill combo such as Bristol-Myers Squibb's ($BMY) daclatasvir and Gilead's Sovaldi. Both combos have the potential to squeeze older, hard-to-tolerate drugs out of the hep C standard of care. And after all, the combo tactic worked with Gilead's HIV meds.
And if PBMs begin to pit drugs against each other, using price as one component of the coverage choice, that could have far-reaching consequences, given pharma's move toward expensive specialty drugs. Companies have long assumed that the U.S. market would bear a much higher price than in other countries, where price controls and cost-effectiveness assessments are commonplace.
Apparently, that assumption should change. "You can't manage exclusively by the techniques PBMs have used in the past," said Sumit Dutta, CMO at the pharmacy benefits manager Catamaran ($CTRX) (as quoted by Bloomberg). "We're seeing the shift, where payers are finally going to say, 'It's $84,000, and the other therapy is $50,000--what am I getting?'"
- read the Bloomberg story
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