Regeneron's Eylea success makes it 'uniquely exposed' to Medicare payment shift

Medicare spends more on Regeneron's eye drug Eylea than any other med injected at doctors' offices, a fact that makes the big biotech particularly susceptible to a proposed shift in the way it pays for those kinds of drugs.

If a proposed change in the way Medicare pays for injected drugs that doctors give at their offices goes forward, some companies will be hit harder than others. And according to a new report, one drugmaker in particular is at risk: Regeneron. The reason? Because it has been so successful with eye drug Eylea.

According to a new report from EvaluatePharma’s EP Vantage, the U.S. health program spends more on Regeneron’s highly successful eye treatment than any other drug injected at doctors’ offices. Eylea, which treats age-related macular degeneration, tops the list of the six injected drugs for which Medicare spends more than $1 billion a year. Medicare spent $1.8 billion for the drug in 2015.  

The Centers for Medicare & Medicaid Services (CMS) is looking at changing the current model, which pays for the cost of the drugs plus a 6% fee, a formula that it says encourages doctors to use pricier meds. The CMS is testing a formula that pays the cost of the drug plus a 2.5% surcharge and a flat fee of $16.80, a model that significantly closes the gap between payments for inexpensive and expensive meds.

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Congress would have to approve the change and the president would have to sign off on a bill, but with Medicare Part B spending rising at an annual rate of 9%, Congress is looking to reel in its growth. And Trump has made lowering drug costs a focus of his healthcare plans.  

Other drugmakers are also vulnerable to a payment shift, like Roche. The Swiss drugmaker has three of the six drugs on the list for which Medicare spends more than $1 billion a year, cancer drugs Rituxan and Avastin, and Lucentis, a drug which competes with Eylea in some indications. Including Medicare’s spend on Herceptin, Roche has four drugs among the top 10.

What makes Regeneron “uniquely exposed” to the potential change is that the Medicare Part B spend accounts for 41% of Eylea’s global sales, EP Vantage said.

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That compares with Roche, whose drugs on the list account for just 9% of total worldwide revenue. And with biosimilar competition looming for Rituxan, Avastin and Herceptin, Roche is already braced for falling sales of those meds.

Of course, the formula change may not make it past the lobbying barrage that is already being lobbed at it. EP Vantage says that Regeneron has opposed the change, saying it might “incentivize use of off-label repackaged/compounded products over other FDA-approved products.”

RELATED: Amgen, already on PCSK9 offense, slaps Sanofi, Regeneron with Dupixent patent suit

But if the change is made, it would come at a time when Regeneron is facing other growth impediments. It and partner Sanofi are fighting Amgen to keep their PCSK9 cholesterol fighter Praluent on the market after a jury found it violated an Amgen patent. And now Amgen is fighting them over the patent on their new atopic dermatitis drug Dupixent, a drug forecast to hit blockbuster sales.