Does the AbbVie-Express Scripts pact signal drug-price Armageddon?

Express Scripts may have warned the world that it would use its gatekeeper status to force big hepatitis C discounts. But when word of its exclusive, discounted deal with AbbVie actually hit on Monday, analysts went a-Twitter, biotech shares slid, other payers pricked up their ears--and media outlets went berserk. Gilead Sciences and its blockbuster franchise cut out! Really! So many headlines in such a short time. We sifted through them for the salient remarks. Here's a roundup:

  • Remember the hepatitis C pricing war some analysts said wouldn't happen? Well, it looks as if they were wrong. Now that AbbVie ($ABBV) has won Express Scripts' business with a "significant" discount off Viekira Pak's $84,000 price, pharma-watchers see more pricing moves coming. Gilead Sciences ($GILD) included. Bank of America analyst Ying Huang estimates AbbVie's discount offer at up to 30% to 35%, and predicts that rivals will follow suit. With more hep C drugs on their way, "we believe there is only one direction for pricing to go. ... In our view, this could be the start of a pricing war," Huang said in an investor note downgrading Gilead shares. Report
  • Don't expect Express Scripts ($ESRX) to be the only payer looking to strike exclusive deals with hepatitis C drugmakers in return for big price breaks. "We will be taking a very serious look at this," said Dr. J. Mario Molina, CEO of California-based Molina Healthcare, an insurer with 2.5 million members, most on Medicaid. Prime Therapeutics, a Blue Cross Blue Shield pharmacy benefits manager, is planning an exclusive contract in hepatitis C, but says it's too early to name names. For now, PBM Catamaran is taking the opposite approach, adding AbbVie's regimen to formularies only at the request of employers and health plans, but execs say they're waiting to see what Gilead does. So far, Express Scripts' biggest rival, CVS Health ($CVS), hasn't disclosed its plans, but William Blair analyst John Kreger sees Gilead as a top prospect there. "Does Gilead really want to be blocked from half the U.S. population?" Kreger asked Bloomberg. "They would be the most motivated to cut a deal with CVS." Report | Report
  • And don't expect Express Scripts to stop with the AbbVie arrangment. In an exclusive interview with Reuters, CMO Steve Miller says he's looking to expand the number of drugs the PBM doesn't cover. Express Scripts introduced an exclusionary formulary for 2014, leaving off 44 meds, and expanded that to 66 for 2015. In 2016, Miller will be "opportunistic" about looking for more savings. Therapeutic areas mentioned? Diabetes, pulmonary hypertension and arthritis. And according to Sanford Bernstein analyst Ronny Gal, the drugs most in danger are older meds in categories where "great new drugs" are forthcoming. "If there is a limited pool of money and a bunch of new drugs, the pressure on older drugs will increase," he told the news service. Report
  • Gilead's stock plunged after news of AbbVie's deal with Express Scripts, falling 14% to close at $92.90--its biggest drop since 2001, Bloomberg notes. The drugmaker also recorded its largest single-session fall since its January 1992 IPO. The knock-out punch was AbbVie's agreement with Express Scripts to lower the price of its drug in exchange for its being the only hep C treatment approved by the PBM. And Gilead's stock isn't the only one taking a beating in the fallout; the Nasdaq Biotechnology Index slipped 2.4%, and biotechnology and life-science companies took four points off the S&P 500 after AbbVie/Express Scripts announced the deal. Report | Post | Story
  • Doctors are facing a losing battle when it comes to prescribing hep C drugs, and AbbVie's deal with Express Scripts could add fuel to the fire. Now that the biggest U.S. pharmacy benefit manager rejected coverage of Gilead's $1,000-a-pill drug in favor of AbbVie's cheaper treatment, physicians will no longer be able to prescribe Gilead's drugs--even if they think the medicine is a better fit for patients, Bloomberg reports. "It seems like a step backward in science when physicians are told they have to prescribe more drugs and manage more side effects and drug interactions to get the same result as they could with one pill per day," Jonathan Fenkel, director of Jefferson University Hospitals' Hepatitis C Center in Philadelphia, told the news outlet. AbbVie's Viekira Pak regimen includes four to six pills taken once or twice daily, as opposed to Gilead's Harvoni, which is only taken once a day. Gilead's therapy costs $94,000 for a 12-week course, while AbbVie's drug has a list price of $83,319 excluding its unspecified discount to Express Scripts. Report
  • Looking ahead, the AbbVie/Express Scripts deal could have costly, if not permanent, repercussions for the biotech bull market. As TheStreet's Adam Feuerstein reports, the power to control drug prices has moved from biotech executives to insurance carriers and pharmacy benefit managers looking to cut costs. The current deal focuses on hep C drugs, but investors should expect the effects of PBM pricing to trickle down to other high-priced disease meds, including those for cancer, rheumatoid arthritis and diabetes. One field to watch is cancer immunotherapy, where the cost of novel CAR-T drugs could run upward of $350,000. Whether history will repeat itself is anyone's best guess, but the Express Scripts/AbbVie deal represents a "tectonic shift" in drug pricing control, Feuerstein said. Article

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