Heavyweight PBMs mean trouble for Big Pharma's pricey new meds

The good news for drugmakers, after UnitedHealth ($UNH) agreed to buy Catamaran ($CTRX): You might need fewer staffers to negotiate with pharmacy benefits managers, now that 1 billion U.S. scripts a year will be controlled by three players.

The bad news? That 1 billion scripts--75% of the U.S. total--will be controlled by three players. And that means those three players will have more leverage to force discounts.

Plus, the news could get even worse. According to Reuters, the Catamaran buyout stands to trigger a spate of consolidation in the payer business. More consolidation means even more power in the hands of a few.

Optum CEO Larry Renfro

"We expect to negotiate for lower prices and offer lower costs to our customers," Larry Renfro, CEO of UnitedHealth's health services division Optum, told Catamaran employees at a Monday meeting, according to an SEC filing.

So, say hello to more exclusive formularies and discounts. Prepare yourselves for more work proving your meds are cost-effective--including more outcomes studies. So-called patient-centered pharma? If that means using all means necessary to get patients to live healthy and take their meds, then you bet.

Already, consolidation in the PBM business has taken its toll. Since Express Scripts ($ESRX) merged with Medco Health Solutions and CVS ($CVS) merged with Caremark, examples of PBM exclusives and price cuts have been piling up.

Consider AbbVie ($ABBV) and Express Scripts' Viekira Pak exclusive, CVS Health's tie-up with Gilead Sciences ($GILD) on Sovaldi, and United Health's own Gilead deal, just to name a few.

The dollar signs are mounting, too. Discounts Gilead extended to get formulary placement took a big bite out of its 2015 revenue forecast. GlaxoSmithKline ($GSK) got a kick in the pants on Advair last year, partly because AstraZeneca ($AZN) nabbed an exclusive for Symbicort with Express Scripts. And Novo Nordisk ($NVO) didn't enjoy the fact that two of its leading meds--Victoza and Novolog--got kicked off Express Scripts' national formulary for 2014.

The Catamaran buyout--which will meld that company with Optum's PBM division, OptumRx--will only ratchet up the pressure on new-and-pricey treatments, particularly those that can't show themselves superior to their head-to-head rivals. Renfro particularly singled out specialty drugs, which he called "the largest cost driver in healthcare." The Catamaran-plus-OptumRx combo can fight that, he said. "Working together, we have the opportunity to make specialty drugs more affordable for clients and the people we serve," Renfro said.

Prime opportunity, according to Express Scripts? The forthcoming class of PCSK9 cholesterol fighters, which aren't all that different from one another. The two closest to market--Regeneron ($REGN) and Sanofi's ($SNY) Praluent (alirocumab) and Amgen's ($AMGN) evolocumab--could find themselves in a PBM face-off a la Sovaldi/Harvoni and Viekira Pak. Diabetes meds are another potential target, as new meds come on the market to face similar-but-older products.

- see the Catamaran SEC filing
- get the UnitedHealth release
- check out the Reuters story

Special Reports:The top 10 most expensive drugs of 2013 | The most influential people in biopharma today - 2014 - Steve Miller - Express Scripts

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