UnitedHealthcare demands drug rebates even if pharma cuts list prices: analyst

UnitedHealthcare
UnitedHealthcare sent a letter to pharma companies with demands about list price reductions, Bernstein analyst Ronny Gal reports. (UnitedHealth Group)

If drugmakers think they can save on rebates if they cut list prices as politicians and public opinion are demanding—well, forget it, says UnitedHealthcare, which sent new demands to pharma companies, an analyst wrote.

The insurance and pharmacy benefits giant is demanding long notices ahead of any drug price cuts, according to the letter, which two drugmakers confirmed to Bernstein analyst Ronny Gal. And UnitedHealthcare expects equivalent rebates whenever list prices are cut, the analyst wrote in a Friday note to investors.

The news comes as drug companies look to price reductions as a new strategy to fight high rebates and gain goodwill with lawmakers and the Trump administration. On Monday, Sanofi announced that it is cutting its Praluent price by 60%, following Amgen's move to chop Repatha's list price by the same percentage. The PCSK9 cholesterol drugs are among many that have a large “gross-to-net" price gap, or high list prices—and high rebates and discounts paid out to the supply chain.  

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Lowering list prices means smaller costs for patients, but the strategy would also mean lower revenues for PBMs.

UnitedHealthcare asked for seven quarters’ notice—a full 21 months—when companies intend to lower prices, Gal wrote. The "drug companies are not too happy about” the UnitedHealthcare letter, he added, as many are considering price reductions.

Gal published another note Monday with UnitedHealthcare's response. The insurance giant's investor relations team reached out to the analyst and said they believed the original report on the letter was misleading. For one, UnitedHealthcare's OptumRx sent the letters in late December and early January, before the administration's recent rebate proposal, Gal wrote, adding that they relate only to rebates in Medicare Part D.

The company explained that Part D contracts "are done on an annual basis and must be submitted to CMS six months ahead of coming into effect," Gal wrote. UnitedHealthcare needs the time to calculate drug cost structures, Gal wrote, summarizing the discussion. And on maintaining rebates, UnitedHealthcare told the analyst patient premiums would rise with lower rebates.

RELATED: PCSK9 price-cut matchup is on, as Regeneron and Sanofi slash Praluent list tag 60% 

A OptumRx spokesman told FiercePharma the company in April 2018 "led the way in providing prescription drug discounts at the point of sale for millions of consumers and OptumRx negotiates with pharmaceutical manufacturers every day to reduce the prices they charge, including list prices."

"Our goal in asking for advance notice of price changes in the lengthy Part D bid process is to achieve greater transparency and predictability in consumer premiums and out-of-pocket costs," he said. Plus, the company "passes the vast majority of Medicare Part D rebates back to health plans, so our negotiations regarding rebates have virtually no impact on our bottom line."

Drug rebates and high list prices have come under growing fire, and the Trump administration recently unveiled a plan to shake up pricing in Medicare Part D and Medicaid. The plan involves outlawing rebates and instead allowing discounts for patients and fee-for-service deals for PBMs. The PBM industry pushed back, but pharma companies support the idea. Quickly after rolling out the plan, HHS secretary Alex Azar called on Congress to extend the proposal to commercial markets. 

The letters have not been made public; Gal wrote that he heard of its existence through conversations with pharma executives.

RELATED: With its hepatitis C franchise tumbling, Gilead plots knockoffs of its own drugs 

The new Trump plan is only one out of many in a heated debate over pricing in recent years. Last week, five pharma CEOs and a top executive at Johnson & Johnson agreed to testify at an upcoming Senate committee hearing on drug prices.

Meanwhile, at least one drugmaker is taking a different tack to lower costs for patients. Gilead Sciences, facing huge rebates in hepatitis C, previously unveiled a plan to launch authorized generics to its big-selling drugs Epclusa and Harvoni, rather than cut list prices.

Editor's note: This story was updated with a statement from UnitedHealthcare's PBM, OptumRx.

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