Step therapy changes at Medicare Part B to hit Amgen, Regeneron particularly hard: analysts

Regeneron's Eylea cost Medicare Part B plans $2.2 billion in 2016, according to an analyst. (Regeneron)

The Centers for Medicare & Medicaid Services made waves this week by authorizing Medicare Part B plans to implement step therapy for new patients and negotiate prices with drugmakers in an effort to control pharmaceutical costs. While the changes stand to bring savings to patients and plans, several drugmakers could suffer in the form of lost revenues, and another could win new sales, according to analysts.

The CMS policy will go into effect quickly for Medicare Advantage plans, and Bernstein analyst Ronny Gal wrote in a note on Thursday that plans are already working to implement a first round of step edits for 2019. Overall, he said the policy should benefit Mylan, as it encourages biosimilar adoption, but hurt Regeneron and Amgen within his team's coverage area.

The changes stand to hurt Regeneron because the drugmaker receives a sizable chunk of Eylea sales from Medicare Part B; the new policy could encourage off-label use of a compounded form of Roche’s Avastin. Leerink analyst Geoff Porges wrote that Eylea was the largest drug by cost in Part B in 2016 at $2.2 billion. Porges and his team believe Regeneron and Amgen are at the biggest risk of lost sales due to the policy changes, as well.

Amgen, for its part, will likely see a negative effect from more biosim Neulasta uptake, according to the analysts. Mylan won the first U.S. approval for a Neulasta biosimilar back in June. Aside from those companies, drugmakers marketing PD1 cancer drugs could face a hit in the future, as well as those that market multiple sclerosis and immunology drugs in certain cases.

Regeneron issued a statement that overall, the CMS policy "has the potential to beneficially impact patient care and the cost of medicines. … However, when it comes to potentially blinding eye diseases, where step therapy may require 'off-label' use of a repackaged drug and/or necessitate more frequent injections into the eye, we agree with the American Academy of Ophthalmology that treatment choice is best made by individual patients and their physicians."

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Overall, 3.4% of the company's 2019 Eylea revenue is at risk due to the changes. At the same time, the company could compete to win more market share under the policy, Regeneron said.

Under the new policy, sponsors are to spend at least 50% of the savings on patients. According to Gal, those expenditures will come in the form of adherence plans, services and coupons or gift cards.

Aside from the Regeneron and Amgen products, Gal wrote that two experts view PD1 cancer drugs such as Merck’s Keytruda and Bristol-Myers Squibb’s Opdivo as the "top of the list" targets for future step edits due to their large and growing costs. Multiple sclerosis and inflammation drugs could also be subjected to the cost-control measures in certain cases.

The CMS policy changes come as pharma faces industrywide scrutiny into its pricing and as the Trump administration works to control costs. In May, President Donald Trump and HHS Secretary Alex Azar unveiled their plan to lower drug costs by boosting competition and negotiations, plus creating incentives for lower list prices. The plan also seeks to provide relief for patients with out-of-pocket costs, among other initiatives.