GlaxoSmithKline giant Advair may be reeling, but it hasn't kicked the bucket yet. And now, it's getting a payer boost that will breathe a little life into falling sales. With dismal second-quarter results depressing investors, the news couldn't have come at a better time.
Express Scripts ($ESRX), the U.S.' largest pharmacy benefits manager (PBM), has decided to put Advair back on its 2015 national preferred formulary after excluding it in 2014. Customers had to either pay out-of-pocket or switch to a covered alternative--and if sales are any indication, they chose the latter.
Why the change of heart? Discounts. The reversal of fortune follows Glaxo's ($GSK) decision to offer the aging drug at a price Reuters called "highly competitive."
"We have changed the formulary status of Advair in 2015 due to the improved pricing we were able to negotiate for our clients," Express Scripts spokesman David Whitrap told the news service.
And that new willingness to negotiate on price inspired rival PBM CVS Caremark ($CVS) to knock Symbicort off its 2015 "covered" list, Leerink Partners analyst Seamus Fernandez reports.
The PBM moves are welcome. Glaxo saw second-quarter sales of the drug plummet 19% in constant currencies. That performance dragged down the company's overall top-line haul and spurred it to cut its earnings guidance for the year. Glaxo-watchers have been grieving, and publicly, to the point where Neil Woodford, a top U.K. investor, felt the need to announce that he, for one, doesn't think Glaxo is done in.
Of course, a little love from Express Scripts won't bring back all of those lost sales; lower prices mean lower per-patient revenue. Plus, Advair faces a host of branded competitors in the U.S., and generic knockoffs in the EU, too, for that matter. AstraZeneca's ($AZN) Symbicort, for one, has been capitalizing on Advair's formulary exclusion, growing by 30% in Q2, EP Vantage notes.
Advair's rivals will still have a leg up at Express Scripts next year, Credit Suisse analysts point out. While Glaxo's drug won't be excluded, it won't be listed as a preferred treatment, either. Both Symbicort and Merck's ($MRK) Dulera are. In other words, while Advair will be covered, patients face a higher copay for Advair than for Symbicort or Dulera.
AstraZeneca will share the pain at CVS, though. Its removal from the preferred formulary--which applies to 24 million of CVS' 37 million covered lives--will no doubt erode Symbicort's market share, Fernandez wrote in a note to clients. "At a minimum, we would expect AZN to lose several percentage points of TRx share from this change in 2015," he said.
Glaxo will take all the help it can get for the former $8-billion-a-year seller, which brought in more than one-fifth of the company's revenues last year. The launch of its new respiratory meds Breo and Anoro--Advair's purported successors--have been lackluster, with both drugs underperforming, analysts say. While it's still early for the newcomers, getting on track may not be so easy in the crowded COPD market, particularly for Breo, which will face its own Express Scripts exclusion for the second straight year in 2015.
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