Gilead Sciences ($GILD) can take the sort of pricing protest that greeted its breakthrough hepatitis C treatment Sovaldi this week--the kind from access-to-medicine advocates. But when payers balk, that's a different story. A horror story, even, that could frighten drugmakers long accustomed to pricing freedom in the U.S.
Yesterday, Bloomberg reported that Express Scripts ($ESRX) plans a tough stance on prices as the next generation of hep C drugs hits the market. The most expensive products might not win a place on the pharmacy benefits manager's formulary--even if they're more convenient for patients, such as Gilead's planned two-in-one pill. After the news broke, Gilead's shares plummeted by more than 4%.
"We will identify which drugs can be pitted against each other and make some really tough formulary decisions," Express Scripts CMO Steven Miller told Bloomberg's Drew Armstrong in an interview. Effectiveness being equal, if a company believes convenient dosing will be enough to win favorable reimbursement, "they may end up being disappointed," he said.
Gilead's Sovaldi is the first in a new wave of hepatitis C treatments, designed to be combined in drug cocktails--and for the first time, those cocktails won't include the difficult-to-tolerate standard drug interferon. They also promise better cure rates and a shorter course of treatment. Bristol-Myers Squibb ($BMY) and AbbVie ($ABBV) are pushing theirs through clinical trials now, while Gilead is testing a combination pill that would comprise Sovaldi and an as-yet-unapproved partner.
The promise of a pricing showdown comes after Gilead announced Sovaldi's $1,000-a-day cost, or $84,000 per treatment course. That hefty price is one reason Sovaldi is expected to rake in $2 billion next year for Gilead and grow to $9 billion or more by 2017. At that level, it would be the biggest-selling drug of all time, surpassing even Pfizer's ($PFE) mass-market statin drug Lipitor. And for patients, Sovaldi is just one drug in a cocktail of at least two, perhaps more. If the other next-gen meds are priced similarly, treating hep C will be a pricey prospect indeed.
Miller told Bloomberg that Sovaldi's price will put additional pressure on healthcare costs at a time when a host of other drugs are making their debuts at nosebleed-level prices. "When you look at the price of many new products coming to the marketplace, it's just not going to be sustainable," he said.
It's the latest example of pricing pressure from Express Scripts, which recently introduced a new formulary that excludes 48 products, including several widely used medications, such as Bayer's multiple sclerosis treatment Betaseron, Novo Nordisk's ($NVO) diabetes blockbuster Victoza, and Boehringer Ingelheim's heart drugs Micardis and Micardis HCT. New products drugmakers are counting on for growth--including GlaxoSmithKline's ($GSK) brand-new Breo Ellipta--also failed to make the grade. Patients who have been using those drugs will have to switch to alternatives the PBM considers equally effective.
But Express Scripts isn't alone in putting the squeeze on drugmakers. Memorial Sloan-Kettering Cancer Center refused to use Sanofi's ($SNY) new colon cancer treatment Zaltrap, saying its benefits weren't worth the price. Soon after, Sanofi announced a 50% discount for the drug. Express Scripts rival CVS Caremark ($CVS) is experimenting with its own restrictive formulary. Australian regulators are tracking patients using Bristol-Myers Squibb's melanoma treatment Yervoy to see whether it's worth the $110,000 price.
And that's the problem for drugmakers. Big Pharma expects to set lower prices on drugs in countries with tough cost-effectiveness rules, such as the U.K. and Germany. In the U.S., however, pharma companies have enjoyed their pricing power. For years, despite rebates and discounts offered to U.S. payers, higher prices in the States have offset lower prices elsewhere. And as patent-cliff losses have eaten into sales over the past few years, some companies have hiked prices on other products to help stabilize their finances.
What happens if PBMs--and even doctors, as at Sloan-Kettering--step up their fight against that power? Drugmakers may find out sooner than they want to. But they're not likely to take it without a fight. Novo Nordisk, for instance, says it's lobbying insurers, doctors and patients to keep Victoza on the Express Scripts reimbursement list.
- read the Bloomberg news
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