With new exclusions, payers draw line on pricing
- Two of the largest pharmacy benefits managers in the U.S. updated their formularies this week, limiting access to scores of highly-priced medicines in an effort to "increase value." Express Scripts will exclude 85 medicines from its national formulary, while CVS Health will exclude a total of 131 medicines.
- Both companies are touting additional savings associated with their formulary decisions. Express Scripts is targeting cost-savings of $1.8 billion versus $1.5 billion last year. And although CVS Health did not disclose a targeted cost-savings for 2017, the PBM claims to have saved more than $9 billion over the last five years.
- CVS Health is targeting "hyperinflationary" drugs with its exclusions. It excluded Novum Pharmaceuticals' Alcortin A External Gel, for example, whose price increased by 2,800% over the last three years.
Pharmacy benefit managers, or PBMs, have become more powerful, as they leverage their payer status to combat drug price increases by selectively including or excluding certain drugs from their formularies.
For the first time, a biosimilar will be placed on a national formulary in lieu of a branded biologic option. CVS Health is placing Sandoz's Zarxio (filgrastim-sndz) on formulary, while removing Amgen's Neupogen. CVS Health is also embracing indication-based pricing—assigning distinct costs per indication—in order to control for an old pharmaceutical trick, the 'orphan price' model, where medicines with multiple indications are highly priced due to a rare disease indication that is only useful for a small population.
Express Scripts has compiled a list of the 85 drugs excluded from its formulary while offering the proviso that only 0.12% of its 25 million covered patients "will be asked to use a different medication to get the same benefits."
For both payers, some general rules hold true: use generics when possible; place specialty drugs on higher tiers; and negotiate aggressively for rebates and discounts. Novartis' widely used cancer drug Gleevec, for example, was dropped by both PBMs in favor of Sun Pharmaceuticals's generic imatinib.
But stakeholders are beginning to question whether the costs saved ever translate to patients' savings. An alliance of large corporations including Coca-Cola, American Express and others are using their leverage to push for increased PBM transparency, Stat reports.
And a recent DrugWonks article by Bob Goldberg, Founding CEO of the Center for Medicine in the Public Interest, suggests much of the money saved accrues directly to PBMs in the form of profits. Goldberg claims there was a $125 billion difference between the reported sales by pharmaceutical companies and the reported purchases from payers.
Goldberg implied most of the burden of drug price increases falls directly to patients, citing statistics from the IMS Health Informatics Report suggesting PBMs were benefiting from tougher negotiations without transferring the benefits to patients.