- Johnson & Johnson reported sales of blood thinner Xarelto fell 19% to $549 million in the second quarter of 2019 compared with the same period in 2018 as increased discounts to Medicare patients took effect.
- Executives of the New Jersey-based big pharma said they expect a return to sales growth later this year, and pointed to expanded indications for Xarelto in which rival Eliquis from Bristol-Myers Squibb can't be used.
- The U.S. government reduced the cost burden for Medicare beneficiaries in the so-called "donut hole" by increasing the share of branded drug costs paid by pharmaceutical manufacturers from 50% in 2018 to 70% in 2019.
Xarelto (rivaroxaban) went from bad to worse. After its 6% decline in the first quarter thanks to donut hole discounting, the damage was 19% in the second quarter, J&J reported an otherwise positive-looking second quarter earnings Tuesday.
The donut hole is a coverage gap in Medicare Part D in which beneficiaries are expected to pay a greater share of their drug costs. It starts at $3,820 of combined insurance plan and beneficiary costs. Once in the donut hole, patients pay 25% of their drug costs and their plans 5% until $5,100 in costs have been accumulated.
The remaining share of the costs, 70%, are covered by manufacturer discounts, a share that increased from 50% in 2018. J&J executives said this was the cause of the sales erosion. Bayer holds Xarelto rights outside the U.S., and thus J&J can't rely on international sales to cushion the blow.
Because the effects of donut hole discounting are felt most acutely in the first half of the year, Xarelto could bounce back in later reports. Moreover, J&J sees expanded indications as a positive sign. Among the ones in which Xarelto has won approval are prevention of pulmonary embolisms and prevention of heart attacks and strokes in patients with coronary or peripheral arterial disease.
"Overall, we continue to see Xarelto as a growth driver," Joaquin Duato, vice chairman of J&J's executive committee, said during a call with analysts.
The company reported an increase in operational sales growth, which excludes the negative effects of currency fluctuations, of about 4% over the second quarter of 2018. Cancer drugs Darzalex (daratumumab) and Imbruvica (ibrutinib) were high points, rising 52% and 34% respectively. Darzalex's sales were helped along by price increases gained after negotiations in Europe.
As a result of the sales picture, the company raised its operational sales guidance from a range of a 2.5% to 3.5% increase estimated in April to 3.2% to 3.7%. However, J&J has not raised its per-share earnings guidance, which remains at $8.73 to $8.83.
Executives said investors should expect no changes to per-share earnings because the company expects to spend more on R&D in the second half of 2019.