With the U.S. drug pricing system as transparent as the darkest shadows, pharmacy benefit managers (PBMs) have stayed out of the political spotlight on the escalating cost of many drugs.
Over the years, they've touted their ability to lower prices by negotiating better deals with drug companies. With a few PBMs controlling nearly 80 percent of the market, their role in setting formularies, negotiating with drug sponsors and administering health plans, including Medicare Part D and employer plans, gives them a lot of weight at the negotiating table.
But a cheaper price often results in exclusion of a competitor's drug, limiting prescription choice for doctors and patient access, with the full cost of an excluded drug generally falling on the patient. Thus, health plans, especially PBMs, are in some instances becoming the "shadow regulators" by dictating what products are used in the market, David Fox, a partner at Hogan Lovells LLP, told BioWorld Today. (See BioWorld Today, April 28, 2016.)
The power of PBMs was evident a few years ago when word hit the street that the two largest, Express Scripts Inc. (ESI) and CVS Caremark, had told Horizon Pharma Inc., of Deerfield, Ill., that they could exclude combination drugs Duexis (ibuprofen/famotidine) and Vimovo (naproxen/esomeprazole magnesium) from their preferred drug lists in 2015. The news of the possibility sent Horizon's shares into a tailspin. (See BioWorld Today, July 29, 2014.)
It wasn't an idle threat. Both PBMs have excluded the drugs for the past two years. In their stead, CVS lists a number of preferred alternatives, including brand drugs Dexilant (dexlansoprazole, Takeda Pharmaceuticals USA Inc.) and Nexium (esomeprazole magnesium, Astrazeneca plc). ESI prefers generics of the two active pharmaceutical ingredients in Duexis and generic omeprazole plus naproxen in place of Vimovo.
PBM exclusions have become a common tool. CVS excluded 124 drugs this year, a 63 percent increase over the number of drugs it excluded in 2014, according to a new report released by the Tufts Center for the Study of Drug Development (CSDD). ESI excluded 80 drugs in 2016, up 67 percent from two years ago. Both PBMs claimed that most drugs removed from their formularies had higher costs and were clinically inferior, said Joshua Cohen, author of the Tufts CSDD report.
The report questioned the claim that drugs are excluded because they are clinically inferior. Instead, it noted that manufacturer rebates to the PBMs play a key role in determining which drugs are kicked off the lists. Effectiveness does not appear to be a factor. No comparative- or cost-effectiveness studies had been conducted for 10 of the 16 drugs excluded by both PBMs, according to the report.
The inferiority claims also suffer from the fact that, in several therapeutic spaces, one PBM prefers a drug the other one excludes. For instance, CVS excludes several insulin products from Eli Lilly and Co., listing Novo Nordisk A/S products as the preferred alternative. ESI does the reverse.
The hepatitis C space is another example. CVS excludes Abbvie Inc.'s Viekira Pak (ombitasvir, paritaprevir, ritonavir and dasabuvir), preferring Gilead Sciences Inc.'s Harvoni (ledipasvir and sofosbuvir) instead. But Viekira Pak is the only hep C drug ESI covers for genotype 1. In addition to Harvoni, it excludes Gilead's Sovaldi (sofosbuvir), Merck's Zepatier (elbasvir and grazoprevir), Daklinza (daclatasvir, Bristol-Myers Squibb Co.) and Olysio (simeprevir, Johnson & Johnson [J&J]).
GATEKEEPERS
When the largest PBMs agree on an exclusion, they become the gatekeepers to the market. That could be a problem for biosimilars and other new drugs trying to gain a foothold in a crowded space, since the sponsors of drugs already on the market may have more negotiating power and price flexibility. Sandoz Inc.'s Omnitrope (somatropin), approved in the U.S. as a 505(b)(2) drug but as a biosimilar in the EU and other markets, remains on both the CVS and ESI exclusion lists, along with a few other growth hormones.
ESI prefers the reference drug, Pfizer Inc.'s Genotropin, as well as Lilly's Humatrope and Novo Nordisk's Norditropin. CVS lists Humatrope and Norditropin as its preferred alternatives, but excludes Genotropin along with Omnitrope and similar drugs.
It's too soon to gauge whether Omnitrope's exclusion will be the fate of other U.S. biosimilars. Sandoz's Zarxio, a biosimilar to Neupogen (filgrastim, Amgen Inc.), is the only biosimilar on the market, and it was launched after the 2016 lists were released.
However, ESI's exclusion list points to some wiggle room for erythropoietin biosimilars that are in the works, as it excludes Roche AG's Mircera and Amgen's Aranesp and Epogen, listing the preferred alternative as Procrit, which Amgen licensed to J&J.
Given the power of PBMs to choose winners and losers, it comes as little surprise that the Department of Justice (DoJ) is investigating the relationship some drug companies have with them. J&J, Merck & Co. Inc. and Endo Pharmaceuticals Inc. all disclosed in their first-quarter SEC filings that DoJ has asked for documents detailing their PBM contracts for the past several years.
While J&J didn't say whether the request focused on specific drugs, Merck disclosed that DoJ wants documents relating to its migraine drug Maxalt (rizatriptan benzoate) and erectile dysfunction drug Levitra (vardenafil hydrochloride). The focus at Endo is on another migraine drug, Frova (frovatriptan succinate).
Approved by the FDA in 2001, Frova was excluded by ESI last year, but not this year. Levitra, approved in 2003, has been on the exclusion list for both PBMs for at least the past two years. Maxalt, approved in 1998, is not on either list.