Source: Pink Sheet Pharma Intelligence

Pfizer filed suit against Johnson & Johnson (J&J) on Wednesday for allegedly using anticompetitive practices to prevent less expensive versions of its rheumatoid arthritis (RA) drug to thrive in the budding biosimilar market.

J&J has sold the injectable biologic Remicade for nearly 2 decades, generating $4.8 billion in US sales last year alone. This injectable biologic drug is widely used to treat RA, Crohn’s disease, and other inflammatory disorders, according to the Chicago Tribune.

Pfizer’s Inflectra was the second biosimilar to receive FDA approval.

If Pfizer wins the case against J&J, it could pave a new path that would discourage brand name companies from cutting deals with insurers to limit competition in the biosimilar marketplace, according to the Chicago Tribune. However, if J&J comes out on top it could continue to fuel strategies that thwart competition, according to the article.

Tyrone’s comment:  While this is a first in the biologics industry, these types of lawsuits (generic vs brand manufacturers) are not uncommon. It’s a clear indication biosimilars are a serious threat to brand competitors and will soon come to market in mass. J&J knows the future of biotech includes biosimilars so they are delaying the inevitable in an attempt to hold on to the cash cow for as long as possible. Because cost will eventually come down as a result of these lawsuits and innovation, this is a good thing for self-funded plan sponsors – stay tuned.

“This is the first lawsuit that is challenging anti-competitive behavior in the biologics industry, and that is very important because this is the wave of the future––this is where a lot of the innovation is taking place today,” Michael Carrier, law professor at Rutgers Law School, told the Chicago Tribune. “It really is an uncharted path, in terms of what competition should look like going forward.”

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For as long as I can remember pharmacy benefit managers have blamed pharmaceutical manufacturers for the high cost of prescription drugs. Drugmakers do share some of the responsibility but so to do pharmacy benefit managers.

Because it essentially eliminates the PBM mark-up, AbbVie’s pricing strategy for its new Hep C drug Mavyret is disruptive to the traditional PBM revenue model. Abbvie is not going to pay a rebate and instead price it [rebate] back into the list price in the form of a significant list price discount. This move forces non-fiduciary PBMs to consider Mavyret for inclusion in their formularies even though the pricing strategy is not aligned with their own interest of needing manufacturer revenue to protect top line revenue.

The looming question is will non-fiduciary PBMs include Mavyret as a preferred drug in the HCV therapeutic class on their formularies. It is less costly and as efficacious as any other drug in the HCV class so it should be a no brainer right? Wrong. If the PBM decides to exclude or list the drug as non-preferred it’s likely because their interests aren’t aligned with those of their clients’. Let’s wait and see.

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But some insurers, including in Illinois, are limiting how those discounts may be applied amid concerns they’re driving up health care costs for everyone. Curbing the coupons could mean more money out of consumers’ pockets in the short term, but in the long run could also help hold down drug prices and health care costs, say critics of the cards and coupons.

Ex. Drug Coupon

Blue Cross and Blue Shield of Illinois told its members with individual plans this year they can still take advantage of the discounts, but they won’t get credit toward their deductibles or out-of-pocket maximums. Cigna only allows coupons to be used for specialty drugs — medications used to treat rare or complex conditions. UnitedHealthcare and Aetna declined to comment on their policies on the discounts.

A number of experts and advocates for lower drug prices applaud any actions aimed at stemming the use of copay cards and coupons, which are available online, through the mail or from doctors.

Tyrone’s comment: I’m not one of those individuals who doesn’t like drug coupons. However, I do agree that patients should not be rewarded by having coupon amounts applied to their deductible or MOOP. Let’s keep it real, non-fiduciary PBMs and health plans don’t like coupons because typically the products with coupons available won’t pay rebates which takes away from the revenue they would have earned from those products which do pay rebates. Plan sponsors follow suit because their PBM or carrier says it’s a bad thing. If a patient is unable to start or complete specialty drug therapy, due to cost which a coupon may have alleviated, the resulting hospital bill will cost more in the long run. Is it about the patient or not? 

Typically, patients with individual and employer-based plans can use the cards or coupons to save money on their insurance copays for certain prescription medications at the pharmacy. While a coupon can reduce all or part of a patient’s copay, the insurance company still has to pay its full portion for what might be a high-priced drug — a cost that opponents of the discounts say is ultimately passed on to all consumers in the form of higher insurance premiums.

Such discounts made news last year amid outcry over the skyrocketing costs of EpiPens, sold by Mylan. As part of its response to the uproar, Mylan offered $300 savings cards to patients with nongovernment insurance to help lower their out-of-pocket costs. Mylan still faced criticism that the discounts wouldn’t help everyone as much as simply lowering the price would.

“The copay coupons are a scam by the drug companies,” said David Mitchell, president and founder of Patients for Affordable Drugs, a nonprofit that doesn’t take money from drug companies or insurers. “Effectively we wind up, all of us, paying a higher price for our health insurance because they just steered us to a more expensive drug that ultimately gets paid for by someone.”

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With the ongoing backlash against them—complaints of lack of transparency and regulation, conflicts of interest created through owning specialty and mail order pharmacies, perverse incentives, and rising pharmacy costs—PBMs may decide to make some changes in how they operate.

Table 1

Susan Pilch, JD, Vice President, Policy and Regulatory Affairs for the National Community Pharmacists Association (NCPA), believes that heightened demand from employers for information about where their pharmacy dollars are going and what their contracts mean could force PBMs to come to the table and address these concerns.

But can the industry live without PBMs, she wondered. “We will always need claims processors—a valid PBM activity—but we would like to move PBMs away from their role as gatekeeper of drugs and their costs,” she said. “We need oversight to hold PBMs accountable, but it’s hard to place demands when you don’t know what PBMs are doing.”

Tyrone’s comment: A fiduciary-model PBM addresses these concerns yet spokespersons at the highest levels of organizations like NCPA aren’t sufficiently talking about it. Have they written the fiduciary model off as unattainable because behemoth PBMs say they won’t provide it? Big breakthroughs occur with persistence despite those who say it isn’t possible.

Mark Merritt, President and CEO of the Pharmaceutical Care Management Association (PCMA), predicts that PBMs will assume a more clinical focus as drugs continue to be more complex. “PBMs have been at the forefront of utilization data and, as genomics leads to more personalized medicine, we can provide claims data,” he said.

He also foresees greater collaboration with health plans as more specialty drugs enter the marketplace and with physicians who require access to data about formularies—what specifically is on them and how many are generics versus brands.

In defense of what many stakeholders call a lack of transparency on the part of PBMs, Merritt noted that as plan sponsors become more sophisticated about benefits by consulting experts, more transparency will evolve. However, he believes that transparency has always existed, but that purchasers have failed to fully take advantage of it.

Tyrone’s comment:  Did you catch that? Mark is essentially repeating what I’ve been writing about for the past seven years. Radical transparency, from PBMs, is attainable provided plan sponsors are willing to invest the time and money required to become more sophisticated and attentive purchasers.

David Lansky, PhD, President and CEO of the Pacific Business Group on Health (PBGH), questions whether PBMs will be able to prove that their performance, transparency, and effectiveness work well enough to justify their role or whether other services and structures will emerge. On the other hand, he said that PBM functions are valuable and that his members want these services at the lowest cost to provide the right medications with the least hassle.

“Ultimately, the responsibility of total cost of care should be in the hands of a care system. If they are going to manage a population, they need to manage all the necessary resources for achieving the best outcomes at a reasonable, competitive cost,” Lansky says.

“With drugs now accounting for close to 25% of total spending, it’s essential that the care system have the tools and responsibility to manage medication spending, as well as other medical services,” he continues.

“Employers need a business partner with pharmacy expertise who understands opportunities and oversees the business,” he says. “It’s a clinically complex area. No employer wants to be in the middle of deciding whether an employee should receive a certain drug.”

[Source]

Figure 1: TransparentRx’s definition of transparency

Peter Rousmaniere last week authored a two-part series that discussed Pharmacy Benefit Management companies (PBM’s) and their pricing practices. He revealed that there may be undisclosed profits in their traditional contract systems, with rebates and negotiated discounts not being made apparent or passed on to the client customer.

He indicated that a “transparency model PBM” might be a good choice for employers and insurers that would ultimately save them a good deal of money. No doubt he is correct; a transparent process that disclosed actual cost and manufacturer incentives would provide both savings and a better understanding of the activity.

But I find myself wondering, given the setup of our industry, if this is an issue that reaches much farther than just the PBM sector. We should ask, for others in our industry, would transparency be a dirty word? We are enveloped in the world of insurance; an ecosphere based on assumption of liability and cost transfer.

Many companies are essentially representing third parties, spending their client’s money, and taking some measure of profit in the process. Insurance companies will pass on their costs in the form of premium rate changes or experience mod factors. TPA’s can price on a transactional basis, managing claims for cost plus fees. DME providers, case management firms and more are all potentially subject to similar arrangements, often pitting cost as a basis for pricing.

In the final analysis, it is all paid by employers, and the parameters of “cost” becomes the subject of greater discussion and debate. Indeed, it is the actual cost of pharmaceutical drugs that is at the core of the PBM discussion. I am a businessman. I understand and appreciate the importance of profit.

When we sell services, it is hoped that our customers perceive value in those offerings commensurate with their investment. Profit is a good thing, indeed. However, if part of your sales approach is to convince customers that you will save them money by negotiating discounts on products and services on their behalf, the elements of actual cost, as well as your profit from the transaction, are certainly subject to scrutiny.

And that is the world where transparency could be considered the enemy. Let’s just conjecture on this a bit further. What if a TPA, working on a cost plus fee basis for an insurance carrier or employer, discovers that a PBM has not disclosed its full pricing discounts on the pharmaceuticals it pays for. It goes back and renegotiates new pricing with the PBM based on this new information.

They have a choice. Do they take the reductions and pass those savings immediately to the customer, or do they receive “volume rebates” (or some other such payment mechanism) after the fact and keep those savings, essentially splitting the previously undisclosed profits with the PBM?

I am not suggesting that has happened, but I am not suggesting it couldn’t. Either way it would be a scenario where transparency could not and would not be afforded. I would suggest, for employers looking at these engagements, that the complexity of workers’ compensation and its myriad of vendors and specialties creates ample opportunity for increased costs.

Neither Rousmaniere or myself are alleging that anything illegal is being done; rather that there is opportunity for abuse enabled by ignorance and inattention.

Tyrone’s comment: A pretty bold statement made above one I happen to support. As much blame should be placed on the shoulders of unsophisticated purchasers of PBM services as the PBMs who take advantage of their inattention. 

For many employers, these costs are ultimately passed on through premiums or other cost-share arrangements. This reality provides even less incentive to drill down and ferret out true costs in these vendor arrangements. Hence, for some in our industry, transparency may be a verboten concept that extends beyond the world of the PBM.

For those employers who engage, transparency will ultimately be the enemy of those engrossed in the world of undisclosed discounts or rebates. Any upstart competitor that promises true transparency in their pricing process could represent a real and present danger to the status quo.

By Robert Wilson

Here is what some participants have said about the webinar.

A snapshot of what you will learn during this 30 minute webinar:

• Hidden cash flows in the PBM Industry such as formulary steering, rebate masking and differential pricing 
• How to calculate cost of pharmacy benefit manager services or CPBMS
• Specialty pharmacy cost-containment strategies
• The financial impact of actual acquisition cost (AAC) vs. effective acquisition cost (EAC)

Recertification Credit Hours: 2

• Why mail-order and preferred pharmacy networks may not be the great deal you were sold