Specialty Drug and PBM Formulary Wars

Express Scripts (ESI) announced December 22, 2014 that it would offer exclusive coverage for AbbVie’s Viekira Pak for the treatment of genotype I hepatitis C, excluding other popular therapies such as Harvoni, Sovaldi, and Olysio from its 2015 formulary. Although Viekira has proven effective in clinical trials, some have argued that it is not the preferred treatment for all prescribers. Viekira must be taken with adjunct therapies whose known side effects may sometimes diminish patient quality of life. In contrast, Gilead’s combination pill Harvoni has been proven effective and eliminates the need for potentially harmful adjunct therapies. Nonetheless, the decision will go into effect January 1 and apply to 25 million beneficiaries.

Although ESI CEO, Steve Miller, has declined to disclose the terms of the AbbVie deal, he has indicated that the significant discount offered by the company prompted the decision to recommend treating all patients with genotype I hepatitis C with Viekira. ESI has publically criticized Gilead’s pricing of Harvoni which at $1,125 per pill, amounts to $63,000-$95,000 for an 8-12 week treatment regimen. Gilead continues to defend its pricing, suggesting that the long term cost of treatment with Harvoni is less overall. However, if AbbVie is negotiating similar arrangements with other payers, Gilead and others will need to offer their own discounts or risk losing a larger portion of the market share. With the cost of specialty drugs continuing to rise, and PBMs forcing pricing competition with exclusivity deals, specialty pharmacies can expect to see a trend towards formulary wars between manufacturers within therapeutic classes. The PBMs’ decisions regarding which drugs are on formulary dramatically impact Specialty Drug Manufacturer’s stock prices and patient care.

The recent weeks have seen specialty drug manufacturers AbbVie and Gilead engaged in a pricing war, offering significant discounts on their hepatitis C treatments and landing exclusivity deals with PBMs Express Scripts and CVS Caremark respectively. Prime Therapeutics has broken the trend with its announcement that both Gilead and AbbVie’s hepatitis C drugs will have preferred status on Prime’s formulary. A spokesperson for Prime indicated that the substantial erosion of the net price of these drugs in the past few weeks made it cost effective to offer both drugs to Prime patients.

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