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 The terminations come from payers who together manage drug benefits
for more than 100 million Americans, and they follow disclosures by
Valeant Pharmaceuticals International Inc in late October that one
pharmacy accounted for about 7 percent of its sales.
"What we had not been aware of, until really the last year, was
these type of pharmacies that have a really high proportion of sales
from a drugmaker and it was not out in the open," Everett Neville,
senior vice president of supply chain at Express Scripts Holding Co
said in an interview.
The actions are being felt by drugmakers that have come to rely on
hefty price hikes to boost profits. Valeant’s closely-linked
pharmacy, Philidor Rx Services, pressed insurers to pay for
expensive Valeant treatments even though much cheaper generic
alternatives were available.
Shares of Valeant have lost more than half their value since its
pharmacy ties were made public.
Neville said Express Scripts, the nation's largest pharmacy benefits
manager, has changed the algorithms it uses in its audits to find
pharmacies focused heavily on one drug manufacturer and has cut ties
with half a dozen such pharmacies in the past week.
Express Scripts and OptumRx, part of UnitedHealth Group, have also
found pharmacies engaged in extensive mail-order operations without
proper accreditation.
CVS Health, the No. 2 pharmacy benefits manager, said in an email
that it had reviewed pharmacies with ties to drug manufacturers and
was removing those that fell short of its contract. It did not give
further details.
All three of the big benefits managers have quit doing business with
Philidor. Neville at Express Scripts was careful to note that the
pharmacies being eliminated are not true "specialty" pharmacies that
help manage drugs for rare diseases.
"The Valeant-Philidor relationship woke payers up to potential
problems in their pharmacy networks," said Adam Fein, president of
Pembroke Consulting, which follows the drug distribution industry.
"We are now seeing much greater scrutiny of the independent
pharmacies that may not be complying with payer requirements."
GROWTH FROM PRICE HIKES
For large pharmaceutical companies, U.S. pricing gains have
accounted for roughly 46 percent of worldwide revenue growth over
the past three years, according to Sector & Sovereign analyst
Richard Evans.
U.S. drug prices rose an estimated 12 percent to 13 percent last
year, and consumers are being asked to pay more of the total cost as
health insurance deductibles and co-payments increase.
"Drug cost has been the single biggest driver of healthcare spend
over the last two years. It wasn't prior to that," said Dr. John
Bennett, chief executive officer at Capital District Physicians'
Health Plan, a non-profit based in Albany, New York. Certain
pharmacies have contributed to higher drug prices by driving
customers to expensive treatments instead of cheaper generics,
pharmacy benefit managers say. Many help drugmakers to cover the
out-of-pocket costs for consumers, lightening their load but leaving
health insurers to pay the rest.
Independent pharmacies and their drugmaker partners counter that
Express Scripts, CVS and OptumRx together control more than
two-thirds of the market through their own mail-order operations.
The specialty pharmacies say that the benefit managers are trying to
curb the explosive growth of smaller, independent players.
"Our philosophy of ensuring that patients get the medicine their
doctors prescribe is threatening Express Scripts' profiteering and
exposing what we believe is a lack of care for patients and respect
for physicians," Horizon Pharmaceuticals Chief Executive Timothy
Walbert said last week.
Express Scripts has cut reimbursement to Linden Care, a New
York-based pharmacy that distributed Horizon drugs.
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A BOOMING BUSINESS
Specialty pharmacies were first formed in the 1970s to deliver
products requiring special handling to doctors' offices and
hospitals, including therapies for cancer, HIV/AIDS or hemophilia.
The field has evolved to include mail-order operations that offer
services for complex, high-cost drugs, often for rare or chronic
diseases.
The growth of such pharmacies has been fueled by a record number of
specialty treatments coming to market for everything from hepatitis
C to cystic fibrosis. Pembroke Consulting estimated that the number
of accredited specialty pharmacies would jump by nearly 100 to a
total of 250 in 2015.
Diplomat Pharmacy Inc, the nation's largest independent specialty
pharmacy, is the sole distributor of three medications for very
small patient populations: Exelixis Inc's thyroid cancer drug
Cometriq, Teva Pharmaceutical Industries leukemia drug Synribo and
Keveyis, a treatment for temporary paralysis made by Taro
Pharmaceuticals.
"We handle drugs for complex, chronic conditions. Many were
previously a death sentence," said Sean Whelan, chief financial
officer. Net income at Diplomat, which went public in 2014, nearly
tripled in the first nine months of this year from the same period a
year ago.
But the Philidor example shows how some pharmacies are being used to
dispense more ordinary, and expensive, prescriptions. Philidor was
selling Jublia, a toenail fungus treatment that retails for about
$500 for a small bottle. The treatment is only moderately effective:
it cured about 18 percent of patients in one clinical trial after
one year.
Linden Care was selling Duexis, Horizon's top drug, which combines
the common pain killer ibuprofen and famotidine, the generic version
of heartburn drug Pepcid. It costs about $500 for a 30-day supply.
Valeant has denied allegations that it used Philidor to inflate
revenue, but is in the process of cutting its distribution
arrangements with the pharmacy. Philidor, which will soon shut down,
insists its employees behaved ethically.
This week, Linden Care Pharmacy sued Express Scripts, while New York
City-based Irmat Pharmacy sued OptumRx for moving to terminate their
contracts.
At Irmat, 60 percent of the prescriptions being sent to OptumRx for
payment were from two drugmakers, a source familiar with the
situation said. Irmat said in its lawsuit that revenue skyrocketed
after it contracted in 2013 with Nestle SA's Galderma SA, and Aqua
Pharmaceuticals, part of Spain's Almirall. Neither company was
immediately available for comment.
Eileen Wood, chief pharmacy officer at CDPHP, said the health plan
rejected 4,700 claims from Philidor and related pharmacies this
year, nearly all of which were for Valeant products. CDPHP works
with CVS for pharmacy benefits.
Wood also called "very suspicious" the 477 claims CDPHP received
from Linden Care this year, noting that 90 percent were for drugs
from Horizon or its subsidiaries. All were rejected.
Officials at Linden Care did not respond to requests for comment.
(Reporting by Caroline Humer in New York and Deena Beasley in Los
Angeles; Editing by Michele Gershberg and Sue Horton)
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