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 Express Scripts is in talks with biotechnology companies Biomarin
Pharmaceutical Inc <BMRN.O>, Spark Therapeutics Inc <ONCE.O> and
Bluebird Bio Inc <BLUE.O> to have its specialty pharmaceutical
business exclusively distribute their new hemophilia therapies when
they are expected to become available in 2019 and 2020, Chief
Medical Officer Steve Miller told Reuters in an interview.
Biomarin, Spark and Bluebird confirmed to Reuters that they were
speaking to a payers - a group generally defined as pharmacy benefit
managers, health plans and government agencies
- about pricing models for future therapies. Analysts project those
drugs could top $1 million to $1.5 million in price.
Rather than rail against the drugs’ expected high prices, Miller
echoes the familiar drug company argument that the potentially
curative therapies will likely be worth the high cost if they
supplant the hundreds of thousands of dollars in annual medical
costs to treat ailments such as hemophilia, which affects about
20,000 people in the United States alone.
“Even if they charge $1 million, that's a great deal," Miller said.
“So there are going to be some gene therapies where it is very clear
that everyone who has that disease should get it.”
By working closely with biotech companies, Miller says it can help
their expensive therapies succeed commercially. To manage any
potential conflicts of interest, he said Express Scripts separates
its benefits management and specialty pharmacy businesses.
The move into hemophilia builds on exclusive rights Express Scripts
already has to distribute Spark's Luxturna - an $850,000 treatment
for a rare genetic disorder that, left untreated, causes children to
go blind. It has a similar deal with Biogen Inc <BIIB.O> on Spinraza,
he told Reuters. The drug costs $750,000 the first year and treats
the rare condition spinal muscular atrophy that often kills babies
within months of their birth. Spark and Biogen confirmed the
agreements.
The company also helps manage one of the most expensive gene-based
cancer treatments on the market: the $475,000 Novartis AG <NOVN.S>
gene-based cancer therapy Kymriah - a personalized treatment that
requires a long hospital stay. Novartis confirmed the arrangement to
Reuters.
Those deals put Express Scripts in a vastly different role than its
traditional business managing prescription drug claims for the
employees of its corporate and government clients, a business Cigna
Corp <CI.N> found so valuable that it agreed in March to acquire
Express Scripts for $52 billion.
Patients usually know Express Scripts and other pharmacy benefit
managers (PBMs) as the name on the insurance card they present at
the pharmacy counter when picking up a prescription. That card
activates discounts the benefits managers have negotiated with drug
companies to lower prices, usually through rebates. PBMs make money
by taking a cut of the rebates, and the rest goes to their clients.
Express Scripts, which negotiates the prescription payments for 80
million people in the United States, competes with UnitedHealth
Group Inc’s <UNH.N> Optum and CVS Health Corp <CVS.N>.
These companies are usually among the most vocal critics of the
pharmaceutical industry’s pricing practices, publicly calling out
companies and specific products for their high cost.
But the pharmacy benefits businesses themselves are facing growing
criticism from U.S. regulators, lawmakers, drugmakers, and President
Trump, who say they act as unnecessary middlemen and end up helping
drive up prices for payers.
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Billionaire activist investor Carl Icahn mounted a proxy campaign to
stop the deal on expectations the Trump Administration would end the
rebates it relies on for profits. But he abandoned his efforts after
two shareholder advisory groups came out in favor of the deal.
GROWTH vs CONFLICTS
As the PBM fight plays out publicly, Express Scripts has been
expanding its low-profile specialty pharmacy business - which
dispenses drugs that usually aren’t sold through drugstores because
they require special handling. By using its own pharmacy instead of
outsiders, Express Scripts is able to hold onto more of the profits
along the drug distribution chain.
Specialty pharmacy is one of Express Script's fastest growing
businesses and accounts for about a third of its sales and profits,
ISI Evercore analyst Ross Muken said. The company earned $4.1
billion last year on total revenue of more than $100 billion - it
does not break out financial information for specialty pharmacy.
Many of the newest, most advanced medicines - including gene-based
therapies and personalized cancer treatments - will be dispensed
through specialty pharmacies, and Express Scripts is pitching
biotech companies for exclusive arrangements.
By working as both the manufacturer’s partner who gets paid for each
sale, and the pharmacy benefit manager responsible for negotiating
the best price for its traditional corporate and government clients,
Express Scripts is open to questions about being conflicted,
industry sources and experts say.
"One could view this role as being a wonderfully catalytic: that
they can help balance the views and interests of all the parties by
being in this middle facilitating role. Or one could view that they
have created a situation where internally they have multiple
conflicts of interest, and can they manage them properly?" said Mark
Trusheim, strategic director of a group of international payers and
providers formed by the Massachusetts Institute of Technology to
study gene therapy pricing models.
Express Scripts says it saves money for payers on Luxturna by
cutting out the hospital pharmacy mark up, which is 6 percent for
the government Medicare program and more for commercial business –
or at least $60,000 on a $1 million drug.
Miller said the company has a firewall between its specialty
pharmacy business, which serves the drugmakers, and its businesses
negotiating on behalf of his clients, the payers.
“Our PBM treats our specialty pharmacy as they treat any other
pharmacy in our pharmacy network," he said. "So they are not privy
to their acquisition prices or anything else, and the specialty
pharmacy is not privy to the contracts that the PBM has with their
payer clients or anything else.”
Beyond potential conflict concerns, there is risk in whether the
gene therapies will ever make it to the public.
Spark on Aug. 7 said two patients in a small trial had an adverse
immune response to an experimental hemophilia gene therapy and its
shares lost more than a quarter of their value. And last month, U.S.
regulators put Biogen’s gene therapy program for spinal muscular
atrophy on hold, but no details were disclosed.
(Editing by Elyse Tanouye and Edward Tobin)
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