CVS/caremark and Express Scripts tighten screws on pharma, will others follow?
Pharmacy benefit giants CVS/caremark and Express Scripts have announced formulary changes for 2018 and while drug exclusions continue to play a major part of cost control strategy, the changes signal strategic areas of focus and an urgency to get ahead of the cost-curve on newly introduced drugs. Given the heft of these two Pharmacy Benefit Managers (PBMs) in the national market, there could be a ripple effect across other PBMs and insurers.
The use of exclusion lists has served as an extremely blunt tool by payers to limit costs. By leveraging the inherent competition between therapies in a given drug class, the major PBMs – which control tens of millions of lives – are able to extract greater rebates and drive prescribing decisions toward favored therapies. The interplay between this trend as well as overall pricing pressures are the topics of a forthcoming update for DRG’s 2017 Access & Reimbursement report on type 2 diabetes.
CVS/caremark, which has been aggressive with exclusions, appears to be taking a more measured and targeted approach. For 2018, it’s excluding 17 drugs in 10 drug classes from its standard control formulary but is adding 17 drugs that were previously excluded. Combined with previous exclusions, the total number of excluded drugs is 154.
While certain branded drugs such as AstraZeneca’s anti-psychotic Seroquel XR, Merck’s cholesterol drug, Zetia, Daiichi Sankyo’s Benicar and Teva’s Nuvigil are removed from the 2018 formulary, 17 new medications got preferred or nonpreferred positioning. Orexo’s opioid dependence drug, Zubsolv which was excluded from formulary in 2016, is getting preferred status in 2018. As opioid dependence continues to gain attention of lawmakers throughout the nation, the way forward for Zubsolv looks promising.
Within the SGLT-2 inhibitor class of drugs to treat diabetes, Eli Lilly’s Jardiance and the combination therapy Synjardy were excluded and instead, Johnson & Johnson’s Invokana has been included as a preferred option. In the specialty category, CVS/caremark added oncology drug Xtandi (which had previously been excluded). Changes to autoimmune and hepatitis C drugs are still under review and CVS expects new entrants in the hepatitis C class.
While CVS/caremark appears to have backed off slightly on new drug exclusions in 2018, it has been ramping up efforts to blend value-based contracting into its formulary model. This effort is focused on targeted formulary management by negotiating pricing for specific drugs and conditions rather than focusing on therapy areas.
CVS/caremark has introduced its Transform Value program that includes three types of contracting models. Indication-based contracting bases reimbursement on the specific use of a drug rather than the same reimbursement across all indications. Outcomes based contracting bases reimbursements on predetermined outcomes (for example, if glucose levels are met). Cost-cap based contracting sets a cost threshold based on expected utilization of a drug, for example, per-member, per-month cap. If the cost exceeds those thresholds, then drug companies would see a reduction in reimbursement or may be required to provide a rebate. CVS/caremark is implementing the Transform Value program in the oncology, obesity, and respiratory therapy areas.
Express Scripts continues to take an aggressive approach to exclusions. The PBM’s national preferred formulary list excludes 64 additional drugs in 2018, bringing its total to 159 drugs excluded out of 3,791 available drugs. In 2017, the PBM excluded 85 drugs. For its 2018 formulary management strategy, the PBM is focusing on lowering costs on branded drugs and, as a result, 46 multi-source branded drugs with high spending levels were excluded in favor of generic equivalents.
For 2018, Express Scripts favors Radius Health’s new postmenopausal osteoporosis drug, Tymlos, which has proven similar clinical outcomes as Eli Lily’s Forteo, the current blockbuster. Forteo is excluded from 2018 formulary as Radius negotiated on a wholesale acquisition cost of $19,500 for Tymlos, lower than the $35,500 list price for Forteo. This exclusion could impact Eli Lily’s sales as Forteo, which brought $1.5 billion in 2016.
Amgen’s neutropenia blockbuster, Neupogen is excluded in 2018 and Zarxio and Granix by Novartis are preferred. Neupogen, Granix, and Zarxio (the first biosimilar approved in the U.S.) increase white blood cell levels in patients with cancer, those who have had bone marrow transplants, or those undergoing chemotherapy or who have other conditions that cause low white blood cell levels. The move to favor Zarxio and Granix indicates the PBM is willing to switch patients to non-interchangeable biosimilars rather than new products. Zarxio is available at a 15 percent discount compared to Neupogen’s list price.
For drugs used to treat inflammatory diseases, Express Scripts continues to cover nine products including best-selling drugs, Humira, Enbrel, Actemra, Otezla, Remicade etc. Anti-inflammatory drug class was the major trend driver for 2016, per PBM’s drug trend report.
More than ever, the focus is shifting among payers and PBMs to a defensive posture when it comes to formulary inclusion and increasingly the focus is on comparative value. As illustrated in Decision Resource Group’s analysis of state markets through its Formulary Insights report series, the ability of PBMs such as Express Scripts and CVS/Caremark to steer prescription drug utilization depends, to a large degree, on market penetration – and when it comes to market penetration, geographic variations can be stark. Still, given the size of these PBMs and the billions in projected savings they expect to achieve through exclusions (an estimated $2.5 billion for Express Scripts and $4.4 billion for CVS/Caremark), it’s not unlikely other PBMs and payers will take a similar approach to formulary decisions.
About Formulary Insights
The Formulary Insights report series provides analysis of the trends and market dynamics affecting formulary decisions and product opportunity in each U.S. state, Washington, D.C., and Puerto Rico. Each report includes our proprietary Opportunity Index, analysis of Value-Based and Innovative Contracting, and regulatory and policy matters. Formulary Insights are an enhancement of DRG’s Health Plan Analysis portfolio.
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