An article in today's Wall Street Journal by Jonathan Rockoff revisits the Epipen price furor. The main point of the piece is found midway:
“But more than seven months after the introduction of the generic, the more expensive brand-name EpiPen still accounts for more than one-quarter of the market, according to Bernstein Research, even though a brand-name drug’s sales usually shrink after low-cost competition arrives.
One reason, according to multiple people familiar with the drug industry, is that a middleman can profit from the sale of pricier
medicines, such as EpiPen. In the murky world of the U.S. drug-supply chain, higher prices can mean a bigger piece of the pie for middlemen such as pharmacy-benefit managers. There is no way to know exactly how much, however, because the amount a PBM makes is laid out in confidential contracts.”
Rockoff wonders aloud if there is a connection between EpiPen’s market share and rebates.
There is. And here’s how I think it went down:
First, EpiPen has a lot more of the injectable epi market than what Bernstein reports:
According to a Fortune magazine article: Epipen “controlled about 95% of the epinephrine auto-injector market. But that figure has dwindled to just over 71% as more and more doctors opt for rival products, according to a new report from athenaHealth.”
In addition, some of the switches may be due to a Mylan’s voluntary Epipen recall in March of 2017 due to potential injector malfunctioning. However much of the shift is to cash payment of alternatives which, when combined with coupons, reduce the cost of other injectors to near zero.
So what have PBMs done in response?
Cash paying customers don’t generate rebate revenue. So as Mylan’s market share has dropped from monopolistic to dominant, the PBMs have carved out a monopoly for EpiPens on their formularies, excluding all other competitors from their national drug lists.
And that kind of monopoly is a cash cow for PBMs.
Consider that last August, the EpiPen had a monopoly in the epi injector market because of PBM machinations:
In November 2015 Sanofi ($SNY) pulled the main competitor for EpiPen--Auvi-Q--from the market, a turn of events that at the time looked as if it “should keep Mylan dominating the epinephrine injection field.”
Mylan already had 95 percent market share.
CVS and Express Scripts had removed another competitor, Andrenaclick, from its formularies. Andrenclick retailed and still retails at $141 while EpiPen retails at around $600.
The PBMs helped sustain the monopoly because they could generate more rebate dollars.
But later in the year, PBMs demanded higher rebates for the privilege of being the only drug that it covered. They were getting about $400 rebates per EpiPen pack.
When Mylan balked, CVS and Express Scripts moved EpiPen from the lowest cost sharing tier to the highest cost sharing tier causing patients to scream. The media and political storm followed.
The shift in out of pocket prices, the result of PBM manipulation, led to the uproar over the EpiPen.
So where are we today?
The leading PBMs- Express Scripts, CVS, OptumRx, and Prime - have excluded all competitors from their formularies and EpiPen is again the monopoly provider.
Mylan gets a monopoly in exchange for deeper rebates and other concessions (perhaps closer coordination with the PBMs to give them a cut of point of sale coupon revenue) including not covering any other competitors, regardless of cost, ease of use or other factors.
Indeed, other companies were quite willing to meet the PBM demands for retail price and co-pay levels. But because they didn’t have Mylan’s volume, the rebate volume would, in turn, be less. Instead of subsidizing PBMs, the other companies are largely subsidizing consumers directly with lower point of sale prices, often at a huge loss.
It sounds confusing but the result is crystal clear:
A year ago, Mylan had a monopoly and didn’t pay up. It was left twisting in the wind by the PBMs.
This year they have the monopoly. Again. Because the PBMs said so.
Rebates are part of a rigged system that provides cash for big insurers, PBMs, and hospital systems while patients wind up paying more, not less. Manipulation of the quantity, acquisition cost and fixing the sale and resale price of products are classic aspects of a cartel.
It’s time for a change. It’s time to bypass the PBMs. When a business model is so broken, trying to fix it with legislation is a waste of time. We need to build a new model.
CORRECTION: I wrote: "PBMs have carved out a monopoly for EpiPens on their formularies, excluding all other competitors from their national drug lists. "
In fact, as Adam Fein's drugchannels points out: "For 2018, the EpiPen AG and Adrenaclick AG will continue to be treated as tier 1 generics in CVS Health’s 2018 Standard Control Formulary. EpiPen (brand) remains on the formulary as a preferred brand product. AuviQ is excluded.
Express Scripts also became much more aggressive with epinephrine. Its 2018 formulary favors the three Mylan products: EpiPen, EpiPen Jr, and the EpiPen authorized generic (AG). "http://www.drugchannels.net/2017/08/whats-in-whats-out-new-2018-cvs-health.html
Thanks Adam!!
Express Scripts excluded Kaléo’s AUVI-Q
