More Medicine Goes Off Limits in Drug-Price Showdown

Updated on
Advair
GlaxoSmithKline's asthma drug Advair. Photographer: JB Reed/Bloomberg

Steve Miller is waging war on high-priced medicine, guiding decisions to ban drugs from the health plans of millions of Americans and sending companies reeling in a $270 billion market.

He and his colleagues at Express Scripts Holding Co. say they are just getting started.

Miller is chief medical officer for the company, which oversees prescription benefits for health plans and employers covering 85 million patients. Unless more is done about a wave of new and expensive drugs, some priced at as much as $50,000 a month, Miller says that health plans are going to be swamped as costs double to half a trillion dollars as soon as 2020.

Employers with health plans “are just terrified,” said Miller, after showing a visitor a giant prescription-filling room packed with robots stuffing pills in bottles. In a few years, “you could be in the business of running your company to pay your pharmacy bill.”

Express Scripts deploys powerful cost-control weapons: refusing outright to pay for dozens of drugs, and setting hurdles for patients to access the most expensive medications.

The St. Louis-based company is excluding 66 brand-name drugs in 2015 from its main formulary, or list of covered drugs, up from 48 in 2014, when it started exclusions. Each year’s list bans the popular rheumatoid arthritis drug Simponi, a $3,000-a-month injectable medicine from Johnson & Johnson.

Pushing Back

Express Scripts is also removing Amgen Inc.’s red blood cell-boosting drugs Epogen and Aranesp from its formulary in 2015. The exclusions apply when the drugs are billed through health plans’ pharmacy benefits, not when they are administered at hospitals, said David Whitrap, an Express Scripts spokesman.

Product choice “ultimately” resides with doctors and patients, Amgen said in an e-mailed statement. Aranesp is used less in the ``retail setting’’ than at hospitals, it said.

Other prescription-benefits managers are expanding exclusions. CVS Health Corp.’s unit that competes with Express Scripts will keep 95 drugs off of its main formulary in 2015, including Rebif, an injection for multiple sclerosis priced at more than $5,000 for a four-week supply. CVS exclusions numbered about 70 in 2014.

From 2012 through 2015, CVS expects “rigorous” formulary management will save more than $3.5 billion for clients, according to Christine Cramer, a company spokeswoman.

Government programs are also pushing back. The Illinois Medicaid program said in July that hepatitis C patients would have to meet 25 criteria to qualify for Gilead Sciences Inc.’s Sovaldi, which costs $84,000 for a 12-week regimen.

Glaxo Hit

Among 42 state Medicaid plans, 27 pay for Sovaldi only for people with severe liver damage, and others also impose coverage limitations for patients with recent substance-abuse problems, according to data from Malinda Ellwood at Harvard University’s Center for Health Law and Policy Innovation.

If they keep raising prices, drug companies “face an increasingly ugly backlash from plan sponsors,” Express Scripts’ Miller said. The company only excludes drugs when there are clinical equivalents available, according to Miller, who said the removals have prompted few complaints.

Some drug makers are hit hard by such moves. In January, Express Scripts removed GlaxoSmithKline Plc’s asthma drug Advair from its main formulary, or coverage list -- the first time it barred a drug so widely used. Glaxo, based in the the U.K., was demanding a “significantly higher price” for Advair, which is no better than competing drugs, Whitrap said. The inhalant costs $373.18 per month for the highest dose.

Survival Threat

The combined market share for Advair and a second Glaxo inhaler fell 8.5 percentage points between December 2013 and October 2014, while competing brands gained, according to data from Bloomberg Intelligence. Glaxo shares fell 8.8 percent this year through Nov. 24, as European drug stocks broadly rose.

Glaxo and other drug makers are facing more price pressure, competition and benefit plans limiting patient choice, Jenni Ligday, a company spokeswoman, said in an e-mail.

Formulary access to Advair is improving and ’’will strengthen considerably in 2015,’’ she said. Advair will go back on the formulary in 2015 because Glaxo offered a better price, Express Scripts said.

Three drug-compounding companies alleged in a lawsuit this month that Express Scripts is denying insurance claims for their customized medicines in decisions that lack scientific backing, threatening to put them out of business.

Bottlenecks

Express Scripts declined to comment on the suit. Its website says that clients’ costs for compound drugs had grown sixfold to $171 million a quarter over two years, driven by “exorbitantly overpriced” ingredients.

Meanwhile, at least a quarter of hepatitis C patients with prescriptions for Harvoni, a combination pill from Gilead that includes Sovaldi, “are facing delays or a bottleneck in insurer authorization for pharmacies to fill their prescription,” according to a Nov. 13 report from Wells Fargo & Co. analyst Brian Abrahams.

Express Scripts’ goal is to use its clout to shift market share to drug companies willing to give it better discounts, said Miller, age 57, a kidney doctor who was chief medical officer for Barnes-Jewish Hospital in St. Louis before he joined the company in 2005.

Drug companies that “think they can charge whatever they want” in competitive categories “run the risk of being excluded,” said Glen Stettin, 50, Miller’s colleague responsible for clinical products, including formularies.

Delays, Snags

Miller and Stettin, the two top doctors at the company, were “intimately involved” with the decision to start the drug exclusions in 2014, Whitrap said. Express Scripts’ main formulary covers 25 million people and is mostly used by employers and union-sponsored health plans. Other clients, including insurer WellPoint Inc., make their own formularies.

Ninety percent of commercial health plans required prescriptions for some specialty drugs -- usually high-cost medicine for complex or life-threatening conditions -- to be pre-approved by insurers in 2013, up from 82 percent in 2011, according to the Pharmacy Benefit Management Institute, a research group in Plano, Texas. And 74 percent sometimes required patients to try cheaper drugs before more expensive ones, up from 60 percent in 2011, the report said.

Doctors say the process results in treatment delays when paperwork gets snagged, appeals need to be filed, or patients are daunted by the barriers and give up.

Dear Patient

Denise Marksberry, 47, of Ruther Glen, Virginia, said she couldn’t find a drug that controlled the symptoms of her rheumatoid arthritis until 2012, when she started taking Johnson & Johnson’s Simponi.

In late 2013, she said a letter from her insurer suggested it wouldn’t pay for the drug in 2014, and that she had to switch to one of two alternatives. Operators for her insurer confirmed her understanding in two long phone calls, she said.

“They said they wouldn’t cover it,” she said. Figuring an official application to stay on Simponi stood little chance, her doctor switched her to one of the other drugs.

After switching, she said she lost 10 pounds because she was queasy and had headaches after each weekly injection. She recently stopped therapy in hopes of getting back on Simponi next year.

Blue Cross Blue Shield Association, the umbrella group for Marksberry’s insurance plan, said in an e-mailed statement that she is covered for Simponi but her doctor didn’t return a required authorization form. It said the letter to Marksberry informed her about a new requirement that her doctor gain authorization for her to stay on the drug. The 2-page authorization form has 17 questions.

Prepared Scripts

“There is never a period of time where I don’t have some patient that is without medication” because of delays in getting insurance approval, said Peter Snyder, an endocrinologist at the University of Pennsylvania, who treats life-threatening pituitary disorders.

He said denials are issued by “low-level employees who are reading from prepared scripts” while his staff tracks down higher-ups to reverse the decision.

“It used to be the most important time was the time you spent actually speaking to the patient. Now it is the paperwork” to get drug approvals, said William Harvey, a rheumatologist at Tufts Medical Center. “The methodology is they hope you will get so tired that you will just give up.”

A quarter of his patients who need expensive biologic drugs face treatment delays because of the bureaucracy, he said.

Costly Cancers

Rising costs have come as a jolt after a period of moderation brought about by new low-priced generics in the market. Federal data show annual cost increases averaging less than 2 percent for the four years through 2013, when $272 billion was spent on prescription drugs.

While drugs at upwards of $100,000 a year have been around for years, the conditions they treated were usually limited to rare disorders, including enzyme deficiencies and unusual cancers. Now such prices are spreading to more diseases, and are especially prominent for cancer.

Sixteen of the 33 cancer drugs introduced since 2010 cost $10,000 a month or more and all were at least $5,000 a month, according to data compiled by Memorial Sloan Kettering Cancer Center, in New York. Only four of 44 cancer drugs introduced in the 1990s cost more than $5,000 monthly.

Sovaldi, which could be beneficial to 2.7 million Americans with hepatitis C, racked up $8.55 billion in sales in the first nine months of this year.

Futile Calls

“Never before has a drug been priced so high to treat such a large population,” Miller said.

In addition to hepatitis C, payers are closely monitoring a new class of injected cholesterol drugs in late-stage testing at companies including Sanofi and Amgen Inc.

Miller said the drugs could reach tens of billions in annual sales based on a price of $10,000 a year, which is comparable to other drugs engineered the same way, and a potential market of 10 million heart patients.

Initially, Express Scripts didn’t restrict use of Sovaldi, other than verifying that patient had the disease and were being treated by appropriate specialists. Instead, it had its pharmacists call doctors’ offices and ask whether they would be willing to postpone treating patients with earlier-stage disease until cheaper, more convenient regimens came out. The calls didn’t have much impact, Miller said.

Some Illinois doctors say the state’s Medicaid restrictions on Sovaldi, including limiting it to sicker hepatitis patients, aren’t based on medical evidence.

Subtracting Billions

“It is a bellwether moment in American medicine, where we have a disease that is known to cause significant morbidity and mortality that we basically are not treating because of cost,” said Steven Flamm, chief of the liver-transplant program at Northwestern University Feinberg School of Medicine.

Gilead’s Harvoni, a pill that combines Sovaldi with a second drug, reduces treatment time from Sovaldi’s 12 weeks to eight weeks for some patients. Harvoni, approved by the U.S. in October, is priced at $63,000 for the shorter regimen.

Harvoni’s cost to the health-care system “is significantly less” than other treatments, Gregg Alton, an executive vice president at Gilead, said in an e-mailed statement.

Although it’s understandable that doctors want unfettered access to drugs for patients, Miller said sometimes decisions aren’t based on the medical evidence or are influenced by pharmaceutical sales representatives.

Express Scripts “acts as a countermeasure” to this marketing, Miller said. “We can take billions out of the system by doing it.”

Before it's here, it's on the Bloomberg Terminal. LEARN MORE