Health

Max Nisen is a Bloomberg Gadfly columnist covering biotech, pharma and health care. He previously wrote about management and corporate strategy for Quartz and Business Insider.

The epic battle between drug makers and the insurers and pharmacy benefit managers that pay for their medicines just opened a fascinating new front. 

Amgen Inc.'s earnings report Thursday afternoon was largely overshadowed by its announcement that its cholesterol-lowering drug Repatha succeeded in a clinical trial designed to prove it helps prevent heart attacks and other cardiovascular events.

But this isn't yet enough to ensure widespread payer and patient acceptance of the drug, given its $14,000 annual cost. Amgen won't reveal full details of the drug's effectiveness until a medical meeting in March. 

This is shaping up as a test of the power payers have to restrict the availability of expensive drugs in large patient populations -- and heart disease is among the largest. Thursday's news was certainly a victory for Amgen, pushing its stock up nearly 4 percent. But we may not know for months or years how much of a victory it is. 

Spiking
Amgen shares are up substantially on the news that its cholesterol lowering drug reduces the risk of heart attacks
Source: Bloomberg

Repatha's sales have been disappointing since its launch in 2015, as payers have thrown up just about every roadblock imaginable to make it difficult to prescribe and obtain. They would rather patients take much cheaper and more widely available statins. The drug booked a modest $141 million in sales in 2016, well below pre-launch expectations.

Down Down Baby
Payer restrictions have held Repatha sales in check and lowered analyst expectations
Source: Bloomberg

Amgen needs a win. Its earnings beat expectations in the latest quarter, but that was driven largely by hiking prices for its aging inflammation drug Enbrel. In fact, a Bloomberg Intelligence analysis recently found much of that drug's growth has come from price increases. Price hikes are less politically palatable these days, making it harder to squeeze more growth out of Enbrel as prescription levels decline. 

Pricey!
A great deal of Enbrel's recent sales growth in the U.S. is price related, which may spell future trouble for the medicine
Source: Bloomberg Intelligence

Sales of Amgen's second-biggest drug, Neulasta, fell in the fourth quarter amid rising competition. Amgen has other potential near-term launches of new drugs for osteoporisis and migraines, but neither have the sales potential of Repatha. 

This is why the company and its investors are rooting so hard for the Repatha Goldilocks scenario. This includes heart-attack data strong enough to drive doctor and patient uptake of the drug, along with quick FDA approval to add the heart-attack benefit to the drug's label. It also involves a ruling by a U.S. court to knock Praluent, a competing drug from Sanofi and Regeneron Pharmaceuticals Inc., off the market.

BI analyst Asthika Goonewardene suggests that, if all goes well, then Repatha could generate as much as $4.5 billion in sales in 2020, versus current consensus of $2 billion. 

Payers, meanwhile, are obviously rooting against wide adoption of Repatha, given the limits they're putting on patient access to it. The data Amgen releases in March will be key: If they're at the low end of expectations, then payers may continue to tightly restrict access to the drug.

But if it turns out Repatha is highly effective at reducing heart attacks and strokes, then patients and doctors might push for more access. And, given how costly heart attacks and strokes are for insurers, an effective Repatha might make payers think twice about keeping it away from patients.

Praluent's fate matters a great deal, as well. A federal judge recently blocked sales of the drug, saying it violated Amgen patents, but Sanofi and Regeneron plan to appeal. If it is allowed to stay on the market and also succeeds in reducing cardiovascular events, then payers will be able to play the drugs off each other to keep prices down. If that drug is booted off the market or fails, then payers will have precious little leverage against Amgen. 

The outcome of this battle means a lot for Amgen. What it reveals about the balance of power between payers and drugmakers will mean even more for the rest of the industry. 

This column does not necessarily reflect the opinion of Bloomberg LP and its owners.

To contact the author of this story:
Max Nisen in New York at mnisen@bloomberg.net

To contact the editor responsible for this story:
Mark Gongloff at mgongloff1@bloomberg.net