ViewPoints: Express Scripts not the only one able to make hay of its latest ‘Drug Trend Report’

Express Scripts published its annual “Drug Trend Report” for 2016 this week and predictably pointed to a dramatic gross-to-net price difference as validation its cost-containment strategy is extracting pounds of flesh from drugmakers, but in reality the paper offered important talking points for both sides.

Drug companies have been under assault from all sides for so-called predatory pricing practices, and one way the industry has sought to defend itself is to shift blame towards other members of the healthcare supply chain. Pharmacy benefit managers (PBMs) like Express Scripts and CVS have been particularly popular targets, in part because the financial details of their arrangements with drugmakers on one side and health insurers on the other remain shrouded in mystery.

The war of words recently ratcheted up a few notches as representatives on both sides have cast aspersions at the other. In the past few months alone, executive from Acorda Therapeutics, Mylan and Pfizer are among those to have criticised the rebate-driven system of healthcare reimbursement that the PBMs supposedly thrive off of, while Glen Stettin, chief innovation officer at Express Scripts, responded publicly last week by pointing out that “rebates do not raise drug prices, drugmakers do.” (See ViewPoints: Biotech CEOs seek to get out in front of storm on drug pricing.)

This week, Express Scripts published the 21st edition of the “Drug Trend Report” in which it noted that per-person spending on prescription drugs increased in 2016 by 3.8 percent, which was significantly below the 5.2-percent jump the year before. In fact, the PBM estimated that if all pharmacy plans across the US managed their benefits as well as it did, the cost savings would have approached $6 billion.

The PBM acknowledged it could not hold down costs on all drugs, and noted that medicines for inflammatory conditions and diabetes were the biggest cost centres last year, which will come as no surprise given the prevalence and availability of high-priced products. In fact, on a per-unit basis the cost of specialty products jumped more than 13 percent, suggesting that all the talk from drug companies about limiting price rises to single-digits each year had clearly not yet taken hold.

AbbVie’s Humira (adalimumab) and Amgen’s Enbrel (etanercept), which experienced unit cost increases of between 10 percent and 18 percent last year, were singled out by Express Scripts as examples of products where drugmakers took an especially aggressive stance on pricing. Critics would also argue that many of these big-ticket items – Biogen’s Tecfidera (dimethyl fumarate)‎ and Teva’s Copaxone (glatiramer acetate)‎ among them – are also notable for being in drug classes where plenty of competition exists, which might otherwise help limit price hikes.

Overall though Express Scripts did manage to put a lid on drug spend for its clients, and perhaps the most relevant statistics contained in the annual report was the finding that the average list price for branded drugs jumped 10.7 percent in 2016, while the unit price actually paid by the PBM’s clients rose by only 2.5 percent, meaning a gross-to-net difference of just over 8 percent secured by way of negotiated rebates and discounts.

Express Scripts will inevitably point to this disparity as justification for why health insurance plans should enlist the PBM’s services. However, it also provides useful ammunition that drugmakers can use to rebut allegations that they are the primary driving force – or beneficiary anyway – of rising drug prices.

Evercore ISI analyst Mark Schoenebaum came to the drug industry’s defence, suggesting that far from demonising pharmaceutical companies marketing practices, Express Scripts’ data do a lot more to exonerate them.

“I understand that the pharma/biotech industry is an easy political target. But the facts aren’t really so offensive,” said Schoenebaum. “I get that specialty drugs have increased much more than the overall system. But it’s the overall system we should look first at. Specialty drugs can take big increases as long as the overall system can absorb it. And lately, the system has been absorbing it,” he added.

Schoenebaum argued that the laser focus of industry critics on specialty drug prices belies the fact that the unit cost of more established (“traditional”) pharmaceuticals actually fell by 2.3 percent in 2016, which also needs to be taken into account in any discussion about drug prices. “Payers/government should logically care most about the overall system. That’s what they are paying for. It’s disingenuous in a way to cherry pick certain drug types if net pricing trends in the overall system are acceptable, which they have been recently,” he concluded.

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