ViewPoints: Why Express Scripts' talk of a hepatitis C price war should act as warning to the industry-at-large

Bloomberg reporter Drew Armstrong may have broken one of the most important pharmaceutical news stories of the year on Tuesday when he revealed that the US pharmacy benefits manager (PBM) is to take an aggressive stance towards the pricing of new hepatitis C therapies.

The crux of the story is that Express Scripts will not view the convenience of Gilead Sciences' proposed fixed-dose combination treatment (comprising the compounds of sofosbuvir and ledipasvir, which is likely to be launched in late 2014 or early 2015) as an adequate justification for higher pricing versus less convenient therapies (i.e. more tablets) that produce similar efficacy.

Immediate reaction saw Gilead’s share price fall on the news, primarily as the company has based much of its hepatitis C strategy on equal parts efficacy and convenience. Furthermore, it opens up the opportunity for rival developers such as AbbVie to compete more aggressively on price if they wish.

But the story has broader implications for the pharmaceutical industry, for this stance is not exclusively focused on the hepatitis C market. Express Scripts has already demonstrated itself to be taking an increasingly aggressive position towards the pricing of drugs that it believes offer minimal efficacy benefit over competing therapies.

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Most significantly, the pharmacy benefit manager (PBM) announced earlier this year that from the beginning of 2014 Novo Nordisk’s diabetes treatment Victoza will no longer have a place on its preferred formulary list (see ViewPoints: As Novo Nordisk finds to its loss, price is now king in the US diabetes market).

More significantly, noted analysts, was the decision by Express Scripts to replace Victoza with AstraZeneca and Bristol-Myers Squibb’s Bydureon, a competitor GLP-1 agonist widely viewed to be inferior to Novo Nordisk’s drug, if not in efficacy terms then certainly in terms of convenience. Sounds familiar?

The key statement made by Express Scripts’ chief medical officer Steven Miller on Tuesday was arguably "we will identify which drugs can be pitted against each other and make some really tough formulary decisions" – rhetoric that clearly lays out how the PBM expects to assess drugs moving forward.

Also likely to strike fear into branded pharmaceutical manufacturers was Miller’s assertion that "when you look at the price of many new products coming to the marketplace, it’s just not going to be sustainable" – a statement that looks much more at home in the European pricing environment than the US.

Let’s not forget also the decision by Sanofi to reduce the price of its colorectal cancer treatment Zaltrap last year after a group of prominent physicians wrote a high-profile opinion piece in the New York Times saying that it was no more effective than an existing therapy available at roughly half the cost - ViewPoints: Sanofi blinks first in cancer price stand-off; what implications for industry/payer relationship in US?

Sanford C. Bernstein analyst Ronny Gal told FirstWord that the decision to exclude Victoza should be viewed as Express Scripts testing the water with more restrictive policies designed to produce greater discounts. How physicians and patients react in 2014 – Novo Nordisk told investors last week that it will actively seek to promote both groups to rally against lack of access – could shape how Express Scripts evolves its policies moving forward, Gal told FirstWord.

However, what appears to be a very aggressive stance towards the next generation of hepatitis C therapies indicates that the PBM is hardly holding fire on its strategy. The key question that industry needs to ask is will others follow?

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