When the $10K brand name drug is more af­ford­able than its $450 gener­ic: How PBMs con­trol the sys­tem

Phar­ma­cy ben­e­fit man­agers — the much-ma­ligned mid­dle­men be­tween drug man­u­fac­tur­ers and health in­sur­ers — of­ten tilt the mar­ket, 80% of which is con­trolled by 3 of the largest PBMs, in their own and un­usu­al ways.

These games, like claw­ing back mon­ey af­ter a pre­scrip­tion has been dis­pensed, or of­fer­ing re­im­burse­ments that don’t cov­er the cost of what phar­ma­cies pay for a drug, were on full dis­play at Thurs­day’s meet­ing where the Fed­er­al Trade Com­mis­sion de­bat­ed whether to look in­to these PBMs, some of which have grown so big to be on the For­tune 15.

But com­mu­ni­ty phar­ma­cists and oth­er PBM com­plaints didn’t end up sway­ing two of the con­ser­v­a­tive com­mis­sion­ers on the FTC, who vot­ed down chair Lina Khan’s plan to study the PBMs’ an­ti-com­pet­i­tive busi­ness prac­tices fur­ther.

An­to­nio Ciac­cia

But a clos­er look in­to some of these pric­ing games shows how PBMs can con­trol mar­kets, and use an­ti-com­pet­i­tive tac­tics, like fa­vor­ing brand-name drugs when gener­ics are avail­able, to boost their own bot­tom lines.

An­to­nio Ciac­cia, who ex­am­ines drug pric­ing prac­tices at the re­search firm 46brook­lyn, ex­plained to End­points News that many health in­sur­ance plan spon­sors are un­so­phis­ti­cat­ed when it comes to drug pric­ing, and many re­ly on ben­e­fits con­sul­tants who al­so have vary­ing de­grees of ex­per­tise and con­flicts of in­ter­est.

“Think of it like a ca­ble bill. The bill is the bill un­til you call and say you’ll can­cel it, and then the bill changes. In a much more so­phis­ti­cat­ed fash­ion, this same thing ex­ists in the PBM world,” he said. “Just when you think you know how PBM con­tracts work, you re­al­ize you have no idea how they work.”

One re­cent ex­am­ple sheds light on the ex­tent of how peo­ple with can­cer can get stuck with a much more ex­pen­sive drug for the en­tire health care sys­tem, even though cheap­er gener­ics are on the mar­ket and read­i­ly avail­able.

Janssen’s metasta­t­ic prostate can­cer drug Zyti­ga (abi­raterone or Xyti­ga) costs $10,000 as a brand name drug, but came to mar­ket in 2019 as a $450 gener­ic. Still, some health plans and PBMs on­ly cov­er the brand name ver­sion.

One of the myr­i­ad rea­sons why a PBM would want to cov­er a much more ex­pen­sive brand name drug than the cheap­er gener­ic is that they re­ceive a per­cent­age of that price as a re­bate and they can rack up these larg­er re­bates more quick­ly with more ex­pen­sive drugs. This is part of the rea­son why in­sulin list prices con­tin­ue to in­crease each year even though the top 3 drug man­u­fac­tur­ers will main­tain that the ac­tu­al net prices have de­clined in re­cent years.

But in the case of Janssen’s block­buster can­cer drug, gener­ic com­pe­ti­tion in the US rav­aged it, pulling US sales down from al­most $2 bil­lion in 2018 to $119 mil­lion last year. The brand ver­sion of Zyti­ga still con­trols in­ter­na­tion­al mar­kets out­side the US, where the drug hauled in more than $2 bil­lion last year.

De­spite that gener­ic com­pe­ti­tion, some US health plans and PBMs might in­cen­tivize pa­tients to se­lect the brand name ver­sion — such as by of­fer­ing a low­er co-pay – so that a PBM may earn more.

Here’s a look at a list of in­sur­ers cov­er­ing the gener­ic ver­sion of Zyti­ga, with some plans plac­ing it in high­er tiers that re­quire these high­est out-of-pock­et costs, or some like Unit­ed­Health­care which ap­pear to not cov­er the drug. Ac­cord­ing to the in­sur­er Hu­mana,

  • Tier 1: Low-cost gener­ic and brand name drugs
  • Tier 2: High­er-cost gener­ic and brand name drugs
  • Tier 3: High-cost, most­ly brand-name drugs that may have gener­ic or brand-name al­ter­na­tives in Lev­els 1 or 2
  • Tier 4: High­est-cost, most­ly brand-name drugs

And de­spite what the chart says, Unit­ed­Health­care told End­points re­cent­ly that it does cov­er the gener­ic ver­sion of Zyti­ga at  250 mg “across our com­mer­cial pre­scrip­tion drug lists. Zyti­ga 250mg, Zyti­ga 500mg and the gener­ic abi­raterone 500mg are cur­rent­ly ex­clud­ed from cov­er­age.”

End­points ob­tained a record­ed phone call be­tween a physi­cian and some­one who works for a PBM dis­cussing Zyti­ga gener­ics. Both speak­ers asked to re­main anony­mous, but they ex­plain how cov­er­age can be re­strict­ed in cer­tain cir­cum­stances so that a brand-name drug has to be used.

“If the brand name is Tier 2, the gener­ic would be a Tier 4?” the doc­tor asks. “So in that case, tak­ing the gener­ic prod­uct would be sig­nif­i­cant­ly more ex­pen­sive than tak­ing the brand.”

Ciac­cia said that some­times PBMs will set guar­an­teed prices for 96% of drugs cov­ered, but then it’s in these oth­er 4% — where they can play games, and “where all the fat of the meal will be cooked.”

He said PBMs can al­so dic­tate that a drug has to be ob­tained from a PBM’s own spe­cial­ty phar­ma­cy too. “PBMs can make mon­ey on ei­ther the up­stream or the down­stream.”

Sta­cie Duset­z­i­na

Cov­er­age for Zyti­ga in Medicare al­so varies based on the two strengths of the drug, 250 mg and 500 mg ver­sions.

Sta­cie Duset­z­i­na, as­so­ciate pro­fes­sor of health pol­i­cy at Van­der­bilt Uni­ver­si­ty Med­ical Cen­ter, told End­points that for Medicare Part D plans, there were al­most 600,000 ben­e­fi­cia­ries who are still on plans that have brand-on­ly cov­er­age for Zyti­ga 500 mg ver­sion, al­though that num­ber rep­re­sents just 1.4% of all those en­rolled.

An­oth­er near­ly 10 mil­lion plans cov­er both the Zyti­ga 500 mg gener­ic and brand (22% of all en­rolled), while 54% of those en­rolled are on gener­ic-on­ly plans, and an­oth­er near­ly 20% of the plans don’t have cov­er­age for ei­ther the gener­ic or the brand, da­ta pro­vid­ed by Duset­z­i­na show.

For the 250 mg ver­sion, how­ev­er, none of the Part D plans on­ly cov­er the brand name, and al­most 99% of plans just cov­er the gener­ic (the oth­er 1% cov­ers the gener­ic and brand).

The Amer­i­can Can­cer So­ci­ety es­ti­mates about 270,000 new cas­es and about 34,500 deaths of prostate can­cer in the US in 2022.

But be­yond the games that were on full dis­play at the FTC hear­ing on Thurs­day, many ex­perts point out that PBMs have al­so grown too big to fail, or cut out. Mark Cuban re­cent­ly launched a cost-plus-15% gener­ic drug com­pa­ny, but it doesn’t cov­er every drug yet, and they’re plan­ning to op­er­ate as a com­pound­ing phar­ma­cy.

UP­DAT­ED: In a fresh dis­ap­point­ment, Am­gen spot­lights a ma­jor safe­ty is­sue with KRAS com­bo

Amgen had hoped that its latest study matching its landmark KRAS G12C drug Lumakras with checkpoint inhibitors would open up its treatment horizons and expand its commercial potential. Instead, the combo spurred safety issues that blunted efficacy and forced the pharma giant to alter course on its treatment strategy, once again disappointing analysts who have been tracking the drug’s faltering sales and limited therapeutic reach.

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Ad­dress­ing the ‘Ca­pac­i­ty Crunch’ with a Scal­able Plat­form Process Ap­proach

The field of gene therapy has been diligently moving forward over the past several decades to bring potentially life-saving treatments to patients with genetic diseases. In addition to two approved adeno-associated viral (AAV) gene therapies, there are more than 250 AAV gene therapies in various clinical trial stages.1 AAV vectors remain the most frequently used vector for delivering therapeutic transgenes to target tissues due to their demonstrated and lasting clinical efficacy and extensive safety track record. As AAV therapies advance through clinical trials and into commercialization, many biotech companies are turning to contract development and manufacturing organizations (CDMOs) to prepare their programs for late-stage clinical and commercial scale manufacturing. Given the scope and scale of the manufacturing needs that will accompany regulatory approvals for these assets, CDMOs continue to expand their capacity to meet the needs of increasing prevalent patient populations. However, despite rapid growth, projected gene therapy manufacturing demands still outpace the collective capacity of the CDMO industry.

A $5B Pfiz­er buy­out? Am­gen, Gilead head­line M&A Thurs­day; Al­ny­lam's AT­TR sweep; An­drew Lo's rare dis­ease quest; and more

Welcome back to Endpoints Weekly, your review of the week’s top biopharma headlines. Want this in your inbox every Saturday morning? Current Endpoints readers can visit their reader profile to add Endpoints Weekly. New to Endpoints? Sign up here.

One of the cool things about adding EndpointsPharma to the daily roster is that my colleagues can now dedicate time to tracking quarterly updates and tuning into calls with Big Pharma companies. Check out their dispatch from the Q2 earnings below.

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George Yancopoulos, Regeneron president and CSO (Brendan McDermid/Reuters/Alamy)

George Yan­copou­los says he's on the trail of the holy grail: ‘This could rep­re­sent the next break­through for im­munother­a­py’

Two of the most outspoken — and successful — drug developers in biotech say they’ve collected early-stage clinical data that are pointing them down the trail to the holy grail in cancer immunotherapy R&D.

While analysts largely busied themselves today with chronicling the ongoing success of Regeneron’s two big cash cows — Dupixent and Eylea — chief scientist George Yancopoulos and CEO Len Schleifer used the Q2 call to spotlight their early success with a combination of the “homegrown” PSMAxCD28 costimulatory bispecific antibody REGN5678 in combination with their PD-1 checkpoint Libtayo. The presentation comes just weeks after Regeneron completed a deal to gather all rights to the PD-1 that had been in Sanofi’s hands. And the two top execs are unstinting in their praise of the potential of a whole set of costimulatory pipeline projects which they say may finally deliver the long-awaited next-level approach to broadening the immunotherapy field of drugs.

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Albert Bourla, Pfizer CEO (Laurent Gillieron/Keystone via AP)

Break­ing: Pfiz­er in hot pur­suit of a $5B buy­out of Glob­al Blood Ther­a­peu­tics — re­port

Pfizer CEO Albert Bourla has vowed to leave no stone unturned in the search for new biotech deals, and the BD team is not letting him down.

The Wall Street Journal reported today that Pfizer is in the final stages of acquiring Global Blood Therapeutics for $5 billion. According to the Journal report, though, Pfizer is not the only buyer at the deal table and while the pharma giant may be close to clinching it, there are no guarantees it will continue.

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Bob Bradway, Amgen CEO (Justin Kase Conder/AP Images for Amgen)

UP­DAT­ED: Am­gen chief Brad­way nabs a rare dis­ease play­er in $4B buy­out as the M&A tem­po ac­cel­er­ates

Amgen CEO Bob Bradway is bellying up to the M&A table today, scooping up the newly anointed commercial biotech ChemoCentryx $CCXI and its recently approved rare disease drug for $3.7 billion out of the cash stockpile. The deal comes in at $52 a share — a hefty increase over the $24.11 close yesterday.

Bradway and the Amgen team get a drug called Tavneos (avacopan) in the deal, a complement factor C5a inhibitor OK’d to treat anti-neutrophil cytoplasmic autoantibody (ANCA)-vasculitis, an autoimmune disease which can be lethal.

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(AP Photo/Richard Vogel, File)

US de­clares mon­key­pox a na­tion­al health emer­gency, as new drug­mak­ers con­sid­er en­ter­ing vac­cine race

Rising monkeypox cases have put the US on high alert as it announces a national health emergency, which grants the government more power in its response.

The news comes as Bavarian Nordic continues to fill orders for its Jynneos vaccine and other companies – including Moderna – consider jumping into the vaccine race. Meanwhile, the New York Times reports that the US has allowed around 20 million doses of smallpox vaccine in its stockpile to expire.

Vlad Coric, Biohaven CEO

Bio­haven touts surge in Nurtec sales ahead of Pfiz­er takeover

Forget buyer’s remorse, Pfizer is likely feeling pretty good about its $11.6 billion Biohaven takeover deal following reports of a 57% sales boost for migraine med Nurtec.

Biohaven reported in Q2 results on Friday that it’s cleared the necessary antitrust hurdles to move forward with the sale of its calcitonin gene-related peptide (CGRP) assets to Pfizer. However, because the company is “focused on workstreams related to the closing” of the deal, it did not host a call with analysts and investors.

Pharma ads are showing up on cooler screens at retail pharmacies, including Walgreens and CVS, under a new OptimizeRx deal (OptimizeRx)

Phar­ma brands chill in the phar­ma­cy re­tail aisle with new style ads on re­frig­er­a­tion screens

Want a prescription drug with that soda? While not directly possible, ads for pharma brands now running on beverage and snack cooler screens at pharmacy retailers may at least inspire customers to think about it.

OptimizeRx is hooking up with Cooler Screens media company to bring prescription drug advertising to refrigerator front doors at pharmacies including Walgreens, CVS and Kroger.

The “point of dispense” ads show a full-door image on the cooler doors when a shopper is 12 feet away, but shrinks down to a smaller banner-sized ad so that the refrigerator contents can be seen when a person gets closer. The doors — which have to be specially installed by Cooler Screens — can detect when a person is nearby, how long a person “dwells” in front of the ad and if they do or don’t open the door.

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