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.

Big Phar­ma's Twit­ter ex­o­dus; Mer­ck wa­gers $1.35B on buy­out; $3.5M gene ther­a­py; and more

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Paul Perreault, CSL Behring CEO

CSL lands FDA ap­proval for he­mo­phil­ia B gene ther­a­py, sets $3.5M list price

The FDA has approved the world’s first gene therapy for hemophilia B, ushering into the market a treatment that’s historic in both what it promises to do and how much it will cost.

CSL will be marketing the drug, Hemgenix, at a list price of $3.5 million — which sets a new record for the most expensive single-use gene therapy in the US.

In a statement provided to Endpoints News, the Australian company noted that the current costs of treating people with moderate to severe hemophilia B can be significant over a lifetime. By some estimates, healthcare systems could spend more than $20 million per person.

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Elon Musk (GDA via AP Images)

Biggest drug com­pa­nies halt­ed Twit­ter ad buys af­ter Lil­ly in­sulin spoof

Almost all of the drug industry’s biggest advertisers cut their spending on Twitter to zero or near-zero over the last two weeks amid worries about impersonation of their brands by pranksters and the future of the social media company.

Among 18 of the biggest pharmaceutical advertisers in the US market, 12 cut their Twitter ad spending to nothing for the week beginning Nov. 14, according to Pathmatics, which tracks data on prescription drug ad spending as well as general corporate advertising. The list of drugmakers cutting spending to zero includes Merck, AstraZeneca, Eli Lilly, Novartis, Pfizer and others.

Rob Davis, Merck CEO

Up­dat­ed: No Seagen here: 'Do more' means a small $1.35B pur­chase of Ima­go for Mer­ck

Merck is making an acquisition, the Big Pharma announced before Monday’s opening bell. No, Seagen is not entering the fold, as had been speculated for quarters.

Folding under Merck’s wings will be Pfizer-backed Imago BioSciences. For nearly a year, Merck CEO Rob Davis has been saying the pharma giant needs to “do more” on the business development front after its 2021 $11.5 billion acquisition of Acceleron.

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MIT re­searchers re­veal DNA "Paste" tech be­hind lat­est gene edit­ing start­up

MIT scientists have developed a tool that they say can insert large gene sequences where they want in the genome.

In a paper published Thursday in Nature Biotechnology, MIT fellows Omar Abudayyeh, Jonathan Gootenberg and colleagues detail a technology they call PASTE, which they say can potentially be used to insert long strands of DNA and treat genetic diseases caused by many different mutations, such as cystic fibrosis and Leber congenital amaurosis, a rare eye disorder that causes blindness.

Dermavant Sciences' first consumer TV ad for its Vtama psoriasis med shows people ready for a new topical treatment.

Roivant’s Der­ma­vant de­buts first-ever TV com­mer­cial for pso­ri­a­sis cream Vta­ma

Dermavant Sciences has been marketing its first product, psoriasis med Vtama, to dermatologists for months, but on Tuesday it rolled out its first consumer campaign. The debut DTC effort including a streaming TV commercial encourages patients to a “Topical Uprising” in a nod to Vtama being a topical cream.

In the new commercial, a swell of people discards scarves and jacket coverings, gathering in the street to converge on a pharmacy to demand a steroid-free prescription. A moment of levity follows when a pharmacist says, “You know you can just talk to your doctor, right?” The gathered crowds collectively says, “Oh.”

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FDA preps for DMD drug gener­ics as Sarep­ta has yet to fin­ish its con­fir­ma­to­ry tri­al

The FDA typically releases guidance to help generic drug manufacturers develop new copycats of small molecule drugs, oftentimes in preparation for a brand name product’s patents or exclusivity to expire.

This week, FDA released such bioequivalence guidance for any generic drugmakers looking to take on Sarepta’s Duchenne muscular dystrophy (DMD) drug Exondys 51 (eteplirsen), even though the drug’s sponsor has yet to convert the accelerated approval to a full approval, showing clinical benefit.

Stanley Erck, Novavax CEO (Andrew Harnik/AP Images)

No­vavax pulls out of Covid-19 vac­cine al­liance with Gavi

Novavax is pulling out of its Covid-19 vaccine deal with Gavi, the Vaccine Alliance, a global partnership tasked with ensuring vaccine access in lower-income countries, following an alleged contract violation.

The Maryland-based company claimed on Friday that Gavi failed to purchase at least 350 million doses of its protein-based vaccine Nuvaxovid by the end of the year, per an advanced purchase agreement. Gavi, the World Health Organization and the Coalition for Epidemic Preparedness Innovations (CEPI) are co-leaders of COVAX, an effort to ensure that all participating countries, regardless of income levels, have access to vaccines.

Fu­ji­film to build $188M man­u­fac­tur­ing plant in North Car­oli­na’s re­search tri­an­gle

As the Japanese conglomerate Fujifilm continues to invest heavily in its CDMO arm, one of its manufacturing divisions is teeing up a major investment.

Fujifilm Irvine Scientific announced on Tuesday that parent Fujifilm is making a $188 million investment to build a cell culture media manufacturing site in the Research Triangle Park in North Carolina. The new site will mark Fujifilm Irvine’s fifth manufacturing site globally and its second in the US.