The pricing battle pitting insurers and pharmacy benefit managers against drugmakers over a new breed of high-priced and highly effective treatments for hepatitis C may be a preview of tougher negotiations for coverage of other blockbuster drugs.
Harvard Pilgrim Health Care's chief medical officer, Dr. Michael Sherman, told Modern Healthcare a new class of cholesterol drugs will be “the next shock to the system,” prompting payers and drug companies to initiate similar rebate conversations.
Last week, Harvard Pilgrim, headquartered in Wellesley, Mass., struck a one-year deal with Gilead Sciences. That agreement put Gilead's newest hepatitis C drug, Harvoni, which costs $94,500 for a regular course of treatment, on Harvard Pilgrim's preferred coverage list for members. In exchange, Harvard Pilgrim got a discount.
Harvard Pilgrim spent $25 million on hepatitis C drugs for about 300 members last year, which spurred the insurer to negotiate down those higher-than-expected costs. “We, like most other health plans, had not budgeted for that,” Sherman said. “They were priced as if they were serving an orphan-drug population.”
Several other large companies have reached similar deals with Gilead for Harvoni or its other breakthrough hepatitis C drug, Sovaldi. Those include Aetna, Anthem, Humana, UnitedHealthcare, CVS Health and EnvisionRx.
The agreements proliferated quickly after Express Scripts said in late December that AbbVie's new Viekira Pak would be the primary option for its members.
Express Scripts is one of the few large players that publicly chose AbbVie over Gilead, although several Blue Cross and Blue Shield plans, such as Blue Shield of California, have picked Viekira as their preferred hepatitis C drug. Some state Medicaid programs have done the same. Missouri, for example, said last week it chose Viekira for its hepatitis C patients who meet certain medical criteria. Missouri expects the deal will save $4.2 million in 2016. Prime Therapeutics, a pharmacy benefit manager owned by 13 Blue Cross plans, said both companies' hepatitis C drugs were on its preferred drug list.
The emergence of AbbVie's drug resulted in price competition and chipped away at Gilead's hold on the market. Observers say the same could happen with a new cohort of potential breakthrough drugs, which is making its way through the federal approval process.
Sanofi and Regeneron Pharmaceuticals are partnering on a class of drugs that treats people with high cholesterol. Amgen is working on a similar project, specifically involving PCSK9 inhibitors.
The drugs are intended to help treat high cholesterol for people who do not respond to statins. Prices for the new cholesterol drugs are expected to be between $4,000 and $8,000 for a course of treatment but could be more, Sherman said.
The drugs will certainly cost less than the hepatitis C drug regimens. But because high cholesterol affects a much larger swath of the American public—the Centers for Disease Control and Prevention estimates 71 million people have high cholesterol levels—analysts say the manufacturers stand to make billions of dollars in new revenue.
“The drug companies and analysts are thinking blockbuster, and we're thinking, 'How do we pay for this?'” Sherman said. “I can assure you we will be negotiating with both (groups of drug) companies.”
AbbVie CEO Richard Gonzalez told investors last week the company estimates Viekira will bring in $3 billion in sales by the end of this year. Gilead has already reaped massive revenue and profit from its hepatitis C drugs.
Follow Bob Herman on Twitter: @MHbherman