- Programs & Services
August 11, 2017
Executive Vice President, Chief Medical Officer, CVS Health
High drug prices continue to be a concern to payors, consumers and lawmakers alike, and costs for epinephrine auto-injectors are once again a focus. A year ago, the branded EpiPen product accounted for more than 90 percent of market share. EpiPen’s manufacturer, Mylan, had raised the price by 150 percent over three years. Consumers, especially those with unmet deductibles who faced a $600 price tag, took to social media to protest the cost, leading to a great deal of news coverage and eventually to a Congressional inquiry. Subsequently, Mylan introduced an authorized generic version.
While the factors behind EpiPen and other similar price increases have been much discussed, it bears repeating that brand-name drug prices are high because manufacturers set them that way, as the Pharmacy Care Management Association recently asserted. Pharmacy benefit managers (PBMs) do not set drug prices nor do we support increasing them. To the contrary, we negotiate with manufacturers to get the best deal and greatest rebates for our clients, to help mitigate the impact of high drug prices.
Not All Generics are Created Equal
One of the important ways we help lower costs for clients and members is by encouraging the use of generics where appropriate. However, it’s important to note that not all generics are equal. “Authorized generics" (AGs), like Mylan’s EpiPen AG, are considered “single-source” generics. Since they do not face the competition faced by multi-source generics — those manufactured by several companies — they tend not to provide the level of savings we expect from generics. In fact, in an effort to increase market competition, Scott Gottlieb, Commissioner of the U.S. Food and Drug Administration, has made it a priority to focus on new generic applications in categories with fewer than three competing generic manufacturers. Authorized generics are not always a bargain for members either. In some cases, these generics are adjudicated as brands, meaning members may be responsible for the full brand copay instead of a typically much lower generic copay.
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Payor Costs Are Down Compared to 2016
We continue to look for opportunities to negotiate with manufacturers for better prices on many products, as we did successfully with Adrenaclick AG. Beginning in January 2017, we were able to make an alternative, the authorized generic for Adrenaclick, available in CVS Pharmacy locations for $109.99. This led to an overall market move toward more cost-effective solutions in this class.
Our management has helped clients keep their spend growth for branded EpiPen to single digits, despite Mylan’s triple-digit price hikes.* Our analysis also shows that we have been able to help clients reduce their cost per claim for the epinephrine class by 24 percent for drugs included in our Standard Control Formulary over the last year.
2016-2017: Claims Shift from Brand to Generic
Range of PBM Solutions
Increase in generic utilization largely accounts for this year’s cost reduction in the epinephrine category. Over the longer term, a large part of our success in managing cost has to do with the discounts and rebates we negotiate from the manufacturer. Rebates and discounts help control costs for payors and enable them to provide an affordable, sustainable benefit for members by keeping other costs, such as premiums, in check.
In today’s health care environment, high drug costs are an increasingly visible area of concern for consumers, especially for those who are on high-deductible plans. That’s why we encourage the use of generics wherever appropriate. We also offer payors the ability to choose to have rebates applied at point-of-sale (POS). This solution reduces POS member costs but also shifts the cost share structure of a plan, increasing overall payor cost share. Payors may choose to make other plan design adjustments if they wish to maintain the overall economics of their plan.
As a PBM we promote competition, and utilize our scale and clinical expertise, to deliver savings and efficiencies to help our clients manage their costs. We also develop innovative solutions that, should payors choose to implement them, can help provide incremental benefits, such as value-based management. All these efforts are intended to help keep prescription drugs affordable and accessible for payors and members despite manufacturer-driven price increases. To fully address the challenge of rising prescription drug costs, other players must do their part.
Brand price inflation has consistently been the top trend driver, even though brand products account for only a small portion of the drugs dispensed. An emerging trend in the last few years has been multiple price increases annually for branded drugs. Prioritizing generic review, ending anti-competitive behavior such as pay-for-play delays and more manufacturers agreeing to limit price inflation for existing brand drugs, can all help bring drug prices down for payors and consumers.
Controlling costs is most payors’ primary concern. Our market-leading solutions help clients get ahead of trend drivers and achieve lowest net cost.
A comprehensive formulary strategy is foundational to mitigating the impact of escalating drug prices, and the introduction of new high-cost therapies.
*Average cost growth net of discounts, rebates, price protection and member copays for PBM commercial clients aligned with our formulary management strategy.
**Analysis includes commercial clients who have adopted Maintenance Choice. Includes products covered in Standard Control Formulary.
This document contains references to brand-name prescription drugs that are trademarks or registered trademarks of pharmaceutical manufacturers not affiliated with CVS Health.