The decline in sales revenue likely reflects changes in utilization, since many in the cohort of Hepatitis C patients have already received treatment. Yet this decline also reflects downward pressure on prices as well as competition and public pressure resulting in significant discounts.
One source of downward pressure that might have implications going forward are the formularies negotiated by the major pharmacy benefit managers (PBMs). Express Scripts (ESI) and CVS—in their recent release of their 2017 lists—continued their exclusion of Hepatitis C therapies.
In their 2016 lists, ESI famously excluded both Gilead products, Harvoni and Sovaldi. In 2017, they continued their exclusion of Harvoni. (Sovaldi, although on the national formulary, is still not preferred.) ESI also excluded Merck’s new entrant, Zepatier, despite a lower wholesale acquisition cost. CVS went with the Gilead products and excluded the major therapies by AbbVie— Daklinza, Olysio, Technivie and Viekira Pak.
Clearly the exclusions give PBMs leverage in negotiations, but the actual effect on drug price trends is difficult to measure. ESI claims their formulary exclusions save their customers an estimated $1.8 billion, but the accuracy of this claim is difficult to assess. Additionally, PBMs have their own complicated motives, and are not strict fiduciaries by any means. One example is that differences in refund amounts may have led to the exclusion of Merck’s Hepatitis C product, despite the lower wholesale acquisition cost.
While leverage exercised by PBMs may represent one way to contain growth in prescription drug prices, another potential source of downward pressure comes from the nascent movement toward value-based pricing. This is seen in the growing importance of the cost effectiveness analyses performed by the Institute for Clinical and Economic Review, and in the examples of value-based contracts between payers and pharmaceutical manufacturers. The movement toward value-based pricing is also seen in parts of the Medicare Part B demonstration, although this proposed pilot is currently facing widespread attack from a host of opponents in the provider community. The threat of various other types of price regulation at the state and federal level may also be fostering a bit of restraint in the industry, although this is hard to ascertain.
Looking ahead, the CMS projections convey a glimmer of optimism. Prescription drug spending is projected to grow by 6.3 percent, 7.0 percent, and 6.6 percent for the years 2016, 2019 and 2025, respectively. This, of course, is high, but only moderately above the projected NHE growth of 4.8 percent, 5.7 percent and 6.0 percent for these years. Drug spending is always difficult to predict, due to unanticipated developments in both medications and disease, in addition to a complicated supply chain. But there are some signs that, at least in the short run, we are finding ways to avoid a return to 12 percent spending growth.