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July 30, 2016

PBMs Create a Path for Me-Too Drugs, Biosimilars on Their Oncology Formulary

Surabhi Dangi-Garimella, PhD
Pharmacy benefit managers (PBMs) and large employer organizations are taking measures to save healthcare costs in 2017, and for PBMs, formulary exclusions is a fool-proof tactic.
“A key to containing cost is effective formulary management,” says a release by one of the bigger pharmacy benefit mangers (PBMs) in the nation, CVS Health, which, along with Express Scripts released their 2017 formulary. The latter announced that it was excluding 85 medicines from its national formulary, with projected cost savings of $1.8 billion in 2017, about 28% more than the current year. CVS has added 35 medicines to its exclusion list—including a few anticancer agents and drugs for diabetes—bumping their exclusion list up to 131.

Come 2017, nilotinib (Tasigna), imatinib (Gleevec), enzalutamide (Xtandi), and filgrastim (Neupogen) will no longer be on the preferred drug list for CVS—they will be replaced by lower cost generic versions or biosimilars. “In situations where the medications are equivalent, from a medical point of view it makes sense to do this in order to reduce cost,” Troyen Brennan, chief medical officer of CVS, told Bloomberg in an interview. The company is also placing importance on an indication-based formulary—especially with multiple indications for each drug—and eliminating drugs that have seen a hyperinflation in their price. Brennan said that the company is now keeping a close eye on drug price hike and that it specifically targeted drugs that had a greater than 200% cumulative price increase in 3 years.

PBM’s, meanwhile, have received flak for not being more upfront and transparent about the drug price rebates that they negotiate with manufacturers, and sharing the savings with employers or clients. This has prompted large employers, such as Macy’s, Coca-Cola, and American Express to form the Heath Transformation Alliance, with the objective of forcing PBMs to seal loopholes and rewrite contracts that would prevent rebate savings to stay within the PBM’s books. If this alliance is successful, their work could potentially impact overall healthcare costs and lend employees some much needed savings.

“The PBMs play a labeling game,” said Linda Cahn, a healthcare attorney who works with health plans, when speaking with STAT News. “So the clients have no idea how much money they are leaving on the table.” She was referring to incorrect categorization of brand-name or generic drugs, which could deprive clients of deserved discount. This could be substantial, considering generics can yield nearly 60% greater discounts than a brand-name drug.

Going back to the formulary exclusions, they apply only to new patients, particularly in oncology—those already on an excluded medication can continue to have access to their prescribed treatment.

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