Express Scripts Holding Co. is primed for the incoming wave of cheaper biological drugs, according to executive comments on the company's fourth-quarter and full-year 2017 earnings call.
The supply chain linking pharmacy benefit managers, or PBMs, such as Express Scripts with insurers, drug distributors and retailers has been shaken up by recent deals, as well as reports of potential acquisitions and disruptions from healthcare industry outsiders.
It is way too early to tell whether the $69 billion deal joining PBM and drugstore chain CVS Health Corp. with large insurer Aetna Inc. will have any impact on Express Scripts' business, President, CEO and Director Tim Wentworth said on the company's call. Executives also shared few details on their PBM contract with Amazon.com Inc., which recently announced a partnership with two financial powerhouses to drill down on healthcare costs as spending growth is expected to accelerate.
"The only thing I'd say it's a normal commercial contract for us; we are performing well to that contract," Wentworth said regarding the company's existing Amazon agreement, which started last year. "I'm not talking about any of the other conversations we've had other than to say, as a client, they care a lot about their employees."
Besides the $3.6 billion purchase of benefits manager eviCore last year, Express Scripts has largely stayed out of recent large M&A. But executives say a joint venture with pharmacy chain Walgreens Boots Alliance Inc. has it ready to shape the future drug cost negotiations, particularly the crucial talks around biosimilars, or biologically equivalent versions of complex medicines derived from cells, that are about to gather momentum in the U.S. market.
Though several biosimilars have been approved in the U.S., few have actually made it to market and more have been tied up in legal battles with the originators of the large-molecule medicines.
"It's frustrating and we've been very, very vocal about the true biosimilars being held up in court," Wentworth said, adding that it could be 2022 or 2023 "before we see a meaningful biosimilar in our country."
There are some biologic rivals to come in the short term, Everett Neville, executive vice president of the strategy, supply chain and specialty segments, soon clarified. A biosimilar for Amgen's bone marrow treatment Neulasta could be a big negotiation point this year, but things will really ramp up when versions of the world's top-selling drug, AbbVie Inc.'s Humira, begin finding their way to market in the 2022 to 2023 range, he said.
Preferred drug lists
Humira, which is prescribed for a range of autoimmune and inflammatory disorders from arthritis to Crohn's disease, made $4.89 billion in sales in the last quarter of 2017. Inflammatory conditions are the biggest expenditure by far for Express Scripts, according to its latest Drug Trend report: Inflammation drugs lead per-person spending across all drug classes and insurance plans.
There are some biosimilars already on the market, but they have also struggled to make headway. Pfizer Inc.'s Inflectra, a version of Johnson & Johnson's own autoimmune drug Remicade, has carved out 5.7% of the market share since its launch in late 2016, which Pfizer has attributed to J&J's contract tactics with the pharmacy benefit managers. Both Inflectra and Remicade are on Express Scripts' preferred list, or formulary, for 2018.
The group purchasing agreement with Walgreens is about long-term buying power in upcoming biosimilar negotiations, Neville said. While initial biosimilar coverage will involve the usual discussions around pricing to get a place on the formulary, Neville said that once there are multiple biosimilars on the market, a group purchasing approach could come into play when making coverage decisions.
"We expect biosimilars agreements to look something like brand agreements and something like generic agreements — so somewhere in between those," he said.