Friday, August 05, 2016

The Business of Diabetes: CVS Caremark's Salvo in Biosimilar Insulin for 2017

Its already mid-2016, and for nearly the past decade, I've been pushing for so-called "biosimilars" or "follow-on biologics" like insulin to be legalized and then introduced in the U.S. (I first investigated this issue back in 2006, and published an article on it in January 2007). The reality is that without any form of generic competition, prices continue to rise with absolutely nothing to stop them.  In recent years, there have been some hyper-aggressive price-increases from the insulin oligopoly, especially within the last 3 years or so.  The reason: they all KNOW that their insulin analog patents are about to expire soon, so they've made a shameless money-grab with huge price increases before that happens.  The retail cost of a vial of insulin is now over $125 a vial, and that's for old varieties like Regular or NPH which have been on the market for like 95 years.  I haven't even bothered to price insulin analogs!

The Affordable Care Act (a.k.a. "Obamacare") finally legalized biosimilar medicines in the U.S. Before that, there was a lot of complaining and bellyaching from pharmaceutical and biotechnology companies that there was no regulatory pathway, which was only true for some newer biotech medicines.  Because insulin was the very first biotech medicine ever approved by the FDA, its grandfathered under the law as a "small-molecule" drug (along with human growth hormone, another very early-generation biologic medicine), so there was no legal impediment for biosimilars.  Consider the case of a very early biosimilar version of human growth hormone known as Omnitrope, which was approved on June 1, 2006, several YEARS before the Affordable Care Act was passed into law on on March 23, 2010 and later implemented in 2011.

The industry bellyaching was more excuses than anything else as far as insulin was concerned.  Frankly, there just wasn't very much incentive from pharma to pursue biosimilar insulin products like Regular and NPH because most American patients were already being switched to more expensive, patent-protected insulin analogs.  But its now fair to presume that this particular money tree has just dropped its last leaf for the likes of Lilly, Sanofi and Novo Nordisk.  The real question is how patients with diabetes will be impacted?

On Monday (August 2, 2016), Express Scripts notified (see HERE for the news) its PBM customers that starting in 2017, 85 medicines would be excluded from its national formulary, and, as a result, that company anticipates about $1.8 billion in savings, up from $1.3 billion in 2016.

Then, the very next day [on August 3, 2016], competitor CVS, which is a large retail pharmacy with an equally large pharmacy benefits manager (PBM) business named Caremark (which competes directly with Express Scripts) levied the first salvo in this battle, announcing that it would recommend to its PBM clients that they drop Sanofi's Lantus (U-100 insulin glargine rDNA origin) from their formularies.  (See the news HERE).  Realize that PBM corporate clients are under zero legal or in many cases even contractual obligation to do so, and they can certainly choose to continue covering Sanofi's U-100 Lantus if they wish.  But as a practical reality, given the big cost-savings expected from following the recommended PBM formularies, most companies will likely follow Express Scripts' and CVS Caremark's recommendations.

CVS Caremark wrote to its PBM clients "CVS Health is taking a stand against egregious drug price increases that unnecessarily add costs for clients and their members.  On a quarterly basis, products with egregious cost inflation that have readily available, clinically appropriate, and more cost-effective alternatives may be evaluated and potentially removed from the formulary."

There was some murmur from people with diabetes about another choice being taken away from them, especially since formularies have become ever more aggressive in pursuit of lower prices for "therapeutically equivalent" medicines in recent years.  For example, over the last 7 years, my employer's insurance company PBMs have switched from Lilly Humalog (U-100 insulin lispro rDNA origin) to Novo Nordisk Novolog (which known as Novorapid in many other markets, but is U-100 insulin aspart rDNA origin) back to Lilly, back to Novo Nordisk, and back to Lilly over a few years.  I just got tired of routine switching to similar, but not identical, insulins that require new ratios and testing to make the switch to a new brand of insulin happen (insurance fights to give me any more test strips as it is).  True, one of the brand switches involved a switch to new insurance carrier, but the point was that I was being treated like a ping pong ball, and I grew tired of routine annual switching to save the insurance company money while my co-pays go up, so I pushed my endo to challenge the switch to slow-mo-log (slow motion from Novo), and after a few appeals, I did manage to get my way.  But that should not have happened, what doctors prescribe is supposed to based on medicine, not necessarily costs unless patients have a need.

I made a number of comments to the FDA on labeling and the like when the docket opened for biosimilars a while back, and I think FDA has tried to incorporate patient concerns into its final guidance.  But the business environment is something FDA has very little control over.  The CVS Caremark move to drop Sanofi's Lantus from its 2017 formulary is an acknowledgement that big pharma has gotten a little too greedy with the price increases.  I would add that market share leader Novo Nordisk has started paying a price for it.

When Novo Nordisk announced its earnings today (on August 5, 2016), the company's shares fell by 8% after Novo cut its forecast for 2017 full-year profit growth, and said it expected tough competition in the U.S. to pressure prices next year.  As a point of reference, Novo Nordisk gets around half its revenue from the U.S.

Diabetic Investor David Kliff has been warning of this for several years, arguing in 2013 that:

"The insulin market, both short and long acting, is transforming itself into a commodity market where price trumps performance. The GLP-1 is also undergoing this transition albeit at a slower rate."  He was also quite critical of Novo Nordisk management for na├»vely believing that it could maintain very aggressive prices/price increases for its products faced with the genuine possibility of "generic" (biosimilar) competition for the first time.

Today, Novo Nordisk chief executive Lars Rebien Sorensen told investors "In the USA, the market environment is becoming increasingly challenging and contract negotiations for 2017 have reflected an intensifying price competition."

"Because of competition and biosimilar entries, we've had to increase our rebates to retain that level of access in the marketplace," Soerensen said by phone on August 5, 2016 (see HERE). "In reality, the only way you can insulate yourself from pricing pressures are by, long-term, introducing new and better products."

Meanwhile, rival Lilly, much as David Kliff told investors in 2013, anticipated that the insulin market was transforming into a commodity business, and in recent years, Lilly has aggressively competed on price to win a spot on various insurance company formularies ranging from Kaiser Permanente to United Healthcare.  Previously, Lilly hadn't paid very much attention to insulin, and that lack of attention allowed rival Novo Nordisk to usurp Lilly insulin from so many insurance company formularies.  But in December 2016, Lilly and its German partner Boehringer Ingelheim will introduce their own Lantus biosimilar (U-100 insulin glargine rDNA origin) branded as Basaglar.

Lilly isn't alone, either.  Rival Merck (along with its South Korean partner Samsung Bioepis) will also introduce a Lantus biosimilar, too.  Although they haven't yet come up with a brand name or logo yet, its Lantus biosimilar is now called MK-1293, which received the same FDA pre-approval as Basaglar did a a while ago (see the news HERE and HERE) and both Lilly and Merck's versions of Lantus are expected to compete aggressively with Sanofi's Lantus on price, hence CVS Health (Caremark) will have a few new choices for the best-selling insulin Lantus that it never enjoyed before.  The thing is, these are biosimilars, which are better than "therapeutically equivalent" switches that insurance has routinely put patients through recently.  But Lantus is merely the first and biggest insulin; products like Humalog, Novolog, Levemir and Aprida all face patent expirations soon.

Other potential competitors for biosimilar insulin include the Sandoz generics unit of Novartis, as well as Israeli drug giant Teva.  Although I did not anticipate competition coming from fellow big pharma giants like Merck and Lilly, the day of biosimilar insulin will indeed be here in early 2017.

For me, the main issue is not who makes the insulin, but the insurance companies routine switching that is starting to get on my nerves!

Update, September 1, 2016:  The news that Novo Nordisk's longstanding CEO, Lars Rebien Sorensen will retire early (at the end of 2016) was a direct result of pricing pressures mounting for the company (see HERE for more), as noted above.  Novo is much more reliant on fat profits from the U.S. even though it operates worldwide, profits outside the U.S. are much smaller.  The recent news is something of acknowledgement that the era of easy profits from the U.S. are going to be much harder in the future as large U.S. payers flex their muscles as described above.

Update, September 22, 2016:  In addition to PBM CVS Health (Caremark), there was news today that United Healthcare will be dropping Sanofi's Lantus (U-100 insulin glargine rDNA origin) from its formulary (see the news at HERE for more detail).  As the giants like CVS and United Healthcare drop costly insulin varieties, 2 possible responses could occur: either more follow suit, or Sanofi gets aggressive and lowers its prices.


Jonah said...

I do want to point out that Walmart still sells R, N and 70/30 for 24.88 per vial. There's where I get my insulin. Walmart has switched the brand it re-brands as Relion over the years, but it's still much much much cheaper than the $125 you just claimed. I buy it without my insurance because my insurance insists there's no such thing as generic insulin, and a non-generic prescription is $40 to fill, and I only need one vial of each, so it's cheaper to just buy out of pocket.
I use Regular because it works better for me than Novolog, which is the only other fast acting insulin I've used (for me, Regular is as fast as Novolog). I use NPH rather than Lantus because I'm disgusted with the price raising of Lantus (Lantus doesn't improve my blood sugar compared to NPH, but it does remove one shot per day).

Scott S said...

Jonah, I agree that Novolog (U-100 insulin aspart rDNA origin) is no quicker than Regular, and that's been my experience as well. As for Walmart, you're right that the company has switched from Novo to Lilly in recent years, but I posit that biosimilars are closer than "therapeutically equivalent" switches are. In other words, a switch to/from Novolin R to/from Humulin R is more similar than a switch to/from Novolog to/from Humalog is. But price increases for old varieties of insulin have been, in the words of CVS Caremark "egregious" in anticipation that the era of easy money is likely over. In the coming years, we are likely to see biosimilar versions of Humalog (lispro), Novolog (aspart), Apridra (glulisine) and Levemir (detemir) in the coming years. The surprise for me is that the biosimilars are coming from big pharma competitors, not startups. Regardless, the era of price inflation, at least for first generation analogs (as well as recombinant "human" insulin) is likely over. Also, the moves for pharmacy benefits managers covering newer varieties like Tresiba (degludec) aren't coming as the company anticipated, which is why the CEO unexpected announced his retirement. The reality is that slightly-better insulins aren't enough to guarantee coverage anymore.

Mike Hoskins said...

Thank you for writing this, and continuing your coverage of this very important topic. I remember reading this many years ago, thinking two key things: "Why the Fructose don't we have generic insulins yet???" and also "Wow, imagine the day when we do and how incredible that will be to have as an option!"

Now, here we are. On the verge. And while a very positive development, it's also concerning given the Payer and PBM and Insulin Maker aspects of pricing and access.

You're one of the go-to people on this, and I'm glad we have you keeping tabs on this and bringing so much historical biz insight into this discussion. Honestly, I'm trying to fully get my head around it and figure out the best way to cover all this... and I think it might be worth one on the Biosims Aspect of Access/Cost by itself.

Scott S said...

I'm not necessarily all for biosims myself, but my bigger concerns are the fact that payers are treating all of them as commodities and not the individualized treatments they need to be. "Therapeutically Equivalent" (e.g. Novolog is exactly the same as Humalog or Apidra) has become the norm now that Lilly has started competing with Novo aggressively on price. They are likely fine, yet what happens when they switch not just from one analog to another, but from Basaglar to MK-1293 to Lantus routinely? I have to fight for extra testing supplies now, yet each brand switch kind of necessitates more testing on my part. Shouldn't extra strips be included with brand-switching?