Caremark's President Speaks at 'Forum 2023'

David Joyner is President & EVP of CVS' Caremark PBM business. Caremark refers to a recent event and business as "Payor Solutions" whose website is at https://payorsolutions.cvshealth.com/. Truth be told, CVS Caremark would rather patients whose insurance use Caremark as their PBM do not know what the PBM's executives say or do behind their veil of secrecy. Caremark is a business used to operating while serving itself first and everyone else as an afterthought.

On May 5, 2023, the Caremark PBM business of CVS Health hosted an event it called "Forum 2023", and Mr. Joyner gave a presentation on "What' next for payors". It was rather amusing that CVS Health said: "though the [PBM] system is working – from claim adjudication to drug dispensing, it's important that payors understand what's on the horizon". 

For example, David Joyner blames insulin manufacturers for continually raising prices, while ignoring the rebates his own industry and his company in particular work to "aggregate". 

He also talks only of how Caremark offers clients low "net" prices, while ignoring that the back-end rebate discounts are the very reason drug manufacturers are forced to raise drug prices so they can pay ever larger rebates to PBMs. 

Mr. Joyner addresses the recent developments in the insulin market and how that no longer appears to be a way for insurance companies (including one in his own company Aetna) use to bankroll premium offsets given to their employer clients and those rebates lower premiums for all at the expense of patients. He cites the spread between retail and list prices, while ignoring that his company is one of the only reasons those disparities exist. He also laments the PBM industry's weakness for lobbying advocacy in the states and how that could adversely impact the PBM business. He warns the audience that there are "over 900 bills" in states across the country targeting the PBM industry. In particular, he warns the states are targeting ERISA preemption, but recall that the Supreme Court essentially gutted ERISA preemption when it ruled unanimously on Rutledge v PCMA back in 2020 as far as PBMs are concerned. But remember: PBMs are notorious for lying with straight faces. Nothing the industry says or does should be presumed as true.

But because of wrongdoing of entities like Caremark, spread pricing exists. For example, I blogged about the insanity of my experience with Aetna/CVS Health/Caremark in getting a cheap generic statin drug made in India. 

Ultimately, because CVS Caremark was so aggressive in its spread pricing on that generic drug, that I as a patient covered by sister company Aetna actually noticed the games they were playing and initially, I simply patronized their biggest competitor: United Healthcare Group's OptumRx (catch my coverage of that experience HERE) saving myself 56%.

However, more recently, Optum has sold its Optum Store to a third-party entity known as RVO Health, LLC (see more about how Optum Store is getting out of the direct-to-consumer mail order pharmacy with limited exceptions HERE). Anyway, when they raised the price of generic Crestor 40%, I found a new supplier which was even cheaper: Mark Cuban Cost Plus Drug Company.  In fact, it was so cheap that I didn't even bother letting Caremark pay for it after I satisfied my deductible because it wasn't worth the temporary savings to do so.

In fact, "the system" as David Joyner describes it is working great for vertically-integrated insurance company payors like Aetna (whose sister business units include Caremark), rival Cigna (which owns Express Scripts) and the other rival United Healthcare (which owns OptumRx), but for every other payor including employers and patients, thanks to PBM financial gamesmanship, there are legitimate questions as to whether the system is really working. 

Prescription drug prices continue to go up and up and up, coverage complaints are endemic, and PBM's use cumbersome tools designed to reduce drug spending such as step therapy whereby a patient must fail first on a preferred formulary drug before the PBM will even cover alternative medicines their doctors actually prescribe, and runaway prices on commoditized prescriptions like insulin have forced manufacturers to launch unbranded, unrebated versions which are frequently even less costly for patients than to even use their insurance company's PBM formulary brands, all while PBM's contribute more to their parent companies' bottom lines than insurance premiums now do (if you believe healthcare industry whistle-blower Wendell Potter who wrote about that HERE). In his article, Mr. Potter opined:

"I've decided it's time to stop calling UnitedHealth and two of its biggest competitors–Cigna and CVS/Aetna–insurance companies. All three are now getting or making more money as drug supply chain middlemen than providing health insurance in the United States."

So, in Caremark's view "the [PBM] system is working – from claim adjudication to drug dispensing" when the data on everything else suggests otherwise. Still, David Joyner (President & EVP of CVS' Caremark PBM business unit) comments are worth a listen. The company disables sharing their videos, but anyone with rudimentary knowledge of html can figure out how to share it with a little work. Catch them at https://payorsolutions.cvshealth.com/insights/dynamic-pbm-landscape or see the video below. Other presentations made at that event can be viewed at https://payorsolutions.cvshealth.com/2023-forum.

"Endocrine News" Podcast Episode 69: Biosimilar Insulin

The Endocrine Society has several podcasts; one of its podcasts is known by the name of "Endocrine News". 

Ordinarily, I ignore most of the Endocrine Society podcasts because: a) they tend to be disproportionately focused on the topic of Type 2 diabetes and treatments for that and b) even when the podcast subject matter includes Type 1 diabetes, I find alternative sources provide considerably more information on the same topics. Partly, it is because the Endocrine Society's Endocrine News podcast tends to be only about 10-30 minutes in length which is frequently insufficient to address the topics they aim to address.

 

Still, I pay attention to their podcast topics and will occasionally listen if the topic is of interest. A recent episode featured an interview with Dr. Irl Hirsch, MD who is a professor of medicine at the University of Washington Medicine Diabetes Institute. In which he talks about biosimilar insulin: its safety, efficacy, what sets it apart from biologic "human" insulin, and when it should be considered for use.

Dr. Irl Hirsch, MD

Dr. Hirsch talks about insulin biosimilars as well as "authorized generic" versions of branded insulins (without actually calling them "authorized generics" in his dialogue, even though that's what the FDA considers them), but he also discusses the outlook for broader biosimilar insulin availability expected in 2024, where we can anticipate biosimilars of Sanofi Lantus from Sandoz/Gan & Lee, Lannett/HEC, Amphastar/ANP, and the nonprofit Civica/GeneSys Biologics, in addition to several on the market from both Biocon as well as Lilly, biosimilars of Novo Nordisk Novolog from Sandoz/Gan & Lee, Lannett/HEC, Amphastar/ANP, and the nonprofit Civica/GeneSys Biologics as well as Biocon, and biosimilars of Lilly Humalog from Sandoz/Gan & Lee and the nonprofit Civica/GeneSys Biologics in addition to one already on the market branded as Admelog from Sanofi.

To be sure, the market is evolving rapidly and not every biosimilar insulin is guaranteed to succeed. But it IS possible that a majority of U.S. insulin-users could become biosimilar users rather than branded insulin users since the big three insulin manufacturers in March 2023 announced plans to slash insulin list prices and to opt-out of the PBM commercialization model (at least for patent-expired insulin varieties). Dr. Hirsch talks very briefly about the market dynamics in the U.S. insulin market and acknowledges the impact of biosimilar insulins in the near future, although he said he could not predict what the market would look like at the time of the "Endocrine News" podcast episode.

The podcast episode can be accessed by visiting https://www.endocrine.org/podcast/enp69-biosimilar-insulin or listen below.

Optum Store Opting Out of Direct-to-Consumer Pharmacy Biz

Last November [2022], I blogged (see my post at https://blog.sstrumello.com/2022/11/cigna-express-scripts-by-insiderx.html for reference) how Cigna's Express Scripts was discontinuing the company's cash-pay mail order pharmacy by InsideRx (the coupon website/app is owned by Express Scripts). Well, now rival United Healthcare's OptumRx is doing the same, effectively shutting down its Optum Store. 

Have a look at this notice (my apologies for the size of the text):

For the moment, the page can also be read online at https://store.optum.com/pharmacy-prescription-update/ but it's unclear how long that page will remain available. I know the image above is impossible to read, but the first paragraph reads:

"We're sad to say that starting June 1st, 2023, you will no longer be able to fill prescriptions through the Optum Store except for on-demand prescriptions, such as Latisse, birth control, erectile dysfunction, and hair loss."

But it looks as if Optum Store is trying to copy what the men's health website hims.com is trying to do, which is sell baldness treatments, erectile dysfunction medicines [boner pills] and similar products and getting out of the mail order pharmacy business more generally. One thing I will point out is to note that the footnote claims: "Optum Store is an affiliate of RVO Health, LLC" which means that today, Optum Store is no longer even owned or operated by United Healthcare Group's PBM business known as OptumRx. Exactly WHEN that occurred is unclear, but evidently, the PBM OptumRx felt it was appropriate to sell the online pharmacy and its OptumPerks coupon-generating website/app business to RVO Health LLC. Incidentally, RVO Health LLC also happens to be the entity which owns Healthline, and Healthline acquired the old DiabetesMine (which was formerly a blog which sold itself to Healthline, which then proceeded to shut it down a few years later). RVO Health LLC evidently now runs Optum Store as well as the OptumPerks coupon-generating website and app. In my view, it's not as if the brand "Optum" is a well-known name which has strong brand recognition because it really does not. Unless you're covered by United Healthcare, you may never have heard of OptumRx.

Now, I could also remind you when, back in August 2022, Optum Store tried to pull a bait-and-switch on the diabetes patient community by claiming it was suddenly making insulin prices affordable for anyone via Optum Store (catch my coverage at https://blog.sstrumello.com/2022/08/uhcs-august-2022-optum-insulin.html for more) when in reality, it was doing nothing other than using Sanofi's ValYou coupons and claiming Optum was somehow helping people with diabetes to afford their insulin. In reality, Optum was responsible for the rebate-driven price inflation in the first place by demanding ever-higher rebates and failing to share the benefit of those discounts with patients. Now it appears, United Healthcare has bailed on the whole direct-to-consumer pharmacy operation completely, not unlike what Cigna's Express Scripts by InsideRx did last fall.

For my part, I knowingly chose to bypass my insurance (which, at the time happened to by Aetna, which is owned by CVS Health which owns/operates the giant PBM Caremark) to buy the generic statin drug rosuvastatin calcium (catch my coverage of that HERE), and I did buy it from Optum Store for a year. Doing so saved me 56% over what Caremark intended to charge me. I hear "Yeah, but it doesn't contribute towards satisfying your deductible" at which point, I tell them "That's only partially true because they only credit you for the PBM-negotiated price, not the artificially-inflated cash price you end up paying." The reality is that Aetna/Caremark planned on charging me $33.84 for 90 rosuvastatin calcium tablets, which worked out to a cost of $0.38/tablet, and yet I got it for $15 instead (or $0.17/tablet), which saved me 56% out-of-pocket. Plus, after calling Caremark, I learned that Aetna would only have credited me about $7.75 for that purchase of 90 generic Crestor tablets anyway, hence it made perfect sense for me to simply bypass my own insurance in this case. In fact, thanks to what the PBM's call "spread pricing" (most typically, on generic drugs), USC researchers investigated and found that nearly one quarter of filled pharmacy prescriptions (23%) involved a patient copayment that exceeded the average reimbursement paid by the insurer (and their PBM) by more than $2.00. In other words, it ends up being cheaper for patients to just pay cash and cut their insurance completely out of the transaction about 23% of the time. (see HERE for more). Then, Optum Store inexplicably raised its price on the generic statin drug by 40% to $21 for 90 tablets (or $0.23/tablet). I had only 1 refill remaining, so I paid the higher price. But I searched elsewhere for the next fill, and ultimately, I said goodbye to Optum Store. Instead, I bought the drug from Mark Cuban Cost Plus Drug Company, and even with shipping added to the price, it saved me even more than I enjoyed by buying it from Optum Store initially. Funny how when every Rx price is fake, you can save so much "money"!

On the upside, we now know that big insulin has grown tired of the PBM commercialization channel eating into their profits and driving list prices through the roof, so they are opting out of the PBM commercialization channel for patent-expired insulin analogues completely (see my coverage on that HERE and HERE), and they have decided to slash prices and cut the PBM's out altogether. No entity deserves that more than the PBM's. As for Optum Store's getting out of the direct-to-consumer pharmacy business, its likely copying what rival Cigna Express Scripts did, along with reading the tea leaves with startups like Mark Cuban Cost Plus Drug Company able to beat them at what they were trying to do, so they're opting out instead.

Info On What It Costs To Make Insulin API's Offshore (Courtesy of China's Gan & Lee Pharmaceuticals Ltd.)

When pharma companies refer to API's, they are referring to "Active Pharmaceutical Ingredients" (which is different from what an internet company means when they say API; to internet companies, the acronym API means "Application Programming Interface"). Regardless, pharma API's are commonly made offshore in places like India, Malaysia, China and elsewhere because its cheaper for them and therefore helps their own bottom lines. Its unclear to me exactly how they manage issues including transporting the products across the world for some items which must be temperature-controlled, but if it fattens pharma's bottom lines, they figure it out.

Beijing, China-based Gan & Lee Pharmaceuticals Ltd., which in 2018 signed a cooperation agreement with Sandoz to sell biosimilars of the three bestselling insulin analogues currently sold in the U.S. (specifically for glargine, aspart and lispro) has made news in 2023 largely due to the company's Sandoz agreement. (Incidentally, I believe Sandoz also intends to commercialize made by Gan & Lee of a GLP-1 receptor agonist FDA approved for the treatment of Type 2 diabetes [designated as GZR-1] which is a copy of the old Victoza formerly sold by Novo Nordisk.)

Regardless, on February 23, 2023, Gan & Lee made news when the company disclosed it had become the first-ever China-based insulin manufacturer to formally file a Biologics License Application (BLA) with the U.S. Food and Drug Administration for an insulin biosimilar (specifically for insulin glargine injection rDNA origin U-100) intended to be sold in the U.S. 

Evidently, Gan & Lee's BLA application for insulin glargine injection had been formally submitted to the FDA via the 351(k) pathway which was done sometime in December 2022 and the FDA formally accepted the BLA on February 23, 2023 (see the company press release on the news at https://www.ganlee.com/detail/683.html for more). Recall that the U.S. FDA formally reclassified insulin as a biologic in March 2020; prior to that, insulin was stuck in a regulatory neverland because historically, it was governed as a "drug" rather than a biologic (insulin was the first-ever FDA approved biologic medicine), but in 2020, FDA formally fixed that regulatory anomaly.

No doubt, Sandoz helped guide Gan & Lee through the laborious application process in an effort to help prepare the company how to handle its BLA's for U-300 glargine, aspart U-100 and lispro U-100. It is necessary to ensure the applications themselves leave no room for matters which could be grounds for clinical trial dismissals, hence seasoned applicants such as Sandoz know pitfalls to avoid. As we know from national academic performance records, many Chinese applicants pride themselves on being outstanding students, hence we can presume Gan & Lee used its own learning from Sandoz to help guide the company's future BLA filings for insulin aspart, insulin lispro and also for patent-expired GLP-1 inhibitors, although Sandoz will be available to its partner to formally review its BLA applications.

Of note is both Gan & Lee's insulin lispro and insulin aspart injection BLA submissions are also now "in their final critical stage of preparation" according to Gan & Lee's financial statements. When submitted, each BLA will reportedly include the application for interchangeability as well.

My followers may also recall that the primary reason that Sandoz chose to partner with Gan & Lee as its offshore partner to make biosimilar insulin API's in the U.S. (Sandoz was more than capable of making the insulins themselves) was, according to Sandoz SEC filings (under the ownership of Novartis), due to its "attractive Cost of Goods Sold [COGS]". However, I really did not have much detail beyond that to know exactly what that entailed. My presumption was that Sandoz initially expected it would be forced to pay rebate kickbacks to PBM's which consumed most of those margins in order to secure formulary placement. Now that the insulin rebate kickback scheme has been abandoned by Lilly, Novo Nordisk and Sanofi, it would appear to put further pressure on biosimilars since they will no longer be significantly less costly to payers (which includes patients). Price is a powerful point of differentiation; once that is no longer so large, how do biosimilars compete then? We know that two biosimilar-makers including Amphastar (which has a Chinese-based operating unit known as ANP and as well as a France-based API manufacturing unit) and Lannett Company (which is partnering with China-based HEC Pharmaceuticals) have noteworthy "white label" (also known as "private label") businesses whereby they sell their products under their retail pharmacy partners' names. Civica, meanwhile, will use a partner named GeneSys Biologics based in Hyderabad, India.

However, I never knew (nor did Sandoz ever disclose) exactly what the Gan & Lee insulin COGS actually were (we just knew it was cheaper than it would be by making the insulins themselves or they wouldn't have partnered with another company). However, Gan & Lee is trying to become more transparent in an effort to expand into the U.S., Canada, Europe and elsewhere in the world. Hence, Gan & Lee has started to formally publish quarterly and annual reporting information which would theoretically suitable for submission to the U.S. Securities and Exchange Commission (SEC) if its commercial partners require it.

I recently read Gan & Lee's 2022 Annual Report (see  https://www.ganlee.com/uploads/files/2023/0428/ILHLDWv4RJ5kJaR1AVfVZOMa8FgQrC13lKU6VnGH.pdf for the report) and fast forward to page 62 of 375. There, I found some interesting factual details which Sandoz never disclosed about its biosimilar insulin development program. Throughout the Gan & Lee annual report itself, the company repeatedly refers to "volume based" production, which is evidently something Gan & Lee views as a point of differentiation for the company.

In Gan & Lee's annual report, there is some disclosure about actual costs. While there's disclosure of the impact of the Chinese government's national drug preparation (insulin special) which it says was organized by the State in 2021, and the impact of that discounting on the company's revenues. It writes (in the English language translations; the report is both in Chinese and English):

Price before the centralized procurement (RMB/Unit; note that when it says "per unit", I must presume the company means the cost of a 10 mL vial since there are no quantity measurements disclosed, but if it were the cost of an actual unit measurement in a syringe, the cost would be FAR above even what Sanofi, Novo Nordisk and Lilly charge for their branded innovator insulins) and it reveals that the costs (disclosed in Chinese Yuan, referred to as "CNY") so I've used the current conversion rate to U.S. Dollars ("USD") using Forbes' currency conversion tool at https://www.forbes.com/advisor/money-transfer/currency-converter/cny-usd/:

• Insulin glargine injection 143.97 CNY = $20.83 USD
• Insulin aspart injection 59.63 CNY = $8.62 USD
• Insulin lispro injection 60.00 CNY = $8.68 USD
  

Also note: the company notes that after the Chinese-government mandated insulin discounts, it then gives discounts ranging from 60% to 67% off the price of these three most commonly-prescribed insulin analogues.

Although Gan & Lee has not formally filed BLA's for prandial insulin analogue biosimilars yet, for whatever reason, basal insulin glargine is more than twice as expensive as aspart and lispro are even though we know unequivocally that the actual manufacturing costs are NOT materially more. There, I attribute that to Sanofi's longstanding premium pricing on that which was aimed at the massive Type 2 patient market. But, comparing the cost of prandial insulin analogues aspart to lispro, we find that insulin aspart is clearly slightly less costly while lispro costs marginally more to make and sell (aspart costs $8.62 while lispro costs $8.68, so a $0.06 price difference). That may partially explain why there are so many glargine and aspart biosimilars in development while there are considerably fewer of lispro. Lilly's aggressive price-cuts on its unbranded lispro product (which since last year has sold at a cost of $35/vial with a Lilly Insulin Value Program coupon from Lilly) don't explain prices outside the U.S., but they may explain why we're seeing fewer lispro biosimilars in development. Remember: Humalog's U.S. patents all expired several years ago.

Obviously, the Gan & Lee's insulin prices are quite low compared to what it would otherwise cost Sandoz to manufacture the biosimilar insulins themselves either in the U.S. or in Europe, and volume-based production is something Gan & Lee is very proud to discuss. In fact, in its annual report, Gan & Lee discusses how in China, the government mandates volume-based discounts as all commercial healthcare insurance companies (via their PBM's) do in the U.S. primarily via rebates. In effect, the Chinese government says "Look, we're buying XXX units of insulin; hence we DEMAND you provide us discounts and we will pay no more than YYY for that". Pharma does that everywhere the do business (including in the United States), and that also applies to China. Gan & Lee (and partner Sandoz) still makes a profit; the discounts are a part of doing business. Novo Nordisk sells its products in China, but its exclusive patents have all expired in China (including on GLP-1 inhibitors for Type 2 diabetes), therefore biosimilar-makers such as Gan & Lee are now allowed to copy those products and sell them for less money. The open question remains: just how low will they actually sell for in the U.S.?