Tuesday, June 06, 2023

Dexcom Pays PBMs Kickbacks to Exclude Rival CGMs; Senseonics Found a Way Around That

This week (on June 3, 2023), there was an interesting announcement from the Maryland-based medical device startup Senseonics, Inc. that UnitedHealthcare will begin providing coverage for the Eversense E3 CGM System effective July 1, 2023 for people with Type 1 and insulin-requiring Type 2 diabetes. You may recall that Senseonics received a cash-infusion financial lifeline from Ascensia Diabetes Care back on August 10, 2020 (see the news release for that at https://www.businesswire.com/news/home/20200810005677/en/Senseonics-Announces-Strategic-Collaboration-with-Ascensia-Diabetes-Care for more) when that company effectively paid for its CGM system. Still, Eversense remains comparatively tiny in the CGM space.


My loyal readers may also recall that I have complained that Dexcom is paying rebate kickbacks to vertically-integrated (with commercial healthcare insurance companies) Pharmacy Benefit Managers formulary managers to EXCLUDE rival CGM's from their prescription drug formularies. Catch Pembroke Consulting's President Adam J. Fein's assessment of formulary exclusions at https://www.drugchannels.net/2023/01/the-big-three-pbms-2023-formulary.html for more info. if you're interested in reading up on the practice. In essence, Adam Fein describes the situation this way: "Formulary exclusions have emerged as a powerful tool for PBMs to gain additional negotiating leverage against manufacturers. The prospect of exclusion leads manufacturers to offer deeper rebates to avoid being cut from the formulary. Exclusions are one of the key factors behind the large gap between list and 'net' prices for brand-name drugs. They can also affect a patient’s out-of-pocket costs and access to a particular therapy."

Until quite recently, insulin-makers like Novo Nordisk paid big bucks to formulary managers at big PBMs to exclude insulins from any rival manufacturers, with a few exceptions (for example, if an insulin manufacturer does not offer a particular type of insulin, such as how Sanofi's U.S. business does not sell any of its old-school biosynthetic "human" insulins branded as Insuman in the U.S., then a formulary might cover those products from either Lilly or Novo Nordisk).

But the action has migrated from insulin following the March 2023 announcements from Eli Lilly & Company, rival Novo Nordisk and smaller rival Sanofi all basically said they were slashing insulin list prices, and to pay for those price-cuts, they were essentially cutting PBMs out of the transaction completely. Big PBMs should have seen that coming, and now multi-billion dollar kickbacks paid to them are going away. Instead, the kickbacks are becoming an issue on things like CGM sensors.

Most notably, Dexcom is bribing (I mean paying "legally-exempted" rebate kickbacks) to CVS Health/Caremark/Aetna (see https://www.caremark.com/portal/asset/Formulary_Exclusion_Drug_List.pdf for its list of formulary exclusions) as well as to United Healthcare/OptumRx (see its "standard" formulary exclusion list at https://professionals.optumrx.com/content/dam/optum3/professional-optumrx/resources/pdfs/Premium_Standard_Abridged_PDF_13188_v98_09072022.pdf and its "premium" formulary exclusion list at https://hr.nd.edu/assets/491518/jan_2023_b2b_cycle_premium_formulary_exclusion_list.pdf for the nitty-gritty details) to keep rival CGMs off-formulary. Currently, Cigna's Express Scripts business unit is not publicizing its own formulary exclusions, most likely due to the FTC's 6(b) study of PBM business practices which has the company under the proverbial microscope and it doesn't want to offer any more ammunition regulators might use to sue the company.

But that raises an interesting question: if Dexcom is paying United Healthcare's OptumRx PBM business to exclude rival CGM's from its formularies, how is it that Senseonics Eversense CGM was just approved for coverage effective July 1, 2023 when its getting kickbacks from Dexcom?

The answer is really due a technicality, but its one Ascensia is taking advantage of.







The Senseonics Eversense CGM must be inserted into patients' arms by a medical doctor; it cannot be self-applied. Hence, that is considered a medical procedure, and not a pharmacy benefit. Voila: Senseonics can bypass the formulary exclusions United Healthcare has in place (paid for by Dexcom, Inc.) for self-inserted CGMs like Abbott Freestyle Libre 3.

It's nice how it works out for OptumRx that way, isn't it? After all, it can keep collecting cash kickbacks to exclude rival CGM's like Abbott Freestyle Libre from its formulary, yet concurrently cover a rival CGM anyway. Incidentally, one of United Healthcare's formularies already includes Medtronic's Guardian Link CGM as well, only it's on a different tier from Dexcom.

I have often said that pharma has a weird, co-dependence on vulturous vertically-integrated PBMs. While Dexcom isn't a pharma company, but a medical device company, the rebate kickbacks work the same way for pharma and medical devices. On the other hand, Dexcom shareholders are paying millions to keep rival CGM's off-formulary, and United Healthcare's OptumRx is still collecting all that money, yet United Healthcare is now covering Eversense CGM's. Kind of defeats the purpose of paying legally-exempted rebate kickbacks, doesn't it?

On the one hand, it makes me hopeful that a similar exception can be worked out with Aetna (owned by CVS Health which also owns the PBM vulture Caremark), but it also frustrates me that patients end up paying for bribes! Maybe activist Dexcom shareholders should some day question company executives including President and CEO Kevin Sayer about the wasted cash the company is spending to exclude rival CGM's from being covered by certain PBMs, and then suddenly a rival found a huge hole in that strategy. Now, if only Senseonics can train more doctors to insert/remove Eversense CGM sensors, and then maybe it would resemble a free market? Wishful thinking perhaps, at least until the government fixes the PBM kickback problem.

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