[Ip-health] Fourteenfold increase in price of epilepsy drug and Benefit Managers conflicts

[James Love]

http://www.nytimes.com/2008/04/19/business/19specialty.html

Benefit Managers Profit by Specialty Drug Rights

An anti-seizure drug used to treat Reegan Schwartz=E2=80=99s epilepsy regis=
tered
a fourteenfold increase in price last summer.

By MILT FREUDENHEIM
Published: April 19, 2008

[Photo: Reegan Schwartz, 3, with her mother, Laurel. Treatment with H.P.
Acthar Gel cost her father=E2=80=99s health plan about $226,000.]

The price increase, put in place over last Labor Day weekend, also
jolted employers that provide health benefits to their workers and bear
the brunt of drug costs.

As it turned out, the exclusive distributor of H.P. Acthar Gel is
Express Scripts, a company whose core business is supposed to be helping
employers manage their drug insurance programs and get medicines at the
best available prices.

But in recent years, drug benefit managers like Express Scripts have
built lucrative side businesses seemingly at odds with that best-price
mission. A growing portion of their revenue comes from acting as
exclusive or semi-exclusive distributors of expensive specialty drugs
that can cost thousands of dollars. And the prices of such medicines are
rising much faster than for the mainstream prescription drugs available
through a wide variety of distributors.

Critics say that distributing specialty drugs with ever-higher prices
runs counter to the best interests of the employers that hire companies
like Express Scripts.

=E2=80=9CWe are headed right down into conflict alley with these exclusive
arrangements,=E2=80=9D said Gerry Purcell, an Atlanta-based health benefits
consultant to big employers. As exclusive or semi-exclusive distributors
of specialty drugs, the benefit managers =E2=80=9Ccan raise the prices at w=
ill,=E2=80=9D
Mr. Purcell said, =E2=80=9Cand the employer will have little chance but to =
pay
the bill.=E2=80=9D

Express Scripts=E2=80=99 main competitors, CVS Caremark and Medco Health
Solutions, have also built lucrative side businesses in specialty drugs.
So have some of the biggest insurers that provide medical benefits to
corporate America, including UnitedHealth Group, Wellpoint, Aetna and
Cigna.

When asked about the potential conflicts, Express Scripts and the other
companies =E2=80=94 which are known as pharmacy benefit managers =E2=80=94 =
tend to
describe themselves as mere middlemen with little influence over what
the drug makers choose to charge.

Steve Miller, an Express Scripts executive vice president, said of the
H.P. Acthar Gel episode: =E2=80=9CThe increase was a manufacturing decision=
. I
can=E2=80=99t comment on that.=E2=80=9D

The pharmacy benefit managers say that keeping a lid on employers=E2=80=99 =
drug
costs is still their top priority. And they defend their involvement
with specialty drugs, saying it helps them keep better track of the
medicines=E2=80=99 use.

=E2=80=9CI don=E2=80=99t believe it is a conflict,=E2=80=9D said Dave Ricka=
rd, an executive vice
president of CVS Caremark. =E2=80=9CWe saved clients $115 million last year=
 that
would have been spent on specialty drugs that were not appropriate.=E2=80=
=9D

But CVS Caremark, meanwhile, sold nearly $6 billion in specialty drugs
last year through its pharmacy benefit management business =E2=80=94 nearly=
 14
percent of the company=E2=80=99s annual revenue.

The main drug benefit managers make as much as 10 to 15 percent on each
sale of a specialty drug, whose prices can range from $5,000 a year for
certain anemia drugs to $389,000 in the case of Soliris, a drug for a
rare blood disorder, whose distributors include Express Scripts=E2=80=99
specialty drug unit, CuraScript.

Spending on specialty drugs rose 16.5 percent in 2006, growing twice as
fast as traditional drug spending, and totaled about $62 billion =E2=80=94 =
which
was about 23 percent of overall drug sales in this country, according to
Charles Boorady, a Citigroup health care analyst.

Big employers and organizations including General Motors, Caterpillar
and Calpers, the large California public employees health and pension
group, say their spending on specialty drugs is growing at double the
rate of the rest of their drug benefits for employees.

In some cases, employers are starting to push back. A group of large-
and medium-size companies like Kinder Morgan Energy, a Houston pipeline
company, and Enodis, an international restaurant equipment maker with
United States headquarters in Florida, recently pushed CVS Caremark to
agree to hand back $15 to the employers on each prescription filled for
all specialty drugs listed in a Caremark contract.

The giveback is meant to let the employers share a portion of the
rebates that the pharmacy benefit managers often collect from drug
makers in addition to keeping a portion of sales. But the giveback is
relatively minuscule, acknowledged David Dross, a drug benefits
specialist at the Mercer benefits consulting group who helped organize
the employer effort.

With specialty drugs, the pharmacy benefit managers are =E2=80=9Cgetting a =
lot
more than the $15 in rebates,=E2=80=9D Mr. Dross said.

Susan A. Hayes, a drug benefits consultant based in Lake Zurich, Ill.,
said she had seen rebate contract terms that give the pharmacy benefit
managers rebates of 3 percent to 10 percent of the selling price.

Specialty drugs are aimed at diseases that include cancer, multiple
sclerosis and hepatitis C. Some, for rarer disorders, may have federal
=E2=80=9Corphan drug=E2=80=9D status that gives a manufacturer exclusive ma=
rketing
rights for a certain period. Specialty drugs also include medications
whose distribution is tightly regulated as federally controlled
substances, like the narcolepsy treatment Xyrem, which is distributed
through Express Scripts.

--
_____________________________
James Love, Knowledge Ecology International (KEI)
http://www.keionline.org, mailto:james.love@keionline.org
voice +1.202.332.2670, fax +1.202.332.2673, US mobile +1.202.361.3040, Gene=
va mobile +41.76.413.6584

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