(Bloomberg Gadfly) — The battle over U.S. drug prices just got tougher. But the new pressure is coming from CVS, not politicians.
CVS isn't just your friendly neighborhood pharmacy and snack emporium. It's also one of the two largest pharmacy benefit managers (PBMs) in the country. A big part of its business is negotiating lower drug prices for employers and insurers, which includes refusing to cover some drugs that have cheaper substitutes.
CVS announced on Tuesday it's going to refuse to cover 35 new drugs in 2017 and 131 in total, up from 124 in 2016 (some of this year's exclusions will drop off next year's list). It's also excluding branded cancer drugs for the first time and favoring the equivalent of a generic version of a biologic drug over the original product. Both moves are unusual in the U.S. and, if adopted more broadly, could have serious impacts on U.S. drug prices.
CVS is excluding Xtandi — a prostate cancer drug made by Medivation that is drawing interest from Sanofi and other bidders — and Novartis' blood-cancer drug Tasigna. Combined, the two drugs are expected to pass $2.4 billion in sales in 2016.
Cancer drugs have traditionally been treated with relative deference by insurers and payers, keeping price pressure at bay. CVS's move means that may begin to change for a class of drugs expected to account for $79 billion in spending in the U.S. by 2020.
What's more, CVS is excluding an Amgen biologic drug — one made with living cells instead of chemical processes — called Neupogen, in favor of a "biosimilar" copy from Novartis called Zarxio. It's also excluding Sanofi's Lantus — a diabetes drug expected to produce more than $6 billion in sales this year — in favor of Eli Lilly's Basaglar. Lilly's drug is considered a biosimilar by European regulators, but isn't designated as such in the U.S.
