IN THE NEWS
In early 2018, Amazon, Berkshire Hathaway and JP Morgan Chase came together to create Haven Healthcare, a venture that would transform US healthcare. Haven’s main goal was to lower costs and improve outcomes in healthcare. However, three years after it launched, Haven is dissolving. According to John S. Toussaint M.D., There are three causes leading to the failure of Haven Healthcare. First, even though the companies, combined, have 1.2 million employees, they weren’t able to dominate the market. This is due to the current consolidation of healthcare systems and their employees being spread all over the country. Second, unfortunately, hospitals still get paid more, the more hospital beds that are occupied. This means that, rather than preventing sickness, the US healthcare system is only treating sickness. Therefore, hospital leaders have no incentive to keep patients out of their hospitals. Lastly, the impact of the COVID-19 pandemic has been significant. The coronavirus has caused providers to focus managing the crisis and not on lowering costs or improving outcomes. The reasons Haven dissolved show just how difficult it is to disrupt the healthcare system in America.Source: John S. Toussaint. “Why Haven Healthcare Failed,” Harvard Business Review, 2021.
Highlights of New Drug Approvals
Early in the pandemic there was concern that COVID-19 would have major impact on the new drug approval process. As 2020 ends and 2021 begins, we are able to see that while COVID-19 has impacted the industry in many ways, it did not greatly reduce new drug development. As of December 2020, there were approximately 50 new drugs approved this year, which is comparable to what was approved by the FDA in previous years. There were 48 new drugs approved by the FDA in 2019, 59 in 2018 and 46 in 2017. One COVID-19 tracking service estimated that about 65% of drug trials planned for 2020 did experience a delay, but the average delay was only about 2.6 months.
2020 has proved to be a challenging year for many industries, but it also highlights the flexibility of the pharmacy industry. The COVID-19 virus was identified only one year ago, but several treatments and vaccine products were developed and approved in a short time. In response to the pandemic, the FDA was able to make adjustments that allow for more efficient drug approvals without impacting the safety of the products approved. The FDA was able to allocate its resources to COVID-19 products without slowing down the approval for other much-needed therapies.
As we begin to look towards what 2021 might bring, we find several of the trends we’ve watched in 2020. We are seeing that the pipeline holds many new specialty medications, rare disease treatments, lower cost biosimilars, new gene therapy applications and additional CAR-T therapies. We also expect that we will continue to see COVID-19 treatments and vaccines being developed throughout 2021.
Some of the notable new drugs that were approved late Q4 2020 or are expected to be approved early 2021:
Orladeyo (berotralstat) was approved in December 2020 and is indicated as prevention of hereditary angioedema (HAE) attacks. Orladeyo is a notable addition to treatment for HAE because it is the first oral, once daily treatment available.
Inclisiran (brand name not yet identified). If Inclisiran is approved it will join Repatha and Praluent as the third PCSK9 inhibitor. It is a notable product though because while Repatha and Praluent are dosed every four weeks, Inclisiran would only need to be given every six months.
Imcivree (setmelanotide) was approved in late November 2020 and will be indicated for chronic weight management. It has been approved for use in patients as young as 6 years old with obesity that is confirmed to be caused by one of three genetic conditions. These genetic conditions are pro-opiomelanocortin (POMC) deficiency, proprotein subtilisin/kexin type 1 (PCSK1) deficiency and leptin receptor (LEPR) deficiency. Imcivree is notable as the first treatment available for these genetic conditions. Imcivree is not a gene therapy though, so while it does help these patients lose weight, it does not treat the genetic defect that causes the condition.
Roxadustat (brand name not yet identified). If approved, Roxadustat would be the first new drug to target anemia related to chronic kidney disease (CKD) in over 30 years. Roxadustat is an oral medication that works on a new pathway to increase the body’s production of red blood cells and hemoglobin. It is notable as an oral medication since current standard treatments are injectable drugs like Epogen and Procrit.
An Update on Biosimilars
In March 2020 there was a change made to the way biologic drugs are regulated by the FDA. Ultimately the change created a pathway for approval of biologic drugs that makes it easier to develop biosimilars. While the new regulatory pathway will not solve all of the issues that have hindered biosimilar utilization, it should help streamline the path to approval for more biosimilar products. The biggest hurdles for biosimilars have been previously described as: misinformation or doubt for prescribers and consumers, exclusionary contracts and rebate practices, patent litigation, and FDA approval time. There is hope that having more available products and a greater awareness for prescribers and consumers could prompt additional changes to increase overall market uptake of biosimilars.
While a very small portion of Americans are using biologic medications (about 2% of total prescriptions), they make up over 35% of the total spent on prescriptions in the US. This continues to be a growing area of the market with 70% of growth in drug spending from 2010 to 2015 being attributed to biologic products. Not surprisingly, there is an interest in the potential biosimilar savings anticipated with nearly 70 biologic patents losing exclusivity by 2023. One of the most watched of these biologic drugs will be Humira, which is projected to be a top selling drug exceeding $10 billion in sales by 2024. A biosimilar would be highly anticipated because the ingredient cost for a biosimilar is approximately 20% – 25% lower than the reference product.Sources: Brett P. Giroir, M.D. “Statement on Efforts to Help Make Development of Biosimilar and Interchangeable Insulin Products More Efficient,” US Food and Drug Administration, 2019. “Biosimilars,” US Food and Drug Administration, 2020. “Frequently Asked Questions About Biosimilars,” Pfizer. “EvaluatePharma World Preview 2019,” Outlook to 2024 Evaluate, 2019.
On Tuesday, November 17, Amazon announced the launch of Amazon Pharmacy, a new store on their platform that allows consumers to complete a prescription transaction, as well as the Amazon Prime Prescription Savings Benefit.
Access the full announcement here.
Amazon acquired PillPack in 2018, and the new offerings leverage PillPack’s infrastructure and software, so this announcement doesn’t come as a complete surprise. However, the announcement has implications for consumers as well as the broader Rx market.
Amazon Home Delivery Pharmacy allows customers to purchase their prescription medications directly from Amazon (instead of going to a retail pharmacy such as Walgreens or Walmart). Using a secure pharmacy profile, members can add their insurance information, manage prescriptions and choose payment options before checking out. Prime members receive unlimited, free two-day delivery on orders from Amazon Pharmacy included with their membership. Amazon Pharmacy is available to customers age 18 and older in all states except Hawaii, Illinois, Kentucky, Louisiana and Minnesota.
The Amazon Prime Prescription (PrimeRx) Savings Benefit gives Prime members access to savings (up to 80% on generics, 40% on brand names) on medications at over 50,000 participating pharmacies nationwide when paying without insurance, including Amazon Pharmacy. PrimeRx is a partnership with ESI’s InsideRx subsidiary that offers a cash card (like Good Rx). Members also receive free two-day delivery.
Cash paying consumers stand to benefit most from Amazon’s PrimeRx.
Additional details include:
- PillPack Home Delivery Pharmacy is in most PBM pharmacy networks (including ESI, Optum and CVS) and Amazon is positioning it as a “distinct service for customers managing multiple daily medications for chronic conditions”
- Patients can use the PrimeRx cash card or their prescription insurance card to pay for prescriptions, but not both
- ESI’s InsideRx subsidiary also partners with GoodRx
Cash paying consumers (including patients in deductibles, on excluded prescriptions or without insurance) stand to benefit most from Amazon’s PrimeRx. Access to a new option creates competition, which may ultimately lower cash prices even further.
Amazon’s website also allows patients to compare their PrimeRx cash card price to the Rx insurance price (copay). This empowers customers to easily price shop for prescriptions on a familiar platform and purchase the lower priced option.
According to data published by the US Census Bureau, consumer spending on prescription drugs increased 31.8% between the first and second quarter of 2020. This, together with Amazon entering the Rx market and consumer familiarity with their platform, is the perfect storm for downward price pressure.
Retail pharmacies stand to lose market share if more patients use Amazon Home Delivery Pharmacy. The combination of fewer customers and greater competition could strain retail pharmacy margins even more.
Patients may lose because prescriptions purchased with a PrimeRx card instead of prescription insurance card will not count towards PBM accumulators such as deductibles and maximum out-of-pocket limits.
What We’re Watching
Rx was a dynamic space even before Amazon’s announcement. Here are some developments we’ll be watching.
- How will PrimeRx vs. GoodRx cash prices evolve over time?
- PrimeRx partners exclusively with ESI, so ESI could choose to give PrimeRx better discounts than they give GoodRx.
- GoodRx does not own a home delivery pharmacy, so they don’t compete with PBMs. Therefore, GoodRx’s PBM partners could give them higher discounts in an effort to beat PrimeRx.
- Will Amazon start or buy a PBM?
- his has the potential to really disrupt the PBM/pharmacy space.
- How might this impact the direct manufacturer distribution channel?
- Will Amazon look to provide direct to consumer wholesale pricing?
- Will Amazon provide manufacturers a higher margin, lower cost distribution channel?
- Will there be any impact on the various COVID-19 vaccines (access, cost, distribution)?
Our experts will continue to monitor activity in the Rx space and provide insights on key considerations for our clients. If you have any questions, please contact your NFP broker.
The fight against COVID-19 took a giant leap forward on December 10, when the Food and Drug Administration (FDA) advisory panel endorsed Pfizer’s COVID-19 vaccine and the FDA granted an emergency use authorization (EUA) for the vaccine the next day. Priority groups started receiving their first doses on December 14.
On December 15, the FDA advisory panel endorsed Moderna’s COVID-19 vaccine. This clears the way for the FDA to issue an EUA for a second vaccine, which will provide millions of additional doses to Americans. With the EUA, distribution of the Moderna vaccine will likely begin the week of December 21.
This is an exciting time. However, it may be some time before those outside the priority groups have access to a vaccine. The Centers for Disease Control and Prevention (CDC) and state health agencies are prioritizing healthcare personnel, essential workers in critical industries, high risk individuals with underlying medical conditions, and people 65 years and older to receive the vaccine first.
As the vaccine is distributed to these priority groups, information is emerging regarding employer administration costs. The following is a summary of details for employers to consider as they plan for 2021.
- Members will have $0 cost-share (copayment, coinsurance or deductible), including when two doses are required (as is the case for the Pfizer vaccine and the Moderna vaccine currently under FDA review).
- The federal government will cover the cost for the vaccine itself – as part of the Coronavirus Aid, Relief, and Economic Security (CARES) Act – purchasing initial supplies of the vaccine and allocating them to the states for prioritized distribution.
- The CARES Act classifies COVID-19 vaccines as “preventive services,” and they will be managed like other preventative vaccines, with administration through physicians’ offices and pharmacies.
Health plans and self-insured plans will be required to pay COVID-19 vaccine admin costs.
- Health plans and self-insured plans will be required to pay for the administration of the COVID-19 vaccine.
- Administration cost for two dose vaccine: first dose $16.94/second dose $28.39
- Administration cost for a single dose vaccine: $28.39
- Clients can cover vaccine administration costs through their medical benefit and/or their PBM pharmacy benefit. Given the HHS announcement regarding the federal government partnership with pharmacy chains and community pharmacies to access and administer the vaccines, we encourage PBM clients to cover the administration fee under their PBM pharmacy benefit.
- Clients are encouraged to consult with their respective state health department to confirm priority groups. Depending on the state, those considered “essential” may not qualify for phase 1 if they are not at a high risk of exposure.
- Administration fees for Medicare plans will be covered by Medicare Fee For Service.
Making the Vaccine Mandatory
The conversation regarding making the vaccine mandatory continues. With legal, ethical and cultural considerations, early assessments indicate that employers likely have the right to require the vaccine if it is “job related and consistent with business necessity,” the standard set forth in the Americans with Disabilities Act.
There will be exceptions, extenuating circumstances like employee concerns regarding vaccine safety, and liability questions. This recent article in the Chicago Tribune provides a solid Q&A to get up to speed as employers consider their respective positions. We will stay on top of developments and provide updates as the vaccine distribution process continues.
This is one of the largest and most complex public health initiatives in our nation’s history. Success requires that we learn, plan and remain flexible throughout the process. As the distribution of the Pfizer vaccine gets underway, and the FDA reviews additional vaccines, we will be watching closely and providing additional information and insight that supports employers and their employees. Please let us know if you have questions regarding vaccine distribution, administration costs or other areas where NFP can be helpful.
Chicago Tribune: “Employers can require COVID-19 vaccination, but there are exceptions. Here’s what you and your boss need to know.” (December 14, 2020)
Optum Rx: “Latest information on COVID-19 vaccines” (December 3, 2020)