As policymakers across the ideological spectrum look to curb drug prices, a little-known success story has been taking shape over the last year thanks to one drugmaker’s actions and the cooperation of the Centers for Medicare and Medicaid Services (CMS).
The story involves the drug Repatha, produced by Amgen to combat high cholesterol, and the National Drug Codes (NDCs) that the Food and Drug Administration (FDA) uses to identify all drugs “manufactured, prepared, propagated, compounded, or processed” for commercial distribution in the U.S.
Repatha and its main competitor, Praluent (produced by Sanofi and Regeneron) are the only two FDA-approved PCSK9 inhibitors. Both launched in 2015 with list prices above $14,000 per year. Because of these very high prices, both were put in the so-called “specialty tier” of many Medicare Part D prescription drug plans. Specialty-tier drugs feature the highest out-of-pocket costs for Part D beneficiaries, according to CMS.
Specialty-tier drugs have put a growing burden on the Medicare Part D program, both for patients and for taxpayers. The Kaiser Family Foundation (KFF) found earlier this year that annual out-of-pocket costs for specialty drugs are, on average, 12 percent higher in 2019 than they were in 2016 (“for 8 of the 10 specialty tier drugs analyzed in both 2016 and 2019 and covered by plans in both years”). Amgen itself estimated “75 percent of Medicare patients prescribed a PCSK9 inhibitor never actually fill their prescriptions, mainly due to high out-of-pocket costs.”
As for taxpayer costs, according to the Congressional Budget Office (CBO), specialty drug spending in Part D was a staggering $32.8 billion in 2015, nearly quadruple the $8.7 billion spent in 2010. As a share of total Part D spending, “specialty drugs accounted for 31 percent of total net spending” in 2015, up from just 13 percent in 2010.
In May 2018 Sanofi and Regeneron, the makers of Repatha competitor Praluent, announced a deal with Express Scripts, a pharmacy benefit manager (PBM), to lower the cost of Praluent to $4,500 to $6,600 per year, in exchange for exclusive placement on Express Scripts’ national formulary.
As Galen Institute President Grace-Marie Turner explained in Forbes, this was a “more traditional approach” to cutting the cost of a prescription drug:
“Amgen and Sanofi/Regeneron both offer a PCSK9 inhibitor in the U.S. marketplace. Sanofi/Regeneron took the more traditional approach to solve access challenges for their patients—announcing earlier this year discounts of up to 69% in exchange for insurers and pharmacy-benefit managers expanding coverage to more patients.”
Amgen pursued a non-traditional approach, and one that deserves applause. Arguing that “higher rebates don't typically result in lower out-of-pocket costs for patients, especially for Medicare patients,” Amgen instead lowered the price of Repatha by making it available at $5,850 per year under new National Drug Codes (NDCs). Although the $14,000-a-year NDC is still offered by Amgen, they plan to phase that higher list price out by the end of 2020.
The initial success of Amgen’s strategy is clear, at least when it comes to driving providers and patients to the new, lower-cost NDC. According to CMS Administrator Seema Verma, in June 2019 “there were over 70% more beneficiaries who filled a Part D prescription for the lower cost Repatha National Drug Code than the higher cost Repatha National Drug Code.”
But there’s also evidence that Amgen’s decision will lower out-of-pocket costs for patients. According to Administrator Verma, the lower-cost Repatha NDC “will not be eligible for placement on the specialty tier in 2020.” (In order to be a specialty-tier drug, CMS says the plan sponsor-negotiated price must exceed $670 per month in 2020. That’s $8,040 a year, a threshold higher than the price of the new Repatha NDC.) This translates to lower out-of-pocket costs for seniors with Part D plans, given that Tiers 1, 2, and 3 have lower copayments than the specialty tier.
What this case study amounts to, then, is a drugmaker voluntarily lowering the cost of their high-priced product, and a federal agency responding in a way that will further lower out-of-pocket costs for patients. There is also now a robust price competition between the two drugs in the PCSK9 inhibitor space, Repatha ($5,850 per year) and Praluent ($4,500 to $6,600 per year).
Both Amgen and CMS should be applauded for their actions. This is an example of how robust competition - and a government that cooperates with the private sector rather than fights it - can lower the costs of prescription drugs, for patients and taxpayers. As some lawmakers are pressured to support government price controls in the prescription drug space, they would do well to remember that this case study offers a better alternative.