Pharmacy benefit managers are concerned about runaway cost of drugs, especially those drugs known as biologics. CVS Health Corp (NYSE:CVS) is one of the benefit managers that have been putting pressure on expensive drug manufacturers to lower prices. However, according to a CVS executive, there is an opportunity to see up to 50% decline in the cost of biologics if more competitors and copycat drugs enter the market.
Biologics are drugs with complex formulation designed for treatment of life-threatening conditions like cancer and hepatitis C. These drugs also cost a lot of money, which is why CVS Health Corp (NYSE:CVS) and its peers are putting pressure on their manufacturers to cut prices.
CVS Health Corp (NYSE:CVS)’s Chief Medical Officer, Troyen Brennan, told Reuters that entry of the so-called biosimilar drugs, which are copies of the more expensive biologics, could support steeper cuts in the cost of the drugs. He said that cuts of 40-50% are possible for the expensive medications depending on the competition between biologics and copycat versions.
The other factor that could also help drive down the cost of the expensive biologics is how close biosimilar biotech can copy them. The demand for biosimilar by patients and doctors could also put pressure on biologic biotech to price their drugs competitively.
CVS Health Corp (NYSE:CVS) and Express Scripts Holding Company (NASDAQ:ESRX) have in the recent times take on manufacturers of expensive treatments. They have targeted AbbVie Inc (NYSE:ABBV) and Gilead Sciences, Inc. (NASDAQ:GILD) over their expensive hepatitis C treatments. The benefit managers are asking the drugmakers to adjust the cost of their drugs downwards for the clients.
Biosimilars in the U.S.
Drugmakers such as Pfizer Inc. (NYSE:PFE) and Hospira, Inc. (NYSE:HSP) are angling to produce biosimilars. The FDA recently approved the first biosimilar drug in the U.S., which is a generic version of Amgen, Inc. (NASDAQ:AMGN)‘s Neupogen, a cancer treatment.
Price pressure strategies
If the cost of biologics remains high, benefit managers such as CVS Health Corp (NYSE:CVS) could use other strategies and try and compel manufacturers to lower cost. The available strategies include removing some brands from their coverage and requiring patients to try out more affordable treatments before they move to the expensive ones.