When the manufacturer of the life saving EpiPen raised its price to $600 in May reflecting a five-fold increase since 2009, a public outcry ensued with consumers and politicians accusing the company of price gouging.
Employers say the controversy offers a glimpse into the challenges they face in managing soaring drug costs.
“It illustrates that employers, insurers and patients are really dependent on the reasonableness and good behavior of drug manufacturers in terms of pricing because our patent systems and rules for competition really give them a lot of leeway,” said Steven Wojcik, vice president of public policy at the National Business Group on Health. “It illustrates the issue that is of great concern for employers — the growing expenditures for specialty drugs. It’s not sustainable for plans and it’s not affordable for individuals.”
Mylan, the company that sells EpiPens, raised the price of the injectable drug to $600 — up from $100 in 2009. The device contains epinephrine, which is an inexpensive but potentially life-saving medication used to treat severe allergic reactions and anaphylactic shock.
With practically no competitors, it’s difficult for insurance carriers, pharmacy benefits managers and employers to negotiate better prices with Mylan.
“They’ve got people in a bind — the insurer, the PBM, the employer and the patient,” Wojcik said. “They don’t have many tools to negotiate.”
In an effort to mitigate the cost, the company began offering savings cards to help consumers with their copayments and in late August it announced the release of a generic version of the EpiPen.
Most drug manufacturers offer coupons and rebates, which can help reduce costs in the short-term, but do little to help employers manage costs over the long run, Wojcik said.
Often, it’s unclear how much of the savings are passed on to employers and therefore trickle down to the employees, according to Mercer consultant Raymond Brown, a leader in the firm’s pharmacy practice.
“Whoever is negotiating with the manufacturer is trying to negotiate a good price with rebates,” he said. “The issue is how do you keep the savings flowing to the plan sponsor? Employers have to ask who is getting those rebates?”
Overall pharmacy spend is expected to increase by 7.3 percent in 2017, with specialty drugs accounting for most of that increase, according to a recent report by the NBGH. Spending on specialty pharmaceuticals is expected to increase by 16.8 percent next year. In response, employers are getting more aggressive about managing specialty drug use.
“There is much more aggressive utilization management,” Wojcik said. “Employers are making sure that the medication is purchased by a specialty pharmacy rather than going through a physician’s office, they are adding specialty tiers to their drug formularies, coaching patients on adhering to their medications, making sure the drugs are administered properly, among other strategies.”
And pharmacy benefit managers, which act as the middleman between employers and pharmaceutical companies, are also revising their strategies around specialty drug costs.
In August, Express Scripts announced that it plans to guarantee per-patient spending caps on all diabetes medications as part of its Diabetes Care Value Program, which will be implemented in March 2017. The program is part of a larger effort to control specialty drug costs called Express Scripts SafeGuardRx. The program was launched in 2015 to improve access to and negotiate discounts for costly specialty drugs that treat hepatitis C, cholesterol and cancer. This year, the pharmacy benefit managers also developed an inflation protection program that covers the cost of medications if those costs rise above a capped amount.
“Each cap is client specific,” said David Whitrap, senior director of corporate communications for Express Scripts. “If an employer’s spending goes above the cap we will cover the price for all those medications.”
Whitrap said that Express Scripts is the first pharmacy benefit managers to offer this kind of inflation protection but that others will likely follow.
“This is a new way of managing pharmacy benefit costs,” he said. “It involves risk sharing and putting our money where our mouth is.”