Pfizer And PBMs Delay Sale Of Generic Lipitor
23 CommentsBy Ed Silverman // November 14th, 2011 // 7:58 am
Shortly before low-cost generic versions of the Lipitor cholesterol pill are due to become available, several large pharmacy benefit managers are instructing pharmacies, as of December 1, not to fill prescriptions for the more expensive brand-name medicine for six months. December 1, you may recall, is the day after Pfizer loses patent protection for Lipitor, which is the world’s best-selling med.
According to letters sent by several PBMs to pharmacies, Pfizer has agreed to discounts for a PBM that blocks generic versions of Lipitor. The PBMs will lower Lipitor co-payments, currently at $25 or more for a 30-day supply, to $10. Consumers who submit a prescription for a generic version of Lipitor are, instead, supposed to be given brand-name Lipitor (here are the letters from the PBMs).
“The move is a blatant attempt by PBMs to retain rebate dollars from Lipitor’s manufacturer,” Dave Marley of Pharmacists United for Truth and Transparency, which distributed the letters, says in a statement. “While the Lipitor co-pay will drop on November 30th, the full price to plan sponsors will stay the same. That means plan sponsors will be forced to pay more for brand Lipitor, even though a low cost generic is available.”
And who are the plan sponsors? Employers and Medicare Part D, which means taxpayers absorb the higher cost as well. The move comes just as Express Scripts seeks government approval for its $29 billion merger with Medco Health Solutions, which is one of the PBMs that agreed to the Pfizer offer. Express Scripts has positioned the deal as a way to lower the nation’s healthcare costs (read here and here).
For pharmacists who might be concerned about the legality of the arrangements, one PBM, Catalyst Rx, provided a qustion-and-answer cheat sheet that says “there are some state laws that require pharmacies to dispense a generic if one is available. However, none of the states require generic substitution if the generic will cost more than its brand-name equivalent. The point-of-sale discount that will be applied will result in a cost that is lower than that of atorvastatin,” which is the generic.
“This is just an egregious case. Clearly, there’s been some negotiation between Pfizer and the large PBM’s saying we’re going to make this cost-beneficial to them, but the plan sponsors are going to eat it,” Geoffrey Joyce, an associate professor of clinical pharmacy and pharmaceutical economics and policy at the University of Southern California, tells The New York Times.
The generic versions of Lipitor, by the way, will be supplied by Watson Pharmaceuticals, which has a deal with Pfizer to sell a so-called authorized generic. The other would be supplied by Ranbaxy Laborartories, which won the exclusive right to sell a generic for 180 days, but is awaiting resolution with the FDA of long-standing manufacturing difficulties that some analysts say may threaten a launch (see here).
This is not the only aggressive tactic Pfizer is undertaking to preserve as much Lipitor sales as possible. For nearly a year, the drugmaker has been offering ‘co-pay’ programs that lower out of pocket costs made by insured patients to $4 a month. And Pfizer is also considering an over-the-counter version of the pill (read here).
pills pic thx to anolobb on flickr
Adam J. Fein
The NYT article is incomplete.
Pfizer could have given deep enough rebates such that the plan sponsors may be no worse off (and may even be financially better off) with the Pfizer brand vs. the generic. We just don’t know the facts.
BTW, many people don’t know that retail prescription prices don’t drop too much during the first 180 days after the first-to-file generic launches. This is good for the profits of retail and mail pharmacies, but it also means that payers don’t see the savings right away. See Pharmacy Profits from Authorized Generics (http://www.drugchannels.net/2011/09/pharmacy-profits-from-authorized.html) for an analysis of FTC data from 95 generic drug launches. Bottom line: Pfizer’s strategy could be saving money for payers instead of boosting pharmacy profits. Perhaps that explains the comments from the pharmacy owner quoted in the article.
I doubt a non-Pharmalot reporter understands these nuances of drug channel economics.
original industry insider
Good ponts, Adam. I would just add that the reason drug prices don’t drop much in the first 180 days post LOE is because the first approved generic drug maker gets an exclusive license to sell the generic version under Hatch-Waxman before the other generics can enter the market. Hence I would also question the economic sense behind Pfizer’s move.
MC RPh
I can attest to the fact that with this type of arrangement the sponsors make out just fine. The only scenario where I can see them fairing poorly is if they don’t manage their PBM well and allow them to snatch the benefit.
Generic substitution laws are irrelevant. Most only mandate generic substitution if the patient and prescriber agree. If the sponsor says that they don’t cover the generic, the patient’s choice is to get the brand or pay out of pocket for the generic. Guess what most choose?
Jason Wallace
Adam, as usual, you are missing the point. This has everything to do with the profits of PBMS and Pfizer and NOTHING to do with the profits of pharmacies and the pocketbooks of taxpayers and employers. I understand Drug-Channel Economics as well as anyone, and this is so simple, that even a “non-pharmalot reporter” figured it out. Pfizer gives PBM money to keep Lipitor on formulary. Pfizer makes lots of money. PBM keeps extra rebate dollars. Pfizer keeps extra money. Employers pay more as a result, pharmacies pay more as a result and taxpayers pay more as a result. Pretty simple.
Adam J. Fein
Jason,
Your story makes no sense because plan sponsors (payers) are not morons.
Use some common sense about how markets work. Everyone knows the game, especially for a high-profile drug like Lipitor. Executives at insurance companies and for-profit businesses can make reasonable decisions. And if not, they have plenty of advisers to help them with a big dollar decision like Lipitor.
Thus, PBM contracts with payers will not allow them to “keep the extra money.” It’s quite possible that a brand-name will be cheaper for both patients and payers during the first 180 days.
FYI, Medco’s SEC filings report that it retained only 13% of manufacturer rebates in 2010 (down from retaining 54% in 2003). I’m not defending them, just highlighting a Sarbanes-Oxley-vetted factoid.
Adam
P.S. Now, watch for the follow-up comments accusing me of being a PBM shill, which I am not.
MC RPh
Jason, you are making the assumption that the PBM is keeping the money instead of either sharing it with, or passing it through to the sponsor. In my opinion only a rather dim-witted sponsor would allow the PBM to keep all of the benefit.
Jason Wallace
Not making an assumption guys, just going with the “no comment” that was issued by the medco spokesperson. If you would both take the time to actually read the whole piece, the reporter asked that very question of Medco and they “declined to comment”. Adam, I don’t think you’re a shill for PBMs, but one has to ask the question “Who pays for Adams’ services”? Further, I told you that I respected your opinions (because they are opinions), I just don’t agree.
Adam J. Fein
Jason,
Perhaps we can agree that the full story has not come out yet. But “No comment” just means that the Pfizer PR flack chose not to respond, not that the “PBM keeps extra rebate dollars” (as you state above).
Sorry, I won’t follow you down the ad hominem attack path regarding my (or your) motives.
Adam
MC RPh
Adam, that is exactly my point.
I work for a “sponsor” that happens to be not-for profit. We will be preferring brand Lipitor over the generic for the first 6 months of generic availability and it will generate savings. This savings will result in lower member premiums.
This is how the system is supposed to work.
basement PharmD
I moonlight on the weekends at an independent pharmacy. When a patient comes in a gets a brand name product for 105 dollars that costs us 100, we lament with them about evil pharma profit motives.
When that product goes generic and we get it for $75 and sell it for $95 we sing our own praises and curse the original manufacturer again.
The Monk
I can see both points of view. With over 35 years in Big Pharma…I have yet to see a Company making an offer that is not in it’s and their shareholders benefit. Now if Pfizer has put a package together that is a win-win for itself and the PBM…so be it. But, someone has to loose. Wheteher it is the consumer, the taxpayer, Insurance Payers or the suppliers…to much is unknown at this point.
Peter wolfe
Monk, I’ve been an independent pharmacist for over 50 years and anything that Big Pharma or PBMs do that is ethical, honest or professional is strickly by accident. Thats the rest of the story. We coulder, shouder or woulder all day long but their profits grow and we close our doors from lack of proper reimbursement. When can we expect FDA and government to put a stop to this maddness?
Dave Marley
As I look at my friend Adam’s comments, I see the words “could” (not did) and “may” (not will)and “perhaps” (not “for sure”) . It is admirable that he is so trusting of the PBM industry, but based upon my review of over 100 employer’s PBM statements, I see nothing that indicates they deserve that trust.
I confirmed with a benefits consultant that employer’s rebate contracts with PBMs are set at the onset of the contract period, and are NOT drug specific. PBMs will guarantee a rate for example of $3 per claim, and that any PBMs will retain all rebate dollars obtained in excess of that amount.
Further, Adam is completely in error when he states “many people don’t know that retail prescription prices don’t drop too much during the first 180 days after the first-to-file generic launches. This is good for the profits of retail and mail pharmacies.” Fact #1: Retail prices do not drop because pharmacy ACQUISITION prices do not drop. More often pharmacies are faced with dispensing the generic during the first 180 days below acquisition cost.
The PBMs could answer these questions with a simple statement that “100% of the Lipitor discount money (notice I did not say rebate, because we know PBM’s hide “rebate” money by calling them “formulary fees, etc) will be passed on to the plan sponsors in a readily identifiable and auditable form”…….but they remain quiet.
dzieczko
@Peter Wolfe - I don’t think anyone remembers that there is an FDA so it’s bound to have its funding cut along with the Energy Department. The Super Committee only has to work very hard at doing nothing until Nov 23rd and then all funding for energy and medicine will be sucked up into the magic bucket of 75 trillion in global derivatives…like you, I state just the facts…
R&D funding at Big Pharma is gone, also. Replacing by praying circles for the lawyers winning the legal battles thanks to the clever design of the clinical trials that collected only ambiguous data.
Clever, aren’t they?
Dave Marley
My friend Adam appears inclined to give the PBM industry the benefit of the doubt with words like “could” (not did) and “may” (not will), and pluralizes “we” when in fact it is only “he” that does not know the facts.
The PBMs were given, and will be given repeated opportunity by the press to say, without ambiguity. “All manufacturer monies (those classified as rebates, formulary fees, and all the other terms the PBMs use to hide rebates)generated from Pfizer in relation to Lipitor will be given to the plan sponsor in a readily identifiable and auditable format”.
In fact if they want to further back up that statement they need only to sign a statement that they will act “as a full fiduciary” (the benefits consultant should sign that too) to the plan. But that would mean reversing 20 years of history fighting and overturning any legislation that has required fiduciary responsibilities of the PBM.
Adam is incorrect when he says:
“retail prescription prices don’t drop too much during the first 180 days after the first-to-file generic launches. This is good for the profits of retail and mail pharmacies”
The price to the consumers and payers does not go down because the ACQUISITION price does significantly go down during the first 180 days. There is simply not enough room here to list all the errors in his analysis from his blog post (yes Adam, I read it). While the chains may gouge the uninsured consumers, the PBMs simply MAC the generic the minute they hear 1 manufacturer has dropped its price to ANYONE. In many cases, based on the one sided contracts offered by PBMs, pharmacists actually LOSE money in the first 180 days of market exclusivity.
It is not the non-PharmAlot reporter that does not understand the “drug channel” (nice plug for your blog) nuances. It is the many “experts”, “pundits”, and “bloggers” that have never set foot inside of pharmacy to see actual pharmacy reimbursement claims or contracts, and never actually reviewed a plan sponsor contract or claims data that do not understand.
Too many people, have spent too many years reading only the propaganda put out by the PBM spin machine. This is why Pharmacists United for Truth and Transparency was created, to tell the “truth” about the PBM industry.
AnnePME
There are a lot of unknowns in this evolving situation, and one of the variables is whether or not there will be supply issues for the generic and in turn, the brand. Supply issues might drive up prices.
Adam J. Fein
@Dave Marley:
1. While it’s true that contracts are not product-specific, it still does not mean that the Pfizer plan sponsors are necessarily worse off with this arrangement. Your aggressive certainty about plan sponsor economics is good PR, but unsupported by any data or facts. In fact, MC RPh explicitly states:
“I work for a ’sponsor’ that happens to be not-for profit. We will be preferring brand Lipitor over the generic for the first 6 months of generic availability and it will generate savings. This savings will result in lower member premiums.”
So, you join pharmacy owners Jason Wallace and Peter Wolfe in automatically assuming that “anything that Big Pharma or PBMs do that is ethical, honest or professional is strickly (sic) by accident.” It’s not possible to have a rational conversation about the facts with such an attitude.
2. The FTC study clearly shows that pharmacy acquisition price drops more than the average prescription price, which is why pharmacy profits go up during the period of exclusivity. See the data in and the original FTC study.
Adam
Adam J. Fein
Link didn’t show up above. Here it is:
http://www.drugchannels.net/2011/09/pharmacy-profits-from-authorized.html
Dave Marley
Adam, your inconsistency is showing again. I send you repeated PBM employer claims data showing spread pricing at mail and retail and you say it is anecdotal and meaningless, but one unverified anonymous post from a “plan sponsor employee” and you take it as fact.
I welcome the opportunity to review MC RPh’s contract, and purchasing agreements. Is he a hospital or 340b and thereby able to purchase Lipitor as at rate that is not available to retail?
Studies, including those done by the FTC are only as good as the data sets they use. Garbage in/Garbage out. Let’s also not forget that the FTC is not a non-partisan agency. It’s head is by appointment, and is therefore subject to political influence.
MC RPh
You won’t be reviewing my contracts but I’ll tell you what we do. At our plan we do not have a traditional PBM. We contract out claims processing and manage our own network and manufacturer rebates. In this manner we can protect our members from special interest groups, whether those groups are PBMs or pharmacies. The biggest surprise to me is that more plans haven’t caught on to this approach.
Adam J. Fein
No, Dave, I am 100% consistent. I was using MC RPh as an *example* of how your analysis is woefully incomplete.
You have no reason to discard the FTC study because it’s a very unbiased look at the available data.
Dave Marley
MC, my hat is off to you. Your example is a great illistration of how an educated a plan sponsor has learned utilize a truly transparent claims processing system over the publicly trafded non-transparent PBM. Adam, we will just have to agree to disagree over the merits of FTC studies.
company insider
THey would not be doing it if they did not make money. What would be the purpose if they did not make moeny?