Featured Health Business Daily Story, Feb. 27, 2015
Reprinted from HEALTH PLAN WEEK, the most reliable source of objective business, financial and regulatory news of the health insurance industry. Sign up for a $91 two-month trial subscription today.
Hepatitis C drug Harvoni is on a hot streak as far as winning preferred status on health insurer formularies goes. National plans like UnitedHealth Group and Anthem, Inc. picked the newest hep C entry from Gilead Sciences Inc. over its main competitor from AbbVie Inc. — Viekira Pak — and more recently, Harvard Pilgrim Health Care, Inc. became the first regional plan in New England to sidle up to Gilead (HPW 2/9/15, p. 7).
But why are plans choosing Gilead? And what is involved in these “Let’s Make a Deal” negotiations among plans, PBMs and drug manufacturers? In an interview with HPW, Harvard Pilgrim Chief Medical Officer Michael Sherman, M.D., reveals all — except the monetary details — of what it took to get his insurer’s business.
There are two main items that led Harvard Pilgrim to Harvoni: one clinical and one financial. “We essentially concluded that of the existing choices we had, they both were clinically efficacious and both were safe,” Sherman says. “With Harvoni it does have fewer side effects, fewer potential interactions with other medications, which made it a little bit easier from that sense. And it is more convenient because it is only one pill a day. So when we considered that other things being equal, we think that Harvoni is the better drug. And in fact, what we’ve seen even before we came up with it as a preferred choice, what our prescribing patterns showed from our physicians was that they all were using Harvoni vs. Viekira.”
The other part of the decision was money, since what Harvard Pilgrim spent on new hep C treatments in 2014 dwarfed other expenditures. The insurer, for instance, said what it spent on “rare drugs” for all of last year was only about one-third or less of its entire hep C drug spend. So getting discounts was a key when the opportunity arose.
Before AbbVie won approval for Viekira Pak late last year and Gilead launched Harvoni, Gilead had a monopoly on the market for new-breed hep C therapies with its first drug in the segment Sovaldi. But the dawn of competition changed everything.
“We didn’t have a lot of choice; we didn’t have any rebates. We just tried to make sure it [Sovaldi] was used where appropriate, which I think most payers were doing,” he says. “What got more interesting was when AbbVie came out with their drug and Harvoni came out from Gilead. So now you’ve got two manufacturers and the ability to look at value and try to determine how best to serve your members.”
With choice came talks. The negotiations yielded a discount and not much change by selecting Gilead, Sherman recounts. “When we did have a choice, and we spoke to both AbbVie and Gilead and negotiated with both, we ultimately chose to prefer Gilead. They provided a rebate that was helpful, would not require us to change any of our existing policies or procedures and also it matched what we were prescribing anyway. So there was absolutely no disruption to our membership,” he describes.
Although payers have not disclosed the discounts they’ve negotiated, more clarity came when Gilead executives indicated during a Feb. 3 earnings call that its payer discounts for Harvoni and Sovaldi are more than 50% in some cases, according to HPW sister publication Drug Benefit News.
Oddly enough, the anger that Gilead generated from its imposition, in many minds, of high-priced Sovaldi on the marketplace, may have come around in a big circle to let it back in the front door with Harvoni. Also favoring health plans was the decision by Express Scripts Holding Co. on Dec. 22, 2014, to choose AbbVie’s hep C drug (HPW 1/12/15, p. 1). Sherman explains:
“In theory, if AbbVie had been willing to offer an aggressive rebate and Gilead was not willing to offer us any, I think it could have swung us in that direction. But they were both willing to play and I think there was also the Gilead experience where they were surprised by Express Scripts,” he continues. “The word is that Express Scripts only spoke to AbbVie and not to Gilead at all….I think there was a lot of anger in the market at Gilead, just the way they priced it when they did have a monopoly. So I think Gilead was a little shaken by the Express Scripts preferred deal with AbbVie and decided that they needed to be more open to different types of rebates in return for preferred placement.”
Harvard Pilgrim also knows that more change could be in the offing for the hep C market, with new entrants likely later this year. This made the preferred status deal with Gilead a short-term arrangement at only one year. “We thought it was important that we didn’t want to be locked in,” Sherman says.
Even though Harvoni is preferred for Harvard Pilgrim members, there are some cases in which a patient may need the AbbVie treatment, which will be covered when appropriate. “There are certain conditions, certain patients, we estimate less than 5% where that may be a better choice for the member. So even though it is not the preferred drug and even though we don’t have a rebate on Viekira, if it is the appropriate clinical drug the physician will be able to prescribe it for those cases,” Sherman says.
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