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Portfolio > ETFs > Broad Market

Skyrocketing cancer drug prices are Express Scripts’ target

By Robert Langreth and Drew Armstrong

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(Bloomberg) — Express Scripts Holding Co. (Nasdaq:ESRX), which this year forced price concessions from makers of $1,000-a-day hepatitis C medicines, has set its sights on $37 billion in U.S. spending on cancer medications. Its goal is to start influencing the drugs’ costs as soon as next year.

Express Scripts is the country’s biggest manager of prescription drug benefits. However, its reach doesn’t extend to many injected or infused cancer drugs administered in doctors’ offices and hospitals, not dispensed in retail pharmacies. The St. Louis-based company’s ambition is to change that, including eventually for new drugs that trigger the body’s own immune system to attack tumors and can cost $150,000.

See also: Cost to develop a drug more than doubles.

“We want to be able to start influencing the market by 2016,” said Steve Miller, Express Scripts’ chief medical officer, in an interview at Bloomberg’s offices in New York. “We are accumulating all the keys to the puzzle to be able to do this.”

See also: Plans in showdown against high-cost drugs.

In December, Express Scripts upended the pharmaceutical industry when it blocked Harvoni, a hepatitis C drug developed by Gilead Sciences Inc. (Nasdaq:GILD), from its main formulary, or list of covered medicines, in favor of a competing treatment from AbbVie Inc. (NYSE:ABBV).

Express Scripts got AbbVie’s drug at a discounted price, and the move ignited a back-and-forth price war between the drugmakers, which have offered discounts to other payers in return for coverage.

Express Scripts administers pharmacy benefits for about 85 million people in the U.S., and its main formulary covers 25 million of those.

$150,000 drugs

Merck & Co. and Bristol-Myers Squibb Co. have the first of the new class of cancer drugs, called PD-1 inhibitors, on the market for melanoma. They’re testing them in numerous other tumor types. The medicines cost about $150,000 a year and are expected to be widely used. Roche Holding A.G., AstraZeneca P.L.C. and others are developing similar drugs in a class that analysts have projected could eventually generate as much as $40 billion in annual global sales.

Spokesmen for Merck and Bristol-Myers declined to comment.

See also: 5 things Eli Lilly is saying about PPACA.

Miller acknowledged that managing cancer treatment is far more complex than hepatitis C, with sometimes ambiguous outcomes during an emotional process for patients. “We are going to have to walk gingerly, but make no mistake we are on that walk,” he said.

Miller said he has been meeting with top oncologists. The company is also looking at how to work more closely with doctors to steer doctors to preferred drugs in ways that don’t upset patients.

Expensive pipeline

There is a large pipeline of new cancer medicines as well as innovative drugs for other diseases coming to market, Miller said. That trend should help patients yet will also stress the health-care system’s ability to pay for care. The IMS Institute for Healthcare Informatics estimated that the country spent $37.2 billion on oncology drugs in 2013.

While drugs at upwards of $100,000 a year have been around for years, the conditions they treated were usually limited to rare disorders, including enzyme deficiencies and unusual cancers. Now such prices are spreading to more diseases, and are especially prominent for cancer.

Half of the about 30 cancer drugs introduced since 2010 cost $10,000 a month or more and all were at least $5,000 a month, according to data compiled by Memorial Sloan Kettering Cancer Center, in New York. Only four of 44 cancer drugs introduced in the 1990s cost more than $5,000 monthly.

See also: VIP drug-approval pass costs $125 million and climbing

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