CVS Health Corp. (NYSE:CVS) said drug costs for its plans grew a modest 5 percent in 2015, far less than the 11.8 spending growth rate from a year before.
The company, which manages drug benefit plans for more than 75 million Americans, was able to keep costs down in 2015 by negotiating discounts from big manufacturers and carefully managing its list of covered drugs, CVS’s Chief Medical Officer Troyen Brennan said in an interview Monday. The company also put restrictions on some high-priced drugs, a step that helped keep costs from growing by double digits last year, he said.
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Last year’s biggest driver of spending increases was across-the-board list price hikes for a variety of brand-name drugs, Brennan said. “Most pharmaceutical manufacturers have built inflation into what they do,” he said. “We see it for little-known drugs” as well as major brand-name medications, he said.
CVS’s spending for hepatitis C drugs was roughly flat over the course of the year, which helped keep costs in check, Brennan said. While more patients used the drugs, there were also bigger discounts, he said. In early 2015, CVS made a deal with Gilead Sciences Inc. (Nasdaq:GILD) to cover its hepatitis drugs Harvoni and Sovaldi, rather than a competitor, in order to get the lowest possible net price.
The company put another check on 2015 costs when it stopped covering many expensive, unproven compounded pain drugs, Brennan said. Spending on those drugs has plummeted, he said.
CVS is continuing to talk to other hepatitis C drug manufacturers, including Merck & Co. (NYSE:MRK), whose new hepatitis C drug, Zepatier, has a $54,600 list price for a 12-week regimen. That’s 42 percent lower than the list price of rival Gilead’s Harvoni, at $94,500. Drugmakers typically offer discounts and rebates to payers that lower the actual cost from the list price.
“We are busy talking with all the manufacturers trying to decide what the best possible course of action is for our clients,” Brennan said, when asked whether his company would favorably cover Merck’s new hepatitis drug. “Competition is always good.” He wouldn’t provide more detail.
CVS plans to restrict the use of a toenail fungus drug from Valeant Pharmaceuticals International Inc. (Nasdaq:VLNT), as part of an initiative aimed at cutting spending on dermatology treatments, Brennan said.
In April, the drug benefit manager will start a new program, optional for CVS’s health insurance and employer clients, that limits the use of Valeant’s Jublia. The antifungal retails at about $1,000 for an 8-milliliter bottle, according to the website GoodRx. Patients in CVS’s program will have to try and fail to have their condition cured by other, less-expensive toenail fungus drugs before taking Jublia.
Costs for dermatology drugs “are out of control,” and CVS has aimed at cutting their use, Brennan said. Spending on Jublia, approved by U.S. regulators in June 2014, grew 950 percent among CVS’s clients last year, Brennan said.
Meanwhile, a new category of expensive cholesterol-lowering drugs has seen only limited use so far, Brennan said. In November, CVS said that it will only cover one of the drugs, Repatha, from Amgen Inc. (Nasdaq:AMGN) and will exclude a competing treatment from Sanofi and Regeneron Pharmaceuticals Inc. (Nasdaq:REGN).
To get the new drug, patients generally need to provide either data showing that standard cholesterol drugs have failed to work or tests confirming that the conventional treatments have caused side effects, Brennan said. Standard treatments include statins, such as generic versions of Lipitor.
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