Benefit Manager's Lipitor Move Highlights Pressure On Pfizer
January 27 2012 - 6:16PM
Dow Jones News
Pharmacy-benefit manager Express Scripts Inc. (ESRX) will soon
make an adjustment that raises out-of-pocket costs for some
customers filling prescriptions of Pfizer Inc.'s (PFE)
cholesterol-lowering drug Lipitor, underscoring the drug maker's
challenge of keeping sales high in the face of generic
competition.
The blockbuster pill began competing late last year with an
authorized copy sold by Watson Pharmaceuticals Inc. (WPI) and a
competing generic from Ranbaxy Laboratories Ltd. (500359.BY). The
price pressure from a three-way contest--plus since-resolved
questions about Ranbaxy's availability--is encouraging health plans
to push generics after a slow start, said Everett Neville, chief
trade relations officer at Express Scripts.
The move to lower Lipitor incentives and encourage generics has
"happened for a significant piece of our business," Neville said.
This pressure, which Neville said he's seeing more broadly, has
contributed to Pfizer falling short of the 40% market-share goal it
was reportedly seeking to keep.
Express Scripts, which manages drug benefits for companies and
health insurers, will downshift branded Lipitor to the third "tier"
on its national formulary starting Feb. 1. That means some people
filling prescriptions who are covered by Express Scripts will pay a
higher co-payment to get the branded drug than they do now, because
branded Lipitor is currently on the second tier.
The generics are already on the first tier, Express Scripts
said. Co-pay prices vary by plan design, but a generic might cost
$10 while a tier 2 drug costs $30 and a tier 3 costs $60.
The national formulary generally applies to companies who hire
Express Scripts, but not health plan clients, because they tend to
make their own formulary decisions. Express Scripts is awaiting a
regulatory decision on its plan to buy rival benefit-managed Medco
Health Solutions Inc. (MHS) in a deal that would make Express
Scripts the industry's biggest firm.
Express Scripts also runs a large mail-order pharmacy, and on
that front it has a deal with Pfizer to get branded Lipitor at a
low price. Because Express Scripts sells the Pfizer-made pills as a
generic through the mail, the formulary change won't raise co-pays
for mail-order prescriptions.
"We expected that, after Lipitor lost patent exclusivity, the
majority of Lipitor patients would receive a generic version when
they fill their prescriptions at the pharmacy," Pfizer said in a
statement. The company noted that many pharmacies and insurance
companies have plans to automatically switch patients to generics
even if they're prescribed branded pills.
But such changes took place more slowly than usual after Pfizer
started facing generic competition, according to Neville. Slowing
the use of generic Lipitor were questions about whether Ranbaxy
would gain approval and enter the market, plus Pfizer's efforts to
maintain Lipitor share through steps like cutting discounting deals
with health plans and offering co-pay bargains to consumers.
IMS Health data cited in a Goldman Sachs research note shows
branded Lipitor had 32% market share for the week ended Jan. 13,
after holding steady around 37% for much of December, the first
month generics were available.
AmerisourceBergen Corp. (ABC), one of three major U.S.
wholesalers that serve as intermediaries between drug makers and
pharmacies, said that generic usage rates have normalized after
looking unusually low last month. The wholesaler feels "very
reassured by the fact that the conversion rate is now approaching
70% and looks like it could go up from there," Chief Executive
Steven Collis said on an earnings call Thursday.
Wholesalers also tend to reap higher margins from generics, and
Collis has been critical of Pfizer's efforts to maintain branded
Lipitor sales while questioning the drug maker's success.
Pfizer was widely believed to be targeting a 40% market share
for branded Lipitor for the first six months after the introduction
of competing generics. After six months, more competitors are
expected to enter the market and further erode Pfizer's share.
Goldman estimates Lipitor has hung onto significantly more
market share than Merck & Co.'s (MRK) cholesterol drug Zocor
did at the same point after it began facing generic competition in
2006. At that time, Merck also was more aggressive than historical
norms in trying to preserve branded Zocor sales amid generic
competition, offering discounts on the brand.
-By Jon Kamp, Dow Jones Newswires; 617-654-6728;
jon.kamp@dowjones.com
--Peter Loftus contributed to this report.
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