Express Scripts Excludes 48 Drugs On 2014 Formulary

Is anyone really surprised here?  We saw CVS Caremark make some changes a few years ago that caught everyone’s attention.  (You can see a good list of 2013 and 2014 removals and options here for CVS Caremark.)  This year, it’s Express Scripts (ESRX) who’s caught the attention of the press.

Why do this?  I think Dr. Steve Miller did a great job of explaining it in a recent interview.  The most interesting thing to come out of this was the possible link to copay cards.

Pharmalot: Where to from here?

Miller: We obviously have a long-term strategy. This has sent a loud message to the marketplace that we have got to preserve the benefit for patients and plan sponsors and do things to rein in costs. As there are more products in the marketplace that are interchangeable, we’ll do more to seek the best value for our members. This is just the beginning of a multi-step process over the next several years.

Will there be more to come?  Of course.  The PBMs have to make a significant show of lowering the number of formulary drugs especially in the oral solid (traditional Rx) space to make the point to the pharmaceutical manufacturers that they control market access.  This is critical for them to create more opportunities in the specialty Rx space around rebates.  (Here’s the 2014 Express Scripts exclusion list)

Additionally, this is a low risk strategy for several reasons:

• The disruption is minimal.  While 780,000 people sounds like a lot, it’s still just 2.6% of the population covered by these formularies.  The savings the employer will generate per disrupted member will pay for the extra customer service needed.  (Harsh reality to some people…I know)
• As I’ve discussed before, the margins are in specialty pharmacy and mail order generics not in branded drugs which represent less than 20% of all drugs.  Therefore, this is a good place to make a stand.
  • From an old JP Morgan analysis from 2011, Lisa Gill estimated the PBM profits to be (all in 30-day equivalents):
    • $1.69 retail brand drug
    • $2.03 mail brand drug
    • $3.00 retail generic drug
    • $13.00 mail generic drug
• This is based on a clinical review by an independent P&T committee.  Therefore, this is aligned with the health reform focus on outcomes and value.