Drug Makers Sidestep Barriers on Pricing - The New York Times
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`https://www.nytimes.com/2015/10/20/business/drug-makers-sidestep-bar...
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`https://nyti.ms/1GQ7GYI
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`BUSINESS DAY
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`By ANDREW POLLACK OCT. 19, 2015
`The pain reliever Duexis is a combination of two old drugs, the generic equivalents of
`Motrin and Pepcid.
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`If prescribed separately, the two drugs together would cost no more than $20 or
`$40 a month. By contrast, Duexis, which contains both in a single pill, costs about
`$1,500 a month.
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`Needless to say, many insurers do not want to pay for Duexis. Yet sales of the
`drug are growing rapidly, in large part because its manufacturer, Horizon Pharma,
`has figured out a way to circumvent efforts of insurers and pharmacists to switch
`patients to the generic components, or even to the over-the-counter versions.
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`It is called “Prescriptions Made Easy.” Instead of sending their patients to the
`drugstore with a prescription, doctors are urged by Horizon to submit prescriptions
`directly to a mail-order specialty pharmacy affiliated with the drug company. The
`pharmacy mails the drug to the patient and deals with the insurance companies,
`relieving the doctor of the reimbursement hassle that might otherwise discourage
`them from prescribing such an expensive drug.
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`Horizon is not alone. Use of specialty pharmacies seems to have become a new
`way of trying to keep the health system paying for high-priced drugs. Valeant
`Pharmaceuticals International, which has attracted government and media scrutiny
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`ACRUX DDS PTY LTD. et al.
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`EXHIBIT 1531
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`IPR Petition for
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`U.S. Patent No. 7,214,506
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`Drug Makers Sidestep Barriers on Pricing - The New York Times
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`https://www.nytimes.com/2015/10/20/business/drug-makers-sidestep-bar...
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`for its huge price increases, does much the same thing for its dermatology products
`with a specialty pharmacy called Philidor Rx Services.
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`“They are all trying to get rid of the sticker shock of using their drugs,” said Dr.
`Kenneth Beer, a dermatologist in West Palm Beach, Fla. “They become the drugstore
`now,” he said.
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`He said Valeant’s program, which he had used, buffered physicians from
`insurers and complaints from their patients about high prices.
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`“It lowers one barrier to using their products,” he said.
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`Valeant revealed last week that it had received subpoenas from federal
`prosecutors in Manhattan and Massachusetts seeking information about its financial
`assistance programs for patients, pricing decisions and the distribution of its
`products. It is not clear if the probes are related in any way to Valeant’s relationship
`with Philidor.
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`Philidor, based in Hatboro, Pa., reveals little about itself on its website. It was
`denied a license in California in 2014 because, the state said, its application had not
`truthfully identified its owners and financial officers. Calls on Monday asking to
`speak to Philidor executives were not returned.
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`Valeant had said little about Philidor until Monday, when J. Michael Pearson,
`Valeant’s chief executive, revealed on his company’s quarterly earnings call that
`Valeant had purchased an option to acquire Philidor late last year. He said that
`Valeant consolidated Philidor’s results in its own financial reports.
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`Mr. Pearson also said on the call that the pricing environment had changed, and
`that the industry was “being aggressively sort of attacked for past pricing actions.”
`He said that Valeant was considering divesting the division selling neurological
`drugs where, he said, the biggest price increases had occurred.
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`He also said that in the future, price increases would be “more modest,”
`probably not more than 10 percent a year. Last year, he said, increases in list prices
`averaged 36 percent for the branded drugs sold by Valeant in the United States.
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`Drug Makers Sidestep Barriers on Pricing - The New York Times
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`https://www.nytimes.com/2015/10/20/business/drug-makers-sidestep-bar...
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`Specialty pharmacies are most known for providing patients with assistance
`with complex drugs, many of them requiring refrigeration and injections, for
`diseases like cancer, multiple sclerosis and rare genetic disorders. But the drugs
`dispensed through the specialty pharmacies used by Horizon and Valeant are for
`common ailments like arthritis pain, acne and toenail fungus.
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`“What was started as administering complex, costly drugs has been co-opted as
`a sales/marketing tool to drive the growth of minor differentiation standard retail
`drugs,” Ronny Gal, a pharmaceutical analyst at Bernstein, said in a note on Friday.
`The programs do offer advantages to patients. The drugs are delivered quickly and
`co-pays are subsidized. Horizon said 98 percent of patients getting Duexis have co-
`payments of no more than $10, less than the co-pays would be for generics in many
`cases.
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`Moreover, if the insurer refuses to pay, the patient already has the drug and the
`manufacturer absorbs the cost. A spokesman for Horizon said that happened for a
`large number of Duexis prescriptions. Still, Horizon and Valeant apparently come
`out ahead because enough insurers do pay.
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`The practice is legal, said Mr. Gal, the analyst, providing that co-pay assistance
`is not used for patients covered by Medicare or other federal programs. For federal
`programs, co-pay assistance is considered an illegal inducement to get someone to
`use a drug. Both Horizon and Valeant say they confine their programs to
`commercially insured patients.
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`On Horizon’s second-quarter earnings conference call in August, one analyst
`asked the company to discuss the positive points of the Prescriptions Made Easy
`program.
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`“I think simply, the positive is we drove over $100 million in net revenue in the
`second quarter, rapidly increased prescriptions,” Timothy P. Walbert, the chief
`executive, replied. He then said the program was “doing the right thing for patients.”
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`Duexis is a combination of ibuprofen, an anti-inflammatory drug, and
`famotidine, the ingredient in Pepcid, which is supposed to prevent the serious and
`even lethal gastrointestinal problems that can result from chronic use of ibuprofen
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`Drug Makers Sidestep Barriers on Pricing - The New York Times
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`https://www.nytimes.com/2015/10/20/business/drug-makers-sidestep-bar...
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`or similar drugs. Both drugs are available as generics, and over the counter. Horizon
`says that by combining the two drugs into one pill that is taken three times a day,
`that makes it more likely that patients will get the benefit of the stomach protection.
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`Horizon has increased the price of Duexis about tenfold since the drug was
`introduced in late 2011. In 2013, it acquired the main competitor to Duexis, a drug
`called Vimovo, which is a combination of the pain reliever naproxen and the
`stomach protector Nexium. Horizon immediately raised the price of Vimovo about
`600 percent, and has roughly doubled it again since then, so both drugs now cost
`about the same amount per month.
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`Geoff Curtis, a spokesman for Horizon, said the company needed to recoup the
`$100 million it invested to develop and manufacture Duexis and the $35 million it
`paid to acquire Vimovo. He noted the low out-of-pocket payments for patients.
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`Deepak Jindal, a pharmacist in Netcong, N.J., said his wife was prescribed
`Vimovo and he could not fill the prescription in his own store because his insurance
`would not cover it. But when the doctor submitted the prescription to Horizon’s
`program, a specialty pharmacy called Linden Care sent the drug to her for a $10 co-
`payment. He said he later learned that his insurance was not billed for the drug.
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`It has become common in the last several years for pharmaceutical companies
`to offer co-payment assistance to make sure patients are not deterred from using a
`drug by out-of-pocket costs. Once the patient uses the drug, the pharmaceutical
`company is paid by the insurance company. Insurers say co-pay assistance
`circumvents their efforts to encourage the use of cheaper drugs by setting lower co-
`pays for them, thereby driving up overall medical spending.
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`Starting this year, the nation’s two largest pharmacy benefit managers, Express
`Scripts and CVS Health, said they would not pay for Duexis and Vimovo.
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`Despite that, Horizon said in its regulatory filing for the second quarter, “with
`the successful adoption of our PME program by physicians,” sales volumes for
`Duexis increased by 72 percent in the first half of this year compared to the first half
`of 2014. In dollars, sales of Duexis rose 131 percent in the first half to $73.1 million.
`In the second quarter, 71 percent of Duexis prescriptions and 61 percent of those for
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`Drug Makers Sidestep Barriers on Pricing - The New York Times
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`https://www.nytimes.com/2015/10/20/business/drug-makers-sidestep-bar...
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`Vimovo went through the Prescriptions Made Easy program.
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`“Horizon has perfected an innovative program to distribute its high-priced pain
`medications that have been actively excluded from reimbursement by a number of
`large payers,” Irina R. Koffler, an analyst at Mizuho Securities, wrote in a report
`earlier this month recommending the company’s stock. The report was titled
`“Outrunning Payers & Not Standing Still.”
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`Ms. Koffler said Horizon targeted physicians whose patients had strong
`commercial coverage. “Patients whose insurance covers Horizon’s medications serve
`to support co-pay buy-downs for patients with less generous coverage,” she wrote.
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`Horizon said in its regulatory filing that prescriptions filled through the
`program “are less likely to be subject to the efforts of traditional pharmacies to
`switch a physician’s intended prescription of our products to a generic or over-the-
`counter brand.” It said that if it were unable to get physicians to direct prescriptions
`to Prescriptions Made Easy, “We may experience a significant decline in Duexis and
`Vimovo prescriptions as a result of formulary exclusions.”
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`A version of this article appears in print on October 20, 2015, on Page B1 of the New York edition with the
`headline: Drug Makers Sidestep Barriers on Pricing.
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`© 2017 The New York Times Company
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