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`U.S. drug benefit managers clamp down on
`specialty pharmacies
`
`#U.S. LEGAL NEWS
`
`NOVEMBER 16, 2015 / 9:23 AM / 2 YEARS AGO
`
`U.S. drug benefit managers clamp
`down on specialty pharmacies
`
`Caroline Humer, Deena Beasley
`
`8 M I N R E A D
`
`NEW YORK/LOS ANGELES (Reuters) - In recent days, the largest U.S.
`managers of private prescription drug benefits have cut off at least eight
`pharmacies that work closely with drugmakers, intensifying scrutiny of a
`system that helps inflate drug prices, officials at the benefit managers told
`Reuters.
`
`The terminations come from payers who together manage drug benefits for
`more than 100 million Americans, and they follow disclosures by Valeant
`Pharmaceuticals International Inc in late October that one pharmacy
`accounted for about 7 percent of its sales.
`
`“What we had not been aware of, until really the last year, was these type of
`pharmacies that have a really high proportion of sales from a drugmaker and
`it was not out in the open,” Everett Neville, senior vice president of supply
`chain at Express Scripts Holding Co said in an interview.
`
`http://www.reuters.com/article/healthcare-pharmacies-terminations-exclu/u-s-drug-benefit-mana...
`
`10/31/2017
`
`Page 1 of 6
`
`ACRUX DDS PTY LTD. et al.
`
`EXHIBIT 1532
`
`IPR Petition for
`
`U.S. Patent No. 7,214,506
`
`
`
`Directory of sites
`
`Login
`
`Contact
`
`Support
`
`U.S. drug benefit managers clamp down on
`specialty pharmacies
`
`#U.S. LEGAL NEWS
`
`NOVEMBER 16, 2015 / 9:23 AM / 2 YEARS AGO
`
`U.S. drug benefit managers clamp
`down on specialty pharmacies
`
`Caroline Humer, Deena Beasley
`
`8 M I N R E A D
`
`NEW YORK/LOS ANGELES (Reuters) - In recent days, the largest U.S.
`managers of private prescription drug benefits have cut off at least eight
`pharmacies that work closely with drugmakers, intensifying scrutiny of a
`system that helps inflate drug prices, officials at the benefit managers told
`Reuters.
`
`The terminations come from payers who together manage drug benefits for
`more than 100 million Americans, and they follow disclosures by Valeant
`Pharmaceuticals International Inc in late October that one pharmacy
`accounted for about 7 percent of its sales.
`
`“What we had not been aware of, until really the last year, was these type of
`pharmacies that have a really high proportion of sales from a drugmaker and
`it was not out in the open,” Everett Neville, senior vice president of supply
`chain at Express Scripts Holding Co said in an interview.
`
`http://www.reuters.com/article/healthcare-pharmacies-terminations-exclu/u-s-drug-benefit-mana...
`
`10/31/2017
`
`Page 1 of 6
`
`ACRUX DDS PTY LTD. et al.
`
`EXHIBIT 1532
`
`IPR Petition for
`
`U.S. Patent No. 7,214,506
`
`
`
`The actions are being felt by drugmakers that have come to rely on hefty price
`hikes to boost profits. Valeant’s closely-linked pharmacy, Philidor Rx Services,
`pressed insurers to pay for expensive Valeant treatments even though much
`cheaper generic alternatives were available.
`
`Shares of Valeant have lost more than half their value since its pharmacy ties
`were made public.
`
`Neville said Express Scripts, the nation’s largest pharmacy benefits manager,
`has changed the algorithms it uses in its audits to find pharmacies focused
`heavily on one drug manufacturer and has cut ties with half a dozen such
`pharmacies in the past week.
`
`Express Scripts and OptumRx, part of UnitedHealth Group , have also found
`pharmacies engaged in extensive mail-order operations without proper
`accreditation. CVS Health, the No. 2 pharmacy benefits manager, said in an
`email that it had reviewed pharmacies with ties to drug manufacturers and
`was removing those that fell short of its contract. It did not give further
`details.
`
`All three of the big benefits managers have quit doing business with Philidor.
`Neville at Express Scripts was careful to note that the pharmacies being
`eliminated are not true “specialty” pharmacies that help manage drugs for
`rare diseases.
`
`“The Valeant-Philidor relationship woke payers up to potential problems in
`their pharmacy networks,” said Adam Fein, president of Pembroke
`Consulting, which follows the drug distribution industry. “We are now seeing
`much greater scrutiny of the independent pharmacies that may not be
`complying with payer requirements.”
`
`http://www.reuters.com/article/healthcare-pharmacies-terminations-exclu/u-s-drug-benefit-mana...
`
`10/31/2017
`
`Page 2 of 6
`
`
`
`GROWTH FROM PRICE HIKES
`
`For large pharmaceutical companies, U.S. pricing gains have accounted for
`roughly 46 percent of worldwide revenue growth over the past three years,
`according to Sector & Sovereign analyst Richard Evans.
`
`U.S. drug prices rose an estimated 12 percent to 13 percent last year, and
`consumers are being asked to pay more of the total cost as health insurance
`deductibles and co-payments increase.
`
`“Drug cost has been the single biggest driver of healthcare spend over the last
`two years. It wasn’t prior to that,” said Dr. John Bennett, chief executive
`officer at Capital District Physicians’ Health Plan, a non-profit based in
`Albany, New York.
`
`Certain pharmacies have contributed to higher drug prices by driving
`customers to expensive treatments instead of cheaper generics, pharmacy
`benefit managers say. Many help drugmakers to cover the out-of-pocket costs
`for consumers, lightening their load but leaving health insurers to pay the
`rest.
`
`Independent pharmacies and their drugmaker partners counter that Express
`Scripts, CVS and OptumRx together control more than two-thirds of the
`market through their own mail-order operations. The specialty pharmacies
`say that the benefit managers are trying to curb the explosive growth of
`smaller, independent players.
`
`“Our philosophy of ensuring that patients get the medicine their doctors
`prescribe is threatening Express Scripts’ profiteering and exposing what we
`believe is a lack of care for patients and respect for physicians,” Horizon
`Pharmaceuticals Chief Executive Timothy Walbert said last week.
`
`http://www.reuters.com/article/healthcare-pharmacies-terminations-exclu/u-s-drug-benefit-mana...
`
`10/31/2017
`
`Page 3 of 6
`
`
`
`Express Scripts has cut reimbursement to Linden Care, a New York-based
`pharmacy that distributed Horizon drugs.
`
`A BOOMING BUSINESS
`
`Specialty pharmacies were first formed in the 1970s to deliver products
`requiring special handling to doctors’ offices and hospitals, including
`therapies for cancer, HIV/AIDS or hemophilia. The field has evolved to
`include mail-order operations that offer services for complex, high-cost drugs,
`often for rare or chronic diseases.
`
`The growth of such pharmacies has been fueled by a record number of
`specialty treatments coming to market for everything from hepatitis C to
`cystic fibrosis. Pembroke Consulting estimated that the number of accredited
`specialty pharmacies would jump by nearly 100 to a total of 250 in 2015.
`
`Diplomat Pharmacy Inc, the nation’s largest independent specialty pharmacy,
`is the sole distributor of three medications for very small patient populations:
`Exelixis Inc’s thyroid cancer drug Cometriq, Teva Pharmaceutical Industries
`leukemia drug Synribo and Keveyis, a treatment for temporary paralysis made
`by Taro Pharmaceuticals.
`
`“We handle drugs for complex, chronic conditions. Many were previously a
`death sentence,” said Sean Whelan, chief financial officer. Net income at
`Diplomat, which went public in 2014, nearly tripled in the first nine months
`of this year from the same period a year ago.
`
`But the Philidor example shows how some pharmacies are being used to
`dispense more ordinary, and expensive, prescriptions. Philidor was selling
`Jublia, a toenail fungus treatment that retails for about $500 for a small
`bottle. The treatment is only moderately effective: it cured about 18 percent
`of patients in one clinical trial after one year.
`
`http://www.reuters.com/article/healthcare-pharmacies-terminations-exclu/u-s-drug-benefit-mana...
`
`10/31/2017
`
`Page 4 of 6
`
`
`
`Linden Care was selling Duexis, Horizon’s top drug, which combines the
`common pain killer ibuprofen and famotidine, the generic version of
`heartburn drug Pepcid. It costs about $500 for a 30-day supply.
`
`Valeant has denied allegations that it used Philidor to inflate revenue, but is in
`the process of cutting its distribution arrangements with the pharmacy.
`Philidor, which will soon shut down, insists its employees behaved ethically.
`
`This week, Linden Care Pharmacy sued Express Scripts, while New York City-
`based Irmat Pharmacy sued OptumRx for moving to terminate their
`contracts.
`
`At Irmat, 60 percent of the prescriptions being sent to OptumRx for payment
`were from two drugmakers, a source familiar with the situation said. Irmat
`said in its lawsuit that revenue skyrocketed after it contracted in 2013 with
`Nestle SA’s Galderma SA, and Aqua Pharmaceuticals, part of Spain’s Almirall.
`Neither company was immediately available for comment.
`
`Eileen Wood, chief pharmacy officer at CDPHP, said the health plan rejected
`4,700 claims from Philidor and related pharmacies this year, nearly all of
`which were for Valeant products. CDPHP works with CVS for pharmacy
`benefits.
`
`Wood also called “very suspicious” the 477 claims CDPHP received from
`Linden Care this year, noting that 90 percent were for drugs from Horizon or
`its subsidiaries. All were rejected.
`
`Officials at Linden Care did not respond to requests for comment.
`
`Our Standards: The Thomson Reuters Trust Principles.
`
`http://www.reuters.com/article/healthcare-pharmacies-terminations-exclu/u-s-drug-benefit-mana...
`
`10/31/2017
`
`Page 5 of 6
`
`
`
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`All quotes delayed a minimum of 15 minutes. See here for a complete list of exchanges and delays.
`
`© 2017 Reuters. All Rights Reserved.
`
`http://www.reuters.com/article/healthcare-pharmacies-terminations-exclu/u-s-drug-benefit-mana...
`
`10/31/2017
`
`Page 6 of 6
`
`
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