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Richard Evans / Scott Hinds

203.901.1631 /.1632

revans@ /


February 18, 2019



  • REGN/SNY recently reduced the US list price of their PCSK9 inhibitor Praluent to $5,850, mirroring a move by AMGN/Repatha last October
  • Because list prices play a direct role in Part D patients’ OOP costs, these actions should bring typical Part D OOP costs down to $122 – $161, from $303 – $400 (Part D beneficiaries account for more than half of potential demand)
  • Despite the significant improvement, the resulting Part D OOP costs may not be low enough to enable full utilization, which implies the companies may offer further Part D discounts in an effort to get the PCSK9’s onto preferred formulary tiers with even lower OOP costs
  • The cost to a Part D plan of lowering OOP costs further is increased utilization, and with millions of Part D patients meeting the criteria for PCSK9’s, but with fewer than 800,000 US Rx’s dispensed annually, there’s a very real chance that utilization picks up dramatically – which would force the Part D plan’s premiums higher. In a market where beneficiaries are extremely price elastic, and often pay their Part D premium separately from other premiums, it’s easy to see why any particular Part D plan might be reluctant to be the first to ease utilization restrictions on the class, despite the lower list prices. All else equal Part D managers may be unwilling to trade better formulary status for further discounts, which implies continued weak demand growth
  • In the commercial market, formulary managers’ gross margins on PCSK9’s will fall because of the lower list prices and the resulting lower gross to net concessions. As of 3Q18 the average dollar value of gross to net deductions for the PCSK9’s was $6,855; under the new list prices ($5,850) any gross to net deduction obviously must be much smaller. Absent some external factor (e.g. overwhelming prescriber demand) it’s doubtful commercial formulary managers will ease utilization restrictions on the class (higher utilization is adverse to formulary managers’ trend commitments) as their gross profits per PCSK9 claim fall
  • Our sense is that either or a combination of two things must occur for PCSK9 inhibitor (unit) demand to reach its full potential – professional guidelines must encode use of PCSK9’s as dogma for patients in whom the class is indicated (current guidelines are tepid on the class); and/or, net prices must fall well below the $5,850 level (easing premium pressures on Part D, and providing competitive gross profits / claim for commercial)
  • Because the approved PCSK9’s are MAbs, their COGS may preclude meaningfully lower net prices. This implies that broader utilization of PCSK9-targeted therapies may not be realistic with Praluent or Repatha, but that broader uptake may be feasible for lower COGS approaches such as MDCO/ALNY’s inclisiran – a small interfering RNA or ‘siRNA’ based approach that is generally much cheaper to make than a MAb
  • On a separate note, the lowering of Repatha and Praluent’s list prices should not be misread as an early reaction to HHS’ pending modification of the Anti-Kickback Statutes’ safe harbor provisions. Repatha and Praluent are relatively unique in having a majority of their sales in Part D, and because Part D patients’ OOP costs are so heavily influenced by list prices, the lower list prices make sense for these brands. We screened for other retail-dispensed brands that get ≥ 40% of sales from Part D, and account for ≥ 10% of a company’s global net sales. The list is quite small: Ingrezza (NBIX), Jakafi (INCY), Auryxia (KERX), Relistor (PGNX), Rhopressa (AERI), Vascepa (AMRN), and Tymlos (RDUS)


On February 11, SNY/REGN announced the March 2019 US availability of their PCSK9 inhibitor Praluent at a lower list price of $5,850 annually, as compared to the current price of $14,560. SNY/REGN’s move mirrors AMGN’s October 2018 decision to offer its PCSK9 inhibitor Repatha in the US at the same $5,850 list-price level

Medicare Part D patients’ OOP levels dominate PCSK9 pricing strategy

Medicare patients account for about 55 percent of potential US PCSK9 inhibitor demand; commercial patients account for just 29 percent. Accordingly, Medicare Part D pricing considerations dominate PCSK9 pricing decisions

In announcing its own decision last October, AMGN claimed they were seeing an abandonment rate of 70 percent for Part D prescriptions, v. 20 percent for commercial prescriptions – a clear sign that Part D patients’ out-of-pocket (OOP) costs were simply too high. List prices weigh heavily on Part D beneficiaries’ OOP costs, since most (about 55 percent) face an annual deductible during which they pay the list price, and effectively all face monthly co-insurance, i.e. monthly OOP costs that are calculated as a percentage of list price, for drugs – like PCSK9’s – that are classified as ‘specialty’ (Exhibit 1). For non-specialty brands, OOP costs are typically in the form of co-insurance for non-preferred brands but are often (though not always) fixed dollar co-payments for preferred brands. Unlike commercial markets, manufacturers cannot offer direct co-pay assistance to Medicare beneficiaries, so whatever OOP amount the plan determines is typically what beneficiaries actually have to pay

At the original list prices, patients with 25% co-insurance would have paid about $303 for Repatha or Praluent per month; at a 33% co-insurance rate the monthly cost would have been about $400 for either drug. At the new lower list prices, these amounts fall to $122 for 25% co-insurance, or $163 for 33% co-insurance

Whether PCSK9 prices fall further turns on whether formulary managers are willing to enable much greater utilization – and thus much greater aggregate PCSK9 spending

Praluent’s list price drop should result in a net price drop of at least 23%. As of 3Q18, the net annual cost (as defined by the net price received by SNY/REGN) for a year of Praluent therapy was about $6,972, and falling (Exhibit 2). At $5,850 list, we would expect Praluent’s effective net price to be around $5,385 after accounting for normal ‘housekeeping’ concessions (e.g. prompt pay discounts, wholesale and retail fees, provisions for returns, etc.). If SNY/REGN has to offer Part D discounts and/or commercial rebates off of the new list price in order to gain traction, the effective net pricing will of course be correspondingly lower

Whether discounts and rebates further reduce net pricing depends in large part on whether formulary managers are willing to accept the increased utilization that would come with driving patients’ OOP costs even lower. At the $122 – $163 monthly level defined by standard specialty co-insurance rates, PCSK9 OOP’s are within the OOP range of the major blood thinners (Exhibit 3), but still well above the blood thinners’ $76 per month class average. It bears emphasizing that the three branded blood thinners have a combined 27.6M annual US Rx’s, as compared to just 790,000 for the PCSK9’s

If we simply apply the selection criteria for the PCSK9’s original pivotal trials to NHANES[1] patient data, we estimate that roughly 11.6M US patients are eligible for a PCSK9 (Exhibit 4), with 4.8M of these having LDL_C levels above 100 mg/dl (Exhibit 5)

In an earlier note[2] we showed that the 0.7% rate of cardiovascular event reduction seen with Repatha in FOURIER roughly parallels the event reduction rates seen in trials of effective agents used to either lower cholesterol or blood pressure – the point being that the 0.7% event rate reduction has historically been sufficient to drive enormous prescription volumes for anti-hypertensives and cholesterol lowering agents. The fact that the PCSK9’s clinical evidence hasn’t resulted in similar uptake implies that formulary policies – both in the form of administrative hurdles and high OOP costs – have limited utilization. If those restrictions were removed, it’s reasonable to believe that PCSK9’s (eventually) might be as commonly used in patients who qualify for them as anti-hypertensives (73 percent of US adults with hypertension are prescribed) and cholesterol-lowering agents (53 percent of US adults with high cholesterol are prescribed). If we were to simply apply the average of these two penetration rates (63 percent) to only the 4.8M PCSK9-qualifying patients with LDL_C >100 mg/dl, this would imply annual prescription potential of about 36M – more than $17B annually at the new lower list prices

That type of utilization surge would have a meaningful impact on Part D premiums – so a plan allowing greater utilization would have measurably higher premiums than a plan that stayed with a more restrictive PCSK9 formulary. Because seniors are so price elastic with respect to Part D premiums, there’s a heavy incentive not to be the first Part D plan to take a more permissive stance with PCSK9’s. The best possible way to break this logjam is for the use of PCSK9’s in qualified patients to become dogmatic – but this isn’t happening. Despite PCSK9s’ proven efficacy, both in terms of lowering LDL_C and reducing cardiovascular events, consensus guidelines[3] give the class tepid support at best. Without strong professional support for PCSK9’s as standard-of-care, Part D plans are unlikely to remove constraints – such as OOP costs – on PCSK9 uptake

On balance, our sense is that Part D formulary managers won’t entertain the risk of surging utilization that would likely follow a further reduction in patients’ OOP costs. So, without an about-face in professional support for the class, PCSK9 pricing to Part D arguably won’t change much from here – and neither will utilization

Shifting to commercial formularies – as of 3Q18, before giving any effect to Repatha’s launch of lower list-price versions, the rolling 4Q average gross-to-net (GTN) concessions for Repatha and Praluent were $7,588 and $6,359, respectively (Exhibit 6), values which put the brands roughly in the middle of the pack for US brands (Exhibit 7). Clearly the brands can’t continue GTN concessions of this dollar magnitude at the new lower list prices, since these concessions exceed the new list prices. So any rebate these brands provide to commercial formulary managers inevitably will be reduced, making the brands less profitable to those managers. And, any easing of utilization restrictions formulary managers provide in exchange for those new, smaller rebates could result in much higher utilization. Smaller rebates and greater utilization aren’t outcomes commercial formulary managers are likely to embrace, so here again the rate limit appears to be clinical consensus: left to their own devices, commercial formulary managers are unlikely to step out of the way of greater PCSK9 utilization

As prices fall, COGS may quickly become a rate limit – after all, these are MAbs

Regardless of formulary dynamics, COGS may temper further price competition between these two brands. Both drugs are monoclonal antibodies (MAbs), and MAbs generally have relatively high manufacturing costs. We don’t have any way to know the specific COGS for Praluent and Repatha, but we can see COGS for certain MAbs in the limited instances where these have been publicly disclosed (Exhibit 8). In those few instances, COGS/mg has ranged from $0.37 to $14.50. If we conservatively assume Praluent and Repatha can manufacture at the low end of this admittedly tiny sample, that implies annual COGS on the order of $727 to $1,455 for Praluent depending on dose, and $1,358 to $2,037 for Repatha depending on dose. At the best case (zero discounts or rebates) net price of $5,385 implied by the new lower list price, COGS/sales ratios would range from 14 percent to 27 percent for Praluent, and from 25 percent to 38 percent for Repatha. If COGS are higher, and/or if net pricing has to go lower to drive utilization, it could just be that the PCSK9’s are too expensive to manufacture at pricing levels that are consistent with general use

Do the list price reductions by Repatha and Praluent imply that other brands will follow suit?

Repatha and Praluent had little choice but to lower list prices, since the majority of their demand comes from Part D, and since Part D patients’ OOP costs are so directly influenced by list prices. The brands’ original pricing strategies might have worked if use of the two agents had become clinical dogma, but so far this is not the case – so lower OOP costs were plainly needed

The PCSK9’s would have lowered their list prices even if HHS had never published its proposed rule changing the Anti-Kickback Statute’s (AKS) safe harbors. In reaction to the Part D OOP problem Repatha lowered its list price before the proposed rule was published, and (presumably as a result) was accelerating its share gains (Exhibit 9). Praluent had little choice but to match Repatha’s move, proposed rule or no

Only drugs with a majority, or near majority of US demand coming from Part D are likely to consider lowering their list prices, either because of the rule, or because of patients’ OOP costs. We screened for drugs that have at least 40% of US demand coming from Part D, and which account for at least 10% of the relevant company’s global net sales. The resulting list is relatively small, and is shown in Exhibit 10

Given the severity (and cost) of conditions treated by Jakafi[4] and Ingrezza[5], affected Part D patients are likely to cross Part D’s catastrophic spending threshold, at which point OOP costs fall considerably. Tymlos[6] and Auryxia[7] are both chronic use medications used by patients who may be well enough not to cross the catastrophic threshold, and both medications compete in classes with alternative therapies – thus lower list prices are entirely feasible. Relistor[8] is used intermittently for a non-life threatening but acutely symptomatic condition, which implies that demand is probably somewhat inelastic at current pricing – implying no price change. OOP costs for Vascepa and Rhopressa are relatively modest at current list prices, which also implies no change


  1. National Health and Nutrition Examination Survey
  2. “AMGN: Repatha potential as much as 4X higher than consensus”, SSR Health LLC, April 2, 2017
  4. E.g. polycythemia vera, myelofibrosis
  5. Tardive dyskinesia
  6. Osteoporosis
  7. Iron deficiency anemia
  8. Opioid induced constipation (OIC)


©2019, SSR, LLC, 225 High Ridge Rd, 2nd Floor, Stamford, CT 06905. All rights reserved. The information contained in this report has been obtained from sources believed to be reliable, and its accuracy and completeness is not guaranteed. No representation or warranty, express or implied, is made as to the fairness, accuracy, completeness or correctness of the information and opinions contained herein. The views and other information provided are subject to change without notice. This report is issued without regard to the specific investment objectives, financial situation or particular needs of any specific recipient and is not construed as a solicitation or an offer to buy or sell any securities or related financial instruments. Past performance is not necessarily a guide to future results. In the past 12 months, through a wholly-owned subsidiary SSR Health LLC has provided paid advisory services to Amgen (AMGN), BioPharmX (BPMX), Bristol-Myers Squibb (BMY), Celgene (CELG), Gilead Sciences (GILD), GlaxoSmithKline (GSK), Johnson & Johnson (JNJ), Merck (MRK), Pfizer Inc (PFE), Roche (RHHBY), Sanofi (SNY) on both securities-related and non-securities-related topics. One or more of SSR Health’s analysts owns long positions in the following stocks: ADMA, AERI, AIMT, ALNY, ALXN, AMAG, ARDX, ASRT, BMY, CRSP, CSSPF, DPLO, EDIT, FOMX, HRTX, ITCI, LXRX, MDCO, NBRV, NTLA, RHHBY, SAGE, SGMO, SRPT, STML, URGN, VRTX

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