US Rx Net Prices Fall 5.1 percent (real) in 3Q18

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Richard Evans / Scott Hinds

203.901.1631 /.1632

revans@ / shinds@ssrllc.com

@SSRHealth

December 12, 2018

US Rx Net Prices Fall 5.1 percent (real) in 3Q18

  • List prices for US Rx brands grew 4.1 percent in real terms in 3Q18, as compared to 5.3 percent growth in the year prior quarter. Net prices fell 5.1 percent in real terms in the most recent quarter, as compared to a 0.4 gain in the year prior quarter
  • List price deceleration reflects some companies’ pledges to keep list price gains at or below a nominal 9.9 percent growth rate, plus the impact of cancelled mid-year list pricing actions in response to political pressure. We believe companies will return to their normal schedule of list price changes in 2019, and so expect list price inflation to ease back up toward the +/- 5 percent level in real terms
  • Net price deceleration reflects the ongoing impact of formulary exclusions in certain categories (e.g. insulins, COPD combinations), outright competition (e.g. HCV), and most of all the impact of co-pay accumulators. Net prices for ‘accumulator-susceptible’ products fell 7.2 percent (real) in the quarter, as compared to a 2.2 percent real decline for products that are not susceptible to co-pay accumulators
  • The net price trend in 2019 almost certainly will be dominated by the balance between expanding (both in terms of patients enrolled and pharmacies participating) co-pay accumulator programs, and manufacturers’ roll-out of measures intended to defend against accumulators (especially measures that shift patients from traditional co-pay support to indemnity-based co-pay support, which cannot be ‘accumulated’). Our sense is that the rate of change in accumulator enrollment will exceed the rate of defensive adaptation by manufacturers, leading to a worsening of net price declines
  • At the company level, CELG, ABBV, and Roche had the largest positive impacts on net price trend in the quarter; GILD, JNJ, LLY, NVO, and PFE made the largest negative contributions to total market net price change
  • At the market segment level, only the Immuno / Thalidomide Analogue sub-category of Oncology made a significant positive contribution to total market net price trend; HCV, Long-acting Insulins, Anti-Psoriatics, Oral Anticoagulants and COPD combination inhalers made the largest negative contributions to overall market net price trend

 

US net pricing for prescription brands fell 5.1 percent in real terms in 3Q18, the fourth straight quarter of real net price declines, and the third straight quarter with declines in excess of 5 percent (Exhibit 1). The trend reflects continued net pricing declines for several categories where deflation has long been present because of formulary exclusions (e.g. HCV, COPD combinations, long-acting insulins); and, the more recent loss of large net price contributions from categories that appear to be heavily impacted by co-pay accumulators (e.g. DMARDs, HIV, and MS). Brands that we identified in our April 17, 2018 note as ‘accumulator susceptible’ saw net price deflation of 7.2 percent in the quarter, as compared to net price deflation of 2.2 percent for products outside of this group (Exhibit 2)

Largest impacts on total market net price change, by company

In rank order, the largest positive contributions to net price change (on an as-calculated basis) were made by CELG, ABBV and Roche

CELG accounts for 29.1 percent of total market net pricing change[1], with sales weighted real net price growth of 14.9 percent (Exhibit 3). CELG’s pricing gains were driven by Revlimid and Pomalyst; however, we note that the calculated net price inflation rates of 14.5 percent and 15.6 percent respectively exceed the list price gains of 11.6 percent and 11.5 percent, respectively, either because of growth in inventories, or because of under-reporting of end-user demand. If we assume net pricing for these brands grew only at the rate of list prices, CELG would rank as the second largest contributor to total market net pricing gains, as opposed to the largest

ABBV accounts for 27.1 percent of total market net pricing change, with sales weighted real price growth of 5.5 percent (Exhibit 4). ABBV’s pricing gains were dominated by Humira (6.4 percent). We note that the rolling 4Q real rate of net price gain for Humira is 3.9 percent (Exhibit 5); as such it’s unclear whether this quarter’s higher net pricing gain reflects the usual quarter-to-quarter noise in net price calculations, or further adaptation to co-pay accumulators on the part of ABBV

Roche accounts for 9.7 percent of total market net pricing change, with sales weighted real price growth of just 0.2 percent (Exhibit 6). Avastin and Herceptin dominate Roche’s net pricing gains on an as-calculated basis, with gains of 6.6 percent and 5.2 percent, respectively. These calculated net gains exceed list gains of 2.4 percent and 3.4 percent, respectively, and may reflect growth in trade inventories, and/or an under-reporting of end-user demand. However, even if we assume these brands’ net prices grew only at the rate of list pricing in the quarter, Roche would still rank third among positive contributors to the overall market’ net pricing trend

GILD, JNJ, LLY, NVO, and PFE made the largest negative contributions to total market net price change

GILD’s net price decline of 12.7 percent (Exhibit 7) accounts for 34.6 percent of total market net price change. HCV brands Epclusa and Harvoni are entirely responsible for GILD’s overall net price declines (Exhibit 8)

JNJ’s net price decline of 10.0 percent (Exhibit 9) accounts for 26.6 percent of total market net price change. Mid-teens net pricing declines on Remicade, Stelara, and Xarelto drove JNJ’s overall net pricing decline (Exhibit 10)

LLY’s net price decline of 13.9 percent (Exhibit 11) accounts for 20.4 percent of the total market net price change. LLY’s overall net price decline is dominated by net price declines on Basaglar, Humalog / Mix, Forteo, and Taltz (Exhibit 12)

NVO’s net price decline of 14.9 percent (Exhibit 13) accounts for 18.1 percent of the total market net price change. The company’s overall net price decline is driven by falling net prices for Novolog / Mix, Levemir, and Tresiba (Exhibit 14)

PFE’s net price decline of 9.2 percent (Exhibit 15) accounts for 16.9 percent of the total market net price change. PFE’s overall net price decline is driven by falling net prices for Xeljanz, Ibrance, and Eliquis (Exhibit 16)

Largest impacts on total market net price change, by market segment

The only significant positive contribution to total market net price change by an individual market segment came from the Immuno / Thalidomide Analogue subcategory of Oncology, which consists of CELG’s Revlimid and Pomalyst. Net price for the category grew 15.7 percent on an as-calculated basis, or 20.6 percent on an as-calculated, 4-quarter rolling basis (Exhibit 17). These calculated net pricing gains exceed list pricing gains of just over 11 percent (Exhibit 18), which implies either that channel inventories are building, or that third-party estimates of end-user pull through are too low. True net price growth is likely closer to the rate of list price growth; however even on this adjusted basis the category still would register as the only major positive contributor to total market net price change for 3Q18

HCV, Long-acting Insulins, Anti-Psoriatics, Oral Anticoagulants and COPD combination inhalers all made large negative contributions to the total market net price trend in 3Q18

Net price declines of 32.2 percent in the HCV category explain 35.7 percent of the total market net price decline. Average (non-Medicaid) net cost of a course of HCV therapy fell below $18,000 in 3Q18 (Exhibit 19)

Long-acting insulin prices fell by 28.1 percent on average, and accounted for 27.9 percent of the total market net pricing decline (Exhibit 20)

Anti-psoriatic pricing fell 16.5 percent on average and explains 15.9 percent of the total market net price change. Net prices in the category may be stabilizing; 3Q18 is the second quarter in which net prices have grown sequentially (Exhibit 21). We believe the sharp 1Q18 rise in average dollar concessions reflects co-pay accumulator impacts (Exhibit 22), and that the sequential improvement in net pricing may reflect changes to these brands’ co-pay support programs aimed at limiting co-pay accumulator effects

Oral anti-coagulant net prices fell by 18.2 percent, and account for 15.9 percent of the total market net price change. Net prices have begun to trend lower (Exhibit 23) as list price gains decelerate (Exhibit 24), and as the absolute dollar value of aggregate concessions grows rapidly (Exhibit 25)