Pharmalot: The proposed acquisition is raising various competition concerns. What are yours? Gay: Any time we have a company that reaches 50 percent or more in distribution reach, we‘re talking about the possibility of a monopoly or such leverage that it could eliminate access to drugs. Health plans have to have access to drugs in order to provide services. If you have a PBM that has 50 percent or more of the marketplace on the PBM side of the specialty side – and, in this case, they both own a specialty pharmacy – you’re talking about a potentially tenuous situation where a monopoly may emerge. We know from the past that when a PBM had exclusive distribution of a drug, they raised the cost. And part of our concern is that this deal may eliminate the availability of a drug by simply increasing the cost. A PBM can continue to provide a drug but turn around and raise the cost.
Pharmalot: Okay, so if the merger is approved, you’re saying all bets could be off. Can you offer an example, though? Gay: So a PBM has far-reaching influence for guiding formulary decisions and establishing benefits. And the PBM can exert influence on the cost by being the sole provider of a single drug. A number of years ago, we saw a PBM approach the manufacturer of Acthar Gel, which is used for MS, and got an exclusive distribution arrangement. The PBM then increased the price by 400 percent and, by doing so, they made it more difficult for a health plan to include it in the formulary and keep the co-pays down…These types of tactics are used in order to drive other people out, but won’t benefit anybody else. We’ve seen these kinds of activities from PBMs – but it shuts down competition, costs go up, access becomes harder and nobody wins.
Pharmalot: You make a point of noting that Express Scripts recently found that spending on specialty pharmacy last year rose almost 20 percent, compared with less than 2 percent of other prescription drugs, and will grow more (here is the report). So your point is that if a merged company controls more of that growing pie, costs will be harder to control. Gay: Yes, if you’re talking about controlling costs, I don’t believe having a specialty pharmacy attached to a PBM is effective at lowering costs. The point of the Express Scripts trend report is that specialty pharmacy is a growing segment of spending and as an industry, we’ve not effectively managed that cost down by using a PBM model. Part of the solution is to create a competitive model to keep one player from being the only provider. But approving the merger would create leverage over more than half of the market. It will be very difficult to work with them. You’ll have to deal with it or walk away from more than half of the patient population. Remember, that they will sell benefits administration, mail order and specialty pharmacy services to health plans. That’s a lot of control.
When Express Scripts was a stand-alone company with a mail order operation, they were pretty easy to work with. But then they purchased CuraScript (in 2004) and got into specialty pharmacy. We started competing, rather than partnering. They had a subsidiary that was juxtaposed with their networks. So a number of specialty pharmacies were terminated from their agreements or not allowed in networks. In my conversations with Express Scripts, one thing they told me is that they don’t have a specialty network. They have a single provider. They have CuraScript. So if you have a health plan, it’s a single source for specialty pharmacy. The leverage takes away choice for individual patients. The optimal consumer landscape is where they have more than one choice.
Think of it this way. If they goof up (in filling a prescription), there’s no choice. You can’t make a change. And you could say the same thing for the payer, too. If the consumer had a health plan network, but there was always one physician or one specialist to choose from, but you were not pleased and you had no other choice, would you be satisfied? A health plan doesn’t offer a single dentist or gynecologist. This is one of the few areas, maybe the only area that I can think of, where consumer or patient doesn’t have that option…
Pharmalot: What kind of vibes are you getting from the FTC? Gay: We’ve had three meetings with different (FTC) commissioners and so we have already contact on this particular issue. We previously had multiple contacts with the entire commission on assorted antitrust and consumer protections. I can’t discuss specifics, but our relationship has been ongoing.