Express Scripts, Pfizer make a deal

From the ST. LOUIS POST-DISPATCH 05/31/2007
by Mary Jo Feldstein

Express Scripts Inc. said Wednesday that it has reached an agreement with Pfizer Inc., the world's largest drug maker, that will put the cholesterol drug Lipitor back onto the pharmacy benefit manager's list of preferred drugs.

Express Scripts, which recently moved its headquarters from Maryland Heights to the University of Missouri-St. Louis campus, said the change is the result of an improved rebate agreement with Pfizer.

"I think Pfizer realized the whole cholesterol-lowering category was becoming increasingly competitive," said Linda Bannister, a pharmaceutical industry analyst at Edward Jones in Des Peres. "Pfizer did what it had to do to increase access. Lipitor is the most important product for Pfizer."

The change is a big one for Express Scripts. In January 2006, Express Scripts started using price incentives and an extensive education campaign to move patients away from Lipitor. The goal was to move more patients to lower-priced cholesterol drugs and to Zocor, which lost patent protection last June, clearing the way for its generic version.

Express Scripts announced in April that the strategy worked, saving patients and their employers and unions $230 million on cholesterol drugs.

The move was not beneficial to Pfizer. JP Morgan analyst Lisa Gill said Lipitor has since lost 6 percent of its market share. Gill predicted Wednesday's announcement on May 25 and wrote in a note to investors, "The move signals the importance of a drug's positioning on a PBM preferred formulary, as Express Scripts' move had eroded Lipitor's share within its member base to below normal levels."

The move also shows how one drug going off patent can put increased pressure not only on that medication, but on all the drugs in that class, Bannister said.

Express Scripts spokesman Steve Little­john would not say whether the company is pursuing similar arrangements with other drug makers. Littlejohn, however, said Express Scripts does anticipate a "competitive" rebate bidding process this year.

Pharmacy benefit managers such as Express Scripts negotiate deals with drug makers. Those contracts include rebates given to the benefit manager, a portion of which is passed on to the plan sponsor, typically a patient's employer or union. The exact portion is determined by the type of plan chosen by the plan sponsor. In some cases it's all or nearly all of the rebate. In other cases, it's less.

Express Scripts determines its formulary by asking for sealed bids from drug makers. The company then takes those bids and recommendations from a committee of clinical experts and creates a list of preferred drugs. The list is then re-examined by the clinical committee to make sure there is an appropriate mix of drugs in each class.