How Lowering The Price of a Common Asthma Drug Made It Harder to Get
Earlier this year, parents trying to fill their children’s asthma prescriptions at pharmacies around the country got a jolt: The medicine was no longer covered. Soon, it would disappear from the market.
The reason: pricing.
Starting Jan. 1, drugmakers that have raised prices significantly face stiff new penalties that require them to essentially pay Medicaid for patients to use their drugs.
Drugmakers including Eli Lilly, Novo Nordisk and Sanofi are cutting prices of some insulin products by 70% or more on New Year’s Day. GlaxoSmithKline plans to cut prices for three products including its asthma and emphysema medication Advair Diskus, according to pricing data reviewed by The Wall Street Journal and confirmed by a Glaxo spokeswoman.
In June, Glaxo decided on a riskier gambit for its popular asthma inhaler Flovent HFA. It told the FDA it would pull the branded drug from the market in 2024. The company hoped patients would use a new generic version manufactured by Glaxo with a lower list price that isn’t subject to the Medicaid penalties. The maneuver would have effectively cut the price of the medication by a third.
It backfired.
Major pharmacy-benefit managers are refusing to cover the new generic product, despite a list price 35% cheaper than brand-name Flovent HFA, a favorite of pediatricians who said it is easier for children to use than other products. The skirmish between Glaxo and PBMs has left children stuck in the middle. One option is to try a different product, but not all insurers cover inhalers appropriate for children, doctors said.
Doctors said the steroid inside Flovent HFA isn’t necessarily superior to products with different steroids but that its inhaler device is easier to use than others that require greater lung capacity than children can muster.
Micaela Lenhart’s 3-year-old son Jayce started using Flovent HFA for his asthma about two years ago. In October, she received a letter from her PBM, Express Scripts, informing her that Flovent HFA wouldn’t be covered in January. Of the four medications that are covered, only one—Asmanex HFA—is appropriate for children, her doctor said.
“I know what he’s currently on is working, and to now have to start all over again is really stressful,” said Lenhart, 34, of Shawnee, Kan. “Not being able to breathe is a big deal.”
An Express Scripts spokeswoman said Glaxo made the decision to pull Flovent HFA from the market and introduce unbranded versions at inflated prices.
A Glaxo spokeswoman said the price of the unbranded Flovent HFA is determined by Prasco Laboratories, which it joined with to sell the generic product. Prasco didn’t respond to requests for comment.
“Patients are ultimately the ones who suffer with this,” said Dr. Christopher Oermann, a pediatric pulmonologist at Children’s Mercy Kansas City who treats Jayce.
The fallout from Flovent HFA being pulled off the market is another indication of how hard it can be to lower drug prices and the unintended consequences of government policies designed to promote lower costs.
Drugmakers have nearly unbridled pricing power for products with patent protection. But to get insurers to cover their drugs, companies often have to concede discounts to the PBMs that manage drug benefits via rebates, creating a gulf between list prices and net revenue.
PBMs said they return virtually all the rebates to their clients, such as employers, unions and insurers. But politicians and health-policy researchers said the rebates boost profits for insurers and pharmacy-benefit managers and undermine their incentive to keep down drug prices.
“When the gross profit per claim falls relative to other options, you can bet PBMs are going to prefer the other option,” said Richard Evans of SSR LLC, an investment research firm.
Under increasing scrutiny from legislators, some drugmakers have offered cheaper nonbranded versions of drugs whose list prices have risen significantly to account for high rebates. But many PBMs continue to cover the higher-priced branded versions of the same drugs because they prefer higher rebates and fees, drugmakers contend. PBMs said they aim to achieve the lowest net price for their clients, often through rebates.
Starting Jan. 1, drugmakers will have to pay additional rebates to Medicaid for drugs that have had cumulative price increases since their launch greater than overall inflation. Right now, Medicaid gets these drugs free. Under the new rules, companies such as Glaxo will have to effectively pay the government for sales to Medicaid because the price increases in some cases add up to more than the initial list price.
Since the 1990s, Medicaid has required drugmakers to rebate to the government any price increases above the annual rate of inflation. But the rebates were capped at 100% of a drug’s total cost.
In 2021, Congress removed the cap, effective in 2024. The new rebates are expected to reduce government Medicaid spending by more than $17 billion total through 2031.
Half of all brand-name drugs were subject to the inflation-rebate in 2020, and nearly 5% reached the rebate cap that will be lifted next year, according to a Congressional research agency.
Glaxo has told Wall Street analysts that several of its drugs, with about $700 million in annual Medicaid sales, are subject to the new inflation-rebate penalties.
In response, the company is cutting list prices for Advair Diskus, an inhaler for asthma and other breathing diseases including emphysema, by as much as 70%; the price of Lamictal, an anti-epilepsy medicine also approved for bipolar disorder, by as much as 50%; and its herpes treatment Valtrex will get a 10% price cut.
Glaxo took a different approach with Flovent HFA, which contains the steroid fluticasone propionate and is taken twice daily to reduce airway inflammation and prevent asthma attacks. Flovent HFA is among the most popular inhalers in Medicaid, an insurance program for the poor.
Medicaid patients filled 2.5 million prescriptions for the drug in 2022 at a cost of $662 million before rebates, government data show. Since the drug came on the market in 2005, the average cost per prescription rose sixfold from about $39 to $264, creating a significant liability under the new inflation-rebate penalties.
Glaxo earlier this year decided to pull the brand-name drug off the market entirely on Jan. 1. The company hoped patients would switch to an unbranded version of the same product introduced by its partner Prasco in March.
But insurers and PBMs wouldn’t play ball. In July, the PBM CVS Caremark stopped covering Flovent HFA, even before it was taken off the market, and declined to cover the unbranded version. Cigna’s Express Scripts and UnitedHealth’s OptumRx told patients they wouldn’t cover the unbranded version as of Jan. 1.
CVS, Express Scripts and OptumRx say that the unbranded Flovent HFA product is more expensive than the net cost of the branded product or competing products. Doctors can seek an exemption to have the unbranded inhaler covered when medically necessary, they said.
