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BERLEX WILL SELL BETASERON DIRECTLY TO PATIENTS USING PCS PHARMACY NETWORK, SHELTERING PHARMACIES FROM INVENTORY COSTS OF THE $990 PER MONTH MS PRODUCT

Executive Summary

Berlex is planning to sell its new multiple sclerosis product Betaseron directly to patients, sheltering wholesalers and pharmacies from the inventory costs of $990 per month biotech product and facilitating a credit purchase system for patients. The product will be dispensed to patients through a managed pharmacy network administered by PCS Health Systems. PCS is currently recruiting pharmacies from its national network of 55,000 pharmacies. The key to the Betaseron network will be a special Betaseron patient identification/credit card that will allow the pharmacist to identify the source of payment for the product at the time of dispensing. Deliveries of the product from Berlex to pharmacies will be handled by overnight delivery services using on-ice packages to keep the product under refrigerated conditions. Patients will be required to visit the pharmacy twice when getting a prescription: first, to place the order; and then to pick up the product, usually within 48 hours. Berlex unveiled the novel delivery and payment plan for Betaseron in an Aug. 20 letter to doctors. PCS sent out letters to pharmacy owners the same day to invite them to participate in what it is calling the PCS Biotech Network. Berlex explained to doctors that the Betaseron patient card will "identify enrolled patients to pharmacists and specify their payment program and price." To help minimize patients' out-of- pocket expenditures, Berlex is also offering patients the option to use their card to defer payment for 55 days interest-free. This will give patients time to file claims and receive reimbursement. After 55 days, a finance charge of 12% will be assessed by the financial institution issuing the card. In its letter to pharmacies, PCS explained that the pharmacy fee for handling Betaseron prescriptions will be "based on professional services provided." The pharmacy will have no inventory or carrying costs from purchasing the product. Pharmacies that wish to participate in PCS' Betaseron program must agree to fill certain conditions, such as storage requirements. MS patients will be able to obtain Betaseron from participating pharmacies by presenting their Betaseron Card and a prescription. The pharmacist will then transfer the patient information to PCS through PCS' RECAP system. PCS will place the order with Berlex, and Berlex will ship the product to the pharmacy, where it should arrive within 48 hours of the claim transmission. The pharmacy is responsible for arranging patient pick-up of the drug. After the first Betaseron prescription, the patient can call the pharmacist to order monthly refills. PCS will inform the pharmacist through its RECAP system of any amount which is to be paid by the patient when the prescription is picked up. The pharmacy's account with PCS will be debited for any amount collected. PCS explained that the adjustment to a pharmacy's account "will be tailored to accommodate the policies of various third-party payors." For instance, for verifiable Medicaid patients, the account would be debited only after a sufficient time has elapsed for the pharmacy to receive reimbursement from Medicaid. The account would be debited on a cycle basis for copayments or full payments collected from patients. The pharmacist's fee for filing a monthly prescription of Betaseron will be $7. As a percent of the total prescription price, that works out to less than 1% of the cost of each monthly prescription. However, because the fee is automatically recorded with the order, there is apparently no risk or long payment wait for the pharmacist. The card system will also enable Berlex to control distribution of Betaseron during a limited supply roll-out of the drug. Because Berlex anticipates more demand for the product than it will be able to meet when it begins shipping in early October, the company has devised a lottery system to determine who will be able to start therapy. Chiron, which manufactures Betaseron for Berlex, is still in the process of completing its scale-up from clinical research manufacturing capacity to large-scale production. Berlex will initially limit the number of patients who may begin Betaseron therapy to ensure that patients experience no interruption of supply. The Betaseron Equal Access Program is a temporary mechanism through which Berlex will provide Betaseron on a specifically identified patient basis. Patients must be registered for the program by their prescribing physician during an initial registration period from Aug. 23 to Sept. 15, after which time all registered patients will be randomly assigned a position on the Betaseron enrollment list. The order of the list will determine who may start on Betaseron therapy. Patients registered after the September deadline will be added to the list on a first-come, first-served basis. Physicians who have registered a patient during the initial period will be provided with information on the patient's status and an estimate of when the drug will be available by the end of September. Once the drug is available for a patient, Berlex explains, the physician will receive a training kit containing an instructional video and handbook to teach the patient about reconstitution and subcutaneous administration of Betaseron. At this point, Berlex notes, the physician should write the Betaseron prescription and contact the patient to arrange a training session. Berlex will also "contact your patient directly for additional information." Pharmacists not participating in the network system will be able to obtain Betaseron through the usual distribution channels; however, "in that case, of course, the price efficiencies and other benefits that we have established for our distribution system may not be available to the patient," Berlex said in its letter to doctors. "Patients will estimate a savings of approximately $2,000 per year compared to non-network pharmacy distribution by purchasing Betaseron directly from Berlex." Through the Betaseron network, the retail price of Betaseron will be $65.96 per vial, with a month's supply of 15 vials costing $989.40. However, patients who use the drug properly for 10 months will receive two months free of charge through the Compliance Assistance Program, reducing the average price per vial to $54.97, or $9,894 per year. Berlex will provide Betaseron free of charge to patients who earn less than $20,000 per year and have no health insurance. Uninsured patients earning between $20,000 and $50,000 per year will be eligible for financial assistance; "depending on income level and family size, these patients will qualify for a price reduction over and above the Compliance Assistance Program," Berlex explained. The company has also created an 800 number for physicians to provide a resource on reimbursement information and the specific details of the Betaseron indigent and support programs. The pricing of Betaseron has come under scrutiny from congressional observers since its July 23 approval ("The Pink Sheet" July 26, T&G-1). Senate Aging Committee Chairman Pryor (D- Ark.) and Ranking Republican Cohen (Maine) have exchanged a series of letters with Berlex in regard to the company's plans for the drug. In an Aug. 10 letter, the senators urged Berlex to consider the drug's likely off-label patient population in setting final pricing ("The Pink Sheet" Aug. 16, p. 6). At that time, Pryor and Cohen understood Berlex to be considering a price range of $8,500 to $10,000. PCS described its Biotech Network to pharmacists as the result of discussions with NARD, the American Pharmacy Association, and the National Association of Chain Drug Stores. PCS sees Berlex as the first customer for the network, and anticipates that the network will be used in the future to deal with reimbursement of other "high-tech/high-cost prescription drugs."

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