Generic PPIs Look For Long-Term Formulary Benefit From Prilosec OTC
This article was originally published in The Tan Sheet
Executive Summary
Price pressures caused by the availability of Procter & Gamble's Prilosec OTC may offer potential upsides for generic omeprazole offerings regarding favorable formulary status, according to insurers
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Price pressures caused by the availability of Procter & Gamble's Prilosec OTC may offer potential upsides for generic omeprazole offerings regarding favorable formulary status, according to insurers. The competitive environment caused by the presence of several generic Rx choices as well as the OTC product may help firms including Mylan Laboratories, Schwarz Pharma and Novartis, which offer generic omeprazole. For example, WellPoint and other insurers currently require prior authorization in order to cover omeprazole. However, if the cost for the generics drops low enough, the insurers could remove the prior authorization requirement for those products. As the price point drops, the generics could become eligible for programs such as WellPoint's GenericsSelect program, which promotes the use of generics as substitutes for brand-name drugs. Under such a scenario, generic Rx omeprazole could become the cheapest option, insurers say. Mylan, which offers a generic prescription omeprazole, highlighted the uncertainties of the OTC's impact in an October earnings call, while Nexium maker AstraZeneca said the impact would be neutral to positive for its Rx drug's formulary status (1 (Also see "Mylan Says PPI Formulary Impact Unclear As Omeprazole Options Increase" - Pink Sheet, 3 Nov, 2003.), p. 6 and 2 (Also see "AstraZeneca Sees Prilosec OTC As “Neutral To Beneficial” For Nexium Sales" - Pink Sheet, 27 Oct, 2003.), p. 5). Mylan pointed to Aetna's decision to heavily restrict coverage of all 20 mg omeprazole in the wake of Prilosec OTC's launch. The firm also cited a decision by WellPoint and other health care providers to offer coupons for the OTC product to non-chronic omeprazole users (3 (Also see "Prilosec OTC Has Retailers Staying Up Late; “BurnTown” Preview Underway" - Pink Sheet, 25 Aug, 2003.), p. 5). In an August citizen petition, Mylan expressed concern over insurers' treatment of the Rx and OTC versions as interchangeable. Although P&G makes careful note of the different indications for the prescription and OTC versions, heartburn sufferers may pursue the least expensive option without distinguishing between frequent heartburn and gastroesophageal reflux disease. Generic prices could take a while to reach the point where the products can achieve preferred status. The average wholesale price for generic omeprazole remains above $4.00 per pill, according to "Price Alert," while Prilosec OTC's AWP is less than $0.70 per pill, as of Oct. 15. According to one insurer, prices for generics will need to dip below $2.00 per pill before the products can reap the benefits. One insurer estimated there already has been a 5% migration from generic omeprazole users to the OTC product. The rate of migration will be closely watched by generics firms and will likely influence the speed of pricing changes. WellPoint has championed of OTC competition against drugs for chronic conditions. In 1998 and 2002, the insurer petitioned FDA to force the switch of several non-sedating antihistamines - including Schering Plough's Claritin and Clarinex , Aventis' Allegra and Pfizer's Zyrtec - to OTC status (4 (Also see "Clarinex Clinical, Safety Characteristics Support OTC Use – WellPoint" - Pink Sheet, 22 Apr, 2002.), p. 9). While Schering voluntarily switched Claritin, WellPoint's petitions are still pending at the HHS Secretary level. However, FDA is likely to face a barrage of legal action if it attempts to force products from prescription status. (5 (Also see "Pfizer, Aventis Still See Wiggle Room On FDA-Mandated Switches" - Pink Sheet, 4 Aug, 2003.), p. 7). Wellpoint says it will not pursue legal action against the agency if it chooses to reject the petition, indicating that FDA may choose to do so in order to avoid a lengthy legal challenge from Rx manufacturers. Separately, the insurer announced a merger agreement Oct. 27 with Indianapolis-based Anthem, creating "the nation's leading health benefits company." Anthem, which claims it is the fifth largest publicly traded health benefits company in the U.S., posted revenue of $13.3 bil. in 2002. Under the terms of the agreement, WellPoint shareholders will receive $23.80 in cash and one share of Anthem common stock for every WellPoint share. WellPoint values the deal at $16.4 billion based on Anthem's Oct. 24 closing price. The merger is expected to close by mid-2004, "subject to regulatory and stockholder approvals," WellPoint says. |