In 2016, CVS Health is going to drop coverage of Viagra, the famous little blue pill that caused the rise a multi-billion dollar industry of drugs for erectile dysfunction. This seems to be creating a window for one of the most curious paradoxes of drug pricing ever.
The thing is that CVS is now replacing Viagra with Cialis, which is another brand name drug with a pretty similar effect — and has made a claim that these changes will result in savings on expenditures. However, this isn’t a typical case of a cheaper generic type drug unseating a more expensive brand name product. Both Viagra (by Brand Company), and Cialis (by Eli Lilly and Co.) still have their patents active.
Why does a price difference make CVS drop Viagra?
The Tufts Center for the Study of Drug Development representative and director, Kenneth Kaitin, says that the problem in providing a clear answer is that it requires an invitation to the shady and mysterious world of drug prices. To explain why exactly a certain medicine costs what it costs, he said, it requires an answer more complex than anyone in the general public would appreciate.
“I don’t have a clue, and for that matter people working in the companies quite often don’t have a clue about pricing strategies either,” Kaitin said. The reason is that the companies that cover medicine for patients — pharmacy benefit managers like CVS/Caremark — don’t buy drugs at list price. They don’t even check on every individual drug price, but just buy drugs in bundles.
Maybe, for instance, a drug company gives a better discount if a pharmacy not only buys their erectile dysfunction medicine, but also a set of their cancer drugs and cardiovascular treatments. That shapes a decision to drop one particular drug from the list of medicines covered by a certain pharmacy benefit company. Such changes are hard to dissect. It might have been due to the price of that particular drug, or it might have been about a discount applied to a bundle of drugs.
The Mysterious World Of Drug Prices
Kaitin notes that all the negotiations between drug companies and pharmacy benefit companies are always very secretive, so he can only guess, but generally, companies such as CVS try to get the best deal for their price from the drug companies. One more thing that might be causing this, he says, is that Cialis is also an approved treatment for a disease called benign prostatic hyperplasia that causes urinary problems.
“We do not disclose specific details of our discussions with our payers,” a spokesman for Eli Lilly said in the e-mail. A spokesman for Brand Company said, “Viagra is still available for millions of patients on the market, including many people whose pharmacy benefits are managed by Caremark.”
CVS wouldn’t talk much about the reason why it is substituting Cialis for Viagra, which is just one of more than two dozen other drugs it’s dropping in 2016.
Reassuring Instead of Clarifying
“For those drugs that got removed, equal products with lower prices remain available on the list,” CVS spokeswoman Christine Cramer says in the e-mail. “Since we have introduced our leading and rigorous approach to the drug-list management in 2012, we have provided sufficient savings for our sponsors.”
Moreover, it’s surprisingly difficult to determine the actual price of a drug because it often depends on who is buying and how well the negotiations went. IMS Health, as a vendor of prescription data, is tracking the total revenue of drugs sales. However, even with that much attention to detail, a spokesman noted that you can’t really tell the average price of a certain brand name drug because the data does not track the manufacturer’s coupons, rebates, and other discounts.
Is This Done On Purpose?
If you take a look at the total revenue for one prescription of these drugs, they’re not very different. IMS Health reports that Cialis made $1.4 billion in revenue in 2014 with 7.5 million prescriptions, and Viagra made $1.3 billion with 7.2 million prescriptions. That actually means that Cialis is a bit more expensive per prescription.
If anything, Kaitin points out, the lack of clarity about drug prices marks a problem in the United States health care system, where physicians have to keep track of which pharmacy plans cover which drugs — an ever-changing list for every company.
“I think that most people have no idea how these processes work and we’ve had such a harsh discussion in the U.S. about rationing it and us not wanting to have a European system, that is restricting people from accessing new and important drugs,” Kaitin says. “Actually, that is what we’re doing: drug lists are a way of not letting people gain access to new important drugs.”