The Affordable Care Act has established basic core health requirements for insurance plans offered in the U.S. that support those diagnosed with life-threatening chronic diseases, including HIV.
As a result, Express Scripts has reported that demand for drugs used to treat HIV and prevent HIV transmission grew in the first quarter because of rising enrollment in both marketplace plans and the expansion of Medicaid in many states.
If the demand trend noticed in the first quarter continues in the second quarter, it may suggest that major HIV drugmakers including Gilead (GILD -1.17%), Bristol-Myers Squibb (BMY 0.70%), and Johnson & Johnson (JNJ -0.33%) post results that are better than analyst forecasts.
Important new access to care
Those previously diagnosed with HIV had difficulty obtaining insurance coverage before Obamacare because the cost to treat HIV patients is high.
By eliminating insurers' ability to drop or choose not to insure people diagnosed with pre-existing conditions, thousands of HIV patients have been able to get coverage that will now help pay for their medicine.
The ACA also mandates that HIV testing be covered at no charge as a preventative service for those over age 15. That is allowing more people who may be at risk of having the disease to determine whether they have it (and the Medicaid expansion is opening up a cost effective insurance option to millions of newly-eligible Americans).
Since HIV is a prevalent disease affecting more than an estimated 1 million Americans (200,000 of which aren't yet diagnosed), these important changes are having a big impact on demand for HIV-targeting drugs.
Growing demand for drugmakers
Gilead is the unquestionable leader in HIV drug development. The company markets a slate of important HIV therapies, including five compounds that could each generate more than $1 billion in sales this year.
Gilead's HIV product portfolio produced $9 billion in sales last year, and its drugs Atripla and Truvada are among the most costly therapies among marketplace plans tracked by Express Scripts.
This indicates that exchange plans may have a disproportionately higher percentage of HIV patients, given that those drugs are among the top five prescribed for the disease.
As a result, HIV was the biggest category for drug claims in exchange plans during the first three months, representing 55% of all specialty drug claims. For comparison, HIV drugs account for 21% of specialty drug claims in non-exchange plans.
While improved insurance coverage for patients with HIV and at risk for contracting HIV will have an outsize affect on Gilead, given that HIV drugs account for 45% of its total sales, it should help Bristol-Myers and Johnson & Johnson, too.
Bristol-Myers markets the HIV drug Reyataz, which was the first once-a-day protease inhibitor developed to treat the disease. The drug, which was approved in 2003 and will lose patent exclusivity in 2017, had sales of $344 million in the first quarter. Bristol also produces Sustiva, which lost patent protection in the EU in 2013, and gets some revenue from the sale of Gilead's Atripla, which includes Sustiva. Sustiva sales totaled $319 million in the first quarter, down 18% from a year ago because of the patent expiration.
Johnson & Johnson could also see demand for its Edurant and Prezista grow. Those two drugs are growing quickly, with Edurant's sales up 88% year over year to $81 million in the first quarter and sales of Prezista up 21% to $445 million in Q1.
Fool-worthy final thoughts
Gilead will report second-quarter earnings on July 25, and Bristol-Myers will report on July 24, but it's Johnson & Johnson that will give us the earliest read out on HIV drug demand. It's scheduled to issue its earnings release on July 15.
The addition of 8 million members to private insurance rolls during the first open enrollment period and 6 million new members in Medicaid suggest that access to care and life-saving drugs like those for HIV has never been better. If so, the companies producing these treatments should see volume and sales growth continue to climb.