Amgen's Next-Generation Cholesterol Drug Is Approved, but Pricing Is a Huge Concern

Source: Amgen.

Biotech blue-chip stock Amgen (AMGN 1.78%) has already given investors a lot to cheer about over the past year, with five separate approvals from the Food and Drug Administration. On Thursday evening Amgen announced that it notched its sixth within the past year.

Amgen gets the green light for Repatha
Following the closing bell, Amgen announced via press release that the FDA had approved its next-generation PCSK9-inhibiting cholesterol drug Repatha as a treatment for heterozygous familial hypercholesterolemia (HeFH), homozygous familial hypercholesterolemia (HoFH), and patients with heart disease (i.e., patients with a history of non-fatal heart attack or stroke) where statin therapy alone isn't reducing LDL-cholesterol levels sufficiently.

PCSK9 inhibitors are a new type of therapy that targets the PCSK9 protein, which is responsible for binding with receptors on the liver and reducing the liver's ability to filter the blood of LDL-cholesterol (the bad kind). By removing the PCSK9 protein from the equation, the liver is able to better perform its function: removing bad cholesterol from the bloodstream, hopefully leading to a healthier patient.

Source: Centers for Disease Control and Prevention.

The approval was widely expected following Repatha's remarkable results in clinical studies that led to a 54% to 77% reduction in LDL-cholesterol levels in patients with atherosclerotic cardiovascular disease and a 30% reduction in LDL-cholesterol levels for HoFH patients. A competing PCSK9 therapy from Regeneron Pharmaceuticals (REGN 0.04%) and Sanofi (SNY 2.47%) known as Praluent was approved last month by the FDA with the same indications as Repatha, minus HoFH, which the pair didn't seek with its new drug application.

One big question raised
However, just because Repatha is approved doesn't mean this potential blockbuster is an automatic success story. FDA approval raises one enormous question.

That gigantic question mark is what's going to happen in the near-term with PCSK9 drug pricing. When Praluent was approved, Regeneron and Sanofi set an annual price tag on the drug of $14,600, higher than a majority of Wall Street analysts had projected. On Thursday, Amgen set the price of Repatha at $14,100 on a wholesale level per year. Although it's a slight discount to Praluent, it's probably not going to do anything to appease pharmacy-benefit managers and insurers, who are nothing short of terrified that broader use of these drugs could wreak havoc on healthcare costs.

Source: Regeneron Pharmaceuticals.

Keep in mind that it's quite common for drugmakers to work with PBMs and insurers to reduce the final cost paid for the drugs they produce -- but with PCSK9 inhibitors so new and demonstrating such a profound effect on lowering LDL-cholesterol in clinical trials, it's possible neither Amgen nor Regeneron/Sanofi is eager to play hardball with drug pricing.

As Investors Business Daily has suggested, select PBMs may choose to exclude certain therapies altogether, including PCSK9 inhibitors, or they could metaphorically put Repatha and Praluent in the ring and let the innovators "duke it out" over which company will give the bigger gross-to-net deduction. The point being that PBMs and insurers are none too pleased with the current price point for either drug, at least as it relates to the larger patient pool with heart disease. 

It's also plausible that we could see PBMs or insurers strike direct and exclusive long-term deals with Amgen or Regeneron/Sanofi if it means netting a substantial price discount. This is what happened when AbbVie came to market with hepatitis C therapy Viekira Pak in Dec. 2014, and it's what coerced Gilead Sciences to lock in deals of its own with PBMs and insurers for its hepatitis C drug Harvoni at gross-to-net deductions of around 46%.

Source: Pictures of Money via Flickr.

We also have to wonder whether or not physicians will be scared of not being reimbursed for the high cost of PCSK9 inhibitors, causing a slower-than-expected launch of this next-generation class of drugs.

These possible scenarios certainly could put a damper on Repatha's near-term launch (even though Repatha has a slightly broader indication with the inclusion of HoFH patients), which would be bad news as investors have been pricing Repatha's success into Amgen's stock price for months.

One key event the market is waiting for
While I don't want to speculate too early on what might happen between Amgen, Regeneron/Sanofi, and PBMs and insurers when it comes to drug pricing, I can say with confidence that one event in 2017 will cause Amgen and PBMs/insurers to come to the pricing table once more.

In 2017 Amgen is expected to report the top-line results from its long-term cardiovascular outcomes study for Repatha. If the study demonstrates that Repatha's LDL-cholesterol reducing effect actually leads to fewer cardiovascular deaths or heart attacks, then power for pricing will probably shift entirely into Amgen's corner. It would also likely put Amgen in the driver's seat to expand the labeling of Repatha to a wider audience down the road, putting PBMs and insurers in quite the bind.

To be clear, Repatha's approval is a good thing for Amgen, and Amgen certainly isn't reliant solely on one drug. It's had five other recent approvals, and it's still generating ample profits from mature therapies like Neulasta and Enbrel. But I suspect the launch of Repatha is likely to be bumpier ride than many on Wall Street expect, and it could be multiple quarters before we know the true potential for Repatha.