Perhaps tired of watching Express Scripts (ESRX) in the vanguard, CVS Health (CVS -0.17%) recently inked a deal with Amgen (AMGN 0.07%) that could save end payers billions. America's second largest pharmacy benefit manager will add Amgen's Repatha to its commercial formularies, while excluding Repatha's only competitor, Praluent, which is made by Sanofi (SNY -2.18%) and Regeneron (REGN -1.44%).

Repatha and Praluent have plenty in common. Both drugs lower "bad"cholesterol by inhibiting the PCSK9 protein, which is great for patients who can't reach their cholesterol goals with statins alone. However, with list prices of around $14,000 per year, they're also more expensive than end payers are comfortable with. And that's where pharmacy benefit managers like Express Scripts and CVS Health come in.

Playing a bigger part
There have been some big changes recently in the way pharmacy benefit managers do business. In the not-so-distant past, drugs that were excluded from PBM formularies were typically limited to pricey branded products with less expensive generic equivalents, or at least viable, low-cost alternatives.

Image source: Express Scripts.

Express Scripts significantly expanded the PBM role by forcing competition between Gilead Sciences and AbbVie for next-generation hepatitis C antivirals. It also opened up an important revenue stream. You see, when PBMs collect rebates from drugmakers, they typically retain a portion. Unfortunately for investors, and healthcare plan sponsors, details of those rebate agreements are almost never disclosed to the public, as they're considered proprietary.

Combine the high number of patients in need of anti-PCSK9s to lower their cholesterol with the enormous price tag of these drugs, and you can see why CVS Health was so eager to cut a deal. Ahead of their approvals, CVS Health executives were predicting $150 billion in annual sales for the class. Analyst estimates are around one-tenth of that staggering figure, but there's clearly a lot to be gained by winning preferred status on a formulary with some 70 million patients, both for Amgen and CVS Health.

Asking for trouble?
So far, America's largest pharmacy benefit manager, Express Scripts, hasn't cut a similar deal for either PCSK9 drug, possibly because a hasty decision to exclude hepatitis C treatment Harvoni from its formulary has proved embarrassing, to say the least.

Just days after the FDA approved AbbVie's Viekira Pak for treatment of hepatitis C genotype 1 patients, Express Scripts dropped coverage of Gilead Sciences' Sovaldi and Harvoni in favor of the new regimen despite warranted safety concerns. Last month, the FDA issued a warning noting 26 cases of hepatic decompensation and liver failure in patients taking Viekira Pak.

While these were patients with cirrhosis that probably shouldn't have been taking the drug in the first place, the warning highlights the fact that Express Scripts excluded a safer option in return for a discount. 

The Hippocratic oath doesn't contain a payer burden clause, so the medical community isn't too pleased. Neither are investors. After Express Scripts excluded Harvoni and Sovaldi for most patients, Gilead quickly cut deals with practically every other PBM that included rebates averaging 46% for treatments with list prices around $90,000 per patient. 

Again, we'll probably never know just what percent of those rebates were retained, but Express Scripts clearly bet on the wrong horse. In the first nine months of the year, Gilead's hepatitis C antivirals have racked up $14.2 billion in sales, compared with AbbVie's Viekira Pak sales of "just" $1.1 billion over the same period.

This time it's different
Perhaps learning from previous mistakes, the major PBMs are taking a more careful approach with the PCSK9 class.

According to CVS Health, Repatha and Praluent are "therapeutically equivalent." The undisclosed discount offered by Amgen surely played a role in the decision, but the claim holds water. During trials that led to approvals of both drugs, similar patient groups exhibited comparable reductions in "bad" cholesterol and other lipid parameters.

Image source: Sanofi.

As a chronic treatment, however, safety and tolerability take center stage. Because placebo arm patients in the Praluent studies experienced adverse events at a higher rate than patients receiving Repatha, we really can't make a direct comparison. Adverse events such as cold and influenza were most common with both drugs, with the frequency of each not more than a few percent higher for patients on treatment.

Lesson learned
Express Scripts has agreed to pay for both Repatha and Praluent. Rather than forcing the competition, it's planning to protect its clients' interests by severely limiting their sale with spending caps while playing wait-and-see with ongoing outcome studies.

No one doubts the ability of these drugs to help difficult patients reach their cholesterol goals. What is in question is whether they actually help people avoid heart attacks. For one of these therapies we'll have an answer soon.

Something to look forward to
Amgen and Sanofi are both running enormous outcome studies for their respective PCSK9 therapies. In a nutshell, these trials will measure how long patients on or off therapy live without a cardiac event, such as stroke or heart attack. These studies take a long time, but a statistically significant cardiac benefit would be an enormous advantage for either drug.

Image source: Amgen.

This summer, when Amgen announced enrollment completion for its 27,500-patient Fourier trial, the company said it would need to wait "no later than 2017" for results. That deadline -- or at least the accrual of events -- has since been moved up to midyear 2016.

There are lots of reasons to speed up an outcome trial, and favorable data is a common one. If this is the case, it would be a big boost to CVS Health and Amgen. Sanofi and Regeneron just announced full enrollment in Praluent's 18,000-patient outcome study, with data expected in 2017. If Amgen can claim a significant cardiac benefit for Repatha, Sanofi wouldn't be able to counter it for at least half a year.