If drugmakers think they can save on rebates if they cut list prices as politicians and public opinion are demanding—well, forget it, says UnitedHealthcare, which sent new demands to pharma companies, an analyst wrote.
The insurance and pharmacy benefits giant is demanding long notices ahead of any drug price cuts, according to the letter, which two drugmakers confirmed to Bernstein analyst Ronny Gal. And UnitedHealthcare expects equivalent rebates whenever list prices are cut, the analyst wrote in a Friday note to investors.
The news comes as drug companies look to price reductions as a new strategy to fight high rebates and gain goodwill with lawmakers and the Trump administration. On Monday, Sanofi announced that it is cutting its Praluent price by 60%, following Amgen’s move to chop Repatha’s list price by the same percentage. The PCSK9 cholesterol drugs are among many that have a large “gross-to-net” price gap, or high list prices—and high rebates and discounts paid out to the supply chain.
Lowering list prices means smaller costs for patients, but the strategy would also mean lower revenues for PBMs.
UnitedHealthcare asked for seven quarters’ notice—a full 21 months—when companies intend to lower prices, Gal wrote. The “drug companies are not too happy about” the UnitedHealthcare letter, he added, as many are considering price reductions.
Gal published another note Monday with UnitedHealthcare’s response. The insurance giant’s investor relations team reached out to the analyst and said they believed the original report on the letter was misleading. For one, UnitedHealthcare’s OptumRx sent the letters in late December and early January, before the administration’s recent rebate proposal, Gal wrote, adding that they relate only to rebates in Medicare Part D.
The insurer explained to the Bernstein team that Part D contracts “are done on an annual basis and must be submitted to CMS six months ahead of coming into effect,” Gal wrote. The company needs the time to calculate drug cost structures, Gal wrote in the Monday afternoon note.
And on maintaining rebates, UnitedHealthcare told the analyst patient premiums would rise with lower rebates.
Drug rebates and high list prices have come under growing fire, and the Trump administration recently unveiled a plan to shake up pricing in Medicare Part D and Medicaid. The plan involves outlawing rebates and instead allowing discounts for patients and fee-for-service deals for PBMs. The PBM industry pushed back, but pharma companies support the idea. Quickly after rolling out the plan, HHS secretary Alex Azar called on Congress to extend the proposal to commercial markets.
The letters have not been made public; Gal wrote that he heard of its existence through conversations with pharma executives.
“While recognized as an opening stance in negotiations, the magnitude of the rebate demands by [UnitedHealthcare] were ‘ludicrous’ and would force drug makers to rethink price reductions unless they were significantly moderated,” Gal wrote.
Representatives for OptumRx, United Healthcare’s PBM, didn’t immediately respond to a request for comment.
The new Trump plan is only one out of many in a heated debate over pricing in recent years. Last week, five pharma CEOs and a top executive at Johnson & Johnson agreed to testify at an upcoming Senate committee hearing on drug prices.
Meanwhile, at least one drugmaker is taking a different tack to lower costs for patients. Gilead Sciences, facing huge rebates in hepatitis C, previously unveiled a plan to launch authorized generics to its big-selling drugs Epclusa and Harvoni, rather than cut list prices.
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