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Express Scripts looks to limit drug price increases

Express Scripts, the largest pharmacy benefits manager in the U.S., says it's got a plan to fight drug price increases: Refuse to pay.

"We actually have inflation protection, which is really important," Express Scripts Chief Medical Officer Dr. Steve Miller said in a telephone interview Tuesday. "What really frustrates employers and other plan sponsors is when you agree to a price and they just start jacking it up."

A building on the Express Scripts campus in Berkeley, Mo.
Jeff Roberson | AP
A building on the Express Scripts campus in Berkeley, Mo.

The company, which negotiates drug prices on behalf of insurers, is implementing the measure on plans to cover two new cholesterol drugs, made by Amgen and Regeneron, partnered with Sanofi. Miller said Tuesday Express Scripts is seeking to limit price increases on the other drugs it covers as well.

"We have told the companies exactly how much they can inflate the price over the course of the contract," Miller said. "If they go up any higher, dollar for dollar it comes back to the plan sponsors."

Read MoreHow Express Scripts plans to cover a $14,000 drug

In other words, Express Scripts will only pay for drugs up to a certain limit. Miller declined to specify what that limit is.

The strategy comes at a time when price increases on medicines are in the national spotlight, after private company Turing Pharmaceuticals raised the price of a 62-year-old drug by more than 5,000 percent, drawing protests from doctors and patient groups that said they could no longer access it.

Presidential candidate Hillary Clinton called the move price gouging, and has vowed to introduce measures to limit other such price increases if she takes office. Her focus on the issue has sent the biotech industry spiraling lower over concerns of price limits — even as most industry analysts say it's unlikely Congress would pass any such plans.

In recent weeks, serial acquirer Valeant Pharmaceuticals has taken a beating over price increases it's imposed on medicines after obtaining their rights, leading some to question its business model. Valeant's stock is down 28 percent in the last month. The company has defended itself from such criticism.

Miller called the practice of raising prices on old drugs "reprehensible," and said capping what it would reimburse for price increases aims to combat the strategy.

Most companies don't take price increases of the magnitude of Turing's; regular rises of 5 to 10 percent several times a year, however, are common. Miller cited Biogen's multiple sclerosis drug Avonex as an example, and said Express Scripts' plan is to limit those kinds of increases as well.

Avonex, approved in 1996, saw price rises of about 6 percent in August and March this year, to a list price of just under $70,000 annually, according to an August note from Cowen. Other makers of multiple sclerosis drugs take similar increases, Cowen analyst Eric Schmidt wrote.

Biogen declined to comment.

Express Scripts' Miller said the company is adding the price increase limits to both generic and branded products it covers, noting it's approaching the point where a "high percentage of our total spend is covered by inflation protection."

"Pharma has shown that they feel very emboldened with their pricing power," Miller said. "We're using our clout in the marketplace to really tamp these down for our clients."