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Walgreens, Valeant plan direct distribution model

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Agreements to reduce pricing for range of branded prescription drugs

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LAVAL, Quebec, and DEERFIELD, Ill. — Valeant Pharmaceuticals International Inc. and Walgreens have entered agreements in which the drug maker will directly distribute branded prescription drugs in a range of therapeutical areas to the pharmacy chain at reduced pricing.

Valeant said Monday that, under the fulfillment agreement, it will cut the wholesale list prices of its branded dermatological and ophthalmological products by 10%, with the reduction to be phased in over the next six to nine months. The pact also includes Valeant’s over-the-counter product lineup. Plans also call for Valeant to extend this distribution model to independent retail pharmacies.

The 20-year agreement, which goes into effect in the 2016 first quarter, initially will cover Valeant’s dermatology products — including Jublia, Luzu, Solodyn, Retin-A Micro Gel 0.08%, Onexton  and Acanya Gel — and ophthalmology products, including Besivance, Lotemax,  Alrex, Prolensa, Bepreve and Zylet.

Valeant and Walgreens said the arrangement will enable consumers to access Valeant dermatology and ophthalmology products at a lower out-of-pocket cost via Walgreens’ more than 8,000 U.S. drug stores, as well as at participating independent pharmacies. Over time, Valeant and Walgreens aim to expand the relationship to include other therapeutic areas.

According to the companies, the agreement creates a more efficient distribution model, reining in costs while providing patients with ready access to the products their doctors prescribe. Patients with commercial insurance can benefit from lower out-of-pocket costs — such as reduced co-payments, set to be as low as zero for some products initially — and the program will provide convenient access for patients without coverage for those products, they said. Due to government regulations, the cost sharing program won’t be available to patients with government insurance.

Under another agreement, Valeant will distribute more than 30 branded products in the dermatology, ophthalmology, gastrointestinal and neurology and other therapeutic areas that have generic versions through Walgreens at generic prices. The program covers such products as Aldara, Tiazac and Glumetza and will be available to all patients, including those with government coverage.

The reduced pricing for the branded products is expected to be 5% to 95%, or a weighted average price decrease of more than 50%, according to Valeant. The pricing is slated to become available to all patients starting in the second half of 2016.

Valeant estimated that the price decreases in both programs, when fully implemented, will yield up to $600 million in annual savings to the U.S. health care system. The company said it arrived at that figure by calculating the 10% cut in average selling price (ASP) of its dermatology and ophthalmology brands and multiplying it by the actual 2015 volume, and then adding the estimated 50% ASP reduction its branded products to the current reimbursed generic equivalent at 2015 volumes.

“We have listened to what the marketplace is saying, and we’ve taken positive steps to respond. We are pleased to announce both a strategic fulfillment agreement with Walgreens, as well as a new agreement to offer innovator products at generic prices, which is good for consumers, good for physicians and good for the health care system,” Valeant chairman and chief executive officer J. Michael Pearson said. “Our goal is to create a system that allows prescription medications to be dispensed and insurance claims adjudicated in an efficient manner while allowing physicians to focus their efforts on what matters most, patient care.” (For more Pearson comments about the Walgreens agreements, see video above from CNBC.)

The companies noted that the direct distribution model for Valeant’s dermatology and ophthalmology products through Walgreens and independent pharmacies can help reduce costs and administrative processes, in turn providing savings for patients and the health care system.

Independently, Walgreens has retained Leavitt Partners, headed by former U.S. Department of Health and Human Services Secretary and former Utah Gov. Michael Leavitt, to assess the model and evaluate its benefits to patients and markets.

“Walgreens is always looking for ways to expand the products and services people want and need, and our agreement with Valeant advances our commitment to creating a patient-led pharmacy experience,” said Alex Gourlay, president of Walgreens. “In addition to promoting pharmacist-patient interactions to improve care and medication adherence, this agreement creates a new direct distribution model that we believe will help increase efficiency.”


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