The discount will apply to wholesale list prices and will be phased in over the next six to nine months. The pact also covers Valeant’s over-the-counter products.
The deal came after Valeant cut ties with Philidor Rx Services, a mail order pharmacy that had played a major part in stopping insurers and pharmacies from substituting lower-price alternatives for the manufacturer’s expensive dermatology drugs. Valeant ended its relationship with Philidor in October after concerns emerged about its practices and Valeant’s lack of transparency about its dealings with the pharmacy, which it had an option to buy. Philidor, which is closing, accounted for some 7% of Valeant’s revenue.
The 20-year agreement with Walgreens takes effect in the first quarter of this year and will initially cover Valeant’s dermatology products — including, most notably, Jublia for toenail fungus, Luzu, Solodyn for acne, Retin-A Micro Gel 0.08%, Onexton and Acanya Gel — and ophthalmology products including Besivance, Lotemax and Alrex. Valeant and Walgreens hope to expand the relationship to include other therapeutic categories over time.
The deal is designed to create a more efficient model to help lower costs while ensuring patients have convenient access to prescribed medications. Patients with commercial insurance can benefit from lower out-of-pocket costs, such as reduced co-pays — set to be as low as zero for some products initially — and the program will provide convenient access for patients who lack coverage. Because of government regulation, the cost sharing program will not be applicable to patients with government insurance.
“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 Walgreens president Alex Gourlay. “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.”
Walgreens and Valeant also entered into a separate agreement under which Valeant will distribute more than 30 branded products, where generics are available, in the dermatology, ophthalmology, gastrointestinal and neurology/other therapeutic areas through Walgreens at generic prices.
The reduced pricing for the branded products, which will be available beginning in the second half of 2016, is expected to range from 5% to 95% — a weighted average price decrease of more than 50%. The agreement covers such products as Aldara, Tiazac and Glumetza. The program will be available to all patients, including those with government coverage.
Valeant expects the price decreases across both programs, when fully implemented, to provide up to $600 million in annual savings to the health care system. This number is derived from calculating the 10% reduction in average selling price (ASP) of Valeant’s dermatology and ophthalmology brands, multiplied by 2015 volume, plus the estimated 50% price reduction in ASP of Valeant’s 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,” said J. Michael Pearson, chairman and chief executive officer of Valeant. He said the generic pricing for branded drugs “is good for consumers, good for physicians and good for the health care system.”
CVS Health president and CEO Larry Merlo criticized the deal as “another example of Valeant attempting to circumvent what PBMs do for payers.”
“These actions ultimately drive up costs for payers when you think about the use of prescription co-payment programs,” Merlo said at CVS’ Analyst Day.