Analyst says PBMs see little, if any, benefit from EpiPen price hikes

Leerink analyst David Larsen told investors that he believes Mylan (MYL) has been taking the vast majority of the pricing increases that have occurred with its EpiPen, while pharmacy benefit managers, or PBMs, and distributors see little, if any, benefit from it. MYLAN BENEFITS MOST: Leerink's Larsen believes Mylan has benefited from EpiPen's price hikes, pointing out that, according to the pharmaceutical maker's fourth quarter transcript, the company has enjoyed about 30% annual growth in its EpiPen franchise from 2008 to 2014. In 2015, the PBMs seemed to have tried to reduce the net price for their members by pitting Sanofi's (SNY) Auvi-Q and Teva's (TEVA) potential generic launch against EpiPen, Larsen noted. He believes this effort by Express Scripts (ESRX) and CVS Health (CVS) should be applauded as it resulted in some moderation of net pricing for Mylan last year. However, the analyst pointed out that Auvi-Q would end up being pulled from the market and Teva's generic pushed back, causing Mylan to seek to raise price again in the first half of 2016. The only way to truly reduce costs for EpiPen is to introduce competition, he contended. WEAKNESS OVERDONE: In the same note to investors, Larsen also said that he believes the recent weakness in PBMs and the drug distribution group is "overdone," as they are likely not benefiting from Mylan's price hikes. The analyst estimated that Cardinal Health (CAH) has a "fee-for-service" deal with EpiPen, which means there may be no benefit to the company for any price increase that occurs. Additionally, the analyst believes Express Scripts gives back 80%-90% of EpiPen rebates to their plan customers. Larsen said he would be a buyer of CVS on weakness, noting that the company has been more aggressive than Express Scripts in formulary management to date. NEW GENERIC: After making headlines all last week on price controversy related to its EpiPen devices, Mylan has announced that its U.S. subsidiary will launch the first generic to the EpiPen Auto-Injector at a list price of $300 per generic two-pack carton, which represents a discount of more than 50% to the list price of the branded medicine. Meanwhile, a spokesperson for Adamis Pharmaceuticals (ADMP) told Bloomberg on Friday that the company is targeting a regulatory submission by year end and is open to partnerships for its alternative to Mylan's EpiPen. PRICE ACTION: In afternoon trading, shares of Express Scripts has gained about 1.5% while CVS' stock has dropped nearly 0.5%. Mylan shares have risen about 1% following the generic EpiPen launch announcement.