Not for the faint of heart

Not for the faint of heart

Just in case anyone thought that the diabetes drug market was not becoming a commodity market, a market where price is more important than performance, think again. Today we learned that Express Scripts has removed Victoza, Novo Nordisk’s (NYSE: NVO) once-daily GLP-1, Tanzeum, the once-weekly GLP-1 from GlaxoSmithKline (NYSE: GSK) and Lantus in another blow to Sanofi (NYSE: SNY) have been excluded from the payors preferred list. Also Express Scripts will not cover short-acting insulins NovoLog and Apidra in 2017.

Lilly (NYSE: LLY) is the primary beneficiary of these changes as Humalog remains covered and given the decision on Lantus likely will likely get favorable treatment when their biosimilar version of Lantus, Basaglar is launched later in the year.

AstraZeneca (NYSE: AZN) who has Bydureon, their once-weekly GLP-1 came out ok but remains in a tough spot competing against Lilly’s once-weekly GLP-1, Trulicity.

What’s the takeaway from this news other than payors continue to have the upper hand and for all intensives purposes can determine who wins and who loses? First and foremost, and this really isn’t news either, when it comes to the diabetes drug market it’s an all-out war. A war being fought with price and rebates as the primary weapons. Second, Lilly is not afraid to go nuclear and is committed to expanding share. Third, the death march for Sanofi continues. Fourth, Novo better get religion in a hurry and realize they can longer ignore the power held in the hands of payors. Fifth, AstraZeneca has to decide whether or not to keep their diabetes portfolio.

Looking over the Express Scripts list here are some other notable winners and losers;

LifeScan, a unit of Johnson and Johnson (NYSE: JNJ) remains the only glucose monitor on the preferred list. Systems from Abbott (NYSE: ABT), Bayer and Roche are all excluded.

Merck (NYSE: MRK) is a happy camper as the Januvia franchise remains on the preferred list while it’s primary competition Onglyza from AstraZeneca is excluded. What was that we said before about AstraZeneca having a decision to make?

Getting back to Basaglar for a moment the list included the following statement;

“The Basal Insulins category may be reassessed later this year to reflect anticipated product launches.”

Now if that one sentence does not in a nutshell indicate just how the insulin market will change even more once Basaglar is available we don’t know what does.

Just to pour gasoline on a forest fire that is already raging out of control think of the pressure this puts on all the drug companies as the negotiate with other payors.  Can Novo afford to sit ideally by? Is there anything Sanofi can do other than offer even lower prices combined with higher rebates that would stop the continued slide in Lantus? And what was that we said about AstraZeneca having a decision to make?

Yet the carnage is not limited to just drug companies. Just how much pain can Abbott, Bayer and Roche endure before crying uncle? And while it was not mentioned today UnitedHealthCare’s exclusive deal with Medtronic (NYSE: MDT) has to be sending shivers up the spines of every insulin pump company.

Frankly none of this is a surprise to Diabetic Investor as we’ve been warning about this for some time. Still it’s one thing to talk about the situation its quite another to actually see the damage up close. Face it the diabetes market is not for the meek or faint of heart. It’s all-out war out there and the payors are winning.