AMGN Amgen Inc

CVS Health Corp. is embracing new, cheaper copies of biotech medicines in an attempt to combat rising prescription drug costs.

CVS, whose Caremark unit administers drug-benefit plans for employers and insurers, said Tuesday it would drop coverage of two higher-priced medicines used in diabetes and cancer treatments. It will instead cover their replica versions, sometimes called biosimilars, for many of its drug-plan members.

The changes, which go into effect Jan. 1, are a blow to Sanofi SA's Lantus, a popular brand-name insulin treatment for diabetes, and Amgen Inc.'s Neupogen, which helps to prevent infections related to cancer treatment. A vial of Lantus retails for about $260 while a single dose of Neupogen costs about $350, according to GoodRx.

Cheaper copies of biotech drugs have only recently begun to enter the U.S. market and haven't yet made much of a dent in the nation's drug spending, in part because they have been priced at relatively small discounts to their branded rivals.

But the move by CVS is the latest indication that U.S. health insurers and pharmacy benefit managers are eager to reap savings from the new drugs. CVS Chief Medical Officer Troyen A. Brennan said biosimilars are typically priced 10% to 15% cheaper but that CVS has negotiated additional discounts.

"We want to signal that this biosimilar movement is real," Dr. Brennan said in an interview. "We have big hopes for [biosimilars] to reduce drug costs over all."

An Amgen spokeswoman said Neupogen "is competitively priced," and that patients and doctors should be able to choose which product they want to use. A Sanofi spokesman said CVS's decision to exclude Lantus and another of the company's insulins would make "it difficult for patients to benefit from the gold standard of basal insulin treatment."

CVS, best known as a retail pharmacy chain, is also a major player in the pharmacy benefit management industry, overseeing drug spending for U.S. employers, health insurers and labor unions. CVS and other PBMs pool their customers' purchasing power to negotiate better prices from drugmakers. In exchange, PBMs often steer their clients to products for which they receive the best prices. Last year, CVS dropped coverage for Pfizer Inc.'s anti-impotence pill Viagra in favor of Eli Lilly & Co.'s Cialis.

However, the exclusions aren't ironclad. Some PBM clients customize their own covered-drug lists, and many prefer to give beneficiaries as many options as possible. The changes that CVS announced on Tuesday, for instance, will apply mainly to its commercial employer and labor union clients who subscribe to its standard formulary, or list of covered drugs.

CVS said it would exclude an additional 35 products in 2017, including Novartis AG's cancer drugs Gleevec and Tasigna. A generic version of Gleevec was launched earlier this year. CVS's Dr. Brennan said the company intends to have all patients currently taking Gleevec switched to the generic version.

A Novartis spokesman said the company was disappointed that CVS would limit access to Tasigna, but that CVS had indicated the coverage decision wouldn't "affect any patients who are currently taking Tasigna."

Write to Joseph Walker at joseph.walker@wsj.com and Paul Ziobro at Paul.Ziobro@wsj.com

(END) Dow Jones Newswires

August 02, 2016 19:15 ET (23:15 GMT)

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