Aetna Rejects Merck’s Price Break on Zocor
Aetna Inc. said Thursday that it would buy discounted copies of the cholesterol drug Zocor from Teva Pharmaceutical Industries Ltd. rather than accept an offer from Merck & Co. to sell its branded pill for less than the generic.
Aetna patients will pay more out-of-pocket for Merck’s Zocor than Teva’s generic, Aetna said. Eric Elliott, Aetna’s pharmacy manager, said the Hartford, Conn.-based insurance company wouldn’t accept an offer from Merck to provide Zocor to patients for less than Teva’s version.
The decision is the latest salvo in a Zocor price war that has heated up because Merck’s patent expires today. The drug generated $4.4 billion in revenue last year and was Merck’s biggest-selling product. Teva may begin marketing its generic copy today if the Food and Drug Administration approves.
“In the long run, we expect generics to always be a less expensive alternative to the branded pharmaceuticals they replace,” Elliott said.
Aetna’s shares rose 25 cents to $40.25. Shares of Whitehouse Station, N.J.-based Merck fell 2 cents to $35.25. U.S.-traded shares of Petah Tikva, Israel-based Teva fell $1.02 to $31.25.
WellPoint Inc. and UnitedHealth Group Inc., the two largest U.S. health insurance providers, received discounts from Merck to sell branded Zocor to patients at lower rates. Merck’s discounting signals that big drug makers are willing to use new tactics to prevent loss of market share to generics.
Aetna, the third-largest U.S. health insurer, is the first to say it has turned down Merck’s offered price break on Zocor. Elliott said accepting it would have been bad over the long term because the decision would undermine years of work by insurers to convince patients and doctors that “generics are the most cost-effective medication.”
Merck’s price break on Zocor was designed to encourage health plans to change long-standing policies on prices patients pay out-of-pocket for drugs, several insurance industry executives said. Normally, patients pay the least for generics and pay the most for brand drugs that can be substituted by generic copies.
Based on price discounts recently brokered with Merck, patients insured by Minneapolis-based UnitedHealth will have $10 co-payments for Zocor, a price normally paid only for generics. Patients who take Teva’s generic copy will pay $50, UnitedHealth spokesman Mark Lindsay said.
Aetna found that a price break on Zocor wasn’t worth sending patients a message that they could get a brand-name drug for less than generics, Elliott said. Any erosion in the use of generics would drive up total spending on drugs.
“For every percentage point that you increase generic utilization, it reduces drug spending by about 1 percentage point,” said Steve Littlejohn, spokesman for Express Scripts Inc., the third-largest manager of drug benefits for employers and insurance companies.
Merck’s Zocor discounts “signal a new battlefield in the price competition war that generic industry participants will have to face,” Friedman, Billings, Ramsey & Co. analysts Robert Uhl and Alan Meyers said Thursday. They reduced their estimate on generic Zocor sales this year by $62 million to $265 million and downgraded their rating on Teva shares to “market perform” from “outperform.”
Standard & Poor’s upgraded Teva from “buy” to “strong buy” based on Aetna’s decision to offer its generic Zocor to patients at a lower price than Merck’s brand-name drug.
