name is Victoria, and I will be your conference facilitator for this conference call on the Repatha announcement made earlier. All lines have been placed on mute to prevent any background noise. There will be a question and answer session at the conclusion of the last speaker's prepared remarks. In order to ensure that everyone has a chance to participate, we would like to request that you limit yourself to asking one question during the Q and A session. I would now like to introduce Arvind Sood, Vice President of Amgen Investor Relations.
Mr. Sood, you may now begin.
Excellent. Thank you, Victoria. Good afternoon, everybody. Thanks for joining us on such short notice, particularly in the middle of earnings season. So today, we announced an important new development with an objective of improving affordability and access to Repatha high risk patients with cardiovascular disease who can benefit from this medication.
We felt that this is an important step and one that warrants having a dialogue with the investment community. So to launch this discussion today, I'm joined by David Rees, who is our Executive Vice President of R and D David Meline, who you know as our CFO and also Murdo Gordon, who is our newly appointed Executive VP of Global Commercial Operations. Murdo will make a few prepared comments, after which we can take some questions. We'll try to keep the overall duration of the call, including Q and A, to about 30 minutes so you can get back to earnings. We've sent out some slides corresponding to our presentation that you should have received.
But before I turn it over to Murdo, a summary of our Safe Harbor statement, I. E, we may make some forward looking statements and actual results could vary materially. So with that, I would like to turn the call over to Murdo.
Thank you, Arvind, and thanks again everybody for joining. Before I make a few remarks about the decision that we made, I would like to invite David Rees to talk a little bit about the journey of Repatha so far and how we've arrived at this juncture.
Thanks, Murdo, and thanks, everyone, for joining us today. As Murdo mentioned, I'd like to give you just a little perspective on how we arrived at today. I was actually fortunate to be involved in the development of Repatha from day 1 when we first went into humans. And I think I don't need to remind everyone that cardiovascular disease remains our number one public health challenge. Every 40 seconds in the United States, someone suffers a heart attack or a stroke.
And we've known for more than 60 years now that LDL cholesterol is the single most important modifiable risk factor. We knew after the first couple dozen patients when we introduced Repatha into humans that we had a potentially transformative medicine on our hands based on the dramatic reductions in LDL cholesterol we were seeing. And it's been frustrating to see the low adoption rates of the drug in the marketplace, particularly since the Fourier results, the outcomes trial results were available that showed unequivocally that we could in high risk patients prevent subsequent events and reduce the need for revascularization procedures. So all of that coupled with the increasing awareness that the principal barrier for many patients was out of pocket costs and in particular in our Medicare population where we know now that up to 75% of them will abandon their prescription or leave the pharmacy without obtaining a PCSK9 inhibitor because of these co pays that range typically from $2.80 to $3.70 per prescription for them. That's why we've made the move to reduce the list price of Repatha by 60% and our goal there is really to lower out of pocket costs for Medicare patients.
Those should come into the range of 25 dollars to $150 As a physician who's taken care of these patients, what I would like to see is many of them who need the drug actually getting the drug. And with that context and background, I'll turn things over to Murdo to make some further remarks.
Thank you, Dave. That's extremely helpful. And I will only add that in my almost 3 decades in the industry, I've always had an interest in the cardiovascular disease area. I worked in the early days of statins. I worked on Plavix and clopidogrel and I worked in the oral novel oral anticoagulation category.
And this is the most dramatic example of a drug with fantastic evidence behind it that is dramatically underutilized in the high risk cardiovascular disease market. And we've decided to do something bold to ensure that Repatha is available, as Dave said, for Medicare Part D patients at an affordable out of pocket expense. If you think about the $3,400,000 high risk cardiovascular patients that we have here in America, the vast majority of them, 65%, will be Medicare beneficiaries. They will be on a Medicare prescription drug plan. Within that drug plan, the patients pay a coinsurance out of pocket expense if they're non low income subsidy eligible.
And that's again the majority of the Medicare patients. When they do that, they pay a very high number right now because that co insurance is based off the list price and that number is $3.70 depending on the plan, but in general, that's the out of pocket expenditure. With this move, we have a direct opportunity to lower that number. And by pricing at the $5,850 list price, the new low price SKU Repatha will dramatically lower the out of pocket expense for Medicare Part D beneficiaries who are not low income subsidy eligible. So we know that even for coinsurance patients, that coinsurance will go from 370 down to 150 out of pocket and we will work with PDMs and health plans for their Part D beneficiaries to try and get that co pay, that out of pocket to a fixed co pay as low as $40 or $50 And we'll be doing that between now and the coming weeks months.
Clearly, there's a bit of a challenge in the timing of this because many healthcare plans and PBMs design their Part D programs in the spring of 1 calendar year to be launched in the beginning of the next calendar year. And we've obviously missed that window for the 2019 Part D plan cycle. However, these plans also have the opportunity to add products to their formularies off cycle or mid cycle. And we're hopeful that given the unmet need here for patients and the significant benefit that could be provided at this new low price SKU that many plans will move quickly to add this to their formularies. We have received some very positive feedback from some PBMs and some health plans, and we're hopeful that, that will continue.
Our goal is to work as quickly as possible to secure those formulary listings, to drive demand of the new low price SKU and to remove the high price SKU from the market over time, but as quickly as possible and not definitely not to have that be the persistent SKU in the market. So that is our goal. That's the decision that we've made. We've spent many, many months looking at patient behavior, physician behavior and payer behavior to understand the dynamics for Repatha, and we feel this was the biggest impact, most direct choice that we could make. So with that, Arvind, I'll turn it back to you for Q and A.
Excellent. Thank you, Murdo. Victoria, let's go ahead and open it up for Q and A and maybe you can just quickly review the procedure for asking questions again.
Certainly. As a reminder, in order to ensure that everyone has a chance to participate, we would like to request that you limit yourself to asking one question during the Q and A session. Your first question comes from the line of Ying Huang with Bank of America Merrill Lynch.
Guys. It's Tasnim on for Ying. Just a couple of quick questions. I guess my first one is, is this in any way a reaction to the price drop you saw from a competitor recently, and then moving forward, how do you think this price cut affects your ability to negotiate with payers going forward? Thank you.
So thanks for the question. This really is a patient focused decision that we're making and not a competitive response decision. We think that the PCSK9 category is currently underutilized. There are many more patients that should be receiving a PCSK9 therapy and Repatha in particular. The reason we feel it's extremely patient focused is because we've worked hard over the last few months years on the contracting site to secure access for Repatha at the payer level.
And over the course of this year and most recent few months in particular, we've dramatically expanded the access for Repatha on just physician attestation. So much easier for physicians to get prescriptions for their patients approved. But what those contracts didn't do was they didn't lower the list price and they didn't lower the co pay for Medicare Part D patients. As you know, we've got lots of co pay support programs that actually brings the co pay down to about $5 for commercial patients. But by law, we can't do that for Part D patients.
So this is really a very focused, very unique solution for a unique situation on Repatha that will allow us to reduce that abandonment rate where 3 out of 4 patients on the Medicare site are walking away from their prescription at the pharmacy counter and get them the prescriptions that they need, that their physicians intended, that their health plan approved, but they couldn't afford. And so that's why it really is a patient focus. And just to the other question on what it might do for our contracting ability, one of the reasons we introduced the low price SKU while keeping the higher price SKU in the market was to allow plans to transition away from the high price SKU and on to the low price SKU over time. There's an administrative process there. There's a pharmacy review committee and economic review committee process at the plan level that needs to occur.
And we think this is the best way for plans to smoothly do that without disrupting patient care and potentially interrupting Repatha prescription approval. So very much a patient focused decision. From a contracting perspective going forward, we're going to continue to work with plans and payers on a plan by plan basis to ensure that the out of pocket expenses are where they need to be to ensure low abandonment and that the physician access, if you will, through the approval process with payers is as smooth as possible.
Thank you.
Our next question comes from the line of Matthew Harrison from Morgan Stanley.
Hello. This is Ishmael on for Matthew. Thank you for taking our question. Building off your commentary of continuing to work with payers, how do you expect the change in the list price to impact your net price versus today and the current access agreements that you have with payers? Thank you.
Thank you, Ishmael. The current low list price SKU that we're launching into the market tomorrow has been pegged at the $5,850 number, which is close to the blended net price across the rest of our book of business. So we wouldn't expect a dramatic change to our blended net price going forward. Of course, there are different net prices in the market and it could be in the short term that there is some change or volatility to that. But over the long term, we feel that this list price will be fairly stable in terms of net price blend effects.
Obviously, what we're hoping to do is treat more patients who are at high risk of cardiovascular disease, particularly those seniors that are on Medicare Part D plans. And we think as those plans update and the low list price of Repatha gets included on their formularies that we will see volume lift that will further offset that net price
change. Wonderful, very helpful. Thank you. Thank you.
Our next question comes from the line of Michael Yee from Jefferies.
Thanks for the question. Nice to have you on a call, Murdo. My question is also related to net and then also how that relates to volume. And that is based on my understanding, net price did modestly change recently due to the competitor contracting. Can you just remind us how that has changed and what our expectation should be?
And then as that relates to volume stepping up, which is going to be offset to the announcement today, what percent of SKUs could change over 6 months 12 months so we have an appreciation of how much today's impact would be benefiting over 6 months 12 months? Thanks.
Thanks Mike. I won't comment necessarily on specific net prices. What I will say is you're correct in your recollection of what's been happening this year, where the 2 large pharmacy benefit managers established contracts with us and our competitors. And we did see some fairly significant additional contracts to expand access on the commercial side. And so there was some net price erosion throughout the course of this year as we signed roughly 20 fairly large contracts across the commercial book.
As I said on the answer to the last question, we're now roughly at a blended net price of what we're showing on this new low price SKU. I think what you will see is some staggered effect. You'll see some plans, I think, from what we're hearing, add the low list price skew to their Part D plans fairly quickly. Other plans are going to take longer because of administrative process or other reasons, and then some may even take as long as the full cycle and that would be Q1 of 2020 where they would be doing all of their Part D plan redesigns. I would say by Q1 of 2020, the new low list price will be the majority reimbursed SKU across all the PDP plans on the Part D side and many, if not most of the plans on the commercial side.
The other group of customers that I would think would move pretty quickly on this would be the integrated delivery network customers where they own all the medical risk and all the pharmacy risk. There's really no reason why they wouldn't choose to make this new low list price available to all their members.
Does this not affect Aimovig or any other things? Why wouldn't this philosophy impact anything else across your book? Thanks so much.
Yes, great question. We basically look at all of our products across the portfolio and make sure that the innovation that Dave and his team are bringing to the market, those innovative medicines are affordable
to as many patients. That's the mission of Amgen.
And I think what we had here was a very unique challenge with Repatha and we needed to develop a unique solution. So I think you should see it as a unique solution for Repatha. What I would say is given the mission that we have to make our innovative medicines available to as many patients as possible, the pricing decision on Aimovig was a very good one patient affordability. And what we've seen so far on Aimovig is very good payer response to allowing and approving prescriptions for Aimovig and patient affordability is good as well. So Aimovig is actually not in a specialty tier and therefore fixed co pay on the Part D side is fairly common.
Perfect. Thanks so much guys. Thank you.
Our next question comes from the line of Robyn Karnauskas with Citi.
Hey, guys. This is Kripa on for Robyn. Thank you so much for taking my question. What percentage of revenues from Repatha or from Medicare? I don't know if you've talked previously about it and can give us some color on that.
And also in the commercial patients, you talked about 19% abandonment rates. I was wondering if you can talk about what the reasons for this are? And also if these are current rates, how have these rates changed since the launch of RUPATA? Thank you so much.
Thank you. The current mix of Repatha revenue by reimbursement type is about fifty-fifty today, 50% commercial, 50% Part D. That's actually different than the population of patients that exists. If we were to be naturally distributed across our book of business, it should be more like 65% from Medicare, 35% from commercial. So we're underrepresented in Medicare Part D patient population and under penetrated in that population, partly because of the high abandonment rates at the pharmacy counter with patients.
So what we need to do is we need to offer a lower out of pocket expense solution and that's exactly what we've done with this low price SKU. So we would expect that as we get listed on these Part D formularies, as we reduce that out of pocket expense, more patients will fill their scripts and that mix of Part D will increase over time and hopefully get to a true representative mix of our total business, which will be 65% Part D, 35% commercial. That would be the goal. But it will take time, as I said, to achieve that natural mix. You had a follow-up question and I'm not recalling.
I was asking about the abandonment rates amongst patients on commercial plants because co pay coinsurance, it doesn't seem likely given that they have much lower co insurance payments compared to Medicare patients, I was wondering if you can talk about the reasons for abandonment.
Yes. So just from our perspective, we do a lot on the commercial side because we can. We provide co pay assistance. So it's less likely to be a co pay out of pocket expense reason. Unfortunately, patients are human beings.
And when you look at all drugs across all categories, 1st prescription abandonment is actually in the neighborhood of 15% to 20%. There are numbers of reasons for that, but study after study in single payer system in the U. S. And other markets around the world, we see a fairly high abandonment rate. It's modifiable, but it takes a lot of time and effort to try and improve that.
But 75% abandonment is not normal. And that's what we're seeing on Repatha right now in Medicare Part D, and that is what we believe we can affect.
Great. Thank you
so much. Thank you.
Our next question comes from the line of Ronny Gal from Bernstein.
Good afternoon. Thank you for taking my call. So just to make sure I understand it. So basically, we dropped the list price under the step edit, under the prior authorization minimum for Medicare and thus all the co pays essentially come down. Is that the way to understand it?
And second, you mentioned IDNs will like this deal. I was wondering about Medicaid. They seem to potentially be liking this as well. And you obviously have ESI quote on your press release. Is that another way of saying that ESI kind of moved from preferring Pralu and to preferring Rhopatha or just giving you an equal status?
Yes. So maybe a clarification on the first part of your question. The main benefit to the lower list price is we will likely be pulled into fixed co pay tier formularies rather than coinsurance designed specialty formularies. So that's indeed what we're trying to do here. So it's not really a PA process as such as getting out of coinsurance high list price to a lower list price fixed co pay.
That's the shift that should happen. Yes, Medicaid will benefit. It's a small percentage of the total business, but yes, absolutely, the price will benefit Medicaid patients as well. And did you have a third question? On ESI.
Oh, ESI, yes. Well, fortunately, our discussions with as I said, our discussions with a lot of PBMs and payers have gone well. ESI were particularly supportive and they felt it was appropriate to make the statement that they did in our press release, which we're grateful for.
Thanks.
Our next question comes from the line of Geoff Meacham from Barclays.
Hey guys, good afternoon. Thanks for the question. Murdo, I want to ask you, how much of the adoption barriers for Repatha have been patient out of pocket costs versus prior auth and step edits from plans? I'm asking because most docs we talk to seem trained to only write a script after 2 or 3 prior statins and they don't really seem to be influenced by the price of the regimen overall?
Yes, that's right. No, it's
a great question, Jeff. And clearly, think about the behavioral barriers in just 3 simple layers because it will help frame the answer to your question. So you have physicians who are reticent to prescribe because of the hassles, that's 1. 2, you've got payers who approve or don't approve the prescription for reimbursement, that's 2. And then patients who will pay and fill or abandoned, that's 3.
So we're addressing with this, we're addressing the pay and fill piece clearly. We've historically been working on the reimburse at the payer level and we'll continue to do that even with this move and this actually affords us an additional opportunity to perhaps reduce the number of barriers at the payer level where simple physician attestation should be enough for the approval of a prescription for reimbursement. So it's a bit of a 1, 2 there, which is nice. But then absolutely, we've got to go upstream now to the HCP and say, look, we've been working with payers, we've been working to reduce out of pocket, you should get less phone calls from patients and find it easier to get prescriptions approved through the payer process. That will take time as well, but ultimately that should be a reinforcing behavior, a reinforcing loop for the physicians who have perhaps not had the best experience in securing Repatha for their patients.
And indeed, that will be where we need to work over the next little while.
Got you. Okay.
Thank you. Thank you.
Our next question comes from the line of Alethia Young with Cantor Fitzgerald.
Hey, guys. Thanks for taking my question. I guess I just wanted to talk a little bit about, do you think this is something that kind of will immediately make a shift in the market? Or is it something that will kind of gradually continue to make inroads, I guess just as we kind of think about revenues and where we're going from here? Thanks.
Thanks Alicia. The most likely scenario is that there will be some fast acting PBMs and health plans on the Part D side that we'll see this as an opportunity to do what we're trying to do and that is help their members access Repatha and improve their cardiovascular risk. I think just some other payers and plans are a little more complex. They have different administrative processes, so that's the medium term. And then longer term, there are plans that we'll just be reluctant to add mid cycle because they've got a formulary process, they have actuarialists that design these plans, they make their bids through CMS and that can be a process that's a bit rigid at some plants.
Our hope is that that won't be the majority, but that will be work that we'll be doing in the next coming weeks months. I think it's possible that we see a short term decline in revenue, but with long term lift. And I'll go back to what Dave said. We've got very, very strong evidence behind this product. We've got physicians and thought leaders that want to use the product in more of their patients.
We've got 3,400,000 high risk cardiovascular patients in this country and a tiny fraction of them are being addressed right now. So if this goes well and we address the 3 barrier behaviors that was just talking about with Jeff, we should be in a really strong position to significantly expand the PCSK9 class and Repatha's share thereof over time.
Great. Thank you.
Our next question comes from the line of Umer Raffat with Evercore ISI.
Hi. Thanks so much for taking my question. Maybe first, and maybe I missed this earlier, what percentage of your sales for the PCSK9 are in Part D? And with that said, I guess what I'm really trying to get at is outside of Part D, it seems like your rebates to the channel are going to go down materially. So how does that make your offering stack up versus Regeneron in the non Part D channel for that reason alone?
Because as the system stands today, because the amount of rebates you're offering up versus what Regeneron may be offering up.
Yes. So the answer to your first question on Part D is 50% of our revenues today come through Part D patients. And as I mentioned before, that's underrepresented because of the abandonment issues. That should be in the neighborhood of 65% of our business based on the epidemiology of the disease being one that affects primarily older patients. The other piece of your question is with respect to current commercial contracts and the rebates that we pay.
With the introduction of this parallel SKU at a low price, we will maintain the high price and the rebate structure behind the high price SKU. It is our hope though that health plans over time, they're trying to bring down the cost of treating these patients for their employer clients and as are PBM. So eventually, when they are rebidding with employers, they will want to list the lower price SKU as well. So I think everybody is in the business here of trying to help patients in the membership of these health plans. I do think over time that transition from the high price SKU with the high rebate will come down and the low list price SKU will be added to more and more formularies over time.
Thank you.
So that's maybe another good explanatory point is that transition from the low list price coming up in demand in the market and the high list price coming down is really what I was referring to that might cause a dip in the very short term in revenue. That's all I meant by that. The long term revenue outlook here on Repatha is still very strong.
Our next question comes from the line of Cory Kasimov with JPMorgan.
Hi, this is Carmen on for Cory. So how should we think about the lower price changing the prescription fill rate amongst Medicare patients ultimately? Is it reasonable to expect it could reach the same level we see amongst commercial patients? And on a related note, have you seen any change in the fill rate since the 4 year data was added to the label? Thanks.
Yes. So the answer to your first question is yes, we should see the Medicare rates of adoption parallel the rates of adoption in commercial and perhaps even exceed them only because the approval rates at the plan level, at the payer level in Medicare are higher than the approval rates in commercial today. And with a lower abandonment and higher approval rate, you could see the Medicare population accelerate at a higher rate than the commercial population. We don't know that that will occur, but the way the market is currently because we're under penetrated in the Medicare market, it's got some catching Yes Yes. I'm not aware of any data on fill rate after the 4 year data specifically, but what Dave said in his opening remarks is really important.
When we saw the data from Fourier and we saw the strength of the product profile, we knew we had to do something in the market to make it available for a broader high risk population and not just FH patients who had a heart attack. So I think that definitely drove the contracting strategy to this point and it's got a huge reason it's a huge reason for what we're doing with the low price SKU. So I think that fill rate eventually will get better because we'll see more plans adopt and we'll see better co pays out there.
Victoria, since we are exceeding our advertised 30 minutes, why don't we take 2 last questions, please?
Absolutely. Our next question comes from the line of Kennen MacKay with RBC Capital Markets.
Hi, thanks for taking the question. I really like this move and what this could do for medical care here in the States. From our conversations and how you price they move it, it seems like maybe this is how you'd hope to price the drug when it was initially brought to market if you had the chance to set pricing for the class. I was just wondering quickly sort of how you're thinking about this globally? It seems like price is still a major factor abroad.
And then maybe if you could just give us a little bit more detail on in terms of feedback from PDMs and payers as you were making this decision on price, sort of how you came to this number specifically? Thank you very much.
Thank you. Thanks for the encouragement. We hope others also see this as the right thing to do. We do think it's a unique situation though and a unique solution that is market driven and market based. So the conditions that we're talking about here, this high abandonment rate Medicare population in Part D isn't really replicated anywhere else in the world.
So this is you should think of this as a U. S. Play, a U. S. Decision to help U.
S. Patients who happen to be on the Medicare prescription drug plan benefit. I would say that we're working with other reimbursement authorities around the world to share with them our belief that this is an important medicine for high risk cardiovascular disease patients. And we're very early in that process, but we're working hard to try and expand utilization in other countries. But this decision doesn't necessarily influence what we're doing in those markets other than strategically we're trying to address the high risk cardiovascular patient population where the benefit has clearly been demonstrated.
As far as the second part of your question, I think if you could just rephrase, I'm not sure I was tracking what you were asking me there.
How we came up with this number.
I just back into the number. Yes, okay. So I think the best way I can describe it is we wanted to make sure that we had every opportunity with Medicare Part D, PBMs and health plans to try to get Repatha to a fixed co pay formulary tier listing. And the best way to do that is to price at a point that is no longer in the specialty category and below specialty threshold. Once you can do that, then you're in a position to work with a plan to try and achieve preferred formulary status where you could get the co pay as low as $40 out of pocket.
We know, as I said earlier on the call, we know that at those numbers, you're now in the realm of other chronic cardiovascular and metabolic products. Think about oral anticoagulants, think about oral antidiabetics. And so if we can take a very valuable specialty medicine and get it on a fixed copay chronic cardiovascular formulary, we're now in the realm of unlocking the opportunity to treat more and more patients. And that's really what we designed the list price of $58,850 around. So it was a patient focused behavioral change that we were trying to affect and that was the price that we landed on.
Okay, Victoria. Let's take one last question, please.
And our final question comes from the line of James Birchenough with Wells Fargo Securities.
Good afternoon. It's Nick in for Jim. And thank you very much for squeezing us in. Can I ask what is the plan or your flexibility for further price reduction if a competitor lowers their price below today's price? You talked about 2nd generation manufacturing.
How important is 2nd generation manufacturing to reduce cost of goods and maintain margins as these list prices decline? Thank you.
Yes. Thank you very much, Nick. The first question that you asked, I think what I would say is, we're making this choice on the basis of trying to help patients. We have had some very preliminary interactions with health plans and PBMs and we feel that at this price point, we should be able to achieve fairly comprehensive coverage on Medicare Part D plans without a whole lot of additional price erosion. So that is where we're at right now.
This was not intended to be a competitive move. This was intended to be a patient focused move that would allow the expansion of Repatha to benefit the many, many patients who require it, particularly on the Part D side. If competitors were to do anything to help drive PCSK9 adoption in the category, I only see that as a good thing. And I think that more and more patients will benefit, payers will hopefully make this product more and more available at reasonable out of pocket expenses And physicians will notice that and in turn feel compelled and feel comfortable using Repatha because it's easier to do.
And maybe I'd add on the manufacturing piece. So, not specific to this particular product, but more broadly, obviously, we continue to believe through time that driving both our capabilities in manufacturing of these products as well as the cost competitiveness is going to be an important competitive advantage for the company. So we're pleased with the progress and the leadership we have in that area. And we think that that along with coming along and focusing on areas of products with very high unmet need, the combination of those 2 is going to continue to put us in a leadership position.
Thanks David. Thank you all for participating. Murdo, did you want
to make any concluding comments? Well, I'd actually like to turn it back to Dave because I think the reason we're doing this is because we've got a highly effective medicine for patients. And I think Dave, your perspective there is the way we should close that.
Yes. So thanks, Murdo. Cardiovascular disease remains our number one public health problem. We think that Repatha has a chance to really bend the curve on that particular public health problem. Our intent here was to get the drug into the hands of as many patients as possible who need it and we're committed to working together as a team to make that happen.
Thank you.
Excellent. Thanks Dave. Thanks again. If you have any follow on questions or comments, feel free to reach out to me. I'll be hanging around for some time.
Have a good day.
This concludes today's conference call. You may now disconnect. Thank you for your participation.