Express Scripts And Abbvie Drug-pricing Deal Might Devastate Biotech Bull Market

BOSTON (TheStreet) -- The exclusive hepatitis C pharmacy deal struck between Express Scripts and AbbVie is a serious, perhaps permanent, blow to the multi-year biotech stock bull market. The power to control drug prices in the U.S. now has shifted firmly to cost-cutting insurance carriers and pharmacy benefit managers. This means biotech companies, especially those facing competition, can't guarantee the outsized profits investors have come to expect and crave. After today, investors are no longer going to ask biotech executives, "What will you charge for your new drug?" Instead, the new question becomes: "What will Express Scripts -- or any other pharmacy benefit manager --- allow you to charge for your new drug?" That's a huge, fundamental change which is likely to put downward pressure on lofty biotech stock valuations. The deal between AbbVie and Express Scripts focuses only on the price of hepatitis C drugs, but expect future cost concessions to be wrung from other high-priced diseases, including cancer. Under terms of the deal announced Sunday night, AbbVie agreed to significantly discount the price of its Viekira Pak hepatitis C therapy in exchange for exclusive access to Express Script's 25 million customers.

 

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