Though Remodulin is expected to face generic competition starting in 2018, United Therapeutics (UTHR) is confident in maintaining the majority of its market share. This will enable the company to continue to be a strong competitor to other cardiovascular players such as GlaxoSmithKline (GSK), Teva Pharmaceutical (TEVA), and Novartis (NVS) (through its subsidiary Sandoz).
Generic substitution policy
In addition to the Medicare Part D program, Remodulin is also covered by the Medicare Part B program as well as by major commercial health insurers. While strict generic substitution policies exist for Medicare Part D, Remodulin will not be subject to these policies. This will limit the degree of market share it loses to generic competition.
Closed distribution channel
Remodulin is generally distributed through closed distribution channels. Doctors directly send the drug prescriptions to pharmacies. The majority of Remodulin’s prescriptions are processed by Accredo Specialty Pharmacy.
These prescriptions also specify that the drug should be disbursed exactly as prescribed. This is because Remodulin is used for medically critical patients falling in the New York Heart Association (or NYHA) functional Class IV category. NYHA is a system used to classify the degree of heart failure depending on symptoms, with Class IV assigned to patients with the most severe symptoms.
Since these patients have very fragile health conditions, any changes in the brand of the drug, its availability, or even the manner of its administration could prove fatal. Since Remodulin is provided with a reliable pump system and United Therapeutics maintains a two-year inventory of the drug across all dosage strengths, Remodulin may prove to be tough competition for generic entrants.
Doctors have been pre-authorizing the disbursal of critical drugs such as Remodulin before prescribing them to patients. This limits the level of generic substitution for such drugs. This was highlighted in the case of GlaxoSmithKline’s PAH drug Flolan, which lost a very small portion of its market share to Teva Pharmaceutical after seven years of generic drug entry.
United Therapeutics expects that the generic version of Remodulin will be available at a discount of around 13% from the price of the branded version. The limited price discounts coupled with the drug’s being targeted at a medically fragile patient population may make it difficult for generic drugs to capture market share.
If United Therapeutics’ projections prove correct, its share price could see a boost along with the price of the SPDR S&P MidCap 400 ETF (MDY). United Therapeutics makes up around 0.35% of MDY’s total portfolio holdings.
In the next article, we’ll explore the growth prospects of Tyvaso in greater detail.