MannKind Corporation: Afrezza Is Broadly Covered

Summary

  • The largest pharmacy benefit managers (Express Scripts, CVS/Caremark, and Catamaran) cover AFREZZA.
  • Three of the Top 5 (Kaiser, Anthem, and Aetna) and more than half the Top 20 health insurers cover AFREZZA in some way.
  • Only 2 insurers in the Top 25 have completely left AFREZZA of all their formularies; this trend points to more than 80% eventual coverage in the U.S.

*Subscribers had an early look at this article.*

MannKind Corporation (NASDAQ:MNKD) is a mid-size ($1.57 billion cap) biopharmaceutical company. MannKind developed and manufactures AFREZZA, a rapid-acting inhaled insulin approved by the FDA in 2014 for adults with diabetes. Global partner Sanofi (SNY) is responsible for commercial, regulatory and development activities of AFREZZA, which was launched in February. MannKind have been on a rollercoaster since May 15, when Jefferies revealed a results from its survey of endocrinologists and primary care physicians suggesting market "penetration rates nearly four times higher than [the analyst firm] had previously modeled." Shares surged 80% in June, before plummeting along with the market to -5% on Friday. Jefferies reiterated their Buy recommendation with price targets of $9 going on to $37 by 2017. This report looks at coverage of AFREZZA from the 3 largest pharmacy benefit managers ((PBMs)) and the top 25 U.S. health insurers as ranked by market share, to see if payers will be ready to meet increased demand for AFREZZA. In the past two months, most insurance companies updated their formularies (the list of covered drugs), and investors should be encouraged that many health plans are already on board (see Table 1).

Table 1. Status of AFREZZA at the Largest U.S. Insurers

Rank

AFREZZA

Pharmacy Benefit Managers

1

Express Scripts

Medco

*

2

CVS/Caremark Health Savings Plan

Pay 20%

3

Catamaran

*

Government-Sponsored Insurance

TRICARE

$20

Medicare

2

Kaiser Permanente

4

8

Highmark

4

Health Insurance Marketplace

6

BlueCross BlueShield (BCBS) Illinois

4

BCBS Montana

4

BCBS New Mexico

4

BCBS Oklahoma

4

BCBS Texas

4

11

Ambetter (WA)

13

Horizon BCBSNJ

*

18

CareFirst BCBS (MD, DC, VA)

*

19

Health Net (CA)

*

Private/Commercial Insurance

1

UnitedHealthcare

2

Kaiser Permanente

3

Anthem BCBS

* PA

4

Aetna Value Plus

3 PA, ST

5

Humana

-

6

Health Care Service Corporation

7

Cigna HealthCare

* PA

8

Highmark

9

Blue Shield of California

10

Independence Blue Cross

* PA

11

Centene

12

EmblemHealth

13

Horizon BCBSNJ

*

14

BCBS of Michigan

15

Florida Blue Preventive/VBD

**

17

WellCare

-

18

CareFirst BCBS

*

19

Health Net

*

22

Excellus BCBS

23

BCBS of Massachusetts

25

RegenceRx

Legend: # = Tier (out of 5); √ = Preferred Brand or equivalent to Tier 1 or 2 (lower copay); * = Non-Preferred Brand or Tier 3 or 4 (higher copay); ** = Specialty Brand or Tier 5 (highest copay); PA = Prior Authorization (patient doesn't get prescription right away, or not at all if denied); ST = Step Therapy (bigger delay; patient needs to take other drugs first); - = Non-Formulary (not covered); Blank = Not Listed (not covered/too new)

Among the more interesting findings:

  • The Top 3 PBMs all cover AFREZZA.
  • Seven of the Top 10 health insurers provide some AFREZZA coverage (certain plans, age groups, etc.).
  • Only one of the Top 15 insurers (#5 Humana) has actively decided not to cover AFREZZA.
  • #2 Kaiser Permanente, known for its comparative effectiveness research and generally stricter standards for adopting expensive new brands, saw fit to cover AFREZZA for its seniors. Many health plans follow the Kaiser model to save money while making the most effective treatments available to their members.
  • #6 Health Care Service Corporation, who owns 5 Blue Cross Blue Shield (BCBS) affiliates, provides coverage for its Health Insurance Marketplace (HIM) members in all 5 states, but declined to place AFREZZA in its standard national formulary. Patients whose drugs aren't covered by their individual or employer's plans can switch to HIM alternatives that do cover in their states.
  • #8 Highmark covers AFREZZA with its Medicare Part D plan, but not its commercial plans, yet.
  • #11 Ambetter Health is a HIM provider in 10 states; so far, Ambetter from Coordinated Care (WA) is the only one covering AFREZZA.

These early adoptions mean that several of the top Pharmacy & Therapeutics (P&T) committees in the nation have determined that AFREZZA is cost-effective. Where there are discrepancies in different formularies within a health system, inclusion in the future is more likely as more doctors and patients experience successful results while using AFREZZA. Also, the required pulmonary function testing (PFT) is covered under Medicare and most commercial health plans. In fact, previous coverage demonstrated how medical offices with enough diabetes clientele could recoup a spirometer investment, and indeed profit, by offering their own PFTs.

In conclusion, the existing coverage base should assist in increasing prescriptions going forward. For plans that currently don't cover it, AFREZZA is simply too new. Many P&T committees are scheduled to make determinations in the third quarter. In the meantime, longs will have to wait out the unpleasantness of doctor ignorance, which should largely vanish once the direct to consumer campaign takes off later this year.

This article was written by

The Clinically Sound Investor is a pharmacist with a PharmD and a BA in psychology. He has worked across the spectrum from very small independent and hospital pharmacies to the some of the largest retail corporations and medical centers in the nation, as well as experience in specialty and mail order settings. Fascinated by watching the rise of Walmart and Apple after 2008, he now follows the advice "know thyself" and puts expertise of understaning scientific literature to research biotechnology stocks. His investments early on were driven by binary events such as FDA Advisory Committee meetings and PDUFA dates (approvals). Despite initial successes, there were too few of these events, so he expanded into predicting Phase II/III trial results. His writings should not be considered financial advice or the basis for investment decisions. While his interpretations of clinical trial results--which may be overlooked or even thoroughly misunderstood by Wall Street--could be helpful, they're only as good as the original reports they come from. Although written by scientists and doctors, there will always be a slant from the sponsoring company, or worse (like, say, missing data...).

Disclosure: I am/we are long MNKD. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

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