Express Cuts Off Pharmacy

As we previously disclosed approximately one year ago, we terminated the contract with Express Scripts after Express Scripts failed to live up to its contractual obligations. While HZNP generates at least 70%-75% of its business through the use of specialty pharmacy distribution, we estimate that in total (including Lazanda) DEPO generates 5% of its sales from this method of distribution.

Express Scripts spokesman Brian Henry said the company distinguishes between “captive” pharmacies, which seem to carry a significant amount of products from a certain pharmacy, and “specialty” pharmacies, which are “high-touch, high-quality care for people with chronic and complex diseases”. “The notion that Linden Care is a so-called “captive pharmacy” of Horizon Pharma is entirely false”, the drugmaker said in a statement.

The move, announced by St. Louis County-based Express Scripts on Tuesday, comes as big managers of prescription medicine benefits for health plans evaluate drug dispensaries after recent claims of questionable practices at Valeant Pharmaceuticals worldwide Inc’s partner pharmacy, Philidor Rx Services.

Shares in IL biotech Horizon Pharma plunged as much as 25 percent Wednesday after a pharmacy benefits company sued it for $140 million and dropped a specialty pharmacy from its network. Earlier this month, in the wake of Valeant’s ($VRX) canceled relationship with controversial specialty pharmacy Philidor, Express Scripts ($ESRX) said it would take a hard look at other specialty pharmacies that deal mostly with a single drugmaker.

Less than five percent of our net sales are from prescriptions that are filled by Linden Care and processed by Express Scripts. This competitive role, in our view, creates a clear conflict of interest, as Express Scripts stands as both a pharmacy’s overseer and competitor. Express Scripts rose 26 cents to $88.79. It said all pharmacies that distribute its drugs are “fully independent”, and Horizon doesn’t own or have a stake in any pharmacy or an option to purchase any pharmacy. It said the majority of damages Express is seeking to recover are for prescriptions that occurred after the contract ended.

In light of Express Scripts’ actions, we will evaluate all legal and other remedies and options.

In a statement, Express Scripts said it removed Linden Care from its network after determining that it “predominantly dispensed Horizon prescription drugs and did not fulfill key components of our pharmacy network agreements”.