Horizon Pharma to pay Express Scripts $65 million to settle rebate litigation

(Reuters) - Horizon Pharma Plc said it would pay pharmacy benefit manager Express Scripts Holding $65 million to settle litigation related to after-market rebates for three of its medicines.

Express Scripts, the largest manager of U.S. drug benefits, in November sued Horizon for a breach of contract, seeking $166.2 million in rebates related to Duexis, Rayos and Vimovo.

Horizon contested the claim and contended that Express Scripts had breached the rebate agreement.

Under the settlement, both companies will be released from claims relating to the litigation without admitting any fault or wrongdoing.

“We are returning the money to our clients, based on their respective rebate agreements for these Horizon drugs,” Express Scripts spokesman Brian Henry told Reuters.

Rayos is a rheumatology treatment, while Duexis and Vimovo are used for pain relief. The three accounted for more than half of Horizon’s net sales of $757 million in 2015.

Prescription benefit managers (PBMs) negotiate drug benefits for health plans and employers and maintain a list of covered drug benefits, called a formulary, that determines which drugs patients can easily buy.

They often extract discounts and after-market rebates from drugmakers in exchange for including their medicines on the list with low co-payments.

Horizon said on Thursday that it is in discussions with Express Scripts to add Duexis and Vimovo to its coverage list after removing the drugs last year.

The settlement clears the path for a contract negotiation with Express Scripts, which currently accounts for about 30 percent of all covered patients in the United States, Mizuho Securities analyst Irina Koffler said.

If Horizon can also contract with UnitedHealth Group Inc’s Optum unit, which covers another 20 percent of lives, then the company could achieve its goal of 80-85 percent coverage on these brands, she added.

Separately, Horizon said it had signed a rebate agreement with the PBM Prime Therapeutics, securing formulary status for primary care medicines Duexis, Pennsaid 2%, Vimovo and Rayos, starting Oct. 1.

Last month, the drugmaker announced it had secured coverage for Duexis and Vimovo with CVS Health Corp.

“Together, we estimate Prime and CVS/Caremark manage roughly 35 percent to 40 percent of national claims,” Goldman Sachs analyst Stephan Stewart wrote in a note.

Dublin, Ireland-based Horizon’s shares slipped about 1 percent in morning trading on the Nasdaq.

Reporting by Natalie Grover in Bengaluru and Caroline Humer in New York; Editing by Maju Samuel