Oxford Continues To Cover QCOR’s Acthar, Sales Look Much More Stable Now
Breaking news that health insurer, Oxford Health, will cover HP Acthar Gel (Acthar), looks like a major win for Questcor Pharmaceuticals (NASDAQ:QCOR), and the stock should rally once the news is properly interpreted by investors. In our prior article, we stated that with no Acthar growth off of the current base of sales, QCOR could trade in the mid-$20 range. Today’s news suggests that the base of sales is much more stable that previously thought, and that once physicians become accustomed to the new authorizations proposed by Oxford, use of the product may begin to show strong growth again. While Aetna’s final Policy Update is expected next week, the Oxford Policy Change suggests that not all health insurers will move to block patients from getting Acthar, and that Aetna could be one of the only health insurers that maintains a highly restrictive policy. In fact, it is possible that Aetna loosens its restrictions, and like Oxford, acknowledges that FDA-approved indications should be reimbursed, especially if patients are not getting relief from alternative treatments (if alternatives even exist). Importantly, Oxford is part of UnitedHealth Group (NYSE:UNH), which reimburses for the largest percentage of Acthar prescriptions. The link to the Oxford Policy Update can be seen here, and importantly, the insurance company deems Acthar MEDICALLY NECESSARY for several conditions including key indications like infantile spasm (IS), multiple sclerosis (MS), and nephrotic syndrome (NS). Essentially, the major changes are for initial approvals of the multiple sclerosis (MS) and infantile spasms (IS) indications, with doctors needing to review therapy for IS and MS patients in 4 weeks and 3 weeks, respectively, rather than the prior 3 month initial approval “without an MD review”. While the shorter intervals required for initial authorization and reauthorizations will create more steps in the process, we note that most patients are only on Acthar for a 2-3 week period anyway. Additionally, given that patients have already failed other therapies, physicians are likely to continue to be aggressive in making sure their patients have access to the drug. Meanwhile, these changes are not very meaningful, given the way Acthar has been prescribed, reimbursed, and used in the past. The real positive in the Oxford update is that prescriptions for NS have almost no restrictions once a patient has failed steroids, and we note that use in NS currently represents 40% of Acthar prescriptions, is growing at very high rates, and could become the biggest indication given that each prescription has the highest dollar value, on average, relative to other indications like MS and NS.
We view the Oxford Policy Update has highly favorable to the QCOR story, particularly given the Oxford’s use of the term “medically necessary” and that it acknowledges the various FDA approved indications for the product. Additionally, we believe the Oxford Policy lends credibility to the company’s case in defending its marketing practices, as the change evidences that insurance reimbursement remains tricky, and company sales reps must work closely with doctors to make sure that the medicine is paid for when patients need the drug in on-label indications. We continue to believe that the new Medicaid reimbursement policy for Acthar also supports that the drug is now being broadly accepted as a critical therapy in certain conditions. Expect QCOR to strengthen on this news and continue to climb into the Aetna Policy Update on Oct. 13, and into Questcor’s next release of Acthar’s prescription growth trends.