Piper Jaffray's comments
September 19, 2012
Questcor (QCOR): Overweight
Much Misunderstanding About Aetna Policy Bulletin on Acthar; Buy on Weakness
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CONCLUSION
We believe that the claim that Aetna will not cover Acthar at all, based on a recent clinical policy bulletin, is not accurate. The language in the bulletin is highly nuanced, and our read is that this is at worst more restrictive prior authorization/step edits surrounding Acthar, and likely only in the multiple sclerosis (MS) relapse setting at that. Given that usage of Acthar (beyond infantile spasms (IS)) is generally already limited to patients failing prior treatments (often multiple prior treatments), we do not see how Aetna's statement will usher in a sea change in the way Acthar is viewed, broadly speaking, by managed care organizations (MCO), particularly given that there have been a number of recent favorable coverage decisions from other MCO's (see below for more details). Our bullish thesis on Questcor is unchanged, and we reiterate our Overweight rating and $67 PT.
⢠Would not interpret Aetna statement as a major change in how Acthar will be covered. The statement notes that Acthar is "not medically necessary for "corticosteroid-responsive conditions"" because it is not more effective than corticosteroids (also referred to Acthar as "rarely" necessary in "corticosteroid-responsive conditions"). The statement does not explicitly say that it will not reimburse for Acthar in a patient failing prior treatment(s) with corticosteroids. It is a reality that a minority of patients with conditions like nephrotic syndrome (NS) or dermatomyositis/polymyositis (DM/PM) do not respond too well to corticosteroids or cannot tolerate them. These are the kind of patients that QCOR has been targeting. Interestingly, Aetna made public statements earlier today that implied that its policy bulletin was driven by feedback from neurologists. The implication, at least on the surface, is that the policy statement is designed more to address usage in MS (intuitive in our view given the large size of the market and the large and growing costs borne by MCO's for MS treatments in general). We did speak with a number of Aetna representatives who indicated that Acthar will be covered, though with restrictive prior authorization (which has generally been the norm already).
⢠What of other coverage decisions? These certainly look favorable for Acthar. Anthem Blue Cross Blue Shield, Cigna, and UnitedHealth all came out with coverage decisions this summer clearly providing access to Acthar in cases of corticosteroid failure/intolerance (refer to the chart on the following page). The Centers for Medicare and Medicaid Services (CMS) also came out with a coverage statement in October 2011 that made it clear that Acthar has limited value in "conditions responsive to corticosteroid therapy", but yet still provides broad access in a range of conditions including MS (in other words, there is managed care recognition that when corticosteroids as an option have been exhausted, Acthar is a reasonable alternative).
