Here's Why Horizon Pharma Plc Is Soaring Today

By George

What: Shares of Horizon Pharma plc , aspecialty biopharmaceutical company, climbed by over 30% today on heavy volume. This rally was catalyzed by a public letter from the company rebuking a New York Times article that suggested that Horizon was circumventing attempts by pharmacy benefits managers like Express Scripts to lower drug prices by using mail-in specialty pharmacies.

Source: Horizon Pharma

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In a nutshell, the article states that Horizon uses specialty pharmacies to handle reimbursement from payers, as well as the delivery of prescription drugs to patients via the mail. The basic idea is to discourage the use of cheaper generics in place of combo drugs like Duexis and Vimovothat command a premium price.

So what: Horizon's rebuttal centered on the idea that its drugs show clear clinical advantages over simply prescribing the generic components of these patented drugs separately, as well as removing the barriers to accessing medicines by patients in general. Management also reiterated that Horizon does not have an ownership stake in any of the specialty pharmacies that handle its medicines.

Now what: The debate over drug prices really heated up late last year after Express Scripts successfully lowered the average cost of new hepatitis C medicines. After that, the company also announced that it was looking into novel ways to bring down the cost of new cancer drugs. In light of these events, specialty pharmas like Horizon that repackage older drugs into novel combinations appear to be a natural target of these cost-cutting efforts in general.

Based on the growing public interest in this issue, I think pharmacy benefits managers stand to make substantial gains in this fight going forward. That's why I'm personally content to stand safely on the sidelines with any drugmakers that rely on premium pricing schemes to drive growth.

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George Budwell has no position in any stocks mentioned. The Motley Fool owns shares of and recommends Express Scripts. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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