CVS Formulary Exclusion Exacerbates Amgen's Bone Drug Price Erosion

What happened

CVS Health announced it will remove Amgen's bone disease treatments from some preferred drug lists starting April 1, favoring lower-cost alternatives. This move intensifies the existing pricing pressure on Amgen's mature biologics, as recent filings show ENBREL net price declines of 30-38% and Prolia/XGEVA facing biosimilar risks. Prolia and XGEVA, key bone health products with expired patents in 2025, are now directly threatened by formulary exclusions that could accelerate volume losses. Amgen's strategy to offset such legacy declines with newer drugs like Repatha and Horizon assets faces heightened headwinds from payer cost-cutting initiatives. Investors must now confront the reality that policy-driven price compression is accelerating, challenging the mid-single-digit growth narrative.

Implication

This formulary change demonstrates that payers are actively substituting Amgen's bone disease treatments with lower-cost options, likely biosimilars, validating near-term downside risks highlighted in the DeepValue report. It exacerbates the structural headwinds from IRA pricing and biosimilar competition, particularly for Prolia and XGEVA, which are critical profit pools. Amgen's reliance on volume growth to offset price declines becomes more precarious, increasing the likelihood of margin compression if newer assets underdeliver. Investors should monitor upcoming earnings for guidance cuts on bone health sales, as this could signal a shift toward the bear scenario with a $270 implied value. Overall, the news underscores the asymmetric risk profile where near-term erosion is certain while obesity pipeline upside remains distant.

Thesis delta

The news strengthens the bearish skew of the existing thesis by providing concrete evidence of accelerating price pressure on bone health drugs, a key risk area. It suggests that biosimilar competition and payer actions are materializing as feared, potentially necessitating downward revisions to 2026 guidance for Prolia and XGEVA. This reinforces the investment call for caution, as current valuations do not adequately discount these heightened near-term headwinds.