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CVS Health Draws a Line in the Sand

The Motley Fool's experts weigh in on payer pushback to new cholesterol busting medicine and surging Obamacare penalties in 2016.

A new class of cholesterol drugs is coming to market, and these novel therapies carry with them mind-boggling price tags. CVS Health (NYSE:CVS) is in the middle of the action, recently releasing a statement that its pharmacy benefit management segment will wait for the second of these drugs to be approved before making coverage decisions.

Meanwhile, speaking of ballooning costs, the Affordable Care Act is about to increase the fee slapped on Americans without health insurance. But is this fee still less than the cost of buying in to a health insurance plan? Motley Fool analysts discuss these issues and more on this week's episode of Industry Focus: Healthcare.

A full transcript follows the video.

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Michael Douglass: One way you don't want to keep up with the Kardashians -- this is Industry Focus.

Hi, Fools! Healthcare analyst Michael Douglass here today. It's Wednesday and we're talking about healthcare. Lots of interesting news and headlines. I'm joined, as always, by long time contributor Todd Campbell and by my fellow healthcare analyst Kristine Harjes. Welcome, everyone.

Let's jump right in. The first and probably least important one of the bunch but one that was just far too interesting to not bring up and lead off with. The FDA has sent a warning letter to Kim Kardashian. On her Twitter,she promoted this morning sickness drug called Diclegis. In doing so she didn't mention the drug to drug interactions and safety issues. She only spoke about its effectiveness and how useful it's been for her.

The company Duchesnay Inc. got a warning letter from the FDA about this Kim Kardashian tweet proving that the FDA is definitely monitoring this social media world. Quick takes; Todd, what do you think?

Todd Campbell: I think it just goes to show that you need to follow the tweets of all the Kardashians until you get all the news that you possibly can on various drugs that are on the market.

Kristine Harjes: We're not just talking Twitter. We're talking Instagram, Facebook -- they're all over it. To be fair, she did point out that they have a website, that there is safety info, but apparently that isn't sufficient. My takeaway on this is I hope that Kanye is ready to go to bat for her and tell the FDA if the pill isn't killing anyone, it's only making them stronger.

Douglass: She just quoted a Kanye song. Folks, that's a wrap! I'm just kidding. Let's head into some of our other news. Interestingly, CVS has decided to delay negotiating with Regeneron (NASDAQ:REGN) and Sanofi about their PCSK9 inhibitor, Praluent, until there's an FDA decision about the competitor drug Repatha. Todd, give us a little background on PCSK9 drugs and set the stage for these conversations?

Campbell: Sure. This is a lot like what we saw a year and a half ago when Sovaldi first came to market. It was a hepatitis C drug with a very high price, $1000 pill, lots of media attention; it kicked off that whole debate on how much drug companies can charge for drugs and how much they should be charging for drugs, and if we should be paying for that.

PCSK9 inhibitors are cholesterol-busting drugs. For two decades, we've been using statins to help control cholesterol and prevent heart attack and stroke. Statins don't do a good job for everybody. Of the 36 million people who take statins, roughly one-third of those people aren't controlling their cholesterol to the level that their doctors would like to see.

Companies like Regeneron and Amgen -- who has another drug coming up with the FDA on August 27th -- develop this new class of drugs that can be used alongside statins to reduce cholesterol even further. Once they receive approval form the FDA to begin marketing this new drug...