Anthem to Launch Its Own Pharmacy-Benefit Manager--2nd Update
October 18 2017 - 3:48PM
Dow Jones News
By Anna Wilde Mathews
Anthem Inc. said it would launch its own pharmacy-benefit
manager, dealing a blow to partner Express Scripts Holding Co. and
further reshuffling a sector under growing pressure to reduce costs
and bolster transparency.
The U.S.'s second-largest insurer said its pharmacy-benefit
manager, to be called IngenioRx, will be serviced by CVS Health
Corp. when it launches in 2020 after the conclusion of its current
contract with Express Scripts. Express Scripts warned in April that
Anthem, its biggest customer, was unlikely to renew their pact once
it expires at the end of 2019.
Pharmacy-benefit managers -- middlemen in health care that help
select which drugs are covered for patients and negotiate discounts
with drugmakers -- have drawn increasing scrutiny over whether and
how they wring savings from the health-care system. Some drug
companies have pointed fingers at the firms, arguing they are
responsible for the rising list price of many drugs because they
can make more money by negotiating steeper discounts and
rebates.
The PBMs say they pass along the discounts they negotiate to
their clients.
Anthem has sued Express Scripts for allegedly overcharging on
prescription drugs over several years. Express has denied the
allegations and made its own counterclaims. The litigation hasn't
yet come to trial.
In its lawsuit, Anthem alleged Express Scripts was getting an
"obscene profit windfall" from overcharging the insurer.
Express Scripts said in a statement Wednesday that Anthem's
announcement was "disappointing" and "we know that no other PBM
will offer Anthem the combination of savings, member and client
stability, and clinical expertise that Express Scripts represents."
Anthem's business had been worth around $17.1 billion in annual
revenue to Express Scripts.
Anthem Chief Executive Joseph R. Swedish said the insurer wanted
to increase savings and take more control over pharmacy-benefit
functions. "Drug costs, and the escalation of drug costs, is top of
mind for everyone in our industry," as well as clients, he said.
Pharmacy "can be a key ingredient to better managing the total cost
of care." Anthem said it decided that it would be more efficient,
and less expensive, to work with CVS instead of attempting to build
its own PBM from scratch.
Anthem's decision takes it back toward a setup it had before its
contract with Express Scripts, which took over Anthem's pharmacy
services in 2009 when it bought Anthem's in-house PBM for about
$4.68 billion.
The company said IngenioRx would seek business from employers as
well as insurers, particularly its fellow Blue Cross Blue Shield
companies.
Anthem said it expected the new PBM to "achieve greater than $4
billion in gross savings annually," starting in 2021 when the new
setup is set to be fully phased in. In a call with analysts, the
company said the figure represented what it projected to be reduced
pharmaceutical spending under its new contract with CVS.
Anthem said roughly 20% of the savings would accrue to the
company, representing pretax operating gain, while the rest would
be passed along to clients.
This latest deal could prove a harbinger, prompting other big
payers that now outsource drug-benefit management to take more
control, said Pratap Khedkar, managing principal of ZS Associates,
a health-care consulting firm. "Other big payers may decide I want
my own PBM" so they can control drug-price negotiations and capture
more of the discounts for themselves, he said.
UnitedHealth Group Inc., which is the parent of the biggest U.S.
health insurer, UnitedHealthcare, also owns a large PBM, OptumRx.
Other insurers have already been moving to exert more influence
over the pharmacy benefit, even when they are using an outside
company to administer it.
Anthem's decision is a win for CVS, which said Anthem's
five-year contract includes services such as claims processing and
prescription fulfillment. Neither company disclosed details of the
pact.
CVS Chief Executive Larry Merlo said in a statement, "We look
forward to working with Anthem and IngenioRx to provide services to
help ensure coordinated, holistic care for their PBM members."
Size can be a huge benefit in negotiating pricing with
pharmaceutical companies. Express Scripts recently announced its
own deal to buy private medical-benefits manager eviCore healthcare
for $3.6 billion. Two years ago, OptumRx closed its acquisition of
Catamaran Corp.
--Jonathan D. Rockoff contributed to this article.
Write to Anna Wilde Mathews at anna.mathews@wsj.com
(END) Dow Jones Newswires
October 18, 2017 15:33 ET (19:33 GMT)
Copyright (c) 2017 Dow Jones & Company, Inc.
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