Originally published on Jan 3, 2019.
PBMs grew with conviction over the past decade but the tide has begun to turn: state and federal government, as well as PBM customers, have taken a peak behind the curtain and have already started to take action.
Executive Office Prohibits PBM Gag Clauses
On October 10, the President signed into law 2 pieces of legislation designed to end the use of “gag clauses” in PBM contracts that prohibit pharmacists from advising patients that they might have a lower price if the drug was purchased without insurance coverage. The Know the Lowest Price Act of 2018 (S.2553 (Pub. L. 115-262)) applies to contracts effecting coverage under Medicare or Medicare Advantage. It applies to plan years beginning on or after January 1, 2020. The Patient Right to Know Prices Act (S.2554 (Pub. L. 115-263)), applies to private health insurance or group health plans and was made effective immediately.
Express Scripts & Anthem
Express Scripts longtime relationship with health insurer Anthem Inc. exploded after Anthem sued Express Scripts for $15 billion, claiming that it had overcharged the company by $3 billion annually. Anthem was Express Scripts’ biggest client, accounting for 18% of total revenue; Express Scripts’ stock dropped by 10% on the day the news was released. Anthem promptly announced plans to create its own pharmacy-benefit manager in partnership with CVS Health; a continuation of the trend where health insurance plans are bringing PBMs in-house.
In Ohio, a state investigation in June found that PBMs overcharged taxpayers by more than $200 million between April 1, 2017 and March 31, 2018. As a result, Ohio’s Medicaid program terminated its contracts with all of its PBMs and mandated new contracts that implement transparent pricing by January 1, 2019.
PBMs and the New Landscape
Each of the four largest PBMs are now owned by a health insurer/healthcare conglomerate: Express Scripts by Cigna, CVS Caremark by CVS Health, Optum Rx by UnitedHealthcare and Prime Therapeutics by a 14 Blue Cross/Blue Shield plans.
Optum Rx as a Healthcare Provider
Additionally, Optum Rx has been on a tear, snapping up healthcare providers:
MedExpress, an urgent care and preventative care services company
Surgical Care Affiliates, an ambulatory surgery center and surgical hospital provider
DaVita Medical Group, a physician group
Avella Specialty Pharmacy, specialty pharmacy
Genoa Healthcare, a behavioral health pharmacy chain (UnitedHealthcare)
Sound Inpatient Physicians, critical/acute care (via subsidiary)
In conclusion, PBMs (and healthcare as a whole) have soundly diversified (and continue to do so) across the healthcare continuum as a defensive and now offensive approach. More to come in 2019!
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