This week Cigna revealed plans to acquire pharmacy benefits manager Express Scripts in a $67 billion deal. The acquisition not only reflects the interest in connecting insurance companies to PBMs but it also raises questions about what it could mean for drug prices in the future.
Adding consumer touchpoints
Cigna CEO David Cordani told The Wall Street Journal that the deal will help the insurer build on its service portfolio.
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“When we think about Express Scripts, it has PBM capabilities, but it has 27,000 individuals and a significant number of consumer touchpoints around health and well being…It expands our service portfolio beyond that of a PBM.”
Guards against Amazon’s anticipated move into drug distribution
There has been a lot of speculation that Amazon plans to move into the drug supply space. Its recent joint venture with Berkshire Hathaway and JPMorgan Chase and the company’s hunt for a HIPAA compliance lead last month has led some to speculate that Amazon will become a drug distributor. That has coincided with some companies making strategic deals in an effort to better position their businesses to compete.
One dramatic example is the joint venture between health systems Intermountain Healthcare, Ascension, SSM Health and Trinity Health — and the U.S. Department of Veterans Affairs to launch a nonprofit generic drug company.
Insurance companies aligned with PBMs
But the deal also raises some questions. Forbes noted that UnitedHealth owns Optum Rx and CVS Caremark is part of CVS Health. If CVS Health is successful in its acquisition of Aetna and the Cigna-Express Scripts deal goes through, these national insurance companies would either own PBMs or be part of companies that do.
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An Express Scripts report shows that spending on medicines grew only 1.5 percent in 2017 —the smallest increase since the company began tracking spending 25 years ago.
Still, PhRMA cited a report from Berkeley Research Group which showed that nearly 40 percent of the list price for brand medicines is rebated back to insurance companies, PBMs and the government, or retained by other stakeholders in the supply chain, those discounts and rebates create savings of more than $100 billion. But insurers don’t always share these savings with patients who are facing rising out-of-pocket costs when they go to the pharmacy to get their medicine.
Forbes referenced FDA Commissioner Scott Gottlieb’s prepared remarks on supply chain impact on patients to highlight the significant out-of-pocket cost burden patients face when paying for certain medications.
“Patients shouldn’t face exorbitant out-of-pocket costs, and pay money where the primary purpose is to help subsidize rebates paid to a long list of supply chain intermediaries or is used to buy down the premium costs for everyone else,” he said.
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