Facing an unexpected judicial roadblock in the plan to combine their two business, CVS Health Corp. and Aetna Inc. successfully negotiated a deal to keep their PBM and health insurance operations separate for at least the next few months.

At the heart of the holdup is U.S. District Court Judge Richard Leon, who has the right to review the agreement that CVS and Aetna struck with the DOJ to resolve antitrust concerns with their deal.

By Leslie Small

Facing an unexpected judicial roadblock in the plan to combine their two business, CVS Health Corp. and Aetna Inc. successfully negotiated a deal to keep their PBM and health insurance operations separate for at least the next few months.

At the heart of the holdup is U.S. District Court Judge Richard Leon, who has the right to review the agreement that CVS and Aetna struck with the DOJ to resolve antitrust concerns with their deal.

CVS said it is currently operating Aetna’s health insurance business separately from CVS’s retail pharmacy and PBM business units, with Aetna maintaining control over pricing and product offerings. Aetna personnel will also retain their current compensation and benefits, and CVS will maintain a firewall to prevent the exchange of competitively sensitive information between the two companies.

Leon issued a Dec. 21 order accepting CVS’s plan, saying he’s satisfied that “so long as these measures remain in place, the assets involved in the challenged acquisition will remain sufficiently separate” to facilitate his review of the deal.

John Matthews, KPMG’s strategy leader for health care and life sciences, points out that if the restrictions remain in place for a long time — or potentially permanently — “then I think it actually really undermines the strategic rationale and value creation proposition for what the deal is intended to do.”

In particular, if the firms have to keep their PBM separate from their insurance business — in terms of both product offerings and data sharing — that could stymie “what was going to be exciting and different about the deal, which was it allowed them to combine pharmacy and benefit data to really understand total cost of care for certain key conditions,” he adds.

Whether that comes to pass largely depends upon timing, according to Matthews. “I think if they start getting into six, nine, 12 months, then it starts becoming a problem, even if it’s not a permanent injunction,” he says.

Express Scripts Holding Co. and CVS Health Corp. have in recent months unveiled new programs that appear designed to transition away from the PBM status quo.

One factor driving both new programs could be a proposed rule that’s still under review by the Office of Management and Budget, which might remove prescription drug rebates’ safe-harbor protections from the federal antikickback statute. But one industry expert says it looks less likely that may actually transpire.

By Leslie Small

Express Scripts Holding Co. and CVS Health Corp. have in recent months unveiled new programs that appear designed to transition away from the PBM status quo.

One factor driving both new programs could be a proposed rule that’s still under review by the Office of Management and Budget, which might remove prescription drug rebates’ safe-harbor protections from the federal antikickback statute. But one industry expert says it looks less likely that may actually transpire.

“I think it has more to do with the fact, almost regardless of that [potential rule], that rebates going forward potentially are going to be so variable,” says David Dross, the leader of Mercer’s managed pharmacy practice. He says the PBMs’ moves are a response to “marketplace demand” for a different type of pharmacy benefits model.

Express Scripts’ new National Preferred Flex Formulary allows it to add to its formulary a newly launched lower-cost alternative to a brand medication — giving members immediate access to that drug — and lets the PBM exclude the innovator brand product from coverage.

The first drugs managed through the National Preferred Flex Formulary will be Asegua Therapeutics’ authorized alternatives for the hepatitis C treatments Epclusa (sofosbuvir/velpatasvir) and Harvoni (ledipasvir/sofosbuvir).

Under CVS’s new Guaranteed Net Cost model, the company will pass 100% of rebates to plan sponsors and “take accountability for the impact of drug price inflation and shifts in drug mix,” the company said in a press release.

Though the models differ in design and scope, Dross says similar forces are driving them. “I think there’s so much buzz in the marketplace around rebates, and what they are or aren’t,” he says. “People are becoming more conversant about it, so what that does is it sort of shines a light on all of the various entities in the supply chain, including pharma manufacturers.”

In response to that, manufacturers are experimenting with different approaches to pricing, which move away from the high-list-price, high-rebate paradigm, he explains. “And it kind of puts the pressure on the PBMs to say, ‘gee, well, how do we deal with that or address that?’” Dross adds.

Express Scripts’ new formulary is “directly dealing with that particular dynamic,” he says, while CVS’s model is more of a broad-based approach that signals to the market it’s open to trying something new and taking on risk.

Since mid-July, a proposed rule has been languishing at the Office of Management and Budget that could remove the safe-harbor protections that shelter the rebates drugmakers give to PBMs from penalties under the federal antikickback statute.

In the meantime, CMS on Nov. 26 released another rule that could essentially force Medicare Part D plans to pass all types of price concessions negotiated with pharmacies onto consumers at the point of sale. The introduction of the new Part D rule, which also seeks to revamp the protected classes of drugs and make other Part D changes, led to renewed speculation about the status of the administration’s safe-harbor rebate rule.

By Leslie Small

Since mid-July, a proposed rule has been languishing at the Office of Management and Budget that could remove the safe-harbor protections that shelter the rebates drugmakers give to PBMs from penalties under the federal antikickback statute.

In the meantime, CMS on Nov. 26 released another rule that could essentially force Medicare Part D plans to pass all types of price concessions negotiated with pharmacies onto consumers at the point of sale. The introduction of the new Part D rule, which also seeks to revamp the protected classes of drugs and make other Part D changes, led to renewed speculation about the status of the administration’s safe-harbor rebate rule.

Miryam Frieder, a vice president at Avalere, says the new Part D rule is not in opposition to the regulation still being reviewed, “but it kind of could be seen as complementary.”

But the fact that the safe-harbor rebate rule has been stuck in the review process since July 18 “to me indicates there’s a lot of discussion going on about this,” says Larry Kocot, a principal at KPMG and national leader of its Center for Healthcare Regulatory Insight.

One of the major questions the administration has to grapple with is whether it actually has the authority to remove prescription-drug rebates’ exemption from the federal antikickback statute, he says. In addition, the administration will have to figure out how to actually go about removing safe-harbor protections for rebates and replacing the current system with a new one.

The way the Citi analysts see it, removing the safe-harbor protection for drug rebates, in isolation, would have a muted impact. “While the market has focused on PBM-negotiated rebates as the chief driver contributing to drug price inflation, the PBM industry has moved over the last 3 years to reduce rebate retention to <5% as indicated in recent CVS [Health Corp.] and [Express Scripts Holding Co.] disclosures,” they wrote in a research note.

Both stand-alone Medicare Prescription Drug Plans and Medicare Advantage prescription drug (MA-PD) plans struggled this year with star rating measures for medication adherence and comprehensive medication review. But while MA-PD plans continued to make some progress on those measures, PDP plans fell shorter, in part because they don’t have the same financial incentives to improve, analysts say.

By Jane Anderson

Both stand-alone Medicare Prescription Drug Plans and Medicare Advantage prescription drug (MA-PD) plans struggled this year with star rating measures for medication adherence and comprehensive medication review. But while MA-PD plans continued to make some progress on those measures, PDP plans fell shorter, in part because they don’t have the same financial incentives to improve, analysts say.

PDPs struggled with all three medication adherence measures: Medication Adherence for Diabetes Medications, Medication Adherence for Hypertension (RAS antagonists) and Medication Adherence for Cholesterol (Statins).

Meanwhile, MA-PDs had trouble on the new Statin Use in Persons with Diabetes, MTM Completion Rate, and two of the medication adherence measures (for hypertension and cholesterol).

Still, MA-PDs eked out some improvement, says Melissa Smith, senior vice president of sales, marketing, strategy and stars for Gorman Health Group. “In MA-PD, the national average for these four measures continued rising in the 2019 ratings. The continuously rising performance impacts cutpoints — which are determined after the performance period ends. That always presents challenges to plans.”

MA-PDs have a powerful financial incentive to improve their performance on star measures, says Cary Badger, principal at HealthScape Advisors, LLC, in Chicago. “Plans on the PDP side don’t have that” since they don’t earn star-related bonuses, he says.

Integrated health plans such as Kaiser Permanente’s MA-PD plans tend to do well on Part D measures, Badger says, because their integrated nature allows them to closely track prescription habits and use peer review to influence those habits. “They’re just better at it because they are doing it in one constant workflow,” he adds.

But stand-alone Part D plans don’t have that type of influence over prescribers, Badger notes. Therefore, they wind up trying to influence patient behavior at the pharmacy window, he says. “Some of the work we’re doing is to provide real-time feedback to the doctors as to what patients are filling — what kind of adherence they’re getting,” he says.

Meanwhile, PDPs can incorporate that information into an augmented peer review process to try to influence prescriber behavior, imitating the systems set up for fully integrated health plans, Badger says.