Radar on Drug Benefits

Insurer-Affiliated PBMs Propel Parent Firms’ Revenues in Third Quarter

November 19, 2020

Large insurer-affiliated PBMs saw strong results for the third quarter of 2020, in several cases driving revenues for parent companies that are grappling with various disruptive effects of the coronavirus pandemic.

At CVS Health Corp., which reported earnings on Nov. 6, total revenues increased 3.5% year over year to $67 billion, and the company posted earnings per share (EPS) of $1.66, beating analysts’ estimates.

By Jane Anderson

Large insurer-affiliated PBMs saw strong results for the third quarter of 2020, in several cases driving revenues for parent companies that are grappling with various disruptive effects of the coronavirus pandemic.

At CVS Health Corp., which reported earnings on Nov. 6, total revenues increased 3.5% year over year to $67 billion, and the company posted earnings per share (EPS) of $1.66, beating analysts’ estimates.

“Our pharmacy services segment delivered double-digit operating income growth versus [the] prior year, reflecting strength in specialty along with favorable purchasing economics, and our 2021 [PBM] selling season is wrapping up quite nicely, with $3.3 billion of net new business,” President and CEO Larry Merlo said.

Still, SVB Leerink equities analyst Stephen Tanal said in a Nov. 6 investor note that CVS’s Caremark business remains at risk from state-level initiatives involving Medicaid pharmacy benefits.

Cigna Corp.’s new Evernorth segment, which includes the company’s Express Scripts PBM business, its Accredo specialty pharmacy division and its eviCore utilization management business, drove strong third-quarter earnings that beat analysts’ expectations.

Evernorth helped to boost Cigna’s overall revenues to $40.8 billion, said Citi analyst Ralph Giacobbe in a Nov. 5 investor note. Revenues for the Evernorth segment were $29.83 billion, a 20% increase year over year.

Evercore ISI analyst Michael Newshel said in a Nov. 5 investor note that Evernorth showed higher script volume and a slightly better margin than anticipated in the quarter, along with lower corporate expenses than expected.

UnitedHealth, which also handily beat analyst expectations with earnings of $3.51 per share, brought in $65.1 billion in the third quarter, representing an 8% increase year over year. However, the $3.51 adjusted EPS is a 10% drop from last year’s third-quarter earnings.

Health insurer Anthem, which has launched its own in-house PBM, IngenioRx, reported third-quarter adjusted EPS of $4.20, a decline of 14% year over year that reflected the company’s obligations to pay out its $594 million share of a recently settled lawsuit against Blue Cross and Blue Shield plans.

Anthem’s revenues increased by 15.9% year over year to $30.6 billion, which Chief Financial Officer John Gallina attributed largely to growth in the firm’s Medicare and Medicaid businesses, although he also gave a nod to “pharmacy revenue related to the launch of IngenioRx.”

States May Expand Drug Price Review Boards to Curb Costs

November 18, 2020

In response to rising drug prices, some states have launched prescription drug review boards designed to make medicines more affordable. So far, the boards control prices mainly for states’ Medicaid and state employee plans, but some states are considering whether to set up panels that would also work to set upper payment limits for prescription drugs in commercial insurance.

A new report by Manatt found that 17 states so far have implemented or introduced legislation for boards that exercise some influence on drug prices, primarily in state Medicaid plans and commercial plans in which the state government is the plan sponsor. The report found that six states — Maine, Maryland, Massachusetts, New Hampshire, New York and Ohio — have such boards in place.

By Peter Johnson

In response to rising drug prices, some states have launched prescription drug review boards designed to make medicines more affordable. So far, the boards control prices mainly for states’ Medicaid and state employee plans, but some states are considering whether to set up panels that would also work to set upper payment limits for prescription drugs in commercial insurance.

A new report by Manatt found that 17 states so far have implemented or introduced legislation for boards that exercise some influence on drug prices, primarily in state Medicaid plans and commercial plans in which the state government is the plan sponsor. The report found that six states — Maine, Maryland, Massachusetts, New Hampshire, New York and Ohio — have such boards in place.

Jeff Myers, senior vice president for market access and reimbursement strategies at Catalyst Health Care Consulting, says that the drug-affordability boards have had a mixed impact on prices so far.

“They have had an impact, but generally on classes where there are several products from which to choose,” Myers tells AIS Health via email. “Smaller classes without significant overlap on labels for competing products are generally less successful.”

Sandy Robinson, the author of the Manatt report and a managing director at the firm, says drug manufacturers have raised concerns that the boards will make previously confidential pricing information public. However, she emphasizes that the figures arrived at by the boards are not rebates or commercial agreements.

She observes that most of the state boards have limited impact on drug prices in the commercial market, since they manage costs for state-controlled plans.

However, that could be changing. Trish Riley, executive director of the National Academy for State Health Policy (NASHP), says some states have begun to pursue drug-affordability boards that would operate in the commercial market. NASHP originated the idea for commercial prescription drug rate-setting boards and has drafted model legislation for the concept.

“Ours is not a rebate model, nor is it a pricing model,” Riley tells AIS Health. “Drug[makers] say, ‘This is the price, pay it.’ So what [our policy] does is say, ‘Nope, we’re going to set a payment limit within the state that commercial payers will pay.’”

Biden Administration’s Drug-Pricing Moves May Be Limited

November 16, 2020

As is the case for other flavors of health care reform, President-elect Joe Biden’s chance of passing substantial, transformative drug-pricing legislation is now highly dependent upon whether Democrats can eke out a majority in the Senate. While that question won’t be resolved until Georgia completes runoff elections in January, industry observers point out that there are still ways that a Biden administration can address drug pricing.

“A president can do a lot even with a divided Congress,” says Stephanie Kennan, a member of McGuireWoods Consulting’s federal public affairs group. “Part of how well something gets done…depends upon the skills of the president or those negotiating for him. With Biden perhaps having a better understanding of the Senate, having come from the Senate, [that] might help him.”

By Leslie Small

As is the case for other flavors of health care reform, President-elect Joe Biden’s chance of passing substantial, transformative drug-pricing legislation is now highly dependent upon whether Democrats can eke out a majority in the Senate. While that question won’t be resolved until Georgia completes runoff elections in January, industry observers point out that there are still ways that a Biden administration can address drug pricing.

“A president can do a lot even with a divided Congress,” says Stephanie Kennan, a member of McGuireWoods Consulting’s federal public affairs group. “Part of how well something gets done…depends upon the skills of the president or those negotiating for him. With Biden perhaps having a better understanding of the Senate, having come from the Senate, [that] might help him.”

During a webinar held on Nov. 5, Avalere Health experts highlighted restructuring the Medicare Part D benefit as an area of potential bipartisan compromise. “I see something like that packaged with the health care extenders that’ll need to move in 2021,” said Chris Sloan, an associate principal at the consulting firm.

Yet Kathryn Bakich, the National Health Compliance Practice Leader at Segal, says that adding an out-of-pocket cost cap in Part D could raise some concerns from employers. “The problem with that is for employer-sponsored plans that have a Part D program, that could make the value of that program less to them,” she says.

In a Nov. 3 note to investors, Leerink SVB analyst Geoffrey Porges pointed out that using regulatory authority to rein in drug prices won’t have as large of an impact as legislation would. “Drug pricing mechanisms implemented via executive order are likely to be limited to a small class of higher-priced drugs within Medicare and Medicaid, with expansion to the commercial side requiring congressional action,” he wrote.

Porges also argued that regardless of who is in charge of the federal government, “the PBM system is likely to remain a target of future reforms.”

Going forward, it’s likely that “lawmakers will focus on the incentives governing formulary decisions and rebates in considering drug pricing reform, although the vehicle for this change is highly uncertain,” he wrote.

Costlier PDPs, Cheaper MA-PDs Participate in CMS Insulin Demo

October 27, 2020

In 2021, about half of enhanced stand-alone Prescription Drug Plans (PDPs) and a little more than a third of Medicare Advantage-Prescription Drug (MA-PD) plans will participate in a new demonstration that aims to lower diabetic seniors’ out-of-pocket costs by capping copays at $35 for a broad set of insulin products, according to a new analysis by consulting firm Avalere Health.

Among the 310 enhanced PDPs that opted to participate in CMS’s Part D Senior Savings Model for 2021, the average enrollment-weighted premium is $57.53 — $23.46 higher than the average premium for non-participating plans, the analysis found. But in the MA-PD space, the average enrollment-weighted premium for the 1,287 participating plans is $10.36 less than the cost of non-participating plans ($22.74 versus $33.10).

By Leslie Small

In 2021, about half of enhanced stand-alone Prescription Drug Plans (PDPs) and a little more than a third of Medicare Advantage-Prescription Drug (MA-PD) plans will participate in a new demonstration that aims to lower diabetic seniors’ out-of-pocket costs by capping copays at $35 for a broad set of insulin products, according to a new analysis by consulting firm Avalere Health.

Among the 310 enhanced PDPs that opted to participate in CMS’s Part D Senior Savings Model for 2021, the average enrollment-weighted premium is $57.53 — $23.46 higher than the average premium for non-participating plans, the analysis found. But in the MA-PD space, the average enrollment-weighted premium for the 1,287 participating plans is $10.36 less than the cost of non-participating plans ($22.74 versus $33.10).

Tom Kornfield, one of the co-authors of the Avalere report and a senior consultant with the firm, says one reason why PDPs with higher premiums tended to participate in the demonstration may be that “the additional protections [for consumers] cost the plans more money, so they’re increasing their bids as a result of that.”

Regarding why the average premium for participating MA-PD plans is lower than non-participating plans, Kornfield notes that, unlike stand-alone PDPs, such plans can reap the benefits of any cost savings associated with the demonstration’s ability to improve medication adherence and diabetes management.

CMS unveiled the Part D Senior Savings Model in March, and in May it said that 1,750 PDPs and MA-PD plans applied to participate, as well as the three major insulin manufacturers: Eli Lilly and Co., Novo Nordisk Inc. and Sanofi SA.

For seniors who sign up for plans that participate in the new model, the main benefit is a maximum copay of $35 each for a month’s supply of insulin while in the deductible, initial coverage and coverage-gap phases of the Part D benefit, rather than cost-sharing amounts that vary by coverage phase.

Kornfield says he was somewhat surprised that so many plan sponsors opted into the demonstration for 2021. “I don’t know that I anticipated quite as much participation, but having said that, the major insulin manufacturers are all voluntarily participating in the demonstration, so I think that makes a big difference.”

Most Medicare PDP Members Land in 3.5-Star Plans

October 26, 2020

Based on current enrollment figures, virtually every Medicare beneficiary who signs up for a stand-alone Prescription Drug Plan (PDP) in 2021 will be enrolled in a plan rated 3.5 stars or higher, CMS estimated recently. However, only 17% of beneficiaries are in plans with 4 or more stars for 2021.

“If you look at the distribution of Part D stars, you can see that 81% of members are in those enormous plans that have landed organically at about a three-and-a-half-star performance zone,” says Melissa Newton Smith, executive vice president of consulting and professional services at Healthmine, Inc.

By Jane Anderson

Based on current enrollment figures, virtually every Medicare beneficiary who signs up for a stand-alone Prescription Drug Plan (PDP) in 2021 will be enrolled in a plan rated 3.5 stars or higher, CMS estimated recently. However, only 17% of beneficiaries are in plans with 4 or more stars for 2021.

“If you look at the distribution of Part D stars, you can see that 81% of members are in those enormous plans that have landed organically at about a three-and-a-half-star performance zone,” says Melissa Newton Smith, executive vice president of consulting and professional services at Healthmine, Inc.

“That’s an interesting landing spot — this is telling us this year that PDPs are just not interested in pursuing 4 or higher star ratings without a financial incentive tied to it,” Smith says. “And that 3-and-a-half stars zone is just a natural, organic industry landing spot for performance. It’s the sweet spot.”

Overall, CMS estimates that based on current enrollment figures, 98% of 2021 stand-alone PDP members will be enrolled in plans with 3.5 stars or higher, up from 70% in plans with 3.5 stars or higher in 2020. Only 2% of members — some 13 contracts — are in plans that received 3 stars or fewer.

“The members are flocking to large plans,” Smith says. “The PBM construct of operations with the retail pharmacy networks is doing what it needs to do.”

The average star rating for Medicare Advantage-Prescription Drug (MA-PD) plans is 4.06 for 2021, down slightly from 4.16 in 2020, according to CMS. Most Medicare beneficiaries enrolled in MA-PD plans — around 77% — will be in plans with 4 or more stars in 2021.

“There’s a fair amount of evidence that members don’t particularly care even what their MA-PD plans’ star rating is, let alone their PDP star rating,” Smith says. “On the PDP side, what they really care about is whether their medications are covered and what the cost structure looks like. The star rating is just not generally a factor in buying decisions for consumers.”

She adds it would take financial incentives — most likely in the form of star-based bonus payments — for stand-alone PDPs to get serious about improving their star ratings.