Radar on Drug Benefits

Payers and PBMs May Play Key Role in COVID-19 Vaccine Rollout

June 2, 2020

The rollout of a vaccine for SARS-CoV-2, the virus that causes COVID-19, is an unprecedented logistical challenge. So will be deciding who gets it: experts say that the initial vaccine supply will not be large enough to dose everyone who wants it — and payers and PBMs will have a large role to play in distributing the medicine to the right people quickly.

David Simchi-Levi, Ph.D., a systems engineer who studies manufacturing and supply chain at MIT, says that it’s inevitable that vaccine supply will not meet demand when it is available. “The question will be, who gets it?” he says.

By Peter Johnson

The rollout of a vaccine for SARS-CoV-2, the virus that causes COVID-19, is an unprecedented logistical challenge. So will be deciding who gets it: experts say that the initial vaccine supply will not be large enough to dose everyone who wants it — and payers and PBMs will have a large role to play in distributing the medicine to the right people quickly.

David Simchi-Levi, Ph.D., a systems engineer who studies manufacturing and supply chain at MIT, says that it’s inevitable that vaccine supply will not meet demand when it is available. “The question will be, who gets it?” he says.

Mike Schneider, a principal at Avalere Health and a former executive at CVS Health Corp.’s Caremark PBM, says that given the likely scarcity of the vaccine, areas hardest hit by COVID-19 should be the focus of the initial supply.

“I think the payers will probably try to stay out of the way as much as possible, and let local laws determine who can get a vaccine and probably local health departments determine who can get the vaccine before others,” Schneider says. He adds that payers should also use prior authorization matched to FDA guidance to ensure the right people are dosed.

When a vaccine is available, Schneider expects retail pharmacies to play a large role in delivery. He cites retail pharmacy chains’ rollout of drive-through SARS-CoV-2 testing and the annual ritual of getting a flu shot from a pharmacist as examples of what delivering the coronavirus vaccine could look like. Along the same lines, he expects primary care practitioners to perform some inoculations.

Even a well-managed rollout will only be a first step. Manufacturing and supply chain concerns will dictate the supply of vaccines available in the U.S. going forward. So will trade, as most medicines are manufactured in China and India. Those countries will certainly want to care for their own citizens as soon as possible, which could delay the release of vaccine here.

Given all that uncertainty, Schneider expects that a SARS-CoV-2 vaccine could be a perennial component of formularies, along the lines of the flu vaccine. Schneider expects that receiving the coronavirus vaccine will be a routine preventive treatment that costs patients little to nothing.

‘Buy American’ Policies May Pressure U.S. Drug Supply Chain

June 1, 2020

While the COVID-19 pandemic led to worrying spikes in demand for certain drugs back in March and April — spurring PBMs to swiftly establish dispensing limits — that particular storm appears to have passed. However, a push to reduce reliance on foreign-produced medicines could be the next cause for concern about the drug supply chain.

HHS on May 19 said it awarded a four-year, $354 million contract to “a team of private industry partners,” led by Virginia-based startup company Phlow Corp., which will work toward expanding pharmaceutical manufacturing in the U.S. “for use in producing medicines needed during the COVID-19 response and future public health emergencies.”

By Leslie Small

While the COVID-19 pandemic led to worrying spikes in demand for certain drugs back in March and April — spurring PBMs to swiftly establish dispensing limits — that particular storm appears to have passed. However, a push to reduce reliance on foreign-produced medicines could be the next cause for concern about the drug supply chain.

HHS on May 19 said it awarded a four-year, $354 million contract to “a team of private industry partners,” led by Virginia-based startup company Phlow Corp., which will work toward expanding pharmaceutical manufacturing in the U.S. “for use in producing medicines needed during the COVID-19 response and future public health emergencies.”

“That’s going to be a big item, I believe,” says Brian Anderson, a principal with Milliman, Inc.. “I’m expecting at some point this year we will see supply chain management issues. It may not be [drugs that are tied to COVID-19 treatments] — it may be some other high-frequency generic product or something else that’s very commonly used, but then another country may use it as leverage to maintain their manufacturing position.”

The U.S. is highly reliant on China and India for base ingredients used to produce drugs, and the “Buy American” philosophy is generally not workable for many pharmeceutical products, Rena Conti, Ph.D., associate research director of biopharma and public policy at Boston University, said during a May 15 webinar hosted by the Alliance for Health Policy.

Other pandemic-related drug supply issues that have affected PBMs have also been intertwined with politics. Prescriptions for hydroxychloroquine spiked in March when President Donald Trump touted the promise of using the malaria drug based on some initial research about its use on COVID-19 patients, as a new study from JAMA illustrates.

For PBMs that had already placed dispensing restrictions on hydroxychloroquine, the strategy now appears to be “stay the course.”

Prime Therapeutics, LLC saw “over a 300% peak in use of hydroxychloroquine by mid/late March that has subsequently come back to baseline,” says Chief Clinical Officer David Lassen, Pharm.D.

While there has been no uptick in hydroxychloroquine utilization following the president’s recent comments about taking the medication, “we continue to recommend utilization management programs remain in place for this medication,” Lassen adds.

COVID-19 Pandemic May Change Rx Delivery Permanently

May 20, 2020

Industry experts expect the COVID-19 pandemic and related economic crisis, in addition to the trend of vertical integration in the PBM sector, will increase those companies’ direct interaction with consumers.

The recent wave of payer acquisitions of PBMs has kept the latter on strong footing despite the crisis. CVS Health Corp.’s Caremark, UnitedHealth Group’s OptumRx and Cigna Corp.’s Express Scripts control approximately 74% of the market, according to a January 2020 estimate by Drug Channels Institute CEO Adam Fein, Ph.D.

By Peter Johnson

Industry experts expect the COVID-19 pandemic and related economic crisis, in addition to the trend of vertical integration in the PBM sector, will increase those companies’ direct interaction with consumers.

The recent wave of payer acquisitions of PBMs has kept the latter on strong footing despite the crisis. CVS Health Corp.’s Caremark, UnitedHealth Group’s OptumRx and Cigna Corp.’s Express Scripts control approximately 74% of the market, according to a January 2020 estimate by Drug Channels Institute CEO Adam Fein, Ph.D.

Fein said in a May 8 webinar that he expects the dominant PBMs’ bargaining clout, deepening synergies and cash reserves to drive more aggressive formulary management during the COVID-19 crisis.

Vertical integration has changed the revenue mix of large PBMs. According to Fein, rebates account for a declining amount of profits for the big three PBMs, and they are largely passed through to payer clients.

The vertical integration trend has also helped PBMs adapt to new consumer choices driven by COVID-19, according to Fein. “Mail pharmacies [had] a huge spike [in fills] into March, and right now, mail pharmacy growth has now flatlined again. Retail pharmacy has taken a very big hit. Once the lockdown started to go into effect, [retail] prescriptions started to decline because people couldn’t get to the retail pharmacy,” Fein said.

Still, he is skeptical about the durability and scale of the consumer shift away from retail toward mail order.

“[Mail order] gained a little, but it’s not some runaway shift in the market,” Fein explained, citing its still-small share of the overall prescription drug market. “The notion of a retail-to-mail shift — it’s going to happen, but it may not last too much longer. So for PBMs, it’s a short-term boost, but perhaps not a long-term shift.”

However, Mike Schneider, a principal at Avalere Health, says that he’s bullish on the trend toward mail order. Schneider says consumers with chronic conditions and long-term medications are likely to stick with mail-order fills — assuming they are still available after the pandemic ends. The key to continuing that trend, he adds, is whether seniors, the largest demographic group of prescription drug users, take a liking to the mail order system.

PBMs See Solid 1Q Results Despite Challenges Ahead

May 18, 2020

Major PBMs reported strong results for the first quarter of 2020 as members rushed to fill prescriptions in March ahead of the COVID-19 pandemic. However, financial analysts warn the pandemic could have unpredictable effects on PBMs’ finances for the rest of 2020 and moving into 2021.

The 2021 PBM selling season could be disrupted in still-unknown ways, analysts said, and members are cutting back on routine physician visits and elective procedures, resulting in lower script volume overall.

By Jane Anderson

Major PBMs reported strong results for the first quarter of 2020 as members rushed to fill prescriptions in March ahead of the COVID-19 pandemic. However, financial analysts warn the pandemic could have unpredictable effects on PBMs’ finances for the rest of 2020 and moving into 2021.

The 2021 PBM selling season could be disrupted in still-unknown ways, analysts said, and members are cutting back on routine physician visits and elective procedures, resulting in lower script volume overall.

Anthem, Inc., posted a particularly strong start for its new IngenioRx PBM, with earnings of $349 million, well above the $275 million to $300 million quarterly earnings that had been expected.

The impact from COVID-19 included a large spike in prescription refills during March, which helped the PBM’s performance, Anthem Executive Vice President and CFO John Gallina said in the company’s earnings conference call. Still, investors shouldn’t expect script numbers to remain elevated, he added: “We have seen a slight drop in new scripts here in April over historical patterns.”

CVS Health Corp. reported first-quarter earnings per share (EPS) of $1.91, well above what analysts had anticipated. Citi analyst Ralph Giacobbe wrote in a May 6 investor note that the company’s Caremark PBM “put up solid results with revenue and operating profit also exceeding consensus with higher claims growth of 12.4%.” This was “aided by pull-forward of scripts due to COVID-19,” plus the partnership between CVS and Anthem on IngenioRx.

Cigna Corp.’s first-quarter adjusted EPS came in 8% above consensus, with better-than-anticipated performances in its Health Services unit, which houses PBM Express Scripts, and in its Integrated Medical segment. Health Services reported an operating profit of $1.08 billion, slightly ahead of expectations, with revenue well ahead of projections — $27.2 billion versus $25.1 billion expected, noted Giacobbe.

At UnitedHealth Group, earnings for Optum, the division that includes OptumRx, missed analysts’ expectations by about 5%, despite stronger-than-expected revenue, Jefferies equities analyst David Windley wrote in a note to investors. “OptumHealth and OptumRx both contributed to the underperformance,” which was offset by stronger-than-expected performance by OptumInsight, he said.

Oncology Drugs Drive Price Growth in Medical-Benefit Spend

April 30, 2020

Spending on prescription drugs that are covered under the medical benefit increased by 65% between 2014 and 2018 for commercial insurers and 40% for Medicare, according to Magellan Rx Management’s annual Medical Pharmacy Trend Report.

“The increase in medical pharmacy spend seems to largely be driven by inflation,” says Kristen Reimers, Magellan’s senior vice president of specialty clinical solutions. “This can be a combination of two things, increasing costs of existing drugs and providers utilizing newer more expensive drugs. The pipeline was extremely robust and new therapies to market are contributing to inflation, driving the trend.”

By Peter Johnson

Spending on prescription drugs that are covered under the medical benefit increased by 65% between 2014 and 2018 for commercial insurers and 40% for Medicare, according to Magellan Rx Management’s annual Medical Pharmacy Trend Report.

“The increase in medical pharmacy spend seems to largely be driven by inflation,” says Kristen Reimers, Magellan’s senior vice president of specialty clinical solutions. “This can be a combination of two things, increasing costs of existing drugs and providers utilizing newer more expensive drugs. The pipeline was extremely robust and new therapies to market are contributing to inflation, driving the trend.”

According to the report, new oncology therapies are both emblematic and a primary driver of growth in drug prices. A new generation of highly effective, biologic oncology drugs have emerged in the last decade. However, these pioneering drugs are expensive. According to the report, oncology drugs and the drugs needed to support them accounted for 43% of per-patient per-month medical pharmacy spending for commercial carriers.

Like other biologic drugs, most biologic oncology drugs have yet to see significant biosimilar competition due to barriers in the biosimilar market and development pipeline.

“The most exciting biosimilars are those currently in the oncology space. Herceptin, Avastin and Rituxan have been the top five drugs in terms of spend for the last 10 years,” says Reimers. “Rituxan and Avastin now have two biosimilars on the market, and Herceptin has five marketed products. There will be competition, which will help to flatten the trend for these products, although there is still expected to be growth.”

Emerging competition could bolster the already-improving price outlook for more established biologic drugs. However, growth in oncology spending is not likely to stop any time soon. In some ways, this is good news for patients: according to Reimers and the Magellan report, promising new, targeted therapies for hard-to-treat cancers will account for much of the increased spending in coming years.

“The pipeline for oncology is extremely robust, with over 700 drugs being studied for a variety of different cancer types,” Reimers says.