The windfalls of secrecy

Express Scripts met with analysts at banking giant Barclays in March and mentioned how its “industry-leading EBITDA per claim” — a measure of profit they collect on each prescription — likely will be “sustainable over time,” according to Barclays’ note to Wall Street. Those comments come as each of the big three pharmacy benefit managers are being attached to health insurers.

The big picture: Some PBMs use a different “transparent” model to earn money, but they are in the minority. New documents obtained by Axios peel back the curtain on the traditional drug benefits business, though many details remain hidden from public view.

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Some new documents shed light on how PBMs make money, and also reveal how difficult it is to get the full picture:

  • Nashville uses Express Scripts to provide drug benefits to city employees, and its publicly available 2017 contract lays out actual financial terms — including rebates. Many of the contract’s definitions are also identical to the template Axios previously published — including the brand/generic algorithm.
  • The state of Delaware amended its contract with Express Scripts a few years ago to ensure that Express Scripts guaranteed more rebates, according to a copy of the contract.
  • Axios obtained an OptumRx pharmacy benefits proposal through New Jersey’s open records law. New Jersey awarded its pharmacy benefits deal to OptumRx last year. However, several sections that outline financial terms for the taxpayer-funded prescription drug deal are “exempt from public disclosure.” OptumRx did not respond to questions.

What we’re hearing: Many people that work in the industry are voicing disdain for the business models and lack of transparency associated with the main players.

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By Bob Herman

What CVS is doing to mom-and-pop pharmacies in the US will make your blood boil

The short version of what happened to CVS in 2018 is this: The company got too greedy, and then it got caught.

In its greed, the company squeezed independent mom-and-pop pharmacies. The squeezing wasn’t being done by the part of CVS you buy dental floss from or visit to pick up a prescription, though it’s not unrelated. It’s a behind-the-scenes business known as a pharmacy benefit manager, which manages payments between insurers and pharmacies and drug companies.

The mom-and-pop pharmacies say CVS’ in-house pharmacy benefit manager, CVS Caremark, slashed reimbursements for medications sold to their patients on Medicaid. At the same time, they say, it was reimbursing CVS pharmacies at much better rates. With some of them on the verge of going out of business, these pharmacies have rallied lawmakers — both Democrats and Republicans — to put an end to this.

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By Linette Lopez

Local pharmacy, lawmaker applaud passage of bill regulating pharmacy benefit managers

Gov. Asa Hutchinson signed a bill into law recently to have the state insurance commissioner license and regulate pharmacy benefit managers (PBMs), which small pharmacy owners have said are driving them out of business.

The Arkansas Pharmacy Benefits Manager Licensure Act, thought to be the first one of its kind in the country, had wide support in both parties in the House and Senate. PBMs have been criticized as “middlemen” between insurance companies and pharmacies, and handle pharmacy claims and reimbursements to pharmacies for medications distributed.

The legislature had attempted to regulate the industry in 2009 and 2015 will little effect, supporters of the new bill said.

“Hopefully this will protect the little pharmacists – the small business pharmacists out there – from the corporate PBMs that are questionable at best,” District 5 Sen. Bryan King said.

On Jan. 1, Arkansas Blue Cross and Blue Shield contracted with CVS Caremark as its PBM. Caremark already served as PBM for Ambetter in the state. Pharmacists around the state soon began getting smaller reimbursements for filling prescriptions, according to other media sources.

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By Rod Harrington

Editorial: Stop soaking taxpayers for Medicaid drugs

Did you know that for every 60-mg caplet of duloxetine dispensed in Ohio through a Medicaid-contracted managed-care company, taxpayers pay a middleman $1.54, but the middleman passes only about 18 cents of that to the pharmacy that supplies the drug and pockets the $1.36 difference?

Sen. Bill Coley, R-West Chester, didn’t know, and he’s on the Senate Medicaid Oversight Committee. “We thought there was some nominal fee to PBMs but had no idea (the fees were so large),” Coley said. “It’s ridiculous.”

He’s talking about pharmacy benefit managers — private companies that contract with managed-care companies to handle prescriptions — deciding which drugs to cover and how much to reimburse pharmacies for them. Most of Ohio’s Medicaid members are served by one of five managed-care companies that contract with the state. For four of those companies, CVS is the subcontracted pharmacy benefit manager, or PBM.

What’s equally ridiculous is that state officials have tolerated contracts under which CVS and other PBMs get to decide how much they’ll charge taxpayers for a drug and how much they’ll pay the pharmacy for it without having to disclose any of that information.

Lawmakers say they’re taking steps to bring transparency to such contracts, and that’s important. But while they’re at it, they should set some reasonable guidelines for how much of a pharmacy transaction the PBMs are allowed to pocket.

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American Antitrust Institute Argues Against CVS/Aetna and Cigna/Express Scripts Deals

The American Antitrust Institute (AAI), a 20-year-old nonprofit “devoted to promoting competition that protects consumers, businesses, and society,” came out sternly this week against pharmacy giant CVS’s proposed purchase of insurer Aetna.

“CVS-Aetna would trigger a fundamental restructuring of the US healthcare system,” the group writes in a letter addressed to Assistant Attorney General Makan Delrahim. They also express concerns about Cigna’s recent $52 billion offer to buy pharmacy benefits management (PBM) company Express Scripts. “Stronger incentives to exclude rival PBMs and health insurers and to engage in anticompetitive coordination would harm competition and consumers at all levels.”

There were only a handful of major PBMs in the country prior to CVS’s 2007 merger with Caremark. In 2012, Express Scripts and Medco also combined. Together, those 2 PBMs control more than 50% of the pharmacy benefits market. The third largest, Optum Rx, is integrated with Aetna rival UnitedHealthcare.

The letter says that CVS and Aetna should face a “high hurdle” in explaining how any efficiencies their combination would create could offset competitive concerns—and they believe that the pair would not be able to do that. A move by the Department of Justice (DOJ) to block the deal would be the “only effective remedy.”

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By Ryan Black

CVS accused of using Medicaid roles in Ohio to push out competition

Pharmacy giant CVS stands accused of overcharging Ohio taxpayers millions in an attempt to drive out retail competition — a charge that CVS flatly denies.

Bottom line: The company allegedly boosts its profits by overcharging insurers for medications while often reimbursing pharmacists less than the cost of the drug, critics say.

As a result, retail pharmacies in the Buckeye State have been dropping like flies, and state regulators are looking at ways to bring more transparency to a Medicaid benefits-management system that CVS dominates.

“Where I’m losing pharmacies right now is in high-Medicaid areas,” said Antonio Ciaccia of the Ohio Pharmacists Association. He noted that 165 Ohio pharmacies have shuttered in the past two years.

Medicaid, the federal-state health program for the poor and disabled, will spend about $3.2 billion on prescription drugs in Ohio this year. CVS Caremark, an arm of the company that manages pharmacy benefits, handles most of that money by billing insurers that contract with the state and then reimbursing pharmacies that fill patients’ prescriptions.

Ohio Medicaid Director Barbara Sears stressed, “This is not an Ohio Medicaid problem. This is impacting all 50 states. It’s a CVS Caremark issue, and it’s not just impacting independent pharmacies.” Sears said “larger chains” also have complained about reimbursement rates.

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By Catherine Candisky and Marty Schladen
The Columbus Dispatch

Insurers Game Medicare System to Boost Federal Bonus Payments

The number in the corner of Upton Martin’s Medicare plan card from Humana Inc. changed twice over the past four years. He didn’t think anything of it, and his coverage didn’t seem different in any way.

The changes, though, were evidence of a lucrative maneuver that has allowed Humana and other providers of Medicare Advantage plans to collect additional revenue from the federal government.

Medicare ranks privately managed plans such as Mr. Martin’s on a five-star quality scale and provides financial bonuses to providers of top-ranked plans. Mr. Martin’s plan was set to be downgraded, which would have cost Humana its bonus. So the company merged plans covering Mr. Martin and more than a million others into different contracts with higher scores. That preserved the bonuses.

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March 11, 2018 13:32 ET (17:32 GMT)

Copyright (c) 2018 Dow Jones & Company, Inc.
By Anna Wilde Mathews and Christopher Weaver

FDA: Capturing the Benefits of Competition for Patients

Speech by Scott Gottlieb, MD
Commissioner of Food and Drugs
America’s Health Insurance Plans’ (AHIP) National Health Policy Conference
“Capturing the Benefits of Competition for Patients”
March 7, 2018
Washington, DC

Good morning, and thank you for inviting me to speak today about “Affording Tomorrow’s Cures.”

To some, this may seem to be an unfitting topic for me to discuss: the FDA, after all, doesn’t — and shouldn’t — regulate drug prices.

The FDA’s mission is to promote and protect public health, and helping ensure access to medicine is a vital part of this mission.

One of the primary ways that FDA helps create access is through efficient review of drug and biologic applications to determine if they’re safe and effective for their intended use.

But Congress also has charged FDA with advancing policies that maintain a balance between encouraging and rewarding medical innovation and facilitating robust and timely market competition.

And access to medicines is a matter of public health.

I want to focus my remarks today on access to generic and other follow-on medicines and, in particular, on the market for biosimilars – or follow on versions of branded, innovator biologics.

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CVS is borrowing a near-record $40 billion to bankroll a deal that hasn’t even been approved

CVS Health plans to sell $40 billion of bonds in order to finance its massive $69 billion acquisition of Aetna.

The sale marks the biggest corporate debt financing in more than two years, and the third-largest in history. And it comes at a tough time for the investment-grade fixed-income market, which is off to its worst start to a year in decades.

CVS’ large bond offering will take place with interest rates still close to historical lows. That will soon change, however, as the Federal Reserve continues to tighten monetary policy. The prospect of higher rates explains why CVS decided to act now, with rates still relatively attractive.

All of the notes besides the 30-year bond being offered will include a special mandatory redemption clause, which will require CVS to withdraw the debt at 101 cents on the dollar if the Aetna deal doesn’t close by September 3, 2019, according to a Financial Times report.

It’s a calculated risk, considering the company’s acquisition of Aetna hasn’t yet received regulatory approval.

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Joe Ciolli
Mar. 6, 2018, 10:29 PM

Patients, Government Face Increasing Healthcare Costs With DIR Fees, Rep. Collins Said

Conferences > NCODA Spring Forum 2018 – Published on: March 02, 2018
Patients, Government Face Increasing Healthcare Costs With DIR Fees, Rep. Collins Said
Laura Joszt
Coverage from the National Community Oncology Dispensing Association Spring Forum 2018.
Direct and indirect remuneration (DIR) fees have been a growing concern for community pharmacists, and pharmacists who haven’t had an issue with them yet will run into them soon, said Representative Doug Collins, R-Georgia, who was the keynote speaker at the National Community Oncology Dispensing Association Spring Forum 2018, held March 1-3 in Dallas, Texas.

Collins focused his discussion on DIR fees and how they are increasing costs for the patient—by pushing them into the donut hole and catastrophic coverage in Medicare—and for the healthcare system. In addition, since Medicare patients are being pushed into catastrophic coverage, CMS has to pick up the extra costs, which means the taxpayer is spending more.

In general, DIR fees to pharmacy benefit managers (PBMs) are driving up costs, and Collins said research has found that the average community pharmacist loses $83,000 a year on DIR fees alone. The problem is that the industry is on track for a situation where PBMs begin to either kill off community pharmacies or they buy other PBMs and consolidate even further.

Read more here
Laura Joszt