Anthem, Express Scripts battle over drug prices

Anthem filing suit against Express Scripts over prescription drug pricing puts another spotlight on the complexity behind high drug costs, according to industry watchers.

The health plan is suing Express Scripts, its vendor for pharmacy benefit management services (PBM), to recover damages for pricing that is higher than competitive benchmark pricing, according to an Anthem press release.

Anthem alleges that Express Scripts has been overcharging by $3 billion annually based on an audit conducted by a third-party consultant. Anthem says this is because Express Scripts is not sharing the savings from the rebates that it negotiates with pharmaceutical manufacturers.

Express Scripts spokesperson Jennifer Luddy, tells Managed Healthcare Executive, that the PBM believes Anthem’s lawsuit is without merit.

“Express Scripts values its relationship with Anthem and will continue to honor its commitments under the contract, as we would do with any client,” Luddy says. “Express Scripts has consistently acted in good faith and in accordance with the terms of its agreement with Anthem.”

Brill

The lawsuit will likely lead to increased scrutiny on the contracts/rebates the PBM negotiate and passes back to its clients, according to Managed Healthcare Executive Editorial Advisor Joel Brill, MD, chief medical officer, Predictive Health LLC, an integrated medical management company.

“Are the savings [from the rebates Express Scripts negotiates with pharmaceutical manufacturers] going to profit the PBM or returned in terms of lower overall premiums for patients whether in plans, exchanges, etc.?” Brill asks. “Are formulary decisions being made on clinical or cost grounds; are we still looking at pharmacy as a silo or part of the overall care-provider, facility, device, lab, etc.? Have PBMs inadvertently facilitated higher drug costs, if they keep the rebates/discounts or market share incentives?”

Next: The role healthcare executives play

Numerof

Traditionally, PBMs have positioned themselves as adding value by negotiating prices with drug manufacturers on preferred drugs through high-volume purchasing, according to Rita Numerof, PhD, cofounder and president of Numerof & Associates, a global healthcare management consulting firm.  

“This [lawsuit] highlights some of the additional costs included in a drug’s price, and the many players vying for a portion of drug spending,” Numerof says. “It also underscores the need for greater price transparency from drug manufacturers and PBMs alike.”

In addition, PBMs and their “middleman” role will likely come under increasing scrutiny as concern over rising drug prices remains an issue for payers and patients, Numerof adds.

“In order to stay relevant, PBMs will need to be able to demonstrate that they deliver on their promise of reduced drug pricing for their managed care customers,” she says. “Competition will likely lead to new expectations of transparency about rebates. Winning will require that PBMs explain how the negotiated price helps downstream stakeholders: payers, providers, and patients.”

Managed care executives can influence the conversation about drug pricing by demanding greater transparency from their PBM partners, Numerof says.

“In addition, managed care executives must also be transparent about their pricing practices with employers and other stakeholders. With drug pricing in the public spotlight, the industry must be proactive in self-policing and addressing price transparency, otherwise unwanted government intervention may be the result.”

Joel White, president of the Council for Affordable Health Coverage, believes that as health costs rise, all payers should take a hard look at every penny spent, both with their customers and with their vendors.  

White

“Clearly Anthem believes they aren’t getting maximum value out of their [Express Scripts] relationship, but to sue its PBM seems like a drastic step,” White says. “Either the relationship has gone sour, or costs are rising faster than we currently know.”