Express Scripts Could Negotiate Drug Rebates For 100m Lives With Prime Therapeutics Deal
Executive Summary
Manufacturers will face the “biggest PBM ever” in price negotiations for pharmacy benefit drugs as a result of the collaboration between the two pharmacy benefit managers.
Express Scripts Holding Co. gains significantly more leverage in rebate negotiations through its recently announced collaboration with Blue Cross Blue Shield-owned pharmacy benefit manager Prime Therapeutics.
Express Scripts will handle rebate negotiations for pharmacy benefit drugs on behalf of Prime under terms of the three-year agreement. The arrangement means Express will add 28m lives to the 75m it already manages, which could help the PBM negotiate deeper discounts from biopharma.
Express Scripts will also assume responsibility for pharmacy network negotiations for Prime. With the combination, “manufacturers and pharmacies will face the biggest PBM ever,” Drug Channels Institute CEO Adam Fein noted in a recent post on his blog.
The arrangement “is designed to deliver more affordable care for clients and their members by enhancing pharmacy networks and pharmaceutical manufacturer value," according to a December press release from the two firms.
It will help mid-size Prime Therapeutics secure more competitive pricing and boost its position in the industry. The company has faced competition for clients from the three dominant PBMs – Express Scripts, CVS Health Corp. and OptumRx Inc., which is owned by UnitedHealth Group Co.
The collaboration will also fortify the membership block Express Scripts can work with following the loss of national insurer Anthem Inc. as a client at the end of 2019. After an acrimonious and public billing dispute with Express Scripts, Anthem decided to move PBM activities for its 23m members in house. (Also see "Anthem In-House PBM Will Draw On CVS But Retain Formulary Control" - Pink Sheet, 18 Oct, 2017.)
The development between Express Scripts and Prime Therapeutics is in keeping with the broader trend among payers of consolidating membership and drug-purchasing volume. High-profile transactions include Cigna Corp.’s acquisition of Express Scripts and CVS Health's purchase of Aetna, both of which closed in late 2018.
The most recent arrangement is not designed as a precursor to an acquisition of Prime Therapeutics by Express Scripts, Prime senior VP, chief supply chain and industry relations officer Jarrod Henshaw said in an email. “This collaboration is beneficial to both PBMs and we’re still both able to retain all the services and offerings that each PBM is best known for,” he added.
Prime Could Adopt Express Scripts’ National Preferred Formulary
Prime will retain its formulary management functions, including Pharmacy & Therapeutics committee activities, under the deal. However, the PBM will also “partner with Express Scripts to identify opportunities to further optimize formulary value for our plans, including potential alignment opportunities with Express Scripts’ national preferred formulary,” the company said in an email.
From 2014 through 2020, Express Scripts expects to save $14.5bn for clients who opt for its national preferred formulary because of formulary exclusions, according to the firm. The PBM added 32 new exclusions to the 2020 national formulary for a total of 296 excluded drugs. Express Scripts uses the threat of exclusion from coverage to negotiate lower net prices.
Prime will also continue to manage formulary and rebate negotiations for drugs covered under the medical benefit, such as physician-administered drugs, and the two PBMs will independently negotiate value-based contracts, the release states.