Express Scripts unveils 'cost-plus' drug pricing model

Cigna Group’s Express Scripts announced plans to offer a “cost-plus” drug pricing model for its clients next year amid growing scrutiny of pharmacy benefit managers.

Employers, health plans and government organizations will have the option to pay for prescription medications at their estimated acquisition costs, plus a fee of up to 15% of the drug’s cost and a flat pharmacy dispensing fee, through the pharmacy network option Express Scripts ClearNetwork, Express Scripts said in a news release Tuesday. Express Scripts is the PBM business of Cigna subsidiary Evernorth Health Services.

Related: Upstart PBMs aim to shake up the market

The company touts the model as an alternate option for clients looking to simplify drug pricing. It contrasts with PBMs' typical practices of negotiating reimbursement rates with pharmacies on clients' behalf.

The dispensing fee, which the company did not disclose, will go to the pharmacy and the percent markup fee is shared by Express Scripts and its pharmacy partners. The reimbursement model will apply to all brand, generic and specialty drugs on a plan sponsor’s formularies and will be available to more than 65,000 retail pharmacies nationwide.

The model won't necessarily lower drug costs for patients. Express Scripts expects customers' out-of-pocket costs to remain consistent in this network, a spokesperson wrote in an email. An Express Scripts executive was not made available for an interview.

"We are constantly innovating to provide our clients with new options that meet their needs and enable them to build custom pharmacy benefits," Express Scripts President Adam Kautzner said in the release. 

The pricing model resembles that of Mark Cuban Cost Plus Drug Co., which sells medications to consumers for 15% more than it pays manufacturers, plus a pharmacy fee. The billionaire’s for-profit company has inked deals with health insurers, including Capital Blue Cross and Intermountain Health-owned Select Health.

Express Scripts’ announcement is the latest indicator of a potentially shifting PBM landscape, particularly amid legislative interest at the state and federal level in promoting company transparency and restricting some business practices.

The model could be Express Scripts’ attempt to preempt some legislative provisions but still allows for opaque business practices, said Geoffrey Joyce, director of health policy at the University of Southern California Schaeffer Center for Health Policy and Economics.

“It does take away incentives [to dispense higher-cost drugs], at least on the pharmacy side, since it doesn’t matter what drug they dispense, they still get the same fee, which is good. But it’s not that case for the PBM. They still have an incentive to potentially go with a higher-cost drug,” Joyce said. 

Because the model applies to all drugs covered by a plan sponsor, he said it could also lead to greater incentive for more formulary exclusions. 

Other companies are also pursuing alternatives to the traditional pharmacy benefit method. Blue Shield of California unveiled a PBM model in August that will spread operations among five companies and scale back its existing relationship with behemoth CVS Caremark. Six smaller, upstart PBMs formed the coalition Transparency-Rx in September to educate employers and health plans about their existing business model and to lobby Congress to advance legislation that would put constraints on their larger rivals.