Leading pharmacy benefit management companies are launching “pass-through” payment plans to confront growing concerns that health insurance companies, employers, government programs and patients are overpaying for prescription drugs.
Cigna’s Express Scripts is marketing a new, “fully transparent” pricing option called ClearCareRx, which will allow employers, insurers and government programs to pay a flat monthly fee for processing pharmacy claims, the company announced in a news release Wednesday. The second-largest PBM will only charge what they pay pharmacies for medicines and pass on rebates from drugmakers.
Express Scripts has been piloting this model with a handful of large, self-insured employers over the past few years, and has reduced their prescription spending while improving patient outcomes, a Cigna spokesperson wrote in an email.
UnitedHealth Group’s OptumRx launched a similar optional system for commercial customers this year, a spokesperson wrote in an email. CVS Health’s Caremark did not respond to an interview request and the Pharmaceutical Care Management Association, a PBM trade group, declined to comment on individual companies’ business decisions.
Caremark, Express Scripts and OptumRx controlled 80% of the PBM market in 2021, according to the most recent data from Drug Channels, a research organization.
The pass-through payments Express Scripts and OptumRx are touting diverge from the industry standard of “spread pricing,” in which PBMs charge payers more than they reimburse pharmacies and retain the difference. Regulators and lawmakers increasingly cite spread pricing as a contributor to rising drug costs.
The Federal Trade Commission, the House Oversight and Accountability Committee and multiple Senate panels have investigated PBMs, with special attention paid to spread pricing. Ohio and other states have banned the practice and sued PBMs, alleging they overcharged government programs.
“However welcome this move may prove to be, it doesn’t settle our lawsuit, or fix their anticompetitive practices. It’s full steam ahead in court,” Ohio Attorney General Dave Yost (R) said in a news release Wednesday.
Ending spread pricing could dent PBM revenue by about $1 billion, said Duane Wright, senior government analyst at Bloomberg Intelligence. Cigna has the most to lose: Express Scripts was responsible for 60% of the parent company's operating profit last year. That compares with 37% for CVS and Caremark and 16% for UnitedHealth and OptumRx, according to data Wright compiled.
“Given the outsize role of this division within the company, I think there’s probably a greater urgency to get out front of regulations than maybe some of the other players,” Wright said.
The financial impact on Cigna may be less than it seems, however, said Antonio Ciaccia, CEO of drug pricing research company 46brooklyn Research and president of the consulting firm 3 Axis Advisors. Cigna could make up for revenue lost on the PBM side by shifting the costs to other parts of the pharmaceutical supply chain it controls, such as group purchasing organizations, he said.
“They're telling you, ‘This is how we will make money,’ as if 'we' is only the PBM,” Ciaccia said. “These are massive, vertically integrated, multilayered companies. Unless they're putting every single card on the table within every one of those layers, it's not transparent. It's just evasion."
In addition to the pass-through payment plan, Cigna pledged to reveal more about its fees and to publish that information on a website and disclose it to the Securities and Exchange Commission. Express Scripts will also limit out-of-pocket costs to $5-$45 per prescription.
These initiatives may be too little, too late to assuage policymakers, Wright said. The drug pricing provisions from the Inflation Reduction Act of 2022 emphasized the role of pharmaceutical companies, while some lawmakers may be ready to broaden their efforts, Wright said. “Their next sights are on the other pieces of the supply chain. That would be PBMs,” he said.
Venture-backed startup PBMs such as CapitalRx, SanaRx and Navitus are leveraging negative feelings about their big competitors to tout their own pass-through payment models and attract customers, Ciaccia said. At the same time, these small players are reliant on the major companies because some partner with GPOs that Express Scripts and other large PBMs own to access their negotiated rebates, he said.
