Drug Pricing

For years, payers have been concerned about the rising prices of prescription medications and how to cover newly approved drugs. Pharmaceutical experts tell AIS Health, a division of MMIT, that PBMs and plans will continue to be challenged in 2024 with similar issues, particularly when it comes to gene therapies, obesity medications and other expensive products.

Andy Szczotka, Pharm.D., chief pharmacy officer at AscellaHealth, notes that more than half of pharmacy benefit spending is on specialty medications even though only a small percentage of members use those drugs.

He says dealing with high-cost specialty products “is a focus for most payers” and adds there is a “large target on specialty drugs.”

Although 2023 trained a harsh spotlight on the country’s dominant PBMs — pressuring some to introduce new pharmacy pricing models — industry observers tell AIS Health, a division of MMIT, that this year may not be nearly as paradigm-shifting.

Take, for example, potential policy action aimed at changing PBMs’ increasingly criticized business models, particularly those associated with the Big Three PBMs: The Cigna Group’s Express Scripts, CVS Health Corp.’s Caremark, and UnitedHealth Group’s Optum Rx.

With the launch of a new website, Eli Lilly and Co. recently became the first pharmaceutical company to offer weight loss medications though a telehealth provider. The platform — LillyDirect — comes less than two months after Lilly’s weight loss drug Zepbound (tirzepatide) gained FDA approval and joined fellow glucagon-like peptide 1 (GLP-1) agonists from Novo Nordisk A/S, Wegovy (semaglutide) and Saxenda (liraglutide), in the burgeoning obesity drug market.

The weight loss medication market is currently dominated by Wegovy, a once-weekly injectable drug. The FDA initially approved semaglutide for Type 2 diabetes under the brand name Ozempic, but the agency expanded the indications to include weight management three years ago. Pharmacy formularies that cover more than half of commercial-plan enrollees categorize Wegovy as “preferred” or “preferred with utilization management restrictions,” — such as prior authorization and/or step therapy — according to MMIT Analytics. (MMIT is the parent company of AIS Health.)

CVS Health Corp.’s PBM, CVS Caremark, said recently that it will remove AbbVie’s immunosuppressive drug Humira (adalimumab) from its major national commercial template formularies. The move comes on the heels of a year in which 14 near-identical copies of the world’s best-selling drug entered the U.S. market after years of delays, leading major PBMs to generally put selections of several biosimilars on the same coverage tiers as their reference product.

Yet while Wall Street analysts heralded CVS’s decision as an indication that it’s become a trailblazer in the biosimilar space, one prominent PBM critic remains skeptical of the company’s motivations — especially since CVS is working with Humira’s manufacturer on a new cobranded version of the drug.

A district court judge wasted no time in responding to the latest motion in an ongoing lawsuit filed against HHS by patient advocacy groups over the use of copay accumulators. In his decision, the judge reiterated his September decision vacating one rule and reinstating another that prohibits the use of accumulators for drugs that do not have a medically appropriate generic equivalent. It’s not entirely clear what next steps will be, but one patient advocacy group says it hopes to see HHS enforce the policy limiting plans’ use of accumulator programs.

While pharma manufacturers began offering the programs to help patients stay on costly therapies, payers have pushed back, saying they lead to higher-cost agents to be used over lower-cost ones. At the same time, similar programs, such as copay maximizers and alternate funding programs, have increased in use, to payers’ dismay.

Walgreens Boots Alliance Inc. agreed to pay Humana Inc. $360 million to settle allegations that Walgreens’ retail pharmacies overcharged for prescription drugs. Walgreens said in a Jan. 4 U.S. Securities and Exchange Commission filing that it had paid $150 million of the settlement amount last month. In May 2023, Walgreens filed a lawsuit asking a judge to overturn a $642 million arbitration judgement awarded to Humana two months earlier. Walgreens has faced other lawsuits in recent years alleging the company overcharged for medications. For instance, Walgreens in 2019 paid the federal government and states a $269.2 million settlement related to allegations that it improperly billed Medicare, Medicaid and other health care programs for insulin pens. And in 2022, three Blue Cross and Blue Shield affiliates sued Walgreens over generic medication pricing.

Eli Lilly & Co. will sell its glucagon-like peptide-1 (GLP-1) weight loss drugs directly to consumers through a telehealth service called LillyDirect, the drugmaker revealed on Jan. 4. Pharmacy benefit experts say that the move is sure to improve market access for Lilly’s weight loss drugs, but they also say that the impact of the new service on PBMs is likely to be minimal.

LillyDirect will contract with “independent healthcare providers,” per a press release, to prescribe the GLP-1 tirzepatide, known by the brand names Mounjaro () and Zepbound. Weight loss-focused telehealth provider Form Health Inc. will be one of those partners, NBC News reported. LillyDirect will also provide “tailored support” from unnamed providers. The service will also feature free “direct home delivery…through third-party pharmacy dispensing services.”

While many people had closed their laptops and were gearing up to open presents, the U.S. District Court for the District of Columbia offered a gift to patient advocates that have been fighting for restrictions on private health plans’ use of copay accumulator programs.

In September, Judge John Bates ruled in favor of a challenge brought by patient advocates — including the HIV + Hepatitis Policy Institute, the Diabetes Patient Advocacy Coalition and the Diabetes Leadership Council — to provisions in a 2021 rule that allowed group and individual health plans to apply copay accumulators even when drugs have no therapeutic alternative. Such programs prevent enrollees from counting any drug manufacturer discounts, like copay coupons, toward their deductibles and out-of-pocket maximums. Insurers and PBMs argue that copay accumulators are necessary to prevent copay coupons from steering patients to high-cost branded drugs — raising costs for everyone — but patient advocates contend that those coupons are necessary to promote affordability amid benefit designs that force patients to bear the brunt of their prescription drug costs.

Entering 2024, growing health care costs are the main worry of employer plan sponsors, according to industry experts. To cope with the problem, those experts add, employers may seek novel benefit designs, while also reaching for tried-and-true cost control methodologies like narrower networks.

Brokerage WTW found in a September survey that 69% of surveyed large employers listed health care costs as a “top health and wellbeing priority” over the next three years, and that health care costs were the most frequently named priority by respondents.

“I think that the emphasis on cost is actually bigger now than it was a few years ago,” says Jeff Levin-Scherz, M.D., population health lead at WTW and an assistant professor at the Harvard School of Public Health.

CVS Health Corp.’s Caremark is the latest big PBM to offer clients new pricing models that the company claims will increase transparency and reduce overhead. Experts say that the new offerings are not as transparent as CVS claims they are, and constitute a response to various pressures including likely federal PBM reforms, scrutiny from plan sponsors and disruptive business trends like the growth of Mark Cuban Cost Plus Drug Co.

Most experts expect that the new CVS offerings, called CostVantage and TrueCost, will only make a marginal difference — if any — in either drug costs or price transparency. Industry observers point to similar product rollouts by the other two of the Big Three PBMs, UnitedHealth Group’s Optum Rx and The Cigna Group’s Express Scripts, neither of which seemed to dampen the firms' PBM earnings. Express Scripts’ ClearCareRx and Optum Rx’s Cost Clarity launched in April and May, respectively. Express Scripts also rolled out a new “cost-plus pharmacy pricing” option, called ClearNetwork, in November.