Specialty Pharmacy

The Kroger Company recently revealed that it had entered into a definitive agreement to sell Kroger Specialty Pharmacy to CarelonRx, a subsidiary of Elevance Health, Inc, formerly known as Anthem, Inc. The deal, say industry experts, allows Kroger to focus on retail pharmacy while bringing scale and coveted limited-distribution contracts to CarelonRx as it seeks to establish a stronger footing within the specialty space.

Unveiled March 18, the deal is expected to close in the second half of this year. It does not include Kroger’s in-store retail pharmacies and The Little Clinics. CarelonRx, formerly known as IngenioRx, operates within Carelon, Elevance’s health care services brand that serves one in three people across 50 states.

Elevance Health Inc. plans to buy Kroger Co.’s specialty pharmacy division, the firms revealed on March 18, in a deal that closely follows Elevance’s purchase off Paragon Healthcare, Inc., an infusion center provider. Health care insiders say that the Kroger deal is a shrewd play for Elevance, which in recent years has sought to expand its Carelon health services arm, particularly the CarelonRx PBM.

The deal could help Elevance catch up with other major insurers. Elevance, a for-profit Blue Cross and Blue Shield affiliate, lags behind its publicly traded managed care competitors, such as The Cigna Group, CVS Health Corp. and UnitedHealth Group, in health services revenue. All three health services divisions, respectively Evernorth, Caremark and Optum, include a major PBM and lucrative specialty pharmacy divisions that serve both their own plans and payers outside their own enterprise. Cigna and CVS's care management divisions had higher revenues and earnings than their insurance divisions in the fourth quarter of 2023, which is often the case for those firms.

Bristol Myers Squibb on March 18 completed its $14 billion acquisition of Karuna Therapeutics, Inc., whose lead drug, KarXT (xanomeline-trospium), is expected to gain FDA approval for treating schizophrenia later this year. That deal and results from clinical trials suggest KarXT could gain significant market share in a crowded schizophrenia medication marketplace.

However, two drug pricing experts tell AIS Health that it remains to be seen how payers will cover KarXT, especially if it’s priced significantly higher than its generic competitors, as it is expected to be. KarXT, an oral medication, has an FDA Prescription Drug User Fee Act data of Sept. 24, meaning the FDA will make an approval decision by then.

The growing use of biosimilars has reduced spending in the Medicare Part B program, but there are opportunities to further reduce costs — through greater use of more affordable biosimilars and through the implementation of different payment policies, according to a study published by the HHS Office of Inspector General (OIG).

The OIG analyzed the average sales prices, utilization and costs of 21 biosimilar drugs and their reference biologic products in the Medicare Part B program between 2015 and 2021. The agency found that overall use rate of biosimilars in Part B jumped from 18% in 2015 to 62% in 2021. While the adoption of biosimilars has lowered both the prices of biologics and biosimilars, Part B spending could have been reduced by $179 million in 2021 if the five biosimilars that cost less than their reference products — epoetin alfa, infliximab, bevacizumab, rituximab and trastuzumab — had been used at the same rate as the most widely used biosimilar, filgrastim.

During its March 7 Investor Day, The Cigna Group raised its long-term earnings projection and highlighted the diverse offerings it believes will win client business and differentiate itself from competitors. The company placed particular emphasis on opportunities in the specialty pharmacy area, where it already has a strong foothold and plans on expanding in the coming years.

Cigna increased its long-term adjusted earnings per share (EPS) guidance range to an average growth of 10% to 14% per year, up from a range of 10% to 13%. For 2024, it kept its adjusted EPS target of at least $28.25, up from $25.09 last year.

Recently it’s been difficult to underestimate artificial intelligence’s (AI) reach across health care entities such as specialty pharmacies, infusion providers and pharma companies. While AI has helped streamline many processes, its ultimate impact may be debatable at this point, and caution in certain areas is warranted, according to some industry experts.

“AI-enabled solutions have transformed the specialty pharmacy and home infusion industries,” contends Mesfin Tegenu, CEO and chairman of RxParadigm, Inc. He notes that AI’s subset of machine learning (ML) uses algorithms to find patterns and make predictions, leading to streamlined operations, better patient care and optimized resource allocations, all of which have the potential to result in cost savings.

Less than two years after Walgreens Boots Alliance Inc.’s purchase of Shields Health Solutions, the pharmacy giant is rumored to be seeking a sale of the health system-owned specialty pharmacy integrator, per a Jan. 23 Bloomberg article, which valued the company at around $4 billion. While returns from a sale could help the company shore up certain units, divesting itself of Shields at a time when specialty pharmacy continues to be a hot commodity may be a questionable approach, say industry experts.

A Walgreens spokesperson told AIS Health, a division of MMIT, that the company has no comment.

During the recent fourth-quarter earnings calls held by their diversified parent companies, the Big Three PBMs — The Cigna Group’s Express Scripts, UnitedHealth Group’s Optum Rx and CVS Health Corp.’s Caremark — factored prominently into discussions of the firms’ financial results and future growth strategies.

When CVS Health reported its quarterly and full-year results on Feb. 7, CEO Karen Lynch wasted little time before describing what she called CVS’s “innovative models and offerings that create more transparency and choice for consumers and clients.”

While the FDA approved a large number of specialty drugs in 2023, payers shouldn’t let their attention wander in 2024. Multiple potential blockbusters are slated for decisions by the agency this year, as are several biosimilars and generic versions of specialty medications. Gene therapies will continue to garner headlines — and payer dollars. All of these trends and more point to an active year ahead within the specialty pharmacy space. AIS Health, a division of MMIT, spoke with some industry experts about what’s on board.

AIS Health: What are some specialty pharmacy issues to keep an eye on in 2024, and why?

Although 2023 was a banner year for biosimilars hitting the U.S. market, uptake of these near-copies of biologic drugs remains low. Manufacturers of biologics also commonly file lawsuits or take other measures to extend their patents and have successfully delayed the introduction of FDA-approved biosimilars. Pharmaceutical industry experts tell AIS Health, a division of MMIT, that the slow adoption of biosimilars has an impact on payers that would prefer patients receive lower-cost biosimilars rather than expensive biologics.

In fact, a recent study offers evidence that private insurers are increasingly embracing biosimilars. Uptake of biosimilar medications was higher in Medicare Advantage plans than in traditional, fee-for-service Medicare from May 2015 through September 2022, according to a recent study published in JAMA Health Forum. However, biosimilars had less than a 50% market share in six of the seven product classes the authors examined, suggesting providers and patients often still opt for biologics.