Payer

Radar On Market Access: 2020 Could Be ‘Wild Year’ for Consolidated PBMs

January 14, 2020

Though the two major transactions that upended the PBM landscape — Cigna Corp. buying Express Scripts Holding Co. and CVS Health Corp. acquiring Aetna Inc. — have already taken place, that doesn’t mean the sector won’t see more changes this year, industry experts tell AIS Health.

Though the two major transactions that upended the PBM landscape — Cigna Corp. buying Express Scripts Holding Co. and CVS Health Corp. acquiring Aetna Inc. — have already taken place, that doesn’t mean the sector won’t see more changes this year, industry experts tell AIS Health.

“The market is evolving,” says Brian Anderson, a principal with Milliman, Inc. The year 2020 will be marked by a presidential election and significant price pressure on manufacturers, along with pharmacies trying to retain their margin, he adds, “so it’s going to be a really wild year.”

Indeed, 2019 ended with Prime Therapeutics LLC and Express Scripts unveiling a three-year collaboration in which the latter PBM will negotiate with pharmaceutical manufacturers, on behalf of Prime’s members, for drugs covered on the pharmacy benefit, as well as provide services related to retail network contracting.

By teaming up with Prime, Express Scripts will be leading rebate negotiations and pharmacy network development for 103 million people, Adam Fein, Ph.D., CEO of Pembroke Consulting, Inc.’s Drug Channels Institute, wrote in a blog post. “This combined volume of Express Scripts and Prime will have enormous leverage with manufacturers and pharmacies,” he noted.

To Ashraf Shehata, KPMG national sector leader for health care and life sciences, the Prime/Express Scripts partnership is yet another example of “pure play” PBMs’ move toward consolidation. Given that trend, the opportunity to scale up both organizations’ purchasing power, and “the ability to kind of lock in Blue clients,” Shehata says, “I think it makes a lot of sense” for the two PBMs to team up.

Employers, meanwhile, are likely to press PBMs of all varieties for innovative solutions — not just deep drug-pricing discounts — during the selling season for 2021 contracts, Anderson says.

Therefore, “there’ll probably be a lot of new innovators in the market — people coming up with new products that maybe look and sound different,” he says. “But the question people are going to have to ask is, how different really is it? And is it really a differentiator in the marketplace?”

MMIT Reality Check on Cystic Fibrosis (Jan 2020)

January 10, 2020

According to our recent payer coverage analysis for cystic fibrosis treatments, combined with news from key healthcare influencers, market access is shifting in this drug landscape.

According to our recent payer coverage analysis for cystic fibrosis treatments, combined with news from key healthcare influencers, market access is shifting in this drug landscape.

To help make sense of this new research, MMIT’s team of experts analyzes the data and summarizes the key findings for you. The following are brief highlights. To read the full piece, including payer coverage, drug competition and prescriber trends, click here.

Payer Coverage: A review of market access for cystic fibrosis treatments shows that under the pharmacy benefit, almost 45% of the lives under commercial formularies are covered with utilization management restrictions.

Trends: Cystic fibrosis transmembrane conductance regulator (CFTR) modulators (Vertex Pharmaceuticals’ Trikafta, Symdeko, Orkambi and Kalydeco) are the first type of CF therapy to treat the root cause of the disease rather than the symptoms. Although costly, these therapies have made a large impact on market value.

Perspectives on UnitedHealth/Diplomat Deal

January 9, 2020

Diplomat Pharmacy, Inc., which has been in a tailspin amid mounting financial losses, agreed to a deal with UnitedHealth Group on Dec. 9 that will see the larger firm’s OptumRx division purchase the midsized specialty pharmacy provider/PBM, AIS Health reported.

Diplomat Pharmacy, Inc., which has been in a tailspin amid mounting financial losses, agreed to a deal with UnitedHealth Group on Dec. 9 that will see the larger firm’s OptumRx division purchase the midsized specialty pharmacy provider/PBM, AIS Health reported.

Diplomat’s difficulties began to come into focus earlier this year, when the firm disclosed customer losses in its PBM business and “increased competitive pressure in the specialty market.” In August, Diplomat said it was “reviewing strategic alternatives” to maximize shareholder value. Then on Dec. 9, UnitedHealth disclosed that it agreed to pay $4 per share for Diplomat’s outstanding stock and assume its debt. Equities analysts noted that Diplomat’s stock was trading at $5.81 as of market close on the Friday before the transaction was unveiled.

Adam Fein, Ph.D., CEO of Pembroke Consulting, Inc.’s Drug Channels Institute, says that “the specialty pharmacy market is reaching maturity, as PBMs and insurers dominate specialty drug dispensing channels.” Diplomat, he says, “was unable to navigate the industry’s evolution.”

“Diplomat’s sale at a bargain basement price signals that the shakeout is underway,” Fein adds. “Fewer new specialty pharmacies are starting up, the bigger companies are getting acquired, and market share is concentrating further with the biggest players.”

Ashraf Shehata, KPMG’s national sector leader for health care and life sciences, says that the purchase of Diplomat comes as the rivalry is intensifying between UnitedHealth and its two big consolidated rivals, CVS Health Corp. and Cigna Corp.

Now that those companies have completed major transactions to assemble their assets — with CVS buying health insurer Aetna and Cigna acquiring the PBM Express Scripts — “we’re kind of seeing what I call the second phase right now of the competition really heating up between the big players,” he says.

Growth continues to be the “name of the game” for those three companies, Shehata says, but it’s difficult to come by in an industry that’s already so consolidated. Because of that, “now you might see some growth on the edges” in the same vein as the UnitedHealth/Diplomat deal, he adds.

Radar On Market Access: Health Care Deals May Slow in 2020, but Government Markets Remain Hot

January 9, 2020

The pace of health care mergers and acquisitions likely will cool slightly in 2020, some industry experts tell AIS Health. Still, insurers are likely to seek out companies with assets such as care management or information technology solutions, while provider consolidation will continue in certain markets, AIS Health reported.

The pace of health care mergers and acquisitions likely will cool slightly in 2020, some industry experts tell AIS Health. Still, insurers are likely to seek out companies with assets such as care management or information technology solutions, while provider consolidation will continue in certain markets, AIS Health reported.

“We expect that payer M&A will continue into 2020, with a bias toward vertical rather than horizontal deals,” says Michael Abrams, managing partner of Numerof & Associates, Inc. “Payers will use such deals to expand into adjacent market spaces to differentiate their offerings as integrated platforms that can deliver superior value, customer experience and innovation.”

Joe Paduda, a principal with Health Strategy Associates, says he expects less M&A generally in 2020, for several reasons. “There aren’t as many assets to buy after the multiple deals done over the last few years; buyers are waiting to see results of the elections, which will drive their future strategy; and asset prices have edged even higher, making transactions more expensive and leaving less margin for error.”

Dan Mendelson, the founder of consulting firm Avalere Health, says he still sees plenty of potential targets for horizontal mergers, along with more targets for vertical deals.

“Health plans are in a transformative phase right now. There are three major areas of focus: government markets, care management, and the information technology needed to support quality improvement and cost reduction,” says Mendelson.

“In government markets, there are a range of quality assets that the larger plans could still acquire,” he adds. “There are also some non-profits that could engage in collaboration with for-profit organizations to expand their scope and reach.”

Medicare Advantage plans will be “a very strong target for M&A” in 2020, says Ashraf Shehata, KPMG’s national sector leader for health care and life sciences.

Shehata says he also expects insurers to “amass capabilities around their PBMs.” This, he says, could include bolstering their specialty pharmacy capabilities and building out technology.

Radar On Market Access: Navajo Nation, Molina Partner on Medicaid Managed Care in New Mexico

January 7, 2020

The business arm of the Navajo Nation plans to contract with Molina Healthcare, Inc., to offer Medicaid managed care as part of a partnership between New Mexico, tribal officials and the insurer, AIS Health reported.

The business arm of the Navajo Nation plans to contract with Molina Healthcare, Inc., to offer Medicaid managed care as part of a partnership between New Mexico, tribal officials and the insurer, AIS Health reported.

The program would be the first-ever Medicaid managed care program dedicated solely to the health care, cultural needs and geographic needs of native populations living in the Navajo Nation, according to Molina.

The new managed care plan — which Navajo Nation-owned Naat’aanii Development Corporation hopes to launch in 2020 — could cover up to 75,000 Navajos who live in New Mexico.
“This is very much led by the Navajo Nation,” says Sandeep Wadhwa, M.D., chief health officer and senior vice president of government programs for Solera Health.

The deal appears to be the first between a managed care company and an organization that is owned by a Native entity, Wadhwa, who is not affiliated with Molina, tells AIS Health. “There is a dimension of self-determination by the tribe and by American Indians that hadn’t been realized previously,” he says.

Under Medicaid, state-contracted managed care plans may be an option for American Indians and Alaska Natives, but this is the first time a tribal nation has contracted with a state Medicaid program, Wadhwa adds.

Approximately 100,000 Navajos live in New Mexico, and around three-quarters of them are eligible for Medicaid, according to the New Mexico Human Services Department (HSD). Navajos experience a heavy disease burden, with a mortality rate that’s 31% higher than the overall U.S. rate, HSD figures show.

If this arrangement with Molina and the Navajo Nation helps to improve health outcomes and reduce costs, there may be other tribes and tribal nations that consider similar initiatives, Wadhwa says.

MMIT Reality Check on Growth Hormone Deficiency (Jan 2020)

January 3, 2020

According to our recent payer coverage analysis for growth hormone deficiency treatments, combined with news from key healthcare influencers, market access is shifting in this drug landscape.

According to our recent payer coverage analysis for growth hormone deficiency treatments, combined with news from key healthcare influencers, market access is shifting in this drug landscape.

To help make sense of this new research, MMIT’s team of experts analyzes the data and summarizes the key findings for you. The following are brief highlights. To read the full piece, including payer coverage, drug competition and prescriber trends, click here.

Payer Coverage: A review of market access for growth hormone deficiency treatments shows that under the pharmacy benefit, more than 63% of the lives under commercial formularies are covered with utilization management restrictions.

Trends: As more growth hormone products become available, payers have even more tactics available to them to manage this specialty class. In particular, payers can manage their unit costs for these therapies by contracting with manufacturers to prefer products.