Perspectives

Perspectives on Uber’s Partnership With ScriptDrop

May 13, 2021

Uber, seeking to expand its prescription delivery business nationwide, has inked a deal with pharmacy home delivery start-up ScriptDrop that makes Uber the default delivery app for a network of grocery store and independent pharmacies that spans 37 states, AIS Health reported.

The partnership, which is just one of many corporate moves in the pharmacy delivery space, positions Uber to take advantage of the vastly increased consumer demand for home delivery services sparked by the pandemic.

It also puts PBMs in the position of playing some catch-up on developing and promoting home delivery services beyond traditional mail order, says Ashraf Shehata, partner and advisory industry leader for health plans at consulting firm KPMG.

Uber, seeking to expand its prescription delivery business nationwide, has inked a deal with pharmacy home delivery start-up ScriptDrop that makes Uber the default delivery app for a network of grocery store and independent pharmacies that spans 37 states, AIS Health reported.

The partnership, which is just one of many corporate moves in the pharmacy delivery space, positions Uber to take advantage of the vastly increased consumer demand for home delivery services sparked by the pandemic.

It also puts PBMs in the position of playing some catch-up on developing and promoting home delivery services beyond traditional mail order, says Ashraf Shehata, partner and advisory industry leader for health plans at consulting firm KPMG.

The immediate question, he says, is “as we start to see these home delivery options, are we really starting to see the digital world competing against the bricks-and-mortar world, plus delivery? That’s really the dynamic tension here. And I think that there are a lot more chapters to be written in that story.”

But Uber is far from the only company investing in this space, and opportunities for partnerships and acquisitions are plentiful. Meanwhile, PBMs do not appear to be reacting much to the changes in prescription delivery and purchasing patterns, says David Dross, national practice leader for managed care pharmacy consulting at Mercer. “It feels like, at this juncture, PBMs are honestly not seeing enough threat to do something different,” he says.

Competition from Amazon and its subsidiary PillPack hasn’t turned out to be as big of a threat as some in the industry had feared, at least so far, Dross notes. Shehata also doesn’t see Uber and Amazon as immediate threats to PBMs and mail-order pharmacy.

However, Peter Manoogian, principal at the consulting firm ZS Associates, notes that that there are multiple deals that touch on prescription delivery, and PBMs definitely are watching. “I think my clients — PBMs and mail order pharmacies — they are thinking about the threat that an Amazon could bring in the Rx delivery space, because the Amazon delivery model is so intertwined into so many people’s lives,” he says.

by Jane Anderson

 

Perspectives on Interoperability Mandate

April 29, 2021

Payers should look at the looming interoperability mandate as a chance to gain a lasting advantage over their competitors, according to two health care information technology (IT) experts.

In a March 26 webinar hosted by America’s Health Insurance Plans (AHIP), IBM Vice President Michael Curry of Watson Health and Jeff Rivkin, research director for payer IT strategies at IDC Insights, said payers should do more than meet the minimum interoperability standards, AIS Health reported.

“It’s just the tip of the iceberg. We’re going to see a lot of data exchanged. And if you don’t have a fairly robust platform to be able to do that, you’re going to hurt next year, too,” Rivkin said.

Payers should look at the looming interoperability mandate as a chance to gain a lasting advantage over their competitors, according to two health care information technology (IT) experts.

In a March 26 webinar hosted by America’s Health Insurance Plans (AHIP), IBM Vice President Michael Curry of Watson Health and Jeff Rivkin, research director for payer IT strategies at IDC Insights, said payers should do more than meet the minimum interoperability standards, AIS Health reported.

“It’s just the tip of the iceberg. We’re going to see a lot of data exchanged. And if you don’t have a fairly robust platform to be able to do that, you’re going to hurt next year, too,” Rivkin said.

Starting July 2021, HHS will require insurers that sell Medicare Advantage, Medicaid and CHIP managed care, and Affordable Care Act exchange plans to launch an application programming interface (API) that will allow patients to access their complete medical and claims history on demand along with a continually updated provider directory. Payers must also make all of their patient and claims data available to other insurers on a payer-to-payer data exchange, which must be in place by January 2022.

Rivkin said insurers should think about the interoperability mandate and the mandate to release pricing information as the same project. Starting on Jan. 1, 2023, health plans must offer members online shopping tools that allow them to see the negotiated rate between their provider and their plan, as well as a personalized estimate of their out-of-pocket cost for 500 of the most shoppable items and services.

“We’re all in the middle of those implementations, but there’s a huge downstream potential for that data,” Curry explained. He says the pandemic-spurred telehealth boom has accelerated changes in consumer expectations.
“The consumer side…has changed a lot in how payers have to think about their relationships with clients,” Curry added. Consumers, he said, now expect accessing health care to be more similar to “buying something on Amazon.”

“Amazon and those like it have raised the bar from the consumerism perspective,” Rivkin said. “Now, you’ve got a significant number of people in the individual market switching because they shop for price. The idea that retail companies have had for years of loyalty and stickiness…is now relevant to health insurance.”

by Peter Johnson

 

Perspectives on ACA Subsidy Expansion

April 15, 2021

For an individual health insurance market that is already hitting its stride, the new pandemic relief legislation’s expansion of Affordable Care Act (ACA) subsidies is yet another positive catalyst that should make the exchanges more attractive to insurers and customers alike, experts tell AIS Health.

Under the American Rescue Plan, which President Joe Biden signed into law on March 11, individuals who already qualified for premium tax credits under the ACA will see more generous financial aid. In addition, people who earn more than 400% of the federal poverty level (FPL) will be eligible for reduced premiums for the first time thanks to a provision that caps marketplace premiums at 8.5% of all enrollees’ income.

For an individual health insurance market that is already hitting its stride, the new pandemic relief legislation’s expansion of Affordable Care Act (ACA) subsidies is yet another positive catalyst that should make the exchanges more attractive to insurers and customers alike, experts tell AIS Health.

Under the American Rescue Plan, which President Joe Biden signed into law on March 11, individuals who already qualified for premium tax credits under the ACA will see more generous financial aid. In addition, people who earn more than 400% of the federal poverty level (FPL) will be eligible for reduced premiums for the first time thanks to a provision that caps marketplace premiums at 8.5% of all enrollees’ income.

Fritz Busch, an actuary at Milliman, Inc., says the newly expanded ACA subsidies will likely bring even more people into the exchanges than the pandemic-related special enrollment period that started Feb. 15. And, “it’s generally agreed that more membership in the individual market means favorable morbidity,” so actuaries will need to figure out just what the impact of that will be, he adds.

Looking ahead to 2022, not only will the revamped subsidies bring more people into the marketplaces, but they will also likely change how people sort themselves among the different coverage tiers — and how insurers respond, Busch says.

“The higher subsidies go, the more likely it is going to be that someone is eligible for a free plan — particularly bronze plans, so there could be some movement towards bronze because of that,” he explains. Health insurers, then, “will want to make sure that they’re in position for [enrollees] to select their bronze plan as a free plan. If their bronze plans are too expensive, they’re not going to be free anymore.”

“We’ll also have an extensive increase of competition in marketplaces in 2022, ’23 and ’24,” says David Anderson, a research associate at the Duke-Margolis Center for Health Policy. He predicts that more insurers will enter the marketplaces and spread their footprints within states where they already operate.

With that increased competition, which will continue a trend already taking place on the exchanges, “the opportunity for monopoly pricing…is going down dramatically,” according to Anderson.

Perspectives on Cigna’s MDLive Deal

April 1, 2021

Health insurers have begun to consolidate their position in the telehealth market, as indicated by a recent move by Cigna Corp. to acquire MDLive Inc. Meanwhile, lawmakers are beginning to consider the future of telehealth regulation and payment, AIS Health reported.

Cigna’s Evernorth health services arm announced on Feb. 26 that it had reached an agreement with MDLive to acquire the virtual care provider, according to MDLive’s website. MDLive has been available in-network as a primary care option to all members of Cigna’s commercial plans since January 2020.

Health insurers have begun to consolidate their position in the telehealth market, as indicated by a recent move by Cigna Corp. to acquire MDLive Inc. Meanwhile, lawmakers are beginning to consider the future of telehealth regulation and payment, AIS Health reported.

Cigna’s Evernorth health services arm announced on Feb. 26 that it had reached an agreement with MDLive to acquire the virtual care provider, according to MDLive’s website. MDLive has been available in-network as a primary care option to all members of Cigna’s commercial plans since January 2020.

Ashraf Shehata, national sector leader for health care and life sciences at KPMG, says he expects even more efforts by payers to offer telehealth benefits directly to members.

He adds that the COVID-19 pandemic has acted as an accelerant for telemedicine use. He expects patients will continue to demand telemedicine options even after the pandemic subsides, and that payers will see that demand as an opportunity to narrow the gap between themselves and members.

“We saw that with massive and immediate uptake of the platforms — all the platforms, I should say. Not only did [payers] use their existing platform relationships, but they added new platforms because demand is so high,” Shehata explains.

Shehata adds that robust, internal telemedicine options offer plans an opportunity to exercise leverage in negotiations with provider systems, which have sought to have virtual visits reimbursed at the same rate as traditional visits.

The payment equity question is central to the coming regulatory battle over telemedicine. Payer and plan sponsor lobbying groups will square off against providers in Congress over whether virtual visits should be reimbursed at the same rate as in-person visits. Early in the pandemic, the Trump administration mandated that Medicare must reimburse most telehealth visits at parity with traditional visits.

Also at issue is whether the full menu of services authorized in response to the pandemic will continue to be eligible for Medicare reimbursement. CMS expanded the types of services that could be delivered via telehealth to Medicare beneficiaries, temporarily adding 135 services. Unless Congress acts or the Biden administration issues new rules, the remaining expanded services will expire either at the end of 2021, or when the pandemic public health emergency ends.

In a March 2 hearing of the House Committee on Energy and Commerce’s Subcommittee on Health, legislators indicated that they are studying both issues.

Perspectives on Stock Selloff Following CVS 4Q Earnings Report

March 18, 2021

Although CVS Health Corp.’s stock price dropped about 5% after the company reported its fourth-quarter and full-year 2020 financial results on Feb. 16, equities analysts seemed to be unshaken in their view that the firm — which owns health insurer Aetna — has strong fundamentals, AIS Health reported.

For the fourth quarter of 2020, CVS’s net income of $975 million was down 44% compared with the prior-year period, a result the company partially attributed to lower operating income driven by the impact of the COVID-19 pandemic on its Health Care Benefits and Retail/Long-Term Care segments. For the full year 2020, CVS’s operating income and net income increased relative to 2019.

Although CVS Health Corp.’s stock price dropped about 5% after the company reported its fourth-quarter and full-year 2020 financial results on Feb. 16, equities analysts seemed to be unshaken in their view that the firm — which owns health insurer Aetna — has strong fundamentals, AIS Health reported.

For the fourth quarter of 2020, CVS’s net income of $975 million was down 44% compared with the prior-year period, a result the company partially attributed to lower operating income driven by the impact of the COVID-19 pandemic on its Health Care Benefits and Retail/Long-Term Care segments. For the full year 2020, CVS’s operating income and net income increased relative to 2019.

Total revenues in the fourth quarter and full-year 2020 increased 4% and 4.6%, respectively, compared with the prior year, according to CVS’s earnings release. The company’s fourth-quarter adjusted earnings per share of $1.30 beat the Wall Street consensus of $1.24.

In a Feb. 17 note, Citi analyst Ralph Giacobbe said his firm views CVS’s results “as generally balanced, with better performance within PBM and health benefits, and in line for its retail segment.” Nevertheless, he acknowledged that “we received a number of calls/emails on the heels of the CVS 4Q20 print/guidance and the subsequent sell-off in shares.”

In their own Feb. 17 note, Evercore ISI analysts weighed in that “CVS’s stock price is down ~5% as we write, which seems overdone to us.” The company’s 2021 guidance “was in-line with prior commentary, which makes sense given that there is little incentive to be aggressive at this point in the year and with Karen [Lynch] just taking over the reins,” they added. Lynch, formerly president of Aetna, replaced the retiring Larry Merlo as CVS CEO on Feb. 1.

Giacobbe observed that CVS’s “commentary around utilization assumptions for the year also raised questions/concerns, as management noted that it was not projecting high levels of pent-up demand given system capacity constraints.”

Lynch said during earnings call that in the fourth quarter the company saw utilization of total health care services “return to more near-normal seasonal levels as higher COVID-related costs were partially offset by somewhat lower levels of traditional services.”

CVS said total medical membership in its Health Care Benefits segment rose by about 140,000 from the third to fourth quarters, reaching 23.4 million. That largely reflected enrollment increases in its Medicaid and Medicare plans, but those gains were partially offset by a 35,000 decline in commercial enrollment.

Perspectives on Pass-Through Rebate Models

March 4, 2021

With the Trump administration’s rebate rule delayed and possibly slated for repeal by Democrats in Congress, major changes in how the PBM industry distributes rebate revenue will have to come from the private sector, AIS Health reported.

The Biden administration will suspend implementation until 2023 of the so-called “rebate rule,” a Trump administration regulation that would have revamped the Medicare prescription drug rebate system, and DC insiders expect the regulation will be repealed by Congress before then. Meanwhile, a growing number of PBMs that deal in the commercial market have pitched plan sponsors on a 100% pass-through rebate structure, in which the PBM collects its compensation through a fee or surcharges rather than diverting a share of rebate revenue.

With the Trump administration’s rebate rule delayed and possibly slated for repeal by Democrats in Congress, major changes in how the PBM industry distributes rebate revenue will have to come from the private sector, AIS Health reported.

The Biden administration will suspend implementation until 2023 of the so-called “rebate rule,” a Trump administration regulation that would have revamped the Medicare prescription drug rebate system, and DC insiders expect the regulation will be repealed by Congress before then. Meanwhile, a growing number of PBMs that deal in the commercial market have pitched plan sponsors on a 100% pass-through rebate structure, in which the PBM collects its compensation through a fee or surcharges rather than diverting a share of rebate revenue.

Jeff Levin-Scherz, M.D., national co-leader of the health management practice at Willis Towers Watson, says that passed-through rebates can flow in two directions after they are in employers’ hands.

“Employers have been moving to pass-through rebates where the PBM will give 100% of the rebate to the employer,” which the employer can then spend on its larger medical benefit, lowering premiums, Levin-Scherz says. “Point of care or point of sale rebates are different, where the rebate is essentially put into the purchase price [of a drug].”

Ge Bai, Ph.D., an associate professor at Johns Hopkins University’s Carey Business School and Bloomberg School of Public Health, says that passing through rebates better aligns the incentives of a PBM and a plan sponsor.

“I think for the large, self-funded employers, the issue is more about product selection,” Bai says. “And the employers are frustrated by some inefficient product selection choices made by the PBMs on the formulary….it’s one reason why employers want the rebate pass-through — it will reduce the PBM’s incentive to make money from high-price, high-rebate drugs.”

However, Bai also says that explains why some employers opt for a traditional rebate model: for firms that don’t expect to have high levels of drug spending by members, the lower premium offered by the traditional rebate model may be more appealing.

Like Bai, Daniel Nam, Pharm.D., associate principal for pharmacy policy at Avalere Health, says that prices and premiums will ultimately decide which approach becomes dominant in the marketplace.

“I think it really depends on the bottom-line price that the PBM is willing to offer to the employer or the health plan,” he says.