Radar on Market Access

Radar on Market Access: Supreme Court to Determine States’ Ability to Regulate PBMs

January 23, 2020

The Supreme Court has agreed to hear a case that observers say ultimately could upend state-based efforts to regulate PBMs and potentially even lead to legislation on the federal level to rein them in, AIS Health reported. The lawsuit, which was brought by the Pharmaceutical Care Management Association, challenges a 2015 Arkansas law that requires PBMs to reimburse pharmacies at or above their wholesale cost for generic drugs.

The Supreme Court has agreed to hear a case that observers say ultimately could upend state-based efforts to regulate PBMs and potentially even lead to legislation on the federal level to rein them in, AIS Health reported. The lawsuit, which was brought by the Pharmaceutical Care Management Association, challenges a 2015 Arkansas law that requires PBMs to reimburse pharmacies at or above their wholesale cost for generic drugs.

The case boils down to whether PBMs are acting as agents under the Employee Retirement Income Security Act of 1974 (ERISA) and therefore are exempt from state-level regulation, or whether they are a “non-interested party and therefore subject to regulation,” says Jeff Myers, founder of health care consulting firm OptDis. He says that he believes it’s likely the high court justices will side with PCMA and the PBM industry, agreeing that ERISA bars state laws like the one at issue in Arkansas.

“If the Supreme Court were to say states have the ability to regulate the PBM marketplace inside ERISA plans…it would give states an almost unlimited ability to force payers to pay a rate [to pharmacies] they deem sufficient,” Myers says. Independent pharmacy lobbies generally are quite powerful in states, and would demand higher rates, he says, adding that this would lead to higher drug prices overall.

If the Supreme Court rules that states can’t directly regulate PBMs, he adds, states may try to regulate them via insurers instead, and “stop attacking PBMs directly.” He says this is the more likely scenario, and something the nine justices could be keeping in mind as they consider this case.

“If the PBMs win, the precedent it sets is that states have no ability to control” them under ERISA plans, Myers says. “The only way you can do it is by going to the actual payer and saying, ‘This is a requirement for offering insurance in my state.'”

Radar on Market Access: Kansas Works Out Medicaid Expansion Deal

January 21, 2020

Kansas Gov. Laura Kelly (D) and Republican Senate Majority Leader Jim Denning on Jan. 9 said they’d reached a compromise proposal to extend Medicaid coverage to an estimated 130,000 more low-income Kansans, AIS Health reported.

Kansas Gov. Laura Kelly (D) and Republican Senate Majority Leader Jim Denning on Jan. 9 said they’d reached a compromise proposal to extend Medicaid coverage to an estimated 130,000 more low-income Kansans, AIS Health reported.

If approved, Kansas will pursue a full expansion of Medicaid to 138% of the Federal Poverty Level (FPL) with a 90/10 funding match. The state will also seek Section 1332 waiver approval to establish a reinsurance program and Section 1115 waiver approval to transition individuals whose incomes fall between 100% and 138% of the FPL from Medicaid to the exchange no later than Jan. 1, 2022, although expansion is not dependent on those waivers. If CMS denies either waiver, full Medicaid expansion will be implemented on Jan. 1, 2021, according to a summary of the pending legislation.

Kansas would be the 37th state to expand Medicaid. Ballot initiatives are pending in Missouri and Oklahoma, while voters in Nebraska and Utah have already approved expansion. The 10 remaining non-expansion states are largely concentrated in the South.

According to a summary of the pending Kansas legislation, the compromise proposal would feature a “robust work referral program,” “modest” premiums of up to $25 per month for an individual (or $100 per family) and no lockout provisions. But the expansion deal does not include work requirements.

Compared with other states that have attempted to require able-bodied expansion enrollees to seek work or other volunteer activities or risk losing their Medicaid coverage, the Kansas tactic is “a kinder, gentler approach to work,” remarks Jerry Vitti, founder and CEO of Healthcare Financial, Inc.

In a Jan. 9 research note from Evercore ISI, securities analyst Michael Newshel noted that if the approximately 130,000 additional lives that would be covered by expansion were split evenly among the state’s three contracted MCOs — which are units of Centene Corp., CVS Health Corp.-owned Aetna and UnitedHealthcare — they would each gain roughly $250 million in annual revenues.

Radar on Market Access: State Lawmakers Tee Up Bills on PBMs, Drug Pricing This Year

January 16, 2020

State lawmakers will continue to focus on the cost of prescription drugs as the 2020 legislative season gets underway, potentially advancing measures to require the disclosure of manufacturer drug pricing information and bills to limit or eliminate the role PBMs play in state Medicaid programs, AIS Health reported.

State lawmakers will continue to focus on the cost of prescription drugs as the 2020 legislative season gets underway, potentially advancing measures to require the disclosure of manufacturer drug pricing information and bills to limit or eliminate the role PBMs play in state Medicaid programs, AIS Health reported.

However, the abbreviated length of the election-year legislative sessions, plus some unexpected hiccups in states that already have passed bills on those issues, could limit how much actually gets done at the state level in 2020, legislative observers say.

“We expect considerable action this year, but it is a short session in most states, which limits the number of bills that will be considered,” says Trish Riley, executive director of the National Academy for State Health Policy. “We expect to see bills that address prices, address price gouging [and] allow importation. Several states may advance bills to allow a buy-in to public programs and the ability to bulk purchase drugs.”

In recent years, state lawmakers have been looking into managed care programs and their drug spend, turning to their PBM contracts as a source of potential savings, says Matt Magner, director of state government affairs for the National Community Pharmacists Association. West Virginia, for example, decided in 2017 to carve out its pharmacy benefits from its Medicaid program, Magner says, noting, “they saved $54 million in the first year they did that.”

Still, the pace of state legislative action regarding PBMs may not be as brisk in 2020 as it was in 2019. Riley says that PBMs already have been the subject of considerable state action, so it’s not clear how many more states will consider bills on PBM issues in 2020. “We may see several more states eliminate or deeply regulate PBMs in Medicaid and develop more enforceable contracts to ensure discounts are passed through,” she says.

Drug pricing likely will stay in the news, says Jeff Myers, founder of OptDis, but he anticipates a slowdown in drug price transparency legislation, in part because states that have approved such legislation are running into roadblocks in implementation.

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?”

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.