Pharmalot: The proposed acquisition is raising various competition concerns. What are yours? Gay: Any time we have a company that reaches 50 percent or more in distribution reach, we‘re talking about the possibility of a monopoly or such leverage that it could eliminate access to drugs. Health plans have to have access to drugs in order to provide services. If you have a PBM that has 50 percent or more of the marketplace on the PBM side of the specialty side – and, in this case, they both own a specialty pharmacy – you’re talking about a potentially tenuous situation where a monopoly may emerge. We know from the past that when a PBM had exclusive distribution of a drug, they raised the cost. And part of our concern is that this deal may eliminate the availability of a drug by simply increasing the cost. A PBM can continue to provide a drug but turn around and raise the cost.
Pharmalot: Okay, so if the merger is approved, you’re saying all bets could be off. Can you offer an example, though? Gay: So a PBM has far-reaching influence for guiding formulary decisions and establishing benefits. And the PBM can exert influence on the cost by being the sole provider of a single drug. A number of years ago, we saw a PBM approach the manufacturer of Acthar Gel, which is used for MS, and got an exclusive distribution arrangement. The PBM then increased the price by 400 percent and, by doing so, they made it more difficult for a health plan to include it in the formulary and keep the co-pays down…These types of tactics are used in order to drive other people out, but won’t benefit anybody else. We’ve seen these kinds of activities from PBMs – but it shuts down competition, costs go up, access becomes harder and nobody wins.
Pharmalot: You make a point of noting that Express Scripts recently found that spending on specialty pharmacy last year rose almost 20 percent, compared with less than 2 percent of other prescription drugs, and will grow more (here is the report). So your point is that if a merged company controls more of that growing pie, costs will be harder to control. Gay: Yes, if you’re talking about controlling costs, I don’t believe having a specialty pharmacy attached to a PBM is effective at lowering costs. The point of the Express Scripts trend report is that specialty pharmacy is a growing segment of spending and as an industry, we’ve not effectively managed that cost down by using a PBM model. Part of the solution is to create a competitive model to keep one player from being the only provider. But approving the merger would create leverage over more than half of the market. It will be very difficult to work with them. You’ll have to deal with it or walk away from more than half of the patient population. Remember, that they will sell benefits administration, mail order and specialty pharmacy services to health plans. That’s a lot of control.
When Express Scripts was a stand-alone company with a mail order operation, they were pretty easy to work with. But then they purchased CuraScript (in 2004) and got into specialty pharmacy. We started competing, rather than partnering. They had a subsidiary that was juxtaposed with their networks. So a number of specialty pharmacies were terminated from their agreements or not allowed in networks. In my conversations with Express Scripts, one thing they told me is that they don’t have a specialty network. They have a single provider. They have CuraScript. So if you have a health plan, it’s a single source for specialty pharmacy. The leverage takes away choice for individual patients. The optimal consumer landscape is where they have more than one choice.
Think of it this way. If they goof up (in filling a prescription), there’s no choice. You can’t make a change. And you could say the same thing for the payer, too. If the consumer had a health plan network, but there was always one physician or one specialist to choose from, but you were not pleased and you had no other choice, would you be satisfied? A health plan doesn’t offer a single dentist or gynecologist. This is one of the few areas, maybe the only area that I can think of, where consumer or patient doesn’t have that option…
Pharmalot: What kind of vibes are you getting from the FTC? Gay: We’ve had three meetings with different (FTC) commissioners and so we have already contact on this particular issue. We previously had multiple contacts with the entire commission on assorted antitrust and consumer protections. I can’t discuss specifics, but our relationship has been ongoing.
1 Comment
Thanks for posting, Ed. Here in Maine, Anthem, a division of Wellpoint is THE monopoly insurer in the small business, individual and state employee plans. PL readers might recall that we have a new republican legislature and they are reaching out to Maine citizens by trying to impose a new state law that allows PBM to drug switch and/or charge captive policyholders what the (monopoly) market will bear. The republican tea party health care reform initiative creates a new tax on policyholders who choose to buy individual, self funded, small business and teacher union health plans.
If the combining of Wellpoint's Next Rx and Expres Scripts systems is ANY indication of how the merging of Medco and Express Scripts systems would be, it will be a disaster.
During the conversion proces last year, drug billing information did not transfer to the new combined system. Anthem failed to notify pharmacies and policyholders that they were being charged but were not being reimbursed. These companies just allowed independent pharmacies to dispense and/or take policyholder money and would not return amounts legally owed to the pharmacy or policyholder. Anthem claimed that they did not have the internal systems to track drugs and money, and then they claimed that it was Express Scripts fault. Express Scripts claimed that it was Anthem's fault. Reminds you a little of the relationship between certain house and the senate politicians.
Also, given their monopoly status in the individual and small business markets, Wellpoint Anthem policyholders individual and small business policyholders might be most at risk. I seem to recall that a lot of these plans automatically were put into a ten year contract between Wellpoint and Express Scripts as part of the sale.
Under new health care reform regulations, insurers are required to to have an individual and small business policy medical loss ratio of 85%. Basically, 85% of premiums must be used to pay claims. Note that Maine was forced to opt out, our insurance superintendent resigned, Wellpoint managed to keep their 67% MLR ratio.
It concerns me that a combined Express Medco PBM could undermine the the intent of the MLR ratios by charging certain plans increased amounts for key drugs. In addition, it concerns me that the combined company would leverage their combined weight to under-reimburse or otherwise undermine smaller competitor pharmacies. This could lead to patient safety issues and might undermine strategies out into place to lower health care costs.
As we move forward with health care reform, policyholders might be subsidized by taxpayers in theform of an insurance premium rebate. As Maine moves forward with its Republican Tea Party health care reform intiative, Maine citizens will be forced to pay BOTH state and federal taxes to subsidize certain policyholders and or potentially, over-billed prescription drug amounts.