July 22, 2018

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Health Plans and Pharmacy Benefit Managers – Past and Future

Historically, health plans and pharmacy benefit managers (“PBMs”) have been uncomfortable neighbors. Plans provide drug coverage, but contract out the provision of such drugs to independent PBMs. PBMs in turn earn market rents by negotiating discounts (and big rebates) with big pharma, in turn offering structured medication formularies to plans.

PBMs make money when plan beneficiaries use drugs. Plans make money when they ensure efficient care of beneficiaries and attract clients. The interests of these two groups don’t necessarily align.

When UnitedHealth used Optum to set up its own PBM, other plans took notice. Now both Cigna (ExpressScripts) and Aetna (CVS) have moved to acquire or align with strong PBMs.

As the U.S. Department of Justice, Antitrust Division ponders the competitive landscape, all healthcare market participants should consider what to make of the significant modification of the competitive landscape.

Given the original move by UnitedHealth, it may be hard to quibble with the proposed responses by Cigna and Aetna. It makes sense for plans to have a more direct and timely say over the acquisition and provision of medications, an ever rising share of the U.S. health care spend.

Technologically speaking, there is significant room for innovation in the prescription delivery system.

SureScripts is a rarely recognized hub and choke point for pharmaceutical management. Owned jointly by pharmacies and PBMs, SureScripts helpfully relays medication eligibility, patient drug histories, and prescriptions between and among providers, PBMs, and pharmacies. SureScripts earns significant fees for these services, historically from PBMs and pharmacies.

But, SureScripts has arguably held back innovative efforts by plans and alternative pharmacy delivery systems to have real time input with providers on prescription decisions. As a result, communications between plans, their contracted PBMs, providers, and pharmacies, though electronic in part, have remained limited.

As plans start, acquire, or more closely align with PBMs, plans (the entities that collect and spend the healthcare dollars) may finally gain more real time input on prescribing decisions, resulting at least in a more efficient pharmaceutical spend.

Copyright © 2018, Sheppard Mullin Richter & Hampton LLP.

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About this Author

Brian M. Daucher, Sheppard Mullin Law Firm, Business Litigator
Partner

Mr. Daucher specializes in business litigation with emphasis on contract, health care, and intellectual property disputes. Mr. Daucher has represented clients in a wide range of industries including technology, consumer products, fiduciary and banking services, food and alcohol, health care, and energy.

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