One of the country’s largest pharmacy benefit managers (PBMs), Express Scripts, just lost its largest customer. Anthem Inc. recently told Express Scripts that it would drop the PBM and not renew its contract when it expires in 2019. The company is already looking at proposals for a new service provider. In a statement, Express Scripts told reporters that “Anthem intends to move its business when the company’s current contract with Anthem expires on December 31, 2019, and that Anthem is not interested in continuing discussions regarding press concessions.”
Relations between the two companies have been strained. Last spring, Anthem sued Express Scripts for $15 billion in damages and demanded the ability to end its contract with the PBM. Anthem said Express Scripts was overcharging for prescription drugs by $3 billion every year, and that while it had tried to negotiate in good faith, Express Scripts had refused to do so and been persistently dishonest. The company was not benefiting from rebates that the PBM negotiated with drug manufacturers.
Anthem’s dropping of Express Scripts is one of the first signs that the emperor has no clothes. When buyers can look behind the scenes of the PBM market, they see they are getting a raw deal. Anthem was a powerful and wealthy company, so it was able to discover Express Scripts’s overcharging for drugs and failing to pass along discounts. But most businesses do not have Anthem’s impressive resources and are left in the dark. And consumers have even less recourse; the three largest PBMs control 75-80% of the market, and there is very little regulation or transparency.
This is a prime example of why consumers, business, and ordinary American need stronger PBM regulation and greater transparency in the industry. A bill introduced by Senator Ron Wyden, known as the C-THRU Act, would require PBMS in Medicare to disclose their aggregate rebates provided by drug companies and also disclose the percentage of those rebates that gets passed on to health plans and actually lower drug prices. And after two years of reporting, the law would require a minimum percent of rebates and discounts to be passed by PBMs to health plans, lowering premiums. It would also require cost-sharing for Medicare prescription drug enrollees to be based on the drug price that manufacturers and PBMs negotiated, so consumers can benefit from discounts and rebates.
While there is a great deal of work to be done, the C-THRU Act would be an excellent first step.