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To integrate or not integrate health care and pharmacy benefits?
The announcement that retail pharmacy giant CVS Health Corp. is seeking to purchase one of the nation's largest health insurers, Aetna Inc., has led health care analysts to ponder the likely effect on both consumers and employer-sponsored health care—assuming that the merger goes through.
Big Employers May Forgo Separate Prescription Plans
The merger would change the way many major U.S. corporations buy health coverage for employees and raise new questions over the cost of those benefits, benefit consultants said. Most national companies employing more than 20,000 people keep their prescription drug benefits separate from medical coverage. They believe they are paying less by shopping those contracts around to competitors within each industry.
CVS and Aetna argue that their deal will lower health care costs for employees of their large corporate customers, giving the company greater clout to negotiate down drug prices and better manage the use of those medicines. Jim Winkler, senior vice president for health at consultancy Aon, expects this will lead large companies to turn to their insurer for pharmacy benefits the same way midsize companies have.
If CVS Buys Aetna, America's Pharmacy Choices Could Narrow
Health insurers and employers say they need to cull lists of doctors, hospitals and pharmacies so they can more closely monitor costs and quality, making sure health plan subscribers get a provider that helps them meet certain health outcomes and measures. "We have seen employers move to smaller networks for years," said David Dross, HR consultancy Mercer's national managed pharmacy practice leader. "While rising pharmacy costs continue to be a concern for employers, other strategies such as specialty drug management, formulary management, and negotiation of newer, more aggressive pricing terms have been more prevalent," said John Malley, a senior vice president who leads Aon's U.S. pharmacy team. (Forbes)
The CVS-Aetna Gamble Not Built Around Doctors
CVS and Aetna say that by integrating pharmacy-benefit and medical coverage, as well as offering expanded health-care offerings at its stores, the combined company will be able to bring down costs and fill gaps that physician practices may not cover. For instance, the tie-up would result in better care for patients with chronic conditions and fewer expensive, avoidable events such readmission to the hospital, executives said.
But no major health-care company has tried to build a vertical system around the combination of drugstores, insurance and pharmacy-benefit management, the main businesses of CVS and Aetna, experts said. The merged company will lack a strong foundation of its own doctors, who make many of the decisions that influence both costs and quality of care. (Wall Street Journal)
Prescription Drugs May Cost More with Insurance than Without It
Some consumers are finding they can get a better deal on prescription drugs by leaving their insurance cards at home. Behind the seemingly simple act of buying a bottle of pills, a host of players—drug companies, pharmacies, insurers and pharmacy benefit managers—are taking a cut of the profits, even as consumers are left to fend for themselves, critics say. Although there are no nationwide figures to track how often consumers could have gotten a better deal on their own, one industry expert estimated that up to 10 percent of drug transactions involve such situations. (New York Times)
A Prescription for Soaring Drug Costs
Employers should ask themselves the following questions about their current pharmacy benefits to determine the potential for savings:
If you answered 'no' to any of these questions, it makes sense to perform a review or audit of your pharmacy spending.(The SHRM Blog)
[SHRM members-only toolkit: Managing Health Care Costs]
End of the Stand-Alone PBM?
CVS's move may shake up an already changing pharmacy benefits landscape. In October, the insurer Anthem announced its intentions to part ways with the pharmacy benefits management (PBM) firm Express Scripts. Instead, it will partner with CVS to develop its own pharmacy management business. Anthem would not be the first insurer to take on this role internally. The insurer UnitedHealth Group also runs a leading PBM business, OptumRx. And CVS's purchase of Aetna would also remove it as a middleman acting between that insurer and drug companies.
"While it's still early, the moves by Anthem and Aetna have the feeling of the beginning of the end of the stand-alone pharmacy benefits manager business," said Craig Garthwaite, a health economist with Northwestern University's Kellogg School of Management. These insurers, and UnitedHealth Group, have concluded that outsourcing pharmacy benefits management may not serve their interests. This removal of profit-taking middlemen could be good for consumers in the short run if it leads to lower drug prices. (New York Times)
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