Anthem Inc.’s New PBM Predicted to Bring Cost Savings to Employers

Insurance giant Anthem Inc. announced this month that it will cut ties with pharmacy benefits manager Express Scripts Holding Co. and is moving to create its own PBM company. It will collaborate with  another major PBM, CVS Health, to form a new PBM called IngenioRx in 2020 when Anthem’s contract with Express Scripts ends.

IngenioRx will drive lower prices and give the company the opportunity to offer transparency throughout the pharmaceutical supply chain, according to industry publication Modern Healthcare . Lack of transparency is a common complaint employers have about PBMs.

It’s still unclear how the cost savings that Anthem expects will translate to lower costs for employers or how truly transparent their model will be, according to Cheryl Larson, vice president of the Midwest Business Group on Health.

[Also read: “Contracting a Cure for Prescription Drug Costs”]

“Anthem has a great opportunity to be disruptive and change the status quo at a time in the market when employers are frustrated but motivated and ready for change,” said Larson in an email interview. “Employers don’t have an open checkbook and I believe we are at a tipping point where they will start to demand change.” If Anthem’s model can curb controversial practices currently in the PBM market, then it could pass those savings on to employer clients.

CVS will manage claims processes and handle drug delivery, according to Modern Healthcare. Meanwhile, Anthem will take over other tasks. It was have full responsibility of creating its own formulary, a list of brand name and generic prescription drugs that employees covered by a specific health care plan can use, and making sure patients take drugs appropriately.

This will be a move in the right direction if Anthem can “effectively integrate medical and pharmacy data and reporting, drive improved patient outcomes and lead to a cost-effective and transparent model,” said Larson.

IngenioRx will join industry heavyweights Express Scripts, CVS Health and Optum Rx, which control about 78 percent of the PBM market. It is unclear how much market share IngenioRx will have, but the new PBM will broaden its customer base outside of Anthem customers.

“IngenioRx will serve customers of Anthem-affiliated health plans, as well as non-Anthem customers, with a seamless, integrated experience by taking Anthem’s new model to the national marketplace,” said an Anthem spokesperson, adding that the agreement with CVS Health is a five-year deal.

The impact on consumers depends on Anthem’s true intentions, according to one CEO in the health care industry.

The new PBM will have to distinguish itself from its competitors, including CVS’ Caremark division, if Anthem is seeking to lower pharmacy costs for members and consumers, said David Henka, CEO of RxTE Health, a health care company that works with employers to implement reference pricing, in an email interview.

“Anthem’s recent decision to launch its own PBM has been positioned as a way to increase savings and transparency for consumers, but the traditional PBM business model is based on cutting deals with manufacturers and pharmacies seeking to build market share or tweak the financial performance of specific drugs using the mechanisms of drug pricing, tiering, and co-pays,” he said.

If Anthem’s decision is simply a way to create “a more closely held middle man” to increase profits, then this move will likely mean little for consumers, employers and other benefits sponsors, he said.

Anthem said it wants to provide affordable, competitive products that produce better health outcomes for plan members, according to an Anthem spokesperson.

“Anthem’s move to create a new PBM captures a valuable opportunity to resolve widespread customer frustration with a market that is too complex,” Anthem said in a statement. “IngenioRx will lead the industry forward by focusing on the member experience, including better health outcomes, while offering customers lower costs.”

“As we have gone through the process of evaluating many PBM options in preparation for the expiration of our current contract, we determined that our scale and experience best position us to deliver an innovative solution to current customers and the market overall,” Anthem added.

Andie Burjek is a Workforce associate editor. Comment below or email editors@workforce.com