Radar on Drug Benefits

Although the fourth quarter of 2020 brought financial challenges for some health insurers due to surging coronavirus infections, the pharmacy-focused divisions of those publicly traded firms seemed to provide a universal bright spot.

Cigna Corp., for example, saw its stock prices slide after its fourth-quarter earnings came in below Wall Street’s expectations — a result the company attributed in part to COVID-19-related costs outpacing the financial benefits of deferred care. But Cigna also reported that for its health services segment Evernorth — which houses its PBM — full-year 2020 adjusted revenues increased 20% compared with 2019, reaching $30.5 billion. Those results were driven by “ongoing strong retention, the completion of insourcing Cigna volumes and organic growth, including our partnership with Prime Therapeutics,” Cigna CEO David Cordani said during the company’s Feb. 4 earnings conference call.

Pharmaceutical manufacturers likely will continue to turn to authorized generics — drugs produced by brand-name drugmakers without the brand label — as they face increased pushback against high drug prices, but payers and patients probably won’t see much benefit as a result, according to industry experts.

“I think we will continue to see authorized generics competing with traditional generics,” says Stacie Dusetzina, Ph.D., associate professor of health policy at Vanderbilt University School of Medicine. “I’m hopeful that we will see fewer signs that they are being used in pay-for-delay types of arrangements or to discourage traditional generic competition.”

With the Trump administration’s rebate rule delayed and possibly slated for repeal by Democrats in Congress, major changes in how the PBM industry distributes rebate revenue will have to come from the private sector. While a notable minority of PBMs has adopted alternative rebate models, experts say that plan sponsors’ demand for such models is muted, as they still must demonstrate that they generate more value than traditional models.

The Biden administration will suspend implementation until 2023 of the so-called “rebate rule,” a Trump administration regulation that would have revamped the Medicare prescription drug rebate system. Some D.C. insiders expect Congress to eliminate the rule before then for budgetary reasons. Meanwhile, a growing number of PBMs that deal in the commercial market have pitched plan sponsors on a 100% pass-through rebate structure, in which the PBM collects its compensation through a fee or surcharges rather than diverting a share of rebate revenue.

✦ Moderna, Inc. and Pfizer Inc./ BioNTech said on Jan. 25 that their vaccines are effective against new variants of the virus discovered in South Africa and the United Kingdom, the New York Times reported. However, the drugmakers said their vaccines are slightly less protective against the South African variant, and therefore Moderna said it is developing a booster shot against that variant as a precautionary measure. Meanwhile, on Jan. 20, President Joe Biden said the government is aiming to vaccinate 300 million Americans by early fall. Read more at https://nyti.ms/36llVuq.

✦ The Government Accountability Office (GAO) found that the Dept. of Veterans Affairs (VA) pays far less than Medicare Part D for most prescription drugs. According to the report, the VA “paid, on average, 54 percent less per unit for a sample of 399 brand-name and generic prescription drugs in 2017 as did Medicare Part D, even after accounting for applicable rebates and price concessions in the Part D program.” The VA’s average price paid for generics is 68% lower than Medicare prices and 49% lower for brand name drugs. This may be due to key structural differences in the programs, suggested the report. Read more at https://bit.ly/2M9ltJ0.