Radar on Drug Benefits

Although Centene Corp.’s decision to contract with Cigna Corp. rather than CVS Health Corp. for PBM services loomed large during major health insurers’ third-quarter earnings conference calls, it wasn’t the only PBM-related discussion worth noting. 

For example, during Elevance Health, Inc.’s earnings call on Oct. 19, executives offered some insights about how the firm’s in-house PBM IngenioRx is carving out a niche in the marketplace. 

“We are, as you know, trying to be a different PBM,” Peter Haytaian, Elevance’s president of Diversified Business and IngenioRx, said in response to an analyst’s question about the PBM’s progress selling its services to self-insured employers that already contract with Elevance.  

Centene Corp. recently announced that it will shift the bulk of its pharmacy benefits business to Cigna Corp.’s Express Scripts PBM; while discussing Cigna’s latest quarterly results, the carrier’s executives told Wall Street analysts that the deal will likely be a drag on profitability in 2023. Health care insiders tell AIS Health, a division of MMIT, that regulatory compliance, temporarily elevated staffing needs, tech-related capital costs and manufacturer contracting transitions are the likeliest sources of overhead that the deal will generate. 

Cigna executives told investors during a Nov. 3 conference call that the Centene deal, which analysts generally praised, would have some start-up costs. Centene Chief Financial Officer Drew Asher said during an Oct. 25 conference call with investors that “we have about $40 billion plus or minus of gross [drug] spend, and almost all of that is [currently] with Caremark,” CVS Health Corp.’s PBM. Cigna CEO David Cordani said that the deal will cover “approximately 20 million Centene members.” 

In an executive order released Oct. 14, the Biden administration directed the CMS Center for Medicare and Medicaid Innovation (CMMI) to “to consider additional actions to further drive down prescription drug costs,” building on the Medicare drug price negotiation stipulations of the Inflation Reduction Act (IRA). D.C. insiders tell AIS Health, a division of MMIT, that CMMI could pull old policy proposals off the shelf when it works to “test new ways of paying for Medicare services that improve the quality of care while lowering costs,” as the administration puts it. 

The executive order isn’t specific about what policies the White House would prefer CMMI look into. However, the administration will know the possibilities fairly soon: CMMI will have 90 days to develop recommendations. Per a White House fact sheet, the final product will be “a formal report outlining any plans to use the Innovation Center’s authorities to lower drug costs and promote access to innovative drug therapies for Medicare beneficiaries.” 

When it comes to Star Ratings for Medicare plans, 2023 represented a return to the status quo after CMS stopped making adjustments related to the COVID-19 public health emergency that had largely inflated plans’ performance. Stand-alone Prescription Drug Plans (PDPs) were no exception to that trend, but they also continued a phenomenon seen in prior years where their overall scores trailed that of the more comprehensive Medicare Advantage-Prescription Drug (MA-PD) plans. 

“In general, the PDP Star Ratings are somewhat lower than the average rating for MA contracts,” observes Shelly Brandel, a principal and consulting actuary at Milliman. That tends to happen every year, she adds, “so I think directionally the PDP Star Ratings have moved pretty similarly to MA Star Ratings [for 2023], but at a lower level.”