Humana/Anthem PBM Venture Could Attract More Blues Plans

Humana Inc. and Anthem, Inc. are teaming up with hedge fund administrator SS&C Technologies Holdings, Inc. to create DomaniRx, a new joint venture that aims to offer a “best-in-class” PBM cloud-based claims adjudication platform. Humana will be the first customer for DomaniRx, the companies say, and industry observers predict a potential market among Blues plans and Medicare Advantage plans.

The “second generation” claims adjudication platform will leverage SS&C’s technology capabilities and will reside on SS&C’s private cloud, according to the company. SS&C already has a suite of pharmaceutical management services available, including formulary and rebate management, drug utilization management, specialty drug management, real-time benefit information at the point of care and pharmacy network optimization.

Ashraf Shehata, national sector leader for health care and life sciences at KPMG, says the partnership between SS&C, Anthem and Humana is “a pretty bold move that I call ‘leading with tech,’” which he says ultimately could result in potent new patient-facing and pharmacy tools to manage drug benefits.

“Just like we’re seeing with everything else in back-office transformation, everything is moving to the cloud,” Shehata tells AIS Health, a division of MMIT. “So why not PBM integration? When we talk about why open source [technology] is important, the platform potentially is going to be able to accelerate innovation.”

SS&C, which holds an 80.2% interest in the new company, says in a press release unveiling the venture that Humana will be the first customer for DomaniRx. Combined, SS&C plus the two insurers have invested $925 million in the joint venture, according to a document filed with the Securities and Exchange Commission.

Bruce Broussard, Humana president and CEO, said during the company’s second-quarter earnings conference call on July 28 that Humana has used SS&C as a vendor for years, and the joint venture will build on those capabilities. “We’ve tried to find partners within the industry that can help build a longer-term [PBM] utility,” he said. “And we look at the particular partnership with Anthem as the opportunity to update and really give both increased productivity, and at the same time increase the experience for members in the area of the PBM side.”

SS&C Purchased Claims Firm

SS&C does have experience in pharmacy claims adjudication: it purchased DST Systems — formerly Argus Health Systems — in 2018 in a deal worth $5.4 billion. DST Systems includes DST Pharmacy Solutions, which said it processed more than 1 billion adjusted pharmacy claims per year at the time of the acquisition.

Bill Stone, SS&C chairman and CEO, said in a statement that “the insights we will draw from hundreds of millions of claims transactions, powered by DomaniRx’s advanced processing platform, will provide participating members flexible tools, advanced analytics, and customizable programs. All while increasing transparency, accessibility and service quality for members and pharmacies.” Humana and Anthem did not respond to requests for additional information on the partnership.

“Scale and capability are the name of the game when it comes to PBMs,” says Peter Manoogian, principal at ZS Associates. “Both of these entities [Humana and Anthem] are looking to grow across segments — such as Medicaid, which we are seeing with both Humana and Anthem. To compete with the big three [PBMs], I suspect both orgs looked at each other and said, ‘We are better off doing this JV to accelerate to scale and capability, versus going it alone, thus helping both firms compete against the big three and win market share.” (The three largest PBMs by market share are CVS Health Corp.’s Caremark, Cigna Corp.’s Express Scripts and UnitedHealth Group’s OptumRx.)

The joint venture structure might enable more risk and upside sharing, which is “something that could be important if there are significant tech investments that Humana/Anthem want to de-risk,” Manoogian tells AIS Health. “It also may make it easier to secure an exclusive offering from SS&C. This could be important if this platform creates meaningful value in bids, especially in large-scale bids such as for Medicaid programs. As the platform gets built, I’d suspect that both entities will migrate business onto the platform and create better experiences for their customers.”

Differentiators Are Not Yet Apparent

However, Elan Rubinstein, Pharm.D., head of pharmacy benefits consulting firm EB Rubinstein Associates, warns that the joint venture announcement doesn’t offer any information about how DomaniRx will be better or unique when compared to other offerings in the market. “Humana is this joint venture’s first customer, per the [SS&C] news release,” Rubinstein tells AIS Health. “It is not possible from the news release to understand whether this new venture augments or replaces Humana Pharmacy Solutions. Because the news release uses hot-button words to describe the JV’s intent, it is not possible to project how it will fit into the overall landscape of PBMs.”

Shehata notes that PBMs are increasingly key to health plan strategies. “And when you think of where both Anthem and Humana are, they don’t necessarily have a major PBM acquisition that they have completed, unlike their competitors.” Anthem has created its own PBM in IngenioRx, Shehata says, but “maybe this story isn’t fully written yet.” Anthem potentially could use both IngenioRx and DomaniRx in parallel, he says, or could put a “cooperation model” in place. “It’s a parallel strategy for now, which could certainly evolve into the primary strategy,” he says.

Scale Will Determine Success

Initially, DomaniRx’s success will depend on how many covered lives are converted from Anthem and Humana, Shehata says. Next, he says, “I think the question is, are there going to be offerings that will be appealing to a Blues plan, because there are a lot of Blues plans that like to work with a Blue owner, and clearly that could be something attractive if Anthem’s in. I’d say the other thing that we’re probably going to see, since Humana’s involved in it, is there’s going to be very much a clear affinity towards Medicare Advantage product design.”

Brian Anderson, principal at actuarial and consulting firm Milliman, tells AIS Health that the partnership holds promise for something he’s pushed for a long time: trying to find a way to integrate blockchain into PBMs’ claims adjudication. In addition, he points out, most of the large claims adjudication platforms are affiliated with a PBM already. “So this seems like a good opportunity for [Humana and Anthem] to create some independence — the opportunity to essentially invest in a claims adjudication platform together means they don’t have to lease one and they can own it, control it and build it the way [they] want.”

Anderson says he sees a market for PBMs that offer faster, lower-cost claims adjudication, since in other settings, consumers have come to expect speed and the ability to compare costs of products in order to make their buying decisions. “We have the opportunity to make those decisions in pharmacy, but it creates a lot of work, and you’ve got to know how to navigate it — most people don’t.”

Shehata says advanced processing and advanced analytics will play into alignment for health plans across other capabilities. In addition, he says, the cloud-based integration platform holds promise because it potentially would enable integration across medical claims and eventually across health information in electronic medical records.

“And I think that’s really important when we talk about why this great technology holds promise, because it’s not just about traversing the pharmacy benefit, but it’s integrating it across an overall care management and care coordination platform. And at the end of the day, that is probably going to be where the real value of an innovative PBM sits in driving overall total medical costs, not just pharmaceuticals.”

Still, Anderson says building a new-and-improved cloud-based adjudication system will take a long time.

The SS&C partnership “is very early, and there are other players out there” also working on cloud-based solutions, he points out. “This is something that will be expensive for them to dive into, but there is opportunity to build it right.”