- Anthem Inc. plans to create its own pharmacy benefit manager (PBM) in a move that will cut ties with the big insurer's current partner, Express Scripts Holding Co.
- The new PBM, dubbed IngenioRx, should come in 2020. Anthem has also signed onto a five-year agreement with CVS Health Corp. that will provide prescription fulfillment and claims processing services, as well as other benefits like larger scale. The agreement is slated to begin on Jan. 1, 2020, after Anthem's contract with Express Scripts expires.
- On a Wednesday investor call, Anthem leadership said the pivot will save an estimated $4 billion annually once IngenioRx becomes fully integrated — which should come no later than Jan. 1, 2021.
Anthem's decision follows months of intense litigation with Express Scripts. Last March, the insurer filed a lawsuit against its PBM partner claiming didn't negotiate new discounts and rebates in good faith. As a result, Anthem concluded that Express Scripts owed $13 billion in pricing concessions for the remainder of their contract, along with $1.8 billion if Anthem decided to end the contract and other compensation.
Express Scripts, however, contended that the fault lies with Anthem, and launched counterclaims explaining how the insurer was the one who breached contractual obligations.
Developing IngenioRx — and, perhaps even more so, teaming up with Express Scripts' rival CVS — showcases that the companies clearly haven't worked out their differences.
"I do believe that we're completely aligned with CVS and, importantly, we've got significant market-leading pricing that will put us in the position to again grow within our core business as well as beyond that," Brian Griffin, the president of Anthem's commercial and specialty business division, said on the Oct. 18 call. "So I'm obviously very excited about that. But we have the financial and operational commitments from our new partner, CVS, that really puts us in a best-in-class contract and ability to compete."
Investors appeared to share that excitement too. Anthem shares opened at $190.38 apiece on Wednesday, up 1.6% from the prior day's close. The company's stock continued to rise through the day, though, hitting a high of almost $200 per share.
Shares also rose for all three major U.S. PBMs: Express Scripts, CVS and UnitedHealth Group Inc.
Anthem executives anticipate IngenioRx will help optimize the company and provide patients with lower healthcare costs, in addition to providing billions in cost savings. As for Express Scripts, the PBM's shares sunk earlier this week when it indicated the Anthem partnership would likely fizzle. According to its last 10-K filing with the Securities and Exchange Commission, contracts with Anthem and the U.S. Department of Defense account for 29% of Express Scripts revenue in 2016 and 2015.
"Our new PBM is committed to transforming a complex and ambiguous industry. Through the creation of IngenioRx, we're expecting to realize a few key benefits," said Anthem's Griffin, pointing first to lowering total healthcare costs.
"Pharmacy costs continue to rise, and our new PBM will be focused on managing the total cost of healthcare to improve affordability for our members. By aligning incentives appropriately across the value chain to focus on the highest quality healthcare with the lowest net cost, we have the opportunity to take a leadership role in addressing the persistent challenges faced by our members," he explained.