Express Scripts looks to limit rebate model, lower drug costs in 2019

Express Scripts will push patients, employers and insurers in 2019 to switch to lower-cost generic drugs rather than rebated brand-name drugs as it tries to wean them off of the rebate model, the pharmacy benefit manager announced Tuesday.

The company said its 2019 formulary, or its list of covered medications, will streamline the introduction of therapeutically equivalent alternatives to branded drugs.

Express Scripts will add approved lower-cost generics to its National Preferred Flex Formulary and exclude the branded drug, and possibly other drugs in the therapy class, from its coverage. Cash-paying patients can have immediate access to lower-priced medications while employers and health plans can still choose between the lower-priced option or the original brand, the company said.

“Our new National Preferred Flex Formulary demonstrates our flexibility to keep clients ahead of industry trends, so that they can fully leverage new opportunities to lower their prescription drug costs,” Dr. Steve Miller, chief medical officer of Express Scripts, said in a statement.

Over time, plans, pharmacies and others in the supply chain can transition to a new pricing model and the drugmaker could ultimately retire their high list price product, the company said.

Asegua Therapeutics’ authorized alternatives for Gilead’s hepatitis C treatments Epclusa and Harvoni will be the first managed through the National Preferred Flex Formulary.

The Food and Drug Administration aims to lower drug costs through a similar competition-boosting strategy that removes the barriers that prevent generic drugs from getting to market.

The Trump administration has urged the pharmaceutical supply chain to ease off the rebate model, which public officials and pharmaceutical experts argue can create perverse incentives.

A pharmacy benefit manager negotiates discounts from a drug’s list price with its manufacturer. These rebates guarantee that the manufacturer’s drug is prominently listed on the formulary.

These transactions take place behind closed doors, covered by the veil of “trade secrets.” Notably, a PBM makes money off the difference between what it charges insurers, employers or patients and what it pays the pharmacy for dispensing the medication, which can inflate list prices, critics argue.

PBMs say they share the rebates with employers and health plans, and insurers claim that money helps limit premium price hikes. But that often isn’t the case, said James Robinson, director of the Berkeley Center for Health Technology.

“In most cases, the value of the rebate goes to the PBM, which shares it with clients and does not go to the patient,” he said. “Then you have a situation where specialty drug prices are higher and the sickest patients are paying the most.”

Robinson is an advocate of reference pricing, where individual drugs are grouped by therapeutic class and the cost is limited to the price of the cheapest, or one of the cheapest, drugs in each class.

Reference pricing has helped move patients from branded to generic drugs, which can potentially reduce drug spending by 13.9%, Robinson’s research shows.

Congress has also acted on gag clauses, which prevent pharmacists from telling patients that they would save money by circumventing their insurance when the co-pay exceeds the full price of a medication.

Nearly a quarter of prescriptions covered by insurance cost patients more than they would have paid out of pocket, according to an analysis of 9.5 million insurance claims filed in 2013 by a trio of University of Southern California researchers. Overpayment totaled $135 million, the research shows.

Pharmacy benefit managers benefit from both the rebate model and gag clauses because they make money off the status quo, said Kenneth Thorpe, a professor of health policy at Emory University.

“They have incentive to keep all this hidden,” he said.

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