Wednesday, March 31, 2021

Drug Channels News Roundup, March 2021: Sanofi’s Gross-to-Net Bubble, Express Scripts Rebates, Health Insurance Hustle, and Vertical Integration Illustrated

Spring has finally reached our worldwide headquarters here in lovely downtown Philadelphia. (See photo at right.) Before your allergies kick in, please inhale this month’s selection of noteworthy news stories:
  • Sanofi: Drug prices drop, but patient costs increase
  • A new rebate disclosure from Express Scripts
  • The health insurance hustle
Plus, a 2021 update to my infamous chart of the seven biggest vertically integrated organizations that combine insurers, PBMs, specialty pharmacies, and healthcare providers.

P.S. Join the more than 11,400 followers of my daily links to neat stuff at @DrugChannels on Twitter. You can also join my more than 16,000 followers on LinkedIn.

Prescription Medicine Pricing: Our Principles and Perspectives (2020), Sanofi

Sanofi has updated its annual report on list vs. net drug prices. For 2020, Sanofi reported that its average list prices rose by a paltry 0.2%—but that its average net prices fell by -7.8%. It’s the fifth year for which net prices declined. Sanofi’s gross-to-net bubble—the dollar gap between its gross sales at list prices and its sales at net prices after rebates and other reductions—grew to $14.6 billion, up by 5% from the 2019 figure. Total rebates and discounts accounted for 54% of gross sales.

Sanofi has also disclosed the following updated pricing trends for its insulin products:

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Alas, patients did not benefit from the lower prices. Consider Lantus. Sanofi reported that Lantus’s net price declined by 45% from 2012 to 2020. However, patients’ out-of-pocket costs for Lantus rose by 82% over the same period.

Sadly, there are still many drug pricing flat earthers (#DPFE) who refuse to follow the data and wake up to reality.

Four other manufacturers regularly release comparable data. I’ll post a detailed review next month.

Cigna Investor Day 2021, Cigna

Over time, a growing share of plan sponsors are receiving 100% pass-through of the rebates negotiated by their PBM. (See Section 9.1.1. of our new 2021 Economic Report on U.S. Pharmacies and Pharmacy Benefit Managers.)

During Cigna’s recent investor day, Express Scripts revealed that more than 75% of its clients have full pass-through rebate arrangements for 2021, compared with fewer than 50% of its clients before 2018. Here’s the small disclosure buried on page 80 of Cigna’s presentation deck:

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It’s an important disclosure, though we’re left wondering how “rebates” are defined in this chart. I presume that the rebate amounts exclude administrative and service fees paid to Express Scripts and the Ascent Health Services business. This reflects how the PBM profit is evolving, which I highlighted during last Friday’s webinar.

Plan sponsors typically use rebates to offset non-drug healthcare costs and reduce general premiums, rather than offset the prices paid by patients whose prescriptions generated the rebate funds. In 2018, Express Scripts tried a new formulary model, but it appears to have limited adoption. At the time, Express Scripts even told me that some of its clients are “addicted to rebate checks.” These issues partly explain why the cost of Lantus could decrease, while patient costs increase.

How Health Insurance Became America’s Biggest Hustle, Forbes

A cynical and darkly funny look at why U.S. health insurance has become three-card monte—with American workers as the marks. Worth reading.

Vertical Business Relationships Among Insurers, PBMs, Specialty Pharmacies, and Providers, 2021, The 2021 Economic Report on U.S. Pharmacies and Pharmacy Benefit Managers

Section 12.4.1. of our new pharmacy/PBM report updates our analyses of insurer/PBM/specialty pharmacy/provider organizations within U.S. drug channels.

The chart below appears as Exhibit 210 in the report. It provides an updated illustration of the major vertical business relationships among the largest companies.

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Various transactions have combined into companies that offer health insurance with PBMs that operate specialty pharmacies. Over the past three years: 
  • Anthem formed IngenioRx
  • CVS Health acquired Aetna
  • Cigna acquired Express Scripts
  • Both OptumRx and Centene acquired the largest independent specialty pharmacies. 
A complex web of pharmacy and PBM relationships also ties together some of these organizations. For example, Cigna’s Evernorth business founded Ascent Health Services, a Switzerland-based group purchasing organization (GPO) that handles rebate negotiations for Express Scripts’ PBM business, Kroger Prescription plans, and a portion of Humana and Prime Therapeutics businesses.
This is the most popular chart I have ever created. Hope you appreciate the 2021 edition—though you may not enjoy the growing influence and impact of these vertically integrated organizations.

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