Business

Not all insurers worried about payment change

Cigna CEO doesn't expect immediate challenges from drug-rebate overhaul

Bloomberg

“We are not sitting in a situation where we are trying to preserve the status quo in any aspect of our business,” says David Cordani, president and CEO of Cigna.
Bloomberg “We are not sitting in a situation where we are trying to preserve the status quo in any aspect of our business,” says David Cordani, president and CEO of Cigna.

A plan unveiled by the Trump administration to lower drug costs by banning some payments to middlemen could alter the way prescription medications are bought and sold. But some companies don’t expect big changes for now.

Cigna CEO David Cordani said the proposal won’t affect the health insurer’s newly acquired pharmacy-benefits business.

Even if rebates were to disappear broadly, Cordani said the plan wouldn’t affect Cigna’s profit margins, as the company already offers a variety of payment models for its health plan and employer clients.

The business “is not oriented” around whether rebates stay or go, he said.

“We are not sitting in a situation where we are trying to preserve the status quo in any aspect of our business,” Cordani said in an interview.

Nevertheless, regulators say that changing the government’s stance eventually will lead to changes in the broader health care marketplace. President Donald Trump’s top health official said he thinks that private health plans will follow the government’s lead.

“We believe it will change the course of conduct in the commercial space,” Health and Human Services Secretary Alex Azar said at an event in Washington, D.C., in January.

Cigna shares declined after the health insurer forecast weaker-than-expected earnings for 2019. The company offered the outlook in its first earnings report since closing its $68 billion purchase of pharmacy-benefits manager Express Scripts in December.

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The Express Scripts deal gave Cigna a large in-house manager of drug plans to rival similar businesses run by UnitedHealth Group and CVS Health, which has bought health insurer Aetna.

By owning a division that bargains with drugmakers on prices, insurers hope to hold down their costs. Pharmacy benefit managers, or PBMs, negotiate discounts on prescription drugs in exchange for placing medications on their lists of approved therapies for plan members.

But critics say that the savings aren’t always shared with patients.

Trump administration officials targeted the rebates PBMs collect from drug manufacturers. Azar called them “a hidden system of kickbacks to middlemen” in announcing a plan to ban them from federal health programs.

The proposal would rein in ten of billions of dollars in rebates that drugmakers pay to PBMs who manage Medicare and Medicaid prescription-drug plans. The move stands to upend how a large part of the prescription-drug market functions.

The changes are “potentially devastating to the current pharma ecosystem,” said Eric Coldwell, an analyst with Baird Equity Research. “The U.S. health care system is a sand castle and the tide is coming in.”

Some of Cigna’s PBM rivals have been moving away from relying on rebates from drugmakers.

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