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Secret Discounts Kept Soaring Drug Bills Down, Says Middleman

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Middlemen that negotiate drug discounts are under fire from drugmakers who say that secret rebates aren’t always shared with patients.

But Express Scripts Holding Co., one of the biggest pharmacy-benefits managers, says the drug-price deals it cuts behind closed doors are saving consumers a lot of money.

In a new report, the company said U.S. drug costs for its employer, union and other commercial plans rose just 1.5% last year, on a per-person basis, the smallest increase in the more than two decades the company has been measuring it. Costs declined for nearly half of its commercial clients, when rebates are included.

Without middlemen, drugmakers “would charge whatever they want,” said Glen Stettin, an Express Scripts senior vice president . “We’ve taken a lot of their pricing power away.”

(Related: Anthem Breaks With Express Scripts, Will Start Own Drug Plan)

Stettin credited the slower growth in drug costs to aggressive steps Express Scripts has taken to secure greater discounts for high-cost drugs, including expensive injected anti-inflammatory drugs, a category that includes blockbuster arthritis treatment Humira.

Express Scripts has developed programs that make drugmakers negotiate separate discounts depending on what disease a drug is treating, creating more price competition for drugs that are approved for multiple uses. For many drugs, the company has inflation-protection contracts that force drugmakers to give back money if they take an unexpected price hike.

Even with better discounts, inflammatory-drug spending rose 15.3% in the company’s commercial plans last year thanks in part to higher utilization. But per-person spending on diabetes drugs, an area of particularly aggressive discounts, climbed just 2.1 percent.

Express Scripts is preparing for the upcoming loss of its biggest client, health insurer Anthem Inc. Following a long-running feud with Express Scripts over whether the benefit manager was overcharging it, the insurer decided last year to set up its own pharmacy-benefit management unit when the companies’ current contract expires at the end of 2019.

Express Scripts shares about 90% of the rebates it obtains with its clients, which include employers, unions, and health plans, Stettin said, and has programs that allow clients to pass on a portion of the rebates to patients at the point of sale.

— Read Long-Dreaded Threat to Drug Middlemen Draws Closer on ThinkAdvisor.

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