It’s a tough time to be a middleman in the U.S. pharmacy business.

Jeff Bezos is teaming up with two fellow billionaires in what could be a prelude to bigger plans to undercut the dominance of intermediaries in the country’s complex health care system. Pharma companies are trying to shift the blame onto them for soaring drug prices. And costly new medicines are getting approved at a record pace pace by regulators in Washington.

In response, the middlemen known as pharmacy-benefit managers, or PBMs, are getting more aggressive with the tactics they use to control costs. Express Scripts Holding Co., CVS Health Corp. and UnitedHealth Group Inc.’s OptumRx are increasingly denying coverage of some drugs, negotiating discounts on others or requiring high co-pays for expensive treatments.

“It’s becoming more common that we have to play the gatekeeper role,” said Steve Miller, chief medical officer of Express Scripts, which manages prescription-drug benefits for more than 100 million people. “It’s becoming increasingly challenging because we have record numbers of specialty drugs coming to the market.”

(Related: Economist: Hospital, Payer Consolidation Hurting Market)

The strategy has had some success. Express Scripts said clients’ drug costs rose 1.5% last year, the slowest in more than two decades. For 2018, Express Scripts and CVS each refused to cover about 150 drugs — typically in cases where they negotiated a better deal for alternatives.

Tactics Replay

The tension between PBMs and drugmakers is likely to intensify for two sets of promising drugs coming soon: treatments that help prevent migraines, and drugs for a little-known but widespread liver disease called NASH. PBMs and health insurers are turning their might on those two diseases because they affect broad populations. Payers say they’ll use the competition to negotiate discounts — a replay of the tactics they used with a new generation of costly hepatitis C treatments starting in 2013.

That would pressure Intercept Pharmaceuticals Inc., Gilead Sciences Inc. and Allergan Plc, which all have NASH trials under way. About 3% to 12% of American adults are estimated to have NASH, a condition most commonly found in people who are overweight or have diabetes.

“The population with NASH is large, so any new therapy in that disease is a definite ‘watch out’ for us,” said Eric Estes, senior director of pharmacy services at insurer Independence Blue Cross.

Migraine Prevention

In migraine prevention, Amgen Inc., Eli Lilly & Co., Alder Biopharmaceuticals Inc. and Teva Pharmaceutical Industries Ltd. are working on new therapies — with at least three expected to reach the market within a year.

CVS store (Photo: M. Spencer Green/AP)

(Photo: M. Spencer Green/AP)

“Having four of them will allow us to be able to pit them against each other more effectively,” said Miller. “Even if they’re not exactly the same, you can have more negotiations.”

The drugmakers are gearing up for the negotiations. Intercept said its NASH drug can help prevent patients from undergoing costly liver transplants, and that it plans to work “collaboratively with payers and other health care stakeholders to deliver effective therapies that improve patient outcomes.”

Lilly and Amgen said they may pursue “value-based” contracts tied to how well their migraine drugs work. Amgen will make its case in part by showing how it increases worker productivity, said Josh Ofman, senior vice president of global value, access and policy at the drugmaker.

‘Competitive Space’

“It will be a competitive space,” Ofman said. “So we know we’re going to need to stand by the value of our product, demonstrate the effectiveness of our product and be a good collaborative partner.”

Gilead, Allergan, Teva and Alder declined to comment.

As the outcry over high drug prices intensified in recent years in the U.S., the pharmaceutical industry has blamed PBMs for not always passing on to patients the rebates they negotiate. The White House, in a recent report, criticized the middlemen’s market power and the opacity of their contracts.

To make it easier for doctors to figure out what’s covered, and at what price, some PBMs and insurers are working with partners to display that information in the physicians’ computer systems. That can help prevent surprises and frustration when patients pick up their prescriptions.

“It’ll say, have you tried this generic therapy? That would be Y amount. Or here’s a favored drug for that patient’s PBM, which would be Z amount,” said Troy Brennan, chief medical officer at CVS.

Hands On

Priority Health, which covers about 800,000 people, is taking a hands-on approach. The Michigan insurer has pharmacists call patients who take large numbers of medications or are seeing multiple specialists. The program helps reduce unnecessary treatments and move patients onto generic or cheaper therapies. The company saved $34 million in its commercial and Medicare businesses last year, a number that will rise to almost $40 million this year.

“We’ve spent a lot of time trying to sort through some best practices that help us manage the cost,” said James Forshee, the insurer’s chief medical officer.

—With assistance from Anna Edney.

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