The vernal equinox also brought a surprising surge of industry updates and noteworthy news you won’t want to miss:
- Blue Shield of California provides a puzzling update to its PBM unbundling effort
- The Stelara biosimilar price war begins
- My reaction to Optum Rx’s pharmacy reimbursement announcement
- A valuable Follow the Dollar primer
P.S. Join my more than 61,000 LinkedIn followers for daily links to neat stuff along with thoughtful and provocative commentary from the DCI community.
Coming soon: PBM Industry Update: Trends, Challenges, and What’s Ahead. Our first webinar of the year will tackle the most controversial drug channel participants. Join Adam J. Fein, Ph.D., on April 4, 2025, from 12:00 p.m. to 1:30 p.m. ET, as he shares his expert analysis on critical industry developments. Click here to learn more and sign up.
What Does Pharmacy Care Reimagined Mean for Blue Shield Members?, Blue Shield of California
Last August, Blue Shield of California promised "$500 million in medication savings” with its widely-reported attempt to unbundle the PBM model. I was a bit skeptical.
So, how’s it going?
In January, Blue Shield quietly implemented the model. Instead of relying solely on CVS Caremark, it now uses services provided by eight separate businesses:
What’s more, Paul Markovich, president of Ascendiun, Blue Shield of California’s new nonprofit parent company (huh?), recently revealed that the company has already “spent nearly $100 million getting our pharmacy model set up and working.” $100 million?!? And why did the company have "much more call volume" than it had expected?
I remain skeptical that Blue Shield has truly stumbled upon a viable new “model” that can or will be widely adopted. Complexity is the enemy of low costs and efficiency.
Just ask Mark Cuban. Last August, the Mark Cuban Cost Plus Drug Company was initially announced as part of Blue Shield's new model. It is no longer listed as a "collaborator" in this multi-company effort.
P.S. The DCI community shared a fascinating debate on LinkedIn about Blue Shield of California’s new model. It even included some comments from Mark Cuban himself.
So, how’s it going?
In January, Blue Shield quietly implemented the model. Instead of relying solely on CVS Caremark, it now uses services provided by eight separate businesses:
- Amazon Pharmacy provides mail delivery of non-specialty brand and generic prescriptions.
- Abarca processes claims using Darwin, its proprietary, cloud-based PBM platform.
- CVS Caremark provides specialty pharmacy services.
- Evio Pharmacy Solutions, which is partially owned by Blue Shield of California, negotiates with manufacturers for value- and outcome-based arrangements.
- Gemini Health provides digital tools for beneficiaries and providers.
- Navitus Health Solutions manages the retail pharmacy network.
- Prime Therapeutics negotiates rebates.
- Synergie Medication Collective contracts for medical benefit drugs. (At some point, Synergie was removed from the list of collaborators.)
What’s more, Paul Markovich, president of Ascendiun, Blue Shield of California’s new nonprofit parent company (huh?), recently revealed that the company has already “spent nearly $100 million getting our pharmacy model set up and working.” $100 million?!? And why did the company have "much more call volume" than it had expected?
I remain skeptical that Blue Shield has truly stumbled upon a viable new “model” that can or will be widely adopted. Complexity is the enemy of low costs and efficiency.
Just ask Mark Cuban. Last August, the Mark Cuban Cost Plus Drug Company was initially announced as part of Blue Shield's new model. It is no longer listed as a "collaborator" in this multi-company effort.
P.S. The DCI community shared a fascinating debate on LinkedIn about Blue Shield of California’s new model. It even included some comments from Mark Cuban himself.
All Things Biosimilars (Issue 11) , Bourgoin Insights Group
The Stelara biosimilar price war is here!
According to data from Bourgoin Insights Group, Stelara biosimilars are launching with wholesale acquisition cost (WAC) list prices more than 80% below the reference product’s list price. Check out the figures in the table below:
Meanwhile, the Inflation Reduction Act’s "maximum fair price" (MFP) only offers a 66% discount off the WAC list price. Looks like competition wins again over price controls.
One more thing: Stelara accounted for 20% or more of the phony and misleading ”$6 billion in savings” figure that CMS shamelessly publicized. Beware of aggressive attempts to spin reality by the IRA's apologists.
According to data from Bourgoin Insights Group, Stelara biosimilars are launching with wholesale acquisition cost (WAC) list prices more than 80% below the reference product’s list price. Check out the figures in the table below:
[Click to Enlarge]
Meanwhile, the Inflation Reduction Act’s "maximum fair price" (MFP) only offers a 66% discount off the WAC list price. Looks like competition wins again over price controls.
One more thing: Stelara accounted for 20% or more of the phony and misleading ”$6 billion in savings” figure that CMS shamelessly publicized. Beware of aggressive attempts to spin reality by the IRA's apologists.
Optum Rx to Modernize Pharmacy Payment Models, Business Wire
Hmm. Optum Rx claims that it will now jump on the cost-based pharmacy reimbursement bandwagon.
While details are scarce, it sounds like Optum Rx will implement a system closer to the fee-for-service Medicaid model. While it may not increase total pharmacy reimbursements, it could remove some of the hidden cross-subsidies in pharmacies’ economics. Naturally, the National Community Pharmacists Association (NCPA) is skeptical.
With a nearly three-year implementation period, Optum Rx has plenty of time to adjust its pharmacy and plan sponsor contracts. The announcement also comes nearly two years after Optum Rx announced its Cost Clarity program, which bases plan sponsors’ pharmacy costs on NADAC or WAC plus an administrative fee.
Oddly, Optum Rx blames “manufacturer pricing actions” for pharmacies' economic challenges, rather than acknowledging PBMs’ role in the drug channel’s financial transactions. In reality, PBMs establish brand-name and generic prescription reimbursement amounts in unpredictable ways that may not be related to pharmacies’ acquisition costs.
For the same prescription drug, different plan sponsors can pay widely varying prices based on their PBM’s discount and rebate guarantees. Arbitrage opportunities between these price discrepancies have led to the growth of patient-paid prescriptions that bypass insurance via such cash-pay pharmacies as the Mark Cuban Cost Plus Drug Company and such discount cards as GoodRx.
We should give credit to Optum Rx for (sort of) acknowledging the issues facing its network pharmacies. But there are just too many unanswered questions and potential loopholes.
For a deep dive on the plusses and minuses of cost-based pharmacy reimbursement, see Section 8.4. of DCI’s new 2025 Economic Report on U.S. Pharmacies and Pharmacy Benefit Managers.
While details are scarce, it sounds like Optum Rx will implement a system closer to the fee-for-service Medicaid model. While it may not increase total pharmacy reimbursements, it could remove some of the hidden cross-subsidies in pharmacies’ economics. Naturally, the National Community Pharmacists Association (NCPA) is skeptical.
With a nearly three-year implementation period, Optum Rx has plenty of time to adjust its pharmacy and plan sponsor contracts. The announcement also comes nearly two years after Optum Rx announced its Cost Clarity program, which bases plan sponsors’ pharmacy costs on NADAC or WAC plus an administrative fee.
Oddly, Optum Rx blames “manufacturer pricing actions” for pharmacies' economic challenges, rather than acknowledging PBMs’ role in the drug channel’s financial transactions. In reality, PBMs establish brand-name and generic prescription reimbursement amounts in unpredictable ways that may not be related to pharmacies’ acquisition costs.
For the same prescription drug, different plan sponsors can pay widely varying prices based on their PBM’s discount and rebate guarantees. Arbitrage opportunities between these price discrepancies have led to the growth of patient-paid prescriptions that bypass insurance via such cash-pay pharmacies as the Mark Cuban Cost Plus Drug Company and such discount cards as GoodRx.
We should give credit to Optum Rx for (sort of) acknowledging the issues facing its network pharmacies. But there are just too many unanswered questions and potential loopholes.
For a deep dive on the plusses and minuses of cost-based pharmacy reimbursement, see Section 8.4. of DCI’s new 2025 Economic Report on U.S. Pharmacies and Pharmacy Benefit Managers.
Follow the Dollar: How the Pharmaceutical Distribution and Payment System Shapes the Prices of Brand Medicines, PhRMA
This great new report should be near and dear to the hearts of all Drug Channels readers. It’s a primer on how the prescription dollars get divided up among manufacturers, wholesalers, pharmacies, PBMs, third-party payers, and patients.
Page 8 highlights the troubling realities of high-deductible plans. As the example illustrates, a patient with a deductible funds the entire drug channel, while her "insurance" collects money. No wonder patient-paid prescriptions—cash-pay prescriptions and discount cards—continue to grow.
P.S. More than six years ago, I walked through a similar example in How Health Plans Profit—and Patients Lose—From Highly Rebated Brand-Name Drugs.
Page 8 highlights the troubling realities of high-deductible plans. As the example illustrates, a patient with a deductible funds the entire drug channel, while her "insurance" collects money. No wonder patient-paid prescriptions—cash-pay prescriptions and discount cards—continue to grow.
P.S. More than six years ago, I walked through a similar example in How Health Plans Profit—and Patients Lose—From Highly Rebated Brand-Name Drugs.
Why reimburse doctors... when you can own them?, Dr. Glaucomflecken
Dr. Glaucomflecken, the funniest physician on the internet, explains why UnitedHealth Group employs physicians.
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