Message Heard – Pharmacy Costs are in the Spotlight

No doubt the health insurance carriers are getting the message: pharmacy costs are too high, and pricing is not transparent.

UnitedHealthcare has announced that they will begin passing rebates directly to retail purchasers at the point of purchase. Pharmacy rebates – which are usually shared between the pharmacy benefits manager (PBM) and the health insurer (and the plan sponsor in self-insured plans) – are fraught with conflicts. In a high deductible plan, the patient might be steered to a drug just because it generates a large rebate, but they would not receive any portion of the rebate. Sounds like a conflict doesn’t it? My thought is that UnitedHealthcare’s new position is a giant step toward equity and fairness.

On the day of the announcement, the United stock price went down a few points. So why did they do it? A lot of brokers and some upstart, technology-based PBMs have been highlighting the practice – and they are making inroads in terms of employers taking pharmacy programs away from the traditional health insurers. In addition, legislators at both the state and federal government are on to the practice and the smart insurers are trying to get ahead of the legal process. Voluntarily making this change makes UHC look great. Finally, they are thinking hard about the pending CVS-Aetna and Amazon-Berkshire-JPMorgan initiatives and they are looking to get ahead of the obvious low-hanging fruit.

In a related move, Cigna announced that they are acquiring PBM giant, Express Scripts. Interestingly, both of these companies have been talked about as likely players in the Amazon-Berkshire-JPMorgan venture. Now that appears to be off the table. Healthcare is rapidly realigning in the right direction. I feel great about that.

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