Who are these pharmaceutical benefit managers and what do they do? Companies that handle prescription medication coverage on behalf of health insurers, Medicare Part D drug plans, major employers, and other payers are known as pharmacy benefit managers, or PBMs.
Who is the PBM for Cigna?
Cigna disclosed its financial results for the first quarter of 2021 just the week before last. Below are some links. The lightning-fast pace at which Cigna’s Express Scripts PBM division has boosted both its revenues and the number of prescriptions coming from its retail pharmacy network astounded me.
- The second chart that follows demonstrates this expansion.
- The companies that make up Cigna’s Evernorth segment—especially Express Scripts, Ascent Health Services, and InsideRx—already provide Prime Therapeutics, Kroger, Humana, GoodRx, and Amazon with rebate negotiation, network management, and/or a sourcing platform.
This is especially true for Express Scripts. As more companies join this developing platform, I anticipate that Cigna’s power over the pharmaceutical distribution route will grow even more. VERIFIABLE INFORMATION As usual, I urge you to investigate the matter on your own by reading the original source material.
- You may see Cigna’s financial results for the first quarter of 2021 by clicking on the following links: Statement for the press Filing form 10-Q Transcript of the earnings call Express Scripts is included as part of Cigna’s Health Services sector in the company’s financial reports.
- Evernorth was the new name given to enterprises in this sector by Cigna during the year 2020.
This included Express Scripts. UNDERSTANDING PBM REVENUES The conflicting roles that PBMs play in the pharmacy system are reflected in the revenues they report: PBM-dispensed medications. PBMs run specialty pharmacies and mail-order pharmacies; some of these pharmacies are among the largest dispensing pharmacies in the country.
The difference between (1) the reimbursement to the pharmacy and (2) the pharmacy’s net acquisition cost for obtaining the product is where the PBM’s mail and specialty pharmacies get their gross earnings, just like any other pharmacy. This is how gross profits are calculated at other pharmacies. This spread accounts for all of the operational costs associated with running a pharmacy, such as the cost of purchasing the medication, the expenses associated with dispensing the medication, the salaries of pharmacists, the costs associated with holding inventory, as well as licensing and investment costs.
Dispensing fees are not normally paid to mail-order pharmacies; however, a speciality pharmacy may collect service and data fees from the companies that provide its medications. In 2018, Cigna completed the acquisition of Express Scripts, which resulted in the companies combining their mail and specialty pharmacy businesses.
- According to the statistics provided by the Drug Channels Institute, the firm in question is the third-largest dispensing pharmacy in the country and the second-largest speciality pharmacy.
- Neither business manages pharmacies that are open to the public.
- Prescriptions that are dispensed through a network.
A pharmacy benefit manager (PBM) is responsible for developing and maintaining a system of participating pharmacies, which enables customers who have prescription drug insurance to easily fill their prescriptions. Plan sponsors pay Pharmacy Benefit Managers (PBMs) to manage their pharmacy networks in exchange for compensation.
- This remuneration is often provided in the form of per-claim fees and/or spreads between (a) the amount that a PBM charges to a plan sponsor and (b) the amount that the PBM pays to the network pharmacy that delivers the medicine to a customer.
- Cigna includes in its financial statements the entire reimbursements made to pharmacies (including ingredient cost and dispensing fee) at the negotiated rate to its clients.
These reimbursements are based on the cost of the medication. These totals incorporate any patient copayments as well as any other applicable expenses. The Evernorth division of Cigna also brings in a large amount of money because to the many fee-for-service therapeutic solutions it offers.
See Chapter 5 and Section 11.2 of DCI’s 2021 Economic Report on U.S. Pharmacies and Pharmacy Benefit Managers for further information on the business models and earnings of pharmacy benefit managers (PBMs). IT IS UP TO YOU TO DOLE IT OUT (DIY) The following figure presents Express Scripts’ quarterly revenue as well as the adjusted number of 30-day equivalent prescriptions that were issued from the company’s specialty and mail-order pharmacies.
Revenue growth in pharmacy dispensing has been driven mostly by the sales of specialty prescriptions. During the year 2020, quarterly revenue increased by between 9 and 10 percent year over year. The rate of expansion fell to 6% during the first three months of 2021.
- It is important to take note that the number of modified prescriptions that were dispensed from pharmacies owned by Express Scripts has not changed dramatically over the course of the preceding nine quarters.
- However, as I said in this space the previous week, we anticipate that the expansion of our pharmacy business will speed up, since Prime’s Blue Cross and Blue Shield plans will soon begin taking advantage of the opportunity to use Express Scripts’ pharmacies.
DISPENSED FOR YOU (DFU) The following figure presents quarterly sales data and prescriptions that have been updated to reflect a 30-day equivalent from retail network pharmacies. In contrast to the data for postal and speciality, retail network sales and claims have increased dramatically over the past few years. 
OptumRx. Up until 2019, Cigna was OptumRx’s second-largest customer. They are a health insurance company. After being acquired by Express Scripts, Cigna transferred all pharmacy benefit management (PBM) activities, including pharmacy network management, to the latter.
The Prime Therapeutics Company. Express Scripts takes over retail pharmacy network contracting for the bulk of Prime’s business beginning in April of 2020. (In addition, Prime started obtaining some of its commercial rebates through Evernorth’s Ascent Health Services.) Due to the fact that this volume was transferred to Express Scripts during the year 2020, we have merged it with the market share information for Express Scripts in our ranking of the best pharmacy benefit managers in 2020.
It is important to take note that Prime continues to operate as a full-service PBM and continues to handle the core pharmacy benefit management capabilities, including claims adjudication and essential activities. In addition, Prime continues to be responsible for enrolling beneficiaries and providing member services, developing formularies, negotiating formularies and rebates with pharmaceutical companies whose products fall under the purview of the medical benefit, managing clinical programs, and providing additional services.
- Express Scripts is expected to negotiate formulary discounts for at least 40 percent of Prime’s annualized comparable claims volume in 2021, according to our estimates.
- As a direct result of this, Express Scripts is continuously expanding its level of control over retail pharmacies.
- According to our best estimates, the Express Scripts networks, together with Prime, currently account for more than 20% of the total prescription income generated by retail and long-term care pharmacies.
THE PLATFORM In my opinion, the businesses that are contained inside Evernorth constitute a platform for negotiating, network management, and sourcing that other firms, including PBMs, are able to exploit. For instance, Ascent Health Services is increasing its scale in order to negotiate higher rebates and fees from manufacturers of brand-name products and more significant purchasing savings from manufacturers of generic products.
Rebate negotiations are currently handled by Ascent for the pharmacy benefit management (PBM) business of Express Scripts, Prime Therapeutics, Kroger Prescription Plans, and Humana’s commercial business. Many times, smaller PBMs do not have their own internal dispensing operations, and as a result, they appear to be less effective at regulating net medication costs.
For instance, as I mentioned back in June of this past year, it would appear that Prime was routinely reimbursing retail pharmacies at greater rates than Express Scripts was doing. Evernorth also operates a number of additional platform companies, including as its very own consumer-oriented discount card brand called Inside Rx.
- Express Scripts’ Inside Rx service will be utilized for the pharmaceutical savings benefit that was introduced for Amazon Prime in the year 2020.
- (For more more, see Making Sense of Amazon’s Latest Pharmacy Moves: Disruption Delayed.) Express Scripts is one of the several PBMs who offer their services to give cost information for the GoodRx discount cards.
My understanding of Cigna’s business plan has never been publicly affirmed, as far as I’m aware, by the company. However, the evidence points to Cigna’s gaining influence as other external companies join Ascent Health Services (for deeper rebates), Express Scripts’ dispensing pharmacies (for better generic and specialty acquisition costs), and Express Scripts’ network management.
Who are PBMs clients?
Who are these pharmaceutical benefit managers and what do they do? Companies that handle prescription medication coverage on behalf of health insurers, Medicare Part D drug plans, major employers, and other payers are known as pharmacy benefit managers, or PBMs.
What is a PBM in healthcare?
Who are these pharmaceutical benefit managers and what do they do? Companies that handle prescription medication coverage on behalf of health insurers, Medicare Part D drug plans, major employers, and other payers are known as pharmacy benefit managers, or PBMs.