(Adds $4 bln in savings, CEO comments, updates shares)
By Caroline Humer
Oct 18 (Reuters) - Health insurer Anthem Inc will
start managing its billions of dollars of patient prescriptions
itself in 2020, it said on Wednesday, ending a deal with Express
Scripts Holding Co that had deteriorated into lawsuits
Anthem said it would save $4 billion annually in the new
contract with drug retailer CVS Health Corp, which will
handle prescription fulfillment and claims processing starting
in 2020 for five years for the new company, called IngenioRX.
Anthem said it would pass on 80 percent of those savings to
customers in pricing and 20 percent to the bottom line, boosting
earnings by $2 per share starting in 2021.
Anthem shares rose 3.1 percent, or $5.93, to $193 in
Wednesday afternoon trading, while CVS shares were up 2.3
percent at $74.31.
The new structure gives Anthem more control to lower
healthcare costs, expand contracting with doctors and hospitals
based on health outcomes and work on lowering annual increases
in medical costs, Anthem Chief Executive Joseph Swedish said in
Anthem had considered exiting the Express Scripts deal for
several years and sued the pharmacy benefit manager in 2016 over
claims of being overcharged by $3 billion annually. Express
Scripts has countersued and denied allegations of overcharging.
Pharmacy benefit managers negotiate prices with drugmakers
and determine which treatments are included on their list of
covered drugs and how much of a co-payment to charge for them
versus their rivals. As drug prices have posted annual
double-digit gains, companies, insurers and the U.S. government
have pushed benefit managers to better manage costs.
Lawmakers have criticized the companies for not being
"transparent" about drug prices and questioned whether any
savings make it to their customers and consumers. Swedish said
that with the pharmacy function run by Anthem, it would be able
to provide that information to customers.
Leerink analyst Ana Gupte estimated that No.2 health insurer
Anthem's prescription business represents about 220 million
scripts per year worth about $23 billion in revenue.
Other insurers, including UnitedHealth Group Inc and
Humana Inc, already manage their pharmacy benefits
Anthem, whose 10-year contract with Express Scripts expires
in 2019, had said it was considering staying with Express
Scripts, choosing another company, or doing the work itself.
Express Scripts spokesman Brian Henry said the company was
disappointed by the move and would continue to work with Anthem
through the contract end date and any transition period.
Excluding Anthem, the company has 65 million members, he said.
Express Scripts' shares rose 2.3 percent.
CVS Health, which also has a pharmacy benefit management
business in addition to its pharmacies and Minute Clinics, said
it expects to incur implementation charges related to the Anthem
deal, but that the costs would not have an impact on its 2017
(reporting by Caroline Humer and Divya Grover; Editing by Arun
Koyyur and Susan Thomas)
First Published: 2017-10-18 12:36:18
Updated 2017-10-18 18:40:45
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