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October 19, 2017

Anthem to launch PBM in a partnership with CVS Health

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    Anthem on Wednesday announced that in 2020 it will launch its own pharmacy-benefit manager (PBM) in collaboration with CVS Health—officially breaking with its current PBM, Express Scripts.

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    Background: Anthem sues Express Scripts 

    The announcement comes amid an ongoing lawsuit between Anthem and Express Scripts, which took over the insurer's pharmacy services when it purchased Anthem's in-house PBM for roughly $4.68 billion in 2009.

    Anthem in the suit alleged that the PBM charged the insurer at least $13 billion more for prescription drugs than competitive benchmark prices. Anthem is seeking $15 billion in damages for uncompetitive pricing practices from Dec. 1, 2015, through 2020, which includes one year of transition costs and effects on Anthem's business. The insurer also is seeking $150 million for "operational breaches" of contract and the right to end its contract with Express Scripts, which is set to expire in 2019. According to Reuters, Express Scripts countersued, denying Anthem's allegations.

    Details of Anthem's future PBM

    Anthem said it will launch its own PBM, called IngenioRx, after its contract with Express Scripts expires. Anthem has signed a five-year contract, which goes into effect on Jan. 1, 2020, to partner with CVS Health to launch the PBM.

    Under the contract, CVS Health will provide Anthem with services such as claims processing, point-of-sale engagement, and prescription fulfillment. Anthem said it would be more efficient and cost effective to work with CVS than to build a new system scratch, the Journal reports.

    Anthem executives said they project there will be "significant" membership growth via existing and new customers, as the company plans to serve Anthem enrollees, employers, and individuals with other health plans.

    Anthem expects to generate $4 billion in gross annual savings under the agreement. Anthem said 80 percent of those savings will be passed on to customers through pricing, and 20 percent will be passed on to investors by increasing earnings by $2 per share beginning in 2021.


    Anthem CEO Joseph Swedish said the company had "determined that our scale and experience best position us to deliver an innovative solution, and the launch of IngenioRx will allow us to break through what is now a complex and fragmented landscape." Swedish said the move "also positions Anthem to take advantage of a unique opportunity to grow and diversify our business within our existing footprint as well as nationally."

    Brian Griffin, Anthem's EVP, told analysts on Wednesday that Anthem has "absolute confidence" that IngenioRx will allow it to competitively price prescription drugs.

    Express Scripts in a statement said Anthem's announcement was "disappointing" and that "it know[s] … no other PBM will offer Anthem the combination of savings, member and client stability, and clinical expertise that Express Scripts represents" (Wilde Matthews, Wall Street Journal, 10/18; Humer, Reuters, 10/18; Murphy, AP/U.S. News & World Report, 10/18; Flanagan/Rausch, Bloomberg, 10/18; Livingston, Modern Healthcare, 10/18).

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