Anthem Targets $3 Billion in Drug Cost Savings with Express Scripts

January 13, 2016
By Alex Keown, BioSpace.com Breaking News Staff

SAN FRANCISCO – Health insurance company Anthem, Inc. will use a re-pricing clause in its contract with Express Scripts in order to save $3 billion annually on drug costs, the company announced Tuesday during the annual J.P. Morgan Healthcare Conference.

That news caused Express Scripts’ stock to drop more than 6 percent in trading this morning. Express Scripts’ stock hit a morning low of $79.80 per share.

Anthem, which manages Blue Cross Blue Shield plans in 14 states, is the country's second-largest health insurer. The company has a 10-year contract with Express Scripts, the largest manager of drug benefit plans in the United States, which expires in 2019, although the repricing clause became effective Jan. 1, Reuters reported this morning.

Joseph Swedish, Anthem’s chief executive officer, told investors on Tuesday said the move “represents a substantial adjustment to drive lower care costs for our customers and improve our competitive position in the marketplace." Anthem identified potential savings from lower generic drug pricing after conducting a market analysis. He said Express Scripts should be passing along more of the savings it negotiates from drugmakers and if it does not, then Anthem may look for another pharmacy partner, Bloomberg reported.

Express Scripts spokesperson Brian Henry told Reuters that Anthem is entitled to renegotiate, but is “not entitled” to $3 billion in savings.

“While the contract calls for good faith negotiations regarding a pricing review, it does not mandate specific price adjustments. Furthermore, Anthem is not entitled to $3 billion,” Henry said according to Bloomberg.

Anthem generated about 14 percent of Express Scripts’ revenue in 2014.

Swedish told Reuters that Anthem is undecided about signing a new contract with Express Scripts when the current one expires in three years. He said the company should have a plan by the end of 2016. If Anthem does not sign a new contract, it would depose Express Scripts as the U.S.’s biggest manager of prescription drug benefits, Bloomberg noted.

In November, Express Scripts terminated its relationship with specialty a pharmacy company called Linden Care, which Horizon Pharma uses to distribute some of its medications to patients. Express Scripts accused Linden Care of being a “captive” pharmacy that only distributes medication for Horizon Pharma. Express Scripts also filed a lawsuit against Horizon, seeking $140 million in damages.

Last year Express Scripts dropped coverage of Gilead Sciences ’ HCV drug Sovaldi due to its high cost. A normal 12-week regimen of the hepatitis C drug has a price tag of about $84,000. Following the company’s decision to drop the drug, one of its executives, Chief Medical Officer Steve Miller, made a public joke about loading up a cruise ship in India with the hepatitis C drug, where the drug can be acquired for about 1 percent of the cost in the U.S., and sailing it to America to provide the drug to those who needed it.