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Diving brief:
- UnitedHealth-owned Optum Rx, one of the largest pharmacy benefit managers in the United States, will launch a new drug pricing model next year intended to make payers' pharmacy spending more predictable.
- The model, called Clear trend guaranteecombines costs that were once separate, including retail pharmacies, home delivery, specialty medications and discounts, into one price per member, according to a release Monday.
- Clear Trend is value-based, meaning Optum Rx will share in any savings related to patient outcomes created in the model.
Dive overview:
Pharmacy benefit managers, or PBMs, are middlemen in the drug supply chain who negotiate discounts and fees with drug manufacturers, create drug formularies for payers, and reimburse pharmacies for prescriptions. The companies say they save their health plan customers money by negotiating high drug prices.
However, major PBMs are under heavy criticism. and lose customers – for how their opaque and allegedly anti-competitive business practices could contribute to rising health care costs.
PBMs are currently facing a Federal Trade Commission investigation, lawsuits And scrutiny of states and the threat of possible legislation of Congress.
Facing public pressure, major PBMs are introducing new pricing programs that they consider simpler and more cost-effective.
Optum Rx — the third largest PBM in the country, manage more than 1.5 billion prescriptions each year — deployed an initiative it calls Cost Made Clear Last year. The program includes pass-through models, in which the PBM passes directly to customers the discounts it received when purchasing drugs, and cost-plus pricing, in which the PBM charges drugs based on their cost acquisition plus a flat rate increase.
From now on, the UnitedHealth subsidiary relies on Cost Made Clear with the Clear Trend model announced Monday.
The program aims to make it easier for plan sponsors, including employers and health insurers, to manage their expenses, while creating more predictability for patients regarding costs, according to the release.
Optum Rx controls about 80% of the PBM market with competitors Express Scripts, which is owned by health insurer Cigna, and Caremark, which is owned by the CVS retail pharmacy chain. Express Scripts and Caremark also rolled out new pricing models to appease regulators and retain customers, intrigued by newcomers in pharmacy like billionaire Mark Cuban's Cost Plus Drug Company, on board.
Late last year, Express Scripts said it was launch a cost-based pricing method for prescription drugs, while Caremark has unveiled a transparent model based on the net cost of medicines, called TrueCost.
At Bank of America's health care conference earlier this month, CVS Chief Financial Officer Tom Cowhey said market interest in TrueCost — and another CVS model changing how pharmacies reimburse medicines – was high.
“Our PBM clients have shown tremendous interest in TrueCost,” Cowhey said.