Cigna Group plans to limit patients’ out-of-pocket expenses for medications as the insurer faces pressure from Washington over its role in prescription costs.
The changes aim to ensure that patients don’t pay the drug company’s list price for medications and don’t pay more out-of-pocket for their medications than the amount that their employer contributes, a top executive said in an interview with Bloomberg News.
It’s the latest step from pharmacy benefit managers to respond to relentless criticism from politicians and regulators over prescription drug costs. President Donald Trump in December said he wanted to “knock out the middleman” in drug purchasing, but lawmakers scrapped a policy to boost transparency for PBMs from a year-end spending bill.
Employers, unions and health insurers hire PBMs to negotiate with drugmakers and pharmacies. Because of the complex flows of money in drug purchasing, the discounts that PBMs negotiate don’t always reach patients at the pharmacy counter. Drugmakers pay rebates to PBMs after a prescription is filled, for example. PBMs say they pass most of that money back to employer clients, but not necessarily to patients directly.
Cigna’s latest changes are part of ongoing work to “make sure that patients benefit from the work we do all the time,” said Eric Palmer, chief executive officer of Cigna’s Evernorth division, which includes its PBM, Express Scripts.
One change will prevent patients from paying the full list price of a drug set by manufacturers, so that they benefit from discounts negotiated by the PBM at the pharmacy counter. Another will ensure that in cases where patients have high out-of-pocket costs, they won’t pay more than their employer for the medication. In effect, the policy aims to make sure that the rebate money that employers get from drugmakers benefits patients more directly.
The company didn’t have an estimate for how much the changes would save patients, or how many people they would apply to.
Palmer said the situations that Cigna is trying to address are exceptions, not the norm. But outsiders have criticized the way PBMs and health plans can shift costs onto patients while pocketing drugmakers’ rebates. If a patient has a high deductible, they might pay the cost of the drug at the pharmacy counter without any assistance from their drug benefit plan. Then, a rebate paid by the drugmaker after the prescription is filled might be retained by the patient’s employer to lower overall costs in the plan.
PBMs have faced rising questions about how they handle opaque flows of money in prescription drug purchasing. Beyond rebates, PBMs and their affiliates collect other money from drugmakers that aren’t always passed on to clients. UnitedHealth Group Inc. in January said its PBM unit would move to pass PBM rebates on to clients, but it stopped short of agreeing to pass along the other fees as well. Critics say these fees, which are often a percentage of the drug’s price, encourage PBMs to favor higher cost drugs, an argument the industry disputes.
The Federal Trade Commission has sued units of Cigna, UnitedHealth and CVS Health Corp. over insulin costs. In that case, the regulator alleged that “a patient may end up paying more than the drug’s entire net cost to the payer” when patients have to pay list prices and don’t benefit from rebates. Cigna disputed that in a court filing. Palmer said separate programs limit patients’ out-of-pocket costs for insulin.
The changes will take effect as soon as the company can implement them, Palmer said, which may depend on the timing of contracts with clients. He said this approach would be the “default” and expected clients to adopt it. He said it shouldn’t have a material impact on the company or on plan sponsors.
Cigna also said it will provide more disclosures to patients about their costs and discounts, and give health plan sponsors more detailed reporting about pharmacy claims.
Stuart Piltch, president of Risk Strategies Consulting, called the measures “first steps.” Piltch consults for employers and was briefed on the company’s plans. He’s worked for Cigna in the past but isn’t currently consulting with the company.
In its simplest terms, the changes mean “the employer will now pay more and the employee cost-share will go down,” Piltch said. How drug rebate dollars are used is usually up to the employer, he said, and directing more of that money to patients at the pharmacy counter might mean employees have to contribute more for premiums. The changes fall short of “moving the market,” he said.
To contact the author of this story:
John Tozzi in New York at jtozzi2@bloomberg.net