We are now deeply enmeshed in the era of "Big Medicine" with large businesses and organizations in the process of dividing up the healthcare industry (see: Physician Private Practice Declines; the Last Barrier to Emergence of "Big Medicine";The Transition to "Big Med": Need for Emphasis on Standardization and Cost; The Institutionalization of Healthcare; Consequences of Big Medicine?; "Doc Binge Buying" by Hospitals Continues, Resulting in Ethical Lapses). As described in these blog notes, these "Big Med" organizations consist of large hospital systems, health insurance companies, large pharmaceutical companies, pharmacy benefit managers (PBMs), and, or course, the federal government which is the largest payer for healthcare in the country. I think that we are not witnessing a second stage of the evolution of "Big Med" beyond consolidation with the large players now squabbling among themselves over the share of profits. Part of this scenario was described in a recent article (see: Anthem sues Express Scripts for $15 billion over drug pricing). Below is an excerpt from it:
Health insurer Anthem has sued Express Scripts Holding Co., alleging the pharmacy benefits manager is not passing along billions of dollars in savings from negotiated drug prices. Anthem is seeking $15 billion in damages and the ability to end its contract with Express Scripts. An Anthem spokeswoman said the damages reflect drug price overpayments Anthem allegedly has made. It also factors in the remainder of Anthem's 10-year contract with Express Scripts, which runs through 2019....Anthem CEO...[said] that Anthem was overpaying for prescription drugs for its members by $3 billion annually through its Express Scripts contract and was "contractually entitled" to those savings. Insurers and self-insured employers hire PBMs like Express Scripts to work with drug companies to bring down the price of medications, which account for about 10% of the U.S. healthcare economy. PBMs get price discounts in part by guaranteeing access to their drug formularies, although the process lacks transparency, and many of those savings are supposed to be passed along to insurers, employers and consumers. Anthem alleges that Express Scripts is skimming a lot of the savings and is not offering wiggle room under Anthem's repricing provision....Anthem has some leverage in the case. The Indianapolis-based insurer is buying Cigna Corp. in a deal valued at more than $54 billion, including debt. If that deal closes, Anthem could shift its drug functions to Cigna's PBM, OptumRx. Cigna had used Catamaran Corp., but OptumRx, a subsidiary of health insurance giant UnitedHealth Group, bought out Catamaran last year in a $12.8 billion deal. Anthem also has toyed with the idea of bringing its pharmacy management in-house.
Note the statement above that one of the expected advantages of a PBM is that some of the drug savings it has bargained for are passed on to "insurers, employers and consumers," Clearly, the goal of the Anthem lawsuit is to gain a larger share of such savings for itself. I suppose that it's possible that some of these savings will also be passed to employers. I would predict, however, that the chance of any such savings passed to consumers is near zero. That's not how the system works. Here's a link to another article on this same topic (see: Will the Anthem-Express Scripts battle change the PBM landscape?).
Note at the end of the excerpt above that the part of the leverage held by Anthem in the lawsuit is its purchase of Cigna for $54 billion dollars. Cigna had used Catamaran in the past as its PBM but the latter was bought by UnitedHealth Group's OptumRx. The fact that Anthem could potentially shift its PBM business to OptumRx/UnitedHealth Group and away from Express Scripts is no cause for cheer. I have followed the unethical and even illegal behavior of UnitedHealth Group for many years and documented it in a series of previous notes (see: UnitedHealth Settles Suit with New York Attorney General Cuomo; UnitedHealth Draws Criticism for Its Out-of-Network Reimbursement Policies; Recall of the United HealthCare Picis PulseCheck Emergency Department Software; The Medical Quack Reveals New Information about QSSI and UnitedHealth).