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Anthem sues Express Scripts for $15 billion over drug pricing

Anthem sues Express Scripts for $15 billion over drug pricing

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. The amount also covers an unspecified transition period.

Anthem is also seeking $150 million for “compensation related to operational breaches,” the spokeswoman said. Anthem has not yet decided whether it will immediately end its contract with Express Scripts, but the company has been contemplating a major change for the past several months.

Anthem CEO Joseph Swedish told investors at this year’s recent J.P. Morgan Healthcare conference 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. That provision went into effect this year, and Swedish previously expected Anthem would save between $500 million and $700 million with new terms.

“Anthem has worked hard for more than a year to try to get Express Scripts to engage in such good faith negotiations, but Express Scripts has refused to do so,” an Anthem news release reads.

An Express Scripts spokesman released a statement that said, “Express Scripts values its relationship with Anthem and will continue to honor its commitments under the contract, as we would do with any client. Express Scripts has consistently acted in good faith and in accordance with the terms of its agreement with Anthem. We believe that Anthem’s lawsuit is without merit.”

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.

“All options are open,” Swedish said at a Morgan Stanley healthcare conference this past September.

Law firm White & Case is representing Anthem.

By mid-day trading, Anthem’s lawsuit was hurting its own stock more. Anthem’s stock was down 2.4%, while Express Scripts’ stock price basically was unchanged.

Originally posted on modernhealthcare.com

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