UnitedHealth Group said Tuesday it is expanding a program to provide consumer discounts at the pharmacy counter via rebates from drug manufacturers — the very rebates that have been labeled by the Trump administration as a driver of high medication costs.
Drug companies have long provided rebates to pharmaceutical benefit managers (PBMs) that administer the drug benefit portion of employer health plans. UnitedHealth Group, based in Minnetonka, Minnesota, runs the nation’s largest health insurer. It says these rebates in the past have been passed to employers so they could decide whether to direct the savings to individuals or use them against overall health plan costs.
This week's announcement means UnitedHealth Group starting in 2020 would extend the value of these rebates to more individual consumers, building on a program announced last year for a subset of employers that buy the company’s health insurance.
“We’ve seen some really compelling results,” said Daniel Schumacher, the chief operating officer at UnitedHealthcare, in comments Tuesday at the Barclays Global Healthcare Conference in Miami, Florida.
Consumers so far are seeing average savings of $130 per eligible prescription, Schumacher said, adding that the savings range from a couple of dollars to “one person who saved on a single prescription $4,400.”
UnitedHealth Group, which is Minnesota’s largest company, runs both the UnitedHealthcare health insurance carrier and a growing health services business called Optum. OptumRx is one of the nation’s largest PBMs. Pharmaceutical benefit managers negotiate prices with manufacturers, create formularies that specify coverage levels for different medicines and establish networks of pharmacies where health plan subscribers can fill prescriptions.
The company’s announcement comes about six weeks after the Trump administration proposed eliminating legal protections for rebates between drug companies and PBMs, saying manufacturers attribute rising drug prices to the growing demand from PBMs for rebates. Drug companies say insurers and PBMs have been pocketing too much of the rebate money, but the companies insist they pass along savings to consumers.
Asked during Tuesday’s investor conference about the Trump administration’s proposal, John Penshorn, a UnitedHealth Group senior vice president, said: “We’re concerned that this is potentially a windfall for pharma. We don’t think that was an intention of the proposed regulation, and we’ll provide comments to that extent.”
With Tuesday’s announcement, new business proposals beginning January 2020 at OptumRx and UnitedHealthcare would incorporate what are known as “point-of-sale” discounts to consumers who use medications as part of their plan design. While employers have had the option of adopting this approach for several years, UnitedHealth Group said it expects the change will accelerate adoption of point-of-sale discounts including in self-insured health plans run by large multistate employers.
Last year, UnitedHealth Group first announced the program, which took effect January 2019, for about 9 million people covered by fully-insured employer health plans. The expansion announced Tuesday includes an exception for current customers.
When consumers do not have a deductible or large out-of-pocket costs, medication adherence improves by between 4 and 16 percent, the insurer says. Pharmacy accounts for about 15 percent of the total premium for an employer, Schumacher said, adding that point-of-sale discounts have a “low single digit impact on 15 percent of the spend.”
The per-person savings “in combination with better medical adherence rates we think drives to a better overall health outcome,” Schumacher said.
Seema Verma, administrator of the Centers for Medicare and Medicaid Services, wrote Tuesday on the social media website Twitter that her agency applauded the move and UnitedHealth Group’s push “to increasing transparency in the convoluted market for prescription drugs.”
In January, the Trump administration proposed a rule that would encourage manufacturers to pass discounts directly to consumers, and create fixed fee service arrangements between drug companies and PBMs. The proposal was applauded by the trade group for drug companies, which argued patient co-payments and cost-sharing is often based on the list price of medications rather than the lower net price that factors savings from rebates.
“We need to ensure that the $150 billion in negotiated rebates and discounts are used to lower costs for patients at the pharmacy counter,” said Stephen J. Ubl, president of the Pharmaceutical Research and Manufacturers of America, in a statement. “This proposal would also help to fix the misaligned incentives in the system that currently result in insurers and pharmacy benefit managers (PBMs) favoring medicines with high list prices.”
Insurers countered that drug companies were trying to deflect attention from their high prices “by convincing Americans that health insurance providers and their PBM partners are the problem, acting as so-called ‘middlemen,’” said Matt Eyles, president of America’s Health Insurance Plans, in a statement.
“We are not middlemen — we are your bargaining power, working hard to negotiate lower prices with drugmakers,” Eyles said. “We cannot achieve those savings if our leverage and negotiating power is weakened through well-intentioned but misguided actions like this proposed rule.”