Pharmacy Benefits in Focus: Reflections and Predictions

As the dragon readies to depart, the snake awaits to slither in. Astrology aside, check out reflections on the past and premonitions for the future.  

Trend

Trend for 2024 will end lower than last year for most. Expect overall industry trend to wrap up in the 9% to 11.5% range, before rebates. The impact from rebates on mitigating trend has softened. A rebate trend off-set of less than 1% is anticipated. National CooperativeRx’s trend, before rebates, is expected to outperform industry benchmarks in the range of 4.5% to 5.5%.

Expect trend for 2025 to be about on par to 2024. It could go higher or lower, depending on how the below trend drivers develop.

Trend Drivers

Expect another year of non-specialty drugs surpassing specialty drugs in their overall contributions to trend. GLP-1s will continue to be major drivers. Continued interest in demand for the antidiabetic and weight loss GLP-1s remains strong and will continue to grow. While there has been some resolution of supply issues, there will be new, expanded, and/or supplemental indications in 2025 that could result in shortages again.  

If drug makers are able to demonstrate they have supply to meet demand, then the Food and Drug Administration (FDA) may force compound pharmacies to end current production of GLP-1s. Production was allowed due to shortages of GLP-1s. If access to compounds outside the pharmacy benefit is cut off, plans will see added pressure to cover these medications, as well as additional claims. Most pharmacy benefit managers (PBMs) deployed infrastructure to prohibit the payment of compounded claims for commercially available products in response to prior abuses by compounders. Some analysts suggest compounded formulations of GLP-1s may represent up to 30% of the current market. 

Plans may be forced to re-examine coverage and management strategies. These drugs work, but adherence, persistency, and cost remain areas of concern. As are long term health outcomes, especially for weight loss.

Oncology, as well as dermatologicals for psoriasis and atopic dermatitis, will be major spend areas for specialty. More pressure from payers may be seen by PBMs for more robust management strategies, similar to those that have already been undertaken by National CooperativeRx.

Pipeline

Some new drugs got off to slow starts in 2024. This was a sigh of relief for payers in the case of Winrevair (sotatercept), a new therapy for Pulmonary Arterial Hypertension (PAH) with a monthly cost of about $22K. Momentum was also slow for Rezdiffra (resmetirom), the first drug approved by the FDA for fatty liver disease or Non-Alcoholic Steatohepatitis (NASH), but it is picking up. The monthly costs of almost $4K will add up.

2025 will likely see the first GLP-1 approved for Metabolic dysfunction-Associated SteatoHepatitis (MASH), formerly known as NASH. The jury is still out as to how the drug maker may market it if approved. One option is an additional indication for Wegovy. Another option is under a new and different trade name with a unique price point that may align closer to the current monthly cost of Rezdiffra ($4K) than Wegovy ($1.5K).

The pipeline is plentiful with novel therapies as well as expanded indications, but few actually make it to market. Success rates fell to a 10-year low of 5.9% in 2022 but jumped to 10.8% in 2023.¹ Success rates may climb due to more use of artificial intelligence in drug development and research. FDA modernization efforts which began to be implemented on October 1, 2024, may also help as the agency transforms to be more efficient and nimbler in the future.

Between the start of 2025 and mid-year, there will be a notable uptake and adoption of Stelara biosimilar strategies. Expect PBMs to leverage similar strategies deployed for Humira biosimilars.

The first cellular and gene therapies for large patient populations will not be seen in 2025 and probably not 2026 either.² 2027 or beyond is more likely. The FDA has requested more comprehensive data to ensure efficacy and safety.

Pharmacists and Pharmacies

2024 is on track to see close to 2,000 pharmacy closures. This is up from the more than 1,500 that shuttered doors the prior year. More closures are in the works. Walgreens plans to close 1,200 stores over the next three years, with 500 stores to close in fiscal year 2025.³ Some of these closures may be offset by new openings. Contributing factors for closures include low reimbursement rates, geographic overlap, online shopping, low margin locations, dated facilities, and/or staffing shortages. 

Enrollment in pharmacy schools, as well as graduate rates, are down and declining, along with a growing number of graduates pursuing non-traditional pharmacy jobs. In 2022, there were 13,323 graduates from four-year pharmacy programs, down from 14,223 the previous year and the largest drop since 1983, per American Association of Colleges of Pharmacy data.^4,5 Some estimates suggest graduates with a Doctor of Pharmacy across the U.S. may only be about 8,000 come 2026.⁶ Contributing factors may include declining secondary education rates, educational costs, pay and work conditions.⁷  

Consumers may see fewer providers in PBM networks and may find it harder to access local pharmacies and pharmacists due to store closures, cut hours of operation, and increased automation. Many chains now use interactive voice response systems, where one has to leave a message for the pharmacy staff and wait for a return call. 

Patient Assistance

Increased drug maker scrutiny of patient assistance programs continues. Plans leveraging alternative funding vendors may run into more instances of patients being found ineligible or disqualified from programs. In response, more and more alternative funding entities are looking at international sourcing as another venue to add to their portfolios to help shore up revenues.

A year has passed, and the U.S. Department of Health and Human Services (HHS) has not released additional rulemaking and guidance regarding copay assistance, accumulations, and whether or not drug manufacturer assistance qualifies as cost sharing under the Affordable Care Act. Since HHS had advised it would not be taking any enforcement action, plans and insurers can utilize copay accumulator programs as they choose until further guidance is provided.

Regulations

There has been no shortage of state legislation impacting PBMs and payers alike. Beginning in 2025, Kentucky gets added to the list of states with NADAC reimbursement requirements. West Virginia was added to this list in May 2024. Arkansas and Tennessee saw this in 2023. In 2023, Minnesota required mail/retail cost share parity and prohibited mandatory mail and exclusive specialty arrangements. As of January 2024, Florida required these items as well in addition to transparent pricing. Other states are trying to follow Oklahoma’s lead in efforts to erode ERISA preemption. A challenge to Oklahoma’s PBM legislation has made it all the way to the U.S. Supreme Court with a decision pending.

The interpretation of the various regulations may be subject to debate. Payers and their legal counsels may have different takes than their PBMs. Contractually, PBMs may exclude claims paid at government required rates from certain contractual guarantees. 

CVS Caremark expanded their Maintenance Choice offering to include other pharmacies beyond Caremark mail and retail CVS Pharmacy locations. Last year, Costco and a handful of independent pharmacies were added. In April 2024, Kroger was added as well. Minnesota and Florida put a wrench in preferred specialty and mail arrangements which forced expanded network access. Kentucky will also have anti-steerage provisions, but it only impacts non-ERISA plans. 

PBMs

It certainly is not just a coincidence that all of the Big 3 PBMs now each have a private-label subsidiary. In 2024, Optum announced Nuvaila, a private-label subsidiary based in Ireland focused on biosimilars. Cordavis, a subsidiary of CVS Health also based in Ireland, works with manufacturers to co-produce biosimilars for the US market. In 2021, Cigna did a similar offshore approach establishing Quallent Pharmaceuticals in the Cayman Islands with an initial focus on select generic drugs, but has since expanded to include biosimilars.

Rebate credit language became commonplace for PBM contracts in 2024. This was leveraged in response to the American Rescue Plan of 2021, which eliminated the rebate cap as of January 1, 2024, and resulted in drug makers reducing their list prices on a number of products. Without the list price reductions and protection of the rebate cap, drug makers may have been on the hook to pay Medicaid more than the price of their respective products. PBMs also advised rebate credit methodology may be applicable to other situations that result in lower list prices and lower rebates. More list price reductions and associated rebate credits will be seen in 2025 and beyond. Do not expect methodology and approach to be the same from one PBM to the next or even from one contract to another within the same PBM.

Keep an eye on the money. There are more shells in the shell game. A lot more!

Disruptors

The notable gains Mark Cuban’s Cost Plus Drugs saw last year, as well as this year, will continue among cash-paying consumers, independent pharmacies, payers and small to mid-size PBMs. Expect the Cost Plus Drugs portfolio of products to continue to grow. Today, it offers 2,276 formulations (NDCs) of 877 drugs. This is mostly generic products, but it does offer some brand drugs (27), as well as select specialty medications (65). Cost Plus Drugs portfolio may only be applicable to around 16% of a payer’s drug spend, so it is not a stand-alone solution. Also, when shipping, handling, and 15% mark-up are added, few products can be sourced cheaper than through a PBM. Pick those cherries wisely!