The attention on pharmacy benefits has been significant for several years. Cutting-edge medications are providing treatments and cures for rare conditions people have suffered from for generations. The consequence is enormous price tags and pressure on payors. This pressure has resulted in a call for action in Washington D.C., but with significant lobbying dollars and partisan politics getting in the way, it continues to be left to the payor community to provide the oversight and cost savings needed.
National CooperativeRx Growth Update
Membership Expansion
National CooperativeRx continues to grow. 41 new members joined the Cooperative last year and we expect 50,000 new lives when final counts are in. In addition, we already have commitments for approximately 15,000 new lives in 2020, meaning our 400,000 lives milestone is within reach.
Team Additions
The Cooperative staff is expanding again with two new positions planned for 2020 to support sales, implementations and our clinical staff. With these additions, our team will represent 21 individuals working diligently to benefit our membership with their expertise and dedication.
Adding Value
With growing resources and a constantly changing pharmacy benefit marketplace, we continue to work on ways to add value for our membership. As a result of market check efforts, members will benefit from average savings of 6.2% over our 2019 contract. We will investigate potential further improvements in 2021 pricing later this year. Both large and small in scope, new programs and recommendations are continually being analyzed. They will be implemented if we determine they will improve health or lower costs.
Patronage Dividends
The financial position of the Cooperative is strong. Once our financial audit is completed, we expect 2019 to achieve another net income record. This will equate to a healthy patronage dividend to membership based on net income in excess of $700,000. It is likely the Board of Directors will vote to retire old equity as well. Payments will be distributed middle to late 2020.
Board Vacancies
As a cooperative model, our members have a voice through a member-appointed board of directors. There will be openings for new directors in 2020 and 2021. Please contact me via email if you are interested and would like more information.
Industry Report and Forecast
The state of change in pharmacy benefits will continue as we usher in the era of precision medicine. Approvals for gene editing will become numerous. With these approvals often comes cures for life-threatening conditions, followed by price tags of hundreds of thousands and even millions of dollars.
Specialty medications aren’t going away. Neither are approvals for new treatments. In the pipeline with expected approval in 2020 are new medications for:
- Migraines
- Peanut allergies
- Nonalcoholic fatty liver disease (NASH)
- High cholesterol
- Anemia
- Gene and cellular therapies
- …and many others.
Our clinical services manager, Erica Guetzlaff, reports quarterly on a selection of new drugs coming down the pipeline. This summary also includes anticipated release dates, impact, and value to plan participants.
Biosimilars
For years the talk has been biosimilars are coming. The hope is these approvals by the US Food and Drug Administration will continue to bring greater competition to specialty medications and lower prices. The issue remains litigation and pay-for-delay type deals that are inhibiting these biosimilars from getting to market. More will be approved and make it to market in 2020, but the greatest relief through biosimilars is further down the road.
Value-based Purchasing
Many argue that value-based purchasing has been around for years through formularies. National CooperativeRx has an element of value-based purchasing through oversight and plan recommendations. In the industry, new efforts with the value-based purchasing theme are being developed to provide a payment model for expensive medications. Payments will then be based on the value they bring to patients. This will occur not only with the Institute for Clinical and Economic Review efforts highlighted at our Annual Meeting, but also for payment models that provide a refund if the medication isn’t as effective as expected or isn’t effective at all. This can also be referred to as outcomes-based contracts.
Rebates
We found out last year the rebate dynamic is unlikely to change. Rebates have become an even more significant aspect of the pricing equation, with rebates often exceeding 20% of total plan costs. The Cooperative continues to get 100% pass-through of all rebates. Through negotiations, we continue to move more of this money into the rebate guarantee so it can be returned to membership sooner. And remember, rebates can be shared with plan participants if you elect, however, you will need to account for the financial impact to the plan.
Mergers and Acquisitions
The significance of recent mergers and acquisitions will begin to show more clearly in 2020. Is bigger really better? The sales pitch for these large models will be the benefits of integrated care. National CooperativeRx was created because the scale and sophistication of large PBMs resulted in a lack of oversight and higher costs for purchasers. There will be benefits of vertical integration, but will the biggest benefit be higher profits for these massive companies?
2020 and Beyond
As 2020 begins, there are many challenges to tackle in our industry. I am excited for the continued role National CooperativeRx will fill in being a cost-effective resource for pharmacy benefit purchasers. We look forward to working with you in 2020 and beyond!
