NEW YORK – Anthem Inc. said it will set up its own pharmacy benefits management unit, signaling a final break with Express Scripts Holding Co. after the health insurer accused Express of overcharging it by billions of dollars.
The move means that Express Scripts will not only lose its biggest client, it will have a new rival. Anthem plans to use the new unit, called IngenioRx, to grow its own business with a “full suite” of services it will offer to potential customers, it said in a statement on Wednesday.
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Learn MoreAnthem said it had also secured a five-year agreement from CVS Health Corp. – Express Scripts’ biggest competitor – that goes into effect after its current contract with Express Scripts expires at the end of 2019. CVS will manage services for IngenioRx, including claims processing and prescription fulfillment. CVS also said in a release that it will “‘apply its expertise in patient messaging and engagement at the point-of-sale to support IngenioRx.”
“We believe that this agreement further validates the important role that CVS Health’s integrated and innovative pharmacy care model plays in today’s health care system and we look forward to working with Anthem and IngenioRx to provide services to help ensure coordinated, holistic care for their PBM members,” said Larry Merlo, president and CEO of CVS Health in prepared remarks.
The pharmacy benefit management business has been under pressure from all sides. Lawmakers in Washington have been asking how the PBMs – which act as middlemen administering complex drug contracts and negotiating prices – make their profits. Drugmakers have blamed PBMs for consumer outrage over the high cost of medicine in the U.S. And analysts have speculated that Amazon.com Inc. is eyeing the industry as ripe for disruption.
Express Scripts said it has already been taking steps to mitigate the fallout by Anthem’s exit. The news is “not unexpected, but is disappointing,” said Brian Henry, an Express Scripts spokesman.
Express Scripts shares were up 1.5 percent to $58.08 at 9:56 a.m. in New York, reversing a dip during pre-market trading. CVS shares were up 0.6 percent to $73.08, and Anthem gained 5.5 percent.
The move draws to a close a turbulent saga for Express Scripts that’s helped push its shares down by about a third since January 2016, when the dispute between the companies became public. At an investor conference that month, Anthem Chief Executive Officer Joe Swedish said that the PBM had overcharged it by as much as $3 billion. The companies subsequently sued each other.
Anthem will host a conference call at 8:30 a.m. New York time to discuss its plans for its business.
“The launch of IngenioRx will allow us to break through what is now a complex and fragmented landscape,” Anthem’s CEO Joseph R. Swedish said in the statement. “It also positions Anthem to take advantage of a unique opportunity to grow and diversify our business within our existing footprint as well as nationally.”
Cristin Flanagan is a reporter for Bloomberg News.