Cigna's no-rebate model sounds good, but experts remain skeptical

As lawmakers impose tighter oversight on pharmacy benefit managers, pharmacy benefit managers appear to be taking their own steps to rein in those practices that have come under scrutiny. However, experts remain skeptical and say it's not enough.

The latest example comes from Evernorth, the health services arm of Cigna, which operates Express Scripts, one of the largest PBMs in the United States. Last week, the company announced a new “no rebate” pharmacy benefit model, in which discounts negotiated by PBMs with drug companies are passed directly to patients at the pharmacy counter. This contrasts with the post-purchase rebate model, in which a partial refund for a prescription drug is typically provided quarterly to a health plan or employer after the prescription is filled.

“Our new model helps Americans get immediate lower prices up front, while their employers and health plans see the impact of member satisfaction, better adherence and health outcomes, while increasing trust in the health care system,” Harold Carter, senior vice president of market development and pharmaceutical contracts at Express Scripts by Evernorth, said in an email.

This isn't the first time a large PBM has touted new measures that it says will lower prescription costs. Optum Rx, for example, announced in March a cost-plus prescription reimbursement model that reimburses pharmacies for the purchase cost of the drug plus the dispensing fee. CVS Caremark also launched a cost-plus model.

To one employer expert, Cigna's new rebate-free model is more promising than some other announcements from the Big Three PBMs, but he remains skeptical.

“To do what they seem to be doing is going to require them to really fundamentally change the way they do business. I think that’s a sign of success for many of us who have been advocating and pushing for real reform of the PBM business model for a long time. … I would say [I’m skeptical] “I don't think Cigna/Express Scripts will do anything that will fundamentally change its bottom line,” said Shawn Gremminger, president and CEO of the National Alliance of Healthcare Buyers Alliance.

One adviser noted that Cigna's announcement appeared to be an effort to prove to Congress that it was self-regulating.

“I would say Cigna looked around and said, 'We better take action to reform ourselves, or Congress is going to take action to reform us, and we'd rather do it ourselves.' “I don't think what they're doing here is enough to satisfy members of Congress,” said Michael Abrams, managing partner at Numerof & Associates.

Express Script model

Cigna's Carter said the new model has three components.

• Negotiated discounts are offered to patients over the counter when they purchase medications. This will be available to fully insured people in 2027 and to all Evernorth Pharmacy Benefit customers in 2028.
• Leverage technology to ensure patients get brand-name and generic drugs at the lowest available cost, whether that's negotiated price, copay or cash discount price. Evernorth's technology will automatically compare different pricing options and charge patients the lowest price at the pharmacy counter.
• Using a reimbursement model, pharmacies are compensated based on drug costs in addition to dispensing fees and are additionally reimbursed for the clinical services they provide.

“Simply put, we launched this new model to meet the needs of a rapidly evolving market to help Americans stay healthy. While PBMs like Express Scripts have helped the United States achieve the lowest prices in the world for generic drugs (90% of all prescription drugs), the cost of brand-name drugs remains out of reach for too many Americans. … We believe it is time to redesign drug benefits to lower costs for Americans and make it simpler for employers and health plans,” Carter said.

While Greminger is hopeful about this new rebate-free model, he questions whether it actually just changes the definition of a rebate. Traditionally, he noted, drug companies have paid rebates to PBMs to get their drugs onto PBM formularies. The rebates are aggregated, and the employer then receives a lump sum for all drugs over a period of time (usually a quarter). This money can then be used to reduce premiums.

“If this was actually just a point-of-sale rebate or a point-of-sale discount, that would be a good thing for people taking high-priced drugs,” he said. “If I think about it carefully, the net impact on employers remains the same. Both on the front end and on the back end, we get discounts. But for people who aren't taking high-priced drugs, and the employer no longer has the money to lower premiums, everyone's premiums go up.”

Gremminger added that it's important to note that the post-purchase rebate model isn't perfect because the PBM's handling of the rebate before passing it on to the employer can be somewhat of a “black box,” making it nearly impossible for the employer to audit it.

Abrams agreed that this really just redefines the definition of rebates, since manufacturers are still paying PBMs for their prescription drugs. In fact, an FTC investigation found that three major PBMs used restrictive drug formularies to exclude certain drugs from coverage and required drug manufacturers to provide hefty rebates to include their products on their formularies. The only thing that has changed is that the discount will go directly to patients at the counter.

“It's good PR, but maybe that's all. The question for me is [that] “Rebates feel wrong because they are mandatory,” he said. “Manufacturers are forced to pay for the level they want. Insureds are forced to choose from a limited selection of drugs, which may not include the lowest-priced option.”

Cigna also claims that the new model will be able to reduce the monthly cost of brand-name prescription drugs by an average of 30%. Greminger said this would make it easier to assess whether the model actually works. If prices for universal coverage fall by 30% from 2027, self-insured employers may actually choose this option when it becomes available in 2028.

However, the statement that this new model will reduce the price by 30% has caused some doubts.

“For years they claimed that the way they operated was the most efficient and cheapest way to buy drugs, but then after a lot of pressure they suddenly changed the way they operated and they said, 'Oh, this will save you 30 percent.'” I thought, 'Cool. In the past 10 years, this 30% has totaled hundreds of billions of dollars. What have you done with this 30%? Greminger said.

Will that be enough for lawmakers?

Abrams said that while PBM appears to be making its own reforms, federal action is still needed. Specifically, he wants to see progress in the Federal Trade Commission's investigation of PBMs. The investigation was underway during the Biden administration but was shelved during the Trump administration.

“I think the FTC needs to take action on the clear anticompetitive activity here when they make agreements with drugmakers to exclude generics or biologics from the formulary,” he said. “It's wrong. It increases the cost of care, and they're being compensated for doing so… It's amazing to me that I spent a year investigating PBMs and that very little action was taken on the information they came back with.”

Greminger also wants to see further action from Congress.

“I have no doubt that people from Cigna and PCMA and others are on Capitol Hill saying, 'You don't need to do anything. We're regulating ourselves.' I think that would be a terrible mistake. I think it's very smart of them to follow up and say, 'Great.' Glad you're doing the right thing. We're still going to move forward and pass laws to make sure we hold them accountable,” he said.

If he had a “magic wand,” he'd like to see legislation requiring PBMs to act as fiduciaries on behalf of health plans (in other words, they have an obligation to act in the plan's best financial interests). However, this may not pass anytime soon, and he would be happy to start with legislation to bring more transparency to PBM practices.

Photo: z_wei, Getty Images